Subject: Re: TURMEL: On Social Credit vs Greendollars
On Dec 1
1995 in Article #116853 of can.politics,
email@example.com (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
: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, firstname.lastname@example.org (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
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
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
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
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
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
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
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)
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
: 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
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
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
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
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.
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 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
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
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,
email@example.com (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
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
:In calling Turmel's model irrational,
:: 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
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
All work to be done should be possible profitably.
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,
There are better ways and leaving the decision-making to private
bankers is leaving too much economic power of life-and-death in their
:: 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.
: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
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
: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
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.
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.
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
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
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 <firstname.lastname@example.org>
email@example.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
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
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
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
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
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
a comment to John Turmel