| Subject: | Re: [socialcredit] Richard C. Cook: Monetary Crank | | Date: | Thursday, September 4, 2008 17:48:10 (+0930) | | From: | John Hermann <hermann @............au>
|
| In reply to: | Message 5504 (written by william_b_ryan) |
William Ryan is correct in saying that bank
interest income is spent back into the economy.
And I agree that Bob Blain's argument is
completely wrong. However it also should be
recognized that around one to two percent of that
income is retained by banks as "retained
earnings". That retained fraction of income,
although small, is significant because it
represents an increase in bank capital. And the 8
percent capital adequacy requirement (which
translates as bank capital supporting up to 12.5
times its magnitude in risk-weighted assets)
allows banks to create new loan assets of
magnitude up to 25 percent of their overall
income, if we assume that two percent of bank
interest income is held back from the economy at large.
John Hermann
At 01:12 AM 3/09/2008, you wrote:
>Appended below is Richard Cook's recent Internet
>posting. It is a great disappointment to me in
>many respects. Gone is even the pretense of
>Social Credit theory. It is heavily influenced
>by Stephen Zarlenga, a Georgist who argues that Henry George was a Greenbacker!
>
>The A + B theorem is replaced by the fallacious
>"debt virus" theory that we have discussed
>previously. The "usury" argument is an Islamic
>fundamentalist slam against modern informed
>Christianity, which we have also discussed
>previously, so I'll just briefly outline the arguments now.
>
>In Zarlenga's "American Monetary Act" is a
>provision for a so-called "citizens'
>dividend." Says Cook: "The Act also includes a
>provision for a citizensâ dividend, similar in
>some respects to the Alaska Permanent Fund,
>which would inject desperately needed purchasing
>power into the economy without additional government debt or taxation."
>
>Lest anyone think that this "citizens' dividend"
>is similar to the Social Credit proposal for a
>dividend, read this from the act itself, as posted on Zarlenga's website:
>
>"SEC. 506 INITIAL MONETARY DIVIDEND TO CITIZENS
>Not later than 90 days from the effective date
>of this section, the Secretary, in cooperation
>with the Monetary Authority shall provide
>recommendations to Congress for payment of a
>Citizens Dividend as a tax-free grant to all
>U.S. citizens residing in the U.S. in order to
>provide liquidity to the banking system at the
>commencement of this act, before governmental
>infrastructure expenditures have had a chance to work into circulation."
>
>Please note that in Zarlenga's plan the dividend
>is not continuing, as in Social Credit, but paid
>only once at the beginning of the plan's
>implementation "before governmental
>infrastructure expenditures have had a chance to work into circulation."
>
>As to the "debt virus" argument, Cook quotes Bob Blain:
>
>âLoans created only the principal. Interest
>had to be paid out of principal. So payment of
>interest reduced the money supply and slowed
>economic activity. Recovery could come only when
>new loans were taken out at least equal to interest paid.â
>
>The second sentence is simply a false statement
>of fact. Banks create customer deposits not
>only through the principal of loans, but when
>they spend, through reciprocal economic
>activity, salaries, wages, dividends and
>ordinary business expenses into the community,
>which become available to pay interest back to the banks.
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