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Hi Tim
On the
face of it your reasoning is correct, but on long term loans eg mortgages the
interest repayments mean that the total repayed to the lending institution
exceeds the initial loan by as much as 300% depending upon the timespan of the
loan. The longer the time span the greater the increase. Even though this can be
included as part of your general budget, the extra funds required to service the
interest on the loan represent restrictions on your discretionary spending and
therefore impact directly upon the well being of the general economy. High
interest rates curtail the quantity of discretionary funds available for general
use to stimulate and maintain the economy.
When the loans
are created by usury, and do not actually represent a physical movements of
funds already present in the financial body ie the funds are created out of
nothing against your asset, then the whole system becomes a finacial liability
if interest rates skyrocket. Douglas showed us that this was how the western
economies were operating. Personally to me the crux of the matter lies in
private banks being able to "print money" to
extend loans based on the assets of other people not their own ie mortgages
overdrafts etc. There is nothing wrong with someone extending a loan from funds
they physically possess, but that is not how the banking system
operates.
Bill Mc G----- Original Message -----
Sent: Tuesday, May 02, 2006 9:26 PM
Subject: Re: [socialcredit] the "effect"
of interest
Just a small point on interest. Many talk
as if they do not realise that the FIRST thing repaid is interest. Only once
ALL interest is repaid to the bank then principal is then repaid and
destroyed. Thus, interest payments do not mount up as some ever-growing ‘hole’
AFTER the principle is destroyed, but it DOES mount up as a transfer of wealth
from the economy as a whole to the banking sector in particular, just as any
profit making service does. Interest payments remain in the economy (paying
bonuses, smart offices, high salaries and first class flights) at all times.
Thus, there is no ever growing liquidity “gap” caused by interest, per
se.
Tim.
On 1/5/06 15:51, "W. McGunnigle"
<wmcgunn@maxnet.co.nz> wrote:
Well said Marc and welcome to our
group.
I have been trying to get
that point across in a different way. Our financial system is inherently
unstable. Even worse the actions of single individuals in control of a large
Reserve bank can bring about a stock market crash overnight, simply by
refusing to allow "call loans" on the stock exchange. That is how The
Federal Reserve of the USA engineered the stock market crash of 1929. It
then contracted the money supply to the US economy by 40% between 1929 and
1934, that is what createed the great depression of the early 1930's. Only
Rousevelt's actions in 1934 that threatened their stranglehold on the US
economy caused a relaxation in that contraction.
I contend that the indeptedness of
governments to their Reserve Bank mean that all the major political parties
of whatever persuation are forced to follow policies that are dictated to
them by their respective Reserve Banks. Political parties are powerless
because they have allowed the control of the money supply to fall into
private hands, and are happy to leave the situation as is. What is not
common knowledge is that the indeptedness of countries is not to each other,
but to the private banking system. Very few countries have no debt at all.
Those involved with the IMF and World Bank have become trhe most debt ridden
of ALL.
Bill McGunnigle
----- Original Message -----
From: Marc Gauvin <mailto:gauvin@wanadoo.es>
To: socialcredit@elistas.com
Sent: Monday, May
01, 2006 10:50 AM
Subject: Re: [socialcredit] the "effect" of
interest
All,
The question of feedback is important because
it creates a level of dynamism in the system that needs to be
managed.
My view is that there is no need for interest as I cannot
see any value to the system as a system, on the contrary I claim that it
causes instability because it creates a demand for repayment in the future
of money that has not been created. The system boots up with a loan
that as time continues the total amount to be repaid grows beyond what was
physically received by the system, unless the aggragate of banks in the
system maintain an exact knowledge and control of all for all points in
the system of all required interest payments, all available monies
available to pay the interest and act in concert to remedy such by
providing the lending required to keep the system in balance. This
is not only unlikely but practically impossible, because it assumes that
people can be coerced in real time to, for example, prod people to borrow.
It is clear that the interest system was not designed with the aim of
making it possible for everyone to be able to pay in time.
So
and in conclusion, if interest provides no valuable service to the
system as a whole it should be removed.
Furthermore, as some have tried to deny by
claiming that the future will pay yesterday's interest and principal, it
remains a fact that the exponential nature of modern banking is positive
feedback period. Some who are incapable of distinguishing being the
square function and an exponential will vehemently deny this truth but the
proof is in the pudding. The only management of finance we have has
brought us a world of increasing cycles of instability in price levels,
increasing social turmoil, increased unemployment, increase in debt levels
etc. all indicative of positive feedack based
instability.
To say that usury has nothing to do with the
stability of the system is to make evident a complete lack of scientific
rigour, as anyone who has studied systems knows, the faster moving curves
of a system are the most indicative of the overall state of a system.
To say that interest on money has no effect on the system and that
it is just a transfer of payment like any other is foolish and
irresponsible.
Best,
Marc
----- Original Message -----
From: thomsonhiyu <mailto:thomsonhiyu@shaw.ca>
To: socialcredit@elistas.com
Sent: Sunday,
April 30, 2006 8:47 AM
Subject: RE: [socialcredit] the
"effect" of interest
.
(Peter:- ) If the
fundamental flaw is in the accounting side the perspective of the
accounting side isnt eligible to expalin to us how to look at things, is
it?
(Joe
replies:- ) Just because the ‘accounting side’ is currently
incomplete, doesn’t mean it isn’t ‘‘eligible to explain how to look at
things’’. The ‘flaw’ lies not with the ‘accounting’ system itself,
which continues to serve us well, but what it currently lacks at the
macro-economic level.
There is no ‘National’ equivalent to the
‘capital account’ found in the Balance Sheet of every business
operating under the conventions of double-entry accountancy. Were
there, the overall relationship between the Banks and the rest of the
economy could finally be rationally established. Something that’s
currently irrationally established, and the ‘cause’ of our
problems.
If such a device were created as part of a properly
constituted “National Balance Sheet”, then as the account balance in
the ‘National Capital Account’ increased, appropriate debt-free
CONSUMER distributions could be made periodically to the Nation’s
‘shareholder-citizens’. In the form of the ‘national
dividend’ and/or the ‘compensated price discount’.
‘Consumers’, all of us, for we’re all ‘consumers’, could
thereby be credited with the overall and ongoing national ‘capital
appreciation’ which is rightfully ours. And something
generally larger than the ‘capital depreciation’ we are currently
expected to pay in prices.
By augmenting as necessary overall
CONSUMER ‘effective demand’, through the ‘discount’ and the ‘dividend’
each entire, overall ‘business cycle’ could become ‘financially’
fully self-liquidating, regardless of the extent of ‘labour
displacement’.
(Peter:- ) I think
this has also made it easier to see why Douglas didnt concern himself
with interest inside the theorem. It is another matter
outside.
(Joe replies:- ) ‘Interest’ is simply
another ‘B’ payment. So there was no need for Douglas to concern
himself with ‘interest’ separately inside A+B. And he
didn’t seem to concern himself much with it outside it either.
For good reason. It’s just a ‘transfer’ from the
account balance of a ‘Firm’ to that of its ‘Bank’.
Same as a ‘transfer’ from one ‘Firm’ to another ‘Firm’ for
anything else. It’s exactly the same as any other ‘cost’
that’s going to end up in the final price of its product. It
will NOT increase overall debt, as Bill McGunnigle and many others
infer, (unless loans are not being serviced). The ‘problem’
with the Banks not ‘spending’ all the interest they receive and
re-investing some of it, as Per mentioned, can easily be dealt
with through adjustments to the ‘dividend’ and ‘compensated price
discount’. We are not concerned with what’s in “anybody’s” account
balances, but what is accumulating in the overall ‘flow’ into and out of
account balances over time is
relevant.
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