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John G Rawson kindly replied to my notes requesting
help in getting a grip on what Social Credit people mean by very basic
expressions such as 'money', 'issuing money', 'credit' and 'issuing credit'.
John G Rawson wrote:
A bank "increases the money supply" when it buys an
asset, e.g. a building. If its cheque is deposited at another bank, it has
to accommodate that debt with it. If deposited with itself, it gets it "for
nothing". Either way, the banking system "gets it for nothing". If they
can do it, the nation can, just as the kings of old could issue gold coins
without incurring debt other than the costs of minting etc. And electronic
impulses don't need minting!
Tim Knight now writes:
Surely, the bank does not 'get it for
nothing'. The bank has to credit either the account of the seller or
the account of the seller's bank. That debt is an asset in the sleer's
books and an equal liability in the bank's books (just like every other
account with a positive balance).
- The bank acquires owned-wealth (i.e. the property)
and an equal liability (the owed-wealth recorded in the account).
- The seller conceedes owned-wealth (i.e. the
property), and acquires an equal asset (the owed-wealth recorded in the
account).
Neither party is richer or poorer. No
wealth is created or destroyed. If a bank could simply 'deny' such a
liability, we could all deny our mortgage, credit-card, and utility
bills etc.! The idea that
any economic entity (state, treasury, central bank,
merchant bank, retail bank, building society, creative accountant, Enron
Finance Director, or whatever) could create wealth 'out of thin air' in the way
John suggests is surely pure wishful thinking. If anyone thinks it can be
done, please tell us all, and we can all be rich (with servants) whilst none of
us need to be servants (and pigs will be able to fly!).
The global aggregate of net-wealth
must equal the global aggregate of
owned-wealth. The global zero-sum network
of owed-wealth is (or ought to be) simply a zero-sum book-keeping exercise which
'keeps the score' on where we are in our non-barter trading and employment
activity. Those who have sold more owned-wealth than they have bought
accumulate a net positive balance, and those who have bought more owned-wealth
than they have sold accumulate a net negative balance. The grand total (of
course) is zero.
Surely, the owed-wealth position between the seller
and the bank, and the changes to that position, can be called money,
non-money, 'credit' or 'money-supply' as the mood takes you, but that is more a
question of semantics (the meaning of words) and administration rather than
economics. It doesn't matter whether you call a particular debt a
cash account, a receivables account, a payables account, a current account, a
deposit account, a credit-card account, a mortgage account, a tweedle-dum
account or a tweedle-deed account. Surely, from an economic perspective, a
debt is a debt is a debt is a debt. Each debt is an asset in one set of
books and an equal liability in another.
Surely also, from an economic perspective,
specie coins, valued at their intrinsic value, are simply a
subset of owned-wealth, like a washing machine or real estate. Use of such
coins for settlement of debts created by trade and employment is a subset of
barter. How do you differentiate between the gold in a shoe-buckle and the
gold in a coin used to 'pay' for the shoe. Or is there any
economically-meaningful distinction to be made?
Best Wishes
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