----- Original Message -----
Sent: Monday, April 25, 2005 8:09
AM
Subject: Re: [socialcredit] Social Credit
from First Principles
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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