1) RENSSELAER POLYTECHNICAL INSTITUTE NOV
12 PRESENTATION
2) PUMPHOUSE OR THE POOL CONTRADICTION?
3) INFLATION A FUNCTION OF INTEREST OR
VICE VERSA?
4) BIG LIE OF INFLATION-FIGHTING?
5) OLD BIG LIE OF MONEY CREATION?
6) LETS IS CASINO ACCOUNTING SOFTWARE:
7) TALLY-FORWARD VS ASININE BACKWARDS
TAXATION?
8) LETS CASHIER'S NO-INFLATION RULE:
1) RENSSELARE POLYTECHNICAL INSTITUTE NOV
12 PRESENTATION
JCT: Professor
James Stodder invited John Turmel to defend my
LETS Banking Systems Engineering Analysis
on Wednesday Nov 12 1997 at
6pm. in classroom #3208 in the Russell
Sage Bldg at Rensselaer
Polytechnical Institute in Troy, New York.
Jim wrote to
his students and possible attendees:
JS: Date: Mon Oct 6 10:44:43 1997
From: stodder@mstr.hgc.edu (James Stodder)
I decided to give the people at RPI a
little introduction to
some of the monetary issues you're likely
to discuss. As fair warning,
this source is critical of the "debt virus"
hypothesis, as it calls
it, although I think it is a fair and
balanced treatment.
JCT: I'm prepared
to defend the "debt virus" as the old Social
Credit solution which is workable if not
optimal like the LETS Local
Employment-Trading Software. Social Crediters
are committed to
balancing the positive feedback loop with
a negative feedback loop
whereas I would eliminate the positive
feedback loop in the first
place.
JS: I wrote the m last Saturday:
"To all those planning on coming to the
meeting with John Turmel, the
Canadian LETS activist on Oct. 15, at
7PM, I would encourage the
reading of the following e-source.
This is from a very econ-literate
d engaging web-page debunking various
monetary conspriacy theories,
including some held dearly by our friend
Mr. Turmel. But I think this
stuff is not just silly -- it's actually
an important question. And
besides, this is a more engaging way to
learn monetary theory than
most text-books can provide!
Look at the section on "the debt virus"
fallacy, at:
http://garnet.acns.fsu.edu/~eflahert/consp.html"
http://garnet.acns.fsu.edu/~eflahert/virus1.html
JCT: And of all
the critiques of Dr. Jaikaran's debt virus
hypothesis, Ed Flaherty's is one of the
slickest. As a matter of fact,
I saved it a while back hoping to do an
in-depth critique and for
those who want to prepare from the same
texts I'll use, watch for two
posts:
TURMEL: Flaherty's Debt Virus Text
TURMEL: Flaherty's Poker Game Text
After my presentation
at RPI, watch for:
TURMEL: Flaherty's Debt Virus Errors
TURMEL: Flaherty's Poker Game Errors
Three general
themes:
2) PUMPHOUSE OR THE POOL CONTRADICTION?
In his Debt Virus
Analysis, Ed Flaherty states what I believe to
be true:
EF: Like a commercial bank, the Federal
Reserve system has expenses
which are met by spending the interest
income... The revenues banks
collect from interest on loans and other
services do not disappear
into an economic void. Instead, those
revenues are used to meet the
bank's operating expenses, to purchase
assets to generate future
income, or are paid to the shareholders
as dividends.
JCT: Referring
to Fig 3 of the Chartered Bank, it shows that
interest and service charges and other
profits collected go into the
reservoir of deposit accounts, the bank's
account to be paid out of
the reservoir to meet operating expenses,
interest, purchases,
dividends. But he then contradicts himself
with statements I believe
to be not true:
EF: In the real world banks must pay their
employees, pay interest to
their depositors, meet their other expenses,
and purchase equipment.
When the banking system does this, it
spends into existence new "debt-
free" money (debt-free in the sense that
no one outside the banking
system is required to obtain a new loan).
In other words, the system
creates a new demand deposit out of nothing,
adding to the money
supply..."
JCT: Here he
is claiming that payments coming out of the Expenses
Out tube are coming from the tap rather
than the reservoir. Paying for
bank expenses with interest payments of
existing money is what I call
splashing in the pool. Paying with newly
created money is what I call
tapping the pumphouse. It can't be both.
If he is simply pointing out
the fact that the money is being returned
into circulation without
being taxed with interest, I'd point out
that it is money which has
been first taken out of circulation before
it could be put back so
that the net effect is that there is no
money creation. It's not from
the tap.
3) INFLATION A FUNCTION OF INTEREST OR
VICE VERSA?
While Ed Flaherty,
believing wet streets cause rain, states that
interest is a direct function of the inflation
rate, that inflation
causes interest, both Dr. Jaikaran and
I accept that inflation is a
direct function of the interest rate,
that interest causes inflation.
4) BIG LIE OF INFLATION-FIGHTING?
Finally, on the
Big Lie of Economics, Ed says:
"Only an increase
in the supply of money relative to the amount
of goods for sale can cause sustained
price inflation."
JCT: In Fig.
4 of my No-Interest Banking Engineering Analysis, I
call this Shift A. He fails to consider
Shift B, "goods decreasing by
foreclosure relative to the money supply."
It is this belief
that the inflation we are suffering is a ShiftA
function of the money supply that is the
Big Lie of Economics. In
GRACE AND MORTGAGE by Bishop Peter Selby,
Bishop of Worcester, ISBN 0-
232-52170-0 Page 116, he writes:
PS: As J.K. Galbraith describes it, that
by fierce regulation of the
money supply inflation could become a
thing that, once exorcised,
would be gone forever... As Galbraith
remarks, higher interest rates,
it is hoped, "will curb inflation"...
These comments of Galbraith and
Hutton illustrate why, although the raising
of interest rates is the
weapon against inflation chosen by those
who profit by it, it is also
clear that as a method it cannot finally
work. John Turmel, a Canadian
civil engineer and campaigner against
usury, has in two long articles
brought algebra, plumbing and poetry to
bear on the task...
JCT: It can't
work because interest doesn't curb inflation, it
causes it. This is a most startling conclusion
and any sampling of the
print media will show it merits of calling
this one the Big Lie. In
just a few days worth of culling the newspapers
for the Big Lie, here
just some of the many repetitions of fighting
inflation with interest,
hosing the inflationary fire with gasoline,
from my master BIGLIE0
file:
19971023 Ottawa Citizen Eric Beauchesne
FALLING INFLATION TAKES DOLLAR WITH IT.
"the further
retreat of inflation in advance of a pre-emptive
strike by the Bank of Canada."
"whether the
bank would still carry through with its threat to
increase interest rates."
"good news on
inflation means the bank won't raise rates."
"With inflation
sliding deeper into the lower half of the bank's
target range of one to three percent,
the bank doesn't have a "smoking
gun" to justify a rate increase hike,
noted Sherry Cooper, economist
with Nesbitt Burns.
"Andrew Pyle,
economist with ABN Amro Bank Canada, said the
bank's concern is not the threat of inflation
today but a year or more
down the road. The report shouldn't deter
it from raising rates, he
said.
"Thiessen has
said higher interest rates and a strong dollar are
both needed to rein it in before inflation
becomes a threat."
"criticism would
intensify if it raised rates in the face of
evidence that there is no inflation.
"Statistics Canada
noted that "low mortgage rates are one of the
main reasons inflation has been tamed."(!)
"If the dollar
remains weak the bank will raise rates, it warned,
"but don't count on it with signs of slower
growth and very low
inflation."
19971021 Ottawa Citizen Eric Beauchesne
WEAK DOLLAR RAISES SPECTRE OF RATE JUMP
Thiessen sees 3rd increase this year to
quash inflation, help currency
"Tough talk on
inflation means interest rates will likely rise
even more than expected."
"Mr. Thiessen
has been banking on higher rates to head off any
buildup of inflation pressures."
"On whether higher
rates here are really needed, Wood Gundy
argued there's no evidence of inflation."
"Mr. Martin noted
that when the central bank raised short-term
rates, longer-term rates eased reflecting
increased market confidence
that the bank will keep a lid on inflation."
19971020 Ottawa Citizen Eric Beauchesne
U.S. URGED TO HIKE INTEREST RATES TO STALL
INFLATION
"The United States
should risk pushing interest rates even higher
to nip inflation in the bud, a major international
research group
urges in a report.
"The Organization
of Economic Co-operation and Development is
urging the U.S. to err on the side of
even higher rates now rather
than risk inflation."
"While inflation
in Canada is not a threat, political
uncertainties may also put upward pressure
on interest rates, it
warns.
19971018 Ottawa Citizen Bertrand Marotte
MARKETS STUMBLE ON INVESTOR JITTERS
"the Federal
Reserve Board will soon step in and raise rates to
stifle any inflationary stirrings."
19971016 Ottawa Citizen Charles Gordon
TAKE COMFORT - GOVERNMENT HAS GOT IT UNDER
CONTROL...
"that would cause
inflation and we'd have to raise interest
rates."
19971013 Ottawa Citizen Bloomberg News
ACQUISITION FEVER FADES FOR GOLD PRODUCERS
"with inflation
generally under control, gold is no longer sees
as a hedge against rising interest rates."
19971011 Ottawa Citizen William Watson
INFLATION ISN'T DEAD, IT'S JUST SLEEPING
"By acting now
to slow the growth of Canada's money supply, and
thereby reduce the danger of inflation,
Thiessen is trying to
encourage sustainable, non-inflationary
growth.
19971011 NY Times Robert Hurtado
BOND PRICES TAKE STEEP FALL ON RISE IN
PRODUCER COSTS
"interest rate
increases by a number of European central bankers
showed that policy-makers worldwide were
also concerned about
inflation."
19971011 NY Times Robert Eisner
WHEN BAD ECONOMIC THEORY THREATENS GOOD
TIMES
"Bundesbank who
have just announced an increase in an interest
rate... to shoot at inflation."
19971011 NY Times Richard W. Stevenson
PRODUCER PRICES EXCEED FORECAST
"The Fed might
raise interest rates if the economy shows any
signs of incipient inflation."
19971010 NY Times Business Digest
GERMANY RAISES RATES
"Germany's central
bank raised a key interest rate. Worries about
inflation were a factor."
19971010 NY Times Edward Wyatt
THE HIGH HOPES OF INVESTORS IN STOCK FUNDS
"Greenspan raised
fears of interest rate increases in comments in
which he warned that inflation might still
be a threat."
19971010 NY Times Richard W. Stevenson
GREENSPAN'S JAWING GETS THE JOB DONE FOR
THE FED
"decisions by
central banks in Germany, France and other European
nations to raise interest rates showed
that policy-makers worldwide
are deeply worried about inflation."
19971010 NY Times Edmund L. Andrews
GERMANS SURPRISE WORLD ECONOMIES WITH
A RATE INCREASE
"raising interest
rates to insure that inflation did not emerge
as the economy improved."
19971010 NY Post John Crudele
IGNORE FED BOSS ALAN GREENSPAN AT YOUR
PERIL
"Greenspan may
have to listen to the anti-inflation hawks.
Greenspan twice raised interest rates
in the past three years. If
Greenspan wants to get control of the
situation, he'll raise interest
rates half a point in November."
"there has been
too much money in our economic system."
19971010 USA TODAY by Hal Paul, Bloomberg
News
EDGINESS HASN'T HURT FLOW TO STOCK FUNDS
"Alan Greenspan
warning about inflation that led other central
banks in boosting interest rates."
"report shows
inflation still dormant and the Fed isn't ready to
raise interest rates yet."
19971009 NY Times Richard W. Stevenson
GREENSPAN CAUTIONS ON INFLATION
"Alan Greenspan
warned that inflation might be on the horizon
increasing the chances the bank might
soon raise interest rates."
Economists had
been predicting interest rates unchanged since
there are few visible signs of inflation
said it was not possible that
the central bank would raise rates in
an effort to keep inflation from
accelerating."
19931110 Ottawa Citizen Eric Beauchesne
HIGH-INTEREST-RATE POLICY WAS UNNECESSARY,
STUDY SUGGESTS
"The Bank of
Canada's high-interest-rate attack on inflation
damaged the economy and destroyed thousands
of jobs but it wasn't
necessary, a new study concludes."
"The message
is that high interest rates are a very costly way of
lowering inflation" Infometrica boss Mike
McCracken said.
19971008 Citizen Eric Beauchesne
THIESSEN DEFENDS CENTRAL BANK'S POLICY
"even more rate
increases will "likely" be need to head off
inflation."
JCT: It's everywhere.
It's mindnumbing. Everyone repeats it. It's
a mantra. ShiftA. ShiftA. ShiftA. ShiftA.
It's a chant by the whole
financial industry. ShiftA. ShiftA. ShiftA.
ShiftA. Remember Germany's
ShiftA, ShiftA. ShiftA. ShiftA.
And along comes
a Bishop who writes: "whoa, all you economists.
Sure no one like's Germany's ShiftA inflation
but it looks like John
The Engineer's LETS Miracle Equation proves
that this is ShiftB."
The most startling
recent example is six Argentinian spending
massive amounts of LETS local bond currencies
into circulation while
the nation was suffering 1000% inflation
and despite dire warnings
about inflation, ample local currency
reduced foreclosures and brought
the nations' annual inflation down to
36%!
This empirical
evidence cannot be explained by believers in
ShiftA inflation but is quite expected
by believers in ShiftB.
5) OLD BIG LIE OF MONEY CREATION?
The Bishop further
adds on page 117:
PS: For banks do not lend out their depositors'
money; they create new
money.
JCT: This is
the old Big Lie of Economics whose rebuttal kept so
many old Social Crediters busy all these
decades and is no longer
questioned by mainstream economists other
than Gordon Thiesson,
Governor of the Bank of Canada who recently
testified he was unaware
that banks were not lending their depositor's
funds.
What I would
point out is that so far, the Debt Virus debate has
been limited to less than the full spectrum
of debate. It's those who
say "interest is bad" versus Ed's "it
does not have to be bad." I have
never seen my "zero interest is good"
being challenged with "zero
interest is bad."
The Debt Virus
is an diagnosis of the problem which may, even if
wrong in some aspects, end up prescribing
the right cure. Though I can
defend my analysis of the unsafe engineering
design of the banking
system, the crucial issue is the correctness
of the solution arrived
at whatever the reasoning. Is "no-interest
1/s banking" the perfect
model or do we need a little interest
positive feedback for stability?
After years of
publishing my Advanced Engineering Mathematics
Analysis on the Banking system on the
sci.econ newsgroup where Mr.
Flaherty usually holds sway on issues
of how the current system is
malfunctioning, he has never directly
challenged my assertion that "a
National or Global Time-based LETS interest-free
medium of currency
cannot exhibit inflation or involuntary
unemployment."
6) LETS IS CASINO ACCOUNTING SOFTWARE:
JS: I also provided this counter-source
when I had some of my
undergrads read your posts last Spring.
My own view is that there IS
too little credit creation by the Federal
Reserve and other central
banks, but not for the reasons you cite.
JCT: I don't
care whether it's a bankers' conspiracy to hurt
people with debts or if it's accidental.
That's a discussion of the
present malfunctioning system.
Why there is
too little credit creation is not as important as
how to legislate a balance of credit creation
to debt creation for a
perfectly functioning system. But I enjoy
explaining the inflation and
unemployment malfunctions of the current
system to those who have
grasped how a perfectly functioning system
works.
And you only
have to go down to your nearest gambling parlor and
watch how their banks which use both paper
and computer credit tokens
work. Having used casino checks as a professional
gambler for these
past two dozen years after my electrical
engineering degree, I don't
think it's too much to insist that in
discussing such very
controversial economic theories as interest-free
banking, we stay
within a frame of reference very familiar
to almost everyone.
The challenge
therefore is to address comments about interest-
free banking to:
a) the casino
cashier dealing with the issuance and redemption of
the chips;
b) the hundred
businessmen and ladies sitting at my Poker tables
with my casino checks in their hands.
JS: I think that national monetary policy
is simply too blunt an
instrument, and that a community-based
credit system such as LETS does
things that a national system cannot.
JCT: I say a
National Employment-Trading System can do anything a
Local Employment-Trading System can do
but better.
7) TALLY-FORWARD VS ASININE BACKWARDS TAXATION?
JS: A national policy that provided the
gross quantity of credit
needed would put it into the wrong hands,
essentially those of
government, rather than directly into
the community,
JCT: I've always
considered government the legitimate
representative of my community. Even if
putting money creation in the
hands of the government is in the wrong
hands, their wrong hands are
still better than the wrong hands of the
private banks considering
existing results. And what can governors
do with their interest-free
Green credit line that's so objectionable
but give people monetary
receipts in exchange for their work?
It's the essence
of good taxation. All governments of the world
now do taxation backwards. They tax to
spend. They should spend to
tax. I see the imbecility of orthodox
backward taxation policies every
time I see cars jammed up at toll booths
wasting gasoline and time
because they can't get organized to all
fairly chip in. So I will
spend time on LETS taxation VS Backward
taxation by contrasting "King
Henry's Tally-Forward" and today's "Asinine-Backwards"
policies.
8) LETS CASHIER'S NO-INFLATION RULE:
JS: and would also be more likely to be
inflationary.
JCT: You must
always keep in mind how the casino cashier prevents
any inflationary issuance of casino checks
by making sure that checks
are never issued until collateral is pledged.
Note also my poem:
I'll pay Your tax for army and police to
handle strife;
I'll pay Your tax for doctors, nurses
who protect my life;
I'll pay Your tax for all engaged repairing
road and sewer;
I'll pay Your tax for social servants
helping out the poor;
I'll even pay Your tax for bureaucrats
with no regret;
But I'll resist Your tax for any interest
on debt.
So I plead with
my government. Borrow from the Treasury and spend
for any of the above and that money's
good with me because I don't
mind using it to pay my taxes for what
I have received.
I just don't
see where government can possibly disburse any new
monetary liquidity and not get something
for it except for interest.
Back in 1980, I did what many considered
whimsical but I refer to it
now. Canada was looking for some Japanese
loans so I offered to lend
Canada's Joe Clark government $100 billion
dollars of my casino chips
interest-free on the sole condition that
they be issued in direct
exchange for work. In that way, people
would retain their confidence
that they now hold in Casino Turmel tokens.
I think it was filed for
future reference. The offer still stands.
Would you refuse Casino
Turmel chips if you knew the Government
of Canada was accepting them
in payment of taxes? Would you refuse
to save the interest on all that
borrowing from other interest-bearing
sources? They refused.
Other than the
debt service interest, which I consider
imbecilically inferior to pure service
charges, hence my motions in
Canada's Supreme Court for "an Order that
the banks computers be
restricted to a pure service charge and
the interest charges
abolished," I just don't see anything
objectionable that my
governments can spend their Greendollar
social credits on. As long as
every dollar they spend is backed up by
value, there can be no
inflation of the chips supply by the cashier.
So I'll be presenting
my rebuttal to Ed Flaherty's Debt Virus
analysis Nov 12 at 6pm. in classroom #3208
in the Russell Sage Bldg at
Rensselaer Polytechnical Institute in
Troy, New York and will see to
posting my point by point parsing to these
newsgroups soon thereafter.