| Subject: | [socialcredit] Re: the goldsmith "fraud" story | | Date: | Monday, June 16, 2008 21:46:07 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
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"Whether or not there are benefits to society from credit creation is a totally
separate issue and should not be confused with the issue of the legality or
propriety of credit creation as a system..."
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This is a rather bizarre statement. Whether or not there are benefits or
detriments to society as a whole should have everything to do with its legality.
If something is beneficial it certainly should not be made illegal or prohibited.
Propriety often has more to do with prejudice than rational science. The
medieval legislators who outlawed interest because it was "usury" were neither
good theologians or economists but prejudiced ignoramuses. They were incompetent
in both fields and retarded the progress of civilization by centuries.
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"...and whether it could be organized more efficiently for society than it
currently is."
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Please clarify something for me. From your comments it appears that you oppose
fractional reserve banking on fundamental principle and would favor something
like one hundred percent reserve banking to replace it. Is that correct?
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"It is like saying that the counterfeiter is not doing anything wrong, because
he counterfeited promissory notes and thus might just live up to his
promises...!"
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This is a false analogy if I've ever seen one. The counterfeiter is not making
promises but forging the promises of someone else.
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"Or do you not think Ponzi or MMM in Russia more recently (or any of the modern
Ponzi scheme operators) did anything wrong? After all, they merely engaged in
your favourite game of 'contracting' and making contractual promises..."
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Ponzi schemes pay investors not from profits from the ordinary business
activities that they claim to be engaged in, but from money collected from new
investors. It has been a settled principle of law for centuries that it is
illegal to pay dividends from paid-in capital. This is not contracting but fraud
per se. By contrast, the banker's promissory note represents his contractual
obligation to redeem it on demand, if and when that demand is made. He
ascertains actuarially when that will be, in a manner closely related to
insurance. Corporations are established to pool resources and share risks. Each
of them therefore has insurance and financial aspects, with insurance companies
being specialists in the insurance function and banks being specialists in the
financial function. Both insurance and finance operate on the basis of
fractional reserves.
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"Since banks are the social accountants of the economy and society assumes
proper accounting, these fictional deposits are treated as actual ones. No
matter what 'paper' is issued (nowadays of course none - it is instead the
banks' books which show the deposits - hence the irrelevance of the promissory
note distinction) fictional deposits are given the appearance of real deposits."
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The deposits are not fictional but actual liabilities of the banks.
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"...whether you call them 'receipts' or promissory notes or promises."
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It's not just what I call them; they are fundamentally different things.
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"What separates us from animals is free will and free choice, including between
right and wrong. And it is indeed such ethical judgements that are at stake
here."
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Well, "ethical judgment" shouldn't trump what science is telling us is actually
happening. When "ethical judgment" trumps fact we are engaging in a type of
idolatry, exhibiting a Taliban-like mentality in our sublime prejudice. Like
condemning Galileo when he expressed the Copernican view. By the way, I do
personally believe in the existence of free will and free choice, but they are
hypothetical constructs, which go to philosophical perspective. Impossible to
verify empirically. Contracting for future performance is observable behavior
that humans engage in, and is distinctly something that separates us from the
animals. It also has everything to do with economics.
Bill
-----------------original message------------------
Dear William,
Whether or not there are benefits to society from credit creation is a totally
separate issue and should not be confused with the issue of the legality or
propriety of credit creation as a system and whether it could be organized more
efficiently for society than it currently is. I see you sent this message to a
social credit list - if that's your interest, the case for social credit is
infinitely stronger if one follows my argument...
I don't really see your response to my points. You repeat your interpretation
that the deposit receipts were promissory notes. Even if that was always and
truly the case, it would not materially alter the argument. It is like saying
that the counterfeiter is not doing anything wrong, because he counterfeited
promissory notes and thus might just live up to his promises...! Or do you not
think Ponzi or MMM in Russia more recently (or any of the modern Ponzi scheme
operators) did anything wrong? After all, they merely engaged in your favourite
game of 'contracting' and making contractual promises...
Credit creation is about the process of how the deposits come about, as I
explained. When the loan is granted, the deposit account of the borrower is
'credited' - although no deposit has taken place. Since banks are the social
accountants of the economy and society assumes proper accounting, these fictional
deposits are treated as actual ones. No matter what 'paper' is issued (nowadays
of course none - it is instead the banks' books which show the deposits - hence
the irrelevance of the promissory note distinction) fictional deposits are given
the appearance of real deposits. I did not see your counter-argument to that.
The goldsmith fraud story is not mythical. There is widespread evidence,
including from parallel cases in other time periods and locations that do not
involve goldsmiths, but in all cases involve deposit takers who issue receipts -
whether you call them 'receipts' or promissory notes or promises. The earliest
example is the Babylonian banking system in the third millennium BC.
Regards, Richard
PS: What separates us from animals is free will and free choice, including
between right and wrong. And it is indeed such ethical judgements that are at
stake here.
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Re: the goldsmith 
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