(Peter
wrote:- )
I question that the relationship would be rationally established. The
Communities Credit isnt the property of the banks. They are only entitled to
charge interest on money not credit in my view and the public should decide
what they want done about their credit, when they wake up.
(Joe replies:- ) We agree that the ‘Community’s Credit’
isn’t the ‘property’ of the Banks. But I don’t quite follow you when you
say “they are only entitled to charge interest on money not credit.” As I understand the matter, all ‘money’
is ‘credit’.
Though not their ‘property’,
the Banks do ‘administer’ the ‘Community’s Credit’, and currently are also
in a position to determine ‘policy’
in regards to it. That ‘policy’
presently is to do what they believe is most beneficial to ‘Banks’,
in priority to that which might be most beneficial to the ‘Community’.
The ‘Banking
system’ as a whole has what might be visualised as an unlimited overdraft
account with itself, against which it writes ‘‘cheques”. The current arrangement is that they go
exclusively toward funding ‘loans’.
That’s the ‘Monopoly of Credit’, and it’s what
has been called a ‘natural monopoly’, since it functions most
efficiently that way.
However, the ‘Monopoly’
really works against its own best interests, since it’s not possible for ALL
the ‘loans’ it makes to be amortized in their totality so long as there
is ongoing ‘labour displacement’.
It is open to question
whether the Banking system yet knows this, though Douglas and others exerted tremendous
efforts trying to tell them. Let’s assume for the moment that they’re
just ‘slow learners’, since the alternate assumption, (which I’m
in no ways negating), carries some highly negative connotations.
If we had a “National Capital (some call
it “Credit”) Account”, its balance, that is an estimate of
the totality of the latent ‘real credit’, or unused productive
capacity of the Community, would mean some of those “cheques” could
fund dividends to CONSUMERS, (the National Dividend and the Compensated Price
Discount), which would allow the full amortization of the ‘loans’.
(Peter
continues:-) WBR showed
theoretically/conventionally how interest in passing from one account to
another doesnt impact on the money supply. Fine now show how the loan on
creation does the same. It starts out as debt as though it already
existed. The interest ( source) already exists, and so isnt the the real
problem. Its the principle. So the issue as often expressed - the
principle cannot pay the loan plus the interest is true but expressed
as the interest being the extraneous straw that breaks the donkeys
back shall we say. Lets turn it around and say,
its the no existing money that becomes a debt that is the extraneuos and
unextenuated factor not interest.
(Joe replies:- ) Well, so far as I understand the matter, modern creditary ‘money’ is not a tangible thing. Douglas defined ‘interest’ as a ‘profit
on an intangible’. It is a form of
‘contract’, a ‘ticket’ if you will, specifying
performance according to terms in the future. Nothing in the future exists today, since the
future is yet to occur. You can’t
eat tomorrow’s lunch today without it becoming today’s lunch.
When you borrow there
has to be an expectation on the part of the Bank that you will have earnings in
the future from which to repay the principal plus the interest. If they don’t have that expectation,
they don’t lend. If you do have
earnings, they will have come from the larger economy based on credit as to
progresses through time. It is a false
assumption that the economy as a whole must borrow in order to pay interest. Interest is merely a transfer payment, no
different than the payment of profit to any other business. It’s spent by the Bank on the things it
needs to purchase or pay. There is a
difference between ‘Bank’ as ‘business’,
and ‘Bank’ as ‘Bank’.
(Peter continues:- ) I accept that the Just Price
mechanism would extenuate the creating of debt, if there was no interest on it
only standard service fees, in relation to the productive sector only. The
the realtionship there would then be rationaly established in my view.)
(Joe replies:- ) A ‘standard service fee’, or any other sum
that makes up the difference between the amount borrowed and the amount repaid
is simply a different way of expressing ‘interest’. Look at it this way. There are said to be three components that
determine the amount of interest.
The first is the cost
of providing the financial service. And there
very definitely is a cost, even if such services were delivered ‘at cost’,
with no profit to the provider. (In
which case it might be a little difficult to determine just ‘what’
financial services might be most suitable, since ‘profit’
fundamentally is an indicator of the correctness of some entrepreneurial
action.) However they’re
provided, or by whom, there is a cost, so we can’t get away from that
one.
The second is an
allowance for ‘inflation’.
The ‘money’ recovered in the future, under the current
system as it is, is normally going to have a continually diminishing ‘‘purchasing
power’’ in terms of what it will buy in consumables in the future than
it has today. Simply because, as Douglas noted, ‘‘the construction of a new
railway bridge raises the price of bacon at the village shop”. Each
new loan dilutes the “purchasing power” of existing money, and in
an expanding economy, raises the general price level of consumables, even
though an increase in manufacturing efficiencies may tend to counteract that
for a time for some items.
If, however, we had a National Credit Account,
CONSUMERS could be ‘credited’ through the ‘dividend’
and the ‘discount’ with the increase in the ‘real credit’
that “new railway bridge” has enabled, and the use of ‘debt-free’
new credit this way would tend to LOWER the general price level of consumables
over time, rather than raise it. The
need to make an allowance for ‘inflation’ in interest is thereby
negated. The ‘interest’ the
Banker receives in future will buy him ‘more’ in consumables, not ‘less’. And the interest rate charged can reflect
this, by removing that component from it.
The third component is
‘Risk’. There will always be
‘risk’ in making any loan, and there must be some way of assessing
it. Even under a Social Credit system
there will be entrepreneurs who, for one reason or another, will still ‘go
broke’. Some may make products no
one wants. Some may be just plain poor
businessmen, not look after their business properly. Etc.
What we have removed in the form of ‘risk’ under Social
Credit is the possibility of ‘credit contractions’ causing business
failures. And with that removal, one of
the elements of ‘risk’ has also been removed. Again tending to a lower
interest rate.
Have to come back to
the rest later, Peter, time for bed.
RE: [socialcredit]
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