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Subject:Re: [socialcredit] Re: [chdouglas] Public-spirited Banking (was: Re: The Abolition of Interest on Loans)
Date:Tuesday, March 18, 2008  00:59:27 (-0600)
From:Wallace Klinck <wmklinck @....ca>
In reply to:Message 5287 (written by Peter Hogwood)

Peter, I have forwarded by separate e-mail several PDF documents on  
Social Credit, the nature of the price-system, the so-called "velocity  
of circulation" misconception, etc.
Sincerely
Wally Klinck


On 17-Mar-08, at 9:07 PM, Peter Hogwood wrote:

> Keith, the way I understand it, the quantity theory is
> that there is some measurable quantity of money, that
> constitutes the totality of money, such as a mass of
> gold or silver coins, or bank notes, and that the
> importation or minting of say, additional gold or
> silver coins, or printing additional banknotes will
> affect the general price level without affecting the
> real factors of production.  That is to say, any mass
> of money will support any volume of production and
> consumption, in continuous circulation.  Inflation
> will distort accounting numbers but will have little
> effect on real factors, although the ownership and
> control of the real factors may well change from
> person to person because of the distortion in the
> numbers.  Historically, the alternative theory was the
> "real bills doctrine" which is more akin to the modern
> creditary theory, although the real bills doctrine
> contains errors in respect to modern theory.  Today,
> most transactions involve bank deposits created by the
> banks, which do not perpetually "circulate" like
> tangible or quasi-tangible coins or bank notes.  But
> rather, are issued as "tickets" by firms through
> "investment" with accommodation by banks in the ticket
> metaphor, which are redeemed and thereby effectively
> canceled at the point of retail through sales to final
> consumers.  The flux of investment by firms and the
> reflux through sales parallels the flux and reflux of
> deposits from and to the banks through lending and
> amortization, which accommodate the process through
> financial services supplied to firms and consumers.
>
> Incidentally, the many recent actions of the Federal
> Reserve, as for example with Bear Stearns, indicate
> that policy makers at the Fed, when push comes to
> shove, do not believe in the quantity theory, though
> they pay lip service to it during more "normal" times.
> Practical lessons learned, I believe, from the Great
> Depression.
>
> I am informed that you are a professional economist.
> I would appreciate your further comments.
>
> Peter
>
>
> --- keith wilde <kwilde@tc-biodiversity.org> wrote:
>
>> Hi Peter,
>>
>>  You say below that
>>  "the theorem that loans create deposits which
>> function as money...is contradictory to the quantity
>> theory that there is inherently a scarcity or
>> limited quantity of money."
>>
>>  I find that a very strange statement of the
>> quantity theory.  Can you explain or cite an easily
>> accessible exposition, please?
>>
>>  Keith Wilde
>>
>> Peter Hogwood <p_t_hogwood@yahoo.com> wrote:
>>  "Peter, You only left out two components--the time
>> value of money and opportunity for other
>> investments..."
>> ---------------------------------------------------
>>
>> Then, I take it, you do agree with the three
>> components that I listed.
>>
>> The time value of money theory is related to the
>> quantity theory. The concept of opportunity cost to
>> loans advanced is also related to the quantity
>> theory.
>>
>> The more modern position is expressed by the theorem
>> that loans create deposits which function as money,
>> which is contradictory to the quantity theory that
>> there is inherently a scarcity or limited quantity
>> of
>> money.
>>
>> In the more modern view interest is fully explained
>> by
>> the three components that I listed, which are
>> payments
>> for financial services rendered by banks to the more
>> general economy.
>>
>> I would value your reply.
>>
>> Peter Hogwood
>>
>>
>>
>> --- Claudette Konola wrote:
>>
>>> Peter,
>>> You only left out two components--the time value
>> of
>>> money and opportunity for
>>> other investments...
>>>
>>>
>>> On Mon, 17 Mar 2008 09:43:13 -0700 (PDT)
>>> Peter Hogwood
>> wrote:
>>>> There is a significant false premise to your
>>> argument,
>>>> Ardeshir.
>>>>
>>>> "So what would be reasonable in your view, given
>>> that
>>>> it takes your people at most an hour to do the
>>>> paperwork, and after that, there's nothing more
>>> for
>>>> you to do but collect my monthly payments?"
>>>>
>>>> The false premise here is that the
>> administrative
>>>> expense in granting loans is the only expense
>>> incurred
>>>> in granting loans. The components of interest
>> are
>>> 1)
>>>> the insurance premium to cover loan defaults,
>>> which is
>>>> by far the largest component of interest
>> received
>>> by
>>>> the banks; 2) the administrative expense,
>> salaries
>>> and
>>>> wages paid by banks, etc. and other ordinary
>>> business
>>>> expenses; and the final and least component: 3)
>>> the
>>>> net profit from banking.
>>>>
>>>> The default or risk premium varies by borrower
>>> risk
>>>> category. In every risk category the borrowers
>>> pay to
>>>> compensate the banks for defaulted loans within
>>> the
>>>> risk category. Therefore, higher credit risk
>>>> borrowers pay higher interest rates than lower
>>> risk
>>>> borrowers.
>>>>
>>>> Peter Hogwood
>>>>
>>>>
>>>>
>>>>> On Sun, 16 Mar 2008 13:58:25 -0400 Ardeshir
>> Mehta
>>>> wrote:
>>>>>
>>>>>> On 16-Mar-08, at 8:31 AM, Claudette Konola
>>> wrote:
>>>>>>
>>>>>>> So, if nobody pays interest on loans, what is
>>>> going to motivate those who have money to let
>>>> somebody who needs money use it?
>>>>>>
>>>>>> WHY WOULD BANKS LEND MONEY TO ANYONE IF THEY
>>> COULD
>>>> NOT CHARGE INTEREST?
>>>>>>
>>>>>> Well, I am not against banks making a
>> reasonable
>>>> amount of money for taking the trouble to issue
>> a
>>> loan
>>>> to us. Call it a "reasonable profit on a
>>> transaction"
>>>> , for example. If the bank that lends us $25,000
>>> to
>>>> buy a car were to say: "We are willing to lend
>> you
>>>> this money, but we would have to make a
>> reasonable
>>>> amount of profit out of the transaction" , I'd
>>> say:
>>>> "Okay, fine. So what would be reasonable in your
>>> view,
>>>> given that it takes your people at most an hour
>> to
>>> do
>>>> the paperwork, and after that, there's nothing
>>> more
>>>> for you to do but collect my monthly payments? A
>>> law
>>>> firm might charge me, let's say, $500 per hour
>> at
>>> the
>>>> outside: so, does $500 seem reasonable to you?"
>>>>>>
>>>>>> It sure does to me. Does it not to YOU?
>>>>>>
>>>>>> But does TEN TIMES as much sound reasonable to
>>> you?
>>>> WHICH law firm, no matter how prestigious, will
>>> charge
>>>> you five GRAND an hour? And yet banks get away
>>> with
>>>> this, and more, every day of the week!
>>>>>>
>>>>>> However, there's another way banks can make
>>> money
>>>> on loans: they can look upon it as an
>> investment,
>>> and
>>>> share in the profits of that investment. If a
>> bank
>>>> issues a loan to a company, that company will,
>> of
>>>> course, use that money to expand its operations,
>>> and
>>>> thereby make profits. The banks can stipulate,
>> in
>>> the
>>>> loan contract, that they will get a share of the
>>>> profits.
>>>>>>
>>>>>> The same thing can apply to a mortgage. If you
>>> buy
>>>> a house today for $200,000, and in order to buy
>>> it,
>>>> borrow $100,000 from the bank, and if after a
>>> year,
>>>> because of market forces, the value of your
>> house
>>>> increases by, say, 3%, the bank can stipulate
>> that
>>> it
>>>> will get a 3% increase on the next year's
>> monthly
>>>> payments. That seems fair enough, because it
>> isn't
>>> as
>>>> if you did something yourself to cause the value
>>> of
>>>> the house to rise. It was just your good luck.
>>>>>>
>>>>>> Of course if that's the way the bank wants to
>>>> structure the loan, then if the value of the
>> house
>>
> === message truncated ===
>
>
>
>
>       
> ____________________________________________________________________________________
> Never miss a thing.  Make Yahoo your home page.
> http://www.yahoo.com/r/hs
> ---------------------------------------------------------------------
> Some introductory materials to the discussion topic of this list are  
> at
> http://www.geocities.com/socredus/compendium
> You're subscribed to this list with the email wmklinck@shaw.ca
> For more information, visit http://www.eListas.com/list/socialcredit

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