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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  19:57:54 (+1100)
From:Jim Inness <drjiminness @.....com>
In reply to:Message 5286 (written by keith wilde)

C.H.Douglas dealt with the problem of time in cycles of production,
and purchasing power made available at the time of each cycle.  Whilst
the concept is a little difficult to visualise, a close reading of
Douglas' "The Monopoly of Credit' makes it quite understandable. And
please remember, Douglas was a double qualified engineer, used to
exact interpretation of what figures mean, and where a miscalculation
easily resulted in disaster. He was NOT an orthodox economist who
tries to explain away a disaster when the invalidity of  his
indoctrination becomes visible for all to see.

On 18/03/2008, 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
> > >FALLS by 3%, the bank must also agree to take a 3%
> > CUT
> > > in the next year's monthly payments. Sharing in
> > > profits means also sharing in losses.
> > >>>
> > >>> But a bank could make MUCH bigger profits by
> > > investing in really promising ideas than it would
> > by
> > > charging interest. For instance, had any bank
> > invested
> > > in Tesla's idea of alternating current at a time
> > when
> > > Edison was promoting direct current, that bank
> > might
> > > soon have become the biggest bank in the world!
> > >>>
> > >>> Of course this idea would make it imperative for
> > > the banks to make sure that the money they are
> > loaning
> > > (more correctly, investing) is not going to all go
> > > down the drain: they would have to scrutinise
> > every
> > > application for a loan carefully, to see if the
> > > activity the loan was going to be used for had a
> > > chance to render a profit down the road. But
> > what's
> > > wrong with THAT?
>
>
>
> ____________________________________________________________________________________
> 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 kwilde@tc-biodiversity.org
> For more information, visit
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>
>
>
>
>
> ---------------------------------------------------------------------
> 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 drjiminness@gmail.com
> For more information, visit
> http://www.eListas.com/list/socialcredit
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