| Subject: | Re: [socialcredit] True belief rather than facts | | Date: | Sunday, April 5, 2009 19:21:41 (-0700) | | From: | Ellen Brown <ellenhbrown @.....com>
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| In reply to: | Message 6543 (written by John Hermann) |
That's not the debt virus I see; it's the fact that banks ALWAYS take back more than they put out. Lend 100, take back 105, lend 105, take back 112 or whatever. It's the miracle of compound interest: in 40 years at 6%, $10 becomes $100. I know the goldbug argument: the banks use their profits to employ the borrowers. Ed Griffin says the bank hires the borrower to scrub its floors. Fine, a tiny portion maybe; but most of their profits are plowed back into yet MORE loans at yet MORE compound interest; into buying up other banks or the commodities of the world; indebting the Third World, etc. etc. The Philippines now pays 80% of their revenues to service their foreign debts. Which banks employ enough Filipinos scrubbing their floors to return this money to the country each year? Ellen
On Sun, Apr 5, 2009 at 6:04 PM, John Hermann <hermann@picknowl.com.au> wrote:
There is a small element of truth in the debt-virus
hypothesis, to the extent that around 3 percent of bank interest income
(on average) is retained by banks and other depositories as
"retained earnings". This small fraction represents money that
has been permanently withdrawn from the money supply (and is actually
invested within the financial system itself). However I don't think
debt-virus believers should take much comfort from this fact. Because it
is clear that, had the debt virus explanation been even half correct,
debt growth would have occurred on a scale considerably larger than we
have experienced thus far, i.e., the financial meltdown we are currently
experiencing would have occurred long ago. John
Hermann.
At 12:07 AM 6/04/2009, Brock Moore
wrote:
Attached is a short audio clip
that may be played in Windows Media Player, RealPlayer and similar
programs from Ellen Brown's interview dated April 2. Fair use is claimed.
The full interview may be found on her website at
http://www.webofdebt.com/media/talkradiop1040209.php
In the clip, Ms. Brown repeats two assertions that have become articles
of faith in "right wing" and "monetary reformist"
circles, elements of true belief rather than facts. These assertions are
that the Federal Reserve is "privately owned" and that when
banks lend they create the principal but not the money to pay the
interest. This second assertion has been termed the "debt
virus" hypothesis, after the book by the same name.
As to the first assertion, I refer you to an essay by G. Thomas Woodward
of the Congressional Research Service Library of Congress, which is
archived at
http://www.geocities.com/new_economics/woodward-money_and_the_federal_reserve_system.txt
Mr. Woodward states that the Federal Reserve Board is a federal agency.
Its Chairman and governors are appointed by the President of the United
States subject to confirmation by the United States Senate. Its employees
are government employees.
The twelve regional Federal Reserve Banks have aspects of being private
corporations. But they are not "private" in the ordinary sense
of the word. They have "stock" that is held by the member banks
as a condition of membership in the Federal Reserve regional bank. The
stock may not be sold but must be returned when a bank leaves the system.
The stock does not pay a dividend based on the regional bank's profits
but conveys a fixed six percent dividend on invested capital, which is
determined by the size of each bank. Each regional bank has nine
directors. Six of them are elected by the member banks, with each bank
getting one vote, regardless of the amount of stock it might hold. Three
of the directors are appointed by the Federal Reserve Board. The Chairman
and Vice Chairman of each regional bank is appointed by the Federal
Reserve Board, which is a government agency.
The second "debt virus" assertion has been addressed previously
on this list. Banks in fact not only create money when they extend loans,
but also when they spend for any purpose whatsoever. Banks spend for
ordinary business expenses and salaries and wages. They also spend when
they pay dividends to their stockholders. When they spend they do exactly
what they do when they extend loans, they credit transaction accounts
throughout the economy. That money becomes available to pay interest back
to the banks.
This fallacy deflects attention from the analytically correct explanation
for the shortage of purchasing power: the A + B theorem. Worse still, the
fallacy suggest a dangerous "solution," the abolition of
interest. It is dangerous because to the extent it is implemented, trade
and commerce is impeded. The theorem, of course, suggests what are in
effect macroeconomic accounting adjustments in the form of the National
Dividend and Retail Discount. These adjustments would allow the economy
to attain its full productive potential to the extent there is real
demand.
Brock Moore
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Re: [socialcredit]
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