| Subject: | Re: [socialcredit] the goldsmith "fraud" story | | Date: | Friday, June 13, 2008 18:47:36 (-0700) | | From: | keith wilde <kwilde @...............org>
|
| In reply to: | Message 5385 (written by william_b_ryan) |
I find Werner's comments obscure, but I wonder if I am getting the drift of your
quotations from Bisschop. Take the last one as the clearest illustration of my
inference: The officer of the Bank of England issued a promissory note to a bank
customer. This is the equivalent (or precedent) for today's practice of setting
up a deposit for a customer who applies for a bank loan. Instead of taking out
cash or writing a cheque, however, the 17th century customer paid for a
consignment of goods with the note of the banker, endorsing it to his supplier
who became the "bearer" and could then take the note to the Bank on maturity date
and claim cash or a credit. Is that what you were
thinking?
Keith
william_b_ryan@yahoo.com wrote: Replying to Joe
Thomson:
...it seems a lot of that 'propaganda' is still being
put out as if it were "matters of
fact."
----------------------------------------------------
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:-
---------------------------------------
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
-
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.
------------------------------------------------------
[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.
------------------------------------------------------
[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.'"
-
--- Richard Werner 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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