| Subject: | [socialcredit] John Hermann's "debt virus" | | Date: | Tuesday, July 27, 2004 10:01:45 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
"I don't believe the payment of interest creates more
debt in a direct sense. It does however redistribute
existing money between borrower and lender. But it
does more than that -- it is a very effective
mechanism for converting transaction money (M1) into
investment money. The reality is that not all
interest payments are quickly returned, by spending,
into the transactive part of the economy - some of it
is transferred to the paper economy."
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The theorem is that loans create deposits, and
conversely, the repayment of loans cancel deposits,
regardless whether the banker spends his profits on
consumption--period. There is no reality to the
distinction between "transaction money" and
"investment money." The effect of a banker's
"propensity to consume" less than unity is
identitical to the effect of any market participant
who spends less than his total income.
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"The velocity of monetary conversion is very rapid,
thus around 70% of new credit is lost to the
transaction economy each year. And the ongoing
depletion of transaction money requires the creation
of new credit on an ongoing basis."
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This is pure "debt virus" theory. I know you don't
like the term, but that's what it is. And you have
blinded yourself to the absurdity. For one thing,
bankers do not make anything close to 70% net profit
after interest paid to the public, and other
expenses. Their gross profit is substantially less
than that, so how in the world do you get 70%? If
the bankers did not spend even a penny of their gross
profits, and stopped paying expenses (thereby running
up their offsetting debts to the public), the amount
extracted from the "transaction economy" could not
exceed the annual percentage rate on loans--which is
far less than 70%.
Perhaps you are trying to say something else.
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"The 'principal' component of the excess reserves that
have been freed up is the basis for creating a future
deposit in the name of a new borrower. The
'interest+fees+charges' component of the excess
reserves is the basis for creating a demand deposit
in the bank's name, and represents an important part
of bank revenue.
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You are very confused. Both principal and interest
are transferred from some other bank, which
represents diminished funds available to that other
bank. Total system reserves are not affected by such
transactions.
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