Question for Flaherty & Turmel
>Date: Tue Jan 19 20:38:39 1999 >From: firstname.lastname@example.org ("Charles Michael") >Subject: [lets] Re: Question for Flaherty & Turmel >To: email@example.com >Firstly, let me congratulate John on the establishment of a new >discussion group on alternative currencies. It is much needed and >very refreshing after lurking on the "What is a Lets" discussion >group for too long. Even though I do not agree with you on all >aspects of the issue I enjoy discussion about alternative currencies >that looks at the possibilities for large scale conversion rather >than just neighborhood currencies.
>DR FLAHERTY >If Dr. Flaherty is still part of this mailing list I would like to >thank him for his contribution to a vigorous debate with Turmel and >others recently. My question relates to the fact that you have >recently conceded a major debating point to Turmel on the question of >banks issuing loans out of newly created money. I would like to ask, >now that you have had several months to think about it, how has this >affected your views on the nature of the financial system and its >effect on the real economy and the real people who must adapt to it? >If newly created money only appears in the form of loan principle, >then do we indeed have to fight (and pauperize) our neighbors in >order to free up the liquidity needed to pay our own interest bill? >How do you explain the stats you yourself presented showing money >supply exceeded outstanding bank loans? If banks mainly seek our >deposits in order to have enough reserves to permit more money >creation, then shouldn't total deposits pretty much equal total >reserves held at the central bank? JCT: I am not aware that Prof. Flaherty has subscribed to our new listserv but I'll post this to sci.econ so he'll see it. If he answers I'll post it to the firstname.lastname@example.org listserv.
>TO MR. TURMEL, I would ask a question regarding your alternate theory >of the causes of inflation. If I understand you correctly, you argue >that some inflation results from banks removing repossessed >collateral from the economy and thus reducing supplies of (say) >homes on the market. This shortage then leads to higher prices. >BUT, no bank seizes collateral and then just sits on it! They seek >to liquidate it ASAP often at "fire sale" prices. At best this would >leave supply/demand unchanged and would likely have a deflationary >impact, would it not? Even your often quoted Mr. Quigley says so at >one point in the writings of his which you have published on this >list recently. Do I misunderstand your theory or does it need some >more refining? Thanks, Charles Michael JCT: Actually, you've hit on one of the most difficult points to explain. Inflation Shift B really takes place at the moment the interest is added to the price tag thereby driving up the price so that some of the production cannot be sold. Yet, the result is the foreclosure of that collateral which shows shift B clearly. And an increase in money both makes the increase in price tags closer to paying which reduces the foreclosure due to failure. Yet, the inflation is actually generated when the interest is added to the prices. I'm not sure of the best way of explaining it but I use an actual model which people can try in my bankmath.htm. But I'll do it again now.
>GAME MODEL: SERVICE CHARGE VS. INTEREST > In his book `The Theory of Games and Economic Behavior', John Von >Neumann, one of this century's top mathematicians, stated that >"important questions in economics arise in a more elementary fashion >in the theory of games." In the business war for markets, the economy >decides who sells their goods and who fails to. Models used by >economists are flawed by guesses and approximations about what the >economy will choose. The only way to perfectly model the economy is to >use fair chance to pick the winners and losers. > >TO PLAY MORT-GAGE: > The necessary game equipment to play "mort-gage" is: > 1) 3 types of tokens to represent food, shelter, and energy (the >tokens can be knives, forks, spoons) > 2) a fair chance mechanism like a coin, cards, dice, etc.; > 3) matches, beans, chips or tokens to represent currency. > Here is how I demonstrated the difference at a dinner party >between the interest on a business loan and the service charge on a >Greendollar LETSystem business. The hostess provided a bag of raw >beans which I used as my model dollars. I used knives as tokens for >food, forks as tokens for clothing and spoons as tokens for services >which I put into a bowl representing the market economy in the center >of the table. > >INTEREST-USURY MARKETING METHOD: > In the Interest Game, all borrow 10 but have to inflate their >prices to recuperate the 11 they owe the bank. > Step 1): I had all 10 guests at the table pledge their watch as >collateral for a $10 Beandollar loan. At 10% interest, they each owed >me 11 Beandollars at the end of the loan period. > Step 2) I had all 10 guests spend their $10 Beandollars into the >market bowl in exchange for a product token. > Step 3): Once all 10 guests now had a product token for sale, I >used fair chance to determine who would successfully market their >product. Starting first with pairs of players with similar product >tokens for sale, I flipped a coin to determine which the economy chose >to buy from. Then winner delivered the product token to the market >bowl and collected $11 Beandollars. After the first round, half the >players had successfully marketed their product and half had not yet >sold. Finally, taking diverse pairs, I continued tossing the coin to >decide who the economy chose to purchase from, the winner delivering >goods and taking price out of the market. > Step 4) Since everyone put in 10 and the winners all took out 11, >eventually, the market bowl ran out of Beandollars with one guest >still having products unsold. I foreclosed and seized the loser's >product token and watch. > Step 5) I explained to the winners how their $100 Beandollars had >inflated because there were now only 9 watches. JCT: I don't know how it should be best explained, by the increase in prices beyond the money available or by the reduction of goods available for that money. The problem is compounded in that the real economy does not operate over just one cycle. If the banker were to issue some new loans, then the foreclosure can be delayed by the increase in purchasing power to purchase the product that would have been unavailable. Yet, when compared to how the economy would work without interest, it seems that whether we call inflation the increase in prices or the decrease in available collateral are two sides of the same coin.
>NO-INTEREST LETS MARKETING METHOD: > In the No-interest Service Charge Game, all guests borrowed 11 >and owed 11. The 11th Beandollar borrowed was to pay the bank >employees a service charge. > Step 1): I had all 10 guests at the table pledge their watch as >collateral for an $11 Beandollar loan. > Step 2) I had all 10 guests spend the same $10 Beandollars to >purchase their production token from the market bowl and then spend >their last Beandollar into the market to pay for the services of the >bank employees who facilitated the transactions. > Step 3): I again used the coin to model the decisions of the fair >market and noted that at the end of the game, all the production was >sold. > Step 4): I noted that no one lost their watch even though the >bankers still got paid. > Step 5): I noted that at the end of the LETS service charge game, >there were enough watches for the Beandollars to retain their original >value, unlike in the Interest Game. I noted that everybody had sold >all their product tokens because the 11th unit of money had entered >the market bowl through the bank employees' service charges. > The very subtle difference between systems is that in the >Interest Game, the bank demands payment of money it did not create >while in the LETS Service Charge Game, the bank demands payment of >money it did create. With exactly enough markets to match the prices >of goods produced, there can be no foreclosures. JCT: No amount of theorizing can substitute for actually testing the models yourself. As long as most economists will not actually try both models, they can remain adamant that they don't understand the philosophy. Of course, once both models have been exhibited, the lack of inflation in the LETS model can be compared to the inflation generated in the other model and people might then decide which they think is the better explanation for inflation shift B, the increase in the prices at the moment of the usury charged or the decrease in available collateral at the moment bought. What do you think. Is the inflationary shift B shown in the first island better explained as foreclosure or price increase due to interest?
>Date: Tue Jan 19 23:05:06 1999 >From: email@example.com ("Paul Dumais") >Subject: [lets] Re: Question for Flaherty & Turmel >To: firstname.lastname@example.org >Bravo, I don't think I fully understand why many local currencies >insist on staying local. Maybe its just the unfortunate name that >limits the vision. JCT: Yes, the fact that LETS stands for Local Employment-Trading System has proven to be a problem in dealing with people who say that since Local is in the name, it must be "local" and small to work right. I keep pointing that there is no limit to the number of accounts possible in the database and that to Captain Kirk and Mr. Spock, Earth is local. Yet, some people are still stuck on the argument that it can only work small while I keep pointing out that it actually works best when everyone has an account and can trade with everyone else.
>Can anyone site any examples of local currencies which have combined? >Such an operation seems easy to do. And the immediate benefit would >be to double the number of places people could shop (roughly). I see >two things that would have to be done to do such a combination. >1. Zero your balances and keep them balanced. For example each >currency should always have debts = credits. New members shouldn't >start with credits unless debts are created elsewhere. JCT: Though the debt side of the orthodox banker's ledger grows with interest while the money side does not, LETS debt always is balanced by LETS money. It is impossible to have an inflationary or deflationary shift in a LETS currency system.
>2. Renormalize any differences in currency values. If 1 Green >dollar = 1 Canadian Dollar = 1 Brown dollar, there's is no problem. >Call the new currency orange and carry on. Sometimes a >conversion is necessary (say from 1 Ithaca hour = $10 US = $15 >Canadian = 15 Edmonton Talents). Paul Dumais JCT: There has been a great deal of work in "intertrading" between systems though no one has really made major inroads. Still, it's only a matter of time until they all standardize to the same Hour of human labor, including the large commercial barter networks, and they'll see the benefits of merging all their databases into one big one or at least intertrading between branches via a clearinghouse. -------------------------------
TURMEL: Question for Flaherty and Turmel #2
>From: Edward Flaherty <email@example.com> >Newsgroups: sci.econ Article #101671 >Subject: Re: TURMEL: Question for Flaherty and Turmel >Date: Wed Jan 20 11:40:55 1999 > >On Jan 19 1999, firstname.lastname@example.org Charles Michael wrote: >>If Dr. Flaherty is still part of this mailing list I would like to >>thank him for his contribution to a vigorous debate with Turmel and >>others recently. My question relates to the fact that you have >>recently conceded a major debating point to Turmel on the question >>of banks issuing loans out of newly created money. I would like to >>ask, now that you have had several months to think about it, how has >>this affected your views on the nature of the financial system > >My resignation from the debate ("OK, John, you win" were my exact >words) must not be construed in any way as agreeing with Turmel's >points. I had simply had enough of him. He is wrong and my arguments >to that effect are available from numerous sources. >Edward Flaherty, School of Business & Economics, College of Charleston > JCT: This is a pretty good example of what I mean when I say Prof. Flaherty doesn't have the same kind of integrity as engineers do. Though Flaherty did concede "OK, John, you win," now he tries to argue that he didn't really mean it and that he still doesn't "agree with Turmel's points." The problem is that he does not realize that he's not disagreeing with "Turmel's points" since there was only one point at issue. He's actually only disagreeing with "Turmel" even without remembering what point was at issue. The point at issue for those readers who have stayed with the discussion is whether the money coming out of the loans pipe from the banking system is the piggy bank model in Fig. 2 or the chartered bank model in Fig. 3 in http://turmelpress.com/bankmath.htm. Being technically incompetent, he argued that the loans pipe was coming from the reservoir of depositors' savings as in Fig. 2 all the while trying to argue that somehow liquidity was created without having a source. It's this belief in the appearance of new money in the system by magic rather than from a source that makes Economics more of a religion rather than a science. Nevertheless, I had saved my Ace in the Hole until the last post. This Ace in the Hole was a statement of Graham Towers, Governor of the Bank of Canada who explained: "The banks, of course, do not lend out their depositors' funds. Each and every time a bank makes a loan, new bank credit is created, brand new money." So, like a good engineer, I linked the loans pipe to a source of new money just as Graham Towers said it should be. It was at this point that Prof. Flaherty stopped trying to argue that money appeared by magic from depositors' savings without a source and admitted "OK, John, you win." Where loans come from is not the difficult concept that it is made out to be no matter how many Economics professors it may have confused. Either the loan was money was that previously in existence, depositors' savings like when you borrow from a friend, or it is new money that was not previously in existence like new chips in a poker game. But it can't be both. And yet, believing that it is both is what I call the double- think of Economics. But finally, we now have Flaherty who now won't even admit that the loan is new money any more. He used to believe that it was both, which is silly, and now has chosen to believe only the wrong answer. So again, now that Flaherty has taken back his admission that I won the discussion about where the loans pipe is connected to, the reservoir or the source, we have to remind you what he is disagreeing with since he seems to have forgotten already. The only point at issue is his disagreement with Governor Towers' statement and I'm sure every elementary Economics textbook which explains the creation of money will agree that Towers is right. Flaherty's statement does demonstrate the conditioning Flaherty has suffered due to his studies. After all, it's no wonder that he can believe that loans are old savings and new money at the same time if he can believe that "OK you win," means "I still disagree." -------------------------------
Question for Flaherty & Turmel #3
>Date: Tue Feb 2 01:36:03 1999 >From: email@example.com (Dan Parker) >John Turmel wrote: >>Nevertheless, I had saved my Ace in the Hole until the last post. > >Hey John, I got ten aces without even taking a draw. That is ten such >quotes from encyclopedia's to Nobel Laureate economists without even >digging. JCT: I'm aware of many of these statements throughout monetary reform literature but none is as clear as Graham Towers' who not only states that loans are from new money but also points out that they are not from depositors' funds. I doubt you can find many Aces in your Encyclopedia that include both these points which is the reason I use it as my Ace in the hole.
>Did you ever read Flaherty's so-called debunking of the debt >virus (at the U of Florida? some time ago)? What a waste, all the >time and research put towards B.S. economics. JCT: Not only have I read his attack on the debt virus theory but I did a critique of it which I presented to the Economics Faculty at Rensselaer Polytechnical Institute in Troy New York at the end of 1997. It's posted at http://turmelpress.com/drivus.htm. Later articles are replete with Flaherty contradicting himself over and over and should be fun reading for any monetary reformers who understand where money really comes from.
>Imagine if all the work was instead directed at designing a real >system. JCT: The point is that the study of economics brainwashes its students into a cognitive dissonance which rejects the solution itself. I think every farmer or laborer who never studied Economics can easily follow how an interest-free LETS works and how it could work nationally or internationally but it seems that those who have studied Economics are the ones who have the greatest difficulty grasping how an interest-free system could work for the main reason that they cannot accept that an interest-free system can even exist given that "who would lend their money without interest?" That is why they resent so violently the claim that loans do not come from depositor's funds since they have been conditioned to believe that loans must come from depositors funds to rationalize the payment of interest. The very fact that all historical instances of interest-free banking systems have been deleted from their Economics textbooks is not accidental. How could they possibly offer the study of interest- free Spartan clay money, Roman Bronze money, British tallies, American Wampum, Colonial script Continentals, Lincoln's Greenbacks, Guernsey money, and even LETS local currencies to guys who are being brainwashed into believing interest-free currency is an impossibility that must not only be ignored but rejected violently? I'm sure historians will find this conditioning-by-money one of the most interesting parts of these money-mad millennia. I do. Every time I read about politicians cutting funds to life-support systems and then about the resulting deaths due to less police, less fire fighters, less doctors and nurses, less road and bridge repairs, I see the financial insanity demonstrated quite clearly. They kill the poor by cutting life-support funds as if in a trance while chanting the mantra "not enough money to go around." I think this mentality is best shown in NEW LOCAL "CURRENCY" SYSTEMS by Edward Goldsmith and Perry Walker which I've posted at: http://turmelpress.com/gold.htm:
>>The question of State involvement in Time Dollar schemes is clearly >>delicate. Clearly it is in the interests of the authorities to >>stimulate both LETS and Time Dollar schemes. Both seek to assure the >>livelihood of people who otherwise might be seeking unemployment >>benefits and other welfare payments that the state, operating under >>the constraints of the global economy, must be ever less capable of >>providing. For this reason, it should welcome these initiatives, >>even if they marginally reduce its tax receipts. >>This has been one of the objections levelled against these schemes. >>It is argued that they are just providing benefits that the State >>and the corporations should themselves provide, and that, in this >>way, it is discouraged from providing them. There is a certain >>element of truth in that, but the objection is not entirely fair. >>By building up local economies LETS and Time Dollar schemes reduce >>our dependence on the State and corporations, making it far easier >>for citizens to oppose the latter's socially and environmentally >>destructive development policies. JCT: Still, this is the kind of mentality that killed the Worgl local currency experiment in Austria. The poor were climbing out of debt and were gainfully employed and the central bank killed the project and impoverished them all. In the above example, one guy doesn't like LETS helping the poor because government should be doing it even government was doing it. Still, this seems to be the kind of mentality that would kill off a LETS and the poor with it with no other alternative.
>>Finally, it could be argued that the formal world economy is already >>tottering on the edge of collapse. The Mexican crisis we have just >>experience (see Heredia and Purcell) is by no means over and it >>might be but a foretaste of what will soon occur elsewhere, probably >>on a bigger scale and with more permanent consequences. Since today, >>a vast proportion of people depend for their sustenance on the >>functioning of the global economy, this would have the direst >>possible consequences, but they would be incomparably less dire for >>those who have organized their own local community-based economies >>and have thereby partly, at least, insulated themselves from the >>consequences of such an eventuality. >>In any case, as already noted, the formal economy, dominated by the >>corporations and the State, cannot even in the most propitious >>conditions provide all the benefits that were once provided by the >>"kitchen-table" world that it has so effectively supplanted. >>Ralph Nader, in the prologue to Cahn and Rowe's excellent book notes >>how "the serious problems our society faces come from the erosion >>of... the economy., of the family and neighbourhood", and "the Time >>Dollar is a currency designed to reward time spent on rebuilding >>that economy" - and so, of course, are the LETS. That is why both >>these schemes are a source of great hope to us all. JCT: That's why it's so easy to forgive the Flahertys and politicians of the world. They can honestly argue that they were too brain-damaged to understand how the LETS was helping the poor since they were under the impression that what LETS was doing was not possible. Of course, the Rothschilds and Rockefellers who understand the system as well as I do will have no such alibi and that's why theirs will be the most-attended judgments when we get to the other side. Hearing Flaherty plead how he had been conditioned insane won't be half as entertaining as hearing the pleadings of the gyys who understood the truth and did the brain-washing. It's another reason that I keep promising that when the debt- slavery Abolitionists do come to power, we won't let anybody execute the bankers no matter how much they deserve it. People may think I'm kidding when I talk of bankers committing genocide against the poor but I was serious enough to take the issue to the Supreme Court of Canada six times. See http://turmelpress.com/scc3.htm. My motto is and always has been "Forgive and Forget." After all, Ezekiel does promise that should the wicked change their ways and help us save our planet, that God will forget all their sins; so who am I to hold a grudge? No, should I ever get political power and reprogram the killer software, I won't let anyone punish the bankers who are responsible for the hundreds of millions of souls who perished in the face of physical abundance for all. I'm sure God's got something just in store for them.
>Date: Tue Feb 2 04:09:46 1999 >From: firstname.lastname@example.org ("Charles Michael") >Subject: [lets] Re: TURMEL: Question for Flaherty & Turmel #2 >To: email@example.com >Though I do not agree with the tone of John Turmels's attacks on >Flaherty, he does have a point. Flaherty clearly capitulated earlier >and is now trying to weasel out of it by claiming that he was just >"throwing in the towel" on further argument with Turmel. Clearly that >was not the case as he continued posting for a time after his >concession. He has simply fallen back into the comforts of his old >paradigm. Too bad! Charles Michael >PS: Anyone know of a LETS in Colorado, USA? JCT: I can't imagne any tone much worse than calling Flaherty a weasel but weaseling out of his capitulation is what he did so a weasel is he is. Still, considering his clear capitulation, how was I to react when he later boasted that he had provided the arguments necessary to win the debate. The point is that here is a so-called Economics expert who is simply relying on his degree to win the debate for him. After my toying with him and his contradictions for years, people who couldn't stay with the debate may believe that an Professor in Economics must be right when he says he won the debate even if those who could stay with the debate know he weaseled out.
>Date: Tue Feb 2 08:41:17 1999 >From: firstname.lastname@example.org ("Alan Sloan") >To: email@example.com >TURMEL ARGUES: >>Either the loan was money was that previously in existence, >>depositors' savings like when you borrow from a friend, or it is new >>money that was not previously in existence like new chips in a poker >>game. But it can't be both. >Yes it can, and it is. JCT: You'll can't expect that acting like the oracle on the mountain is going to be enough to convince us. Since the only way for you to believe both contradictory points of view at the same time is having studied economics, I'll try to make it even simpler. You approach the casino cashier with your $100 collateral and ask for liquidity. On the right side of the cashier's cage, you see a bank of chips labelled "new chips." On the left side of the cage, you see a bank of chips labelled "depositors chips" in the safety deposit section. When the cashier hands you 100 chips in exchange for your $100 dollar bill, did he take the chips from the "depositors' chips" in the safety-deposit section on the left side or did he take the chips from the "new chips" section on the right side? If you want to argue both, please detail the cashier's hands movements in both sides of the cage.
>This is a technical argument between experts but not a relevance for >"Most people" who think money is just the stuff we use to buy the >things we need. Getting it is a matter of selling ourself in one way >or another, and the basis of the banking system itself is virtually >irrelevant to this important (at the time) process. JCT: Though this is a technical argument, it is not between experts in the system. The only system expert is the engineer who is willing to resort to the blueprints, not the economists who stay from the blueprints like the plague. It is erroneous to even attempt to equate the engineer looking down from the top of the technology totem pole to the economists looking up from the bottom. It is wrong to equate an engineer who insists on a source of new liquidity with economists who insist new liquidity appears without a source by magic.
>This is no to say that people are not aware of a fundamental fault >in the system somewhere... they are, but the prospect of fixing this >problem seems too remote and quite frankly too much trouble or >downright dangerous. JCT: Still, you can't just state that loans come from both sides of the cage at the same time without explaining yourself. x >>>And yet, believing that it is both is what I call the double- >>>think of Economics. >People quite willingly go along with it, though, and the chap you >are were dispute with over this is quite typical. JCT: It doesn't matter what people are willing to go along with if they're wrong. Only the truth matters. Graham Towers says loans come from a source of new money. Flaherty says they come from depositors' funds in the reservoir. Most economists say it comes from both at the same time. I say Towers is the only one who makes engineering sense. Now it's up to you to explain how "it can, and it is" both new and old tokens at the same time. -------------------------------
Question for Flaherty & Turmel #4
>Article #102745 (102784 is last): >From: Paul Dumais <firstname.lastname@example.org> >Date: Thu Feb 4 19:03:27 1999 >John Turmel wrote: >>If you want to argue both, please detail the cashier's hands >>movements in both sides of the cage. >I would like to comment on the possible source of confusion. People >often don't regard money in the bank's computer in the same way as >they do the physical mony (bills, coins or chips). Going back to >JCT's example, the cashier can "physically" move chips from both >piles to the person receiving the loan. However, this would reduce >the balance of a depositor. Since the bank never reduces another >person's account when they loan money, they must have a near >unlimited source of new chips to maintain the depositor's balance. >Therefore, if chips are the accounting system used, it does not make >sense for the cashier to give depositors' money to the borrower, >because he'd have to move an equal amount from the "new chips" pile >to the "depositors' chips" pile to maintain the proper account >balance. Since perhaps 90% of money in circulation is not physical, >the bank simply has to change the electronic number which represents >the borrower's account balance whenever making a loan. There is no >corresponding decrement in any other depositor's account balance when >a banker loans in this way. It is not important to track what is >happening to the physical money, because it is simply another form of >representing balances. The complete understanding is achieved only >when you take into consideration all forms of account balance >representations (cash, poker chips, electronic debit/credit records). JCT: As you pointed out, when they added "number" to the borrower's account, they did not subtract any from any depositor's account. So the loan was definitely new "number." Yet, the whole issue here is that Flaherty is claiming that it came from the depositor's funds and not from new money while many more people claim not only like Flaherty that it came from depositors' savings but also that it came from a source of new money at the same time. If you read the Essence of Money articles at dvirus.htm, or debates at econ.htm at my web site, you'll see over and over how this double think occurs. It's how I catch every economist in the contradiction. I simply ask them 1) where the money for the loan comes from and after they respond "from depositors' funds, I then ask if their Economics textbooks don't state that it's new money to which they agree all the while never realizing that they've contradicted themselves. What's funniest is when it's pointed out that it can't come from both, they still argue that it can and does.
>>This is no to say that people are not aware of a fundamental fault >>in the system somewhere... they are, but the prospect of fixing >>this problem seems too remote and quite frankly too much trouble >>or downright dangerous. >That's right, it is dangerous. We are free to do what we want as long >as we continue to pay the private banks through taxation for the >repayment of national debt. As soon as we annoy the powers who >control the issuing of our money by opting out of the interest-based >economy (and cease being wage slaves) in significant numbers, we will >start to see governments weilding power against us. I might even >predict the use of armed forces against the people. Our only defence >(and strategy) is to maintain all channels of information so that the >examples of power-giving, interest-free communities can influence the >ignorant wage slaves everywhere and keep them informed when their >"democratically elected" government tries to destroy these examples. >These channels of communication will easily be attacked because the >secret controllers of banks can exert power over any corporation >which needs interest bearing money for operations by calling in loans >or by funding a competitor at low interest rates. Individuals can be >fired by threating their employer's with the same measures. This >secret power is absolute and far reaching. But don't worry though, as >long as you keep watching tv and going to work, no one will mess >with you. Paul Dumais, B.Eng. JCT: All true though setting up "do-it-yourself" LETS interest- free currency systems does a lot to demonstrate how the Global version would work to free us from our debt slavery.
>Article #102751 (102784 is last): >From: email@example.com (GChand4059) >Date: Thu Feb 4 16:48:20 1999 >Turmel wrote: >>This has been one of the objections levelled against these schemes: >>>It is argued that they are just providing benefits that the State >>>and the corporations should themselves provide, and that, in this >>>way, it is discouraged from providing them. >> >This has not been the major argument against LETS. The overwhelming >argument against LETS is the progress/development/use of LETS. The >"utility" of LETS. How much time-dollars has Turmel earned? JCT: Wasn't this same argument used to decry the "utility" of insulin after Dr. Banting had developed it but before everyone started using it. Luckily, people did not accept the argument against using insulin because no one else was as I hope people will not accept the argument against using LETS because few are trading with it yet.
>Suggestion: Turmel might consider not putting all his eggs in one >basket. A basket that has been moving so slowly to almost be not >worth discussing. JCT: Dr. Banting was urged not to put all his eggs in the insulin basket because originally it was moving so slowly to almost be not worth discussing. Luckily, most intelligent people base their opinions not on how many other people agree but rather on how the medicine actually works. That LETS has been acclaimed by hundreds of thousands of users as well as the governments of Australia, New Zealand, UK, and various U.S. state governments as a working anti-poverty lifeboat so that such skepticism is clearly not only illogical but also unwarranted.
>The concept of an interest-free economic system is much bigger than >one small, seldom used Lets system. JCT: Though a minority opinion may not necessarily be right, a right opinion on a novel problem always starts with a minority of one. The quality of the system is not dependeng on the votes or feelings of people but rather on the engineering of the design. Much like the quality of a bicycle does not depend on the competence of its riders.
>Couldn't Turmel and other free-thinking economic system people - >just design a system that gets rid of demon interest? (or at least >reduces interest)? JCT: The whole point is that it's already been done. The LETS banking software has been successfully demonstrated in millions of transactions to have gotten rid of, not reduce, the demon positive feedback of interest and the goal now is to have the regular banks offer LETS accounts to their users.
>The FED and now the European System of Central Banking have as their >objective: "stability". - No mention of improvement -They have their >hands full trying to stabilize things. Turmel and crew see past that >to coming up with a better way. But maybe not hanging all on one >tiny scheme would help. Don't flame me I am really trying to help. JCT: Don't consider my criticisms a flame but the fact a working system isn't yet being used by many people does not detract from the engineering quality of the system. Much like the bicycle.
>"We the people get the kind of economic system we deserve." George JCT: I don't think most people had a choice in the system that was foisted upon them. No one chose to be enslaved by exponential debt. As our study of David Astle's Babylonian Woe at firstname.lastname@example.org will show, humankind has been tricked into the impossible quest of trying to repay 11 tokens when the bankers only created 10. And once caught in the trap, there was never a way out without physical revolution which had little chance of success since the guys who created the money got to hire the warriors and politicians to make sure their slavery system remained in force.
>Date: Thu Feb 4 20:20:42 1999 >From: email@example.com ("Alan Sloan") >>JCT: Still, you can't just state that loans come from both sides >>of the cage at the same time without explaining yourself. >Yes I can, because that is how it happens TO me. No one can explain >it to me, so I am mystified. >The process from my point of view is a mystery. i just go and draw >the cash from the machine, and put it back again. What happens behind >the wall is not my concern. You are the one who can't say that the >loans are new money and deposits at the same time because you do not >accept the illogicality of it. If I were not blind deaf and dumb I >would agree with you. For the purpose of this thread I am blind, deaf >and dumb because most people need to be that way to get along. >Economists are professionals at being blind deaf and dumb which is >why I am surprised that any have let you get the better of them. >They obviously took you too seriously. Whatever economics is, it is >certainly a joke. JCT: Okay, I'll accept your reason for not explaining how loans could both be new money and old deposits at the same time as long as you're positive that you believe it's possible because you're mystified and no one can explain it to you. Sounds more honest than most economists about it.
>>JCT: It doesn't matter what people are willing to go along with >>if they're wrong. Only the truth matters. >There is no truth in human affairs only consensual reality. As an >engineer you expect human systems to conform to logical riules that >actually have very little bearing on life. A LETS system analyses >much better than usury....that does not mean it performs as well in >mankind's illogical world. JCT: That's the reason I've reproduced so many press reports about the successful results of LETS hoping that with the testimonials of so many happy users, you might be convinced that it's as easy to ride as a bicycle no matter how illogical the riders or the streets.
>>Graham Towers says loans come from a source of new money. >>I say Towers is the only one who makes engineering sense. >And I agree 90% of the time. 10% of loans are the original deposit >the other 90% are the original deposit recycled, or "new" money. JCT: Actually, the whole loan is new money. The original 10% is the reserve held for the central bank. The original loan is not recycled at all. That's the whole point of the discussion. It can't be both.
>This is semantics. The "new" money and the original deposit are the >same thing. The old money is getting newer every day. JCT: I gave you the choice of using the savings deposits on one side of the cashier's cage or the new chips on the other side of the cage to point out that there is a difference. Once again, you state that tokens on both sides of the cage are the same. I must ask again how you explain that loans are both.
>>Now it's up to you to explain how "it can, and it is" both new and >>old tokens at the same time. >>You approach the casino cashier with your $100 collateral and ask >>for liquidity. On the right side of the cashier's cage, you see a >>bank of chips labelled "new chips." On the left side of the cage, >>you see a bank of chips labelled "depositors chips" in the safety >>deposit section. >>When the cashier hands you 100 chips in exchange for your $100 >>dollar bill, did he take the chips from the "depositors' chips" in >>the safety-deposit section on the left side or did he take the chips >>from the "new chips" section on the right side? >He takes the chips from the "depositors chips" on the left. JCT: If you received a depositor's chips, the number of chips in existence did not change. Yet, the Governor of the Bank of Canada said that your loan came from the new chips on the right side of the cage.
>I say that I'd like to leave the chips on deposit with him, I hand >them back to him, and I leave. They go back into the depositors box. >I don't demand my $100 back at that point, because I am scared of >getting mugged and I trust the bank more than the muggers. JCT: So the chips went back to the left side of the cage.
>The next customer comes in and asks to borrow 100 chips, gets scared >and leaves them on deposit like I did.. this happens another 9 times, >so making 900 new chips out of 100 actually on deposit. JCT: This is actually demonstrates my point quite well. All you did was move the same 100 chips back and forth from the left side of the cage and somehow concluded that you now have a new 900 chips there when there's really on the same 100.
>There are no chips coming out of the new chips box, just the same >chips going in and out of the deposit box. JCT: My point exactly. If loans indeed came from the depositors' chips as you suggest, no new chips were issued into circulation. There are only 100 chips on the left side of the cage no matter how many you and Flaherty think you see.
>And so on, until the government gets scared at the prospect of too >many punters wanting out at the same time, and says to the bank >"Don't lend out any more until someone comes in with another $100." >Which they do, the bank doubles its business to 2000 chips, and the >cycle goes on....but you know all this stuff, it is the classic >banking confidence trick. Even I know this, and I am the nudnik. All >the usury follows from this process of trust generating new deposits, >and things would be fine if the world was infinite. It's like a chain >letter which promises everyone they can have a fortune; it can't >deliver in the long run. You know that. JCT: At this point, you have not touched any new chips from the right side of the cage. You've only touched the old chips on the left.
>What you don't know is how I can accept that the new money is old at >the same time. To you, it is illogical. To "me", it is the same old >story, and sadly I 'll put up with I until I go crazy or die. JCT: But you don't have to put up with it until you go crazy. You just have to accept that you didn't touch any new chips and only shuffled the old ones around and realize that shuffling old ones does not create new ones and it will all seem logical. Governor Towers was right. The chips came from the new chips on the right. It's as simple and logical as that.
>You are blessed with the determination to replace the old system by a >better one, and I am blessed with the patience or stupidity to put up >with that all that endemic, usurious corruption that glues the old >system together. It does not mean I am against change, just that >someone else can do it better, or I am waiting for the time, or I am >quietly beavering away on a replacement. You will never understand >this latter viewpoint because you don't lose. I make a point of >losing half of the time, so I don't suffer that disadvantage. >The cashier's hand has not moved on the right hand side. All the new >chips have come and are returned to the left. JCT: There were only 100 chips on the left when you started and only 100 when you finished. Anything you think you see is purely Economic conditioning.
>In fact the cashier only has one hand, the other one is just sewn on >to the end of his jacket to avoid frightening the customers away and >to give the impression that the game is even handed. It s not. >No new money, just the old stuff repeated a lot so it becomes newer >every time. Alan Sloan JCT: Agreed that your way, dealing with only the chips on the left, there was "no new money." But the whole issue here is where new money comes from and you certainly agree that you have now shown us where new money comes from. All you have to do is accept Governor Towers's statement that loans are from the new chips on the right and not from the savings on the left and now we've explained where the new money comes from, the original question. All you've done is prove to us where the new money "does not come from." -------------------------------
Question for Flaherty & Turmel #5
>Date: Sat Feb 6 11:28:17 1999 >From: firstname.lastname@example.org ("Paul Dumais") >Subject: [lets] Re: TURMEL: Question for Flaherty & Turmel #3 >To: email@example.com >>From: Alan Sloan <firstname.lastname@example.org> >>He takes the chips from the "depositors chips" on the left. I say >>that I'd like to leave the chips on deposit with him, I hand them >>back to him, and I leave. They go back into the depositors box. I >>don't demand my $100 back at that point, because I am scared of >>geting mugged and I trust the bank more than the muggers. >O.K. This is where the confusion arises. If the chips are the only >means of accounting for the balances, how can the cashier issue the >"depositors' chips" for the new loan? Wouldn't that decrease the >balance in at least one of the depositor's accounts? When that >depositor comes to get his money, does the cashier tell him "sorry we >lent out half to a borrower"? JCT: That's the point. Tom Kennedy has great experience in working in a casino cage and could verify that every new borrower gets his very own new chips. It explains why the number of chips in circulation goes up, how the money supply rises.
>I don't think so. What happens is that >it does not matter where the cashier gets the new chips as long as in >the end the depositor's balances are the same. This means if the >cashier took chips from the left side to loan, he'd have to replace >these chips with an equal amount from the right side. This is >equivalent to taking the chips directly from the right side. So John >Turmel seems obviously right to me in saying that loans are taken >from the "new chips" pile. That's right. But as Graham Towers said "banks do not lend out their depositors funds, each and every time a bank makes a loan," it comes from the right side of the cage, never the less.
>>The cashier's hand has not moved on the right hand side. All the new >>chips have come and are returned to the left. >The purpose of these group discussions is quite powerful. You hold an >idea which I believe to be false in some sense. The only way this >group can "prove" anything to you is through a group validation >process. This process of presenting ideas, arguments and >counterarguments usually leads to one or several parties to a >realization that they believe two contradictory statements to be >true. When this happens the person is forced to rationalize and >choose one to be true. More discussion and thought would reveal that >this change also destroys other beliefs. All this can happen to >anyone without resorting to formal logic! The group simply must be >able to use the logic of the person they are trying to convince. >Using this logic, it is usually possible to point out a "double >think" or as in formal logic "all you premises cannot be true if they >lead to a pair of contadictory statements". What people like JCT >should strive to do when arguing is to use the logic system of the >person they are trying to convince. His web site should use the logic >system that he deams to be most universal or he should present his >arguments in several ways. JCT: But what we have here is the argument that the loan came from the depositors chips on the left when we are trying to convince him that they come from the new chips on the right. It's pretty tough to make out point when he originally argued that they come from both sides and now argues that they come from only one side, unfortunately, the wrong side. Still, it's easier to explain which side they come from to someone who doesn't believe they come from both sides.
>To change topics just a bit - here's a thought experiment. Notice how >our examples use only one way of accounting for the account balances >- the chips. To keep the discussion simple we have not discussed >other ways of keeping track of the balances - not even memory! Now >let's use only memory! JCT: This is exactly how LETSystems which do not use a physical medium operate. Pure credit systems. Only computer memory. So let's go.
>The cashier has all the account balances in his memory. JCT: Just as the LETS central computer has all the account balances in its memory.
>A depositor makes a deposit by saying "I'm depositing 5 >dollars". The cashier adds 5 dollars to the account balance in his >memory for that person. The depositor is now free to forget about >that 5 dollars. He deposited his 5 dollars because he is scared to >forget (equivalent to getting mugged in the previous example). Now >whenever the cashier makes a loan, he just adds money to the proper >account in his head. This is new money! This increases the total >amount of money in circulation! JCT: Before the depositor can make a deposit to his account, he must receive it from another member's account who makes a withdrawal or a loan. Whenever the cashier makes another loan, the borrower's account goes negative while the new recipient's account goes positive. The new money was created by the borrower making the loan, not the depositor depositing it.
>If the borrower wants to take his money elsewhere he simply adds the >money to his memory and the cashier subtracts the corresponding >amount from the account in his memory. The total amount of money in >circulation is still unchanged! JCT: When money is paid from a positive balance to positive balance account, there is a destruction and creation of new money. When money is paid from a negative balance to a negative balance account, there is a creation then a destruction of new money. Only when there is the payment from a negative to a positive account is there a creation of new money and only when there is a payment from a positive account to a negative one is there a destruction of money.
>The total amount of money in circulation is once again reduced when >the borrower returns the money he borrowed. This system of accounting >is the simplest and is made practical and secure by a mutually >trusted agent which can also track account balances, but who does not >make transactions. Paul Dumais JCT: This is looking at the process from a less than complete point of view. The best way is to forget pure memory, get yourself some poker chips and do it with a physical model.
>Date: Sat Feb 6 18:58:55 1999 >From: email@example.com ("Alan Sloan") >Subject: [lets] Re: TURMEL: Question for Flaherty & Turmel #3 >To: firstname.lastname@example.org >From: "Paul Dumais" <email@example.com> >>This system of accounting is the simplest and is made practical and >>secure by a mutually trusted agent which can also track account >>balances, but who does not make transactions. >Well, yes, I have no problem with that, nor do I think anyone else >will have. The question of old or new money being the foundation of >the system is not central to my mind. JCT: The whole issue central to our minds was the question of whether old or new money is the foundation of the system.
>it is the confidence in the system itself that means that the money >is created. JCT: Ask Tom and he'll explain how confidence had nothing to do with the integrity of the chips in the system and certainly had nothing to do with the money being created.
>The problem arises, of course, when we actually need to change the >system. The interest charges, transaction charges and the sheer >number of personnel in the finance system are putting a huge load on >the back of the economic and ecological camel, and spoiling the >chances of places in the so called third world and even the FSU >getting into or back to some form of civilisation. JCT: Actually, the solution arises when we actually do change the system. And it's as easily done as switching banking software.
>Magritte Kennedy argued that an interest free currency would >streamline and rationalise the whole system, but such a proposal will >prove very hard to swallow for the extremely rich people who own the >present system, because it would mean that they have to work for >their livings in a productive rather than a parasitic sense. JCT: The fact rich people will find hard to swallow what's good for them is hopefully not relevant. The software must be upgraded before the planet is destroyed from lack of funds to save ourselves. It can only be a matter of time until even rich people realize this. That's why I'm so happy about the ecological catastrophes looming before us. Without them, there would be no reason for them ever to set us free.
>Large numbers of people are actually surplus to requirements in the >financial sector, they do nothing all day but shift numbers from one >place to another gambling on fluctuations on interest rates and stock >movemements. The actual numbers required for transactions in the >the physical economy are probably what, 30% of the total if that? JCT: If by this you mean that that 70% of all transactions have no basis in real goods and services, I'd suggest that we actually waste even more.
>Article #102999 (103037 is last): >From: Paul Dumais <firstname.lastname@example.org> >Newsgroups: listecon >Subject: Re: TURMEL: Question for Flaherty & Turmel #4 >Date: Mon Feb 8 13:11:04 1999 >This argument is unimportant because assets and debts are the same >thing. When I lend money to a friend I increase his account (usually >with cash in hand) and I create an account for him which is negative. >Most people would say that I've lent my own assets. The reason most >people would sy this is because I had to use cash wich is a more >limited resource because it can only exist if I have a positive >account balance. However, what I've really done is created money by >creating one negative account and one positive account. JCT: You can't say you've created money by such a private transaction. The Bank of Canada nor the Federal Reserve would have counted the monetary mass going up. Only when federally chartered banks increase someone's account with a new loan is that new "debit" called the creation of new money. I use the word "debit" in its proper accounting sense. Most people would think that to debit one's account means subtracting from it. Actually, in compliance with making finance as non-understandable as possible, to debit an account, to an accountant, actually means to increase that account while to credit an account, which most people would think would be an increase, is actually a decrease. Is it any wonder that lay people find finance difficult to understand when the terms actually mean the opposite of what they sound like?
>The fact that I had to come up with real currency is a different >issue since probably over 90% of money in circulation is not in the >form of real currency anywhere. That is why if I had lots of friends >who I lent money to lots of friends who deposited cash with me, I >could create lots of money by lending it out. JCT: Again this is exactly the same error made by Professor Simms who in the Essence of money mentioned that he taught his students that it worked just like a piggy bank with the bank lending out its depositors' funds and that all he had to do was count up the new deposits to be able to say that new money has been created:
PROFESSOR JONATHAN SIMMS' EXAMPLE >>Firstly, yes, you are exactly right concerning the process of credit >>creation I described the other day. It is just like a SHARED >>piggybank. >>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 through >the piggy bank plumbing. > At the end of all the transactions there is #100 together with >#900 in loan notes and deposit slips claiming #1000. > Since Economics says that money is the total of deposits, it is >then claimed that #900 in new money has been created. Yet, I only see >the original #100 with a bunch of deposits slips and loan notes. > If a man comes in to cash checks from Alan for #100 and Charles >for #90 on the same day, the piggy bank only has #100 to pay out and I >doubt that man seeking to cash those checks is going to accept anyone >else's deposit slips. He wants cash. And as it's been pointed out, all >the bank has to offer him is #100 in cash and deposit slips. > It's pretty clear that a piggy bank cannot create new money. > Yet, in reality, even though a piggy bank model does not have a >source and cannot create new money, only new notes and deposit slips, >when someone does come into the bank to cash those checks, the bank >actually does pay him #190. > So how is this possible? Where did the new money come from to >pay out both checks when the piggy bank only had #100 money, #900 in >loan notes and #1000 in deposit slips? > The answer was provided in 1939 by the Governor of the Bank of >Canada, Graham Towers, under questioning by Social Credit members of >Canada's Parliament. > Though Social Credit have always said that all Social Credit >politicians must end up corrupted by the political process and for >that reason condemn striving for Social Credit via the political >process, if it had not been for those intrepid Social Crediters in >Parliament, we would have never gotten this admission from the >Governor of the Bank of Canada. He said: > "The banks, of course, do not lend out their depositors' funds. >Each and every time a bank makes a loan, new bank credit is created, >brand new money."
JCT: Professor Simms complained: >Date: Wed Dec 2 10:30:43 1998 >From: email@example.com ("Jonathan Simms") >Subject: Re: TURMEL: The Essence of Money #10 >To: firstname.lastname@example.org >I really do give up. I sent you an explanation of how banks create >deposits, going from the example of one piggy bank, through to two >piggybanks with the use of cheques, ie the transfer of deposits >(claims on the bank) and interbank transactions. >You then proceed to use only the description of one piggybank with no >cheques (using this you then say that nobody would accept anybody >elses deposits slips). If you had used the fullest, more realistic >example, you would not have come to the same conclusions. >I acknowledge that I did say that you should use my email as >you saw fit. I never thought that you would use only the first part >of it, which was for illustrative purposes, and then belittle the >point that was made. >I am disappointed, but somehow not surprised. Regards. Jonathan
JCT: I responded: >>I really do give up. I sent you an explanation of how banks create >>deposits, going from the example of one piggy bank, through to two >>piggybanks with the use of cheques, ie the transfer of deposits >>(claims on the bank) and interbank transactions. > JCT: And you still haven't caught on that your piggy banks have >no source of new money. How come Flaherty finally accepts that "the >banks, of course, do not lend out their depositors' funds" and you >don't? > >>You then proceed to use only the description of one piggybank with no >>cheques (using this you then say that nobody would accept anybody >>elses deposits slips). If you had used the fullest, more realistic >>example, you would not have come to the same conclusions. > JCT: I didn't include it because it made no difference whether >the money was deposited back in the first bank or the other. You >yourself said: > >>For myself I went through the case of two piggy-banks, with no >>cheques. Basically the same result emerges. > JCT: Why should I have included the case of two piggy banks if, >as I said, "the same result emerges?" > >>I acknowledge that I did say that you should use my email as >>you saw fit. I never thought that you would use only the first part >>of it, which was for illustrative purposes, and then belittle the >>point that was made. > JCT: I did not belittle your post. Actually I was very gentle and >saved my belittling for Flaherty's piggy bank example. And all you >illustrated was what it looks like, not how it actually works. I knew >your understanding of the creation of money made the "standard" >economic error but chose to do the number on Flaherty's piggy bank and >spare you the embarassment. > >>I am disappointed, but somehow not surprised. > JCT: That's a cheap shot. Being right in the engineering design >of the banking system, I don't have to ever hide my opponent's best >arguments. I hid nothing which would have had another result emerge. > But it's obvious that you haven't yet seen the connection of the >bank with the source to the source within a LETS bank. > I usually don't write private mail but I don't need to do a >number on you in public. But I suggest you re-read posts #9 and #10 >and if still you want to take Flaherty's place in the argument with >me, I'll publish your whole post and do a complete critique. But >frankly, you had better reconsider your opinion of how I conduct >myself in debate. JCT: Though I challenged him to get himself a piggy bank and using $100, run the deposits and loans over and over he'd notice that he still had only his original $100, of course, Economics being more a religion than a science, Professor Simms refused to accept the fact that piggy banks don't create money and still teaches his false beliefs to his students. I guess he didn't want a complete critique because he never responded.
JCT: Back to the Question to Flaherty and Turmel: >>So in fact, it's possible to lend money that is neither new money >>nor taken from a specific depositor's account. >I think we can both agree that when we lend money, it does not come >from a depositor's account. But if it comes from neither, which >account does it come from? JCT: That's my point. Since it does not come from the depositor's funds, it must be coming from the new chips on the right side of the banker's cage.
>So to the short answer to the what money is being lent: "It can be >thought of as new money or money from the borrower's account". JCT: That's what it is in a LETSystem. It is new money created from the borrower's account.
>Note that the scarcity of money comes from how freely people are able >to spend money. As things stand now, this comes down to the repayment >schedules on all the money in existence. Since currently all money >is owed to the banks, the banks control this scarcity and therefore >they also control the world. Thank-you, Paul Dumais, B.Eng. JCT: Actually, Paul, the scarcity of money comes from the interest charge where you owe more than the newly-created principal that you just borrowed. Don't you see that the moment you borrow 100 dollars into circulation but owe $110 at the end of the year, that the interest had created a scarcity of money which foments a "death- gamble" between its participants, like musical chairs with money. So the final point here is that the Governor of the Bank of Canada, Graham Towers, was correct when he said that loans did not come from the left side of the cage, depositors' savings, but actually came from the right side of the cage, new chips.
>Date: Thu Feb 4 03:13:05 1999 >From: email@example.com ("Charles Michael") >John, Perhaps you can expand a bit on your idea of an interest free >line of LETS credit for everyone. Do you propose, in effect, a "Visa" >with no credit limit? Would there be no formalized requirement that >the borrower or their heirs must repay at some point or do you just >assume they will "do the right thing" some day? Thanks, JCT: I think an interest-free Visa Card would be the easiest way to offer a LETS Greencurrency account to everyone in the world the fastest. Theoretically, I want no credit limit though there would be no trouble having a credit limit. Without interest, the failure rate would be much much less than it is today. Should we opt for a credit limit, there would be a difference between credit used to purchase collateral goods and credit used to purchase consumable goods and services. Credit based on collateral should be repaid at the rate that the collateral depreciates. In essence, a $240,000 home rated to last 50 years would need $4,800 per year or $400 a month in depreciation payments. If after 10 years, a person moves or dies, then the house it pledged back to the bank and the remaining debt erased from his account so that the next person could purchase it for the remaining A $12,000 automobile depreciated over 10 years would have to be repaid at $100 a month while a $24,000 car would be be repaid at $200 per month. My favorite example of how life would work would be for the gambling taxi driver who would "buy" a $24,000 car to be depreciated over 4 years given the higher consumption rate, work for a year to pay the $6,000 depreciation at $500 per month, return the car and take his $12,000 net profit or more to Las Vegas to play Poker for as long as it lasts. Half a year later when he's gone broke, he comes home, takes out another car, works another year, pays the depreciation and leaves for Las Vegas again with his savings to see how long they last him this time. Of course, he could choose to use his earned profits to pay the depreciation on a more luxurious home rather than a basic apartment, he could purchase and pay depreciation on an automobile rather than bus it between shifts, he could choose to spend his money in any way he wishes. I see no problem with an initial limit on consumption spending though I would want everyone to have a totally open line for food, education and health care. If someone were to die in the negative, that negative could be shared by the whole society on the database rather than the person's family, a smaller database. Similarly, if someone were to die in the positive, that positive could be shared by the whole society on the database rather than the person's family as an inheritance. In this way, everyone's money account would be a score-card of how they did in the production and consumption game without the support or detriment caused by one's family. Though I often explain that I will not take away any money from the accounts of the Rothschilds or the Rockefeller children's accounts, I also bet that they won't want any of daddy's winnings in their accounts when it's a fair game in which there's no reason they won't be able to do well on their own. So I'd bet that most of the Rockefeller and Rothschild children will not only change their names to avoid the stigma of being associated with the genocidal parasite families but won't even want any of their ill-gotten gains and will be content with what they can themselves score in a fair game. -------------------------------
Question for Flaherty & Turmel #6
>Date: Thu Feb 18 12:56:46 1999 >From: firstname.lastname@example.org (Paul Dumais) >Subject: [lets] Re: TURMEL: Question for Flaherty & Turmel #5 >To: email@example.com Cc: firstname.lastname@example.org >>JCT: This is looking at the process from a less than complete >>point of view. The best way is to forget pure memory, get yourself >>some poker chips and do it with a physical model. >The point I was trying to make was that sometimes when people think >of the casino chips they also think there is some other accounting >going on - ie memory. For example, how could anyone claim that the >borrower recieved depositor's chips unless they also thought that the >account balances of these borrowers were somehow memorized so that >when the depositor checked to see what his balance was the cashier >would tell him the proper amount. JCT: The point is no one would ever claim that the borrower received the depositor's chips since everyone knows that they're always getting their own new chips. Casino cashiers may hold depositors' chips in the safety deposit section but they do not lend them out.
>Since memory of account balances is often used without realizing it, >I tried to use the analogy of using only memory for tracking account >balances. If we use a nice model such as casino chips, we must also >keep track of any accounting going on in memory or people will get >confused. To summarize: any model must give the complete picture - >including memory accounting. JCT: But all people have to do is count the chips in their possession to know how they're doing. The cashier doesn't have to know any of this stuff and it's quite irrelevant to his doing his job right. No memory necessary at all.
>>Only when federally chartered banks increase someone's account with >>a new loan is that new "debit" called the creation of new money. >I don't understand. Who cares whether or not the Bank of Canada or >Federal Reserve counted the monetary mass going up? In my example it >did - privately. Here's my argument. JCT: It is very important. The way economists measure the money mass is to count the deposits. That's the reason the Professors Simms and Flaherty can watch the same $100 go in and out of the piggy bank, count the deposits in that piggy bank, and even though they've still only got the original $100, conclude that they've created new money. They have not in the piggy bank. Yet, using the casino bank model actually issuing new chips, counting the deposits does accurately tell us how much new money has been created. Since counting when the new money shows up as deposits is how economists have been trained to notice the creation of new money, not counting the creation itself, it's important to note that counting the deposits in a piggy bank is not the same as counting the deposits in a creationary bank. If you don't make the distinction, you'll remain as confused about the creation of money as Professors Flaherty and Simms and all their students. Sad to think that men with so little understanding of the engineering of the system should be its teachers, isn't it?
>Definition - Total amount of money in circulation (monetary mass?): >The number representing the sum of all positive account balances for >a particular currency. JCT: And yet this does not apply to a piggy bank, does it? I challenge anyone to start with a piggy bank and a $100 in bills and somehow end up with more than the original $100 in bills as claimed by our Economics professors. Yet, if the same process if followed using a casino chip bank or a LETS bank, then counting the deposits will accurately reflect the issuance of new money though it would have been easier to count the new money as it was created rather than when it was deposited.
>My private bank can create money. I take my savings and put it under >my pillow (real cash). I put out my shingle announcing the private >bank "Bank of Paul" is now open for business. I loan 1000 dollars to >Bob. I create a negative account for him (Bob's account = -$1000). I >credit Bob's account in Mexico with $1000. The monetary mass >increased! JCT: That's the same delusion that Flaherty and Simms suffer under. I don't care how many times you relend your $1000, you'll always end up with the same $1000 no matter how many new deposits you have. Counting the deposits only tells you the true amount of new money when those deposits were made from loans not made of depositors' funds. This is key. If you are lending your depositors funds from the reservoir, then you are not creating money. Only when you are not lending your depositors' funds are you taking those loans from the source.
>At the start: >Paul's pillow account: $10000 >Monetarty mass = $10000 >At the end: >Paul's Pillow account: $10000 >Bob's account with Paul: -$1000 >Bob's account in Mexico: $1000 >Monetary mass = $11000 JCT: Sorry, you have monetary mass of $10000 with an extra IOU and and extra deposit slip. But no new money.
>According to the above definition the monetary mass has increased by >$1000. My pillow account can be used to cover my small cash >requirements. However, I can charge interest on every dime that I >lend. What I've done is probably illegal. Will I go to jail? JCT: Not unless the extra $1000 you think you have created has the Queen's picture or Ben Franklin's picture on it.
>How do banks verify that electronic money transfers are "real" money? JCT: The very fact they're in "bank accounts" is the certification that they are real money.
>>I challenged him to get himself a piggy bank and using $100, run the >>deposits and loans over and over he'd notice that he still had only >>his original $100. >I hope I havn't made the same error. JCT: You won't realize it until you get yourself a piggy bank and $100 in bills, lend those deposits out and redeposit them, and come to the conclusion that you haven't created any new money.
>My point about deposits was that >I need enough cash deposits to cover my cash loans. In my monetary >mass argument I used a my personal pillow deposit to cover any short >term cash requirements. Any loans in cash would not increase the >monetary mass because my pillow account would decrease at the same >time. However if 90% of my loans do not involve cash, I can really >expand the monetary mass! The Bank of Paul is not a piggy bank! JCT: Talking economic theory can go on forever. Do the piggy bank model and if you manage to come up with more than your original $100, give me a call and we'll both soon be rich.
>>interest had created a scarcity of money which foments a "death- >>gamble" between its participants, like musical chairs with money. >I think my statement is more correct. Here is my argument: >Here's my ace in the hole: Does an interest free currency have >scarcity? It must otherwise it is worthless. In this case scarcity is >not caused by interest but by the repayment schedule enforced by the >currency group. If the group changes the repayment or loan issuing >policy, the money's scarcity would change. JCT: If you try to apply this to interest free chips, you'll see that the value of the chips is not determined by scarcity of chips, the value is fixed by the collateral pledged in the cage. And since there is no repayment schedule at all, again, it doesn't matter when the inflation-free value is pegged at the start.
>>JCT: I think an interest-free Visa Card would be the easiest way to >>offer a LETS Greencurrency account to everyone in the world the >>fastest. >Yeah! I almost forgot about that. Perhaps I should create a card >similar to a department store points card. This would avoid the red >tape of issuing a credit card. By the way, does anyone know how much >red tape is involved in becoming a credit card company (it's probably >a lot)? That give's me the idea of partnering with global department >stores in creating a global currency. If Zellers points and Sears >points and XX points were combined, we could really get going on >this! JCT: I've always said that if Zellers offered a way for me to send you some of my Zellers points in payment for something, it would effectively become a LETS. A really large LETS. The same with Sears. If they let me add to my Sears debt not by purchasing something for me but by sending it to you and reducing your account, though it would have no effect on their total accounts, it would again act like a LETS.
>>Should we opt for a credit limit, there would be a difference >>between credit used to purchase collateral goods and credit used to >>purchase consumable goods and services. >Though a "credit limit" is not strictly required, scarcity must be >introduced such that the currency's value is stable (see my argument >above). JCT: Again, I refer you to casino chips to verify that their value remains steady without any need for them being scarce. They are stable as a given and nothing can change that fact.
>Ultimately scarcity is created by "encouraging" the repayment >of loans. I think an "unsecured debt limit" combined with a maximum >debt to collateral ratio is the simplest way to achieve this. The >central account would ultimately not carry out transactions beyond >these limits. A social assistance account could be set up and run >separately by governments to allow needy people in their countries to >spend for the basics of life. JCT: There's no reason at all for anyone to be chasing debtors once we accept that generating scarcity by forced repayment is unnecessary.
>>Half a year later when he's gone broke, he comes home, takes out >>another car, works another year, pays the depreciation and leaves >>for Las Vegas again with his savings to see how long they last him >>this time. >This sounds like a good idea. An important consideration: The >repayment policies on all debts must remain very stable to prevent >the currency's value from fluctuating too wildly. JCT: I see no reason for any repayment schedule at all.
>For example: The GIFCG requires all debts to be 100% secured by >collateral on day 5 (with payments for depreciation as described by >John). On day 6 the GIFCG requires only 60% collateral on all debts >(with payment for depreciation). The loan would have to be repaid >fully by the time the value of the collateral reached 0. On the days >following day 6, the money supply would suddenly expand and the >value of the money already in circulation might decrease suddenly. >This would create opportunities for speculation and insider trading >by directors of the board (if they could change such policy without >a vote by the membership) and people who have created most of their >savings prior to the change would suddenly lose a certain percentage >of the value of their savings. JCT: Again, I challenge to try this with poker chips to realize that their value remain fixed no matter what is done.
>>In this way, everyone's money account would be a score-card of how >>they did in the production and consumption game without the support >>or detriment caused by one's family. >I would suggest (as above) that democratically elected governments >(or charitable organizations) provide their own accounts for needy >people to use. This would allow the global currency membership to >concentrate on providing the stable currency and leave humanitarian >policy to those whos primary job it is to safeguard the well being of >its constituent people. JCT: There's no reason for charity when we can just give these people their own loans. And those lucky enough to finally find productive employment of lucky enough to win a lottery will then be able to pay their loan without us suffering any anxiety over their failure to pay all along.
>>So I'd bet that most of the Rockefeller and Rothschild children... >>will be content with what they can themselves score in a fair game. >I'd make the same bet (if I was a gambling man). However, as long as >they can exert their power over us poor slobs in secret, we are very >vulnerable to attack. I don't mind forgiving them, but I want >everyone to know who I'm fighting if we meet significant resistance >to our life-saving initiatives. JCT: You just have to read my correspondence with the economics professors to realize that opposition will not be coming from those who understand the evil of their system when they have trained seals to do their squawking for them. And I don't want to "fight" with anybody. I want to do an end run by simply starting our own currency systems and not using theirs to the point where they realise they'd do better offering LETS accounts through their own systems rather than force us to build up ours from scratch.
>Feel free to watch for any such subtle attacks on the creation of a >global interest free currency. We must be prepared for war! Just to >clarify, I'm not referring to things like constructive criticism as >such attacks (those things are obviously encouraged). I'd just like >people to be aware of the power that is held over us by the mostly >secretive controllers of international banks. Such people may chose >to oppose our efforts in many different ways in order to continue >their empire. The most effective and secretive attack might be to >use their money to bribe elected officials (even GIFCG board >members) to hinder progress via legal means. JCT: That as always worked in the past. When Social Credit's Aberhart wanted to start up a provincial LETS to help poor Albertans, the Supreme Court of Canada ruled had no right as it was a federal jurisdiction even though the feds weren't helping. Much like the rich dude the gold.htm article preventing any aid to the poor because the government that wasn't doing it should have been. Or the Worgl local currency which had help their poor and was shut down by the central bank which forced them all back into unemployment. Today, LETS has been officially endorsed by too many governments to be turned back. How could the Canadian government outlaw a system supported by the British, Australian and New Zealand governments? It can't. That's why supporting LETS is the safest monetary reform we can work at. Not technocracy, not social credit. No other monetary reform has ever received such government support before. There's no other way to go.
>Also, they might fund a world wide propaganda campaign which >confuses everyone about the nature of money and encourages people to >accept the existing standard (this is what they've done throughout >history). > -- Paul Dumais JCT: My whole point is that development of LETS is way past the point of no return. Governments could squelch any incipient Technocracy Energy Certificate systems, they could squelch any Social Credit systems but it's too late to squelch the many thousands of government-endorsed LETSystems around the world. -------------------------------
Question for Flaherty & Turmel #7
>Date: Sun Feb 21 02:40:43 1999 >From: email@example.com ("Paul Dumais") >Subject: [lets] Re: TURMEL: Question for Flaherty & Turmel #6 >To: firstname.lastname@example.org >>JCT: But all people have to do is count the chips in their >>possession to know how they're doing. The cashier doesn't have to >>know any of this stuff and it's quite irrelevant to his doing his >>job right. No memory necessary at all. >No memory (or other accounting system) is required in 100% reserve >casino model. JCT: There are no 100% casino models. Casino banks are 0% reserve systems, not 100% reserve systems. 0% chips need to be saved before new ones may be loaned out.
>You need to work on your model to allow the use of fractional or 0% >reserve currency. JCT: My model does not need a fraction of the the chips issued to have been previously saved since it doesn't lend out the deposited chips anyway, it lends out all new chips, like a real chartered bank.
>In a zero or fractional reserve casino a negative balance must be >held in an account whenever a loan is made to represent the casino >bank's claim on the casino chips the cashier loaned. In the 100% >reserve casino this is not required because that casino bank doesn't >need a claim, it actually holds the 100% collateral. JCT: Tom, having worked a casino cage more than most, can you understand what he's saying? Considering he thinks they have a 100% reserve requirement like a piggy bank, should I even try or just state that the since the initial premise is 100% wrong, the conclusion is probably 100% wrong?
>So are there such things as 0% reserve casinos? JCT: They're all 0% reserve casino banks and no 100% ones.
>Fractional reserve casinos? JCT: Why insist that someone deposit old chips before you may issue new chips?
>If not, you might have to abandon your casino model. I don't know >much about casino's, but I'll create a hypothetical 0% reserve >casino: JCT: I hope the zero reserve casino bank you create looks like all the rest of them in the world.
>The 0% reserve casino (called Paul's Casino or PC) issues chips via >a cashier (her name is Barb). She has to be quite a bit more >sophisticated that the 100% reserve casino (called John's Casino or >JC) cashier because she must account for PC's claims whenever chips >are loaned out. JCT: Since there are no 100% reserve casinos, please don't call them John's casino. I can't imagine where you got the impression that my casino had a 100% reserve but it does indicate that you may not understand what a reserve means and have not yet read the banking systems engineering analysis at: http://turmelpress.com/bankmath.htm.
>So whenever customers request loans of chips from >Barb, barb must take down the person's name (among other info) and >create an account for the customer. This account is negative and >represents the amount of the PC's claim on the borrower. How can this >claim be best represented? The most practical way is probably on a >computer spread sheet. A second form of accounting is always required >in such a system. >How would you represent this claim using only casino chips? One way >would be for the borrower to use an electronic chip with the amount >borrowed and personal information imprinted on it. Barb could hold >onto it until the borrower returned the casino chips (or take legal >action if he the borrower failed to do so). JCT: Let's assume Tom is the head casino cashier and is in charge of Barb. Checking up on her, Tom would have simply made sure that for every Hour chip she has loaned out, she has made the borrower sign a marker, an IOU, for that number of Hours owed. In this way, the collateral in the cage, the assets and markers, equals the chips issued into circulation onto the casino floor.
>So any banking system model (other than 100% reserve systems) will >need to include a second form of accounting. The reason for this is >that positive balances can be represented with tokens or chips >because it represents a claim which is accepted in the open market >(there's no need to specify who will fulfill the claim for goods or >services). Negative balances can't be represented with such simple >tokens because a negative balance represents a claim for tokens which >must be fulfilled my a particular person. If the single form of >accounting was more powerful and general, you could get away with >only one form of accounting. Such an accounting scheme exists with >LETS currencies since positive and negative accounts are treated >similarly. JCT: Other than the fact that a casino model bank accepts both markets and IOUs whereas the LETS banks accept only IOUs so far, a casino model bank is a LETS model bank and both are run the same way.
>Anyway, a casino model is a good model for 100% reserve systems. JCT: No, a piggy bank is a 100% reserve model needing a savings deposit before that deposit can be loaned out.
>For banking in general, memory is the simplest model because all of >banking can be thought of simply accounting for individual balances >(both negative and positive). These balances are accounted for using >memory or memory aids such as spread sheets or ledgers. JCT: I think most casinos use chips and written accounts for good reason. As my gambling prof always said: "the palest ink is stronger than the strongest memory." I don't want to use memory in our example until I'm sure you have a handle on how the chips work.
>It's interesting to note that issuing a negative currency (similar to >casino chips) wouldn't work because no one could be trusted not to >lose their negative chips! So the central bank would want to hold on >to them (since a negative chip is the bank's claim on your wealth). >But as soon as you give it to the bank, you will need to keep track >of who owned the chip in the first place. A positive chip tracks its >ownership by physical possession. That's why we give our money to >banks to hold on to, because we don't trust that physical posession >is a secure enough way to track the posession of our tokens. If >you're going to want to give your money to someone for safe keeping >you're going to need a better accounting method than casino chips - >unless you think the bank is going to keep a separate slot for each >of its 12000 depositors. JCT: I find it interesting to qualify chips issued for collateral as positive chips and chips issued for IOU promises as negative ones. It does prove that whether the chips are based on asset or debt makes no difference and proves that Social Credit complaints against the "debt chips" as non valid. I've often pointed out that should Sears permit trading between all those negative accounts, a pure debt money system, it would work fine.
>>>At the end: >>>Paul's Pillow account: $10000 >>>Bob's account with Paul: -$1000 >>>Bob's account in Mexico: $1000 >>>Monetary mass $11000 >>JCT: Sorry, you have monetary mass of $10000 with an extra IOU >>and and extra deposit slip. But no new money. >What do you mean no new money? JCT: Just what I said. I told you to get a piggy bank and one hundred $1 bills and try it out and you'd see what I mean. You did not get the piggy bank nor the bills and you didn't try it out. If you insist on seeing something that's not there when I've given you the laboratory instruments to test it out, then I can't help you. Just because you want to call your new deposit slip money doesn't make it so. Only a registered bank can create deposit slips that are accepted by other banks as money.
>Bob is in Mexico right now withdrawing >his $1000 in cash! The bank isn't going to give him my deposit slip! JCT: If you think some bank in Mexico is going to give him pesos because Paul's piggy bank holds his deposit slip, you're dreaming. They would for the chartered bank of somewhere but not for Paul's bank.
>>>According to the above definition the monetary mass has increased >>>by $1000. My pillow account can be used to cover my small cash >>>requirements. However, I can charge interest on every dime that I >>>lend. What I've done is probably illegal. Will I go to jail? >>JCT: Not unless the extra $1000 you think you have created has >>the Queen's picture or Ben Franklin's picture on it. >What are you talking about? 90% of the money in circulation doesn't >have any picture on it! It's in the form of electronic account >balances or ledger entries. Are you saying no interest is charged on >such money? JCT: Yes, they do. Only credits in registered participating banks are accepted as newly created deposits, not the ones in Paul's piggy bank. That's the reason I'm trying to get you to use the bills and the piggy bank. If you don't see that the piggy bank can't create paper money, it will be ever harder to get you to see that the computer bank isn't created computer money.
>>JCT: Talking economic theory can go on forever. Do the piggy bank >>model and if you manage to come up with more than your original >>$100, give me a call and we'll both soon be rich. >Why do you insist on me using a piggy bank model? Didn't I just tell >you my bank is not a piggy bank? I have never been interested in >using a piggy bank model - ever! JCT: But you agreed with Dr. Simms that it operated like his piggy bank. That is the whole basis of this discussion, whether piggy banks create new money or not.
>I'm not interested in theory, I'm interested in reality. You appear >to be challenging me on something that I never said I believed to be >true. JCT: You agreed with Simms and stated that his model created money and I'm simply pointing out that the example you and Dr. Simms gave did not create any new money, only new deposits which in a piggy bank do not create new money. New deposits only create new money when issued by a casino bank, not a piggy bank.
>Anyway, I'd really appreciate if you could answer my above questions. >As a fellow engineer I'm sure we can come to an understanding as >long as we're both interested in finding the truth. JCT: And as an engineer, you'd remember from the modeling courses that when you created new flow, you needed a source and a sink. When it comes to the creation of new monetary flows, we have the interesting and irrational claim that these flows are created by a system without a source, as if by magic. Every child knows that a piggy bank has no source. You need 100% deposit before you can lend it out. Yet, Dr. Simms insists that after his piggy bank has taken in a deposit and loaned it out, that the money supply has gone up to a sum equaling the old deposits and new deposits. My argument is that only if it is a casino LETS model lending out new money and not old deposits can the old deposits plus new deposits total an increased sum. If you're lending out the old chips, you haven't created new chips. How Economics conditions its students to believe that piggy banks create new money is one of the most amazing brain-washings in history and I hope to get into what makes them think this way in future articles.
>My Bank of Paul (BoP) in the above example is supposed to be a >simplified model of real banks (which you have said are not piggy >banks). So if we are disagreeing about something, it must come down >to a difference between my simplified model of real banks (BoP) and >real banks. Do you have any idea what those differences might be? >Please help. JCT: Real banks operate like LETS casino-style banks except that they charge interest. Some insist that someone deposit a fractional reserve of old money to the safety deposit section before they'll issue new chips while the Canadian banks now need zero reserve of old money to be deposited before they can lend new chips. So the Canadian system now operates exactly as a 0% LETS creationary bank by not demanding any reserve to be deposited at all. This should greatly ease the confusion caused by the old need for deposits which make them look like piggy banks and not even Dr. Simms will be able to argue that the Canadian model is lending out depositors' funds when it doesn't need to take any depositors' funds in at all.
>>JCT: If you try to apply this to interest free chips, you'll see >>that the value of the chips is not determined by scarcity of chips, >>the value is fixed by the collateral pledged in the cage. And since >>there is no repayment schedule at all, again, it doesn't matter when >>the inflation-free value is pegged at the start. >I scarcity, you say collateral. However scarcity has to be more >fundamentally correct since 0% reserve currencies don't have >collateral. JCT: 0% reserve currencies need 100% collateral. Reserve has nothing to do with collateral. It has to do with the deposit of old chips to another section of the casino cage.
>Your 0% reserve casino model is letting you down again. JCT: Your understanding of reserve differs from mine and the economists of the world. Reserves are not the collateral backing up the new money, they are the chips they have demanded be deposited elsewhere before they issue new chips over here.
>If you start using a model which applies to 0% and fractional reserve >banks as well (includes by far most banks in existence) then you'll >come to a realization that collateral cannot be the only >determination of value. I use the word "scarcity" to describe this >the sum of all pressures which give the currency value. For 0% >reserve currencies this is not collateral. It is the policies for >repayment instituted by the central (LETS) bank. What would you call >this sum of all pressures which "encourage" repayment? I like the >word scarcity. Remember my previous post? JCT: You're going to have to accept that your definition of reserves is not collateral.
>>>Note that the scarcity of money comes from how freely people are >>>able to spend money. As things stand now, this comes down to the >>>repayment schedules on all the money in existence. Since currently >>>all money is owed to the banks, the banks control this scarcity and >>>therefore they also control the world. >So the point I made above remains the same. Banks control scarcity >and therefore the money's value. Banks can loan money with little or >no collateral if they choose. They can also require infinite >collateral if they chose. They can extend loans and deny loans for >whatever reason they want. JCT: And that's why they've been so successful at having the value of money fluctuate. Once money is backed up by time at labor on a one-to-one basis, not even an economist will be able to screw up its value.
>>>Though a "credit limit" is not strictly required, scarcity must be >>>introduced such that the currency's value is stable (see my >>>argument above). >>JCT: Again, I refer you to casino chips to verify that their value >>remains steady without any need for them being scarce. They are >>stable as a given and nothing can change that fact. >Again I refer you to the fact that your casino model is restricted to >100% reserve systems. This does not apply to the majority of real >banking systems. JCT: Again I point out that your definition of reserves is wrong.
>>JCT: There's no reason at all for anyone to be chasing debtors once >>we accept that generating scarcity by forced repayment is >>unnecessary. >I agree somewhat, but you must agree that some pressure to repay your >debt must be installed (at least for corporate accounts) in a 0% >reserve system. Do we agree that a 0% reserve system is best? Let's >clarify our definition first: >0% reserve system: banks can issue any amount they wish >fractional reserve system: banks can issue an amount of new money >equal to a fraction of the amount of money they have on deposit. >100% reserve system: banks can issue an amount of new money equal to >100% of the amount of money they have on deposit. JCT: Finally, we agree on reserves. Using these definitions, go back and reread your previous writings on reserves.
>collateral: money or other physical assets which the bank lays legal >claim to in the case that the loan is in default >I realize now that I may have confused the % reserve requirement with >the % collateral requirement. I'll try to be more consistent in the >future. JCT: Yes, the % reserve requirement is not the % collateral requirement. LETS is a 0% reserve requirement bank with a 100% collateral requirement.
>Can we agree that a reserve requirement serves no purpose except >perhaps to limit the money supply (create scarcity)? JCT: Yes, we can agree that insisting that someone deposit old chips to the safety deposit section before the cashier can issue new chips from his till has no purpose other that to confuse economists into thinking that it's a piggy bank model. If you had read my engineering analysis, you'd have noticed that I've already explained this. Why insist on a deposit before you can lend if you're not lending out that savings deposit? There is no purpose. The fact that they insist on a deposit before they can lend is what makes them think that they're getting the depositor's funds from their piggy bank model. And since people have call on the savings chips in their accounts, it doesn't really cause any scarcity.
>Since creating scarcity in this way is not related to how much money >is actually needed to operate the economey without cronic >unemployment, then such a reserve requirement seems silly. JCT: They've got a much better way of creating scarcity of money called interest. This death-gamble mort-gage is created simply by insisting that for every 10 tokens issued into circulation, 11 tokens have to be repaid. How long do you think it takes for the chronic shortage to manifest itself.
>Your casino model appears to be a 0% reserve bank which requires >100% collateral to be held at the bank. Sorry, I know I'm >contradicting myself now. I hope we'll be clear on this soon. JCT: Yet but you've contradicted your former erroneous statements with the right ones now.
>100% collateral requirement isn't all bad, but it seems silly for >people to lose the use of assets just so they can carry around >plastic tokens. If casino chips were the only money in use, potatoes >and farm equipment would have to be used as collateral - seems silly. JCT: They don't lose the use of their assets. They pledge the deeds to their homes and their tractors, make use of them and only pay for the depreciation as they are consumed.
>So that's another reason why your casino model is weak. Lets take >stock of the different methods of generating scarcity. You mentioned >one: 1. "forced repayment". What is that exactly? You can't force >someone to pay something they don't have. So you must mean >repossession of pledged collateral when you speak of "forced >repayment". JCT: Sure LETS could repossess assets on which some people could not afford to pay the depreciation. If a guy can't afford it, there's no reason he should be riding in a yacht. If he can't afford it, there's no reason he should be riding in a Porsche. But if there's a whole stock-yard full of Porsches, I won't mind if my mentally retarded cousin takes one out to use and then later dies in the negative so that I'll have to chip in a share to cover his depreciation.
>2. Limit on borrowing. This limit can be set to 100% of >pledged collateral. Or it can be a combination of collateral and a >written pledge promising to repay. So you are correct when you say >collateral can produce the required scarcity. We should also consider >not creating scarcity (value) by pledging collateral. The reason for >this is that we should consider living in a society where posession >of material wealth is not so important to our well beeing. JCT: Just like in my casino, people could buy in with collateral or with a marker, an IOU for time.
>For example: I live in a coop and pay rent. I'm CEO of a large >corporation but I own no shares. I get paid a salary $120000 >annually. Should I not be allowed to borrow lots of money? Assume >that I have nothing for collateral except a letter of employment. In >this case any collateral requirement seems silly for small loans. >This is how banks operate today in any case. I can get a loan based >on my promise to make regular payments and proof of employment. JCT: How much credit you get for non-collateral spending will be dependent on your earning power as will the kind of collateral depending on your ability to pay its depreciation. But most farmers' kids will be able to sign up for all the tractors and farm machinery they can use.
>>JCT: I see no reason for any repayment schedule at all. >Isn't making payments for depreciation just such a schedule? JCT: Again, my mentally-retarded cousin Herbie may not be able to follow any depreciation schedules but it's no reason he can't go to the stockyard and get wheels, or pick an empty house and get a home, or to the food store and get food. As long as there's abundance, no one will care if you are meeting any repayment schedule and we won't care. Everyone will be too busy getting rich and spending it to worry about the few who can't get rich and are also spending it. Just think of everyone as your cousin before you raise any objection to cutting your cousin's consumption and you'll see that such objections won't arise very often.
>>JCT: Again, I challenge to try this with poker chips to realize >>that their value remain fixed no matter what is done. >Ok. The casino requires all debts to be 100% secured by collateral on >day 5. On day 6 the casino requires only 60% collateral on all debts. >On the days following day 6, the money supply would suddenly expand >and the value of the money already in circulation might decrease >suddenly. This decrease in value is caused by the fact that only 60% >collateral is now required. This means the person leaves the same >$100 with the cashier but gets ~$167 worth of casino chips (which >would be worth $100). Everyone who had $100 in chips on day 5 would >now have only get $60 in national currency on day 6 when they >returned on day 6. If you tell me this never happens in a casino, >you're probably right, because the casino model is a poor >representation of real life. JCT: I'm not going to comment on these kinds of manipulations. If you were the cashier who allowed this to happen and who deviated on your own from my rules of collateral, I'd not only fire you but have you charged with fraud. People all know that Casino Turmel chips are backed up and can never inflate and your attempts to cause such inflation would be treated quickly and summarily. My casino bank worked fine in real life because no one tried any of the inflation- causing activities you suggested.
>Real banks can choose to overvalue or undervalue the pledged >collateral (they rarely ever see the collateral in any case). >So simply via valuation of collateral (and fractional reserve requirements) banks can cause inflation and deflation at will. It all >comes down to the approval or denial of each individual loan. JCT: Sure, you can take a system that doesn't inflate and screw it up completely. But it would be obvious to everyone and you'd be in jail before you got very far. And it would be easily correctable.
>>JCT: There's no reason for charity when we can just give these >>people their own loans. And those lucky enough to finally find >>productive employment of lucky enough to win a lottery will then be >>able to pay their loan without us suffering any anxiety over their >>failure to pay all along. >Whatever, its just personal preference. The democratically controlled >currency group would have to decide how to manage its risk. I'm >assuming only the basics of life could be bought without limit. >Thanks for the fascinating debate. You could give me some >encouragement by telling me whether I've changed your view of the >world in any way whatsoever. You most definitely have (whether I >agreed or not). JCT: My view of the world may be changed but my view of how the tokens should work is based on engineering principles, not my feelings, and that can never change.
>Date: Mon Feb 22 10:48:05 1999 >From: email@example.com (Paul Dumais) >Subject: [lets] TURMEL: Question for Flaherty & Turmel #5 >To: firstname.lastname@example.org, email@example.com > >>Subject: Re: [lets] TURMEL: Question for Flaherty & Turmel #5 >>Date: Fri, 19 Feb 1999 13:09:52 BST >>From: "Jonathan Simms" <firstname.lastname@example.org> >>Reply-To: email@example.com >>To: firstname.lastname@example.org >>Dear Paul, >>Thank you for the email. I really thought that I would stop >>receiving this kind of "debate" when I stopped subscribing to >>econ-lets, but I thank you for your courtesy. JCT: What would you expect an economist to do but chicken out of the debate once he'd lost it.
>>John Turmel has not used all of the descriptions of credit creation >>that I wrote for him. I don't have access to my original message >>right now, but here is the description again. JCT: He's trying to imply that I didn't offer his whole argument and somehow knocked down a straw man and that's why he was not defeated in debate. Yet, the part that he complained about my cutting out had been prefaced with his own statement that it didn't change anything from the part that I had analyzed. I had analysed the section where it was all done in one bank and omitted the part where it would have been done with two banks because he himself had said it was the same. That's why I called it a cheap shot on his part, to be expected from someone running away from the debate.
>>My point was that banks behave exactly like piggybanks, but with >>IOUs as well. Suppose Alan puts 100 pounds into the communal piggy >>bank in his house. At the same time he puts in a note "The piggy >>bank owes Alan 100 pounds". The piggy bank has an asset of 100 >>pounds cash, and a liability of 100, (it promises to pay Alan 100). >I think you are correct. Except I think the whole point of calling >something a piggy bank is that real piggy banks don't use IOUs or >can't hold negative accounts. I can see that your point is valid >despite the fact that my definition of piggy bank is different from >yours. This difference in definitions will cause you and John to >disagree for a long time until you both recognize this silly >difference. JCT: Paul, I'm not going to re-argue this again. It's in the Essence of Money debates starting at numbers 9 at: http://turmelpress.com/lp.htm My point is that I challenged him to get a piggy bank and some actual money to help convince himself that he was not creating any money no matter what he thought he was doing. Again, I challenge you to do the same before you take him seriously. Surely you must realize how silly it is to believe that Simms and his friends and their piggy bank are creating new money when they have no source. But as long as they refuse to test it out and simply insist that it's true, then there's no breaking through their conditioning.
>>Now Brenda comes into the kitchen one day. She needs some cash. She >>looks in the piggy bank, sees the 100 pounds cash, and 100 promise >>to pay Alan. She thinks "Alan won't need all of his money at once, >>I'll take 90 cash". She takes 90 cash, and leaves a note that >>Brenda owes the piggy bank 90 pounds. >>The piggy bank now has assets of 10 pounds cash, and a 90 pound loan >>to Brenda. It has liabilities of the 100 promise to pay Alan. >>For the sake of argument, Brenda pays Charles 90 pounds for all the >>shopping and cleaning he has been doing. Charles takes his 90 pounds >>cash, and puts it into the piggy bank. At the same time he writes a >>note that the piggy bank owes him 90 pounds. >>Now, the bank has assets of 100 pounds cash, and an outstanding loan >>to Brenda of 90 pounds. On the liabilities side it promises to pay >>Alan 100 pounds and Charles 90. >>Brenda, in this example always in need of cash, could go to the >>piggy bank, see 100 pounds in cash, and the claims of Alan and >>Charles, consider that of their 190 claims, they might only need >>access to 19 pounds at that time, and borrow 81 pounds cash. >>The process could continue until Brenda goes to the piggy bank, >>there is 100 pounds cash (and other piggy bank assets of 900 loan to >>Brenda), and 1000 claims , and realise that she shouldn't take any >>cash out, since, Alan and Charles might need access to say 10 per >>cent of their deposits ie 100 pounds cash. >>Please correct me if I am wrong, but this is my understanding of how >>banks create credit. The big difference from the simplified example >>is that with real banks it is possible to use your claims on the >>bank to pay other people, ie you can use cheques. If you have >>deposits in the bank, and you write a cheque to somebody else, you >>transfer your claim to cash to somebody else. >You are exactly correct as far as I can tell. JCT: Get your piggy bank and actually do it and you'll realize that you are both exactly wrong. You created a ton of new deposits and loans with your piggy bank but no new money. I will spend more time going into what makes you both think you see new money after your piggy bank transactions when it's obvious to anyone who actually uses bills and a piggy bank to test it that you aren't. But the process that makes you think you see new money is a fascinating process in itself.
>>With many banks you can transfer your claim against one bank to >>somebody who has an account with another bank. >>Apart from the most narrow definitions of money, most definitions >>include bank deposits. In the shared piggy bank example, the money >>supply has increased (even though the cash is fixed at 100 pounds). >Does John refuse to think that deposits are real money? JCT: That's right. The deposits in the Simms' Communal Piggy Bank are not new money. Do it. Test it. They may act like money as they're transferred back and forth but they are not new money. Only new deposits in a real bank can be called new money.
>I would assume deposits are real money if the bank pays interest on >deposits and there is never any distinction made between deposits in >cash or deposits via cheque. JCT: Make your borrowers pay interest to your piggy bank and pay interest to your depositors all you want but you'll never come up with more than your original $100 in bills.
>I have had similar debates with John and he appears to be stubborn >in that he'll reject your entire point of view based on one part of >your argument. In my case he thought that I was >arguing that my "Bank of Paul" was like a piggy bank. In fact I never >argued this, yet he challenged me to prove my model using a piggy >bank. Well of course I wouldn't accept his silly challenge! JCT: And yet you've accepted Simms's piggy bank thesis completely. Were you not also agreeing with it in the first place?
>Based on this misconception he had about my argument, he was unable >to accept most of my arguments, though they are all valid. JCT: Sorry, but none of your arguments were valid until you realized that you had contradicted yourself and started agreeing with me until you again started disagreeing again.
>John needs to be specific about which parts of my arguments are >invalid so that we can have a good debate rather that assume >something about my argument and reject everything wholesale. JCT: And you have to actually do the modeling otherwise you'll end up contradicting yourself again. Nothing beats testing with a model which Simms has never done. He assumes that his piggy bank has created money because it created new deposits no matter that it those deposits aren't accepted by the banking system unless his bank is part of that system. He cannot challenge the statement of the Governor of the Bank of Canada that the banks do not lend out their depositors' funds. Faced with that accurate engineering statement, he just unsubscribed from the debate and ran away, presumably how he wins most of his debates.
>John, if you're reading this notice how I got to the point about >exactly how I disagree with Dr. Simms. I did not reject his whole >argument as false even though I think he misuses the words "piggy >bank". It doesn't help to debate too stubbornly. I would appreciate >the same treatment when you critique my posts. JCT: He is not misusing the words "piggy bank" since a normal piggy bank works exactly as he described it. My only disagreement is that counting up the deposits made after loans from his piggy bank does not total new money. Only when the loans were made from a source of new chips as in a LETS does the totaling up of the deposits add up to the new money. As long as you accept that the loans came from the new chips section, then counting up the deposits as economists do will give the right answer. Counting the deposits in a piggy bank does not.
>>I don't understand why John Turmel refuses to accept this as a >>description of credit creation. And no, I don't think you have made >>the same "error" that you refer to below. JCT: See above to explain why I refuse to accept that his piggy bank created new money. Only LETS-style creationary banks create new money.
>I don't think I've made an error either. As I stated above, he >probably refuses to accept your definition of "piggy bank", because >what you've described is equivalent to how John describes how real >banks work. JCT: No, what he's described is how a piggy bank works. I didn't see any money being created even if you did. Try it and I'm sure the money you think you see being created is not.
>However, he has difficulty in pointing out his precise >problem with your argument and therefore rejects it entirely. Note >that I may not be giving John justice because I have not been part >of your debate, I apologize to John if this is the case. JCT: I don't think I've had any trouble explaining my objections to his argument at all. Notice he unsubscribed from the debate when I referred to Governor Towers to prove that real banks don't lend out their depositors' funds, only piggy banks to. His running away from the debate is not the same as my rejecting his arguments.
>>>JCT: I challenged him to get himself a piggy bank and using $100, >>>run the deposits and loans over and over he'd notice that he still >>>had only his original $100. >>Where is the problem here? Of course there is still 100 cash. But >>credit has been created, deposits (which are nothing more than >>people's claims on the bank, but are used as money) have increased. JCT: Now it's "of course, there is still 100 cash." But Simms thinks there's more cash. That's the whole point. The credit you and your private piggy bank created is not official credit accepted by the banking system in Mexico. Sure they can be used as money by you and your friends but they are not accepted by banks elsewhere as official money. Only credit created in banks is new money and therefore, those banks were not lending out old funds, they're lending new money. Remember that this issue is about the doublethink of believing that the loans are both new money and old money at the same time.
>>>However if 90% of my loans do not involve cash, I can really expand >>>the monetary mass! The Bank of Paul is not a piggy bank! JCT: Sorry, but your Bank of Paul is still a piggy bank and so is the Bank of Simms. No piggy bank creates new money. If the credit your bank creates is accepted as new money, then it did not lend out the depositor's funds.
>>JCT: Of course, Professor Simms refused to accept the fact that >>piggy banks don't create money and still teaches the falsehood to >>his students. > >>Your example is the same as my example. My whole point is that banks >>really do behave like communal piggy banks with IOUs to the piggy >>bank (loans the bank has made) and IOUs from the piggy bank (the >>record of people's deposits). JCT: And my point is that banks that lend out new money are not lending out old money like piggy banks no matter how much it may look that way. That's the scam that fools the economists into believing that they do both.
>>For the record, I am not a Professor, and I don't teach economics. >>Very best wishes. Dr Jonathan Simms, CROMTEC, JCT: My mistake. I guess his Ph.D. in Economics explains why he sees imaginary new money being created by his piggy bank. -------------------------------
Question for Flaherty & Turmel #8
>Date: Thu Feb 25 17:59:32 1999 >From: email@example.com (Paul Dumais) >Subject: [lets] Now We're Getting Somewhere >John Turmel and other readers, >I really think we're starting to clarify each others differences of >opinion now. I want to make sure these differences are really clear >so that we don't waste too many words on future emotional debate. >Below are some excerpts which have helped clarify what I think is >John's Turmel's, Paul Dumais', and Dr. Simms' position regarding >"piggy banks" and chartered banks and casino banks. JCT: There are only two types of banks as defined in Fig. 2 and Fig 3 in http://turmelpress.com/bankmath.htm. Piggy banks which lend out their savers' deposits and creationary banks which lend out new deposits. You now offer for consideration four types of banks. Sorry but trying to discuss four types of banks when there are only two would raises too many problems. The whole issue in discussion is the question of how piggy banks which which lend out their depositors's funds can also be creating money at the same time. If they are creating new money, they are not piggy banks. You're an engineer. Rather than go through this discussion for four types of only two models in prose, why don't you try to build the plumbing for your four models as I've built the plumbing for my two. I can't imagine you having received and engineering degree without having been taught how to do this. If you try to do such modelling of banking theory, I'm sure you'll run up against the same problem that I did in trying to create new monetary flow without a source, as Drs. Simms and Flaherty keep insisting upon. Once you realize how irrational this is, then you'll realize just how insightful was the statement of the Governor of Bank of Canada who stated unequivocally that loans "are not depositors' funds." but rather come from a source of new credit. Only after hearing that statement did I know for the first time that I had to connect the loans pipe to a source and not to the reservoir as advocated by the Economics experts.
>Paul's Definitions: >Piggy Bank: A container which can contain money. No IOUs are used in >such a bank which is why I would never consider such a bank very >useful. It does not create money. JCT: Sure IOUs can be used in a piggy bank. You deposit money to your piggy bank and your brother borrows it by replacing it with his IOU. It did not create money but it certainly could create deposits and IOUs.
>Chartered Bank: A container which can contain money, and create money >via deposit/credit creation. I don't know if such banks have an >unlimited supply of hard cash though. >Casino Bank: A container which contains chips and can create and loan >chips via credit creation. Can create money. JCT: The chartered bank and the casino bank and the LETS bank are all the same, all three creating new currency when they make loans.
>Bank of Paul (BoP): A bank model which is identical to chartered >banks. It contains money and can create it via deposit/credit >creation. Such deposits are only accepted at other banks which are >affiliated with the BoP. JCT: So this is exactly like the chartered LETS casino bank and as expected, there are only two models, the first which lends out its depositors funds and the other three which lend out new currency.
>Money: A medium of exchange which can be used to pay for goods and >services. This includes deposits which have been created via loans. JCT: Not if they are deposits from a piggy bank.
>John Turmel's Definitions: >Piggy Bank: A container which contains money. IOUs and deposit slips >can be used. Does not create money. >Chartered Bank: A container which can contain money, and create money >via deposit/credit creation. >Casino Bank: A container which contains chips and can create and loan >chips via credit creation. Can create money. >BoP: A bank model which is identical to chartered banks excepts new >money is not created because deposits created via loans are not >accepted at chartered banks. JCT: Only the Bank of Paul differs from our previous examples. If money is not created, then it is necessarily a piggy bank model. I challenge you to do the plumbing model to convince yourself.
>Money: A medium of exchange which can be used to pay for goods and >services. However, deposits created via loans at non-chartered banks >or lenders are not considered money. An exception to this is a casino >bank who's deposits created via loans are considered money though >they are not accepted at chartered banks. >Dr. Simms' Definitions: >The definitions are probably the same as Paul's except for the >definition of a piggy bank. >Piggy Bank: A container which contains money. IOUs and deposit slips >can be used. Can create money. JCT: Have you ever heard of a piggy bank that creates new money? I haven't. Actually, if it creates new money, then it is not lending out its depositors' funds so why demand to have any funds deposited if you're not going to lend them out? Go ahead and try to draw the plumbing and you'll realize that if the loans are new money, the loan pipe can't be connected to the reservoir of old deposits as stated by Flaherty and Simms.
>John, do you agree with these definitions? I have some more questions >I'd like you to answer if you can. Why is your definition of money so >convoluted? If casino's can create money, why can't the BoP? JCT: My definition of money is not convoluted, the definition used by economists is. They define money as anything accepted as money. I define it as a token or receipt for value, including labor. What's so hard to understand? A receipt issued by my cashier in exchange for a fixed value. That's not so convoluted at all.
>>JCT: Surely you must realize how silly it is to believe that Simms >>and his friends and their piggy bank are creating new money when >>they have no source. But as long as they refuse to test it out and >>simply insist that it's true, then there's no breaking through their >>conditioning. >If you test the piggy bank model, you'll see that deposits are >created which can be used as money at affiliated banks. JCT: If you actually test the plumbing yourself, you'll see that the IOUs left by your brother in your piggy bank can't be used as money anywhere else.
>>JCT: That's right. The deposits in the Simms' Communal Piggy Bank >>are not new money. Do it. Test it. They may act like money as >>they're transferred back and forth but they are not new money. Only >>new deposits in a real bank can be called new money. >So since a casino bank is not a real bank, a casino bank does not >create real money either. JCT: No, a casino bank creates its own local currency. A piggy bank doesn't create any currency at all. That's why a casino bank resembles a chartered bank and does not resemble a piggy bank.
>>JCT: Make your borrowers pay interest to your piggy bank and pay >>interest to your depositors all you want but you'll never come up >>with more than your original $100 in bills. >True. I never said that you could get more than $100 in bills. JCT: So why do you believe Simms's claim that he's created more money in his piggy bank when you now admit that he could never get more than the original in bills? That's my point. He can create all new IOUs in his piggy bank that he wants but he hasn't created any new money, only new IOUs.
>There's a nice straw man for you. I didn't build it. So what it comes >down to is that your definition of money is really odd. It includes >deposits created via loans at chartered banks, but not money created >via loans at other banks (ie BoP). JCT: That's because loans from chartered banks are deposits which never existed before and loans from piggy banks are deposits which did exist before. At Simms' and Flaherty's piggy banks, they're lending out the same money over and over and creating new deposit slips but no new money while at a chartered bank, they're also creating new deposit slips but by lending out new money which did not exist before.
>However, it does include money >created via loans at Casino Banks. What is your basis for this >definition? Is it that chartered banks are the current standard and >we should define money as being part of that standard? If the BoP >created it's own standard and had many banks join to become >affiliated with it, would you allow people who used these banks to >call their deposits money? It seems to me you have given the power to >define money to the bankers instead of defining money as it actually >should be defined, quite simply: A medium of exchange which can be >used to pay for goods and services. JCT: There's nothing wrong with that definition but it does not deal with how that medium of exchange is created which is the issue being discussed here.
>Looking at your silly definition above makes me think you are >confused. However, I will give you a chance to modify your >definitions before I get carried away. JCT: Sorry, my definition of money as a token based on collateral is not silly and I don't have to modify it. Sounds like you've already gotten carried away. It's not bright to challenge an engineer on his specialty since you'll probably end up being the one looking silly.
>Even if you accept the reasoning that deposits created outside of >chartered banks are not real money, how do you rationalize calling >chips created via loans in a casino bank money? JCT: I never said casino chips were money. I said that they were a local currency which is created in the same way as money is created. Just as the chips created by my casino bank do not qualify as federal money, so too, federal chips created by a chartered bank do qualify as federal money.
>I think you will have difficulty trying not to contradict yourself. >Feel free to clarify your position. JCT: Like I said, I'm an engineer with 30 years experience in perfect banking and have never been caught contradicting myself though I've caught the economists on a regular basis. Unfortunately, it seems that no amount of clarification is going to ease your confusion so all I can do is challenge you to prove that you're as good an engineer as I am and you go draw the banking pipes connecting to the economy like I have already done and come up with a better solution. Once you've failed, you can always apologize.
>>JCT: And yet you've accepted Simms's piggy bank thesis completely. >>Were you not also agreeing with it in the first place? >I did and still do accept the thesis as presented in his last post, >yes. Though I disagree that he should define his bank as a piggy bank. JCT: Need I say more when an engineer who has not specialized in banking systems wants to challenge the engineer who has.
>>He assumes that his piggy bank has created money because it created >>new deposits no matter that it those deposits aren't accepted by >>the banking system unless his bank is part of that system. >So here again you point out that deposits created at a bank cannot be >considered money unless it is part of the existing banking system. So >by this definition, casinos do not create money since the chips are >not accepted in the existing banking system. JCT: Yes, that it what I said. My casino chips are created in the same way as money but are not accepted at federally chartered banks as money. Neither will yours be.
>I propose that non-chartered banks can create money via their own >banking system, even if they are not part of the existing banking >system. JCT: Propose it all you want. It's wrong. But go ahead. Get a piggy bank like Simms proposed, lend out your original $100 several times then take your deposit slips to your local bank and tell them that it's money and they should give you change for it. If it works, let me know real quick.
>So if I create my own banking system which operates similar >to the chartered banking system and uses Canadian and American >currencies will I go to jail? JCT: How do you propose to do that?
>Will the deposits I create be considered illegal money? Will people be >outlawed from depositing or borrowing from such banks? JCT: As I suggested in the above example, when you try to get your local federally chartered bank to accept your piggy bank deposits as money, they'll be so busy laughing that I doubt they'll call the cops though they might call some men in white suits to escort you to a rubberized room.
>I think you artificially restrict the definition of money. Any bank >which creates deposits and loans and uses these to pay for goods and >services can create money. This includes piggy banks as you've >defined them, but not as I've defined them. JCT: Prove to us that you're a real engineer and draw the connections from your source-less piggy bank to demonstate how your piggy bank created new money.
>>JCT: As long as you accept that the loans came from the new chips >>section, then counting up the deposits as economists do will give >>the right answer. Counting the deposits in a piggy bank does not. >This is problably being repetative, but why are loans made from a >source of new chips called money and loans made from a source of new >electronic tokens or deposits not money as in the piggy bank as you >describe? You see, I consider electronic account tracking identical >to plastic chip accounting. If we operate a system that has a source >of electronic "tokens" that are accepted within the system then new >money is created. JCT: My casino and many casinos around the world have their own source of electronic as well as plastic tokens that are accepted within the system but not accepted as money anywhere else.
>You seem to be arguing that since the BoP's >electronic tokens (created deposits) are supposed to represent >federal dollars that this is not possible since it would not be >accepted by other chartered banks. JCT: Go ahead and create some deposits in your Bank of Paul and tell me if you ever convince your local banker to accept them as payments for your mortgage payment.
>All I'm saying is that I don't care that other chartered banks don't >accept these deposits since I can create a system where other banks >may choose to accept such deposits. JCT: I think you've made my point for me.
>These deposits are money since they can be used to buy >goods and services. You see, my system of banking is identical to >LETS banking except, we don't bother calling our dollers green >dollars or hours. We just keep calling them Canadian dollars or US >dollars. We just have to make sure there is enough federal cash >currency on hand to cover the small fraction that is required by >people who want to carry it around on them. Are you going to be >around screeming "but it's not real money!" while people happily >carry on business and buy and sell goods and services via my new >banking system? JCT: No I won't scream that it's not real money but I'm sure you're sentencing judge rule that way.
>I suggest you will look as silly as your arguments sound right now. JCT: If you go back a few posts, you'll remember when you admitted that you had just contradicted yourself so you'd better stop calling me silly.
>The only argument left to you is to claim that such >banks as I've described are illegal and I'll be thrown in jail. JCT: Go ahead and write a check on the deposit you created in your Bank of Paul and get some merchant to accept it for a purchase and you can bet you'll end up behind bars.
>No one has stepped forward to say that such practices are illegal >yet. So I have to refute your arguments that the BoP cannot create >money. JCT: So use a counter-check drawn on the deposit you created in your Bank of Paul to pay for something and tell me if the judge agrees with you that your deposit at the Bank of Paul was real money.
>As I've already stated, any bank that uses IOUs can create money. JCT: So spend some of that money and tell me what your judge says.
>If you define a piggy bank as being able to use IOUs, then a piggy >bank can create money. JCT: Go ahead and try to spend some of the money your piggy bank created and tell me what your judge says about it.
>>JCT: No, what he's described is how a piggy bank works. I didn't >>see any money being created even if you did. Try it and I'm sure the >>money you think you see being created is not. >Money by which definition? JCT: How about your judge's definition?
>>JCT: Now it's "of course, there is still 100 cash." But Simms >>thinks there's more cash. That's the whole point. >Well if he said there's more cash then he's wrong. If he said there's >more money, then he's right. Cash is not the only form of money as >I'm sure you already know (but appear to get confused about it). JCT: So try to spend some of that money created in Paul's Piggy Bank and tell me what your judge decides.
>>JCT: Sorry, but your Bank of Paul is still a piggy bank and so is >>the Bank of Simms. No piggy bank creates new money. >There's a circular argument that's totally wrong. First you say my >bank is a piggy bank. Why is it a piggy bank? Because it doesn't >create new money. Why doesn't it create new money? Because it is a >piggy bank. Real funny. Are you trying to drive me insane? JCT: I didn't drive you.
>>If the credit your bank creates is accepted as new money, then it >>did not lend out the depositor's funds. >OK! Now you've admitted it! So you accept that someone might accept >my credit as new money! Great! We agree! So if this is true, then I >created new money! JCT: Sure the merchant might tell your judge that he accepted your credit as new money but when he found out he couldn't deposit it at his bank is when he decided to charge you with fraud.
>Is it your opinion that some people who accept deposits as new money >are wrong? JCT: When they can't deposit it at their own banks, they'll certainly know they were wrong though they will have recourse to the police.
>Do you think that even though they are able to carry on buying and >selling with this new money that they are not allowed to call it >money? You have a problem if you do. JCT: No, you'll have a problem with your judge if you do.
>Your entire basis of your argument relies on the idea that some >people are more qualified to call something money than others. JCT: It's got nothing to do with who is qualified to call something money, it's got to do with legislation which calls deposits created in federally chartered institutions money and anything created in a piggy bank nothing more than an IOU for a deposit.
>Even if this is the government, it doesn't make the argument valid. JCT: Tell it to your judge.
>You also admit above that if the other banks accept this as new >money, then my bank did not lend out the depositor's funds. Great! >I agree! JCT: But they only accept deposits created at federally chartered institutions as new money.
>I assume that you define a piggy bank as a bank that lends >depositor's fund. JCT: That's right and I define creationary banks as those that do not lend out their depositors' funds but which lend out new money.
>Since you say that if a bank accepts my deposits as money, then it >did not lend out depositor's funds, then you're saying that my bank >is not a piggy bank! JCT: No, I'm saying that any banker who accepts deposits at the Bank of Paul as new money will end up in the docket with you because your bank was always a piggy bank no matter what he and you considered it to be.
>Super! You've just contradicted yourself, but at least you are >correct now. JCT: No I've been consistent all along. The fact you can't see it despite my advanced engineering analysis puts your engineering degree into question. You've made statements that any real engineer should be ashamed of and you have shown absolutely no mastery over plumbing models. I've challenged you over and over to test out your theories so that the inability to link up the pipes or a few years behind bars might convince you of the error of your ideas. -------------------------------
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