| Subject: | [socialcredit] the goldsmith "fraud" story | | Date: | Friday, June 13, 2008 12:29:24 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
Replying to Joe Thomson:
...it seems a lot of that 'propaganda' is still being put out as if it were
"matters of fact."
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We've already discussed the Guernsey "magic money" story, and the bogus
quotations attributed to Benjamin Franklin and Abraham Lincoln. I am currently
researching the goldsmith "fraud" story, which seems to also have arisen from
nineteenth century Greenbacker propaganda. The story is that the goldsmiths
began by issuing warehouse receipts for gold kept in their safekeeping, who then
began to issue fraudulent warehouse receipts for gold that they did not have. It
appears in actuality that their loans were promissory notes, promises to pay on
demand, which were contractual in nature and not warehouse receipts. That isn't
fraud no matter how you want to slice it.
This is a recent posting to another list on this subject:-
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For those who are interested, there's a twenty minute video of an interview with
Professor Werner on the Internet, broken into two parts, at Youtube and Google
Video:
http://youtube.com/results?search_query=Richard+Werner&search_type=
The 1841 Friedrich List book that he mentions in his email below (*The National
System of Political Economy*) can be found in English translation at http://www.econlib.org/library/YPDBooks/List/lstNPEtoc.html
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The double entry accounting was handled in the ancient banking systems in the
form of grammar: genitive for liabilities and dative for assets. I am quite sure
a footnote to chapter 12 mentions this. In my view, this is the key feature of
double-entry bookkeeping. The equity bit does not materially change this: just
think of a system where paid-in equity is very small (such as the old Japanese,
Korean, German systems etc) and you would still get all the benefits of double
entry accounting.
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[Reply] It is note number 10 to chapter 12. However, the term "double entry"
is not found anywhere in the book that I can see. As to the "equity bit,"
without it the one benefit you would definitely not have is the ability to
calculate profit and loss. Double entry accounting is the only known system for
calculating profit and loss with any degree of accuracy. I don't know of a
single accounting historian who dates this very important invention before the
twelfth or thirteenth centuries.
-
Double entry accounting was of course not in itself the marvelous invention, but
did its wonders only in connection with its use by fraudulent deposit taking
institutions that operated and used this system to 'cook the books' and issue
deposit receipts that were not actually based on any net new deposits.
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[Reply] Whether or not they were actually fraudulent would depend on how the
deposit receipts were worded, I should think. I think the fraudulent spin
derives from nineteenth century anti-bank Greenbacker propaganda, and is a
concoction. I have as my authority the book *The Rise of the London Money Market
1640-1826* by W. R. Bisschop, available for free download from http://2020ok.com/books/43/the-rise-of-the-london-money-market-1640-1826-10043.htm
It appears that the notes that were loaned were contracts and not "warehouse
receipts." They were promises to pay on demand.
From the first chapter of the book:
"Second amongst the goldsmiths’ notes rank their 'promissory notes.' It seems
very probable that the latter were the precursors of the banknote of a subsequent
period. Pepys’ entry in his diary on February 29, 1667–8 is one of the
earliest records in which reference is made to such promissory notes: 'Wrote to
my father and sent him Colvil’s note for £600 for my sister’s portion.'
"Among the Promissory Notes of Messrs. Child & Co. which are still in existence, is one of the year 1684, which runs as follows:
"'Nov. 28, 1684. I promise to pay unto the Rt. Honble. Ye Lord North and Grey or
bearer, ninety pounds at demand. For Mr. Francis Child and myself Jno. Rogers.'
"The oldest note of the Bank of England which has been preserved also contains
the words:
"'I promise to pay Mr. John Wright or Bearer on Demand the surnme of two hundred
Pounds. London the 23 day of Jan. 1699 200 pd.st. For the Govr. and Compy. of the
Bank of England Joseph.'"
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--- Richard Werner <werner@profitfund.com> wrote:
Hi William,
The double entry accounting was handled in the ancient banking systems in the
form of grammar: genitive for liabilities and dative for assets. I am quite sure
a footnote to chapter 12 mentions this. In my view, this is the key feature of
double-entry bookkeeping. The equity bit does not materially change this: just
think of a system where paid-in equity is very small (such as the old Japanese,
Korean, German systems etc) and you would still get all the benefits of double
entry accounting.
Double entry accounting was of course not in itself the marvelous invention, but
did its wonders only in connection with its use by fraudulent deposit taking
institutions that operated and used this system to 'cook the books' and issue
deposit receipts that were not actually based on any net new deposits. Now that's
the miracle that created modern capitalism - and it came about in Babylonia in
the 3rd millennium BC. Since then, as the author of proverbs said a few thousand
years ago, 'there is nothing new under the sun'. The Romans, for instance, had
efficient mass production. The degree of mechanization has gradually increased,
but mass production, mechanization and 'technology' has been around for several
thousand years. Ancient Rome had elevators, taxis with meters, etc. And this is
of course without saying anything about ancient Chinese technology.
Concerning free markets I misunderstood you then. With the most important
market, namely that for the creation and allocation of credit in the hands of
bureaucratic decision-makers - currently not supervised by appropriate
authorities - free markets are a pipedream.
Often we forget that mainstream economics has established that the conditions
required for free markets to be Pareto efficient, or efficient and competitive,
or to render government intervention inefficient, are so unrealistic that we can
be sure that they do not hold in this world.
This also applies to an even more fundamental fact concerning the functioning of
markets, namely the question whether they even clear. Again, economics has
established that the conditions required for mere market clearing (equilibrium)
are so unrealistic that we know they cannot ever exist. Hence all markets are
rationed. Talk of free and efficient markets is thus irrelevant for our world,
but it clearly is excellent propaganda that serves a useful purpose...
Just to keep the dialogue going: Here's another qualifier to the statement that
"Quite organized societies with large populations existed before [the Industrial
Revolution], but could not advance beyond peonage, slavery, and war." How far
removed from such a world are we even today? (sex slaves, the Iraq war, etc. come
to mind). Let alone at the time of the Industrial Revolution, when a
globe-spanning, commercially-operated British Empire dominated commerce, and
rigorously enforced the rules it invented for its own benefit through government
sanctioned troops? (Including earlier 'visits' to Iraq and the 'tribes with
flags'). No peonage, slavery and war? I recommend Friedrich List's analysis of
British economic development policy and the creation of suitable propaganda
(called classical economics), published in 1841.
Warm regards,
Richard
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