Subject: The Essence of Money
From: (William F. Hummel)
Newsgroups: sci.econ
Date: Fri Oct  9 17:54:05 1998
>A very astute economist friend of mine offers this seemingly
>simple, but really profound, view on money:
>The essence of money is deficit spending.  In terms of real
>goods, it is the 'buy now -- pay later' option. Compare this to
>a barter economy:  the buyer must present real goods of the same
>value as the merchandise, and at the time as the transaction. In
>a monetary, or credit, economy the payment can be deferred. All
>the buyer has to do in order to get the merchandise is to hand
>over an IOU to the seller.
>The difference between credit and money is that the former is a
>necessary condition for the latter. Credit is an 'ex ante'
>concept, and money is the 'ex post' counterpart. In order to
>deficit spend, i.e. to create money, one must first be granted
>credit. When this credit is drawn upon, money is created. The
>difference between the amount of credit granted and the amount of
>credit used is his 'liquidity'. 
     JCT: Very interesting and of course, this is how LETS credit 
money does work. But it's not how orthodox credit money works which 
has a middleman. 
     "When this credit is drawn upon, money is created." (by a banker) 
And when you earn back that credit money from the person who 
originally accepted it from you and return to the bank, you find out 
that you owe the banker 10% more than the money he initially lent 
you. Does anyone see a problem with orthodox banking that interest-
free LETS banking does not have? 
From: "Michael L. Coburn" <>
Date: Sat Oct 10 14:34:13 1998
>I do not see that there is a substantial difference between "money" 
>and "credit". That does not mean that there is no substantial 
>difference, but that *_ I _* can't seem to divine it from what has 
>been written above. Can we shed some more light on this?
     JCT: I have to agree with you. There are three basic media 
for money, paper notes, metal coins and computerized blips called 
credit. I think what the author originally called credit was really 
meant to be "credit line" which can be partially used. Regardless, 
you're right on the mark when you point out that credit is simply 
money, though another media of money. 
From: (William F. Hummel)
Date: Sat Oct 10 18:39:25 1998
>On Sat, 10 Oct 1998, "Michael L. Coburn" <> wrote:
>>Can we shed some more light on this?
>OK, I'll try to oblige. However I'm still digesting the writings of my 
>economist friend and don't feel that I have a full grasp all of the 
>points he has made. 
     JCT: You cited it and you still haven't fully grasped it yet? 
Since it is correct and jives with my bank blueprint, it seems pretty 
>His analysis deals with three core concepts, 
>liquidity, credit, and money, 
     JCT: Since Liquidity is money is credit, these are not three 
concepts, they are one. 
>as well as their respective asset representatives, LFAs (liquid 
>financial assets), NLFAs (non-liquid financial assets), and RAs 
>(real assets). I've already alluded to the core concepts, but 
>haven't defined them in the sense that he uses them.
     JCT: So you're looking for three different ways to define the 
same thing. 
> I'll do that when I can provide a reasonable summary.
>One of the things that is fascinating about "money" is that it
>can be viewed at many levels, and each can serve a useful
>purpose.  A superficial understanding is quite adequate for the
>average person in daily life.  However a deeper understanding is
>required for serious work in economics and policy formulation.
>The importance of understanding "liquidity" in particular can be
>seen in this paraphrase from my friend's work:
><<Neo-classical economic theory errs in presuming that a nation's
>wealth consists of nothing but human and real capital (the latter
>including natural resources). I would add that liquidity forms
>another part of that wealth, for it is an appropriate dosage of
>liquidity that sets the other 'factors of production' in motion,
>and thus works as a factor of production in itself.>>
     JCT: So the economist you are citing seems to think that the 
receipt the collateral is collateral in itself. I guess a casino 
cashier could let someone buy-in for some of the casino's chips with 
some more of the casinos own chips though the whole process seems 
rather wasted and inane. 
>I should note that the most difficult concept to really
>understand is "liquidity", where it comes from and where it
>resides. I don't mean to be mysterious about it, but that is
>probably at the heart of a basic understanding of money.
     JCT: Of course, once you realize that the money tap is connected 
to the loans output pipe, all the mystery seems to disappear. 
From: Osman Gani <>
Date: Sat Oct 10 20:10:11 1998
>I could not agree more. The concept of liquidity does remain a 
>mystery. To get a sense of what it might be, we will have to start 
>from scratch. Here is an attempt. But it is the beginning of a long 
>process of digging.
     JCT: Here's a guy who thinks the concept of chips liquifying 
collateral is mysterious. Bet he's never run the bank at his 
neighborhood poker game. What follows how economists can complicate 
things until even they don't know what they mean. I wouldn't push this  
tripe on anyone in its present form but to make it funny for my 
friends in the Poker room at the Taj Mahal, I've changed "money" to 
"chips," "bank" as "cage" and "banker" as "cashier." 
>First, for the sake of argument, let us agree that for chips to have
>liquidity, it must be a medium of payment. If it is not accepted as a
>payment, it can not be chips.
>Secondly, let us consider the most fundamental reason for the demand 
>for chips. In fact, the term demand is inappropriate. We should use a 
>new term ACCEPTANCE. Think of acceptance as the willingness of the 
>seller to accept the particular KIND of good, while demand measures 
>the QUANTITY of the good which the buyer agrees to accept. Ultimately, 
>every primary agent (one who is the original producer or the ultimate 
>user of the real good) faces the same basic problem in an indirect 
>exchange. He sells one kind of good and wants to get in exchange a 
>different kind of good of the same market value. However, although the 
>market may have a practically infinite number of different items of 
>the same market value, the individual wants only that particular KIND 
>of good which offers him the most utility. The lack of double 
>coincidence in kind between his good and the one he wants to get 
>(being the one with the highest utility from among all the different 
>kinds) means that barter is not possible. Indeed, we must define 
>double coincidence precisely in terms of preference ordering over the 
>kind of good. For that we will also need a concept of offer in terms 
>of KIND rather than in Quantity. (This will need a lot of clearing.)
>Now, provided further that something called multiple coincidence 
>exists (as indicated by the feature that every good has both demand 
>and supply), it is possible to create an artificial good called a 
>chip that can facilitate trade. I am sure this part seems too 
>elementary to some and too hard to grasp to others.
>Warning: If it seems too elementary, I have failed to point out the
>essence of the problem. It is the determination of the precise KIND of
>object of exchange that we must resolve, in addition to understanding
>the determination of the precise QUANTITY. OFFER. ACCEPTANCE, DOUBLE
>COINCIDENCE and MULTIPLE COINCIDENCE must each be defined precisely in
>terms of utility and form four different equilibrium concepts to
>determine four variables (1. the quantity of each single good, 2. the
>ratio of the quantities of goods being exchanged or price, 3. the kind
>of each single good and 4. the relation between the kinds of goods 
>that are exchanged). A completely new analytical tool called 
>COINCIDENCE ANALYSIS will be needed. One must understand all about 
>matrix algebra and input/output models before one can see the whole 
>picture. Sorry that it is really complex. End of warning.  
>A peculiar ability is required for a cashier to issue chips that can
>actually facilitate the exchange of any kind of good against any 
>other kind of good. Greater liquidity indeed must mean that a given 
>token chip is able to procure a larger set of different kinds of 
>good than a less liquid chip.
>Thirdly, we must develop a theory of intermediation to understand the
>competitive quality of chips. Surprisingly, this involves
>entrepreneurship on the one hand and transaction cost on the other.
>Self-appointed secondary agents (who buy without an intention to 
>consume and sell without having produced the object) bring some 
>special ability to cut the transaction costs. Chips (here, pure fiat) 
>arises as an artificial device created by intermediaries of a peculiar 
>sort to minimize transaction costs. (Any two goods can be traded 
>without chips if one of the agents is willing to carry out a 
>practically infinite series of barters.) When  there are competing 
>issuers of chips, the one who allows a larger set of different kinds 
>of goods has a more liquid chip. It also means that the more liquid 
>chip imposes smaller transaction cost. (You can do world trade with 
>Thai chips or any chips, except that it will be a lot more hassle to 
>organize the trades.) This has nothing to do with the quality of the 
>wood on which the chip is imprinted, but everything to do with the 
>ability of the seignor (mostly, the network of cages) to manage 
>transactions involving different kinds of goods (normally meaning 
>different sets of buyers and sellers.) Thus even if England and 
>Netherlands both issue paper chips based on gold, but England happens 
>to have a banking network spanning the globe while Netherlands does 
>not, it is English chips that will be more liquid in international 
>trade. (In reality, Netherlands's paper chips had a far higher reserve 
>of real gold than England, but this chip was not widely used 
>internationally.) Unfortunately, we must dig deeper to get at the 
>essence of chips. Osman Gani
     JCT: Typical clear economic reasoning to explain the mystery of 
From: (William F. Hummel)
Date: Mon Oct 12 12:56:21 1998
>The problem is that your initial premise is false. The government 
>would not print a fresh dollar bill to buy the banana. If the 
>government used that method to pay for its purchases, it would soon 
>lead to serious inflation. 
     JCT: Yet Argentinian provinces printed fresh currency to pay 
for their bananas and it didn't cause inflation. Hummel would rather 
the government continue letting the banks print the same amount of 
fresh currency, borrow that same amount from the banks and pay the 
banks interest as they now do. He sees inflation when government 
prints the money but can't see it when the the banks do it nor that 
it's the banks' interest that is the actual cause of inflation.
>The government pays for its purchases using recycled funds, i.e. 
>funds acquired through taxes and loans from the private sector.  
     JCT: Loans are not recycled funds as are taxes. Loans are funds 
newly created by the banks. 
From: "Michael L. Coburn" <>
Date: Mon Oct 12 12:38:13 1998
>The Federal reserve creates Federal Reserve Notes on its books and
>sells FRN's to the banks in return for _something_. The accurate 
>definition of this  _something_ is not a mere detail.
     JCT: Quite right. Paper money is purchased from the Treasury in 
return for credit money from a bank account. 
From: (William F. Hummel)
Date: Mon Oct 12 13:24:39 1998
>FRNs having nothing to do with increasing the money supply. They are 
>bought by the public through the banking system in exchange for funds 
>the public already owns, and could if desired all be returned to the 
>Fed in exchange for those funds. FRNs are basically street money and 
>the amount issued depends on what that the public desires to hold.
     JCT: Again, that's my point. Paper money is only chips for the 
credit money and credit money is only created by lending it out. 
>>The accurate definition of this _something_ is not a mere detail.
>I explained this in another post. The Fed exchanges FRNs for debits 
>to the bank's reserves. It merely swaps liabilities on the Fed's
>balance sheet between reserves due the banks and its FRN obligations.
     JCT: At least this question should not have to be answered again 
and again and again. 
From: "Michael L. Coburn" <>
Date: Mon Oct 12 19:09:50 1998
>I think that probably the separation of these two kinds of money is 
>very important, and FRN's are tokens that represent credit money. 
>Is there anything wrong with this concept?  
     JCT: No. I think calling paper currency tokens that represent 
credit money is completely accurate. 
From: (William F. Hummel)
Date: Mon Oct 12 20:49:41 1998
>In brief, banking system reserves include both vault cash and 
>deposits at the Fed. Swapping one for the other has no effect on 
>banking system reserves.
     JCT: Good. I also thought that cash had no effect on bank 
From: (Frank Palmer)
Date: Mon Oct 12 01:51:13 1998
>I've left all of this because it is indeed profound. It has nothing 
>however, to do with the origin of money. Money is a unit of account.
>Until there is a unit of account, credit does not create money. I can 
>borrow a 5 bushels of wheat now on the promise to repay six at the 
>harvest, but unless shoes and ships and sealing wax and cabbages are 
>priced in wheat, this does not give me a medium of exchange.
     JCT: The point is that shoes and ships and sealing wax and 
cabbages can always be priced in wheat making anything a medium of 
exchange. You tell me how many dollars or francs a ship is worth and 
how many dollars or francs some wheat is worth and I'll tell you 
how much wheat your ship is worth.
     Once again, I apoligize to any who spent time on the lousy stuff 
and didn't find it funny. You won't often see me reproduce a lot 
of economic complexities. Usually, just the funny and inane parts.  
Re: TURMEL: The Essence of Money #2
From: "Michael L. Coburn" <>
Date: Sat Oct 17 14:32:52 1998
>>JCT: Loans are not recycled funds as are taxes. Loans are funds
>>newly created by the banks.
>Tis off subject, but the "loans" (principle and interest) will 
>eventually be repaid via taxes or the claim to "recycled funds" is 
     JCT: Loans (principle and interest) is wrong. Loan payments 
(principal and interest) is fine but loans are only (principal). The 
interest is not created and issued as is the principal. 
From: (William F. Hummel)
Date: Sat Oct 17 17:33:02 1998
>Reserves have absolutely nothing to do with the proceeds of 
>bank loans (created money). 
     JCT: At least everyone agrees that loans are newly created money 
which is relevant to my post on Economic brain-damage. 
From: (William F. Hummel)
Date: Mon Oct 19 15:43:55 1998
>>Reserves are created when banks lend money.
>The Fed, and only the Fed, can create banking system reserves.
     JCT: That the Fed, and only the Fed, can create banking system 
reserves is incorrect. It is true that only the Fed can create high-
powered reserves with no other money as base, all new money created by  
one bank do end up as reserves for other banks to which they are 
deposited. Otherwise, the multiplier effect could not occur. At a 10% 
reserve ratio, the Fed creates a new $100 which is deposited to the 
first bank which loans out a new $90 which, when deposited, are 
reserves for the second bank's loan of a new $81 which, when 
deposited, are reserves for the $72 created by the third, etc until 
the new money created has been multiplied up to 1/(10%)=10 times the 
original amount of high-powered Fed money. It's all explained in: for the multiplier 
    So again, once an ordinary bank creates new money and it is 
transferred to another bank via a check, that money is now reserves 
for the second bank to make a new loan. All bank-created money can act 
as new reserves though only the FED can create new reserves without 
first having had a deposit of old reserves. 
>To repeat, banks do not and cannot create their own reserves.
     JCT: No one said the banks create their own reserves but they do 
create new money which acts as reserves at other banks. 
>Any deposit a bank has with the Fed is by definition a part of its 
>reserves. But the act of lending by a bank does not itself create a 
>deposit at the Fed. It will appear on the bank's books as a new asset 
>and a customer deposit until it is spent. When spent it will appear 
>as a deposit in another bank, assuming the parties involved use 
>separate banks. The receiving bank now has an increase in deposits - 
>a liability which is matched by an increase in assets. 
     JCT: And this increase in deposits acts as reserves for the 
creation of even more money, 90% of the deposit. 
>I've also pointed out that a bank obtains additional reserves when
>a customer deposits currency (FRNs) in the bank for his account. 
     JCT: So Hummell says that when a customer deposits a check to his 
account, it does not allow the bank to use it as reserves for new 
loans but when a customer deposits Federal Reserve Notes to his 
account, now the bank may use it as reserves for new loans. This is in 
error. Any and all deposits act as reserves for new loans. 
     Now we'll see an example of the economic double-think with 
respect to the source of new money. 
>>If the bank loans JOE $80 and then Joe writes Pete a check for $80 
>>and Pete puts the money in the bank, then the bank can put $2.40 in 
>>its reserve account at the Fed and lend another $77.60. 
     JCT: Under a 3% fractional reserve system, a deposit of $80 would 
allow the lending of another "new" $77.60. That this is new money is 
correct but in the very next sentence: 
>>The magic $80 has just been used to satisfy the reserve requirement 
>>and to provide an asset that can be loaned again. 
     JCT: It is not the old deposit that is being "loaned again." It 
is a new deposit being loaned out for the first time. 
>>The bank just created $80 out of nothing 
     JCT: That's right. It was not old money that is being loaned out 
>>The bank will continue to loan this original $80 as $77.60, $75.27, 
>>$73... $5 
     JCT: That's wrong. It does not continue to loan the original 
monies as $77.60, $75.27, $73 but it continues to create a new $77.60 
after the $80 deposit, to create a new $75.27 after the $77.60 deposit 
and $73 after the $75.27 deposit, etc. 
     So in this one paragraph, he first said the bank loaned "another 
$77.60," then contradicted it by saying it was money "loaned again," 
then contradicted that by saying it created new money "out of nothing" 
then contradicted that again by saying it "will continue to loan this 
original" money. It's like saying "it's new chips from the cage, old 
chips from the savings, new chips from the cage and old chips from 
savings" all at the same time. There is no clearer example of Orwell's 
double-think than the brain-washing which effectively prevents 
economists from perceiving that new chips may come from the cage or 
old chips may come from the safety deposit section but they can't be 
coming from both. This is exactly the same double-think I keep 
stumping professor Flaherty with and it's pretty obvious that the 
brain damage is most effective on people who have studied economics 
more than most. 
     George Orwell coined the expression "double-think" to explain how 
a human brain can be damaged to maintain two contradictory beliefs at 
the same time and to accept both without conflict. 
     Economics is the only subject where such brain damage occurs. 
     It's easy to test. I've demonstrated it umpteen times. Just ask 
any economist the following questions:
     Question 1) "When banks lend me money, where does it come from?"
     99% of economists will invariably answer: 
     Answer 1) "From their depositors' funds." 
     Question 2) But don't your Economics text books say that banks 
create new money when they make loans?" 
     99% of economists will answer:
     Answer 2) "That's right." 
     Not one ever grasps that it is a contradiction to believe that 
the loan is at the same time from previously circulating savings like 
a piggy bank and from newly issued money like a casino bank. Either 
the loan is previously circulating savings like a piggy bank or it is 
newly issued liquidity like a casino bank but it cannot be both. 
     What's funniest is that even when you point out the 
contradiction, the brain-damage is such that 99% of economists still 
can't see the contradiction and continue to argue that the loan is 
"both" old savings and new issuance at the same time. 
     If there's anything that demonstrates the double-think concept, 
it's this economics question and if there's anything that demonstrates 
the brain-damage, it's the fact that most economists still cannot 
distinguish the difference between old savings and new money even when 
it is pointed out. 
     So go ahead and try it. Find yourself almost anyone who has taken 
economics and ask them those two questions and you'll see that 99% of 
them will contradict themselves and continue to be unable to see the 
>our figures don't correspond to the reserve ratio requirement 
>currently in effect of 10%. Aside from that, however, your scenario 
>of Pete's bank putting $2.40 in its reserve account and lending 
>$77.60 is simply wrong. 
     JCT: Since he stated both contradictory possibilities at the same 
time, how can he be wrong on both? Unless you don't see the 
contradiction either. He can only be wrong one one. He's wrong in 
stating it's new money or it's old money but he can't just be wrong on 
     Actually, when the second bank receives the $80 deposit in a 10% 
fractional reserve system, it in fact does create a new $72 dollars to 
lend out. He might have made the small error on the 10% basis but his 
reasoning is correct. 
>As I explained above, Pete's bank would automatically get the full 
>$80.00 as an addition to its reserve account at the Fed, but that 
>would be done by the Fed debiting Joe's bank's reserve account by 
>exactly the same amount. This is no mere detail. It shows clearly why 
>banks cannot create their own reserves. Their transactions can only 
>transfer reserves. 
     JCT: No, the Fed did not debit Joe's bank's reserves. The loan to 
Joe didn't come from their reserves. It was new money. That's why the 
money supply went up. 
From: "Michael L. Coburn" <>
Subject: Re: Coburn on Reserves (w
Date: Wed Oct 21 22:02:21 1998
>Frank Palmer wrote in message <70ljdm$kkm$>...
>> (William F. Hummel) writes:
>>1)  The individual BANK can only lend $9 for a $10 deposit by
>>a customer. It must increase its reserves by $1.
>When the bank makes a loan it creates a deposit: If the bank accepts
>collateral and loans $100, the bank creates a demand deposit for 
>$100. The bank now has an asset of $100 (the collateral), and, 
>supposedly a liability of $100.  The bank only converted non-liquid 
>capital (the collateral) to liquid capital (credit tokens in a bank 
>>2) The BANKING SYSTEM can lend $100 for an increase
>>of $10 in deposits in the FEDERAL RESERVE.
     JCT: True, though it can't do it in one transaction. It can keep 
rolling over the deposits and loans until it adds up to lending $100 
with only $10 in new deposits. Again, I explain it completely in the 
banking system blueprint supplied in  so I wish we could get 
off debate about what is essentially a defined issue. 
In Article #97164 
From: (William F. Hummel)
Newsgroups: sci.econ
Subject: A Different Money System
Date: Sun Nov 8 14:29:56 1998
>Only the Fed is able to create money through the act of lending.
     JCT: I think we've spent a lot of time explaining how regular 
banks create new money every time they make a loan so the error in 
this statement should be obvious when he again contradicts himself in 
another article:
Article #72110 (72291 is last):
From: (William F. Hummel)
Newsgroups: sci.econ
Subject: An Essay on Understanding Money
Date: Fri Jun  6 16:14:32 1997
>The Creation of Money
>The story of money properly begins with the monetary base. This is 
>money the Fed creates when it buys securities, mainly Treasury debt, 
>from the public for its own portfolio. It pays for the bonds by 
>creating a deposit at a Federal Reserve Bank for the seller's own 
>commercial bank. The transaction is the equivalent of what is 
>sometimes described as "printing money". That derogatory term, 
>however, masks the fact that it is an essential first step in the 
>creation of the money supply. The newly acquired funds become 
>reserves against which the bank can make commercial and consumer 
     JCT: The words "against which" misleads one into believing that 
the loans are made against the "savings" account when in fact they are 
made against the "new deposits" account. 
>Each dollar of reserves can support a multiple in loan dollars 
>in our fractional reserve banking system. 
     JCT: Each dollar of reserves can not support a multiple of loan 
dollars. Each dollar can support the loan of 90% of that dollar. It is 
the redeposting as new reserves against which one may create new money 
over and over which adds up to a multiple of the original dollar but 
the original dollar is only used as reserves for new loans once. It is 
the new loans which become the reserves for the next new loans, not 
the original dollar. Again, see the bankmath.htm for full explanation.
>In short, the Fed monetizes debt to provide the reserves that the 
>banking system needs to expand the money supply.  
     JCT: It is obvious that his original statement that "Only the Fed 
is able to create money through the act of lending" is belied by the 
statement his recent statement that "banks do expand the money 
     Yet, he again contradicts himself in the next paragraph: 
>The current rule allows a bank to lend 90% of such deposits, leaving 
>a reserve of 10% to cover possible withdrawals by its depositors.  
     JCT: Here once again, he is stating that the bank puts aside 10% 
of the original deposits and lends out the remaining 90% of the old 
savings, just like a piggy bank. Yet, in another paragraph:
>If a creditworthy borrower is willing to pay the bank's rate, the 
>bank will normally make the loan even if it must seek the funds after 
>the fact.  
     JCT: How can the bank lend out money it never had in the first 
place unless it is lending out new money? 
>The size of this flow will expand with time as government spending 
>increases, but no money is created in the process. That is done by the 
>fractional reserve banking system, augmented by consumer lending 
>through various bank credit systems. 
     JCT: Seems pretty clear that money is created by the banking 
system and not only by the Fed which again contradicts his original 
statement that:"Only the Fed is able to create money through the act 
of lending." Obviously, his last statement proves that the banks 
create money by lending to consumers too. Later again: 
>Many businesses finance their growth with borrowed money, i.e. newly 
>created money that preceeds the production. 
     JCT: Again, it's clear that bank, not only the Fed, create new 
money to make new loans.
     Finally, he does admit: 
>I confess to a fascination with money -- acquiring it, to be sure, but
>also in understanding what it is and how it works. Money plays a 
>pivotal role in the lives of individuals as well as in the economy as 
>a whole. Yet its complexities are such that no one can be totally free 
>of misconceptions about it. 
     JCT: He, as an economist, may not be totally free of 
misconceptions about money but I, as a banking systems engineer, 
possessed of perfect models like casino banks and LETS, are totally 
free of such misconceptions about currency tokens. It's just sad that 
there seems nothing that can be done to correct the brain-washing 
they've undergone and so what could be a very valuable source of 
support in our efforts to institute a world-saving money system goes 
not only untapped but actually hinders its implementation. 
     Global interest-free LETS banking can "switch" Earth on to 
maximum industrial clean power. And the potential for freedom and 
abundance is grander than most people can even imagine. 
     Laid-off financial managers hired by industrial management firms 
to guide maximum industrial humanity. No more industries ripping off 
or helping the poor, everyone moved into good-paying jobs in 
production and clean-up. No more welfare bureaucracies, no more 
insurance companies, no more advertising on television. Everyone 
involved in useful productive enterprise. All accounting done in 
"Hour" units linked to each country's basic wage rate producing an 
explosion of production that will save the world. 
     That's what I told the courts in my interest-rate fights. And I 
told the judges of the responsibility in delaying the debt salvation 
the accurate blueprint shows is possible. A Way out. And I told them 
that in dealing with the mort-gage death-gamble, their responsibility 
could be counted according to the example in the "conveyor belt of 
death." See 
     Back in June 1982, 17 million Unicef kids were dying every year. 
If the positive feedback might have been cut off way by the Supreme 
Court of Canada and we could have gone to full power and possibly 
saved many. Since Since it might be down to 13 million today, that 
represents an equation of responsibility of average 15 million times 
16 years or 240 million dead babies who shouldn't have gone off the 
conveyor if the judges had restricted the banks computers to a pure 
service charge then. I can look a sitting Supreme Court of Canada 
judge right in the eye and say I think history will judge that he's 
responsible for the loss of an extra 240 million babies. Can you 
imagine the day all those foolish judges who didn't take the case on 
the mort-gage death-gamble seriously are going to feel when they 
realize freedom from usurious debt was really life and death? 
     So take note you apologists for the death-gamble banking system, 
No one is going to blame you for helping brain-wash people with 
information you've been brain-washed with yourselves. This question of 
interest on debts is a life-and-death issue. 
     Professor Flaherty who has often attempted to engage me will 
argue with me about what is wrong with the present system, "is 
interest so bad?" But when it comes to LETS, he isn't sure. He sees 
nothing wrong with LETS but his unqualified endorsement of it as the 
new global banking software hasn't been forthcoming.
     There are only two choices here. The one everyone's arguing about 
the one that no one's arguing about. But nothing's being done to 
further the one everyone's agreeing with by dint of their lack of 
questions or objections. Very few people are making fun of the LETS 
software any more. Too many governments are promoting it as an anti-
poverty system to reduce their welfare pressures. So it's here to 
     The real question has always been not only how do we avoid a K-
slab of responsibility but actually earn an A-slab of applause for 
having speeded up our delivery? How the K and A slabs work is again in . 
     So I ask those economists whose defences of the interest-bearing 
system take away from the time for discussion of the interest-free 
system to really really look deeply into this "usury" issue before you 
slow-down or speed-up our deliverance from it. 
     Christ was very clear in his prohibition of interest. In St. 
Thomas, verse 95, it states: "Jesus said "If you have money, do not 
lend it out at interest" but found that when it comes to interest, 
"they will forever be hearing without hearing and seeing without 
seeing." Mohammed said usurers are those whom "the Evil One by his 
touch hath driven to madness." 
     What will people study about human behavior in the future era of 
financial peace and prosperity once usury has been abolished and the 
banking system is performing flawlessly? 
     I think they will find the study of financial insanity will be 
most interesting. And we have live characters right on television. 
Real life politicians and newspeople saying things that will appear 
quite insane to the world of the future. They will have a video-log of 
people under the influence of it. 
     We accept as nothing unusual the myriad of atrocities committed 
under the alibi "I did it for the money." After the paradigm shift 
where they no longer live under the law of the Jungle, survival of the 
financial fittest, once money is treated no differently than mere 
chips in a casino, they'd be hard-pressed to believe that humankind 
could have been so absolutely conned.
     Of course, how the victims of the system coped with it is of 
great interest but I think there will be even more interest in the 
thinking of the people who foisted the killer scam on humanity. 
     Yes, the few others who do understand the actual banking systems 
blueprint benefited with the enslavement control it develops. 
     For as so many in the Jubilee 2000 movement are admitting all 
aloud, the usury banking system enslaves people to death with debts. 
Everything around us is dying by a strangulation by debts. Usury, 
interest on non-productive media as opposed to cattle and grain, 
creates a death-gamble mort-gage for its participants. They starting 
to see that debt slavery needs to be abolished as surely as chattel 
slavery was by the former generation of Abolitionists. 
     It's the reason I chose "Abolitionist" as the name for my party's 
members when I had that once-in-a-lifetime chance to finance and get a 
national political party into in a National registry. "Abolitionists." 
People who think the slavery issue isn't over until the issue of debt 
slavery has been dealt with. 
     The proper attitude towards economists and bankers is best told 
by Ezekiel in the  where 
God says:
Ezekiel in 22, verse 25's the test:
"If you lend money to the needy, charge no interest."
Ezekiel 3:18 adds responsibility,
God states his laws for life with his expected certainty:
"And when I tell the wicked man that "You will surely die,"
You will be held accountable if you don't warn the guy?
But if you speak up and he doesn't change his wicked way,
You will have saved yourself and he will be the one to pay."
In 18:5: "Suppose a man takes not much interest,
He takes no usury. He'll live! His actions I have blessed.
Suppose he has a son who takes excessive interest,
And lends at usury. He'll die! His actions I detest.
But if this son too has a son who doesn't do the same,
He does not take the pledge for loans, his greed he overcame.
He takes no usury nor interest that is too high, 
He will not die for his father's sin, the soul that sins will die.
But if a wicked man turns from the sins he did commit,
He gives back what he took in pledge. His sins I will acquit.
Forgotten will be his offences when I come to judge,
Because of good things he does now, I will not hold a grudge.
But if a righteous man turns from my law to evil way,
None of his righteous deeds will count. He'll die! I do inveigh.
So cleanse yourselves of all your sins and cease to be such fools,
I take no pleasure in the death of men who break my rules."
     Boy, do I ever believe that about warning people about interest. 
If there's anyone who can claim he tried to warn the world about 
usury, it was me. Court actions, picketing world leaders, jamming the 
Internet with debate. 
     And not only did I do my best to warn the world of the evils of 
the old banking blueprint while trying to get them to understand the 
boons of the new banking blueprint, I can stake claim to betting my 
resources to provide the seed money for the better banking software 
which is now winning the day. The Global LETS software is what it's 
going to take to save the world's poor from their current enslavement 
by exponential debts. I'm already known as one of the world's top 
professional gamblers but I take greatest pride in having made my best 
bet on LETS. 
     Yet I must ask why I am the only LETSer promoting LETS on 
sci.econ and defending it against the Economics Phds? Where are all 
our LETS Phds and LETS Phd candidates? We know they're out there. We 
read about them on econ-lets. But we don't see them taking on the Big 
Boys in sci.econ. 
     Though I've been posting a copy of my Usenet newsgroup debates 
over to the econ-lets listserv, I haven't seen much input from 
LETSers. Unfortunately, a lot of time is still being stuck on 
discussing basics like "What is a LETS?", "LETS Definitions", "How 
LETSystem" currencies differ from LETScheme currencies?" Maybe once in 
my life, I might have taken a few seconds to ask myself "How are 
Tropicana chips different from Taj Mahal chips?" Since they're not 
really different, I probably never asked myself that question ever 
     Why don't some LETSers follow topics in sci.econ and point out 
how using LETS currency would improve the situation under discussion. 
Economists might take it more seriously when a few more Phds start 
promoting it on sci.econ. 
     And I think sci.econ readers might want to visit the econ-lets 
at to find out how the world's future perfect currency 
system has and is developing. It can never hurt to have a perfect 
model when studying the unsafe engineering design of our current 
malfunctioning banking system. 
TURMEL: The Essence of Money #3
     JCT: Though the following argument seems mainly a difference of 
opinion on definitions, it's a great example of the brain-damage 
caused by economic double-think so I've set up some questions to 
demonstrate his confusion. 
>Article #97913 sci.econ Usenet newsgroup
>From: (William F. Hummel)
>Date: Fri Nov 20 12:46:24 1998
>On 19 Nov 1998, (John Turmel) wrote:
>>JCT: So again, once an ordinary bank creates new money and it is
>>transferred to another bank via a check, that money is now reserves
>>for the second bank to make a new loan. All bank-created money can 
>>act as new reserves though only the FED can create new reserves 
>>without first having had a deposit of old reserves.
>This is nonsense. Banks cannot create reserves individually or 
>collectively. Nor is the money multiplier effect an example of 
>creating reserves by banks. Only the Fed can create reserves. To 
>illustrate using your model: The Fed creates $100 and deposits it at 
>the first bank. That increases the first bank's reserves as well as 
>the total system reserves by $100. 
     JCT: Let's assume that the total money supply in the state is now 
this $100. 
>The first bank lends $90, which when deposited becomes reserves of 
>the second bank.
      JCT: How much nonsense can it be when I said the same thing:
"once it is transferred to another bank via a check, that money is now 
reserves for the second bank to make a new loan." It seems pretty 
clear that the loan from one bank becomes the reserves for the second. 
The questions to be answered are: 
1) Where did the $90 come from? 
>BUT the first bank loses exactly that amount of reserves
>to the second bank, even though it still owns a loan of $90. 
     JCT: Considering the loss: 
2) How much money is now in the first bank? 
3) What is the total money supply?  
>The second banks lends $81, which when deposited becomes reserves of 
>the third bank. BUT the second bank loses exactly that amount of 
reserves to the third bank, even though it still owns a loan of $81. 
     JCT: Again:  
5) Where did the $81 come from? 
6) How much money is now in the second bank? 
7) What is the total money supply?  
>And so forth. If this process continues, the total of new loans 
>outstanding will be $1000. 
     JCT: True the final loans outstanding is $1000 but:
8) What is the final total money supply?  
>BUT the total of reserves held by all the banks involved will remain 
>unchanged. The banks will have distributed the $100 of reserves added 
>by the Fed in the following amounts:$10.00, $9.00, $8.10, etc, 
     JCT: Several questions remain.
9) Would anything be different if the original $100 had been 
transferred from an out-of-state bank rather than the FED?
10) Where will the banks "have distributed the $100 of reserves" to? 
>As of Oct 1998, bank credit totaled $4,494 billion, and has steadily 
>increased. Bank reserves totaled $44 billion, and have actually 
>decreased over the last few years. William F. Hummel
     JCT: Actually, this agrees completely with what my analysis of 
money creation in  Fig 3 
says. I too conclude that the reserves held by the Fed after the 
process is the original $100 and the total bank credit money is $1000. 
Yet, he has stated it's all nonsense. 
     I think he will be stumped by the questions.
>Article #97916 (97948 is last):
>From: Edward Flaherty <>
>Date: Fri Nov 20 14:38:30 1998
>That JCT does not (or will not) understand this answers his earlier 
>question as to why no economists take him seriously.
     JCT: Perhaps Prof. Flaherty would like to take up the challenge 
of answering the questions too but though he's known to step out of 
the woodwork once in a while to snipe his cheap shots, he has always 
left the arena of our debates with his tail between his legs. Let's 
see if he finds enough back-bone to try to answer the above questions. 
I doubt he'll deviate from his standard behavior though. 
TURMEL: The Essence of Money #4
>Article #98032 (98035 is last):
>From: Edward Flaherty <>
>Newsgroups: letslist
>Date: Sun Nov 22 09:52:13 1998
>John Turmel wrote:
>>JCT: Perhaps Prof. Flaherty would like to take up the challenge
>>I doubt he'll deviate from his standard behavior though. 
>Do not delude yourself, John. I've addressed your questions many 
>times. Perhaps I can repost them for you? 
     JCT: Please do. I don't see one exchange where you ended up with 
the last word or you did not contradict yourself. After all, I'm the 
guy who published our correspondence under . Do you think I did that 
because you had proved me wrong? I can't count the number of times 
where I pointed out your contradictions and you failed to respond? So 
resorting to name-calling and false claims would seem to be the only 
recourse you have left. So please repost any exchange which you think 
you won. 
>For your convienence I have also placed the following PDF file about 
>money creation at my 
>website at 
>It describes in precise detail using accounting balance sheets how 
>the banking system creates money. And then you can read
>and focus on Appendix A in which I use similar analysis and empirical 
>data to prove that the banking system also creates money in non-debt 
>producing transactions. This latter part completely debunks the whole 
>debt-money, "Debt Virus" nonsense.
     JCT: Anyone who takes the time to visit my web site and read  topics should be able to 
see that you contradicted yourself over and over, just as I caught you 
in a contradiction in your initial post to this stream. 
>Of course, you've ignored such detailed analysis and especially the 
>empirical data in the past, so there's little doubt that is what you 
>will continue to do in the future.
     JCT: I've never had any disagreement with how much money is 
created, only the source of it which I keep pointing out your 
doublethink prevents you from seeing. 
>Article #98062 (98092 is last):
>From: (Kingmouse)
>Date: Mon Nov 23 03:40:50 1998
     JCT: This was a valiant effort by Bryant to explain the creation 
of money with only three errors though one is minor and the other two 
may only have to do with a difference in definitions. 
     Also, Dr. Jonathan Simms took a stab at it and since he only 
posted his response to the listserv, I choose 
to reproduce it on sci.econ. 
Date: Mon Nov 23 08:21:14 1998
From: ("Dr Jonathan Simms")
Subject: Re: TURMEL: The Essence of Money #3
Hello everybody, and especially to John, Here is a lengthy, although 
hopefully not too indigestible, contribution to the ongoing debate 
about what banks do and do not create. For anybody who doesn't want to 
read it all, the gist of the message is that yes, banks do create 
deposit money, but no, they do not create reserves. The confusion does 
seem to be a matter of definition, but I don't think it's confined to 
economists alone.
Yes, banks do create deposit money. A deposit is a liability of a 
It is a promise to pay out, on demand, the amount of the deposit. 
"Banks can create money by issuing more promises to pay than they 
actually have cash to pay out. In most circumstances, any one bank 
can have liabilities greatly in excess of the amount of cash that it 
has in reserve." (Lipsey, An Introduction to Positive Economics, 6th 
edition, 1983, page 573).  
So, on to John's questions. What follows is a repeat of the 
description of the process that has already been described by John 
and others, but I think it's necessary for clarity.
Suppose person A (who could be the Central Bank) deposits #100 in 
notes and coins with a commercial bank. This bank now has an asset of 
#100 cash, and a liability, the #100 deposit. Total money supply is 
#100. Notes and coins in circulation have decreased by #100, and 
deposits at the bank have increased by #100.
Now suppose that the bank lends #90 to person B. At this point, the 
bank has assets of #100, made up of #10 cash, and a #90 loan to 
person B. Its liabilities are still #100.
Now suppose B pays C #90, and C deposits this with the bank.
The assets and liabilities of the bank are now as follows. It has 
total assets of #190: #100 cash and the #90 loan to B. It has #190 of 
liabilities (It has made a promise to pay A #100, and to pay C #90). 
Total money supply has increased by #90. Notes and coins in 
circulation is now zero (its all back at the bank), but deposits are 
now #190.  
Total reserves are still #100. The bank has made promises to pay in 
excess of the amount of reserves it has.
This process might continue, as has been described by John and others, 
until the bank has deposits (has made promises to pay) which are in 
the desired proportion to the amount of reserves it has (either the 
bank thinks it is prudent, or it is legally required, to back every 
#10 of deposits with #1 reserves).  
At this point the bank will have assets totalling #1000; these are 
made up of #100 cash, and #900 of loans. It has total liabilities of 
#1000 i.e. the bank's customers have #1000 deposits. At this point the 
reserves are still #100. The bank has created deposit money by making 
promises to pay, on demand, in excess of the amount of reserves it 
(We could generalise the case to have many banks. In this case the 
argument holds true for the banking sector as a whole. As each bank 
makes loans, which may then be transferred in payments and deposits 
with other banks, so it too will be receiving deposits. Also, since 
people use cheques, and now cards, more than cash, we can think of 
cheques as a transferral of deposits from one individual to another; 
the bank's promise to pay cash is transferred from one individual to 
To answer Johns' questions again. Yes, final loans outstanding total 
#1000. The total money supply is #1000. The money supply is notes and 
coins in circulation (which at the end of the process is zero it's all 
at the bank), and total deposits, which is #1000.
On the last question, I don't think anything would have been different 
if the original #100 had been transferred from an out-of-state (or for 
the UK, out-of-country) bank, rather than the Fed (the Bank of 
I have been trying to figure out where all the confusion, inherent in 
John Turmel's correspondence, is coming from. Both he, and the 
economists he so vilifies, are describing the same process of banks 
creating deposit money. At the moment I can only suppose that it is 
stemming from a failure to communicate what all parties understand by 
their definitions of money.
I come to this confusion after reading some of John's earlier 
statements about what is money (I don't remember the exact date of the 
transimssion, sorry). I am sure that in one message John refers to 
casino chips as money. I have to say that I don't think that this is 
so. Although chips can be used in the casino, in the wider economy it 
is very unlikely that one could use casino chips to purchase goods and 
services (I've never tried it, so I could be wrong). We then get into 
a discussion of what is and isn't money. Perhaps the best way to think 
about it is to go back to the definitions of monetary aggregates, 
starting with the most narrow (in the UK, notes and coins in 
circulation, added to commercial bankers' deposits with the Bank of 
England). The wider definitions then include sight deposits (current 
accounts) with banks, and time deposits (notice accounts) and building 
society deposits etc. The wider definitions of money include financial 
products which are very far from liquid. They would need to be changed 
before they could be used to purchase goods and services. LETS money 
is also money, but only can only be used within the LETS.
It is worth observing  that different people have different views 
about money. Also, people use different kinds of money to perform 
different functions. Furthermore banks and other financial 
intermediaries are constantly developing new products, or changing 
existing products, in response to demand, competition, new technology, 
changing legislation. I think this answers another of John's 
criticisms made repeatedly, that economics is useless because it can't 
measure money. If one were to look at the academic literature in 
monetary economics, one would see that economists have always been 
refining and adapting their models of money supply and money demand in 
response to changing behaviours (by this I don't imply that John 
hasn't looked at this literature). I'm sure he will be pleased to know 
that many academic economists apply methods taken from natural 
sciences, including physics and engineering. This is a whole other 
issue which doesn't really fit in this particular discussion. My 
personal view is that it is dangerous to apply these methods to 
economics, without making very careful allowances for human behaviour. 
In the end economics attempts to describe the behaviour of people, who 
are, as we know, very unpredictable, thankfully.
To anybody who has taken the time to read all this, many thanks. I 
have taken the time to write it because I cannot sit by and watch John 
make his sweeping generalisations that all, okay, 99%, of economists 
are stupid and unreasoning and that economics is useless. Oh yes, I do 
have a PhD in economics, and yes, I have been a member of and 
administrator of Calderdale LETS for 3 and a half years.
Does this answer your questions, John, or have I missed your point 
altogether and can join the other 99%? Regards to you all, Jonathan
     JCT: I have one major disagreement with this process and it's the 
fact that anyone can sit at their kitchen table, use #100 pounds and a 
piggy bank and go through the whole process and no matter how you 
count it, you will still end up with your original #100 at the end 
of the process. I do think that not using coins and notes in the 
example and only using computer credits would clear some things up. 
     As to applying systems engineering methods to the banking system, 
I don't think it is dangerous nor do I think human behavior has 
anything to do with such a mechanical system. 
     At this time, I do not choose to go into my disagreements because 
the series of questions was designed to trap Hummell and Flaherty who 
have so far chickened out from responding. I see that in another 
article, Bryant has also raised objection to Flaherty's theories:
>Article #98086 (98092 is last):
>From: (Kingmouse)
>Newsgroups: sci.econ
>Subject: Re: TURMEL: The Essence of Money #3
>Date: Mon Nov 23 15:47:02 1998
>Tsk.  Tsk.  Tsk.
>From reading your article and comparing it to the standard economics 
>text I have here, your error is suggested. Please forgive the slight 
>changes in format. It didn't copy from Acrobat well.
     JCT: Now I'm worried that Flaherty may have been scared away for 
good but I'll give Hummell and Flaherty a few days to respond to my 
questions before I provide the answers.
     One further point is that I would hope others check:  and check out my version 
of the creation of money while looking at Fig 3 of the plumbing of the 
banking system and tell me whether it agrees with what they've said 
and if not, why not. 
     I treat this with importance because Flaherty has suggested that 
since my understanding of how the malfunctioning orthodox banking 
system is not correct, then my suggested well-functioning LETS banking 
system is not worthy of attention. 
     I would argue that even if the banking systems engineer's 
understanding of the mechanics of the banking system is incorrect, it 
has no bearing on whether the LETS banking system is a perfect model 
or not. 
     So I'll wait to see if we can get more than silence out of 
Hummell or cheap shots out of Flaherty before I give my answers to the 
10 question quiz. 
     Thank you for your inputs which have been helpful and please 
don't think that because some economists are cheap shot artists, I've 
concluded that economists are stupid and unreasoning. 
     I've said over and over that once the money system had been fixed 
and you're working with a stable monetary unit, their theories will 
work and economists will be quite qualified for engineering degrees in 
real science. 
     Yes it's true I've been rough with economists over the last two 
decades but it's only been with the advent of successful LETSsystems 
over the the last few years that a few economists have taken interest-
free banking have taken interest-free banking seriously. 
     Since I consider fixing the money system a matter of the Earth's 
life or death, I think my tone and words were quite appropriate for 
those who have stood in the way of Global LETS for all these years. 
     Finally, Jay Hanson has asked me to provide an explanation of 
LETS for readers of the listserv for those 
who haven't heard of it yet and I can only say that there is abundant 
information on the Internet accessible for a start from:  though I would stress 
that LETS is nothing more than casino chips which accept not only 
chattel goods but also promised human labor as collateral. 
     If everyone took the deeds to their housing to the Taj Mahal and 
received chips, it would serve as a 100% non-inflatable currency that 
could provide for maximum clean industrial power. 
     So I'll wait a few days for Hummell and Flaherty to face my 
challenge before I provide the answers though reading either Bryant's 
or Simms's analyses while looking at Fig. 3 of the bank plumbing would 
give anyone a head start on the subject while continuing to stump the 
two economists who have claimed that I am wrong. 
TURMEL: The Essence of Money #5
     JCT: I received a message from Dr. Jonathan Simms which details 
well what the transactions in the creation of money look like. Before 
I go into it, I would suggest that people obtain and print out a copy 
of not only Fig. 3 of a chartered bank's plumbing but also Fig. 2 of a 
piggy bank's plumbing at: 
>Date: Wed Nov 25 05:53:44 1998
>From: ("Dr Jonathan Simms")
>Hi there John,
>Firstly, yes, you are exactly right concerning the process of credit 
>creation I described the other day. It is just like a SHARED 
>Suppose Alan puts #100 in the piggy-bank. Because it's a shared 
>piggy-bank, he also puts in a note, "The PB owes Alan #100".
>Brenda needs some cash. Looking in the piggy-bank, she sees the #100 
>cash and the note "The PB owes Alan #100". She thinks, Alan won't 
>need all his cash at once, I'll take #90, and leave an IOU, "Brenda 
>owes the PB #90".
>Brenda then pays Charles for all the cleaning, cooking and shopping 
>he has done for her (when are they going to set up their LETS?!). 
>Charles doesn't want to carry #90 around with him, so he puts it in 
>the piggy-bank, together with a note "The PB owes Charles #90".
>In the piggy-bank there is now #100 cash, and three notes: Brenda 
>owes the piggy-bank #90; the piggy-bank owes Alan #100; and the 
>piggy-bank owes Charles #90.
>A few days pass and Brenda needs some more cash. She goes to the
>piggy-bank, sees the #100, and the two notes: Alan has a claim of
>#100, and Charles has a claim of #90. She thinks that she should 
>leave #10 in case Alan needs any cash, and #9 in case Charles needs 
>any cash, and she borrows #81. And so on.
>Brenda might stop borrowing cash when she sees that although there is
>#100 in the piggy-bank, there are claims for #1000, so at any one 
>time the claimants between them might need the #100. At this stage 
>there is #100 in the piggy-bank, together with loan notes totalling 
>#900, and claims on the piggy-bank of #1000.
     JCT: This is certainly how the transactions take place. I did a 
similar analysis a few years ago except I had a banker hand Alan a 
$100 deposit slip as he added $100 to Alan's account. I also had 
Brenda exchange IOUs for her loans and I also had Charles receive a 
deposit slip when the banker added $90 to Charles's account, etc. 
I have no disagreement with the process as you've described. And yet, 
there is a fundamental difference between the operations of Fig. 2, 
the piggy bank you've described, and those of the chartered 
bank in Fig. 3, even though they both handle the same transactions in 
exactly the same way. 
>After all this I think I would like to ask you to remind me what the 
>point is of all this. I think I did read the extracts from your 
>correspondence that you posted, but I think I need reminding. I have 
>been thinking about this a lot, because it has been bugging me that 
>the descriptions of deposit creation that have been given in the 
>postings, by you, ME, and the other economists, have thus far been 
>incomplete (I haven't looked at the websites you referred to, so I 
>can't comment on them).
     JCT: Jonathan, you must go see the two Figures I have cited so 
you have an idea of the difference I'm talking about. Without them, 
you will never be able to see the the trap I've laid for Hummell and 
Flaherty which they have so far failed to attempt to answer. 
>From my experience of teaching economics to undergraduates, I have to 
>say that many textbooks do not give a full explanation of these 
>processes. They also gloss over other issues like the effects of 
>open-market-transactions by the Bank of England, or the sale of 
>government bonds to the banking and non-banking private sector. 
     JCT: That's the reason I used advanced engineering modelling 
techniques so that readers may get a full explanation of these 
processes. I'm quite proud of having been the first in history to have 
charted the flows through a bank so as to demonstrate the difference 
between piggy banks and chartered banks. 
     So please get copies of both, run through our analysis with both 
and I think the difference will stand out. I'm wondering if even 
Hummell and Flaherty's reticence to continue discussion on my 
questions is not the clearest evidence that even they may be finally 
seeing the contradictions in their previous postulations. You have to 
admit that it looks pretty bad when Bryant has taken the time to post 
3 amended analyses and you've commented twice while the guys who were 
the most insulting hide from the questions. 
     I hope you can understand why I may have challenged the integrity 
of economists like these whose only response to my challenge is to 
make the spurious claim that they have often proven me wrong in the 
past. You'll notice that though Flaherty bluffed that he could post 
such proofs, he couldn't produce the cards when I called his bluff. 
     Still I do take encouragement from several economists who have 
treated the topic seriously and especially those like you who have 
involved themselves directly in LETS interest-free banking. You should 
subscribe to the Usenet newsgroup sci.econ to help provide a defence 
of the LETS banking concept by someone other than an engineer with 
only half an economics course to his credit. 
     Unfortunately, back in 1980, I had to drop out of the course to 
pursue and election campaign but I can state that I was the only 
student who was chided by other students for picking on the prof. Yet, 
due to my further readings on banking and my possession of a perfect 
model for comparison, I have managed to come up with what they will 
someday accept is the definitive plumbing of the banking system. 
>I have always encouraged students I teach to think through these 
>processes to get a complete understanding. Alas, most of them are 
>happy to learn a simplistic explanation, which they then regurgitate 
>in essays and examinations.
     JCT: And I can only bet that having the correct banking blueprint 
provides a simplistic explanation which not only agrees with current 
teachings but also discounts the errors in current teachings. 
>The discussions you have posted, and the questions you have raised, 
>have certainly stimulated me to think harder about the processes going 
>on. Regards,
     JCT: Discussions with one economist like you make the discussions 
with dozens like H&F bearable. I'll give H&F a couple of more days to 
answer so everyone can accept they have backed down before I post the 
tricky answers to my questions. 
     Finally, Bryant answered my question:
>>1) Where did the $90 come from?
>Already stated: It came from the non reserve deposits of the
>1st bank. 
     JCT: $100 of reserves was deposited into the first bank which we 
assumed was all the money in circulation in that state. Now we're told 
that they had some "non reserve deposits" with which to make the $90 
loan. What are "non reserve deposits" and where did they come from 
since there was "only" $100 in reserves to start with? 
TURMEL: The Essence of Money #6
>Article #98331 (98374 is last):
>From: Edward Flaherty <>
>Date: Thu Nov 26 10:23:48 1998
>John Turmel wrote:
>>I hope you can understand why I may have challenged the integrity
>>of economists like these whose only response to my challenge is to
>>make the spurious claim that they have often proven me wrong in the
>>past. You'll notice that though Flaherty bluffed that he could post
>>such proofs, he couldn't produce the cards when I called his bluff.
>Uh...perhaps you didn't see my five-of-a-kind. Let me repost
>it...again. I will repeat myself one last time, John.
>[Make that "one penultimate time".]
>You argue that I contradict myself when I state that money is 
>destroyed when a loan is repaid, but then isn't really destroyed 
>because banks create deposits when they pay their operating
>expenses, pay dividends, or buy assets.
     JCT: If you argue that the money is destroyed and then really 
isn't destroyed, then it's pretty obvious isn't it? 
     You then posted how you think money creation works, but again 
fail to answer the series of questions I posted. Nowhere is there any 
mention of any statements that I've made that you have disproven 
though. I'm not going to do another critique of your post when you 
keep ducking the major issue. 
     Answer the questions that everyone else are trying to answer and 
then I might take you seriously enough to also respond to your latest 
post. But if you can't handle the 10 questions, just admit it rather 
than keep reposting your erroneous analysis. 
>Gosh, maybe if you had not dropped out of that economics course all 
>those years ago, you might have gotten it right the first time and 
>we would  all have been spared your ego, whose over-inflation rivals 
>that of  any of the Macy's floats. Edward Flaherty
     It's obvious that you can't answer the the questions and you 
keep trying to hide that fact with evasions and insults. So put your 
money where your mouth is and try to answer the questions before 
talking about over-inflated egos. My ego can't help but inflate every 
time you publicly back down from the questions no matter how insulting 
you try to be. 
See Part B


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