| Subject: | Re: [socialcredit] Where does the interest go? | | Date: | Thursday, September 29, 2005 15:31:27 (-0700) | | From: | William B. Ryan <w_b_ryan @.....com>
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"Part of the income received from interest and other
loan charges is re-invested at interest. That is, not
all of it is spent back into the transactive part of
the money supply."
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--------------------------
The theorem is that loans create deposits, not that
income that is invested cause deposits.
Bankers' income that is invested (rather than spent on
consumption) does not behave differently than John
Hermann's income that is invested.
Why should it?
--- John Hermann <hermann@picknowl.com.au> wrote:
On Wed 17 Aug, Joe [Thompson] wrote:
After being on this List since its inception, and the
previous one at Topica almost as long, all I can say
after reading the recent posts under the heading "Re:-
Timely article about the usury free community" is,
"Oh, oh, here we go again."
Bill Ryan has, over that period, written copious,
factual material on here explaining how banking
works, what 'interest' really is, how serviced loans
cannot 'compound'...
[John Hermann's response] Joe and Bill seem to have
confused the servicing of individual loans with the
behaviour of the entire economy.
The national interest aggregate grows over time
because loan repayments are generally matched with new
loans (at the same or similar rate of interest).
Hence, in many respects, the financial framework of
each national economy behaves like a single gigantic
loan encumbered with annual interest payments - in
perpetuity. Part of the income received from interest
and other loan charges is re-invested at interest.
That is, not all of it is spent back into the
transactive part of the money supply.
You also have to appreciate that there are three types
of money. Firstly there is the supply of bank funds,
which is inaccessible to the public. Secondly, there
is transaction money, which is used by the public for
buying and selling goods and services. And thirdly,
there is investment money, which is associated with
saving (eg, for retirement, etc). There is a
continuing, and rather rapid, flow of transaction
money into investment money. And interest payments
play a major role in the dynamics of this process.
That net flow of money into investment accounts is a
root cause of the need to increase the broad money
supply (transaction money plus investment money) each
year.
---
...the importance of where 'interest' goes, (which is
the 'real' issue here ~ not its charging), etc., etc.,
etc. And stated many times that 'banking', being a
natural monopoly, needs to be 'regulated', as we would
regulate any other 'monopoly', such as a
public-utility, etc. Which includes regulating
'interest rates' charged.
[John Hermann's response] They also need to be
regulated on the basis of sound principles.
---
Now obviously many participants here have not had the
opportunity to read all he has written over that
period. It is scattered over a great many posts, and
many are probably no longer accessible. And new
people who come aboard, many with the idea that
'Social Credit' is an 'interest-free' money scheme,
will not have seen any of them.
[John Hermann's response] This statement reveals
another misconception on Joe's part. Most of the
monetary reformers that I have encountered are not
opposed to the charging of interest. The real issues
of concern to them are (a) which institutions create
the money, (b) how regulated the system needs to be
and the nature of that regulation, and (c) the
principles underpinning the regulatory processes and
monetary policy.
-- JH
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