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Message 426
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| Subject: | Re: [socialcredit] Re: the theorem CORRECTION | | Date: | Saturday, January 1, 2005 00:49:23 (+0000) | | From: | Timothy Carpenter <timbeau_hk @........uk>
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Dear Bill,
Banks do not lend out deposits. I repeat, banks do not lend out deposits.
Loans are created using new credit money and when repaid the credit money is
destroyed. Cash deposits form part of the asset base of the bank and
weighted along with stock, land, mortgages etc in a risk and liquidity-rated
mechanism to form a bank's capital adequacy. BTW is a single monopoly bank
another must for A+B?
I accept you wish to use the model of a river and for the sake of this
discussion we can continue but I do not agree that it fully reflects the
behaviour of an account balance, but I believe I understand what you think
it behaves like.
If you are interested to know why I think this, a reservoir and an account
can, if the outflow taps are turned full on, flow out faster than it has
ever flowed in and flow at rates totally at odds with the delayed inflow
rate pattern. It can build up continuously over many years then flow out
faster. This is how any account balance can behave - final consumer or firm.
I attach a small diagram to show how I see it.
I state again I recognise you understand the point about specific molecules.
Let us use the river analogy to make progress.
I will revisit Say's Theorem, but I am guessing I still need to clarify
'costs' and 'point of retail'...
In the meantime, have a happy and prosperous new year, Bill, Wally, Joe and
all!
Tim
On 31/12/04 7:18 pm, "william_b_ryan@yahoo.com" <william_b_ryan@yahoo.com>
wrote:
> *Banks can and do lend out approx 10x deposits using
> fiat money by creating deposits in the form of
> consumer [or producer] credit. The issue is that the
> money, although 'in' the account is used elsewhere.*
> -----------------------
> -------------------
> [REPLY] You are saying that ten times the money in
> you account is "used elsewhere." How is ten times
> the money in your account the same money as in your
> account? How do banks lend out ten times deposits if
> what they lend are deposits? In other words,
> deposits = ten times deposits. X = 10X. Why is this
> not a fundamental contradiction in logic?
> -
>
> *Let us put that aside for now and move on by
> assuming for the sake of the argument that the money
> does sit in a box, jar, under a mattress, account etc
> and is not used by anyone else for any other purpose
> whatsoever - it is 'dead' like a gold bar in a
> vault...*
> -----------------------
> -------------------
> [REPLY] Again, we are talking statistically, not
> what may or may not happen to specific "dollars."
> Take a look at the conceptual diagram of a river or
> pipeline appended below also archived at
> http://www.geocities.com/w_b_ryan/pipeline1.jpg
> depicting flow from input to output. The physicists
> tell us it is impossible to make a determination as
> to the fate of any specific molecule of water in the
> river. Though the river is in continuous flow, it
> may in fact be true that specific molecules of water
> have remained in the river since the river began
> flowing. When we talk about the river's *flow,* we
> are talking about the river's flow of water as a
> statistical concept, not the fate of specific
> molecules of water. Do you see the point?
>
> For any river in continuous flow, it is always the
> case that the volume contained within the river is in
> subtrahend from the total volume of water inputted
> into the river since the river commenced flowing.
> Yet, if the rate being inputted is constant, it will
> always be the case that the rate being outputted will
> remain constant and equal to the rate being inputted.
>
> This does not remain the case if the rate being
> inputted is changing. There is necessarily a *delay*
> in the effect of the change in the input on its
> output. Think of a river where floodwaters are
> gushing in upstream. The effect downstream is not
> instantaneous.
> -
>
> *...how could such a deposit gain interest unless it
> is used/sold/lent to another?*
> -----------------------
> -------------------
> [REPLY] A single monopoly bank in a closed system
> would have no need for reserves. Every transactor
> would be a depositor in the very same bank. So when
> the monopoly banker creates a deposit through a loan,
> he would have no fear that another bank, into which
> the deposit might be transferred, might require him
> to make the deposit good. The monopoly banker in
> such a system would have no need to pay depositors
> for keeping their deposits in his bank. Indeed, he
> might require his depositors to pay him extra for the
> clearing services he provides.
>
> This is the *creditary* theory of interest as opposed
> to the *monetary* theory of interest, which you have
> locked in your head. I am asking you to try to
> unlock it (meaning your head)--that is to say, to
> think dynamically, where time is always part of the
> equation.
>
> The creditary theory is that "money" is a contract
> calling for future performance, rather than some
> quasi-physical "medium of exchange" traded
> perpetually from hand to hand.
>
> But this is in digression from A+B, which in broad
> concept is in reductio ad absurdum to the medium of
> exchange argument, which means it starts from the
> assumption that money IS a medium of exchange in
> continuous circulation, which it disproves through
> contradiction, in contradistinction to the
> conventional model of circular flow.
> -
>
> Earlier, Tim, I asked you to read Say's "law" in his
> own words. Please go ahead and do that, and report
> back to me what you think it means. It is archived
> at
> http://www.geocities.com/socredus/say.txt
>
> That's your homework assignment.
>
> HAPPY NEW YEAR!
>
> Bill
>
>
> ------original message------
> Date: Fri, 31 Dec 2004 10:20:11 +0000
> From: "Timothy Carpenter" <timbeau_hk@yahoo.co.uk
> Re: the theorem CORRECTION
>
> Ok Bill, let us for the sake of progress IGNORE
> fractional reserve banking and, for that matter,
> banking in general!
>
> I used the correction to highlight this, for the sake
> of your argument (i.e. Accepting not agreeing). Banks
> can and do lend out approx 10x deposits using fiat
> money by creating deposits in the form of consumer
> credit. The issue is that the money, although 'in'
> the account is used elsewhere. It is like saying your
> river is flowing but someone is using the water to
> flush their lavatory before it is treated and put
> back in and you count all that water in the cisterns
> as it will end up flowing out of the river
> eventually.
>
> Let us put that aside for now and move on by assuming
> for the sake of the argument that the money does sit
> in a box, jar, under a mattress, account etc and is
> not used by anyone else for any other purpose
> whatsoever - it is 'dead' like a gold bar in a vault
> (which is, frankly, absurd because how could such a
> deposit gain interest unless it is used/sold/lent to
> another?)
>
> Tim
> -
>
>
>
>
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