Bankmath Page

>Date: Mon Jan 25 16:15:41 1999
>From: (Peter Schaefer)
>Subject: bankmath page
>Hi John! I wanted to point out mistakes you made on top of the page. 
>But I now see there is just one moot point:
>>Monetary reformers who think that banks use $100 to lend out $900 
>>and collect interest on the whole $900 are incorrect. It is evident 
>>that most interest is paid to depositors and used for expenses at 
>>every stage.
>I do not see this. Usually the interest paid to depositors and the 
>expenses are much lower than the interest paid to the bank. This 
>should mean the difference stays with the bank owners[1], and is 
>usually deposited again.
     JCT: Of course, the interest paid to depositors has to be less 
than the interest taken in by the "spread." Yet, the spread usually 
only represents a couple of percent between all the interest taken in 
and the interest paid out, say 7% paid out and 10% charged. 
     My point was that many monetary reformers argue that since the 
banks can eventually lend out a total of $1000 on a base of an 
original $100, that it means that they take in $100 on which they're 
going to have to pay out $7 in interest while making $100 on 10% of 
the whole $1000 they lend out. 
     I point out that that there must be a deposit of old money on 
which they'll have to pay the 7% before the can lend out any new money 
on which they'll collect 10%. 
     There's a big difference between banks collecting $10 and paying 
out $7 with their argument that the banks collect $100 and pay out $7. 
That's what error in many monetary reform tracts I'm pointing out, not 
the small spread that actually exists. 

>(1)For the entire $100+$900. (reserve rate is 10%).
>Maybe you should make a difference between 'smart' and 'dumb' 
>depositors? And that argument should replace the sentence?[2][4]
     JCT: I'm not quite sure what you mean.  

>(2)Which leads to your interest-free banking system.
>Isn't it just a banking system with less 'smart' depositors ?[3]
     JCT: No, those who join the LETS may not be getting more money to 
buy their future food but they are getting more future food for the 
same money they'll get back. The gain they are counting on is the 
increased production per hour due to technology, not the increased 
money due to usury which eventually inflates anyway. 

>(3)Speaking of monetary systems, it seems that the system of 'annual 
>money' is related to your system this way: With 'annual money', the 
>state sort of harvests an interest+inflation on the money, but 
>doesn't claim it (just destroys it). With interest-free banks, 
>inflation alone can do the same work.
     JCT: If you check with any interest-free casino cashier, he'll 
explain how every unit of currency issued is backed up by a unit of 
collateral so that inflation cannot exist as a given. 

>My favorite system of this would be to destroy the money when the 
>owner does (i.e. subtract as much from his money as a 'dumb' or 
>average person would have made (rest is inherited)).
>The philosophy is to allow everyone who does better to do better, but 
>curb the rest. Also gives fairer starting positions to everyone. More 
>interest-ing game it makes.
     JCT: I'm not quite sure what you mean by this though the 
operation of the usual casino bank has proven to be problem-free for 
the centuries that they've been used.  

>Unfortunately, our broke state(s) probably can't simply give that 
>kind of tax to the federal bank for burning.
>(4)Maybe in good times, the 'dumb' are more 'dumb'?
>So there is no contradiction to the usual lore.
     JCT: I think the only dumb people are those who are conditioned 
to want more interest money for their future food which, after 
inflation, gains them nothing when they could be getting more future 
food for their money.  

>Do you explore anywhere where the sinks of all that money are?
     JCT: Just as all new loans come from the sources (taps) in 
the private banks, so too, all loan payments go to the sink (drain) in 
the same private banks. 

>Maybe rising prices for ground and houses?
>Federal Depth?
>Inflation? [ but that is low ]
     JCT: No, the bulk source of new monetary mass is bank loans with 
a few percent in minted coins and printed notes. The bulk sink of 
monetary mass is bank loan payments with the odd retirement of coins 
and notes which barely affect the numbers. 

>That doubleplus circuit which becomes a singleplus circuit is a
>little bit unclear. May be there should be a transistor to amplify 
>the second circuit heading left by 10 %?
     JCT: I don't understand what you are saying but if you can relate 
your point as if you were talking to me as your casino cashier, I  
think any misunderstanding will be quickly cleared up. It's the 
economists absolute refusal to consider how a casino bank works that 
allows them to remain perpetually confused because if they tried to 
couch their objections in terms relevant to their local casino 
cashier, again, the problems they think they see would disappear.

>I think you should clear out some of your old thoughts and treasures 
>on the web page to become a true glittering cyberhero. Regards, 
     JCT: I have no doubts about the value of either my LETS equation 
or my Miracle Equation as discussion of Carroll Quigley's Tragedy and 
Hope will show. Every single financial paradox and conundrum can be 
explained using the Miracle Equation and its inevitable Shift B 

>I don't think you can feed EVERYONE and all kids that will be in the 
>world today and tomorrow. I bet you could feed more, maybe with your 
>system, but with a population growth rate>>0/1000, this can't work 
>forever. HAND Peter Schaefer
     JCT: I've read that the planet has the resources to support 50  
billion people and think that if all those who were now in 
unemployment and useless industries were redirected into useful 
productive industry, there would be sufficient abundance for all. 

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