TURMEL: Social Credit Stream #3 45k

Subject: Re: TURMEL: On Social Credit

     On Oct 27 1995, huyert@qed.uucp (Timothy Huyer) wrote:

:I am discovering that my time constraints are becoming even more
:binding.  I am also discovering that I am starting to repeat myself a
:lot since my statements are apparently not being understood.
     And yet, despite your reliance on repeated assertions, you wrote:

:::   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?
     You're the one who is admitting to using the tactic of repeated
assertion. The fact my rebuttals to every one of your points has
forced you to this tactic is an indication you can't handle them.
Actually, it's not my "proof by repeated assertion" but I would admit
that it's pretty good proof by "unchallenged assertion." And the
reason you're repeating yourself is that you're not answering the
points I've been making.

    The original point of this stream was to identify where the source
of the bulk of the money supply was. I asked where the double-think
was in believing both that
:A bank loans money that it receives from other depositors...
:The money supply increases whenever a bank creates a new loan, and it
:decreases when the loanee pays off the loan.

     He answered:

::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.
::        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.
:     Though he's again talking about the banks creating money, his
:example doesn't show any new money being created.
:     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.
:     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?
     (1) He never returns to explain where the source of this new
money comes from in his model and that's because his model doesn't
have a source, it's a piggy bank with only a reservoir and no tap.

:     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
:                  |             |             |
:     |------------|-------------|-------------|--------------|
:     |       |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 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.

     I showed what the piping had to look like if loans were really
new money increasing the money supply so that both the depositor and
the borrower had access to their money:

:     The following is the actual pipe engineering:
:                     FRACTIONAL RESERVE BANK
:              Deposits     Interest(in)   Loan Payments
:                  |             |              |
:     |------------|-------------|--------------|-------------|
:     |            |             |          |---|---|         |
:     |       |----|-------------|----|     | DRAIN |         |
:     |       |                       |     |-------|         |
:     |       |       RESERVOIR       |                       |
:     |       |                       |     |-------|         |
:     |       |----|-------------|----|     |  TAP  |         |
:     |            |             |          |---|---|         |
:     |------------|-------------|--------------|-------------|
:                  |             |              |
:            Withdrawals   Bank Expenses    Loans Out
:     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
:     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 question is why should anyone simply loan money at zero interest
::     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
:     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.
:Interest-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.
     Once again, he's under the impression that I'm suggesting that
private people like me lend him our money and he just can't keep it in
his head that I'm saying that he should be able to borrow new money
from the casino cage, not me.

: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.

     (2) The whole time-preference idea assumes that we're borrowing
the depositors savings. And yet, we spent a lot of time discovering
that the banks do not lend out their depositors funds. When we borrow
newly created money, who is losing their time-preference?

:::        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.
::     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?
     He just repeats:
:::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.
     This point remains unchallenged. And so I showed that the
statement that the borrowers are getting Rockefeller's savings is
false, they are getting new money. He has not responded to the fact
his model doesn't have a source while he claims that somewhere there
is a source which is creating new money.

     (3) He never answered to explain how both the depositor and the
borrower can both both write checks on their accounts at the same time
and where the other $100 would come from.

: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.
:     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.
     (4) My correcting his impression that it was tedious to divide 1
by the reserve ratio was not challenged.

::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

::        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.
::      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
:     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.
:::      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. By borrowing money, one can consume now
:::what one would otherwise have to consume later.
::     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. :
     (5) Again he attributes the advantage of living in the house now
to the interest when it should be attributed to the loan. Someone who
gets an interest-free loan (like rich kids) enjoys this whether he has
to pay interest or not. This is another point he couldn't answer.
Borrowers get the utility of resources he's talking about under my
model too but this has no bearing on whether large interest or small
service charge paid for the banker's time is the better way to go.

::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.
     Again, he attributes the benefit of a loan to usury. Of course,
given the original premise that one must pay interest, it's easy to
make that false attribution.

     To model the lending system where people go pledge their
collateral, receive 10 and promise to pay 10 and 1 in interest, I

::      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.
     I thought that my modelling the mort(death)-gage(gamble) by
having all players borrow 10, promise to pay 11 and letting the
decision on who survives be made by a fair random mechanism was a
quite perfect analogy which demonstrated the poverty and failure
caused by the demand for 11 when only 10 was loaned out.

:::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?

      Tim suggested his more realistic model:

:::        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.
:::Each player, therefore, can theoretically earn enough tokens to
:::repay their loan AND have some left over.
::     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.
:::     Turmel critiques my model in this thread by stating that I
:::assume that there is enough money.  I do know such thing.
     (6) Seems to me like that offering a model where the banker
simply adds enough to the circulation so borrowers can pay interest IS
assuming that there is enough model. But the assumption is wrong since
since banks do not simply add more money to the economy as it expands
but LEND out more money under the same initial 11 for 10 interest rate
condition. What actually happens in a growing economy is that:
     2 more watches are pledged to get the other 20 into circulation
but the debt for the total loans of 120 has now grown by 22 to 132
units. The standard poverty of money is always maintained no matter
how the economy grows.

    He made the statement that

:      The simple problem with your above model is that it assumes no
::     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
:     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
::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.
     (7) Of course, my model does handle growth. Just tell me how much
growth is pledged as collateral since that's the only way to borrow
more money into circulation and I'll point out that it's the same
failure rate inherent in the irrational demand. He doesn't answer when
I point out an infinite supply of chips to handle any growth rate.
When adding new money in his model, he does NOT take into account the
corresponding added debt. He never returned to defend his argument
that his model was more realistic than mine.

::       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.
     (8) Again, he does not show how the underlying assumption that
everyone owes 11 for every 10 borrowed is not reasonable.

::      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.
     He can't answer the criticism that the model does involve an
irrational risk when the banker does not simply add more chips to the
     The money borrowed into circulation is 10($100).
     The money demanded from circulation is 10($110).
     The ratio of survivors is 100/110.
     He asks us to assume that the money in circulation increases
until it can pay the debt without considering that the money is
borrowed into circulation with a debt which has also increased but
hasn't been able to challenge that for all new money entering is a new
but greater debt.

:     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.
     Again, he's criticizing my model because it shows that it is not
economically rational to borrow at interest. The fact that this is so
does not make the model irrational but simply point out that the
dilemma is irrational.

:        For a model to be rational, all agents in the model must behave
     (9) Absolutely wrong. The rationality of the agents has nothing
to do with whether the model is a valid model or not. The fact that
model displays an irrational game does not make the model irrational.
It's like saying that a bicycle is a rational mechanism when ridden by
rational people but becomes an irrational mechanism when ridden by
irrational irrational people. The rationality of the people has no
bearing on the merit of the model. This is so silly that I'm counting
it as a point he will not try to state again.

::        In the game Turmel proposed, everyone has an expected return
::equal to what they start with, i.e., 10 toothpicks.
::        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.
     As he points out:

:::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.
     (10) So once again, his statement that his expectation was to lose
his watch was incorrect as only the ratio 100/110 (P/(P+I)) lose their
watch. Though a player has an expected return of 100% if he doesn't
play the game, not 0%, and he does have an expected return of 91% if
he does play the game, that 91% does not show odds of being the 1 in
10 who loses his watch but the odds of being one of the 9 survivors
who keep their watch. He never returned to answer this criticism.

::        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.
     (11) Again, he continues to defend his ridiculous model by simply
changing what is a zero sum game (everybody only gets their principal)
to a positive sum game (where the banker mysteriously adds money into
circulation). That this does not occur just doesn't seem to register.

::::      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.
     (12) And again, he has no answer to the fact that a $10,000 house
worth 100,000 10 cent chocolate bars in 1950 becomes a $100,000 house
worth the 100,000 $1 chocolate bars in 1990 and that it was the
depreciation of the dollars and the not the appreciation of the house
which caused the price rise. Another issue he backed away from.

::: A non-profit Local Employment Trading System (LETS) ingeniously
::: allows hundreds of people to barter goods and services throughout
::: a community."
::        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.
::     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
     (13) He hasn't answered how interest is inherent in an LETSystem
which has no interest.
     (14) And there's no reason that suppliers can't be linked with
consumers among the very rich too.

:::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
     (15) He hasn't explained how his paying interest benefits
economists a lot.

::[ 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.
     (16) He hasn't returned to explain why economists have failed
after 5000 years of managing the money system to produce a successful
stable system.

::      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?
     (17) So he fails to note that the banks are effectively pawn-
shops that charge interest?

     (18) I pointed out the successful use of interest-free Tally
currency in Great Britain for over 700 years, the present use of
interest-free currency in Guernsey but that hasn't been challenged,
for obvious reasons.

:I will be
:charitable and acknowledge that, since I am not an instructor and since I
:have been trying to convey information under binding time constraints,
:that I have not been clear and indeed, possibly even confusing.
     I think that's it's confusing because you haven't been able to
successfully respond to any my arguments and keep ducking them.

:Instead, then, of trying to explain most of the points I brought forward
:earlier, I will simply refer everyone to a better source.  Basically, all
:of the information I have conveyed here is not original anyway; it is
:standard economic theory and is thus readily available in textbooks
:written by persons with lots of instructional experience and a
:significantly and non-trivially reduced time constraint (and they have
:editors too!).
     This is a standard economist's technique. When they can't answer
any of the questions themselves, they tell us the answer is in such
and such a textbook. That gives the impression that they the questions
left unhandled are handled in the book and they might still be right.

:Several comments that are still worth noting:
:(1)  Interest and the creation of money are actually separate issues,
:although they clearly can be related.  Note that interest has existed for
:centuries and that the ability for banks to create money has not. Paper
:money is relatively recent, only about 250 years old and originally was
:still entirely backed by gold.
     (19) Fractional reserve banking has been used for millenia. They
were issuing clay money in the same loan-sharking way long before our
banks started issuing paper money.

: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.*
:        In summary, bullshit + LaPlace Transforms = bullshit
:                    bullshit + real analysis = bullshit
:                    bullshit + any kind of math = bullshit
:        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.

:::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.
     (20) Name-calling does not invalidate a model. And of course, he
never answered to try to explain it.

:::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?
     (21) Electoral support for a model has no bearing on the quality
of the model. A transparently cheap shot. The Wright brothers
developed a flying model without electoral support.

:In fact, interest still existed even when it was explicitly outlawed
:(a situation that created a stereotype about Jewish people thereby
:fueling anti-Semitism.  Indications of this are evident in Major
:Douglas's work as well).
     Standard cheap smear suggesting that people who object to money-
lenders' loan-sharking blame the Jews. You can bet it was the Jewish
tailor and not the the Jewish money-lender who took the heat from the
progroms over the money-lenders' loan-sharking activities throughout
     I think that using the anti-semitism argument to smear anyone who
is against usury is doing a disservice to those good Jews who aren't
into usury and who follow the Old Testament precepts.
     Not only that Tim has failed to respond to all my above points
but that he has now resorted to bringing in anti-semitism to the
discussion does seem to indicate that he has given up trying to stay
on the technical level with me.
     (22) Anti-semitism is not relevant to a mechanical model.

:(2)  Not all money is created through debt.  Money created by the central
:bank, which effectively defines the entire money supply, is created
:through open market transactions.
     (23) And as I pointed out, only a tiny fraction is created by the
central bank though it does provide the basis for the bulk of new
money which is created by the chartered banks. He ducked that point
while continuing to point out the 2% created by the central bank. Why
don't you deal with the bulk of the money to which the problem

:(3)  Turmel implied that an individual should not have the decision to
:not extend credit at 0% interest.  For example, Rockafeller would have to
:loan money at 0% to anyone putting up the collateral, regardless of
:Rockafeller's personal desires regarding the money.  This contradicts the
:concept of property rights, upon which paradigm our society operates.
     (24) I answered this by pointing out that Rockefeller wouldn't
have to loan out his money at 0%. And yet, he ignores it and simply
takes my statement to mean the very opposite of what I said. And the
bank doesn't lend out Rocky's savings anyway so why should he get
interest from me for borrowing money that is not his?

:        The argument as to whether or not property rights should or
:should not exist (or if they should be limited) is a philosophical
:argument in which economics can be used, but it is not an economic
     (25) Once again, I had pointed that I had no interest in changing
any property rights. I simply wanted to provide an alternative to
people having to go to Rocky which he construes as somehow
constraining him. If people choose to go to an interest-free bank and
not to borrow from Rocky, that doesn't affect his property rights at
all. But he just restated the opposite of what I'd said, again.

:That is to say, Turmel's argument then should target John
:Locke's _Second Treatise on Government_, or similar essays.  A debate on
:property rights can certainly be worthwhile, but I would appreciate
:clarification as to whether or not this will be an issue (and owing to
:its significance, its presence is a key issue) in this thread.
     (25) The only person who is trying to make this an issue in this
thread is you. I haven't though you're falsely attributed that issue
to me.

:(4)  Although I am certainly no statistician, Turmel's propositions can
:be empirically tested.  Turmel's model predicts fairly clear results for
:which good data exists.  Regressions can be run to determine how well the
:data fit the model and Turmel's model can then be compared to the
:standard economic models in order to test which one has greater empirical
:validity.  Since standard burden of proof falls to Turmel in this case, I
:would suggest that he hire a statistician (there are economists who have
:the adequate skills, but I would suspect that Turmel would prefer to
:avoid these "biased" persons) -- I would imagine that an M.Sc. would
:suffice -- to set up the regression and run it.
     (27) I asked that he test it himself at an interest rate of 10%
and then 20% and instead he suggests that someone else test. The whole
purpose of the model is that anyone can test it even if you can't. You
don't need a statistician for what you should be able to do yourself.
Just lend your friends 10 monetary units based on their collateral,
make them all come up with 11 and determine if the actual results
correspond to the predicted results.

:Other comments:
:        I wrote, to show how interest would be implicit in a LETSystem:
:: :        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.
:        Turmel replied:
::      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.
:Which is precisely the point.  The offer is stupid since it is clear that
:everyone will take option (1).  You admit it when you suggest that you
:would offer the lower valued option first.  The reason that option (2)
:has lower value is from time preferences:  people want things now.  If I
:were to try to make a person indifferent between (1) and (2) I would need
:to sweeten the deal for (2) by offering, say, a new wheel.   That new
:wheel is the interest implicit in the LETSystem.
     (28) But the shingler has the same option too. He can say "I'll
do your roof next month but I want the bicycle now." And if you do
need to have your roof fixed, you'll pay up front. Since time
preference works both ways, those preferences can be said to have
balanced out when the contract is made. And again, he ignores the fact
that though Rocky may want to spend all of his $100 billion now, he

::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.
     (29) Though I can show that the Koran, Old and New Testaments
condemn interest, he can't show anywhere where it condones it. No
wonder economists don't consult their bibles or they'd soon realize
that their advocacy of usury goes against all the saints in our
history. So either the saints are right and condemning interest or
Tim's right in condoning it and whether the saints are in Heaven or
Hell, you can bet Tim won't be joining them.

     So to recap, there have been 29 points Tim has been unable to

(1) His model has NO source of new money.
(2) NO ONE gives up their use of money.
(3) Depositor and borrower can BOTH get their money now.
(4) Division of 1 by reserve ratio is NOT a tedious process.
(5) Benefit is from the loan, NOT paying interest.
(6) Banker adds chips is NOT more realistic than banker doesn't.
(7) My model handles growth, his does NOT.
(8) Underlying assumption of debt>money is NOT unreasonable.
(9) Rationality of model NOT dependent on rationality of players.
(10) Expected result is NOT that you lose your collateral.
(11) True game is NOT his positive sum model.
(12) Housing and chocolate do NOT appreciate
(13) Interest-free LETS Greendollars do NOT inherently have interest
(14) Interest-free LETS NOT for only the very poor.
(15) Paying interest does NOT benefit economists a lot.
(16) Can NOT explain 5000 years of economist failure.
(17) Banks ARE like interest-bearing pawnshops.
(18) He could NOT respond to successful use of tallies.
(19) Clay money shows fractional reserve banking NOT new.
(20) Name-calling is NOT relevant to a model.
(21) Electoral support is NOT relevant a model.
(22) Anti-semitism does NOT relevant to a model.
(23) Central bank does NOT create the bulk of the money supply.
(24) Rockefeller does NOT have to lend at 0%.
(25) There is NO effect on Rockefeller's property rights.
(26) I am NOT making property rights an issue, he is.
(27) Do NOT need statistician to test the model,anyone can.
(28) He does NOT account for the time preference of both traders.
(29) Religious works condemn, NOT condone, interest.

     Telling us to go read some economics textbooks is not an
acceptable way to handle them if he can't handle them himself.

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