-----Original
Message----- From: Peter Haines [mailto:cymric@xtra.co.nz]
Sent:May 5,
20066:19 PM To: socialcredit@elistas.com Subject: Re: [socialcredit] the
"effect" of interest
Howdy Bill,
Good reply. There is a
difference between money and credit although the latter in the course of
'business' becomes money simply because the private banking system causes it to
do so. I agree the former ( pre-existing) is
entitled to interest and latter ( not pre-existing) not as I
have argued elsewhere with Joe.
If the Bank ‘mobilises’
the credit of the community is it not entitled to charge for doing so?Surely it must be obvious that there are real
COSTS involved in banking.Somebody has
to do it, and they can’t do it unless they’re getting paid. No matter how you state that charge, no matter who provides this service, be it
Banks as presently constituted, Credit Unions as we have in BC, some department of Government, like the oldAlberta
Treasury Branches, JAK in Scandinavia, or anything else imaginable, it is in effect ‘interest’.It can be expressed as a
percentage.Just as your deposits vs. withdrawals could be expressed as a percentage.Whether or not that is done
is immaterial.The difference between the total amount that was disbursed
vs. what will be the total amounts repaid is still ‘interest’, no matter how
it is hidden.Even if,
as is the case with JAK, it is a sum that is foregone on your savings that the
Bank would otherwise be paying you.
And in fact, if you
have the John Hughes book, “Major Douglas: the Policy of a Philosophy”,
(which is an excellent history well worth acquiring, if you don’t already
have it ), and you look in the Appendices you will
find a transcript of evidence Douglas gave before the MacMillan
Commission. And in those hearings Douglas was asked specifically about whether the Banks
could make an ‘interest’charge to cover their costs in handing
the Compensated Price Discount, and he replied that they could.
The argument that the profits of the
banking corporations gets back into the economy by various means and times
holds not more valid excuse for it to continue as it is ( supposedly so crucial
we mustnt meddle with their business methods) than the laundering of
international crime profits which also are a crucial factor in the stablising
of the game. If there is a better way as Douglas presents
then we are not bound to preserve the present one as-is are we?
The ‘profits’
of the banking corporations canbe made to be ‘distributed’
profits rather than retained ones. You
will recall that Douglas criticised the Banks, not for paying a high
dividend to their shareholders, but for NOT paying one that was a good deal
higher.A similar criticism can be
inferred from what he wrote later in regards to what the Banks PAY their
depositors in ‘interest’.
The argument about whether there is
a 'black-hole' or not is directly related to the fact that the banking system
is a centre of gravity and will attract all the benefit of everyone elses
credit, equity and social credit ( increment of association) of
society, and while from a macro perspective theoretically the system is
re-supplying itself with sufficient funds for everyone to survive in fact many
businesses are falling through cracks, crack the macro views is oblivious
to. The cashflow problem of small businesses world wide is one example,
and in this country its small businesses that employ more people.
Absolutely.But what
would you expect if overall CONSUMER “Incomes” are continually falling
in ratio to the overall “Costs of Production” flowing through into Prices
of goods for sale over the retail counter?They are ‘falling’
because of ‘labour displacement’.Even if those still employed were making as much in total, in ‘higher’
wages, say, than the total amount that
was being paid out to more people previously in ‘lower’ wages, we’d
still have a problem.Because the ‘propensity
to consume’ declines with an increased income. Once you’ve acquired your ‘goodies’ , your propensity to spend decreases. You put more of your dough into ‘savings’.Or ‘invest’ it.
Those ‘Consumer Incomes’,
in total, over any given time period, are what liquidates the ‘Costs of Production’,
in total, over that same time period,which in turn originated as Bank loans.If they CANNOT, through ‘labour
displacement’ and an overall lower propensity to spend.fully liquidate those ‘Costs of Production’ then
those Bank Loans in total CANNOT be fully amortized, and debt increases.(And on it, interest will also increase as it
accrues.)
‘Interest’
is an ‘effect’ of the larger problem.NOT the problem itself.Which can be corrected by having a proper set of ‘National
Accounts’ from which new, debt-free ‘credit’, (not ‘costed’ into production), can be distributed to
CONSUMERS by way of the National dividend and/or the Compensated Price Discount.To try
to correct the problem by distributing morePRODUCER ‘credit’, even supposedly ‘interest-free’
ones, even for ‘Government’
public works projects, is not correcting it at all.You’re just deferring the inevitable,(and creating ‘inflation’
in the process under the guise of ‘prosperity’.)
The APR quote actually confirms your
point. It also itemisers the various costs of a loan as seperate, just as
you do and makes them all equivalent to costs/profits. Not
equivalent to one another. Can anyone imagine a banks accounts not
showing the various sourses of profits? I cant.
RE Joes point, "the progress of
civilisation" as it aught to as per the Social Credit perspective of
reality and philosophy, the current banking system HAS serious arrested
progress.
I totally agree.But it would be much, much worse under the
other systems proposed. Like the ‘dollar
for dollar’ lending idea, or, even ‘Islamic Banking’.And, ultimately, the way the ‘Democrats’
want to use the Reserve Bank.
It cant be seriously
arrested by making the changes Douglas
would. Only the stranglehold of the banking system would be. Should
slaves be every thankful to masters for feeding them, when they can be free and
live healthier lives?
You break the ‘stranglehold’
by making it possible for each cycle of production to be fully ‘financially
self-liquidating’ while allowing the genuine ‘progress’ which
ongoing ‘labour displacement’ actually is to be accommodated.By doing so, through a proper set of ‘National
Accounts’, CONSUMERS, all of us, can be properly credited with the
ongoing increase in the nation’s overall capital appreciation over overall capital
depreciation through the ND and CPD.‘Prices’
fall as ‘efficiency’ increases.The ‘fall’ in prices, over time, means a given unit of your
currency will buy ‘more’, over time, provided you ‘have’
it to spend. If it buys more, over time, the ‘inflation’
factor is removed from ‘interest’ rates.(And it must be a major factor in NZ, so I
understand, or you rates wouldn’t be higher than elsewhere.)
If civilisation was as it aught to
be then the rate of interest on money lent by anyone wouldnt be very much
because the demand would be so much lower outside the seige system of the
banks, since in part credit would play such a bigger role than money and as
well people would be so much better off and be able to avoid debt
substantially.
Douglas intended by his remedies to
break the stranglehold by the banks and replace their dominance with the
dominance of the consumer ( general public) and those who defend the present
system are opposed to this change in centre of gravity. It is one or the
other and Douglas has drawn a line in the sand.
Subject: Re:
[socialcredit] the "effect" of interest
Hi Tim
We definitely are at cross purposes. I look upon interest as a fair return on
an investment and quite justified IF the lender had the funds to start with.
This would be money earned by working or trading throughout your
lifetime ie savings. An interest return on that type of lending is
reasonable. My contention is that the banking system DOES NOT have those funds to
lend. It simply creates a debt against the borrower that it calls its own
equity based on the Assets possessed by the borrower. It is a paper transaction
based on nothing more than a tradition. Effectively a confidence trick, but one
backed by governments and all who support our present banking system. This type
of borrowing should not incur interest at all, but simply a service charge.
That is the essence to my way of thinking of Reserve Bank Credit backed by the
Government's revenue.
Your
mathematics are correct, but does not take into account the methodology
behind the initial debt. If the lending is Path one ie lending from already
established assets as savings then I agree entirely with your hypothesis. The
repayment of capital and interest are as you say, and interest
rates can not substancially affect money flow.
Method two however upsets the equation because
it is used by the banking system to increase endebtedness under the excuse of
maintaining the flow of funding. It creates " new unearned money"
into the system and charges everyone an exorbitent rent for doing so via
interest rates. In this case the "interest " does indeed disappear
into a "Black hole" or rather it becomes a transfer of equity from
the borrower to the lender at the expense of the general money flow ie a
concentration of financial wealth into banking hands. There is no circulation
but an accumulation into the banking system
Unfortunately both sets of funding
are operating simultaneously in the money system and the bulk of financial
working of of the second type. It would be nearly impossible to seperate the
two even with the finest accounting methods. The problem has arisen because
wealth ie assets has been monetised. We no longer measure wealth in terms of
land, buildings, jewels, food etc but as $. Thus the Banking system can conduct
its great lending/interset scam to the detriment of the general money
circulation.
This is where I am still
investigating the adverse effects of fluctuating interest rates on the
economy. I think we will have to agree to differ on this Tim without prejudice,
until I can find definitive general confirmation of either your concept or
mine. I don't really care who proves to be more correct to quite honest,
because you have provided me with avenues of thinking and possible research
that will yield a greater understanding of the present financial system anyway.
Subject: Re:
[socialcredit] the "effect" of interest
Hi Bill,
You seem to speak as if interest charges disappear in to some black hole or are
taken out of circulation. Where is there any evidence of this? You said
yourself that loans are fiat money, thus interest receipts do not become loans,
they are profit on services rendered. Even if they did become loans, they are
re-entering the economy for circulation – even better than if they become
profits, bonuses or outlay on marble foyers! Banks either spend their money on
their top people or they invest it. Can you show me an example of where a bank
or other lending organisation willingly leaves money lying around not earning
its keep?
Think of it.
Create $100, interest will be $10, but SHOCK economy has only $100 and a
liability (over 1 yr) of $110! HELP!
Pay back $10 per month over 11 months, for arguments sake.
First $10 repaid, $9 is destroyed, $1 is interest-profit, back into the economy
via a new loan PRINCIPAL (that is NOT destroyed on repayment!) or spent on
bonus.
Economy now has $100 – 10 + 1 = 91.
Fiat loan outstanding $100 – 9 = 91.
Bingo, no liquidity problem.
Loan interest DOES transfer wealth from borrower to lender, but then again so
does any consumer-supplier who runs at a profit!
And remember one very important thing which I stress again, the interest is
always paid FIRST and no money is ‘destroyed’ while ANY interest is
outstanding. African debt is one example of how this is “bad” but
it is “bad” because the loans went on Mercedes and into Swiss Banks
and the interest profit went abroad also – so how on earth could the
domestic economy replace principal AND interest that both fled the
nation’s economy? Interest per se is not the issue, just as guns do not
kill people, interest does not kill economies.
Tim
On 3/5/06 23:00, "W. McGunnigle" <wmcgunn@maxnet.co.nz> wrote:
Hi Tim
I don't
follow your argument at all Tim. Surely any loss in discreationary spending ie
an increase in fixed charges without a corresponding increase in income, must
create a liquidity problem? Interest rate increases divert funds away from
general commerce into a stagnant pool that is not automatically fed back into
the economy except as further loans and increased indeptedness. I do follow
your axiom that "new"loans are necessary for further expansion of
specific projects, but that is a different issue to fluctuating interest rates
on already established loans.
Can you amplify your argument more fully or are
we at cross purposes here?
regards Bill Mc G
----- Original Message ----- From: Timothy Carpenter
<mailto:timbeau_hk@yahoo.co.uk> To: socialcredit@elistas.com Sent: Wednesday, May 03, 2006 6:54
PM Subject: Re: [socialcredit] the
"effect" of interest
Hi Bill,
Of course high interest is “a bad thing” - we all know that, but it
does not change the fact that the concept of interest does not cause a gap or a
loss in liquidity by definition.
Tim
On 2/5/06 13:24, "W. McGunnigle" <wmcgunn@maxnet.co.nz> wrote:
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 -----
From: Timothy Carpenter
<mailto:timbeau_hk@yahoo.co.uk> To: socialcredit@elistas.com 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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RE: [socialcredit]
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