| Subject: | Re: [socialcredit] Re: the theorem CORRECTION | | Date: | Saturday, January 1, 2005 10:42:22 (-0800) | | From: | william_b_ryan <william_b_ryan @.....com>
|
| In reply to: | Message 426 (written by Timothy Carpenter) |
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.
----------------------
------------------------
[REPLY] That's fine, but how do you reconcile this
most recent statement of yours with the utterly
contradictory one from the day before?
"I do agree with the assertion that dollars in
company account balances are not in the hands of
final consumers. [correction follows] provided that
balance is held in notes in a drawer and not in a
bank (otherwise the money may well be put to work and
lent to someone...)"
Perhaps you will explain how "put to work and lent"
means something other than deposits are lent.
-
As to river v. reservoir, is it impossible for you to
see that your reservoir is morphologically equivalent
to a river with dam and floodgate? A river is a
reservoir that is in continuous flow, whereas a
reservoir could be merely a body of water just
sitting there. That is to say, it could be
dynamically dead.
The thing about account balances is, yes, the rate
being outputted can transiently exceed the rate being
inputted during the period of depletion. That is
indeed what happens during credit contractions. But
at the point of depletion the rate being outputted
cannot exceed the rate being inputted. During the
period of replenishment the rate being inputted will
always exceed the rate being outputted. It is also
true that nothing will output before it has inputted;
as a matter of sequence the output will always lag
the input. So in concept the "account balance" is a
delay component. Don't get too concerned about the
details of its internal operation. Better to just
think of it as a "black box" that is a delay
component in a block diagram for now. It is not
necessary to think about the details of rivers and
reservoirs, since they seem to have confused you. We
can go into the details later. Right now, all I want
is for you to get A+B in broad concept, if you are
willing. I'm not sure you are.
And Tim, we are talking about models - models, which
necessarily involve simplifications. Models don't
and can't prove or disprove anything. They can never
prove anything. They are merely aids to
understanding, heuristic tools.
At this moment we are not trying to prove A+B, but
understand it. But you seem to be intent on
disproving it, which certainly you cannot do until
you understand it.
Whether or not we are able to proceed is therefore
entirely up to you.
-
Assuming you are, I will expect you to get back to me
on what you think Say's Law means, from Say's own
words, http://www.geocities.com/socredus/say.txt
put into your own words. That's your homework
assignment. Forget about "costs" and "point of
retail" for now. I'll define them later. They are
from my paraphrase. I want you to tell me what you
think Say's Law means. I want your paraphrase.
Please do that so we might move on.
-
--- Timothy Carpenter <timbeau_hk@yahoo.co.uk> wrote:
> 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
> > your 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!
>
=== message truncated ===
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