| Subject: | Re: [socialcredit] Richard C. Cook: Monetary Crank | | Date: | Saturday, September 6, 2008 11:04:45 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
It is difficult to follow your arguments, Rodney, because of your odd syntax and
meanings of familiar words that are different from the definitions found in
standard dictionaries. But I'll attempt some brief replies to a few of your
points.
From your link is this statement:
"The Alaska Permanent Fund takes the annual income from the Alaskan oil pipe
line and distributes it directly as income to each individual Alaskan citizen."
http://knol.google.com/k/rodney-shakespeare/binary-economics/i2b1ciidsw5u/2#
This is not correct. The income to the fund is not distributed directly to
Alaskans, but is invested. Some of the income from the investments is reinvested
and the remainder is distributed to Alaskans. The fund is described as permanent
because the income from the investments will continue indefinitely, while the
income that is used to purchase the investments in the first instance is from
depleting resources. And while some of the income may well be from the pipeline,
it includes other sources. You're fixated on the pipeline because of Mike
Gravel's proposal to purchase it that was rejected in referendum. From a history
of the fund:
"In 1976, the voters of Alaska passed a Constitutional amendment establishing
the Alaska Permanent Fund. The amendment required the dedication of 25 percent of
mineral bonuses, royalties and related income to a special fund to be put into
income-producing investments."
http://www.apfc.org/home/Content/reportspublications/tp5-2.cfm
-
Also from your link:
"Binary economics proposes that national bank-issued interest-free loans should
be administered by the banking system and that, while no interest would be
charged, there would be an administrative cost as well as capital credit
insurance if necessary."
I suppose you mean charged to the borrower. Why do you believe that
"administrative cost" plus "capital credit insurance" will be substantially
less that what the borrower pays today? The only thing absent from the three
components of interest, it seems to me, is the bankers' profit. Presumably that
is paid to the private bankers by the central bank in your proposal as a fee for
handling the loans. In which case it is effectively paid by all of us rather
than the direct beneficiaries of the loans.
-
Also from your link:
"This supply of interest-free loans for the spreading of productive capacity
(and the associated consuming capacity) as well as for environmental and public
capital would take place in circumstances of a gradual move to 100% banking
reserves so that the banking system would not be continually creating money (as
happens today) but would be confined to lending (with permission) depositors’
money and the bank’s own capital. New, efficient productive capacity will be
the backing of the currency."
Correct me if I'm wrong, but I don't believe that the requirement for 100%
reserves was promoted by Louis Kelso. Isn't it just something you've added to
the theory? And what makes you think that productive capacity does not now back
the currency? It does so in any conceivable system of money and credit.
-
Also from your link:
"Interest-free loans would allow low-cost public housing, hospitals, social
housing, roads, bridges, waterworks, schools etc. to be built for one half, one
third, even one quarter of the present cost."
The costs may well be greater than they are today because of inefficiencies
introduced into the system. The big difference is in who pays the costs. In
your proposal the direct beneficiary of the loans will not pay the totality of
the costs incurred in supplying those loans. The point is that interest
reimburses the costs of production of financial services, which do not go away in
your proposal.
-
Also from your link:
"Such loans have undoubtedly been used by the English Channel Island of Guernsey
over the years but exact information as to the present position is difficult to
obtain."
Actually the information is quite easily obtained. The banking system in
Guernsey is quite conventional and has always been so. You're too caught up in
the crank literature with its mythical Guernsey magic money story to know that.
From today's post:
"ii) Default premium and security are not involved -- the effective collateral
is the ability of government to tax."
Yes, of course, we all will pay the costs rather than the direct beneficiaries
of the "interest free" loans.
Also from today's post:
"iii) Profit is not involved."
I thought you said that the private banks would administer the loans. These are
profit making institutions. Their profit will have to come from somewhere. The
question is who will pay for it.
-
Also from today's post:
"iv) Since the cost is halved, more projects can be built or the existing
amount built at half the cost."
Not half the cost but half the interest charged to the borrower. Do you not see
the difference?
Also from today's post:
"The mechanism has been used very successfully in New Zealand, Australia and
Canada in the past."
What verifiable source do you have for this information?
-
Also from today's post:
"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."
Where do you come up with your "usual estimate" of two or three percent? The
actual fact is that banks' profit is the smallest of the three components of
interest. Expenses greatly exceed profits. And the cost of defaults exceed
expenses. And I can assure you that their totality greatly exceeds two or three
percent. But of course you didn't actually state two or three percent of what,
so you've got some wiggle room.
-
And in conclusion, also from today's post:
"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."
My understanding is the the bridge was financed by government loans and not
directly from "financiers," though presumably the loans contributed to the
government deficit. Much of the bridge debt has been written off by the UK
government.
The point is that there are real costs in supplying financial services that do
not go away in real terms if interest is waived. All that happens in your
proposal is that somebody other than the direct beneficiaries of the loans will
pay them. That may merely be through the simple deflation in value of the money
that they hold.
-
--- On Sat, 9/6/08, Rodney Shakespeare <rodney.shakespeare1@btopenworld.com>
wrote:
Re: [socialcredit] Richard C. Cook: Monetary Crank
Saturday, September 6, 2008 1:58 AM
From: "Rodney Shakespeare" <rodney.shakespeare1@btopenworld.com>
To: "Discussion Forum for Global Justice"
<Discussion@globaljusticemovement.net>, socialcredit@elistas.com
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
http://knol.google.com/k/rodney-shakespeare/binary-economics/i2b1ciidsw5u/2#
http://www.binaryeconomics.net/
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.
|
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