| Subject: | Re: [socialcredit] In Reply to Per Almgren | | Date: | Friday, July 20, 2007 15:35:11 (+1200) | | From: | William Hugh McGunnigle <wmcgunn @.........nz>
|
| In reply to: | Message 4933 (written by william_b_ryan) |
Reply supplementing Bill"s answer to Per amalgam
Bill is telling you that the double accounting system is designed to
cover an apparent deficit in the money supply that is created during an
expansion period in the economy. I will not argue about the morality of the
practice, but state simply that it is designed to account for or conceal ( I
have still to decide which one it is) for the increasing debt burden being
imposed upon the world's financial system by out moded financial practices
designed in the 16th century. Basically today we are attempting to run a
21st century economy using financial tools that are 5 centuries out of date.
It is like trying to control a sophisticated modern jumbo jet using the
control mechnisms appropriate to the machines of World War One. The whole
system is unstable and the larger it becomes the more likely it is that it
will collapse simply because those controlling it have no inclination to
prevent that collapse. We have learned nothing from the financial disaster
from 1929-1934.
It is not a question of 10 not being able to pay back 11, but a
question of whether we continue accepting a system that requires increasing
indeptedness in order to ensure that human progress and developement can
continue. Social Credit has simply analysed a financial problem and offered
a possible method of reducing or preventing this deptor economy. The
rapidity of the money flow ironically conceals much of the indeptedness
crisis because a great deal of the present money flow is simply ledger
entries transferring debts from one place to another. Have a close look at
the material that Bill has supplied and you will find that this will confirm
that axiom. Our problem, as monetary reformers, is to develope a fresh
system to overcome the increasing indeptedness inherent to the present
system. Social Credit offers a viable and sustainable alternative.
regards
Bill McGunnigle
----- Original Message -----
From: <william_b_ryan@yahoo.com>
To: <socialcredit@elistas.com>
Sent: Friday, July 20, 2007 4:28 AM
Subject: [socialcredit] In Reply to Per Almgren
> Replying to Per Almgren's post of July 8.
>
> "Can you explain, in detail, how this extra 1 is spent
> into circulation without creating a corresponding
> debt?"
> -----------------------------
> ------------------------------
>
> There is a credit for every debit, and a debit for
> every credit. In the example, the banks spend 1 into
> circulation in payment salaries, wages, dividends,
> plus ordinary business expenses. It is available in
> the community for payment of interest plus other fees
> back to the banks for services rendered.
> -
>
> "If the borrowers' debt accounts are charged daily
> with the daily interest part of what they are supposed
> to pay in cash or from other accounts at the end of
> the period..."
> -----------------------------
> ------------------------------
>
> The borrowers' accounts are not charged daily but only
> as their individual loan contracts stipulate.
> -
>
> "...but they themselves are not entitled to use that
> money at the corresponding credit accounts..."
> -----------------------------
> ------------------------------
>
> Perhaps I'm not following you here. They are free to
> use the positive balances in their transaction
> accounts, whatever they might be.
> -
>
> "...doesn't that mean that the bank is borrowing
> interest-free from the credit accounts until the
> borrowers actually pay their accrued interest
> amounts?"
> -----------------------------
> ------------------------------
>
> Not interest free because there is a real cost to
> supplying financial services, even to themselves. The
> real cost is for salaries, wages and resources
> utilized in providing the service.
> -
>
> "And what happens if the bank doesn't completely use
> the interest for payment of expenses?"
> -----------------------------
> ------------------------------
>
> This is what I call the bankers' underconsumption
> hypothesis, which I began to address in my posting
> yesterday, entitled, "10 can't pay 11, RIP." Please
> read it. The answer requires a dynamic perspective of
> the economic process. The simple answer is that your
> question is based on a false premise. In a steady
> state economy entrepreneurs are always spending
> exactly what they are receiving back in reflux. In an
> expanding economy they are always spending more than
> they are receiving back, yet are recording a profit in
> their double entry accounts.
>
> This holds true for bankers as with any classification
> of entrepreneurs.
> -
>
> "But even the bank can't use money to pay with until
> they actually have got them, either from inpayments
> from outside or by borrowing internally from their
> customers accounts."
> -----------------------------
> ------------------------------
>
> You simply do not understand how double entry accrual
> accounting works. Look again at the flux-reflux
> diagram appended below and archived at
> http://www.geocities.com/new_economics/flux-reflux.gif
>
> Please note that in an expanding economy spending
> always leads its reflux. Again, this holds true for
> bankers as with any classification of entrepreneurs.
> It is not possible for the continuing increment of
> increase in the rising flux curve to be funded by
> "sales" or "saving" from income, but by the financial
> sector's ability to increase fungible credit in
> support of the entrepreneur. The totality of spending
> is funded by what is tantamount to a revolving fund,
> plus the incremental increase accommodated by credit.
> Please see the "stream of increasing spending"
> description in my post of July 16. Also, look at the
> second diagram appended below, archived at
> http://www.geocities.com/new_economics/accounting_profit.gif
>
>
> --------------original message-------------
>
> At 12:50 2007-07-06, you wrote:
>> "The money for the interest is not created,
>>that's my beef. Sure, the debt for the interest
>>is added to the debt for the money principle
>>but you can't say the interest is 'created out
>>of thin air' like the chips are created out of
>>thin air."
>> -----------------------------------
>> ------------------------------------
>>
>> Again, the word is spelled p_r_i_n_c_i_PAL
>>when referring to the principal of loans. But
>>sure it is, the money for the interest is
>>most definitely created. Banking is a function
>>of double entry accounting in a creditary
>>economy. At the beginning of T1, 10 are lent,
>>and 11 must be repaid at the beginning of T2
>>in loan amortization and interest payments.
>>During T1 the banks spend thereby creating 1
>>into circulation for their salaries, wages,
>>dividends and ordinary business expenses, so
>>at the beginning of T2, 11 is in circulation.
>
> Can you explain, in detail, how this extra 1 is spent
> into circulation without creating a corresponding
> debt?
>
>> The money that the banks spend is charged,
>>as a matter of accounting, against their
>>accrued profit accounts.
>
> If the borrowers debt accounts is charged daily with
> the daily interest part of what they are supposed to
> pay in cash or from other accounts at the end of the
> period, but they themselves are not entitled to use
> that money at the corresponding credit accounts,
> doesn't that mean that the bank is borrowing
> interest-free from the credit accounts until the
> borrowers actually pay their accrued interest amounts?
> ;-)
>
> And what happens if the bank doesn't completely use
> the interest for payments of expenses? It may prefer
> to increase its liquidity (cash money) so it stays
> compatible with the increasing amounts on different
> accounts. In that case the borrowers are forced to
> borrow more to fill the difference, or they will
> experience a society with a shrinking economy!
>
>> This is allowable because by the rules of
>>accounting profit accrues contractually even
>>if not yet received in cash receipts.
>
> But even the bank can't use money to pay with until
> they actually have got them, either from inpayments
> from outside or by borrowing internally from their
> customers accounts. So debt is created before money
> can be spent. That means that interest is hard to pay
> if you don't have anybody that borrows that money in
> advance.
>
> Per Almgren
>
>
>
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