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.
DOUBLE-THINK
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...
and
: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
: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 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
::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.
: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
:line.
::
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
::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.
:
::: 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.
REALISTIC MODELS:
To model the
lending system where people go pledge their
collateral, receive 10 and promise to
pay 10 and 1 in interest, I
suggested:
:: 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.
NO GROWTH
He made the statement
that
: The simple
problem with your above model is that it assumes no
:growth.
:
:: 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.
:
(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
circulation.
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
:rationally.
:
(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.
HOUSES APPRECIATE:
:::: 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.
LETS
::: 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
:handling.
:
(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
::Professor.
::
(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.
PAWNSHOP
:: 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
history.
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
applies?
:(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
:debate.
:
(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
can't.
::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
handle:
(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.