| Subject: | [socialcredit] The Stream of Increasing Spending | | Date: | Sunday, July 15, 2007 20:12:48 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
"MG: What percentage of the money supply is not
principal, please provide references."
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I cannot improve on this from a standard reference to
the new economics:
"The totality of bank deposits plus currency, M3, is
approximately 10% greater than bank credit, C1. M3 -
C1 devolves from Fed open market operations funding a
portion of government spending, and the small residual
from the era of gold and silver monetization, and
greenbacks. Checking deposits plus currency, M1, is
approximately 20% of M3. M1 derives from the composite
of Fed open market operations and bank credit
expansion. M3 - M1 devolves in the first instance from
M1. M3 - M1 constitutes a revolving fund of finance
that is a continuing source of loanable funds.
Loanable funds in the aggregate derive from the
composite of bank credit expansion and the revolving
M3 - M1. In a growing economy, M3 - M1 is an expanding
nodality with inputs that exceed outputs. But the
outputs are funds that are being invested or spent.
The stream of increasing spending is therefore
financed by bank credit expansion, Fed open market
operations, and disbursements from M3 - M1."
-
"MG: But do discount loans create deposit money or are
they extraneous to money creation?"
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In reference to discount loans by banks, as with all
loans by banks, the theorem is that loans create
deposits and the repayment of loans cancel deposits.
-
"MG: But is it not true that interest charged as is
practiced by 99% of loans is not paid as a single time
service charge and that interest continues to accrue
until the last payment period?"
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Only as a matter of the wording in specific contracts,
not as a physical process. It only goes to how the
interest is calculated, which may be worded quite
differently to arrive at the same interest paid for
the same time that principal is held when the loan is
fully amortized. To repeat, a loan contract is not a
physical process but a contract for future
performance. Pond scum analogies are irrelevant
inasmuch as they describe physical processes. Because
of the multiplicity in the ways that loan contracts
may be worded, which have the potential for much
confusion, the Truth in Lending law in the United
States requires that most loan contracts be translated
into what is called the "APR," which permits consumers
to more reasonably compare one loan contract with
another in terms of their relative cost for credit
received.
-
"MG. Is this the other source of money creation you
allude to above?"
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Well, it's a source, but not a very important source
in the total scheme of things. It's not even
mentioned in the "stream of increasing spending"
description I gave above that lists the major sources.
Because it is something real--deriving from the rules
of double entry accounting, where banks are simply
crediting deposit accounts which are among their
liabilities in their charts of accounts--it is quite
sufficient by itself to defeat the 10 can't pay 11
fallacy that falsely assumes that the 10 is all the
money in existence from which both the principal and
interest can be paid.
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The Stream of Incr
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