This argument misses the main point.
Although it is a little more complicated in the case of banks, they may be considered, like businesses, to reinvest funds that have already been charged once into costs of production.
This results in costs being charged in to production twice, but the purchasing power to buy them being paid out only once.
Businesses may not invest from savings to any extent now, but depreciation allowances charged into prices are the equivalent.
Regards.
John R.
From: brock_moore@accountant.com
To: socialcredit@elistas.com
Date: Fri, 5 Dec 2008 15:21:52 -0500
Subject: [socialcredit] Re: Worldwide Money Creation Tsunami
"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
--
Be Yourself @ mail.com! Choose From 200+ Email Addresses Get a Free Account at www.mail.com! ---------------------------------------------------------------------
Some introductory materials to the discussion topic of this list are at
http://www.geocities.com/socredus/compendium
You're subscribed to this list with the email johngrawson@hotmail.com
For more information, visit http://www.eListas.com/list/socialcredit
Book now AirNZ vs Pacific Blue & heaps more! |
RE: [socialcredit]
Reply to this message
