|Subject:||Re: [socialcredit] Re: more on -- typo in para eight (and three)|
|Date:||Monday, July 26, 2004 07:34:09 (-0700)|
|From:||Joe Thomson <thomsonhiyu @....ca>
|In reply to:||Message 21 (written by Wallace)|
Also in paragraph three. You've got the second loan, the one at
'T-one/half', at 5% interest instead of 10%. While the math won't come out
properly that way, anybody reading should still be able to see what you're
getting at. It's a very good explanation. Thanks.
----- Original Message -----
From: "Wallace" <firstname.lastname@example.org>
Sent: Sunday, July 25, 2004 11:03 PM
Subject: [socialcredit] Re: more on -- typo in para eight
> Bill, I believe that in paragraph eight there is a typo. I believe that
> meant 50 [cents] in the pockets of the banker. -- Wally
> <email@example.com> wrote:
> > Usually the fallacy goes something like this: There
> > is only ten dollars existing in the world that arose
> > in the first instance entirely from a bank loan, that
> > must be repaid plus ten percent interest at the end
> > of one year. How is it possible to pay back the
> > borrowed principal without having to borrow the money
> > to pay the interest, thereby compounding the
> > underlying debt?
> > The simple answer is that there are many overlapping
> > loans in the real world, but to disprove the rather
> > trivial fallacy all we need to assume is there are
> > merely two loans that are recurring.
> > The loan granted at T-zero is in the amount of five
> > dollars, payable in one year at ten percent. The
> > second loan in the amount of five dollars is granted
> > six months later, at T-one/half, payable one year
> > after that at five percent.
> > At this point in time there are ten dollars in
> > "circulation," constituting the credit expansion
> > phase of the circuit, which is paid in wages to
> > employees during the course of time.
> > At the end of the first year $5.50 is due and payable
> > including principal plus interest to the banker,
> > which the entrepreneur pays, at the same time
> > collecting fifty cents profit for himself on his
> > transactions with consumers.
> > At this point, the employees have received income in
> > the amount of ten dollars, the banker has received
> > interest income in the amount of fifty cents, and the
> > entrepreneur has received fifty cents profit.
> > A third loan is granted at T-one, in the amount of
> > five dollars, payable, as before, in one year at ten
> > percent.
> > At this point there are nine dollars in the pockets
> > of the employees, fifty in the pockets of the banker,
> > and fifty cents in the pocket of the entrepreneur.
> > When the second loan comes due six months later at T-
> > one and one/half, the principal in the amount of five
> > dollars is paid to the banker, plus fifty cents
> > interest, plus fifty cents profit to the
> > entrepreneur.
> > At that point the transient period of the credit
> > expansion has ended and has stabilized.
> > Year after year after that, the banker will earn one
> > dollar in interest per year, the entrepreneur will
> > earn one dollar per year in profit, and the employees
> > will earn ten dollars in salaries and wages per year.
> > Total income per period being earned by the community
> > in its totality is twelve dollars per year, on loan
> > principal not exceeding ten dollars. The banker is
> > supplying financial services, the entrepreneur is
> > supplying entrepreneur services, and the employees
> > are supplying employee services to one another in the
> > cooperative community, year after year.
> > It is conceptually possible to devolve at this point
> > into some kind of "underconsumptionist" argument,
> > which would be in departure from steady-state--where
> > either employees, entrepreneurs or bankers do not
> > respectively spend all their income for some reason
> > or another.
> > This could however have nothing to do with interest
> > per se, in any respect that could distinguish its
> > effects from not spending from income from any
> > source.
> > -
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