Subject: Re: TURMEL: On Social Credit vs Greendollars
On Dec 1
1995 in Article #116853 of can.politics,
huyert@qed.uucp (Timothy Huyer) wrote:
:I re-read Turmel's posts to see if there
was anything that I could add to
:my previous posts. Unfortunately,
the differences seem to be more a
:function of Turmel not understanding
my arguments (although I am certain
:Turmel would argue vice versa!) rather
than missing any important elements.
:
:I will attempt, though, to re-cap conclusions
of my previous posts.
:
:First, one only takes out a loan (at
interest) if one feels that the
:benefit of that loan exceeds the cost
of that loan and interest. In the
:most trivial case, one could look at
investing. If I knew of an
:investment that I expected would have
a 10% return, I would be willing to
:borrow money at any rate of interest
strictly less than 10%. However,
:one does not need to restrict oneself
to monetary returns; economists
:deal primarily with utility. If
I got greater utility by borrowing
:against my future income and spending
that money now than if I simply
:waited and spent the money in the future,
I would be willing to take out
:a loan at interest to facilitate that
present consumption.
:
No one is debating
the utility of credit. Certainly not me. I
want you to borrow against your future
income and spending that money
now because you need that support now
and all I'm asking you to do is
NOT "take out a loan at interest to facilitate
that present
consumption" but to pay a one-time service
charge to "take out a loan
at NO interest to facilitate that present
consumption."
He keeps repeating
the theory that because credit is good and
because they've made it necessary to pay
interest for that credit,
therefore paying interest is necessary.
Credit is just
as good from a Greendollar bank and because
they've made it unnecessary to pay interest
for that credit, therefore
paying interest is not necessary.
This generalizes. Any mutual exchange is carried out only if all
:participants are (weakly) better off
as a result. If the terms of the
:exchange are such that any person would
be strictly worse off, than that
:person simply would not agree to the
transaction. In the case of
:borrowing, for example, if the bank would
only loan me money at 11% I
:would decline the loan and not invest
the borrowed money in that
:investment with 10% return.
:
Unless you're
refinancing your house from a 10% to 11% loan. In
that case, which the case of most death-gamblers,
you don't have a
choice not to take the survival money
at any price.
Your example
doesn't deal with people already hooked in the game.
It deals with you having a new investment
opportunity which you can
decline because the rate has been set
too high. What about the
majority dealing with an old investment
opportunity, their home, which
they cannot decline even if the rate is
set too high. It is pure
financial coercion, nothing less.
: Obviously, when dealing
with the future, there is uncertainty and
:risk. Clearly, people adapt to
these figures. If the investment was
:only expected to provide 10% return (could
be higher, could be lower),
:but the loan was definitely at 10% interest,
the risk averse individual
:would not take out a loan to invest money.
Even risk averse individuals
:might make bad mistakes and end up bankrupt.
:
Bankrupt in today's
world. In a Greener world, he'd only be
highly negative with his future opportunities
as optimal as his past
ones. The concept of bankruptcy just does
not exist under an interest-
free software because we don't turn off
industrial motors just because
they've hit a certain negative number.
Everyone can keep trying with
whatever tools are available.
And that is the
problem with the present economic system. It puts
human motors out of action who are not
yet dead. Just imagine if ants,
bees, termites, used a monetary system
which systematically put a
certain percentage of insects in the colony
out of action. If ants,
bees and termites used money to reflect
their physical achievements,
they would soon also be on the verge of
self-extinction. Just lock up
all the honey and worker ants without
life-tickets don't get any. Just lock
up all the industrial production and worker
people without money
don't get any.
Poverty amidst
plenty, the famous Social Credit description of
the major symptom of usury. Inequitable
distribution the major
symptom of usury. If someone is getting
something for nothing, someone
else is getting nothing for something.
:This is unfortunate but not
:a fault from positive interest rate investments.
If the interest rate
:was 0%, not only would I be willing to
borrow money to invest in
:something that had a 10% expected return,
I would also be willing to
:invest in something that had say, a 1%
expected return. Of course,
:either of these investments might end
up having a negative return and I
:would still end up bankrupt if that happened.
:
Interesting point.
With interest-free credit, projects which have
a 1% return become feasible! As long as
there are idle workers and a
positive return is possible, we can go
after it. Today's world cannot.
Competing for loans via return, opening
casinos are a better
investment than improving the mouse-trap.
But even the small demand
for a better mouse-trap will be catered
to.
: But the
option of not borrowing always remains,
:
Upon this we
again fundamentally disagree. I say that once you
have mortgaged your house, you'll have
to refinance at whatever rate
they offer you or you lose your house.
This is coercion and the option
of not borrowing does NOT always remain.
I thought I'd gone over the
predicament of those who are already hooked.
And they do represent the
majority.
:and this is why
:Turmel's mortgage gamble model is irrational
-- the players are denied
:the option of not borrowing, not playing.
:
The model is
modeling the 11 for 10 contract, not the players,
though it does show what happens to the
participants. I earlier
explained how it's not a model that is
irrational but what the players
in the model do which might be. You can't
use those kinds of words
with respect to a model.
Whether you're
playing 11 for 10 pledging a watch in the model or
your business in real life, it's the 11
for 10 game which is being
modelled, the logic of getting into it.
The model takes
over when all the mortgages have been signed. The
model doesn't tell the inducement that
gets people into the game. When
you signed your mort-gage, that inducement
was the deal: "With the 10
you get now, you'll get a better education
which might let you pay
11." When the butcher signed his death-gamble,
his inducement was
"With the 10 you get now, you'll provide
a better meat and might let
you pay 11." When the dentist signed his
11 for 10 promissory note,
his inducement was "With the 10 you get
now, you'll provide service
and might let you pay 11."
In all cases,
yours included, the alternative was to not get the
loan and all the impediments that entailed.
I'm trying to tell you you
are being coerced into paying interest
when you shouldn't have to and
you're arguing you like it. Think about
it.
:Second, in regards to the alleged tap
that charter banks are supposed to
:have (in actuality, I would imagine that
if charter banks have a tap, so
:must other near bank financial institutions.
The process that credit
:unions et al follow is identical to charter
banks, the only difference is
:that these near bank financial institutions
do not have accounts in the
:central bank. M2+ and M3+ account
for deposits etc in near bank
:financial institutions as well as in
the charter banks).
:
Turmel follows how money flows through the banking system and
:thus results in deposits and loans significantly
larger than the amount
:of cash in existence. The problem
is that he suddenly concludes that,
:since loans exceed cash supply that banks
have created money from
:elsewhere and not loaned depositors'
money.
:
I'm going to
play my Ace now. "Not loaned depositors' money" is
Turmel's allegation. Whether new money
banks create comes out of
a tap or whether it's old money lent out
over and over. It started
with the question:
: I noted a perfect
example of Orwell's "double-think" in one of
:the articles. Double-think was defined
as the ability to
:simultaneously accept two contradictory
points of view as both true.
: On Aug 24 1995,
wfhummel@netcom.com (William F. Hummel) wrote:
::A bank loans money that it receives
from other depositors...
: In the next
paragraph, he says:
::The money supply increases whenever
a bank creates a new loan, and it
::decreases when the loanee pays off the
loan.
:Can anyone else see the double-think
here?
:John C. Turmel, B. Eng.
The essence of
all our arguments is that you say the money supply
can be increased by relending the same
depositors' savings out of the
loans pipe and I say the money supply
can only increase by the loans
pipe being connected to a pump.
I hate turning
to authorities when we have the plumbing and we
should be able to judge for ourselves
but I will now cite my one
ultimate Canadian financial authority
as backup for the fact that
depositors' savings do not come out of
the loans pipe, only new bank
credit from the tap does.
In 1939, Graham
Towers, Governor of the Bank of Canada, before
the Commons Banking and Finance Committee
testified:
"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."
Again, I point
out that it's not hard for me to connect the pump
to the loans pipe or the battery to the
loans wire. You're showing me
10 times the voltage of your first battery
and claiming the financial
power is magnified 10 times by reusing
the same battery over and over
and I say it can't be done. For banks
to create new money, I have to
see a voltage source.
So the Governor
of the Bank of Canada says that "the banks, of
course, do not lend out their depositors'
batteries. Each and every
time a bank makes a loan, new batteries
are created. Brand new
charge."
I know many might
feel it unfair to argue a dozen rounds with an
Ace in the hole, but the Graham Towers
quote is in my Mathematics of
usury and had Tim read it, he would have
seen it hanging over this
debate like a sword of Damocles over his
model.
I don't think
I could have proven my point about the double-think
implanted on everyone in society with
respect to banks lending out
their depositors' funds without such vigorous
debate. If you went up
to the average person and repeat the truth
we've concluded:
"Banks do not lend out your deposits,"
you'd run up against the first wall of
cognitive dissonance. Everyone
originally dealt with piggy banks as children
and instinctively knows
"you need a deposit before you can lend."
Everyone reacts: "Of course
they lend out my deposit. Why else would
the borrower pay me
interest?"
Over and over,
everything in people's experience leads them to
conclude that banks lend out their depositors'
funds and getting them
to accept that "banks do not lend out
their depositors' funds" is like
undoing brainwashing. Cognitive dissonance.
Even if it's the truth,
they can't believe it because it goes
against everything they've been
trained to believe before. Cognitive dissonance.
When people hear
bankers repeat "Deposit your savings so
we can lend," it's natural to
assume they are waiting for savings to
lend out; if you don't know the
loans are coming out of the tap.
That's why finding
out loans are coming out of the tap is such a
shock to the cognitively dissonant. Tim
can deny the existence of a
tap in the chartered bank plumbing stating
there is only a tap at the
central bank while admitting that the
money supply goes up when the
central bank makes a loan and when the
chartered bank makes a loan.
Why accepting a tap at the central bank
is so easy while accepting a
tap at the private banks is so hard is
again testament to the piggy
bank theory of savings for loans versus
the casino bank theory of new
chips for loans.
Finding out that
loans come out of the pump cannot be accepted by
the subconscious because it destroys the
rationale for having been
enslaved by the interest all their lives.
No one wants to admit
they've been suckered but to find out
that you've paid interest all
your life believing it was the only way
you could get credit from the
depositors when you were actually getting
credit from the tap makes
some people really irate.
And that he fell
for the bankers saying that his deposits were
down and that's why they were cancelling
people's credit lines when
they didn't need the deposits at all,
evidenced by the recent doing
away of the reserve requirements, some
people get really irate.
That my government
has handed over the creation of the chips to a
bunch of loansharks and then gotten in
line to compete with me for a
loan is the height of insanity when that
government could take back
the creation of the chips and we could
eliminate the middlemen from
our transactions completely.
It seemed through
these discussions that no matter how much I
inferred that there had to be a tap, this
went against the grain to
the extent Tim had to deny the existence
of the tap.
Now he had to
explain the appearance of real money without a tap
and rolling the same liquidity over and
over just didn't come up with
the batteries.
Up to now, Tim's
had the cognitive dissonance of an education in
Economics to explain the refusal to accept
that banks do not lend out
their depositors' funds. Now that he's
faced not only with the
plumbing showing a tap but the statement
of the Governor of the Bank
of Canada indicating a tap where "banks
do not lend out their
depositors' funds" and that "each and
every time a bank makes a loan,
it's brand new batteries," he has no excuse
but to sit back and
re-evaluate in light of my Ace in the
hole.
This is one statement
I personally verified in Hansard for 1939.
:
I had demonstrated a mathematical series that virtually mimics
:what I believe Turmel called the piggy
bank model. With a reserve ratio
:of r, say r=0.1, and all money ending
up in the bank, each dollar in cash
:creates $10 in deposits, $9 in loans,
and $1 in reserves, the last item
:being entirely cash. Turmel was
correct in calling the additional $9
:e-money, electric money, since it really
only exists electronically in a
:bank's computers (originally, though,
it existed only in ledger books,
:before the microchip revolution).
However, it is obvious that the bank's
:assets -- loans plus reserves -- are
matched by its liabilitie --
:deposits. In fact, at each stage
of the lending/depositing process, the
:depositor gives the banker cash and the
banker gives the lender cash that
:the banker has at hand.
:
Here's an added
explanation of why Tim can't see a tap. He's
watching the paper tokens going into and
out of the banker's till.
He's not looking at what's happening in
the computer accounts.
I explained that
when cash comes in, the soul of it is deposited
into the depositor's emoney account. When
another saver decides to
take some of his emoney out, he brings
it to the cashier who lets him
leave with that paper money.
The fact the
depositor deposits paper money and the borrower
receives that paper money forgets that
there's been a switch of souls
in that money which took place in their
computer accounts. When Mr.
Jones deposits a $100 bill and Mr. Smith
borrows it out, Mr. Jones'
emoney account went up and Mr. Smith's
emoney account went down. It
wasn't the same money leaving the bank.
Entering the bank was Jones
emoney dressed in a cash coat and leaving
the bank was Smith emoney
dressed in the same cash coat.
I rarely delve
into how this movement of paper money helps
deceive the viewer into believing that
no pump exists. Tim sees the
Jones money go into the till and Smith
take it out and concludes that
there can't be a pump. What he fails to
realize is that the real
action is taking place in the emoney computer
and the movement of the
real emoney backing up the cash is invisible
to the eyes of those
watching the cash.
Cash is a cloaking
system. Two forms of emoney are leaving under
the same cash cloak. Withdrawals from
the reservoir go to the till to
put on the cash cloak to leave the premises
or loans from the pump go
to the till to put on the same cash cloak
to leave.
Furthermore,
in repeated talk about the pump or the tap, we've
neglected it's corollary, the sink or
the drain.
When you accepted
Mr. Robert's cash in your store, the ownership
to the emoney under the cloak changed
to you. When you go into the
bank with that cash in hand, your emoney
comes out of the cash in the
till and goes into your emoney account.
But if you are
repaying the loan principal, the converse of
getting the loan principal, your emoney
leaves your cash cloak at the
till and goes down the drain thereby reducing
the volume of money in
circulation.
Count up all
the new loans made by the banks this week and all
the principal payments on those loans
and that's how much new money
was pumped into circulation minus money
pumped out for the weekly
numbers reported in the newspapers.
The fact that
they count the increase in the money supply by the
volume of new loans is another Ace proving
that loans are new money.
And the fact they count the decrease in
the money supply by the volume
of payments on principal proves that paying
loans extinguishes them as
money.
As a matter of
fact, I can't think of a greater reason why most
people think banks operate like piggy
banks than what goes on in front
of their eyes at the teller's till. We
all put in bills as deposits
and we all take out bills as loans and
this certainly helps cloud
what's going on in the computer. It's
a wonderfully intricate shell
game but with genocidal consequences.
The real question is whether
there's an invisible pump behind the cash
Tim's watching moving in and
out of the till.
:
I really cannot see another way of explaining that this was not
:resultant from the banks having a tap.
I apologize for having reached
:the very limits of my ability to explain.
:
It is also obvious that there are more deposits than loans,
:i.e., there is not only money in existence
to cover loans but also the
:interest.
:
Stop. We were
talking about the tap of money coming into
existence. We're not into the 11 for 10
Rule of Return. I state that
every injection demands the removal of
it and more. And saying it's
obvious there's enough money to cover
the interest is jumping to an
unwarranted conclusion.
Every dollar
that comes into existence is born with a debt to the
banker bearing interest. The very next
day, the debt is always greater
than the loan you received. The next day,
the aggregate debt is always
greater than the aggregate loans received.
Derived from the concept
that (Principal + Interest) owed is always
greater than (Principal)
received.
:
I suppose Turmel could reply that the model I presented is not
:wrong, per se, but that his is better.
:
No, your choice
of the piggy bank plumbing is NOT not wrong. It
is wrong. And my choice of the casino
bank plumbing is not better, it
is right. I'm standing my ground because
if this simple plumbing model
is correct, it necessitates a fundamental
revaluation of economic
theory to date.
If it took an
engineer to see a systems engineering approach to
monetary system design, so be it. It is
done and can't be undone. If
I'm right, the a lot of economists are
going to have a lot of
explaining to do. Telling the world you
grasped this stuff when it was
full of nutsy double-think won't be something
they'll be proud of.
But once you've
seen the plumbing, there's no denying the truth.
This LETS Greendollar software could not
only provide currency for
full Local Employment Tradings all around
the world but it could
provide currency for the full Employment
Trading for the Federation
of Planets, interpolating and extrapolating
Earth as also operating at
full employment trading.
:However, in previous posts I also
:did some work showing how Turmel's model
would not lead to equilibrium
:point, which is a necessary condition
for the model to explain anything
:which has not fallen to _complete_ chaos
over time.
:
Sure, a casino
chip matched one-to-one to collateral would not
lead to equilibrium because it is always
at equilibrium Greendollar
systems are at equilibrium all the time.
Positives always balance
negatives. If it starts balanced and positives
are always created with
negatives, it can't be unbalanced. To
say it doesn't lead to
equilibrium fails to note that it doesn't
have to lead anywhere when
it's already in equilibrium.
:There was some additional mention of scarcity.
Turmel correctly pointed
:out that there are sufficient resources
to eliminate extreme poverty
:(indeed, most if not all poverty) worldwide.
This is a distributional
:problem and a very valid criticism of
how the world is operating.
:
Let's keep that
in mind. There's nothing wrong with the engine
but only a failure to distribute its energy
properly. The problem is a
failure in the human ability to purchase
which is registered on the
financial dial.
: It is
:not necessarily a social credit criticism;
:
I'm glad to see
that the Socreds may have been somewhat cleared
in your eyes. But remember, they looked
at the 11 for 10 dilemma and
said just like you. Balance the extra
interest with new chips.
That's what's
sad because I've had difficulty with the old
Socreds who thought they really understood
this stuff. When I now come
along and say that all the ways they had
thought of to up the money to
balance the debt won't be needed anymore
because we've found a way to
keep the debt balanced to the money automatically,
it's as if they
don't want to accept the better innovation
because they never really
got the chance to show off how their balancing
act would have worked
too.
Remember, I posit
two solutions to our dilemma. Eliminating
interest as the one and only evil which
you aren't yet convinced is
the solution or balancing the interest
which initially struck you as
the way out.
If you're not
going to be a "LETS eliminate the interest" Social
Crediter, the least you should become
is an old "balance the interest"
Socred. Because, they'd be 100% behind
your balance the debt
solution.
But Socreds do
score a higher ratio of those who hear about LETS
Greendollars and quickly understand. It's
no accident that in LETS is
expanding so quickly in U,K, Australia,
New Zealand, Canada. These
were all countries where Social Credit
had major movements. Perhaps
those Social Credit preachers made it
easier for today's generation to
accept that we'll use our own chips even
if we forego paying interest
to use the loanshark's down the block.
:my criticism of the
:distributional problem is a socialist
one and does not depend upon the
:problem being one of usury per se.
And the problem
I've always encountered with Socialists is that
they have no policy with respect to the
money pump. They talk about
socialized medicine, socialized day-care,
socialized environmental
care but they don't speak of socialized
credit as a social service. To
use the pump to society's credit, you
have to go through a middleman
loanshark. It's not his money I'm getting,
it's not the money they're
using in the reservoir show, it's new
money I'm getting from the pump
on the casino's chips. Credit is probably
the most important social
service we could ever get. And fixing
the credit system is just never
discussed.
Look at the Reform
Party which sprung up in English Western
Canada led by former Social Crediter Preston
Manning. If you look at
all the suggested reforms in their platform,
you'll notice that this
former leader of monetary reform has promised
every reform under the
sun but money reform.
He had many ways
to reform how we rule ourselves.
He had many many
ways to change the tax splashings in the pool.
But he had no
way to reform what was going on in the pump house.
No monetary reform.
Bankers must
like giving loans to political parties who do not
have monetary reform on their agendas.
Rich people must like giving
loans to political parties who do not
have monetary reform on their
agendas.
And bankers finance
all socialists who don't have monetary reform
on their platforms. They'll help you form
a party protesting how tax
money is splashed around, protesting how
we rule ourselves, but never
to protest what they're doing in the financial
pump-house.
To say that Banking
Families form the invisible Elite is trite.
The Elite are those everybody including
nations are bowing to. And
that's international bankers. They sit
on the boards or all major
corporations or those corporations don't
get finance. They vote the
corporate stock left under their care.
The have the decision on
granting life-and-death loans.
Interesting hypothesis.
I've thrown all
my spare resources for the past 15 years in the
fight to install the upgrade LETS money
software on the World Bank
computer. I invested a few of my major
jack-pots in the enterprise.
I've always felt
that the world's richest 50 men, probably all
bank-owners, could organize the installation
of a global LETS giving
each person an interest-free credit card
and checking account.
I wonder what
would happen if Bill Gates got it into his mind to
try to deliver access to interest-free
credit to the starving masses
of the Third World. I bet he could do
it with a few billion dollars
because I, as a humble electrical engineer,
think I could do it. Give
Michael Linton, the designer of the original
LETSystem, a few billion
dollars and I think he could deliver global
access too.
:
Nevertheless, scarcity still exists.
:
Scarcity of physical
wealth is not the problem, it's the rule of
11 return for 10 loaned out which generates
the initial artificial
scarcity of the money tokens we use to
represent that wealth. Tokens
are in short supply, we think wealth is
in short supply. It's a trick.
:Scarcity simply means that
:it is impossible for every person on
the planet to be satiated; to have
:all of their possible demands filled.
:
This doesn't
mean we can't come close. And because only 99% of
our earthly demands are satiated, I wouldn't
call this scarcity.
It's the oldest
dogma of poverty economics. I read it in the
early pages of my first Economics book.
Since man's wants are
infinite, there will always be scarcity.
Tropical islands with too
many fish and coconuts are ignored under
the scarcity model.
:I may have enough to eat and be
:satiated there, but I still want a better
computer. If I got the
:computer then I would still want a car,
and so on. Perhaps I would be
:satisfied before I owned the entire planet,
but aggregate demand exceeds
:aggregate supply. Hence, scarcity.
:
Everybody wants
to own everything so assume there must be
scarcity.
Scarcity is an
opiate to the conscience. We see people starving
on TV, we reason "Scarcity, better them
and us." We see wars and
revolutions, we reason "Fighting over
Scarcity, better them than us."
To find out that there is no scarcity,
that there never was, and
they've made us believe life-support was
scarce when only money had
been made artificially scarce, is an insult
to our intelligence.
We can look back
at the last Great Depression when the world ran
out of money and banks made everybody
lay down their tools and end
their productive boom. They went from
knowing they were producing in
abundance to believing everything was
gone just because their chips
had been taken out of circulation. All
that human misery of the Great
Depression for the profits of the loanshark
banking industry.
:Again, other then repeating myself, I
do not know if I can further
:explain these points. I had suggested
previously that perhaps textbooks
:might have better explanations since,
after all, the authors are smarter
:than me, have teaching experience, more
time, and editors.
:
I find it hard
to accept that there are whole bunch of textbooks
out there which say that Governor Towers
was wrong when he testified
that banks do not lend out their depositors'
funds. I personally found
that most books do acknowledge that loans
are from newly-created money
while at the same time fostering, without
stating, the continued
notion that banks do lend out their depositors
funds. If you'd check
most Economics text-books, they might
explain how banks hand out cash
to borrowers taken in from depositors.
That, and the fact they have
depositors at all, cements the notion
that depositors' funds are used
for something and the obvious use is loans.
I think most
are quite clear in admitting the money supply does
increase with the issuance of a loan and
it seems that the question
left for them to admit is that this increase
comes from a pump and not
the reservoir. This observation they cannot
face.
:
Otherwise, I am prepared to accept that my ability to explain is
:not sufficient for the task. If
there are new points which I have not
:addressed, I will attempt to respond
to those, but I cannot see the point
:of being repetitive. In the ground
otherwise covered, I would like to
:say that I believe I do understand what
Turmel is trying to demonstrate,
:but that his conclusions are wrong (and,
perhaps, Turmel would argue vice
:versa).
:
I think my conclusion
is simply that interest is a destructive
way of paying for our monetary accounting.
This conclusion has been
expounded by most of the major philosophers
and saints in history. The
real different between then and now is
that for the first time in
humankind's history, there breaks on the
horizon not only a ray of
global interest-free LETS sunshine but
the very possibility of
instantaneous and universal cure. Quite
the potential.
I would like
to hear Tim's explanation of where all the poverty
around us stems from if it does not stem
from the initial 11 for 10
promise at the bank at the start of the
game.
:
If there are lurkers on this thread (if Turmel and I have not
:scared you away with our epic length
posts!)
:
You shouldn't
think that everyone is daunted by lengthy debate.
This series of long discourses has generated
only two irate readers
and considering how many people read my
TURMEL articles looking to be
irate, it's quite an indication that everyone's
staying with us.
This have suffered
under a lie about the creation of money for so
long, that many people find the subject
as fascinating as I do. Sure
we deal with dozens of points in detail
and it's nowhere near the 15
second or two line sound bite most are
used to but if they've been
following the debate, I'd bet they don't
want to interrupt.
I must admit
that you've forced me to break new economic ground
with my engineering jackhammer. You've
prompted discussion of reserve
ratios which I'd never dealt with in that
particular way before. We've
shown how "runs on banks" used to occur
and why. It may be that as the
plumbing was cemented in our debates,
that made other angles clearer.
We may have certainly had a tussle in
the plumbing and darn if I
didn't think I dropped you on that pump
over and over again, and even
I gained new insights into using the plumbing
model. There's lots of
brand new unique stuff I'll have to integrate
into my regular posts.
:and any of these lurkers
:have additional questions, please e-mail
me (and I am certain that Turmel
:extends the same invitation).
:
Actually, I don't
like answering detail via mail. New questions
focus new angles and I'd like to think
of all new angles on this
esoteric money-creation topic as a valuable
education. I'd rather
effort here be public.
:Dependent upon time constraints and my
:already acknowledged limited ability
to explain, I will do my best to
:reply fully.
:
I know it must
be upsetting to have me state "I'm an engineer and
I know more about economic plumbing than
your Economics professor's
do." But the economic system can be looked
at from two angles, the
Systems Engineering angle, top looking
down, and the Economics angle,
bottom looking up." (sorry, it's a standard
barb in my speeches)
It's a fact that
the way the creation of money is taught in
Economics courses is totally confusing
compared to following the
pipes in a plumbing blueprint.
I'm still going
to demand my due. Once the question of Mr.
Towers' statement that banks do not loan
out their depositors funds is
accepted, I'd then like a comment on the
value of my using the
plumbing to model the bank's financial
flows.
---
Subject: Re: TURMEL: On Social Credit vs Greendollars
On Dec 3
1995 in article #117261 in can.politics,
4th8@qlink.queensu.ca (Huyer Timothy)
wrote:
:: He keeps
repeating the theory that because credit is good and
:: because they've made it necessary to
pay interest for that credit,
:: therefore paying interest is necessary.
:
:My argument is that (1) since borrowers
get some utility for having that
:credit now and (2) since transactions
are not undertaken unless they are
:mutually beneficial, borrowers make gains
from borrowing even under
:positive interest. This, alone,
does not make positive interest necessary.
:
What makes positive interest necessary is the willingness to lend
:money only occurs with positive interest.
:
But a tap shows
no willingness to lend or not. That's why this
discussion of the pump is important. You
keep justifying interest
using the savers' willingness to lend
without accepting that we're not
getting those dollars from the savers
but the tap. As long as you deny
a tap and believe that it's really the
savers' money you're borrowing,
then I'll never convince you that a pump
has no liquidity preference.
:If the interest rate was zero, then demand
for credit vastly exceeds
:supply.
No. If the interest
is zero, then the demand for credit exactly
fits the supply. You can't use more credit
than there's stuff
available to purchase with it despite
your infinite appetite.
:
To acknowledge this, without loss of generality, assume that the
:simple example I gave was a pure barter
economy with two goods, and that
:good number two was valued in units of
good number one. The positive
:interest equilibrium still remains.
:
Your argument
applies to 20% interest, 10% interest, 5% interest
and 0% interest. The "positive or zero"
equilibrium still remains.
:
With zero interest, both agents in the simple example would
:demand credit. After getting credit,
both would find that the total
:amount of goods has not increased.
:
But demanding
credit is not necessarily using it.
:With more money than goods (Turmel
:calls this shift a inflation, economists
use a different term, otherwise
:it is identical), prices in period one
rise, and in period two fall.
:
This does not
follow when the cardinal rule of casino chip
banking is that money equals goods and
there is NOT more money than
goods.
:In calling Turmel's model irrational,
he replies:
:: Your
example doesn't deal with people already hooked in the game.
:
:It doesn't have to. Let me try
to explain using as simple language as
:possible. You have choice to play
game or not play game. Let's say you
:play game. You either win or you
lose. In either case, you start to
:think that game is stacked against you.
You decide not to play again.
:If you are dumb, it takes more than one
game before you learn.
:
But how do you
leave the game once hooked without being a winner
or losing all? I've asked this several
times already.
: The game,
obviously, can be long lived -- a 25 year mortgage for
:example. However, we have been
talking about the existence of this game
:for millenia (apparently). If you
played the game and found out that it
:now had you hooked for the rest of your
life, perhaps, maybe, you would
:counsel your kids to not play when they
have a choice?
:
Perhaps you should.
But explaining to your kids to avoid getting
hooked doesn't solve your present dilemma.
:
I repeat. Try the experiment. Get several people together.
:Make the game purely random. Make
them mortgage something of value to
:them. Find out how many agree to
play. Play the game, and find out how
:many are willing to play again.
If anyone plays the game more than 3
:times, tell that person I have a bridge
that I would like to sell them...
:
Well then walk
up to anyone who just signed an 11 for 10 loan at
your neighborhood bank and you've got
someone to sell that bridge to.
My whole point is that signing a mortgage
deathgamble is a really
stupid gamble.
:: Bankrupt
in today's world. In a Greener world, he'd only be
:: highly negative with his future opportunities
as optimal as his past
:: ones. The concept of bankruptcy just
does not exist under an interest-
:: free software because we don't turn
off industrial motors just because
:: they've hit a certain negative number.
Everyone can keep trying with
:: whatever tools are available.
:
:Bankruptcy = wealth + ability to repay
< debt. Nothing to do with interest.
:
First, you've
got your units wrong.
Wealth is store
energy, physical assets.
Ability to repay
is power, rate of production of assets. So
actually, your equation would be correct
is you had:
Bankruptcy = wealth + (ability to repay)*(time)
< debt. Ability to
repay has everything to do with interest.
Ability to repay is gauged
by the interest. Facing a doubled interest
rate, your ability to repay
would be lessened.
:
Industrial motors, as it were, are not shut off because of
:bankruptcy which necessarily only exists
under positive interest.
:Capital and labour are unemployed when
they are not considered
:profitable.
:
All work to be
done should be possible profitably.
:: Interesting
point. With interest-free credit, projects which have
:: a 1% return become feasible! As long
as there are idle workers and a
:: positive return is possible, we can
go after it. Today's world cannot.
:: Competing for loans via return, opening
casinos are a better
:: investment than improving the mouse-trap.
But even the small demand
:: for a better mouse-trap will be catered
to.
:
:A positive return does not necessarily
mean something is a good
:investment. There are plenty of
other options to where the resources
:that went into a particular investment
could have gone. The interest
:rate system, then, is one way in determining
where the resources of
:society are allocated to. Again,
without some decision making criteria,
:disequilibrium occurs.
:
There are better
ways and leaving the decision-making to private
bankers is leaving too much economic power
of life-and-death in their
hands.
:: In all
cases, yours included, the alternative was to not get the
:: loan and all the impediments that entailed.
I'm trying to tell you you
:: are being coerced into paying interest
when you shouldn't have to and
:: you're arguing you like it. Think about
it.
:
:I'm not arguing that I like to pay interest.
I am arguing that, in order
:for me to borrow, I must.
:
But you don't
"must" if your loan is really coming out the pump
and you're compensating the pump and not
a depositor for doing without
their savings. That's why getting you
to accept that your loan came
from the pump is so important. With the
acceptance of that truth, the
rationale that you "must" pay interest
to get your loan disappears.
:I am also arguing that it is worth it.
:
Paying the interest
to get the credit may have been a good deal
but paying a once-only service charge
to get the credit is an even
better deal. At LETS, they accept that
they're lending you new
Greendollars out of the pump and that
why no one would dare try to
charge you interest.
:Turmel cites someone who posted earier
as well as a previous governor of
:the Bank of Canada. The quotes
display rather avidly Turmel's ignorance
:of the banking system, and his willingness
to stop his research once he
:has found a nice sound bite that could
be construed to support him.
:
Turmel is obsessed with the fact that money in depositor's
:accounts greatly exceeds money created
by the central bank.
:
No, actually
how much more the chartered banks create than the
central banks is of no real interest to
me. It's the positive feedback
on the debt that bothers me. I wouldn't
really care whether my
credit supplier were an Internet provider,
a chartered bank or even
the central bank. I don't care whose chips
I use to liquefy my
collateral as long as the chips retain
their value.
:Where does
:this money come from, he wonders, where
is the tap? And if there is a
:tap, why must we deal with scarcity in
money?
:
Yes. Yes. Why
do we accept "No money" as an excuse for cutting
social services, infrastructure repair,
etc. Why do we accept scarcity
in money if there is a tap.
LETSers don't
accept scarcity in Greendollars because they know
their banking system has a tap.
:
First, let me extend Turmel's analysis. Suppose that bankers can
:lend money without any regard for the
amount of money deposited in their
:accounts.
:
I thought that
our determination that the reserve ratio was now
zero effectively does just that. So let
us not suppose that bankers
can lend money without any regard for
deposits because they now need
zero deposits before they can lend.
:When they make a loan, they add money
electronically to
:someone's bank account, so cash isn't
needed anyway, the argument goes.
:
But it can't
hurt to have the borrower leave with the cash loan
and deposit it to his account in the reservoir.
And yes, the example
is best shown without adding the confusing
aspects of cash flows.
:
But note that everyone has a demand for cash, a demand function
:which is a function of wealth and other
circumstances which I call the
:environment.
:
I'm not going
into this again. I'm prepared to accept your
statement that "the cash isn't needed
anyway" but am perturbed by your
insistence in going into how individual's
preference for cash is
somehow relevant when we've accepted it
is not.
: In other words, cash
is the determinant of the money supply -- it
:does not encompass the money supply but
it certainly limits how much
:money can exist.
:
No, now that
there's no reserve ratio, the amount of cash is NOT
a major but a totally minor determinant
of the money supply.
:
This allows for multiple methods of attempting to explain the
:banking system. Whichever method
works depends upon the way one person
:learns, or in Turmel's case, fails to
learn.
:
Multiple methods
of attempting to explain something as trivial as
a pump, drain, reservoir and some pipes?
:
One could state that charter banks have a tap, however, the
:amount of money that charter banks create
depends directly upon the cash
:supply and the amount of money deposited
in their banks.
:
Used to before
the reserve ratio went to zero. No more.
And it is the
first time I've heard Tim say:
"chartered banks
have a tap." It's about time. Now to disabuse
him of the notion that he should keep
paying interest to satisfy the
liquidity preference of the tap.
:
One could also state that charter banks do not have a tap since
:saying there is a tap can create, in
Turmel's case, the confusion that
:banks have some separate source for their
reserves.
:
No. Saying there's
a tap and that it's connected to the loans
pipe causes no confusion at all in helping
determine the meanings of
the splashings in the pool.
:: Up to
now, Tim's had the cognitive dissonance of an education in
:: Economics to explain the refusal to
accept that banks do not lend out
:: their depositors' funds. Now that he's
faced not only with the
:: plumbing showing a tap but the statement
of the Governor of the Bank
:: of Canada indicating a tap where "banks
do not lend out their
:: depositors' funds" and that "each and
every time a bank makes a loan,
:: it's brand new batteries," he has no
excuse but to sit back and
:: re-evaluate in light of my Ace in the
hole.
:
:Needless to say, I haven't yet quit my
education and gone on a
:pilgrimmage to meet the Dalai Lama.
:
Bet you the Dalai
Lama would insist on seeing a tap too.
:: Here's
an added explanation of why Tim can't see a tap. He's
:: watching the paper tokens going into
and out of the banker's till.
:: He's not looking at what's happening
in the computer accounts.
:
:And, since Turmel is not watching the
flow of money, he is not
:recognizing the finite limit to the money
supply dependent upon the
:existence of cash.
:
If there's an
infinite supply of emoney ready to go, a finite
amount of cash has no limiting effect.
:: Every
dollar that comes into existence is born with a debt to the
:: banker bearing interest.
:
:Categorically incorrect. I already
stated, and you acknowledged, that
:the central bank creates money not through
debt but through open market
:operations.
:
And your open
market operations leave those who end up with the
new Bank of Canada dollars paying interest
for it. When the Bank of
Canada turns on it's tap of high-powered
no-reserve money, someone
ends up promising to pay interest. It
can't be escaped that every
dollar born into circulation is accompanied
by a component of debt
which grows beyond the original amount
of money.
:You called the amount trivial, but, if
you would refer to
:the mathematics, you would note that
any trivial but positive amount of
:money is the limiting factor in the money
supply.
:
Not when the
emoney needs zero reserves before being created.
There is no limit to the amount of emoney
they can now create.
:: I would
like to hear Tim's explanation of where all the poverty
:: around us stems from if it does not
stem from the initial 11 for 10
:: promise at the bank at the start of
the game.
:
:Distributional results: Labour
not being paid its true value (even Adam
:Smith recognized that one). Accumulation
of capital which is passed
:along through hereditary lines -- unequal
endowments. Some wars
:(coercion).
:
And at the root
of the economic war causing the unequal
endowments of the economic spoils is usury,
the yoke of oppression.
In article #117240,
Phil Hunt <philip@storcomp.demon.co.uk>
added:
:
johnturmel@yahoo.com "John Turmel" writes:
:> Bankrupt
in today's world. In a Greener world, he'd only be
:> highly negative with his future opportunities
as optimal as his past
:> ones. The concept of bankruptcy just
does not exist under an interest-
:> free software because we don't turn
off industrial motors just because
:> they've hit a certain negative number.
:
:Does that mean everyone can work up as
big a debt as they like? Is there
:some limit to how much debt someone is
allowed to get into?
:
Of course, there
would have to be a limit. But limited by the
availability of the goods and services
and not by the availability of
the credit.
If there's an
idle tractor and some farmer's kid wants the credit
to buy it, it's automatic.
If a young doctor
is qualified, credit for his practice is
automatic.
Credit for tools
and basic life support is automatic.
Credit for fun
can be limited by availability and consensus.
I've spoken in
greater detail about the 50 World Owners who have
the power to liberate us from our debts.
How have the power to fulfill
Christ's prayer to the Father:
"Forgive us our
debts as we forgive our debtors."
I just watched
reasonable doubt on A&E on the Kennedy
assassination. It was an examination of
the flaws in the Warren
report. I makes it evident that hidden
powers had Kennedy removed and
controlled the investigation. They still
control it. Only those
pulling the true strings of real power
could have been in power then
and still be in power now.
If you follow
alt.conspiracy, you'll notice many of the populists
saying that Kennedy was shot because he
had plans to use Treasury
notes instead of Federal Reserve money.
If he really were going to use
interest-free Treasury money like Lincoln
did, then I could believe
that his similar fate had the same root.
They say he issued an
Executive Order which was immediately
cancelled by Johnson but I've
never been able to get a copy of it. But
if there were proof that
Kennedy had ordered the borrowing of interest-free
funds from the
Treasury and was by-passing the Federal
Reserve loansharks, then I
would have no doubt that he was done in
over the money plates.
Once you appreciate
the life-and-death power the government has
given to our bankers over not only us
but also of our government, many
things in history now make more sense.
Just as Tim's explanation of
the money flows makes more sense using
the plumbing with a pump, the
history of government makes new sense
when we take into account the
fact that they're all operating in debt
to the same guys.
Of course, that
Kennedy was removed by a conspiracy is pooh-
poohed by those who don't believe in conspiracy
theories. "He believes
in conspiracies" is used as a denigration.
But I'll be the first to
say I believe that JFK was removed as
the result of a conspiracy which
had the power to call off the President's
military protection and
change the parade route on the very day
of the parade to take a slow-
speed deke in front of the ambush site.
The motorcade,
which is supposed to keep to minimum 40 mph and
could have gone straight through on Main
St to the Stemmons Freeway,
takes a 90 degree deke to the right and
a 135 degree deke to the left
into and out of the ambush site.
If that 10 mph
deke right in front of Oswald's building had been
part of the original parade route, I wouldn't
be so convinced of
conspiracy. But to call off his protection
and cause the parade to
make a slow deke into the ambush zone
is just too much to be
coincidence.
This levers of
logistical power stands right out when you
contemplate the odds of the change in
parade route to just that deke
into the ambush zone being accidental.
It's astronomical. Standing
exposed are changes in the route to parade
Kennedy into those rifle
sights.
Realizing what
that parade route deke really signifies chills me
to the bone. It convinces me there is
an invisible structure which
really rules the world and it's not the
rulers I see before me. And if
those front men displease, they can be
removed in many ways including
ultimate termination.
That the President
of the United States could be so easily
paraded into an ambush and the investigation
so easily controlled is a
great indication to me of an operating
intelligence which doesn't seem
to have made the news. But of course,
I'm ready to forgive, forget and
get on with an interest-free life.
Sure, I'm
a believer in a International Loansharks' Conspiracy
which finances all of the other ones.
The guys who were banking the
Communists and the guys who were banking
the Capitalists happen to be
the same guys.
Maybe it's because
I have a better understanding of the power of
loansharking, the power of inducing people
into deathgambles and
stripping them clean. Like highwaymen
or thugs, they fall on you and
leave you for dead in an alley where men
weep and gnash their teeth.
That's what Christ
kept saying. If you have interest, you're
going to have alleys of poverty where
men weep and gnash their teeth.
Nice way of putting it. Interest is the
"yoke of oppression," the
chain of slavery.
And of course,
the power that removed Kennedy still rules today.
It may have ruled for 200 years, probably
for 5,000 years. I
acknowledge that power. I fear it. But
I can forgive and forget what
it did if it will free me to get on with
an interest-free life.
I found out that
these posts seem to be erased in can.politics
and other newsgroups in under a week.
For those readers asking me for
past instalments, we have a problem. There
is 650Kb of debate in the
Social Credit topic, 390 in just the last
two weeks. I'll try to edit
down the debate to the main points over
the next few weeks. I'm
looking into a web site where these kind
of debates can be posted as
they're written.