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Tim writes: Surely, the banking
system is merely one of many zero-sum 'books'. If a
buyer buys
something from a seller, and pays through the banking system,
Tim:
Douglas described the problem
with this process as follows:
"At every stage of the process there exists
three "assets". A debt owing to the bank, a purchasing power that will
either liquidate the bank debt, or it will transfer the goods. It will clearly
not do both. It is impossible for the repayment of a loan to it bank to take
place other than through the purchase of goods (deflation) without dislocating
the financial system.
Consider the nature of these assets:
The bank debt, which is shown in the bank's
accounts as an asset has one attribute which distinguishes it from the other
two. The initiative of a liquidation of it probably rests with the bank and not
with anyone else, because it is a "loan".
The goods produced, which may be regarded as a
second asset, require the consent of a purchaser before they can be
transferred.
The third asset, the purchasing power distributed
will either transfer goods or liquidate the bank debt.
Assets No. 1 and No. 3 cancel each other on
cross-transfer. Asset No. 2 does not so cancel.
Now suppose at any stage of the proceedings
asset No. 3 is used to buy or cancel asset No. 1; then clearly there is a
disparity between the figure value of asset No. 2, which is not affected by this
transaction and the figure value of the other two assets, i.e., the bank debt
and the purchasing power.
This is exactly what happens when any
portion of the loans concerned in any stage of the production of an article is
repaid to a bank before the articles, into the cost of which they enter, has
finally and irrevocably been sold to its ultimate consumer. In order either to
resell it (in addition to normal trade in new articles) or to use it in such a
way that it forms a cost in production, a fresh loan has to be granted upon
it."
Cheers,
Jim
----- Original Message -----
Sent: Saturday, January 01, 2005 2:16
PM
Subject: Re: [socialcredit] Re: the theorem
CORRECTION
> 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.
>
> Tim Knight now
writes:
>
> Surely, the banking system is merely one of many
zero-sum 'books'. If a
> buyer buys something from a seller, and
pays through the banking system,
> then:
>
> 1. The purchase
transaction involves only the buyer's books and the seller's
>
books:
>
> 1.1. The seller debits the
buyer in a receivables account, and credits
> the profit and loss
account.
>
> 1.2. The buyer debits the
profit and loss account, and credits the
> seller in a payables
account.
>
> 2. The payment transaction involves the buyer's books,
the seller's books
> and the banking system's books:
>
>
2.1. The seller credits the buyer in a receivables
account (thereby
> reducing the balance to zero), and debits the banking
system.
>
> 2.2. The buyer credits the
banking system, and debits the seller in a
> payables account (thereby
reducing the balance to zero).
>
> 2.3.
The banking system credits the seller, and debits the buyer.
>
>
That's it. End of the discussion about economic and administrative
> fundamentals.
>
> In any discussion about economic and
administrative fundamentals, talk of
> 'money', 'lending out deposits',
'loans are created using new credit money',
> and 'when repaid the credit
money is destroyed' is all completely spurious
> 'noise'. Such
expressions are relevant only in discussions about semantics.
>
Discussions using such expressions say nothing about the economic and
>
administrative fundamentals; they are merely spurious attempts to define
> what the expressions might mean. Who cares. The expressions
are redundant
> because there are no economically-significant concepts on
which to hang
> them.
>
>
>
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