----- 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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