“If the world undertook to pay cash, only spend what you have, we would never come out of this crisis”

If the world undertook to pay cash only, you would send the national economies of the developed nations back more than 300 years.

How would anyone pay for their imports or be paid for their exports with no Letters of Credit?

The crisis would be lack of economies of scale, something akin to 100% tariff barriers because no one would trust someone beyond national boundaries to pay when due.

Like Bazz said “Credit is fine”.

It is an unemotional process, formed from trust or a basis of trade (usually organised through banks), when trust might be lacking.

In the sense that credit enables people to benefit from a wider choice of often cheaper or better quality goods, than those made locally and allows efficient manufacturers to expand their markets into populations they would not otherwise be able to service, without significant risk, the provision of credit is a value adding element to the process of “production” and is thus an equal contender for a share in the value of production,

Thus, countering the silliness of some (Marxist thinking) folk who foolishly pretend that “labour” is the only “productive” component in the supply side of a transaction.

The US Corporates for some time have been pushing for a North American Union that would see US,Canada and Mexico using one currency called the Amero.The US Dollar is on the brink of collapse.Aparently Ameros are being printed already.What the Corporates will do is get in early and buy Ameros before the collapse happens.Anyone who then has investments in US dollars after this realisation happens,will lose out big time since the US dollar will then be worthless.The US people themselves will be the greatest losers.The Chinese who hold $1.8 trillion US dollars as a trade surplus will also lose out.

Many Aussies still have super invested in US companies.They will lose out again.

This is the way in which the US corporates will escape bankruptcy and the Federal Reserve Cartell will extend their power base to both Canada and Mexico.If you don't believe me,google Bush,Obama,Amero.There is much video evidence on youtube.

I am glad you are connecting the dots on this subject, Arjay.

Well I tried, Col is concerned about reds under the bed Marxists? they could not fill a phone box if they held a conference.
Arjay is chasing a phantom that never existed.
The subject was credit, maybe it was meant to look at just how we would control credit after we recreate world financial markets this year.
We will do that wont we?
We must do that mustn't we?
500 billion dollars in one fraud?
Almost quarterly we see a multi billion dollar failure of a firm we thought of as invulnerable.
Up the thread some one, forgive me, said we must pay interest on loans from increases in income?
No not so if my income is 100 units and I borrow 100 I must, should insure I can repay my loan and interest from my current income, and live on the remainder.
Must go and see if any Marxists are under my veranda.

Col Rouge;
How do you find the money to pay interest if there is no growth ?
When you borrow money you expect to pay for the goods with past
profits plus the expanded business activity profits.
Take out the expansion and you only have the accumulated profits to
pay your costs and living.
Others have expressed this problem better than I can but
growth cannot go on forever with energy being limited.

Letters of credit are just a guaranteed promise to pay are they not,
and do not necessarily have an interest component.
The financial world will have to do a rethink on how business is
conducted when we have zero growth. I understand that it is like
swearing in church to state that growth will soon end.
It is almost like predicting the end of the world.
It will certainly be like the end of the finance world.

I am sure that they will adapt and invent new procedures.
The big worry is that their history of innovative procedures such as
Credit Default Swaps has not been good.

Anyway the energy will enforce change whether they like it or not.

Belly “Col is concerned about reds under the bed Marxists”

Not at all, I was merely identifying another one of the many socialist/communist/Marxist frauds, the common one, which fraudulently claims the only generator of wealth is ‘labour’.

But, in Belly's words, I am doing one thing, Arjay another, Belly seems to be demonstrating his capacity for the facile. Looking for whatever is under his veranda is likely to be a more productive pursuit than pondering what might be found between his ears.

However, “The subject was credit,“

Belly rightly reminds us all, the topic is “Credit”

And the relevance of my comment was “Letter of Credit”, although not commonly used as a personal facility, it has, nonetheless, as its name implies, something relevance to “Credit”.

Maybe Belly thinks different rules apply for commercial credit (the gross value of transactions which dwarfs personal credit) as do for personal credit.

Wrong. Same rules apply, essentially, advances made attracting costs for interest, services, insurance etc. identical principles, some slightly different but sharing a lot of common processes. For instance, I can get a credit card in my own name ior a credit card in one of my business names. The only material difference, any interest charges are directly identifiable for tax deductibility purposes on the ‘business’ credit card. I have several bank accounts, a private one and a couple of business ones. I have loans in my own name. If I so desired, I can get loans in my business name too, based on business financial history and good credit rating.

“Almost quarterly we see a multi billion dollar failure of a firm we thought of as invulnerable.”

No different to WorldCom(2001), Barings Bank (1995), Christopher Skase(1990), Cambridge Credit (1976) Charles Ponzi (1900ish - who has a fraud named after him).

You will find the history of commerce littered with fraudulent schemes all the way back to the South Sea Bubble and the Jewish concept “geneivat da'at”.

So don’t worry Belly, Chicken Little can rest safe, the sky is not really falling in.