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Subject:[socialcredit] Re: [chdouglas] Re: I await your answers to my questions (was: Re: Public-spirited Banking (was: Re: The Abolition of Interest on Loans))
Date:Saturday, March 22, 2008  11:01:30 (-0700)
From:Peter Hogwood <p_t_hogwood @.....com>

Ardeshir, double entry accounting was not invented
before the twelfth century, before which it was
impossible to accurately calculate profit in economic
organizations.  The invention of double entry
accounting was a necessary though not sufficient
development that enabled the Industrial Revolution. 
Before the invention of double entry accounting the
world could support only a fraction of its present
population.  In your example you have arbitrarily
defined profit as twelve denarii minus ten denarii =
two denarii.  But we have no way of knowing if the
firm actually made a profit in terms of double entry
accounting on the transaction, which defines profit as
the operational change to net worth.  In double entry
accounting the two denarii would be the gross profit
on the sale, not the net profit when all expenses are
brought into the equation.  See the diagram at
http://www.geocities.com/socredus/compendium/accounting_profit.gif
Also, in a growing economy with a fixed quantity of
gold coins, each firm as a statistical matter (or
"average") would be always receiving back through
sales fewer gold coins than it is spending, an
impossible situation, inasmuch as each firm would
statistically be continuously booking a loss under any
conceivable system of accounting, even pre-double
entry.  Of course there would be new gold entering the
economy through mining etc., but it would tend to
always be insufficient because of physical limitations
in terms of accommodating increasing trade and
commerce.  There is no physical limitation to how much
bank credit could in principle enter the economy.
-

Now, to your constitutional argument.  The operative
term in the constitution is "coin."  The Federal
Reserve nor do the member banks coin money.  That
function is reserved by law to the United States Mint
and the U. S. Treasury Department.  The Federal
Reserve issues Federal Reserve Notes, not coins, which
are declared to be "legal tender" by congressional
legislation.  The member banks issue bank credit in
the form of deposits, which are redeemable on demand
for legal tender.  The fact of the matter is that most
transactions in the modern world are conducted through
the transfer of bank deposits, which we colloquially
call money.
-

Now to the ridiculous Credit River case, which you
continue to harp on, as if it had any legal
significance whatsoever, which it does not.

> [Reply] The court did indeed have jurisdiction over
the underlying matter brought by the bank. 

Where's your evidence for that?
---------------------------------

[Reply]:  Because the bank itself brought its action
in the justice court.  But note that in every
jurisdiction that I know of, the losing party in
justice court may demand an automatically granted
"trial de novo" in the higher "court of record," which
is what the bank did in this case, which found in
favor of the bank.  Appeals from trial courts of
record are not retried, but decided by the appellate
courts on points of law.  It was the points of law in
appeals from Daly and Mahoney in several such cases
that were ultimately nullified.
-

> I can create a limited form of money by tendering a
promissory note denominated in dollars. 

Sure, but how would such a promissory note be money?
It would be a promissory note, I submit, but could its
bearer use it as if it were real money? Could he, for
example, take it to any grocery store in town and buy
milk or a bag of chips with it? Could he pay his taxes
with it?

But with the bank's electronic money, he could take it
to any grocery store in town and buy milk or a bag of
chips with it, couldn't he - just as if he were to
take cash to the store in question?

Then how can you say that a promissory note issued by
you be the same as bank money (most of which is
electronic nowadays)? 

> It is limited in the sense that it is not as
generally recognizable as are bank deposits, and
therefore could not accommodate trade and commerce to
the same extent.

As I asked, it could not be used as money, could it -
namely, to buy goods in stores, to buy meals in
restaurants, to buy airline or train tickets, or to
pay taxes. Could it?
---------------------------------

[Reply]:  It has everything to do with general
acceptability.  My note would not be generally
recognized through the community.  A primary function
that banks perform is to exchange their generally
recognized and accepted notes in the form of deposits
for the individual notes of their borrowers, for which
they charge a fee called interest.  The basic model I
offered earlier is that firms in a growing economy
spend "tickets" into circulation with accommodation by
banks.  That is the salient feature of the modern free
market economy.

I must say, Ardeshir, that your crank rantings are
getting a bit tedious.

Peter Hogwood
Certified Public Account
Monroe, Louisiana


--- Ardeshir Mehta <ardeshir@mac.com> wrote:

> 
> On 21-Mar-08, at 11:40 AM, Peter Hogwood wrote:
> 
> >> But this reply of yours does not respond to what
> I had asked. I  
> >> had asked, in effect, why cannot profit be
> calculated in a non- 
> >> creditary system? I proved that it CAN be.
> >>
> >> You did not answer the question I had asked,
> while I demonstrated  
> >> that what you claimed - namely that profit cannot
> be calculated in  
> >> a non-creditary system - was false. Please answer
> the question I  
> >> had asked!
> >
> >
> > [Reply] No, you didn't prove that. You gave a
> single isolated  
> > example of where a chariot that cost ten denarii
> to produce was  
> > sold for twelve denarii. Isolated examples are
> always possible in  
> > exception to the general rule.
> 
> Does not a single counter-example suffices to
> disprove any general  
> statement, UNLESS the general statement has
> previously been qualified  
> by saying "There may be exceptions" ... in which
> case it is up to the  
> maker of the statement to specify what kinds of
> exceptions those  
> might be? Is this not simple logic and standard
> scientific method?  
> (You might want to study Popper, for example, in
> regards to this. I  
> could suggest for your edification Popper's essay
> entitled "The  
> Problem of Induction" found at
> <http://dieoff.org/page126.htm>;.)
> 
> In any case, it doesn't matter - your claim that
> profit cannot be  
> calculated in a non-creditary system stands
> disproved in all cases.  
> See below.
> 
> > Start with the assumption of a fixed number of
> gold coins that  
> > support the entire volume of trade and commerce.
> If the population  
> > is increasing and the number of firms and
> transactions are  
> > increasing, it has to be the case that, as a
> matter of statistics  
> > and averages, that each individual firm is always
> receiving back  
> > fewer gold coins than it is spending, that, again
> as a matter of  
> > statistics and averages, that each individual firm
> is booking  
> > continuously a loss by any conceivable system of
> accounting.
> >
> > You could imagine that there is a gold mining
> industry that is  
> > supplying gold coins to the community.  It spends
> gold coins for  
> > goods and services from the remainder of the
> community, and loans  
> > gold coins to non-mining firms so they can conduct
> their business.  
> > It follows that trade and commerce would be
> limited to the number  
> > of gold coins that the mining industry could
> supply, regardless of  
> > the real needs of trade and commerce in an
> otherwise growing  
> > economy.  The economy would be severely
> constrained by the  
> > limitations of finance.
> 
> I only put forward the notion of using gold as
> money, as one of many  
> counter-examples to your blanket statement that
> profit cannot be  
> calculated in a non-creditary system. Money could be
> in the form of  
> grain, for example, as it was in ancient Egypt. As
> much extra grain  
> as was needed to meet the demands of a growing
> economy - and note  
> that in ancient Egypt, the economy WAS growing,
> certainly from the  
> pre-pyramid days to the days of Cleopatra - could be
> grown to satisfy  
> the needs of trade and commerce.
> 
> Even with regards to gold, and even if it were fixed
> in supply while  
> the economy was growing, prices of goods and
> services would fall over  
> time, that's all. There would be gradual deflation -
> the opposite of  
> what's happening nowadays with the credit-based
> economy, in which we  
> have gradual inflation. If the deflation were
> gradual enough, people  
> would adjust, just as they are adjusting to gradual
> inflation. Why  
> ever not?
> 
> Note that in any sophisticated society, calculations
> of profit or  
> loss could be indexed to deflation no less than they
> can be to  
> inflation - and inflation is what is taking place
> today.
> 
> So could you please explain again why in a
> non-creditary system,  
> profits and losses could not be calculated?
> 
> >>>> So what? Where exactly does the fractional
> reserve system - or  
> >>>> anything like it - enter into your argument
> above?
> >>>
> >>> [Reply]: Because fractional reserve banking
> allows the flux of  
> >>> “tickets” from firms through their spending to
> increase with the  
> >>> expanding needs of trade and commerce.
> >>
> >> Sure it does, but the same thing can be done
> without fractional  
> >> reserve banking - by the government of a nation
> simply increasing  
> >> the nation's money supply commensurate with the
> expanding needs of  
> >> the nation's trade and commerce. Why should the
> BANKS, which are  
> >> often multi-national, and are NOT answerable to
> the citizens of  
> >> any nation, be allowed to increase the flux of
> these "tickets", as  
> >> you call them? Why should not only a government
> answerable to the  
> >> citizens be allowed to do that?
> >
> > [Reply] In our system all firms are, again
> statistically speaking,  
> > deficit spending in the normally growing economy,
> yet are booking a  
> > profit through the rules and conventions of double
> entry  
> > accounting, with accommodation by the banks. In
> your proposed  
> > alternative, only the government would be allowed
> to deficit spend,  
> > which was essentially the Soviet system. It was
> also a system where  
> > the calculation of profit was impossible, which
> directed production  
> > through elaborate Leontiefian-like input-output
> tables. Whereas  
> > ours is entrepreneurial driven, with informational
> feedback from  
> > final consumers through free markets.
> 
> I never mentioned deficit spending, did I? I said
> that the government  
> could, and indeed should, issue just enough money to
> meet the demands  
> of the economy: it should inject more money into
> circulation when the  
> economy grows and withdraw money from circulation
> when it declines.  
> (Thankfully, because of advances in technology that
> take place daily,  
> the latter is not likely to happen unless the
> government really  
> screws things up.)
> 
> In my proposed system - which is the only system
> permitted by the US  
> Constitution, you might note (see also below, where
> I expand upon  
> this claim) - the government could make sure that
> only enough money  
> were issued to meed the needs of expanding industry,
> trade and  
> commerce: neither more nor less. There would NOT be
> any inflation, as  
> there is today. The system I propose would be
> NOTHING like the Soviet  
> system, in which the means of production were also
> in the hands of  
> the government. Only the creation of money would be
> in 
=== message truncated ===



     
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