Thanks Graeme. I agree with your first paragraph, which means that bank interest charges have nothing to do with a deficiency of money in circulation. Except that I believe they do not pay out the total in costs, and may be seen to do the equivalent of reinvesting part of their profit.
And reinvestment produces new production (if applied to industry) and new costs, without increasing the money supply.
Regards.
John R.
From: telergy@bigpond.com
To: socialcredit@elistas.com
Date: Mon, 18 May 2009 19:52:19 +1000
Subject: Re: [socialcredit] Re: 100 percent reserve system
Hi John
you write
What portion of the interest etc. paid to banks do you see being "extinguished", and what proportion do you think goes to pay their working expenses and profits to shareholders?
I see no part of "interest" on loans being extinguished. The only new money numbers that lending banks create, are extinguished when the principal is paid down. That is all the creation/extinguishment they carry out.
The interest component (plus fees and charges) represents the margins for their business (a bank) to operate.
Debtors have to find these money numbers, additional to the amount they borrowed, out of the "slush fund" of money already existing in the economy, whether it be money numbers created by other loans, and/or physical money.
Reserve Banks/Mints create and extinguish physical currency, but that's a seperate issue.
The interest and other charges by banks, are a fee for their services, the same as any other business charges more than it costs. I can't see any money extinguishment, nor creation, in these fees.
BTW
For over 300 years, the "lore" or formula of Banks keeping capital, at least 6 or 7% relative to the amount of new loans they write, was seen to be best practice. As to why Greenspan chose to ignore this, and allow "easy money" is a quandary. Obama has recapitalised those banks, so time will tell, I guess.
As Ellen Brown wrote, the IMF forced Japanese Banks to recapitalise around 1990. Fat lot of good it did Japan tho'.
interesting times
Graeme Taylor
----- Original Message -----
Sent: Monday, May 18, 2009 1:38 PM
Subject: RE: [socialcredit] Re: 100 percent reserve system
Sorry Graeme. We were discussing extinguishing of money, not creation of it.
I'll try to be clearer:
What portion of the interest etc. paid to banks do you see being "extinguished", and what proportion do you think goes to pay their working expenses and profits to shareholders?
Regards.
John R.
From: telergy@bigpond.com
To: socialcredit@elistas.com
Date: Mon, 18 May 2009 08:28:09 +1000
Subject: Re: [socialcredit] Re: 100 percent reserve system
John R asks, in my comments about having enough money to repay interest
But Graeme, the underlying argument here is related to how much is being extinguished.
What mechanism are you basing your assumptions on?
I am basing this on banks writing new money "out of thin air" by contract, and the new money disappearing again, as the loan is paid down.
I can see that a steady economy, not necessarily a growth economy, can achieve that.
Graeme T
----- Original Message -----
Sent: Monday, May 18, 2009 6:42 AM
Subject: RE: [socialcredit] Re: 100 percent reserve system
But Graeme, the underlying argument here is related to how much is being extinguished.
What mechanism are you basing your assumptions on?
Regards.
John R.
From: telergy@bigpond.com
To: socialcredit@elistas.com
Date: Sun, 17 May 2009 20:34:19 +1000
Subject: Re: [socialcredit] Re: 100 percent reserve system
I'm just trying to pull together some cross boards and comments.
Payment of interest on loans is possible, so long as the amount of loans being created is equal to the amount being extinguished. Physical currency, for day to day operations of each bank is insufficient capital to hold. This is Greenspan's massive mistake. There needs to be a capital ratio, relative to loans written, for banks to properly serve their purpose (or supposed purpose) of keeping a tension (interest) on the new money supplied to the economy, additional to the amount of M1 (physical and capital backed money numbers) Or else we get easy money, being created for all this hyper priced derivatives and all those other fanciful financial instruments.
Lending banks just kept writing new money for the investment banksters.
What may be of interest to all, or some here, is a new article in Community Currency Research, from Brazil, where the new govt is looking to LETS type barter networks to pick up the slack in times of underemployment. As a tool of monetary policy, perhaps regulated by their Reserve Bank.
See here
click on bottom to a pdf file
Graeme Taylor
----- Original Message -----
Sent: Sunday, May 17, 2009 1:14 PM
Subject: Re: [socialcredit] Re: 100 percent reserve system
At 12:41 AM 16/05/2009, William Ryan wrote:
Perhaps you will tell us, John, what point you were trying to make by posting this essay by William Hummel. He is not a particularly deep thinker. He entitles his essay, "What is a 100 percent reserve system?," then proceeds to describe a fractional reserve system, albeit one that is more centrally controlled than the one we now have. There is at least one bank in Hummel's system that loans against fractional reserves:
"The money supply could change only as a result of open market operations or lending by the central bank."
Like Bill McGunnigle, you have badly misinterpreted the proposed 100% reserve system. It is not a fractional reserve system. Read my latest reply to Bill, and it should become clearer.
John Hermann
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RE: Re: 100 percen
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