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| Subject: | [socialcredit] Re: [ijccr] Re: Extrapolating A+B Part 1 | | Date: | Monday, September 19, 2005 16:36:31 (+0200) | | From: | Marc Gauvin <gauvin @.......es>
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William,
But the interest paid by the banks is much less
than that exacted on loans and you have not accounted for the fact that lending
is the only source of new money to pay yesterday's interest.
Best,
Marc
----- Original Message -----
Sent: Monday, September 19, 2005 10:56
AM
Subject: [ijccr] Re: Extrapolating A+B
Part 1
"The function that makes the inactive depositors
account
balance grow as you describe is the same
function that makes the balance of
a debt
grow..."
------------------------
-------------------------
How
and why? It is incumbent on you to explain. So
far you have not
explained but merely asserted.
We know how "the function" works on an
inactive
(non-performing) balance according to the MIT students
in the
example you cite. In that example the bank's
debt to its non-bank
depositor grows exponentially.
Please explain the mechanism that causes
the non-bank
public's debt to the banking sector in the aggregate
to
grow exponentially in the o_p_p_o_s_i_t_e
direction.
Does not the
term "amortize" infer that debt is
d_e_c_r_e_a_s_i_n_g not
increasing?
-
"The argument of the hypothetical situation where
100%
of dividends and interest taken in by the banks is
paid out with no
time lag and all money is always
available to pay debts is unrealistic."
------------------------
-------------------------
The false
assumption implicit here is that there is a
fixed quantity of money that
accumulates into account
balances held by banks in receiving interest,
causing
the "medium of exchange" to withdraw from circulation.
In
respect to banks, the creditary theorem that
Douglas enunciated in his book
*Social Credit* is that
loans create deposits; the repayment of loans
cancel
deposits.
-
"For this to work there would have to be a
pefect
orchestration of all payments where the slightest slip
would send
the system spinning into
disequilibrium."
------------------------
-------------------------
Time
lags are accommodated by the conventions of
double-entry accounting.
Loans are amortized through
time. Contracts of all types are
fulfilled through
time.
The fallacy in your mind is, it seems, that
a debt in
the amount of X due and payable in one year (or
whatever) is
exactly equivalent in value to a debt in
the amount of X due and payable in
fifty years or a
thousand years. That if X is "borrowed" today, X
and
only X should be repaid regardless of the term of
the
loan.
-
"The only way to compensate a force is by applying
an
equal and opposite
force..."
------------------------
-------------------------
We
are not dealing with forces or anything tangible
where the laws of physics
apply. We are discussing
modern creditary money, a species of
contract in the
manifold of social relations.
But the statement is
nonsense even within the context
of physics. Have you never heard of
the concept of
vector? Did you not know that sailboats can
sail
against the wind, utilizing wind power alone?
-
"The
difficulty in following this argument comes from
the inability to cleary
differentiate the concept of
receiving money from the concept of interest
accrual."
------------------------
-------------------------
Yes,
there is a difference. The one is accrual to an
isolated inactive
account. The other relates to
actual transactions. Your MIT
example related where
the debt accruing was from a bank to its
non-bank
depositor, illustrating that banks not only receive
interest
but p_a_y interest.
If banks both receive interest from the public and
pay
interest to the public, as well as paying ordinary
business expenses
and dividends to the public, please
explain why interest should cause debt
to polarize -
with the banks in the aggregate becoming net creditor,
and
the public net debtor?
I insist you answer this specific
question.
-
--- Marc Gauvin <gauvin@wanadoo.es>
wrote:
William,
1) The function that makes the inactive
depositors
account balance grow as you describe is the same
function
that makes the balance of a debt grow so the
design of both represent first
order +ve feedback
loops.
2) Now, there is a residual difference
that I pointed
out between the aggregate rate of debt growth and that
of
funds on deposits. Put simply, exp x minus exp y
where x>y = exp
z >0. If the total of all money
created as principal
and lent into circulation has a
corresponding debt growth that is faster
than any
other growth i.e. principal deposits then the
difference
between (debt + interest on debt) and
(deposits + interest on deposits) has
to be positive
i.e always a residual exponential debt unpaid and
there
is no alternative source of new money free of
debt growth to compensate the
difference.
The argument of the hypothetical situation where
100%
of dividends and interest taken in by the banks is
paid out with no
time lag and all money is always
available to pay debts is unrealistic. For
this to
work there would have to be a pefect orchestration of
all
payments where the slightest slip would send the
system spinning into
disequilibrium. The only way to
compensate a force is by applying an
equal and
opposite force, likewise the only realistic way to
compensate
for exp x on debt is whith exp x on
deposits. The difficulty in
following this argument
comes from the inability to cleary differentiate
the
concept of receiving money from the concept of
interest accrual.
Interest debt grows as a function of
itself and not as a function of
anything else,
receiving monies can be a function of other parameters
in
the system but the two are not equivalent.
Best,
Marc
-
Yes, Marc, I looked at the links. Let's look at the
PDF from
the MIT students, the one about the bank
balance growing because of
interest.
It is certainly true that an inactive bank balance
on
which interest will accrue will grow exponentially.
Two things
to notice: 1. The balance is inactive
except for interest accruals; and 2.
It accrues to be
benefit of the depositor, representing the amount
the
bank is contracted to pay the depositor when and if he
withdraws his
balance.
The fallacy here is extrapolating from the behavior of
an
an isolated inactive account to form a general
conclusion about the
behavior of the economy as a
whole, where banks both r_e_c_e_i_v_e and
p_a_y
interest c_o_n_t_i_n_u_o_u_s_l_y together with
ordinary business
disbursements and dividends paid to
the general public.
Should not
the counterflows offset one another in the
economy as a whole? If so,
where is the source of the
"feedback" causing "exponential growth"?
If not, please explain why not.
I shall expect your reply.
-
--- Marc Gauvin <gauvin@wanadoo.es> wrote:
Question:
For what logical reason should the banks'
ordinary
business disbursements plus dividends NOT equal the
payment of
interest and other fees to the banks?
-
First and before we
continue, I suggest that Mr. Ryan
brush up on his systems dynamics because
I have caught
him brashly correcting Jonh C. Turmel B. Eng with
regards
to Mr. Turmel's claim that interest on money
results in a positive feedback
system. In support of
Mr. Turmel's claims I would like to direct the
readers
to the following two links where it shows that indeed
the
interest function is a First-Order Positive
Feedback. The links are here:
http://www.systemdynamics.org/DL-IntroSysDyn/feed.htm
and here
http://sysdyn.clexchange.org/sdep/Roadmaps/RM4/D-4474-2.pdf
Now
that we have established that we are talking about
positive feedback
dynamics, we can answer the question
with greater rigour and precision than
what I have
heard so far except of course for Mr. Turmel's B.
Eng
Banking System's math which you would all do well in
studying and is
available here:
http://www.cyberclass.net/turmel/bankmath.htm
Now onto
the question:
Indeed the banks want to maintain their
payments out
as low as possible so there is no reason why they
would
want there payments out to be greater than their
income. Since their
payments out are kept as low as
possible has nothing to do with the issue
of whether
or not when they create money through loans they only
create
the principal and not the interest.
Having said that, whether
dividends plus disburements
is equal or not to the payment of interest at
any
givent moment is not as important as the fact that
when a new loan
is created the total amount of money
in circulation at that precise moment
has been
increased by the principal only and not by the
principal plus
the interest. Now, if all money
created through loans has been
created in this fashion
and it is, then exponential debt growth a
positive
feedback system will have a head start on the growth
of the
corresponding principal that grows only as do
deposits i.e. at a much lower
rate. Thus, the overall
aggregate scenario is one where the odds of
coming up
with money at any given point in time are
reduced
progressively as a direct function of the difference
between the
curve representing the debt growth and the
curve representing the growth in
deposits.
The positive feedback of the debt growth is the
fastest
growing curve in the system its only function
is to make money scarce so
that something that is
essentially nothing more than a book entry (i.e.
money
has no necessary physical properties nor behaves
according to any
physical or divine law), becomes a
highly valued scarce commodity.
Thus interest as a
rule linked to money creation only serves to make
sure
that money never becomes abundant, since if it ever
were the system
could no longer be controlled through
a single industry i.e. the banking
industry.
The money scam is about making an abundant
and
immediately available commodity artificially scarce to
the vast
majority of its users, who through social
convention have entered into an
agreement to use that
commodity as a standard universal measure of
value.
This results in a monopoly to the ticket to life and
source of
tremendous power and control.
Major Douglas' A+B theorem simply
indicates that there
is a difference between the minimum price
threshold
for all to break even and the corresponding amoung
of
available money in circulation. It can be corrected
by the
government issueing the difference but a
simpler solution is simply to
avoid the difference in
the first place. The most direct method of
doing that
is by removing the feedback in the system and Mr.
Turmel
suggests.
Best regards,
Marc Gauvin B. Sc.
-
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