|
Dear Bill,
1. I invited Stephen Zarlenga,
Richard Cook and other members of this list (which includes you) to say
where they stand on national bank interest-free issuance and debt-free
issuance. I am continuing this correspondence on the assumption that you
will soon be availing yourself of the opportunity to do so. My own
position is made clear at
2. Regarding your comments on interest, you are not
taking into account that loan money issued by a commercial bank and that
issued by a national bank are two very different things. For a start the
purposes are different (e.g.,.a commercial bank
indulges in sub-prime and derivative lending with consequences which
may yet lead to a collapse of the global financial system).
Secondly, a commercial bank is completely
heedless of the need to develop and spread the ownership of productive (and the
associated purchasing) capacity so as to achieve a Say's Theorem balance
of producers and consumers and the forwarding of efficiency and social and
economic justice.
Public capital
Furthermore, you are not taking into account other
important matters if, for example, the loan money is
created by the national bank for public capital.
i) the
national bank's administration cost is negligible and virtually all of the rest
of the administration is done by the governmental body
(state, city, local). Thus your point on administration cost is
largely irrelevant.
ii) Default premium and security are
not involved -- the effective collateral is the ability of government
to tax.
iii) Profit is not involved.
iv) Since the cost is halved, more projects
can be built or the existing amount built at half the cost.
The mechanism has
been used very successfully in New Zealand, Australia and Canada in the
past.
Micro-credit
With micro-credit (on Grameen and IIRD lines)
a) the collateral is not
conventional but exists in practice -- the named organisations get 98%+
repayment. The 98% repayment happens
even though the interest rate is (very roughly) 34%.
b) unlike with conventional lending the purpose is
to develop and spread productive (and the associated purchasing)
capacity.
c) profit in the usual sense is
not involved because profit stays within the organisation -- and there is no
intent to batten onto the poor.
I have discussed the subject with twenty five
officers of IIRD and they said that, roughly, they charge around 34% on
loans (there is a big training and administration cost) but, with
interest-free loan money from the national bank, they could get that down
to around 17%. They had one request to me -- to ask that the Bangladesh
national bank issue interest-free loans to IIRD.
A few months ago I also raised the subject with Dr
Yunus of the Grameen Bank (which is not a conventional bank). Yunus
long ago discussed the subject with Norman Macrae of The Times (London)
and they both agreed the interest-free supply (although Yunus
has in effect given up on getting anywhere with the subject and he has now
settled for the present Grameen situation which is not using interest-bearing
money in the usual sense because, although interest is charged, the repaid
interest does NOT go to outsiders but, instead, forms the new capital to
lend to new borrowers. This is a vital point because interest generally
acts as a mechanism to transfer wealth from poor to rich for 80% of the
population, evens for 10% and very profitable for the last 10% (Magrit Kennedy).
Spreading
ownership in private sector
In the case of loans for the spreading of
ownership in the private sector, the collateral may already exist but if it does
not, the binary proposal is for capital credit insurance. The usual
estimate for reasonable bank expenses and profit is two to three per
cent. Please read Binary economics.-- the new
paradigm.
3. You are invited to google the
subject of the financing of the UK Humber Bridge and then state if you do, or do
not, approve of many millions of pounds going to the financiers for doing
damn-all.
Rodney Shakespeare.
----- Original Message -----
Sent: Friday, September 05, 2008 10:11
PM
Subject: Re: [socialcredit] Richard C. Cook:
Monetary Crank
"It would be helpful if, for once, Stephen Zarlenga and Richard Cook
(and, yes please, other members of this list) state specifically whether they
do, or do not, agree with national bank-issued interest-free loans (administered
by the banking system which may make an administration
charge)..."
-----------------------------------------------------------
------------------------------------------------------------
I
am unclear what you mean by "administration charge," you've never really defined
it that I have seen, but presumably, it is charged to the borrower.
At present there are three components of interest collected from the
borrower: 1. The default premium that contributes to what is in effect an
insurance fund to cover defaulted loans. This premium is rated by credit
risk category, so that poorer risk borrowers pay more than better risk
borrowers. Security pledged against loans is also a factor, which is why
secured loans like mortgages have substantially lower interest rates than
unsecured credit like credit cards. But across all loans the default
premium is the largest component of interest collected; 2. The component
that covers ordinary banking business expenses, including salaries and
wages. This is the second largest component of interest collected;
and 3. An amount to cover the banks' profit. This is the smallest
component of interest collected.
I suppose that what you call
"administrative expense' is equivalent to category 2 above which you will
continue to charge to the borrower, so in this regard he will pay what he pays
today.
You leave open who will pay the banks' profit, but we will assume
for the moment that it is paid by the central bank as a fee to the private banks
for initiating and administering the loans.
That leaves the default risk
which does not go away in your proposed system. In the present system it
is paid for in the form of a premium included in the borrower's interest
payments rated by his personal credit risk, and whether or he he has pledged
security.
You have not stated who will pay for this in your proposed
system.
In the system of private enterprise generally the direct
beneficiaries of goods and services pay for them rather than the more general
community.
If the risk is absorbed by the central bank, then poor credit
risk borrowers will pay exactly the same as good credit risk
borrowers.
This doesn't seem fair, does it? And would not this
distort the relationship between supply and demand for financial
services?
--- On Fri, 9/5/08, Rodney Shakespeare
<rodney.shakespeare1@btopenworld.com> wrote:
> From: Rodney Shakespeare <rodney.shakespeare1@btopenworld.com>
> Subject: Re: [socialcredit] Richard C. Cook: Monetary
Crank
> To: socialcredit@elistas.com
> Date: Friday, September 5, 2008, 10:42 AM
> Dear Alan,
>
> The situation is a complete dog's breakfast.
>
>
1. a) It would be helpful if, for
once, Stephen
> Zarlenga and Richard
> Cooke (and, yes please,
other members of this list) state
> specifically
> whether they do,
or do not, agree with national bank-issued
> interest-free
> loans
(administered by the banking system which may make an
> administration
> charge) for:--
> a.. public capital projects --
bridges, sewage works,
> hospitals
> b..
environmental capital projects (including clean
> electricity
>
generation)
> c.. micro-credit
> d.. student
loans
> e.. medium and large businesses (IF thereby
wider
> ownership is furthered
> and productive capacity
spread)
> f.. small business/farms
> g..
homes (when banking system not able to create money
> and, say, 80%
> loans
> NB All such loans are repayable and cancellable.
The
> issuance is for the
> purposes of developing and spreading
productive (and the
> associated
> purchasing) capacity so as to
achieve a Say's Theorem
> balance of supply and
> demand and also
forwarding social and economic justice.
>
> b)
They might then like to state specifically if they
> agree with
>
debt-free issuance, (roughly) to what amounts, for what
> purposes and in
what
> circumstances (e.g. restriction of banking system ability
>
to create money).
>
> c) They might then further
wish to say specifically
> whether the AMI
> Monetary Act does, or
does not, contain a National Dividend
> (defined as a
> reasonable
basic income). Bill Ryan is right -- it
> doesn't.
>
>
It is about time that both Stephen and Richard clearly said
> where they
stand
> and did not hide behind general phrases like "we must
>
spend and lend" which
> phrases have no meaning until given specificity
and, in
> any case, allow
> enemies of monetary reform to
claim that large-scale
> inflationary funny
> money is being
proposed.
>
> I would like to add that I greatly admire
Richard's
> spirited analyses of the
> overall situation and his
understanding of the corrosive
> effects of interest
> but, being
opposed to interest, should result in
> understanding of
>
interest-free loans yet, in his case, this does not appear
> to be
the case
> (I could be wrong).
>
> 2. Bill can quote
Calvin to his heart's content but
> the real issue is
> whether
interest is necessary when the issuance is for the
> purposes of
>
developing and spreading productive (and the associated
> purchasing)
capacity
> so as to achieve a Say's Theorem balance of supply and
>
demand and also
> forwarding social and economic justice. In
these
> circumstances, interest is
> not necessary because the
money comes from the national
> bank (and is
> administered by the
banking system which may make an
> administration charge).
>
> There is no objection to Bill and his colleagues (and the
>
banks) lending
> their own money and charging interest -- they have
the
> money and if you want
> it you will have to pay their
demand. BUT that is a
> completely different
> matter from
the supply emanating from the national bank for
> the
>
above-mentioned purposes.
>
> Rodney Shakespeare.
>
> ----- Original Message -----
> From:
Adavans@aol.com
>
To: socialcredit@elistas.com
> Sent: Wednesday, September 03, 2008 3:46
PM
> Subject: Re: [socialcredit] Richard C. Cook:
Monetary
> Crank
>
>
> I ran across
Zarlenga a number of months ago and was
> impressed with his vehement
rejection of Social Credit
> principles. My guess is that Richard Cook's
involvement
> with Zarlenga is kind of an uneasy dance that
involves
> compromise and reduction of principles to almost the
least
> common denominator.
>
> With that
in mind I can see why Richard Cook might
> promote something that isn't
100 percent what he wants
> but comes the closest to addressing the issues
he is
> concerned with, even if he is only getting 50 percent of
>
what he really wants as an advocate of Social Credit.
>
> Regards
> Alan
>
> In a message dated 9/3/2008 9:31:23 A.M. Central
Daylight
> Time, johngrawson@hotmail.com
writes:
> You appear to have missed a lot of
Richard's
> material.
> His policies are
identical with Douglas, including the
> "price discount" which I consider
unworkable, but
> with two exceptions: One the immediate cash payment
to
> consumers. We could not do that here, but I think perhaps
>
your economy is so strong and so depressed that it might be
> practicable
and perhaps necesary. The other is use of the
> nation's credit for
infrastructure. I believe that the
> debt structure has grown so much
since Douglas' time
> that this is absolutely necessary. It certainly
worked here
> when our first NZ Labour govt. was applying monetary
reform
> principles.
> I believe it is no
accident that deep thought over the
> years here by our movement
coincides almost exactly with
> that of a man of Cook's
stature.
> He appears to have a more complete
grasp of the
> situation than Zarlenga.
>
Your term "crank" is very familiar here. It
> has invariably come
from orthodox opponents who dared not
> counter us with
reason.
> John R.
>
>
> > Date: Tue, 2 Sep 2008 08:42:12
-0700
> > From: william_b_ryan@yahoo.com
> > To: socialcredit@elistas.com
> > CC: rickycook21@hotmail.com; ami@taconic.net
> > Subject: [socialcredit] Richard C.
Cook: Monetary
> Crank
> >
> > 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 citizens’ 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:
> >
> > “Loans 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.”
> >
>
> 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.
> >
>
> As to the religious argument, I have as the
> authority John Calvin's
letter of 1545, as related by
> Norman Jones of Utah State University,
that two quite
> different words in the Semitic languages were
>
inappropriately translated as "usury" into the
> European
languages.
> >
> http://www.geocities.com/new_economics/Calvin-usury.txt
> >
> > This is supported in modern
Islam.
> >
> http://www.geocities.com/new_economics/Quran-usury.txt
> >
>
-------------------------------------------------------------
>
>
> >
FAIR_USE_CLAIMED
> >
> > Democrats in Denver Should Skip One of
Their
> Parties & Read the American Monetary
Act
> >
> >
by Richard C. Cook
> > Aug. 27,
2008
> >
> >
How are things going at the Democratic Party
> National Convention in
Denver this week?
> >
> > Are they talking about the fact that the
Western
> world is run by an international financial elite
>
headquartered in London, the financial capitals of mainland
> Europe (such
as Frankfurt, Hamburg, Amsterdam, Paris, and
> Milan), and, of course, New
York City?
> >
>
> Are they mentioning at their cocktail parties that
> the financial
elite exert control over the world’s
> population through the cartels that
make up the world’s
> producing economies and through the civilian and
military
> bureaucracies who work for the governments that kow-tow
to
> them?
> >
> > Of course they know that the most
important
> cartels are those which control energy resources. And
that
> of these, the commodity of central importance is oil. But
is
> any of this helping them draw conclusions regarding the
>
doubling of oil prices during the last year or about the
> largest oil
company profits in history?
> >
> > Also, they should be drawing the right
conclusions
> from the fact that every private and pubic
enterprise
> operates on the basis of a money economy, though it would
be
> more accurate to call it a credit economy. This means that
>
whoever controls the issuance of money and credit controls
> the world.
And the world’s monetary systems function on
> the basis of money and
credit being introduced into
> circulation through loans from the banking
system, loans for
> which interest is charged. So what should that tell
them?
> >
> >
In fact, they should be pointing out to each other
> and their TV viewers
that the charging of interest for the
> use of money is a chain around the
neck of everyone on
> earth. Further, that these cumulative interest
charges are
> built into the price of every product that is
manufactured
> or consumed. And that growth of debt means price
increases
> too.
> >
> > They should be honest in making it clear
that the
> world is a master-slave society, that the slaves are
those
> who borrow and pay interest, that the masters are those
who
> collect the interest, and that this unjust system has
>
existed in one form or another for thousands of
years.
> >
>
> The candidates and delegates are talking about the
> aspirations of
the American people and how everyone should
> have an opportunity to
achieve their dreams. But if the
> United States were a free nation, they
would also be talking
> about a financial system that destroys people’s
dreams.
> >
>
> Unfortunately, the highest rung the candidates and
> delegates have
been able to reach on the ladder of
> modern-day slavery is the need for
more jobs—but they fail
> to note that jobs are not only the means by
which people
> live, but also the instruments for them to pay the
heavy
> burden of interest the masters of finance
require.
> >
>
> What they won’t say is that the world economy is
> based on usury,
something religions used to consider a crime
> (and which Islam still
does). Usury is the charging of
> interest for the use of money. As the
religions backed off
> from their prohibitions of interest, usury became
just
> excess interest. But that’s not what the word really
>
means.
> >
>
> So what have over two centuries of usury done to
> the United
States?
> >
>
> The best answer ever given to that question was
> contained in a
paper entitled “Revisiting U.S. Public and
> Private Debt” published in
January 2005 by Dr. Bob Blain,
> Emeritus Professor of Sociology at
Southern Illinois
> University. The paper updated an earlier study by Dr.
Blain
> published for the United Nations Educational, Scientific,
>
and Cultural Organization (UNESCO) in the International
> Social Science
Journal, November, 1987, Paris, pages
>
577-591.
> >
>
> In his paper, Dr. Blain examined the growth of
> total public and
private debt in the U.S. Total debt
> includes “the debts of governments
(federal, state, and
> local), corporations, farmers, home mortgages, and
consumer,
> commercial, and financial
debts.”
> >
>
> In his analysis, Dr. Blain began with data from
> the Bureau of
Economic Analyses of the United States
> Department of Commerce which
covered the years 1916-1976.
> After that year the Bureau stopped
publishing the data.
> >
> > The figures showed that from 1916-1976,
total U.S.
> debt grew from $82 billion to $3,800 billion ($3.8
>
trillion). But most of that growth was during the last 21
> years, from
1955-1976, when it began to grow exponentially.
> Dr. Blain wrote, “The
consistency of the pattern suggests
> that some imperative is at work,
something that requires
> debt to
increase.”
> >
>
> Dr. Blain found the answer by researching American
> history. He
wrote: “Then I read G.R. Taylor’s 1950 book,
> Hamilton and the National
Debt, which described the debate
> over Alexander Hamilton’s plan to fund
the new economy
> with borrowed money.” He
continued:
> >
>
> “The most revealing account was a speech by the
> first congressman
from Georgia, James Jackson, on February
> 9, 1790, in which he predicted
that adoption of Hamilton’s
> funding plan would lead to the explosive
growth of debt.
> Jackson said, ‘Though our present debt be but a
few
> millions, in the course of a single century it may be
>
multiplied to an extent we dare not think of.’” (Annals
> of Congress,
Vol. I, February 1790, pp. 1141-2)
> >
> > From the very beginning, the U.S. had a
monetary
> system based on borrowing and debt. First came the
thousands
> of state chartered banks that began operating late in
the
> Revolutionary War period and continued in one form or
>
another until today. Then there were the two early central
> banks: the
First Bank of the United States (1791-1811) and
> the Second Bank of the
United States (1816-1836). Today’s
> national banking system began during
the Civil War with the
> National Banking Acts of 1863-64. Then there is
the system
> we are living under today, the Federal Reserve, chartered
by
> Congress in 1913. Even during the times when the government
>
has sold its debt directly to the public, as with war bonds,
> savings
bonds, and Treasury notes and bills, that too has
> been money borrowed at
interest.
> >
>
> Although there have been times in history when
> money entered into
circulation other than through debt, such
> as with coinage and the Civil
War greenbacks, those were
> exceptions and today are of little
importance.
> >
> > Dr. Blain estimated that from the time
Alexander
> Hamilton placed the U.S. under a debt-based monetary
system
> until today, the debt has compounded at 5.8 percent
>
annually. The big problem with this system, he said, was
> “that no money
was created to pay interest.” He
>
continued:
> >
>
> “Loans 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.”
>
>
> > Dr. Blain concluded, “As long as the
money
> supply of a nation is created as debt costing interest,
debt
> must grow by compound interest.” From a longer-range view,
>
it’s a system that is constantly collapsing and that must
> constantly be
bailed out.
> >
> > Dr. Blain next sought to update his
figures past
> the 1976 data from the Bureau of Economic Analyses.
Turning
> to the Federal Reserve’s series on “Total Credit Market
>
Debt Outstanding,” he found remarkably similar
indicators.
> >
> > He found that adding data from the Federal
Reserve
> from 1945 to 2003 showed the “debt explosion”
>
continuing. In 1945 total debt was $463.4 billion. In 2003
> it was
$44,967.7 billion ($45.0 trillion). When he projected
> the debt level for
2010, he arrived at a figure of $74.9
> trillion. By this time the debt
curve was climbing so
> steeply there would be almost a doubling of the
amount of
> total debt in only nine years.
>
>
> > It might be argued that these figures
do not take
> into account inflation. This is because lending at
interest
> is the cause of inflation. The dollars still have to be
>
repaid with interest. The problem occurs when economic
> growth, measured
by GDP, does not keep up.
> >
> > Looking at the growth of GDP from 1945 to
2003,
> the increase was from $223.1 billion to $10,987.9 billion,
a
> factor of 49. But the debt ($463.4 billion vs. $44,967.7
>
billion) grew by a factor of 97, almost twice the rate of
> GDP growth.
Thus the total debt burden on the economy has
> doubled from a ratio of
2:1 to more than 4:1 (though it was
> much less than that during the early
days of the nation).
> >
> > But with continued compound growth of debt
and a
> slow- or no-growth state of the economy as we head into a
>
recession, we are starting to see what Dr. Blain called an
> “acceleration
to meltdown.” He wrote:
> >
> > “We are buying more and more in the same
amount
> of time. Witness the efforts of people to get rid of
their
> excess through yard sales, storage units, and big trash
>
pickup days, and the massive size of what are
> euphemistically called
landfills. While two billion people
> in the world lack basics such as
clean water, food, and
> shelter, Americans throw away their microwave
ovens,
> televisions, computers, refrigerators, furniture, and
cars.
> Meanwhile, acceleration is applauded as increasing
>
productivity. It’s like arguing that cancer is good
> because it
grows.”
> >
>
> These are the things the Democrats in Denver
> should be talking
about, instead of going to so many
> parties. They should be making note
that the U.S., to quote
> economists close to the Federal Reserve, is
“functionally
> bankrupt.”
> >
> > In fact, the debt this nation owes to the
banks,
> to foreign creditors, and to each other can never be paid
>
off. Further, one big reason for all of our fruitless
> military endeavors
overseas may simply be to escape
> unpleasant economic realities at home.
But this is
> pointless. Nothing creates more debt than war, as
the
> bankers have always known.
> >
> > The only solution is to adopt a monetary
system
> that is not based on debt. Dr. Blain makes a couple of
>
specific recommendations: 1) “Stop using percentage rates
> to calculate
charges for the use of money”; and 2)
> “Congress must supply the economy
with a money base that
> is debt-free and
interest-free.”
> >
> > The second point is a call for a new
monetary
> system, not one based solely on lending by the banks or
on
> government borrowing. One organization that has developed a
>
blueprint for such a system is the American Monetary
> Institute (AMI),
headquartered in Chicago. The director of
> the AMI is Stephen Zarlenga,
author of a massive,
> groundbreaking work: The Lost Science of Money
(AMI, 2002).
> Zarlenga’s assistant is Jamie Walton, a monetary
reformer
> from New Zealand.
> >
> > AMI will be holding its fourth annual
conference
> in Chicago on September 25-28. Expected as keynote
speaker
> is Congressman Dennis Kucinich, whose wife Elizabeth
once
> worked as an intern at AMI. Dr. Bob Blain will be a
featured
> speaker.
> >
> > On the AMI website at www.monetary.org is a
>
remarkable document, the American Monetary Act [.pdf] The
> product of
several years of work by Zarlenga and his
> network, which now includes a
number of local chapters
> around the country, the American Monetary Act
would replace
> today’s debt-based monetary system with one where
the
> government spends or loans money directly into
circulation.
> >
> > Under the Act, the Federal Reserve would
be
> retained as a national financial clearinghouse but would no
>
longer be a bank of issue. The system would be overseen by a
> Monetary
Control Board within the U.S. Treasury Department.
> The Act also includes
a provision for a citizens’
> 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.
> >
>
> Also promoting a citizens’ dividend, by the way,
> is Stephen
Shafarman in his important new book, Peaceful,
> Positive Revolution.
(Tendril Press, 2008)
> >
> > It’s the American Monetary Act the
candidates
> and delegates in Denver should skip one of their parties
to
> read, because it’s the only way any of their hopes for
>
America can ever be realized. Says AMI’s Jamie
Walton:
> >
>
> “This is a crucial time. Things are happening.
> We have got some key
media people talking and writing about
> our kind of reforms. The inertia
is starting to yield.
> Things are starting to roll. The worsening
conditions in
> 2009 will give us a once-in-a-lifetime chance to be
heard
> above the
propaganda.”
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