|Subject:||[socialcredit] Re: [chdouglas] I await your answers to my questions (was: Re: Public-spirited Banking (was: Re: The Abolition of Interest on Loans))|
|Date:||Thursday, March 20, 2008 23:29:44 (-0700)|
|From:||Peter Hogwood <p_t_hogwood @.....com>
Ardeshir, my replies are inserted [Reply] below:-
> It has to do with accounting and numbers. The
fundamental question is how could profit be calculated
in a non-creditary system? It can't be in a
non-creditary system, which is the point.
Why ever not?
Suppose there were only gold coins in circulation, and
no bank notes at all, like in Roman times. A
manufacturer of, say, chariots could use gold coins to
buy everything he needs: his lumber, his hardware
(axles, nails, and so on), the firewood for his fires,
his tools, etc.. Suppose he makes chariots and sells
them. Suppose it costs him ten denarii per chariot to
buy everything he needs to make the chariots, and he
is able to sell each chariot for twelve denarii. Then
his profit would be calculated as being two denarii
per chariot, wouldn't it?
If not, why not? ( Note that no credit is involved in
this calculation. )
> A commodity-like money operating in accordance to
the quantity theory just wouldn't work. There is no
possible way for profit and loss to be accurately
calculated in such a system.
Why not, given the example I just gave above?
[Reply]: Gold is in relatively fixed quantity. A
commodity money based on gold could not expand to
accommodate increasing trade. With increasing
transactions involving more and more people and firms,
as a statistical matter individual firms could not
possibly be receiving back in reflux to their spending
more than they are spending, because their spending is
accumulating into more and more balances which are in
subtrahend to system flow. The reflux to individual
firms in sales would always be falling in respect to
their spending, an impossible condition involving
perpetual loss in terms of any conceivable system of
accounting. The Roman civilization was precluded from
developing a mass production economy because double
entry accounting had yet to be invented, and creditary
instutions like modern banks that accommodate
expanding trade could therefore not exist. For this
reason Roman civilization was doomed to subsist on
slavery and plunder.
> Basic model of the modern economy:
> Firms pay out, in return for goods and services
received, generally recognizable creditary
instruments, or "tickets," which they redeem over
their sales counters for produced goods and services.
Inasmuch as tickets printed by the individual firms
themselves would not be generally recognizable, and
therefore would not be tradeable, banks accommodate
the process by exchanging their generally recognizable
"tickets" in the form of deposits for the individual
"tickets" of the firms, a service for which they
charge a fee called interest, inasmuch as it is a
function of time. These "tickets" are contracts
involving credit and debt, pure and simple.
So what? Where exactly does the fractional reserve
system - or anything like it - enter into your
[Reply]: Because fractional reserve banking allows
the flux of "tickets" from firms through their
spending to increase with the expanding needs of trade
Is it conceivable to you that the bank was seeking
possession of a house worth less than $100? If the
house was worth more, then a Justice of the Peace
would, according to the first-quoted passage, have no
jurisdiction over the case.
[Reply]: You are clearly not a lawyer and know
nothing about the law. I would even question your
your ability to read a simple declarative sentence.
The $100 limitation has to do with civil disputes
between parties involving monetary claims, or minor
criminal matters. JPs are involved in approving
various writs and warrants that do not involve
monetary claims. The claim in this case was not for
money but foreclosure and the sheriff's sale of
collateral, something apparently handled by JP courts
Besides, please note that it was a properly empanelled
JURY which found for Daly, not Justice Mahoney.
[Reply]: In the American system plaintiffs and
defendants have the right to trial by jury, in even
the most trivial of civil or criminal cases, if they
so demand. If both plaintiff and defendant waive
their right by trial by jury, the case is decided by
Because the decisions of these justice of the peace
courts are not precedential (that is, other courts do
not have to follow them), they are not published.
Again the article is in error, since the decision was
NOT that of a Justice of the Peace.
[Reply]: What a trivially stupid assertion! The
decision was by the justice of the peace court, which
in this case included a jury. Please notice it says
justice of the peace COURTS and not simply the justice
of the peace.
> Moreover, the underlying ridiculous Mahoney
"decision" was ultimately overturned on appeal.
This is a VERY suspect statement, because Jerome Daly
lived in his home in Credit River for several decades
after the Credit River Decision was handed down by the
jury. If the decision had really been overturned on
appeal, he would have been ordered by the court to
leave the home, wouldn't he?
[Reply]: The foreclosure appears to be not against
his home but a vacant piece of investment property.
It is described in the case as "Lot 19, Fairview
Beach, Scott County, Minn."
"All proceedings in the justice court in the
underlying matter were declared a nullity in Zurn v.
Northwestern National Bank, 284 Minn. 573, 170 N.W.2d
600 (1969). The same happened in another case brought
by Jerome Daly, Daly v. Savage State Bank, 285 Minn.
503, 171 N.W.2d 218 (1969)."
But the point I was making - in case you had actually
been READING what I had written in my e-mail in favour
of the Abolition of Interest on Loans - was that the
bank manager admitted under oath that it was "standard
banking practice" to create money "out of thin air".
That's all that matters: it's a statement of fact,
admitted by all bankers.
I notice that even YOU don't deny it. Or do you?
If you don't, then how can you argue that it is not
"counterfeiting" or a "scam"?
[Reply]: Because if you will read your deposit
contract, the bank is only required to supply legal
tender in exchange for your deposit ON DEMAND. If the
bank will not do so it is violation of its contract.
The bank DOES NOT claim that your deposit IS legal
tender. Every bank, so long as it is able, will
supply legal tender in exchange for deposits when
demanded. Beyond that deposits are backed by
insurance. The theorem is that loans create deposits,
not that deposits are legal tender. Most transactions
in the modern economy, however, are conducted through
the exchange of bank deposits, which is why we call
them money. Modern money in the form of bank deposits
is backed by fractional reserves of legal tender.
Modern money is in fact a generalized form of
contract, created "out of thin air" by the various
parties involved, with pen and ink or electronic
digits, as with any contract, rather than something
with intrinsic value dug out of the ground as a
--- Ardeshir Mehta <email@example.com> wrote:
> On 20-Mar-08, at 10:35 AM, Peter Hogwood wrote:
> > Actually, I would characterize Rothbard as being
> an ignoramus, if
> > not a complete ignoramus.
> Exactly why?
> Or are you claiming that your simply saying that
> someone is an
> ignoramus makes it so?
> > The Austrian school is certainly not mainstream
> So? Are you claiming that mainstream economics is
> always right?
> > but very cult-like.
> So what? Are you saying that cults can't be telling
> the truth?
> >>> The fractional reserve system or something like
> it is absolutely
> >>> essential to the modern industrialized mass
> production economy
> >>> producing goods and services for the masses.
> >> Why, exactly?
> > I could write a book to answer that question.
> I'll give you the
> > briefest synopsis, which I'll introduce here.
> > It has to do with accounting and numbers. The
> fundamental question
> > is how could profit be calculated in a
> non-creditary system? It
> > can't be in a non-creditary system, which is the
> Why ever not?
> Suppose there were only gold coins in circulation,
> and no bank notes
> at all, like in Roman times. A manufacturer of, say,
> chariots could
> use gold coins to buy everything he needs: his
> lumber, his hardware
> (axles, nails, and so on), the firewood for his
> fires, his tools,
> etc.. Suppose he makes chariots and sells them.
> Suppose it costs him
> ten denarii per chariot to buy everything he needs
> to make the
> chariots, and he is able to sell each chariot for
> twelve denarii.
> Then his profit would be calculated as being two
> denarii per chariot,
> wouldn't it?
> If not, why not? ( Note that no credit is involved
> in this calculation.)
> > A commodity-like money operating in accordance to
> the quantity
> > theory just wouldn't work. There is no possible
> way for profit and
> > loss to be accurately calculated in such a system.
> Why not, given the example I just gave above?
> > The mass production industrialized economy was
> therefore impossible
> > before the invention of double entry accounting
> and the development
> > of creditary institutions like banks that the
> invention of double
> > entry accounting facilitated.
> > Basic model of the modern economy:
> > Firms pay out, in return for goods and services
> received, generally
> > recognizable creditary instruments, or "tickets,"
> which they redeem
> > over their sales counters for produced goods and
> services. Inasmuch
> > as tickets printed by the individual firms
> themselves would not be
> > generally recognizable, and therefore would not be
> tradeable, banks
> > accommodate the process by exchanging their
> generally recognizable
> > "tickets" in the form of deposits for the
> individual "tickets" of
> > the firms, a service for which they charge a fee
> called interest,
> > inasmuch as it is a function of time. These
> "tickets" are contracts
> > involving credit and debt, pure and simple.
> So what? Where exactly does the fractional reserve
> system - or
> anything like it - enter into your argument above?
> >>> Typical of this nonsense is your reference to
> the non-existent
> >>> "Credit River Decision" toward the end of your
> post. If it is an
> >>> actual court decision you should be able to cite
> some law book in
> >>> which the decision is to be found. It is in fact
> a concoction
> >>> fabricated by some ideological nut case, then
> circulated around
> >>> the Internet to be picked up by the gullible,
> like you.
> >>> Peter
> >> I had already given you a link to the court
> transcript of this
> >> "non-existent" legal decision, which was all
> there, quoted
> >> verbatim for the "non-gullible", like you (the
> link being, as I
> >> said,
> >> [snipped]
> > I apologize. I was thrown off by the link to the
> crank website and
> > the ridiculousness of the "decision."
> > Mahoney was a justice of the peace, the lowest
> possible judicial
> > official. In most or perhaps all jurisdictions it
> is an elected
> > position, where the candidates are not required to
> be lawyers or
> > have legal training.
> > The State of Minnesota has a website, a portion of
> which discusses
> > the Credit River case:
> > askfaq.html that states:
> > "Because the decisions of these justice of the
> peace courts are not
> > precedential (that is, other courts do not have to
> follow them),
> > they are not published."
> > So that's why it is not found in ordinary law
> The report you refer to is clearly
> self-contradictory, at least by
> implication, and thus either cannot be true, or
> else, if it is true,
> renders the Credit River decision binding and
> I explain hereunder:
> The article states,
> The 1967/1968 Minnesota Legislative Manual states:
> "Justices of the peace are elected for two-year
> terms in townships
> and in cities and villages which do not have
> municipal courts.
> Justices of the peace have jurisdiction over actions
> arising within a
> county when the amount involved does not exceed $100
> for civil cases,
> and when the punishment or fine does not exceed $100
> or three months'
> imprisonment in criminal cases."
> [END QUOTE]
> However, according to the same article:
> In this case, First National Bank of Montgomery vs.
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