Two weeks ago, I wrote:
: 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?
Roger <Roger@ducks.demon.co.uk>
didn't answer the question but
suggested:
:You deposit 1000 in the bank. The bank
lends 1000 to me.
:I deposit that 1000 in the bank, the
bank lends it
:to someone else, and so on. I'm sure
our resident banker
:can explain it more precisely.
:It looks a bit like climbing on stacked
boxes by moving the
:bottom one to the top, but it appears
to work.
Markku Stenborg <marsten@utu.fi> pointed out:
:Not quite. You deposit 1000 in the bank.
Bank has reserve requirements of
:10%, say. The bank lends 900 to me, and
keeps 100 in its reserves. I
:deposit that 900 in the bank, the bank
keeps 90 in its reserves, and
:lends 810 of it to ... You getting the
picture?
:Or, equivalently, bank keeps 1000 in
reserves, and lends 10,000 to me.
:
So because the
bank reloaned the same money to you over and over
until your debt was $10,000, it doesn't
explain where any new money
other than the $1,000 came from. And if
the bank calls in your $10,000
loan, where do you get the other $9,000?
u4d14@cc.keele.ac.uk (Julian White) wrote:
:: :A bank loans money that it receives
from other depositors...
:
:That is clearly true.
:
:: :The money supply increases whenever
a bank creates a new loan, and it
:: :decreases when the loanee pays off
the loan.
:
:And so is that I think. If the bank lends
money the velocity of money
:increases, ie, an increase in supply.
You can create money in other ways
:other than just printing it.
:
That's my whole
point. I say that they both can't be true.
On Sep 27 1995,
jhardy@foreigner.class.udg.mx ("James E. Hardy")
wrote:
:Read a good economics textbook if you
don't understand this.
:When a bank loans money that someone
has deposited, the depositor
:still has access to this money, too,
as long as he only writes a
:check and doesn't actually withdraw the
cash. Therefore, new money
:IS put into circulation. Both the person
who receives the loan and
:the depositor can use the money.
:
So because I
put my $1000 in a piggy bank which you may use
hasn't explained where the second $1,000
comes from. Try again.
On Sep 28 1995, ljp@fn1.freenet.edmonton.ab.ca wrote:
:Your forgetting velocity.
:
How does velocity
make the two statements true? This I have to
hear.
On Sep 30 1995, tangle@iadfw.net (Tim of Angle) wrote:
:*sigh* It's not "double-think"; you just
don't understand the dialectic.
:The "money supply" expands through fractional-reserve
banking only in a
:virtual sense, in the same way that ten
guys shooting at a house can "be" a
:hundred by firing from a different position
each time. Since the effect is
:measured from inside the house (outside
the bank), it's almost as good as
:being real.
:
What's real and
what's almost as good as being real?
On Oct 6 1995, 100026,2150@compuserve.com (Eric Stevens) wrote:
:I can see the utter confusion.
:Major Douglas's error, perpetuated by
John C. Turmel, is creating a
:set of equations on the basis that the
money supply is fixed. If Joe C
:Bloggs pays off his loan by creating
more wealth/money the whole stack
:of cards falls down.
:Eric Stevens
: B.E. C.Eng F.I.Mech.E. F.I.P.E.N.Z.
M.S.A.E. M.S.A.E (Aust) Regd
:Eng etc etc - but what that
has to do with economics beats me.
On Oct 5
1995, forbis@cac.washington.edu (Gary Forbis) pointed
out the error in Eric's analysis:
:While an individual may create goods or
perform services she may not create
:money. If the money supply is not
increased the production of goods can only
:lower the price as the same money now
is more scarce in relationship to these
:goods. The offset is an increase
in the money supply to keep the price of
:goods stable. Where does this money
come from?
:Here's another way to look at it.
When you increase the production of a
:good or service its value in trade drops
in relationship to other goods and
:services. You are not allowed to
legally create money though you may make
:or take loans. Who creates money?
What is its market? How is it
:distributed?
:
This seems to
escape many people. Banks will not allow you to pay
off your loan with any new wealth you
create. They want money and you
don't create money or they charge you
with counterfeiting.
What the creation
of money has to do with economics beats him? I
thought economics was where they try to
explain how the creation of
money works. Where does he think it should
be discussed?
On Oct 2 1995, huyert@qed.uucp (Timothy Huyer) wrote:
John Turmel (johnturmel@yahoo.com) wrote:
:: The complainants
feel that some of our newsgroups are not
:: relevant and should be removed.
:: Having
received no response, I hope that he has rethought his
:: original impression that Social Credit
Monetary Engineering design
:: should not be considered by people
who frequent sci. newsgroups.
:
:Actually, this social credit b.s. not
only does not belong on such groups
:as sci.engr but does not belong on any
sci.* newsgroup. Instead, it
:should more appropriately be sent to
nonesense.* or fiction.*
:To claim that there is any scientific
principle involved requires the
:premise that the foundation of the analysis
is rational. Notwithstanding
:all of the mystical differential equations
that Mr. Turmel lusts over,
:his arguments do not follow logical premises.
:
In summary, bullshit + LaPlace Transforms = bullshit
:
bullshit + real analysis = bullshit
:
bullshit + any kind of math = bullshit
:This is perhaps why Mr. Turmel has never
replied to any of my posts which
:demonstrate, very simply, using basic
and straightforward undergraduate
:level economics, why his social credit
theories are of no value.
:
However, rather than suggesting to Mr. Turmel that he should stop
:spouting such blatantly wrong information
on the 'net, I would like to
:encourage him to continue to do so.
Mr. Turmel's other profession is an
:engineer. If he applies the same
diligence to engineering as he does to
:his social credit philosophies [sic],
then I sure as hell do not wish to
:cross over any bridge, etc., which he
might have had a hand in designing,
:on the likelihood that it falls down.
By all means, please sputter away
:on this forum; it is far safer than building
a bridge with the assumption
:that sand has the same consistency as
concrete.
:Tim Huyer - huyert@qed.econ.queensu.ca
- 4th8@qlink.queensu.ca
What an incompetent.
Who would want to answer such a lo-tech
rant. I've never bothered trying to answer
the correspondents who can
do nothing more than name-calling. I'd
bet that he can't produce one
valid argument he's ever made in the past.
Incompetents usually can't.
kennyta@craft.camp.clarkson.edu (Thomas A. Kenny)
:Timothy Huyer (huyert@qed.uucp) wrote:
::
In summary, bullshit + LaPlace Transforms = bullshit
:
:Actually, I think L^(-1){L{bs}} = bs
:but I haven't used laplace xforms in
about a year.
:Tom Kenny : Clarkson University : Chemical
Engineering |
:
I guess electrical
engineers are better at Laplace Transforms
than chemical engineers. I see no rebuttal
to my Laplace Transform
analysis though.
What constantly
amazes me is engineers who can look at my
analysis which includes Laplace Transformations,
exponential
functions, differential equations and
control systems and not see a
connection to engineering.
The following
are the technical incompetents we can count on who
can't see the relevance and don't mind
letting everyone else know
theyh can't see.
zare@cco.caltech.edu (Douglas J. Zare)
idaniel@jesus.ox.ac.uk (Illtud Daniel)
tjnye@calum.csclub.uwaterloo.ca (TJ Nye)
reckdahl@leland.Stanford.EDU (Keith Reckdahl)
Markku Stenborg <marsten@utu.fi>
watermj@gov.on.ca (Joel Waterman)
They've contributed
nothing but complaints, quite a sad spectacle
actually. Perhaps Major Douglas submitted
his economic analysis to the
1919 World Engineering Conference because
he, as I, saw things they
don't. It certainly doesn't say much about
universities that turn out
engineers who don't recognize engineering
analysis when they see it.
I've restricted
my rebuttals to the more inane remarks to email
to those who do see. It seems to upset
them when I make fun of their
ignorance so I'll keep it private.
So once again,
surely someone can see the double-think in
believing that:
:A bank loans money that it receives from other depositors...
and
:The money supply increases whenever a
bank creates a new loan, and it
:decreases when the loanee pays off the
loan.
Because my news
administrator has been given the power to
surrepticiously cancel my posts without
notice if they are posted to
more than 10 newsgroups, I've decided
to drop the following
newsgroups:
tor.general,
can.taxes,
nz.general,
ncf.general,
aus.general,
uk.misc,
sci.systems,
sci.philosophy.tech,
sci.math,
sci.engr.safety,
ncf.sigs.business.freedata,
sci.engr.control,
To keep up on
the topic, you'll have to check:
ont.general,
can.general,
can.politics,
nz.politics,
aus.politics,
uk.politics,
sci.engr,
sci.econ,
alt.conspiracy,
alt.christnet.philosophy,
alt.politics.economics
After all, the
last thing these people want is information on how
to save the planet by fixing the financial
system posted in too many
places. History will need some laughingstocks
and they seem happy to
comply.
John C. Turmel, B. Eng.
---
Subject: Re: TURMEL: On Social Credit
huyert@qed.uucp (Timothy Huyer) wrote:
:: :all of the mystical differential equations
that Mr. Turmel lusts over,
:: :his arguments do not follow logical
premises.
:
:: What
an incompetent. Who would want to answer such a lo-tech
:: rant. I've never bothered trying to
answer the correspondents who can
:: do nothing more than name-calling.
I'd bet that he can't produce one
:: valid argument he's ever made in the
past. Incompetents usually can't.
:
:In fact, I have on a number of occasions
put forward arguments against
:Turmel's views, which contained no "ranting"
but were merely
:straightforward economics, easily accessible
in any undergraduate
:textbook. Turmel has never replied
to any of those posts as far as I am
:aware. I have noted, though, that
he does reply to other posts by
:claiming that, because he uses Laplace
transforms, his arguments are
:necessarily true.
:
I've searched
my files for exchanges with Mr. Huyer and found
some very interesting ones. I find it
hard to believe that he could
have forgotten this response from Jul
19 1995 in Subject: Re: TURMEL:
What National Debt???
: On Jul 18 1995,
thuyer@gpu3.srv.ualberta.ca (Timothy Huyer)
:wrote:
:
::John Turmel (johnturmel@yahoo.com)
wrote:
::
::: I'll
try again. Get 10 friends to put up their watch as
::: collateral and lend them all 10 toothpicks.
Make them all promise
::: to pay back 11. Let them flip coins
to model the economy picking
::: the winners and losers.
::: At the
end of the game, what ratio get foreclosed upon?
::: What
ratio of collateral is confiscated?
::: Now
try it for 20% interest.
::
::A very useful principle to know when
attempting to set up any economic
::model is whether or not it is a realistic
model. Mathematically, one can
::set up whatever model he or she desires,
but it has no meaning
::economically unless the assumptions
in the model are reasonable assumptions.
::
: What's hard
for you to understand. I've modelled lending
:everyone 10, demanding 20% interest and
asking what happens.
:What's so unreasonable about that?
:
:: The simple
problem with your above model is that it assumes no
::growth. Moreover, it is a model
in which it is not rational to play. By
::not playing, a player has an expected
return of 0%. But by playing,
::since the player can reasonably only
expect a return of 10 toothpicks,
::equal to what he/she started with, the
player has a negative expected
::return -- losing the watch.
::
: No, though he
does have a negative expected return, he
:doesn't necessarily lose his watch. Only
a certain ratio of
:players, which you have have failed to
solve so far, will lose
:their watch. If he's skillful, he might
even come up with someone
:else's watch so it's not necessarily
a sure loss.
: After all, it
is called a "mort-gage" "death-gamble." Some
:live, some die.
:
::
Instead, assume a poker game where each player borrows tokens
::from the bank (not a player) at 10%
interest. However, to model a
::growing economy, let the bank on occasion
add tokens to each pot, until
::there are 20% more tokens in circulation
than merely borrowed.
::
: Of all the unreasonable
assumptions.
: Assume an economic
game where a player borrows money from
:the bank at 10% interest. However, to
model a growing economy,
:let the bank on occasion add money to
each transaction, until
:there is 20% more money in circulation
than merely borrowed.
: I don't know
of any banking that adds more money to your
:account without you first borrowing it
first.
: For you to say
that my model makes unreasonable assumptions
:and for you to then come up with this
is laughable.
:
One has to admit
that the notion that the banker adds money to
your bank account so you can pay the interest
is pretty funny, isn't
it. And this guy teaches economics. I'd
like to know of any bank that
adds money to your account so you can
pay the interest.
::Each player, therefore, can theoretically
earn enough tokens to
::repay their loan AND have some left
over.
::
: So let's assume
the banks just give you enough to pay back
:your principal and interest. Upon such
an unreasonable
:assumption each player can repay their
loan and have some left.
:This is silly.
::
Of course there is risk involved. But then again, even with no
::interest, and no extra tokens, a game
of poker still involves risk. The
::risk, in either case, is not caused
by the interest.
::
: In your totally
unreasonable example, of course, it's no
:longer a death-gamble. But life doesn't
work that way. Tell me
:about any bank that will lend you $100
wanting $110 back and who
:will ten give you $20 so you can pay
them back and keep more and
:I'll be first in line.
: Making the reasonable
empirical note that banks lend our
:$100 while demanding $110, then the demand
for the extra 10 does
:create the element of gambling you noticed
above.
::: The ups
and downs of the housing market are not that the
::: houses are getting more and less valuable
but that the money is
::: getting more or less valuable. It's
easy to be fooled into
::: thinking that an asset which gets
older and used becomes more
::: valuable simply because the purchasing
power of the dollar is
::: reduced. But it looks like you've
fallen for it hook, line and
::: sinker. Houses that get older only
fetch a higher price because
::: the dollars buy less.
::
::This is categorically incorrect.
Money is a numeraire, a medium of
::exchange. A house rises and falls
in value not because money changes in
::value but because the house, RELATIVE
TO OTHER GOODS AND SERVICES,
::changes in value.
::
: When my father
bought his house 40 years ago, that
:$14,000 was worth 70,000 twenty-cent
loaves of bread or 140,000
:ten-cent chocolate bars. Today, his
:house is worth $140,000 but it's still
worth only 70,000 two-
:dollar loaves of bread of 140,000 one-dollar
chocolate bars. Relative
:to each other, the prices of most products
which do not rely on
:innovative techniques are about the same.
The value of the dollar
:has really gone down.
:: Thus, if I had two cars which
I could each sell for
::$25 000, I could buy a house valued
at $50 000. If the house changed to
::$100 000, I would not be able to exchange
the cars for the house => the
::house has changed value.
::
: Sure you could.
Car prices go up over time too so you'd be
:able to sell the two cars for about $50,000
each. This is silly.
::: And who
wrote those economic history books that say that
::: Continentals weren't worth the paper
they were printed on? The
::: economists who have a vested interest
in getting back onto a
::: usury system, that's who.
::
::Conspiracy. Economists, surprise,
surprise, often hold debt as well. In
::fact, history records only two exceptionally
wealthy economists (David
::Ricardo and J.M. Keynes). Many
of the rest of us earn a professor's
::salary (being profs), and make mortgage
and car-loan payments. Giving
::all that interest money to someone else
sure must benefit us a lot.
::
: Thinking that
paying all that interest is benefitting you a
:lot, I can only conclude that you really
are an Economics
:Professor.
: Once the money
system is fixed and money is stabilized,
:Economics will be relegated to the Antiquity
Section of History
:dealing with slavery devices where you'll
be free to wear it as
:much as you want.
: For the rest
of us slaves, freedom will be welcome.
:John "The Engineer" Turmel
On Jul 19 1995
in Subject: Re: TURMEL: Guinness Record for mos
elections, I replied:
: On Jul 18 1995,
thuyer@gpu3.srv.ualberta.ca (Timothy Huyer)
:wrote:
::: Subject: Re: TURMEL: Guinness Record
for most elections
::
:: ...And most election losses.
Perhaps the public is giving you a hint?
::
: Yes, elections
in Canada are not democratic when the media
:get to support the parties of their choice
and exclude the others
:from coverage.
::: :indicates to me that when I think
your ideas are full of
::: :industrial-sized (socialist-sized?)
horseshit, I have a pretty
::: :good grasp of the situation.
::
: The only grasp
people like this have is of the horse's tail
:which would account for their expertise.
::For the record, social credit ...(ideas
is too generous a word)... policy
::is not socialist policy, nor anything
in the same universe.
::
: I can explain
Social Credit in one paragraph. I bet you've
:been too busy laughing to be able to
explain it at all.
:
And of course,
he never answered to try to explain it.
Considering he left the arena of debate
with his tail between his
legs, isn't it funny how he now remmebers
it as if I was the one who
didn't answer.
::: A non-profit Local Employment Trading
System (LETS) ingeniously
::: allows hundreds of people to barter
goods and services throughout
::: a community."
::
::Very simple and straightforward economics
will tell you that the use of
::barter does not negate any economic
practice happening today, including
::"usury" -- the charging of interest.
In fact, the use of currency is
::solely a means of facilitating barter,
since, inevitably, people are
::truly exchanging goods and services,
and using money solely as a medium
::of exchange.
::
The LETS software, therefore, offers not an alternative to the
::economic system but is merely a means
of assisting disadvantaged
::individuals who may have, otherwise,
exceptional difficulty marketing
::their goods and services. In this sense,
LETS is a further facilitator
::of the economic system, and your claims
that it debunks centuries of
::economic science and thought are totally
ridiculous.
::
: You see that
it facilitates but you just can't quite seem to
:see the whole picture, can you?
::: The last
thing you'd want is to see pensioners with their
::: pensions being stretched further.
It means less usury for you,
::: right?
::
::Funny you should mention pensions.
The use of savings implies the use of
::lendings -- one person's savings is
another person's borrowings. People
::who want to consume now, borrow, people
who want to consume later, save.
::This simple time preference -- another
straightforward and introductory
::concept in economics -- results in interest.
::
: And wet streets
result in rain.
::: Again,
as long as they can buy their housing, their food,
::: their services for Greendollars, I
doubt they'll take your
::: opinions seriously and it could be
they'll find your opinions as
::: worthless as the computer it's displayed
on.
::
::Pointing out how basic and simple these
economic concepts are can be
::emphasized by your electoral support:
it is not merely the academic or
::commercial elite who are allegedly indoctrinated
in usury to inflict
::upon the suffering, but an exceptionally
high percentage of voters as
::well who reject your nonsense.
::
: My electoral
support has no bearing on the worth of the
:idea. Voters haven't heard about usury-free
banking so how could
:they have rejected it?
::Tim Huyer
::
-- who, of course, by studying economics, is completely
::unqualified to comment on this issue.
::
: The brain damage
shows quite clearly. I'm surprised you show
:enough understanding to even admit it.
:Mine doesn't (Queen's) and it is generally
regarded as the best school in
:Canada. It does offer the course
at graduate and undergraduate level,
:but it is not required.
:
That Queen's
has an Economics professor who thinks that banks
simply add money to the economy so people
can pay their interest makes
it hard to believe that it's the best
school in Canada.
On Oct 2 1995, he really goes into a rant:
:: Having
received no response, I hope that he has rethought his
:: original impression that Social Credit
Monetary Engineering design
:: should not be considered by people
who frequent sci. newsgroups.
:
:Actually, this social credit b.s. not
only does not belong on such groups
:as sci.engr but does not belong on any
sci.* newsgroup. Instead, it
:should more appropriately be sent to
nonesense.* or fiction.*
:To claim that there is any scientific
principle involved requires the
:premise that the foundation of the analysis
is rational. Notwithstanding
:all of the mystical differential equations
that Mr. Turmel lusts over,
:his arguments do not follow logical premises.
:
In summary, bullshit + LaPlace Transforms = bullshit
:
bullshit + real analysis = bullshit
:
bullshit + any kind of math = bullshit
:This is perhaps why Mr. Turmel has never
replied to any of my posts which
:demonstrate, very simply, using basic
and straightforward undergraduate
:level economics, why his social credit
theories are of no value.
:
Again, he seems
to have forgotten our exchanges where he was
laughed out of the debate with his ridiculous
assertion that bankers
simply sneak money into people's accounts.
: However, rather than
suggesting to Mr. Turmel that he should stop
:spouting such blatantly wrong information
on the 'net, I would like to
:encourage him to continue to do so.
Mr. Turmel's other profession is an
:engineer. If he applies the same
diligence to engineering as he does to
:his social credit philosophies [sic],
then I sure as hell do not wish to
:cross over any bridge, etc., which he
might have had a hand in designing,
:on the likelihood that it falls down.
By all means, please sputter away
:on this forum; it is far safer than building
a bridge with the assumption
:that sand has the same consistency as
concrete.
:
One thing we
do know is that engineers deal with theories that
work and economists deal with theories
that don't.
I've often joked
how economists are two intellectual levels below
engineers.
We know that
ants and termites have managed to exert maximum
industrial capacity. The only reason there
are unemployed humans is
because economists are running the economic
engine's monetary control
system. Without money, there are no unemployed
ants like there are
unemployed humans. So it's pretty easy
for me to prove that ants are
intellectually superior to economists
just by their economic
performance.
Now I'm not claiming
that engineers could exert more than the
100% employment exerted by the ants but
I do believe that we have the
ability to solve the problem in a twinkling
of an eye so I conclude
that just as the economic performance
of the ants is superior to that
of economists, perhaps the economic performance
of engineers may be at
least equal to and perhaps superior to
that of the ants. So, assuming
ants in nature as the stationary point,
engineers are going forward
while economics are in reverse.
He then goes into
some complicated mathematical contortions
proving "I don't know what." But it certainly
doesn't prove that
they're competent or the economy wouldn't
be in the mess that it now
is. But you'll note that though we're
talking about a problem with the
creation and destruction of the money
supply, what's the first thing
he does: Assume there's enough money:
:
For a very simple view on interest, we can create a model with
:two agents, A and B, and two time periods,
1 and 2. In each time period
:each agent earns an income I_at and I_bt,
t=1,2.
:
So just assume
the money is there and the income streams work.
Typical economist thinking.
No matter how
we cut it, economists are responsible for all the
foul-ups and I think it's the height of
presumption that he should
offer any kind of analysis which might
induce people to believe that
the "dismal science" has any reason to
be proud.
Remember, this
is from the guy who thinks bankers sneak money
into circulation so you can pay your interest.
And note that
the fact he hasn't commented on my question on
double-think indicates that he still can't
see the contradiction which
will be readily apparent when I point
it out.
Finally, if he
thinks I'm ducking any debate with him, I'd
challenge him to public debate since Queen's
in Kingston is only 140km
from Ottawa on the very simple proposition
that an interest-free
monetary system is not only feasible but
exhibits no inflation or
involuntary unemployment. A perfect money
system exemplified by the
operation of the Greendollar LETSystem.
A global interest-free
Greendollar system would solve the world's
financial problems
overnight.
If he backs down
from the debate, I hope he keeps his ridiculous
and nasty comments to himself from now
on.
Put your money
where your mouth is. If you won't put up, then
shut up and don't disturb discussion between
people who don't believe
that bankers add money to our accounts
so we can pay our interest.
:
If the agent buys in period 1, the agent enjoys the consumption
:over both time periods. Thus all
else being equal, everyone would like
:to consume in period 1. In order to delay
consuming, an agent thus
:needs to be offered a premium.
:
So if we don't
offer Rockefeller $1 billion in interest, he might
just go out there and spend his $10 billion
this year. It's to deter
him from consuming his $10 billion that
we should give him a premium
of $1 billion. I think this economic fantasy
fails to take into
account that he can't spend his $10 billion
so why should we pay to
encourage him not do do something he can't
do anyway.
: For
a more detailed development of this, I would recommend any
:intermediate undergraduate microeconomics
textbook. I would even suspect
:that most, if not all, intermediate macroeconomics
textbooks would also
:cover this field.
:
Of course, he
encourages us to delve into the fantasies of other
economists who have their own way to explaining
these ridiculous
premises.
I'd like to note
that there has never been a successful
economist. They are all failures. They
might get Nobel prizes for
coming close but I think the state of
the world is pretty conclusive
proof that they're still all failures.
: Of
course, the mathematics are not useful
:unless the underlying assumptions are
reasonable, which is something that
:Turmel should consider significantly
when he mentions math as his defence.
:
I guess that
if I make the underlying assumption "let the bank on
occasion add tokens to each pot, until
there are 20% more tokens in
circulation than merely borrowed," then
of course, the growth of debt
due to usury is no longer a problem but
I'd point out that the growth
of debt happens to be a major world problem
which his assumed
injection of new money doesn't seem to
have solved.
:Turmel has cited the christian bible in
:his defence; I will merely admit that
it is not frequently used by
:economists as an academic reference.
Mind you, it is also not frequently
:used by most academics as a research
tool, the main exception being
:religious studies.
:
I did point out
that the reason Christ spoke in parables was
given in a differential equation which
was derived by two other
readers. Not Huyer though. I'd bet he
still couldn't derive despite an
undergrad Physics student who solved it
in the "Why did Christ speak
in Differential Equations?" stream which
was unfortunately totally
deleted by my news administrator.
: Of course, if
Turmel is so insistent that zero interest is the
:only way to make society better, I am
perfectly willing to borrow
:whatever amount of money he is willing
to lend me at that rate of
:interest.
:
And all he has
to do is pledge his asset to my casino cashier and
that cashier will lend him all the chips
his collateral is worth.
Interset-free. And everyone would understand
that the value of the
chips is based on his collateral and will
not change. Isn't it amazing
how economists just can't seem to grasp
how poker chip liquidity
and how casino chip accounting work.
:I have eliminated sci.engr from the follow-up,
since I fail to see how
:any of this is relevant to engineering
other then the fact that Turmel
:claims to have a bachelor's degree in
it (and can't describe how
:impressed I am about that). I encourage
other people to eliminate
:newsgroups as they see fit.
:
If I kept putting
my foot in my mouth and came up with laughable
assumptions like "let the bank on occasion
add tokens to each pot,
until there are 20% more tokens in circulation
than merely borrowed,"
and I'd be eager to reduce the number
of conferences laughing at me
too.
Did I put the
boots to his brain or what?
John "The Engineer" Turmel
---
Subject: Re: TURMEL: On Social Credit
On Oct 16 1995, 4th8@qlink.queensu.ca (Huyer Timothy) wrote:
:Turmel likes to quote gratuitously as
well as cross-post gratuitously. I
:will precis the previous posts so as
to save band-width and eye strain.
: Turmel proposed
a model in which everyone borrows at interest to
:participate in a zero sum game.
I criticized the model since it was not
:economically rational.
:
For a model to be rational, all agents in the model must behave
:rationally. For a definition of
rationality that shows the link to the
:mathematical definition of rationality,
see Mas-Collel, Whinston, and
:Green _Microeconomic Theory_ or Varian
_Microeconomic Analysis_. The
:definition of rationality is standard
across the social sciences.
:
In the game Turmel proposed, everyone has an expected return
:equal to what they start with, i.e.,
10 toothpicks. For a detailed
:explanation of expectations, see Freund
_Mathematical Statistics_ or any
:other decent statistics textbook.
Any other textbook that deals with
:uncertainty in detail will also cover
expectations.
:
Since the expected return is not sufficient to cover the
:interest, each player can expect to end
up worse by playing the game than
:by not playing the game. Thus,
only risk loving agents would be willing
:to play, and to make the assumption that
people are in general risk
:loving is contrary to empirical evidence.
:
Tim concludes
that it's irrational for borrowers to borrow the
principal and promise to return both the
principal and the interest.
He considers that this irrationality is
a deficiency in my model even
though promising to return 11 for every
10 borrowed is exactly what
all borrowers are doing.
:
I attempted to correct for the deficiencies of Turmel's model by
:changing the game from a zero sum game
to a positive sum game, i.e., one
:where the economy is growing. Turmel
in turn attacks some of my attempts
:to correct. Rather than defending
against Turmel's critiques, I will
:merely accept that even the corrected
model is not robust. However,
:this, by no means, validates the original
(Turmel) model.
:
But the way he
tried to compensate for the irrationality is not
a true representation of what is going
on. Though the money supply
does grow, it does not grow with an injection
of money to match the
interest demanded as he proposed. The
money supply grows in the same
way that it grew initially: people borrow
another 10 promising to
repay another 11 which is just more of
the same irrational problem.
: I will comment
to Turmel's criticisms that I had never suggested
:that the bank pays people interest in
order to cover the interest it
:charges.
:
I never took
it that way. You simply implied that money enters
circulation in some way to match the interest
demanded. This is not
the case. Though new money does enter
circulation, a corresponding but
larger debt also enters into circulation.
My model does take into
account the growth of the money supply
though it also takes into
account the growth of the debt for that
new money which his model did
not.
:I merely stated that the economy is growing.
Note that money
:is merely a means of tallying up the
value of the economy; by changing
:the accounting method one does not change
the amount of goods and
:services in the economy. It is
the latter, what economists call real
:wealth (or frequently, real GDP) which
is important, not the nominal
:accounting means.
:
And no matter
how much the money economy grows, my model shows
that the debt for that money growth also
grows but with the added
interest for the new money.
: Turmel
also comments that my examples, both in the earlier post
:and the one that is also earlier on this
thread, do not involve risk.
:
Your model would
not involve risk if indeed the money supply
simply grow with the banker adding new
chips to every pot with no
corresponding debt.
:That was a simplification on my part,
and does not significantly alter
:the results.
:
Sure it does.
If you don't take into account that all new money
injected into circulation has created
a corresponding but larger
element of debt, it does significantly
alter the results. That all
money principal entering circulation is
matched by Principal+Interest
component of debt changes the analysis
drastically.
:For understandings on how to generalize
from two to I agents
:and two to N periods, and to insert risk,
Ellickson _Competitive Equilibrium_
:is a good text, although it assumes a
thorough understanding of real analysis
:and topology. For those of you
confident of your math skills and, with
:the aid of some econ texts to understand
the intuitions of the
:mathematical proofs, I recommend that
book. With risk, obviously there
:are still losers since variance can neve
be totally eliminated. But only
:sensible risks will be taken, something
which is lacking in Turmel's model.
:
Unfortunately,
the irrational risk of promising to come up with
more than was created with the foreclosure
of the losers is the
actually risk I do object to and which
Tim will never see if he
doesn't take into account that the debt
grew with the growth of money.
: Turmel
argues that paying interest benefits no one. Although my
:model earlier in this thread was very
terse, it shows how each
:participant was benefitted.
:
Tim did not show
any benefit of interest. What he did show was
that there is an advantage to resources
being used by borrowers. This
advantage would still accrue in an interest-free
system.
:By borrowing money, one can consume now
what
:one would otherwise have to consume later.
But, in lending money, one
:must consume later what could have been
consumed today. Clearly, some
:people are more impatient than others,
but, all else being equal, I would
:rather consume now than later.
If I am to be enticed to consume later,
:i.e., to be a lender, I need to be compensated
for being patient, i.e.,
:to be paid interest.
:
This is the standard
rational by all apologists for usury. I
always ask how those who don't consume
their billion dollars should be
rewarded with $100 million for not consuming
the billion they could
never consume. No one ever answers but
they keep repeating the same
line.
: Paying
interest means that I might be able to live in a house
:long before I could otherwise save the
money necessary to buy it
:outright.
:
Paying the home
as it depreciates is all that is required in an
interest-free system. Of course, the home
would be paid off in a third
of the time.
:It means that I could pay for an education
that should
:hopefully provide me with the income
necessary to live a much better life
:than without the education. It
allows the entrepreneur to raise the
:capital necessary to start his/her business
that creates new wealth for
:him/her and the economy.
:
It's not the
paying the interest that should allow this but the
paying of the principal.
: Turmel also described
a LETS system, which was an electronic method of
:linking suppliers with consumers among
the very poor. This, here, is
:merely a barter economy and could easily
be found as an example of a
:market in an introductory econ textbook.
It does not condemn economic
:theory; it supports it.
:
It supports the
idea of an interest-free system. Not an interest-
bearing system.
:
Turmel adds that intertemporal payment schedules can be handled
:through LETS, i.e., I supply now and
you pay later. I would argue that,
:inherent in such an agreement is, implicitly,
interest. That is, if you
:offered to pay me $100 (or equivalent
in barter goods) next year, I might
:counter by saying, why not pay me $90
now?
:
No matter how
implicit interest is in a LETSystem, it is not
present in reality. But reality is not
what economists seem good at
handling.
:Turmel replied
:: : You see that
it facilitates but you just can't quite seem to
:: :see the whole picture, can you?
:
:I will repeat that, unless, where intertemporal
payments are being made,
:unless you can prove that interest is
not implicit in the transaction
:agreement you have proven nothing.
LETS is otherwise completely
:consistent with economic theory.
:
Is the fact that
there is no interest in LETSystems should be a
pretty good indicator that interest is
not implicit in the transaction
agreement.
:[ Turmel moves beyond discussing models
to makng ad homiens ]
:: I've
often joked how economists are two intellectual levels below
:: engineers.
:
:Which really validates everything he
has said, I am sure.
:
It sure validates
that economists don't have a clue after 5000
years of trying.
:: He then
goes into some complicated mathematical contortions
:: proving "I don't know what."
:
:I would have to say that this does seem
to be the problem; that you
:simply do not know.
:
No. It shows
that you make no conclusions about what we simply do
not know. What is it that you have proven
with all your mathematical
contortions.
: Turmel critiques
my model in this thread by stating that I assume that
:there is enough money. I do know
such thing. I don't even assume the
:existence of money. Let income
be in grain or any commodity. In both
:periods, commodities are produced which,
in the simple model, must be
:consumed in that period. Again,
for adding complexity, see Ellickson.
:
Turmel further critiques the model by stating that the people who
:study the economy are, automatically,
unqualified to explain how it
:operates.
:
It certainly
seems that way, doesn't it? It's almost as if the
more you study economics, the less you
can see the solution. Of
course, nowhere in any economics textbook
is there any discussion of
all the historical interest-free systems
which have been successfully
used.
:: No matter
how we cut it, economists are responsible for all the
:: foul-ups and I think it's the height
of presumption that he should
:: offer any kind of analysis which might
induce people to believe that
:: the "dismal science" has any reason
to be proud.
:: And note
that the fact he hasn't commented on my question on
:: double-think indicates that he still
can't see the contradiction which
:: will be readily apparent when I point
it out.
:
: still waiting. Is this, perhaps,
an example of the "proof by
:repeated assertion", where, instead of
explicitly proving a theorem, one
:merely repeats it so often that hopefully
everyone just accepts it as true?
:
No, but I am
amazed that no one has been able to see the
impossibility of both statements. I'll
lay out the contradiction at
the end of this post.
:: Finally,
if he thinks I'm ducking any debate with him, I'd
:: challenge him to public debate since
Queen's in Kingston is only 140km
:: from Ottawa
:
:Last time I checked, internet is a public
forum. I am severely
:constrained in my ability (as opposed
to willingness) to travel due to
:extreme limitations in budget and time.
Hence I am debating on this medium.
:
I'd be willing
to drive the 140km if any kind of debate could be
arranged.
:: So if
we don't offer Rockefeller $1 billion in interest, he might
:: just go out there and spend his $10
billion this year. It's to deter
:: him from consuming his $10 billion
that we should give him a premium
:: of $1 billion. I think this economic
fantasy fails to take into
:: account that he can't spend his $10
billion so why should we pay to
:: encourage him not do do something he
can't do anyway.
:
: Allowing for
further generalizations, some of which Turmel has not noted,
:the above example does fit a generalization
of my simple model. The
:question is why should anyone simply
loan money at zero interest if there
:is some other purpose to which that money
can be put (in Rockefeller's
:case, that would be the ownership of
capital, different from loaning
:money).
:
How many houses
can Rocky live in? How many cars can he drive.
How many boats can he sail? How many suits
can he wear? How much can
he eat?
In one of Father
Coughlin's best speeches, he said: "Mr.
Rockefeller, take all the houses you need,
all the clothes,
all the food, all the entertainment you
need. But when you can't eat
any more, can't drink any more, can't
live in more houses, then leave
the rest for the people."
:To agree to loan money, Rockefeller, like
the loaner in the
:simple model, has to be compensated for
deferring the use of the money
:(either consumption or ownership of capital)
in the present.
:
You keep forgetting
that he can't defer the use of money he can't
physically spend. That was my original
point which evidently slid
right by you.
: Turmel
cites as well a zero interest society in which lending, in
:effect, does not occur, but pawning does.
Of course, pawn shops exist in
:current society. I could sell my
assets, either to a pawn shop or
:elsewhere, for whatever the market would
bear. I could then buy back my
:assets later, or equivalent assets, again
at market bearing rates.
:
That's exactly
right, just like a casino bank. You pledge your
collateral and you get monetary chips.
What's hard to understand?
:
However, people also want to own assets prior to being able to
:afford them (by pawning assets to buy
others, they can clearly afford to
:buy the other). For example, houses.
Most people may not have the,
:hypothetical, $100 000 required to buy
a house up front, in cash or in
:assets. To be able to live in the
house prior to being able to fully own
:it, people are willing to pay interest.
Thus people not willing to pay
:the interest can, of course, continue
to rent.
:
It's not that
people are willing to pay interest, it's that they
have no choice as the banks have a monopoly
of the chip system.
Besides, properly insured, where's the
risk in fronting you a home.
You can't run away with it? There is no
risk. Why pay interest?
In an interest-free
system, the house would be the collateral for
the loan and you'd have to pay the depreciation.
What could be fairer
and without any risk.
:: Of course,
he encourages us to delve into the fantasies of other
:: economists who have their own way to
explaining these ridiculous
:: premises.
:
: I am accepting
that my models are terse and that I skip over steps in
:giving a summarized version of the results,
due to the limits of my time
:and this medium. For those people
who want a fuller analysis, please ref
:the books. Most are in university
libraries so you don't even have to
:buy them and thus support the economist
who wrote it!
:
The model of
the banker adding money to each pot so people would
have enough to pay the interest is a ridiculous,
not terse, model. It
had absolutely nothing to do with reality.
: I am, however,
also noting that this is hardly a debate against
:Turmel and myself; it is a debate of
social credit versus economics.
:Thus, I am attempting to note the wider
resources available for
:understanding economic science.
I am sure that others might even
:appreciate a similar note regarding the
resources of social credit.
:
LETS is a friendly
credit system and though Tim professes to
understand it's elementary nature, he
just can't see the connection to
the theory of social credit. I can't accept
that he understands LETS
if he can't see the social nature of Greendollar
credits.
: Turmel has apparently
mistaken me for a professor of economics at
:Queen's. Whereas I am at
Queen's, it is in the capacity of student, not
:prof. Whereas I always appreciate
flattery, I hope that others have not
:been misled by this error.
:
There's a good
reason I was mislead. On Jul 18 1995 in the
Subject: Re: TURMEL: What national debt??
Tim wrote:
:Conspiracy. Economists, surprise,
surprise, often hold debt as well.
:In fact, history records only two exceptionally
wealthy economists
:(David Ricardo and J.M. Keynes).
Many of the rest of us earn a
:professor's salary (being profs), and
make mortgage and car-loan
:payments. Giving all that interest
money to someone else sure must
:benefit us a lot.
:
When he said
"many of us earn a professor's salary (being profs),
I naturally assumed that he was one of
the "us" he was talking about.
So it would seem I wasn't mistaken unless
he was first mistaken.
: I will retract
the statements made that Turmel had not replied to my
:previous posts, since, apparently, it
seems that he has. I did not see
:that these posts had been made.
Perhaps (hopefully?) they were
:censored.
:
In fact, my news
administrator deleted everyone's posts in the
whole stream just a few days later on
July 21, including Tim's post. I
guess he didn't realize that his posts
were also deleted but
"hopefully" he's happy about having his
work censored.
4th8@qlink.queensu.ca (Huyer Timothy) wrote:
:Ser Olmy (simon@timeslip.zynet.co.uk)
wrote:
:
:: Sorry about this, but I do not study
economics. Perhaps someone could point out
:: in simple terms why banks can loan
(in UK anyway) eight times the amount of
:: money they get through deposits.
Does this not lead to inflation and the
:: devaluation of the currency?
:
:Okay, suppose you have $100 and you deposit
it in the bank. The bank
:needs to, either by law or just to cover
demands for cash, to keep some
:of that in reserves, say, arbitrarily,
$10. It then loans out the
:remaining $90. The person loaned
the $90 buys goods from someone else,
:who then deposits the $90 in the bank.
The bank holds $9 to maintain
:cash reserves, and loans out $81.
And so on. I have not checked the
:limit of the series, but it should be
relatively trivial but tedious to
:find a reserve ratio that results in
eight times the amount of money
:created from the deposits.
:
I don't see more
than the original $100 in this analysis. Does
anyone else. The $100 goes into the piggy
bank. $10 goes to reserves
and $90 is loaned out. That still adds
up to $100. It then loans the
$90 which is redeposited and $9 is stowed
to reserves and $81 is then
loaned out. That still adds up to $100.
$19 in reserves and $81 out.
And so on. At no point has he explained
how he jumps to the conclusion
that there is more than the original $100
anywhere.
Actually, and
I would have thought that most economists would
have know this, but the limit to the series
happens to be inverse of
the reserve ratio. In his above example
of a reserve ratio of 10%, the
limit of the loan expansion would be (1/.1)
x $10 = $1000.
Nevertheless,
this again relates to the original question of the
double-think. He gives us an example where
there is never more than
$100 in circulation and he comes to the
conclusion that somehow it
results in "eight (ten) times the amount
of money created from the
deposits." At no point do we see any source
of this new money he's
talking about. Sure it seems to be used
over and over again but never
do we see any new money. Isn't it interesting
that he sees monetary
creation even though there is never more
than the original $100?
:
Thus, the fundamental limit to the supply of money is set by the
:central bank, such as by setting the
supply of currency in existence.
:Since, for any cash reserve ratio greater
than zero, any series of loans
:and deposits such as the example above
will sum to a finite value, the
:banks themselves are limited in their
ability to create money.
:
Again, he's talking
about the banks creating money but his
example doesn't show any new money being
created.
:This may be a little terse and confusing,
as my field is not money and
:banking. There are a number of
textbooks that cover this in more detail,
:however, so check a university library
for them.
:
It only looks
terse and confusing because there's something
wrong. And only if you don't see the contradiction
in my original
question can you accept that somehow that
$100 became more.
On Oct 19 1995 ph@gramercy.ios.com (Phil Henshaw) wrote:
:For example, I don't see a problem with
banks creating money by being
:able to lend more than they have in deposits,
up to the governmentally
:set reserve limit.
:
In Tim's example,
the bank always lent out 10% less than they had
taken in as deposits. Now we're told that
they lend out more than they
have in deposits. This seems like a direct
contradiction, again. Who
is right, are they both right, are they
both wrong?
The answers to
these contradictions are in my post about the
Mathematics of Interest Rate Usury. In
it, I use pipes to show
monetary flows. After all, they always
called engineers plumbers and
there's no better way to model the liquidity
system than with pipes.
If no one figures it out, I'll explain
the contradictions and the
errors in my next post unless someone
else finds it first.
simon@timeslip.zynet.co.uk
(Ser Olmy)
:
:Surely creating money just causes inflation,
whoever creates it?
:
Actually, adding
more money would reduce inflation. Figure that
one out.
:>Some people think government debt would
be lowered if the country, rather
:>than private banks, created money.
:
:Perhaps if the Govs. spent less they
would not get into debt?
:
Of course government
debt would be reduced if the government
created the money instead of letting the
banks do it and loanshark it
to the government. But if they spent less,
you'd have far more people
starving in the streets.
The intellectually challenged are still protesting:
bc865@FreeNet.Carleton.CA
(Peter J. Amsel) wrote:
:Why is John TURMEL still crossposting
to so many groups (I counted over
:twenty for this one)? It is sort of like
the O.J. question: WHO CARES?
:whatever...
reckdahl@leland.Stanford.EDU
(Keith Reckdahl) wrote:
:Dear Postmaster,
:Turmel posted this article to Newsgroups:
:*nothing* belongs in all those newsgroups.
Please cancel
:this article and cancel Turmel's posting
privileges.
iain@hotch.demon.co.uk
(Iain Hotchkies) wrote:
:> more than 10 newsgroups, I've decided
to drop the following
:> newsgroups:
^^^^
:Oh my goodness, I don't think a post
has made me so happy in
:years. Thank you, Sir, thank you!
watermj@gov.on.ca (Joel Waterman) wrote:
:Why do you post this to the occupational
health and safety newsgroup
:sci.engr.safety. Do you appreciate
the dammage that irrelavent cross
:posts do to your good name?
peter@petecar.demon.co.uk
(peter carley) wrote:
:Despite asking nicely you continue to
post your INANE RAVINGS to
:inappropriate newsgroups.
:Once again (simply for the obviously
THICK)
:The ONLY newsgroup you should be posting
to is sci.eng.econ
:Do you really thrive on trying to bring
newsgroups to there knees?
:Once again I'm obliged to request your
postmaster to suspend your account
:Peter Carley
John "The Engineer" Turmel
---
The original double-think question was:
: 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?
:You deposit 1000 in the bank. The bank
lends 1000 to me.
:I deposit that 1000 in the bank, the
bank lends it
:to someone else, and so on. I'm sure
our resident banker
:can explain it more precisely.
:It looks a bit like climbing on stacked
boxes by moving the
:bottom one to the top, but it appears
to work.
This is exactly
how everyone thinks a savings bank works, just
like a piggy bank. No source of new money,
no tap. Just a reservoir.
The easiest way
to model our system of financial liquidity is
with plumbing. All banking systems have
the same exterior connections
to the economy.
The three arrows
going in at the top are "Deposits," "Interest
paid," "Loans paid."
The three arrows
coming out from the bottom are "Withdrawals,"
"Expenses," Loans made."
In the Piggy
Bank, draw a rectangle wide enough to accept all
three input flows and all three output
flows. Label it "Reservoir."
PIGGY BANK
Deposits Interest(paid) Loans Paid
|
|
|
|------------|-------------|-------------|--------------|
|
|----|-------------|-------------|----|
|
|
|
RESERVOIR
| |
|
|----|-------------|-------------|----|
|
|------------|-------------|-------------|--------------|
|
|
|
Withdrawals Expenses
Loans Made
Notice that the
$1000 goes in deposits and is loaned out, returns
to deposits and is loaned out, etc. Notice
also that there is no new
tap source of money and no drain so there
is no creation or
destruction of money.
Markku Stenborg <marsten@utu.fi> pointed out:
:Not quite. You deposit 1000 in the bank.
Bank has reserve requirements of
:10%, say. The bank lends 900 to me, and
keeps 100 in its reserves. I
:deposit that 900 in the bank, the bank
keeps 90 in its reserves, and
:lends 810 of it to ... You getting the
picture?
:Or, equivalently, bank keeps 1000 in
reserves, and lends 10,000 to me.
:
PIGGY BANK
Deposits Interest(paid) Loans Paid
|
|
|
|------------|-------------|-------------|--------------|
|
|xxxx|-------------|-------------|----|
|
|
|xxxx RESERVOIR
| |
|
|xxxx|-------------|-------------|----|
|
|------------|-------------|-------------|--------------|
|
|
|
Withdrawals Expenses
Loans Made
The part of the
reservoir xed out represents the 10% reserves the
bank must hold. Again there is no source
tap and no sink drain. So
again I pointed out:
: So because the
bank reloaned the same money to you over and over
:until your debt was $10,000, it doesn't
explain where any new money
:other than the $1,000 came from. And
if the bank calls in your $10,000
:loan, where do you get the other $9,000?
On Sep 27 1995,
jhardy@foreigner.class.udg.mx ("James E. Hardy")
wrote:
:When a bank loans money that someone has
deposited, the depositor
:still has access to this money, too,
as long as he only writes a
:check and doesn't actually withdraw the
cash. Therefore, new money
:IS put into circulation. Both the person
who receives the loan and
:the depositor can use the money.
:
Just because
two people can call on the
money doesn't mean that it's there. Otherwise,
they wouldn't have bank
runs. Everybody knows that everybody can't
all ask for their money at
the same time, right? Again I pointed
out there was no tap of new
money in his example.
: So because I
put my $1000 in a piggy bank which you may use
:hasn't explained where the second $1,000
comes from. Try again.
Timothy Huyer tried again.
:Okay, suppose you have $100 and you deposit
it in the bank. The bank
:needs to, either by law or just to cover
demands for cash, to keep some
:of that in reserves, say, arbitrarily,
$10. It then loans out the
:remaining $90. The person loaned
the $90 buys goods from someone else,
:who then deposits the $90 in the bank.
The bank holds $9 to maintain
:cash reserves, and loans out $81...
And so on. I have not checked the
:limit of the series, but it should be
relatively trivial but tedious to
:find a reserve ratio that results in
[ten] times the amount of money
:created from the deposits.
:
I again pointed
out:
: I don't see more than
the original $100 in this analysis. Does
:anyone else. The $100 goes into the piggy
bank. $10 goes to reserves
:and $90 is loaned out. That still adds
up to $100. It then loans the
:$90 which is redeposited and $9 is stowed
to reserves and $81 is then
:loaned out. That still adds up to $100.
$19 in reserves and $81 out.
:And so on. At no point has he explained
how he jumps to the conclusion
:that there is more than the original
$100 anywhere.
So given their
descriptions of how the banking system works,
there is never more than 100 $1 bills
anywhere in the system. Yet
they all adamantly claim that the money
borrowed is new money put into
circulation. How can this be?
When you make
a loan, you are either getting new money or someone
elses' savings. You can't be getting both.
Yet, what seems to be a
piggy bank operation lending out depositors
funds does not actually
lend out depositors funds but brand new
funds.
Graham Towers,
the former Governor of the Bank of Canada,
testified "The banks, of course, do NOT
lend out their depositors
funds. Each and every time a bank loan
is made, new money is created."
So they are all
correct when they state that the money supply
goes up when new loans are made and anyone
who claims that they lend
out their depositors funds is incorrect.
That's the double-think.
It is to double-think that loans are of
new money and old money at the same time.
It can't be both.
Concluding that
new loans are new money, a piggy bank plumbing
does not apply and yet it sure looks like
it operates just like a
piggy bank.
But since what
is coming out of the loans pipe is new money, it
means that LOANS ARE CONNECTED TO THE
TAP, NOT THE RESERVOIR.
So if they don't
actually lend out the depositors' funds, why do
they need them in the first place?
Because piggy
banks need deposits before they make loans and if
you want your creationary bank to look
like a non-creationary piggy
bank, you make up a rule that says "NO
LOANS FROM THE TAP UNTIL
SOMEONE DEPOSITS TO THE RESERVOIR" so
everyone thinks they're getting
the deposit to the reservoir.
It's brilliant.
Bankers run around screaming "Give us your
deposits so we can lend them" when they're
really getting the deposits
so they can lend new money and increase
the money supply.
The following
is the actual pipe engineering:
FRACTIONAL RESERVE BANK
Deposits Interest(in) Loan Payments
|
|
|
|------------|-------------|--------------|-------------|
|
|
| |---|---|
|
|
|----|-------------|----| | DRAIN |
|
|
|
| |-------|
|
|
| RESERVOIR
|
|
|
|
| |-------|
|
|
|----|-------------|----| | TAP |
|
|
|
| |---|---|
|
|------------|-------------|--------------|-------------|
|
|
|
Withdrawals Bank Expenses Loans Out
The simplest of
such creationary banking systems is a poker
chips bank which has a tap exchanging
new liquidity for pledged
collateral when people borrow their chips
and a drain for when people
cash them in. No reservoir. Pure tap and
drain. Of course, many larger
casinos do have safety deposit boxes which
could act as reservoirs but
there is no connection between the operation
of the tap to the
reservoir. Operating like the current
banking system, they wouldn't be
allowed to loan out 90 new chips until
the reservoir indicated that
someone had deposited 100 old ones.
A casino bank
which charges interest on chips and which will not
issue any new ones until old ones are
deposited in the safety deposit
section is a perfect model.
So let's read
the former explanations to see how the above system
is the actual plumbing that looks like
it's a piggy bank but is
actually a creationary bank lending out
new money.
:You deposit 1000 in the bank. Bank has
reserve requirements of
:10%, say. The bank lends 900 to me, and
keeps 100 in its reserves.
He doesn't say
where the bank got the 900 dollars, from the
reservoir or the tap. But if it's from
the reservoir, no new money is
created and if it's from the tap, new
money is created.
So, actually,
the bank turns on the tap and lends 900 to me,
keeps 100 in its reserves for the central
bank and holds the other 900
for its depositors. This is the fact that
is hidden. In a sense, 90%
of the depositor's money is held by the
bank and the other 10% is held
by the Bank of Canada. All loans are new
money.
:Okay, suppose you have $100 and you deposit
it in the bank. The bank
:needs to, either by law or just to cover
demands for cash, to keep some
:of that in reserves, say, arbitrarily,
$10. It then loans out the
:remaining $90.
:
It looks like
it loans out the remaining $90 but if it did that,
there would be no increase in the money
supply. It actually holds the
remaining $90 while creating and lending
out the new $90. That's why
the money supply goes up when banks make
loans and why both the
depositor and the borrower have access
to their funds. The depositor
has his old savings and the borrower has
his new loans.
:When a bank loans money that someone has
deposited, the depositor
:still has access to this money, too,
as long as he only writes a
:check and doesn't actually withdraw the
cash. Therefore, new money
:IS put into circulation. Both the person
who receives the loan and
:the depositor can use the money.
:
Assuming the
first guy uses the whole $1,000, he doesn't explain
where the money would come from for the
second guy to use it at the
same time. It really couldn't. Yet, sure
enough, both the depositor
and the borrower do have access to $1,900
under the present system,
not because they both have access to the
same $1,000 but because the
depositor has access to his savings and
the borrower had access to his
new loan.
Note how the example
using the pipes has a source and a sink
which none of the offered models showed.
They can't talk creation of
new money without having a tap in their
model and once you connect up
the tap to loans, the rest is obvious.
But there's no shame in being
taken in by such a a brilliant scam to
make a creationary casino style
bank look like a piggy bank. There is
shame in not believing what must
be the obvious engineering design.
It is wrong to believe that:
:A bank can accept $100M in deposits. They lend out $2000M..
It's true that
at a 5% reserve ratio, with a $100m deposit, 90m
is loaned out to be redeposited releasing
a new $81 million which is
redeposited releasing a new $72 million,
etc. until they've
effectively created $2000M in money. But
the interest they're paying
to depositors is on the whole $2000M created
and not just the original
$100M.
I'll sum up this
question of why it's so wrong for private
industry to be running the creation of
money rather than government
in a short poem.
A mayor faced
with rising costs and shrinking revenues,
To study any proposition, he would not
refuse.
"So many think
the job of being mayor is a snap,
But the decisions that I'm faced with
are an ugly trap.
With tools, materials
and trades that cover total range,
Yet one ingredient is lacking, money to
exchange.
If snowstorm
hits the city and there are no funds to pay,
What does my council have to do to clear
the snow away?
We pledge a million
dollar bond to banks to get the cash,
With which we pay the skillful men who
clear snow in a flash.
The merchants
gladly take the funds for soon they'll have to pay,
The taxes for the snow removal that was
done that day.
But though a
million principle was spent, we must request,
That citizens be taxed for principle and
interest.
To budget who
gets scarce resources isn't ever fun,
But interest on city's debt is always
number one.
Whatever rate
the bankers set is due amount I pay,
Unhappily, which projects live or die's
my only say."
A closer look
at how our governments spend revenue,
Might let us know what's gone amiss and
what we have to do.
I'll pay my tax
for army and police to handle strife;
I'll pay my tax for doctors, nurses who
protect my life;
I'll pay my tax
for all engaged repairing road and sewer;
I'll pay my tax for social servants helping
out the poor;
I'll even pay
my tax for bureaucrats with no regret;
But I object to paying tax for interest
on debt.
We're told that
government finance is only for the sage,
Too hard for Mr. Average, its study to
engage.
But does it have
to be well understood by only few?
Or can the problem be explained for Mr.
Average too?
When you were
little, did you ever dream of printing cash?
Of filling up your wallet with some money
in a flash?
Creating money
accurately means TO HAVE THE PLATES,
The stamping of some paper into notes
best demonstrates;
Or stamping metal
into coins; or blips computerized,
Into your bank account deposits, checks
now authorized.
Yet others would
object if you could print it up to spend.
But what if government would let you print
it up to lend?
If you could
print and lend a thousand out at ten percent,
You'd make a hundred interest on printing
that you lent.
But if you could
print up and lend a million out you'd get,
An extra hundred thousand dollars for
your fee on debt!
If government
stops using its own plates and comes to you,
A billion printed nets a hundred million
revenue!!
With everybody
being taxed to pay you interest,
Of all the scams in history, TO HAVE THE
PLATES is best!!!
Though never
spending, only lending, riches to await,
To all who with the plates become the
loan-sharks to the state.
And though to
join the few who thusly profit, one might dream,
Wake up to see we're all the victims of
their greedy scheme.
Though governments
of old ruled "Treasury run money plates,"
Without the interest to middle-men at
rip-off rates,
Today most governments
to banking industry have lost,
Control of money plates so interest is
now a cost.
To service debt
in ninety four, Canada's request,
A hundred'n eighty billion dollars paid
in interest.
We're taxed over
five hundred dollars each per month to pay,
For interest to holders of our plates
they gave away!!!
We now see the
unjustly cost that makes our tax inflate,
And only usury is what we must eliminate.
We Abolitionists
would get the plates back from the banks,
Have Treasury control for only printing
charge and thanks.
The interest
we save would be split up I recommend,
For each to get five hundred dollars monthly
dividend,
As if you owned
a share in the incorporated state,
An income guaranteed for life, no question,
no debate.
The mayor said
that if Greendollars served as Locals tell:
"Why shouldn't government be one to try
it out as well?
Another snowstorm
hits the city with no funds to pay,
We'll test the LETS and see if we have
found a better way.
This time we
pledge the million dollar bond to LETS instead,
And see if use of Green will get us very
much ahead.
The merchant
should accept the Green for it's another way,
His taxes needed for the snow removal,
he can pay.
Again we spent
a million but the tax to be assessed,
Included only principle without the interest.
We'd offer Green
to fix a pothole to a company,
Wishing to pay their tax with unemployed
capacity.
Today in our
society where money clearly lacks,
Who could refuse some paper anyone may
use for tax?
Greendollar paychecks
could be earned by all desiring work,
The opportunity to pull their weight so
few would shirk.
Before the budget
allocations are completely spent,
Can LETS Greendollars help reverse project
abandonment?
If council members
for their tax took part of pay in Green,
We'd have some cash left over which is
something rarely seen.
If civil service
took some Green at least for taxes due,
The extra cash would guarantee that extra
jobs ensue.
The only question
left is how the tax should be assessed,
For goods and services? A simple formula
to test.
For services,
we'd levy tax at end of every year.
For assets, tax to pay depreciation. It's
so clear.
With Green we'd
pay for road repairs and I would gladly take,
Greendollars from the working men so payment
I could make;
And we could
built our hospitals and I would take as pay,
Greendollars to buy medicine and service
they purvey.
The government
that spent the most and had the highest tax,
Would be the government providing citizens
the max.
And best of all
we'd have the Green to save environment,
A way to pay to save our lives and make
us affluent.
With Green the
unemployed throughout the world could save the day,
Without it they will idly sit and die
their lives away.
We let the State
run things for us. In banking they should too.
Creation of the money is a service they
should do.
The LETS can
be adapted to most any database,
Municipal, provincial, federal. In every
case.
No need to understand
the simple program for we know,
Computer pros in government can surely
make it go.
And though retired
residents do often feel dismay,
They shouldn't fear if we should take
their interest away.
All those who
live on saving bonds to furnish what they spend,
Could buy some stocks, create some jobs
and get a dividend.
So I'll accept
the tax for people's time at useful toil,
But taxing me for money's time will always
make me boil.
Would you agree
control of money plates by banks should end,
With all that interest diverted to your
monthly dividend?
Would you agree
control of money plates by banks should end,
With no more tax for interest on money
bankers lend?
Finally kamamer@io.org (karl mamer) who wrote:
:|nowhere in any economics textbook is
there any discussion of all the
:|historical interest-free systems which
have been successfully used.
:
:Care to point some of those out? Care
to tell us why they vanished?
I've pointed the
successful use of interest-free currency systems
in the past but those that come to mind
in order of quality and
success are:
British tallies
which were instituted by the greatest of English
kings, Henry I, and performed flawlessly
for over 700 years until 1826
when their use was discontinued by Parliament
in favor of getting into
interest-bearing debt to use gold.
North American
Indian wampum beads which were promissory notes
and upon which the Local Employment Trading
System Greendollars are
based was used into the 19th century from
time immemorial.
The city-state
of Sparta had an interest-free bank where
merchants could buy in with their gold
and receive clay chips to use
while they were in town, another successful
example of government
using Greendollars.
The Roman Empire
used interest-free copper Aes Grave chips until
they got hooked on interest-bearing gold.
The American
colonies used interest-free Continentals to provide
for full employment and revolted over
the unemployment caused when
King George forced them to use interest-bearing
gold. (Ben Franklin)
They certainly didn't revolt over something
as trivial as a tax on
tea.
Abraham Lincoln
used interest-free Treasury Greenbacks to win the
civil war but Congress soon reduced their
use in preference to
interest-bearing loans from the gold merchants.
Even Hitler's
Third Reich used interest-free Marks to provide
full employment while the rest of the
gold-using world were deep in
depression. Unfortunately, he put them
to work building tanks instead
of tractors.
The Island of
Guernsey in the English Channel presently and for
almost 200 years had been using its own
national currency with no
unemployment, low inflation, low taxes
and virtually no debt.
The growth of
the LETS Greendollar systems around the world is
testament to the relief local people-based
currency can provide to
cash-starved municipalities. Britain had
2 systems in 1992 and by mid-
1995, there were over 350 systems serving
over 30,000 accounts.
In Australia where they have over 200
systems, Parliament has just
endorsed LETSystems as a valuable relief
mechanism for the poor.
Why did these
systems come into disuse?
Good question.
What I can attest
to and what the success of Guernsey and of
Greendollar systems shows is that they
didn't cease functioning
because they didn't work. 700 years of
successful British use is a
pretty good test. In most cases, it started
with international trade
where you needed gold. In most cases,
the bankers bought the
governments or kings who needed the gold
for their foreign adventures.
That's what happened to tallies. The King
needed gold for an overseas
war and succumbed to the pressure to discontinue
use of government
currency in favor of bank-created and
interest-bearing currency.
I would like to
try to get into why the mere thought of an
interest-free system seems to ridiculous
to many. They want interest
so everybody else must want it. They'll
always demand it so everyone
else will always demand it.
The notion that
the volume of chips must be kept in short supply
to give those chips their value is ingrained
in the brains of everyone
who uses money. And it's going to take
a paradigm shift, a totally
different of view of the system, to overcome
that brain-washing of the
general public.
It's as if you've
been playing musical chairs all of your life
where you see the losers everywhere around
you. Anyone who has played
musical chairs successfully knows that
it would be foolhardy to help
someone else up onto their chair before
looking for theirs. Such an
elimination "death-gamble" forces one
to think only of one-self.
Adding the missing
chair to the game changes the psychological
effect on the participants drastically.
Knowing that there are no more
forced losers makes what used to be a
war to the death a game where it
doesn't hurt to help your competitor.
It doesn't have to an economic
jungle with economic losers who die of
want but an economic game where
everyone may survive.
I think Christ
explained the difference between the two best when
he described the usury system as:
"To him who has
abundance will more be given and from him who has
no abundance, even what he has will be
take away.
He described
the interest-free LETSystem as:
"His abundance
should at the present time be a supply for your
want to that your abundance may later
be a supply for his want and in
that way, he who gathers much doesn't
have too much and he who gathers
little doesn't have too little."
He leaves room
in a Christian economic system for superior
performers to win and have more while
at the same time making sure
that the lesser performers still have
enough of the plenty.
So much can be
explained once you understand how musical chairs
with money works. Local economics, international
economics. Macro and
micro-economics become unified into one
theory.
The last point
to deal with is why the banking families would
trick world governments into giving them
our money plates and letting
them loan-shark new money to both governments
and citizens? Power's an
ugly answer but fits.
Usury is financial
slavery and has been since the dawn of money.
Bankers have been history's slave-masters
and the techniques they used
to control their slave populations are
still in evidence today.
Did you ever
wonder why synthetic fuel technology producing
gasoline at 1.6 cents a gallon was hidden
in favor of keeping the
world hooked on petroleum.
Did you ever
wonder why hemp, the most useful plant in history,
capable of providing all mankind's fuel,
chemical and food needs had
been outlawed? Did you ever wonder its
marijuana flowers were outlawed
and debasing alcohol consumption has been
promoted?
Did you ever
wonder why they're passing legislation to ban our
choice of natural vitamins and why they've
suppressed so many
alternative therapies?
It all boils
down to keeping the slave population too sick, too
drunk and too broke to resist. The death
from sickness, the suicides
from from depression, the death from crime
in the streets can all be
laid on the doorstep of the damned loan-sharking
fraternity. The
banking families have the blood of centuries
on their hands but our
liberation from financial slavery through
our own local currencies is
at hand with the advent of the internet
revolution and our deliverance
is at hand.
I'm proud to
have been the bearer of the good news of a
liberation system over these last 16 years
and am fascinated at
the world's real financial rulers will
do to respond.
Hopefully, there's
no reason to shoot this loud-mouth slave
because I'm in favor of forgiving, forgetting
and getting on with
turning financial Hell into financial
and economic Heaven by the
abolition of interest rate usury.
John "The Engineer" Turmel
---
Subject: Re: TURMEL: On Social Credit
On Oct 25 1995, huyert@qed.uucp (Timothy Huyer) wrote:
:John Turmel (johnturmel@yahoo.com)
wrote:
:
:: Tim concludes
that it's irrational for borrowers to borrow the
:: principal and promise to return both
the principal and the interest.
:: He considers that this irrationality
is a deficiency in my model even
:: though promising to return 11 for every
10 borrowed is exactly what
:: all borrowers are doing.
:
:Perhaps I was being too technical in
my previous post. I will attempt to
:be more clear, and to even try to avoid
multi-syllabic (big) words, just in
:case that is the real problem.
:
In Turmel's model, each agent (person) has two options:
:(1) Play the game. To do
so, you put your watch up as collateral.
:Since your expected return is not sufficient
to get your watch back, you
:expect to lose your watch. This
does not mean that you will lose your
:watch, just that odds are you will.
:
Actually, odds
are that you don't. If 10 people put up their
house they're purchasing as collateral
for a loan at 10% to receive
$100,000 each, 9 people manage to keep
their house by paying back
$110,000 and only one person loses his
house so the other 9 survive.
:If expectations are still causing
:problems, please consult a statistics
book; it is purely an exercise in
:probability and entirely independent
of the mathematics.
:
Actually, it
is entirely DEPENDENT on the mathematics. So odds
are the majority will make it at the expense
of the minority who lose.
The actual ratio of survivors is 100/110,
P/(P+I).
:(2) Don't play. You don't
lose your watch.
:
Don't try to
purchase a house is not an alternative most people
will choose. Since the majority do manage
to survive, they're simply
gambling that the bankers will foreclose
on someone else.
So my model of
people pledging their watch for their loan is is
actually quite true to the real world
where they're pledging the house
they're purchasing with their loan for
their loan. The model is so
perfect I find it hard to understand why
Tim can't see it.
:Since your expected return from not playing
is better than your expected
:return from playing, any risk adverse
or even risk neutral agent will not
:play the game. To assume that people
are risk loving, (eg. will always
:take the long-shot gamble) is contrary
to empirical evidence.
:
But if you want
to live in a house, you either pay interest as an
owner or you pay the owner's interest
are rent. There's just no
escaping it. Either you pay to take the
death-gamble or you pay for
your landlord to take the death-gamble.
Why do you think it's called a
mort(death)-gage(gamble)?
:Turmel argues that people play the game
when it is better for them to not
:do so. This means that the agents
are not behaving in a rational
:manner. This means the model is
irrational.
:
Just because
it's irrational for the group to consent to such
rules doesn't mean that the model of the
gamble they're taking is
irrational. What a ridiculous conclusion.
It's like saying that
because playing musical chairs for real
is not behaving in a rational
manner doesn't mean that the musical chairs
model is irrational.
:Recall that, in reality, the option of
never borrowing money does exist;
:in real life we have the option of not
playing the game.
:
And if citizens
choose not to take the gamble and borrow money
into circulation, there would be no money
and we'd have to go back to
the barter system.
:: This is
the standard rational by all apologists for usury.
:
:Perhaps because it is correct?
:
Perhaps because
they've been brain-washed?
:: No matter
how implicit interest is in a LETSystem, it is not
:: present in reality. But reality is
not what economists seem good at
:: handling.
:
:In order to provide a theory that eliminating
interest increases social
:welfare, the model showing an interest
free society must not contain
:interest, either explicit or implicit.
I pointed out that interest was
:still implicit in a LETSystem, and unless
Turmel can prove that interest
:is not implicit, the LETSystem proves
nothing. Turmel could also argue
:that the model being described is not
a good representation of reality,
:i.e., a real LETSystem. In which
case, one would expect him to provide a
:better model. Since there apparently
are real LETSystems in existence,
:we can compare which model is the more
accurate. (Indeed, options for
:empirical testing abound as well...).
:
I argue that interest is implicit in a LETSystem in that the
:barter deal can include time preferences.
An example:
:
Say that I am trying to sell my bicycle in exchange for my roof
:being shingled. We will further
imagine that my bicycle will experience
:absolutely no wear over the course of
the next year.
:
I make two offers:
:(1) You shingle my roof now, I
give you my bicycle now
:(2) You shingle my roof now, I
give you my bicycle next year.
:In both cases, the value has not changed,
merely the time in payment.
:I claim that, all else being equal, everyone
will choose offer (1).
:Furthermore, I claim that in order to
get people to accept offer (2), I
:need to sweeten the deal, say, a spare
inner tube or something. That
:last bit is the implicit interest.
:
What a stupid
offer. I think it would start by my offering you my
bicycle next year for my roof shingled
today and if he says no, then I
have the choice to offer the bicycle today.
And the fact
that there is no interest in LETSystems should be an
indication that the value of the trade
is set when the trade is made
and if it includes giving the bicycle
next year or this year, that is
the perceived value in the eyes of the
other trader.
:
I hope that, at the very least, most people will understand the
:intuition of what I am saying.
People have a time preference: they want
:NOW, and in order for them to defer spending
now, they need to be offered
:an incentive, interest. Those people
willing to pay that interest in
:order to have even greater spending power
now will thus borrow at interest.
:
One final note
is that the bicycle is a true commodity while
money is nothing but a chip. The only
reason people fall for the time
preference argument is that the chips
are kept in short supply. Walk
into any casino and try to get interest
for chips when there's cage
willing to give them chips without interest
and only fools would
choose to pay you interest. Of course,
find a way to keep chips in
short supply and I'd bet people would
start paying interest on chips
too.
:: How many
houses can Rocky live in? How many cars can he drive.
:: How many boats can he sail? How many
suits can he wear? How much can
:: he eat?
:
:Congratulations, Mr. Turmel, you are
now a socialist.
:
Jumping to conclusions
again. You'll note that I favor each being
able to keep everything they earn with
the more successful having more
than the less successful. I advocate taking
nothing from the rich and
given nothing to the poor short of credit.
This is a standard
misinterpretation. Socialists attack me for
being the ultimate capitalist and usury
capitalists attack me for
being the ultimate socialist.
There is a good
reason for this.
The Capitalist
thesis is not all good. The Socialist anti-thesis
is not all bad. There is a perfect synthesis:
Social Capitalism where
everybody gets to be a capitalist. This
happens when access to credit
is based on what everyone has: manpower.
Now credit is based on what
everyone may not necessarily have, collateral.
Basing the ability to
get into the economic game on human power
to work offers an even
playing field in the capitalist game.
This also explains
why socialists shun interest-free credit as
capitalistic and why Tim shuns interest-free
credit as socialist. It
is a perfect blend of the two.
:: You keep
forgetting that he can't defer the use of money he can't
:: physically spend. That was my original
point which evidently slid
:: right by you.
:
:Rockafeller may not be able to consume
his multi-billions, but it is
:clear that he gets some utility out of
it, if merely in making more
:billions by investing his money in capital.
:
Tell me the use
Rockefeller is getting out of owning 10000
apartments or 100 tractors? It's called
abundance because it's more
than he can physically use. And there's
no reason he should be
compensated for use of capital he can't
make.
:Since we are operating
:within a system of private property,
this is his prerogative. Now,
:certainly, Rockafeller can agree to loan
out his money, but, since he
:loses the use of it and thus whatever
value it has for him during the
:time he has loaned it out, he will presumably
ask for compensation, i.e.,
:interest, for loaning out his money.
:
Notice that he
completely missed the point and is once again
indicating that Rockefeller is forsaking
spending it all and should
therefore be compensated. It's pretty
obvious that this explanation
went in one ear and out the other.
: You suggest
that Rockafeller should not charge interest. Thus,
:Rockafeller would see no reason beyond
altruism (and we can safely say
:that his altruism does not cover his
entire stock of wealth!) to loan out
:money.
:
No one wants
to borrow his chips. They stay in his safety deposit
box while people go to the cage to get
their own chips. Again, he's
stuck within the paradigm that there is
no source of money other than
Rockefeller's savings which would be expected
given his previous
explanation of banking which had no source
of money and was purely a
piggy bank model.
:Are you implying that Rockafeller, then,
MUST loan out money at
:0% interest? That, in fact, Rockafeller
should not have property
:rights?
;
Again, I don't
want to use his chips, I want to get my own in
exchange for the work I produce. When
will they ever get it through
their heads that this is a casino cage
model where we don't need any
of his savings since the bank has enough
to liquefy everyone's
production. And I've never said anything
about his not having a right
to his property. One has to wonder how
he can jump to these
conclusions.
;We are quickly leaving a debate regarding
the fallacies of a
:social credit system and moving into
a philosophical argument defending
:socialism. If so, fine, but please
keep the argument straight!
:
So far, he's
shown no fallacies of a social credit chip system
and I'm not arguing socialism. Never hurts
to throw up straw man to
knock down though.
:: It's not
that people are willing to pay interest, it's that they
:: have no choice as the banks have a
monopoly of the chip system.
:: Besides, properly insured, where's
the risk in fronting you a home.
:: You can't run away with it? There is
no risk. Why pay interest?
:
:(1) Banks don't have all the money.
People can loan other people money,
:at whatever interest rate they want,
even 0. Doesn't sound like a
:monopoly there.
:
Again he missed
the whole point. The banks have a monopoly on the
creation of new money loaned out. No one
has a monopoly on the old
money loaned out though anyone familiar
with a casino cage operation
will realize that no one needs use someone
else's chips. But since he
can't grasp how casino chips work, he
just can't get it out his head
that we don't need to use savings to make
loans at all.
:(2) Houses are obviously a bad example.
Let's try cars: I could
:default on a car loan and run away with
the car. Also a lot of other
:smaller goods.
:
Houses are obviously
only a bad example because he can't answer
why we should pay interest to purchase
collateral that can be stolen.
He prefers to discuss collateral which
can be stolen and then conclude
that the risk also applies collateral
that can't be stolen.
Typical. Turmel's
right about interest on housing so let's
discuss interest on cars.
:: When he
said "many of us earn a professor's salary (being profs),
:: I naturally assumed that he was one
of the "us" he was talking about.
:: So it would seem I wasn't mistaken
unless he was first mistaken.
:
:I apologised for any misleading that
may have resulted, which I already
:stated as unintentional. I see
no reason to belabour the point.
:
I don't remember
you having apologized though I also see no reason
to belabor such a minor point. I just
need to point out that I don't
take cheap shots or make cheap arguments.
Ever. If I can't beat your
best case, then I don't deserve to win
the argument.
:I should also note something which I missed
earlier:
:
Not all money is created through debt. The central bank (eg.
:Bank of Canada), creates money through
open market transactions. The
:central bank also effectively defines
the size of the entire money supply.
:
Sure the central
bank creates the original high-powered money
which is then multiplied through the deposit
loans in the private
banks, I believe that it is less than
2%. The other 98% is created by
the private banks. Pointing out the central
bank creates money while
omitting to mention that it's only a trickle
compared to the money
created by the private banks does tend
to mislead.
On Subject: Re: TURMEL: Social Credit:
Double-think solution, Bruce
McFarling <brmcf@utkux.utk.edu> wrote:
:On Wed, 25 Oct 1995, John Turmel wrote:
:
:>
PIGGY BANK
:>
Deposits Interest(paid) Loans Paid
:>
|
|
|
:> |------------|-------------|-------------|--------------|
:> |
|----|-------------|-------------|----|
|
:> |
|
RESERVOIR
| |
:> |
|----|-------------|-------------|----|
|
:> |------------|-------------|-------------|--------------|
:>
|
|
|
:>
Withdrawals Expenses
Loans Made
:
:> Notice
that the $1000 goes in deposits and is loaned out, returns
:> to deposits and is loaned out, etc.
Notice also that there is no new
:> tap source of money and no drain so
there is no creation or
:> destruction of money.
:
Notice that what is drawn does not correspond to what is said:
:
: ----------> Deposits
Interest(paid) Loans Paid
: |
|
| (=)
: | |------------|-------------|----------------------------|
: | |
|----|-------------|-------------|----|
|
: | |
|
RESERVOIR
| |
: | |
|----|-------------|-------------|----|
|
: | |------------|-------------|----------------------------|
: |
|
| (=)
: |
Withdrawals Expenses
Loans Made
: |___________________________________________|
:
:
Give me a break.
How dare you draw the arrow from the loans made
to the deposits right after I said that
the loan "returns to
deposits." All you've done is draw the
flow that I accurately
described. Quite a cheap shot.
:
As long as loans Made > loans paid (that is, a growing
:entrepenurial economy), and loans are
made on the basis of replacing
:reserves as an asset to back deposits
(the (=) signs above) [and isn't
:financing the purchase of equiment and
the payment of wages in advance of
:sales by entrepeneurs producers be a
better backing for deposits than
:pieces of green paper?], *that's* where
the money is created.
:
In other words, the idea that banks withdraw funds from deposits
:to make loans is simply not true.
Ask a banker. Go ahead, I'll wait.
:
That's exactly
what I've been saying. That the idea that the
banks withdraw funds from deposit reservoir
to make loans is simply
not true. Loans come from the tap. I don't
need to ask any banker,
it's the argument that I've been trying
to make. That the statement
that banks lend out their depositors funds
is false. You're
challenging me to go check with a banker
that what I've been arguing
is true? I'd rather just take your word
for it that I've been right
all along even though you have somehow
come to the conclusion that I
was not arguing that at all. This is actually
quite funny, isn't it?
:> Just because
two people can call on the money doesn't mean that
:> it's there. Otherwise, they wouldn't
have bank runs. Everybody knows
:> that everybody can't all ask for their
money at the same time, right?
:
Actually, if *everybody* with a checking account balance writes a
:check *at the same time*, and they *all*
arrive for settlement at the
:same time, and the people who got the
money kept *all* of it on deposit,
:why yes, everybody could ask for their
money at the same time.
:
That's because
nothing happens when everybody writes a check at
the same time. It's only when the check
is deposited back into the
bank that notice is taken of it and the
money is simply moved from one
account to another.
:And
:that's money, isn't it: they spent it,
the checks cleared, they got their
:stuff. Of course, some banks would
have to borrow a whole bunch of
:reserves on the overnight market, but
then there would be banks in the
:matching position of having excess reserves
to lend, so no problem.
:
Bank runs are when to many people want to transform their money
:from deposits into currency. And
its a problem precisely because its the
:lending --> *deposits* circular flow
that underlies the creation of the
:money supply. lending --> *cash*
doesn't do it. So deposits --> cash
:runs the process in reverse.
:
This is a good
point. It serves to show how the use of cash
confuses the whole question and must be
cleared up.
He is correct
when he says that lending cash doesn't do it. It is
only when the banks lend new deposits
which go into your account does
the money supply increase.
The easiest way
not to get confused is to think totally in terms
of the cashless system of computer money
and checks. When you make a
loan, they simply add new blips to your
account which you can then
transfer to others through checks rather
than cash.
Now imagine that
you can purchase poker chips with your checks
and you see how cash relates to the banking
system. Cash can represent
either your deposit or mine. That's why
when I deposit my chips to the
bank and they lend out my chips to a new
borrower, though he gets the
same chips, they represent his check of
new money from his account.
This is a point
I've never really had to explain before but
looking at it from the cashless point
of view does make the whole
system easier to understand.
:
Look: if I write a check to buy a pizza, and presuming there is
:an actual positive balance to support
it, I get to eat the pizza, the
:pizzaria gets to add the money to their
account, so they can buy stuff
:and meet their payroll, etc. If
I pay cash, they deposit the money in
:the morning, and the same stuff happens.
So those numbers written down in
:my account *are* money! If I have
enough, I can eat, pay my rent, pay
:for my kids football pictures, etc.
And its been working that way since
:*before* we had an industrial economy,
and there has never been an
:industrial economy that has been effective
working in any other way.
:
What you've described
is simply the transference of chips from
one account to another. This doesn't deal
with the creationary
aspect.
: I would only add that I am in favor
of local money types systems.
:But how you are not going to have much
headway fixing an internal
:combustion engine if you're under the
impression its a steam engine!
:
And it's just
lucky that I'm the systems engineer and evidently
you're not.
:To improve the system, you have to understand
how it works.
:
And to date,
even your own points prove that my engineering blue-
print is the actual thing.