"If the banks SPENT all the money that they earnt back into the economy,
there would indeed be a balance between the amount of money flowing out (into
the bank's own coffers) and the amount flowing in, but they
don't."
-----------------------------------------------------------
----------------------------------------------------------
This
is an assertion. The argument against it is inferred by this question:
Why should the banks, in this regard, behave in a manner different than
ordinary firms? Ordinary firms, as a general matter, in terms of cash
flow, in a normally expanding economy, are always spending MORE than they are
receiving back through sales, yet are booking a profit. This is
accomplished through accommodation by the banks that allows the increasing
spending. This facilitates the lengthening and broadening to the
structure of production, what we call in our jargon, "labor
displacement." The quantity and variety of goods and services produced
are thereby increased in terms of unit input. See the diagrams
at
http://www.geocities.com/socredus/compendium/flux_reflux2.gif
and
http://www.geocities.com/socredus/compendium/accounting_profit.gif
In
the diagrams, the flux represents entrepreneurial spending or
investment. Each dollar of that spending is held statistically for a
finite period of time before it is re-spent by its recipient. With a
constant delay that spending in "reflux" is always less than the simultaneous
entrepreneurial spending. Firms will book a profit through the
conventions of accounting in that their spending is delayed in being
"expensed" such that today's spending is matched against future sales, which
are prospectively greater than today's spending.
In this sense profit
is not a tangible "thing" but is an "accounting fiction" that allows
entrepreneurs to judge how effective their efforts are in supplying the needs
of consumers in competitive markets. It is an algorithm through which
the entrepreneur compares changes in investment to changes in sales, an
informational feedback mechanism from consumers that is always guiding the
course and direction of production into a more efficient direction.
Decentralized management is thereby accommodated as opposed to centralized or
bureaucratic "Soviet" style management, with the necessity for directives
coming down from above. The consumer directed market is by contrast
"economic democracy."
For banks, their analog to entrepreneurial
spending are the ordinary business expenses and the salaries, wages and
dividends they are paying into the community, which become available to pay
interest back to the banks. It is reciprocal economic activity.
There is always more than enough money held by the community from this
spending to pay interest back to the banks.
-
"Nobody ever got rich
by spending money. One gets rich by investing or LENDING money. So most of the
money that the banks, their shareholders and, doubtless, their senior
executives earn is LENT back into the economy. Thus creating even more debt on
the back of the same amount of
money."
-----------------------------------------------------------
----------------------------------------------------------
But
investment involves spending, don't forget. Banks create deposits both
when they spend or lend.
**The funds for the spending and lending do
not arise from the banks' retained profits; they derive from the banks'
ability to credit deposit accounts "out of thin air," by the stroke of a pen
or its electronic equivalent, which are used for customer transactions.**
For individual banks and to individual bankers it may seem that loans
and spending flow from deposits or retained earnings, but it is an
illusion. The fact is that individual banks must themselves keep reserve
deposits at the clearing bank, so that when the funds from loans they have
extended or bills they have paid are transferred to other banks in trade and
commerce, the transferred amounts will clear. So individual banks must
always attempt to attract deposits from other banks to cover these
transfers. This requires a great deal of coordination between the banks,
so that transfers from any individual bank are balanced by transfers into that
bank. Only with perfect coordination would reserve deposits not be
required. With perfect coordination, the banking system has the
theoretical ability to expand credit without limit. Certainly it has the
ability to supply the financial needs of the community, when and where
required.
Because of this coordination, **modern banking is therefore a
natural monopoly that requires public oversight so that its monopoly power is
not abused.** The oversight must be appropriate.
In Social
Credit, the fallacious "debt virus" theory that interest is the root of all
evil, so favored by many "monetary reformers," who don't know better, is
replaced by the theoretically correct A + B theorem in its modern
rendition.
Brock
----- Original
Message -----
From: "Anne Belsey"
Subject: Re: Worldwide Money Creation Tsunami
Date: Sun,
30 Nov 2008 15:24:19 -0000
Dear
Brock,
If the banks SPENT
all the money that they earnt back into the economy, there would indeed be a
balance between the amount of money flowing out (into the bank's own coffers)
and the amount flowing in, but they don't.
Nobody ever got rich by spending money. One gets rich
by investing or LENDING money. So most of the money that the banks, their
shareholders and, doubtless, their senior executives earn is LENT back into
the economy. Thus creating even more debt on the back of the same amount of
money.
I trust this helps
to explain where the money goes,
Regards,
Anne
Belsey
(Leader of the UK Money Reform
Party)
----- Original Message -----
From: albert opstad
To: Brock
Moore
Cc: Opstad Albert (Canada)
; BryanD
Sent: Saturday,
November 29, 2008 5:47 PM
Subject: Re: Worldwide Money Creation
Tsunami
Thank you for the
email. How did you get involved in this discussion?; since you are not on my
email list. The global money creation elite is pocketing too much of the
"outflow". "Outflow" has to go into the pockets of the
people.
Albert
Opstad
On Nov 29, 2008 12:17
AM MST Brock Moore
wrote:
> But the banks
are collecting interest and spending money
reciprocally
> back into
the community in the form of defaulted principal on loans,
and
> ordinary business
expenses and salaries and wages to their employees,
and
> dividends to their
stockholders. If this is occurring, where is
the
> drain? It
would seem to balance, I should think. The outflows
would
> seem to balance
the inflows.
>
>
It is incumbent on you, being the proselytizer for non-standard
theory,
> to demonstrate
not only why there should be a drain, but in fact
that
> there is a drain,
as you
hypothesize.
>
>
That is the nature of science, to prove up your assertions through
logic
> and empirical
evidence. You just can't assert and get away with it.
You
> would universally
be regarded as a crank. I'm sure you've been
accused
> of that on
numerous
occasions.
>
>
Brock
>
>
>
-----------------original
message------------------
>
>
Re: Worldwide Money Creation
Tsunami
> Friday,
November 28, 2008 4:20
PM
> From: "albert
opstad"
<aopstad@telus.net>
>
To: "BryanD"
<formula@embarqmail.com>
>
>
It is interest on money as it is created that is a large drain on
any
> society.
Debt-money is a no large drain on any society, except for
the
> administration
costs, which are part of any money system. You get
100.00
> dollars of
debt-money and you pay back 100.00 dollars; so where is
the
> drain? With
interest-money you get 100.00 dollars and you pay back
100.00
> dollars plus
interest, so the drain is right
there.
>
>
AlbertO
>
> On Nov
28, 2008 1:19 PM MST BryanD
wrote:
>
>
>> Even with out
interest, debt-money is a large drain on any
society.
>>
>>
BryanD
Re: [socialcredit]
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