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Re: Re: 100 percen Wallace
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Subject:Re: [socialcredit] Re: 100 percent reserve system
Date:Sunday, June 7, 2009  09:28:35 (+0200)
From:Swieto Radosci <radosc @........pl>
In reply to:Message 6798 (written by Wallace Klinck)

Dear Wally,
I didn't mind "velocity of money" and extention of money supply, but 
simply reinvesting. When you reinvest in machine, say it a car, you do 
the same as when buying bread & butter - simply you give money to the 
owner of car factory and to his intermediaries, which they use for 
paying salaries, dividends etc. You don't freeze that money.
I think problem starts when you save above what you are able to spend or 
invest.

Sincerely
Kristof Levandovski

Wallace Klinck pisze:
> Dear Kristof and Others:
>
> Money issued as incomes during the act of production is accounted as a 
> cost of that production and, if these costs are to be recovered, it 
> must be spent by consumers on that production. If is is not so spent, 
> but saved and re-invested in new production it leaves the original 
> costs by which it was distributed unliquidated. However, in being 
> saved and invested this income creates new goods with a whole new set 
> of costs and prices. Money saved and invested creates new goods with 
> new costs, multiplied by the number of times of re-investment, but 
> does not create new purchasing-power. If it is used to purchase the 
> original goods, it will pass from the retailer to the bank where it 
> will be cancelled when the original production loan is acquited. A 
> unit of currency is a unit of currency and cannot in some magical way 
> be turned into additional purchasing power by virtue of it being 
> passed on any number of times. There is no such thing as the so-called 
> "velocity of money" increasing purchasing power. It may result in an 
> increased volume of real goods but it does not create the income 
> required by the consumer to purchase such additional goods. Only by 
> resorting to bank debt can such goods find their way into the hands of 
> consumers --but consumer debt is a charge against future cycles of 
> production and does not liquidate the costs attached to the produced 
> goods which are accessed by assumption of this debt. Under the 
> existing financial system this can only be achieved by the use of 
> incomes earned in future cycles of production--cycles unrelated to 
> earlier cycles I paste below the following brief essay.
>
> Sincerely
> Wally
>
> BEGINNING OF ESSAY:
>
> From: THE ALBERTA POST-WAR RECONSTRUCTION COMMITTEE
> REPORT OF THE SUBCOMMITTEE ON FINANCE (March, /1945)/
> /
> /
> Part II: THE MONETARY SYSTEM IN UNIVERSAL USE
>
> 6. VELOCITY OF CIRCULATION
>
> It is generally assumed that the purchasing power of money
> is increased or decreased by its "velocity of circulation." However,
> this theory will not bear examination in the light of the facts regarding
> the issue and withdrawal of money under the established system.
>
> For purposes of analysis the following simple illustration of
> the velocity of circulation theory will suffice.
>
> A wage-earner A uses a $10 bill of his income to buy two
> pairs of shoes f'rom a shoe merchant B, who immediately goes into the
> adjoining store and spends the $10 to purchase some shirts from C.
> C in turn immediately goes across the street to grocer D and buys
> some provisions costing $10, grocer D then takes the $10 bill across
> to the local garage E, to buy some gasoline and oil.
>
> The contention is that the $10 bill provided purchasing
> power to the extent of $40 during the day by virtue of its "velocity of
> circulation" in enabling $40 worth of goods to be purchased by consumers.
> On the face of it this would appear to be the case, but on examination
> it will be found to be a complete fallacy.
>
> Because all money issued creates a debt of' the corresponding
> amount at its source of issue, for all practical purposes merchants
> B, C., D, and E can be assumed to be operating on credit loans
> from their banks with some "savings" invested in their stock..
>
> The proceeds of every sale they make can be divided into three
> parts: (1) repayment of a bank loan before a new line of credit can
> be obtained to replace stock, (2) payment of operating costs, and
> (3) net profit--i.e., personal income for services. Suppose that in
> each case B, C, D and E work on a 15% net profit. From each
> purchase amounting to $10 they would be obliged to set aside, say,
> $8.50 repayment of their bank loans for replacement of stock and overhead
> costs, and only $1.50 as personal income.
>
> This is likewise true of C and D. Therefore, by spending
> the $10 both of them created a liability against their future purchasing
> power.
>
> When A obtained the $10 in wages there was against it a
> corresponding cost in the prices of goods coming on the market. This
> liability must be kept in mind.
>
> On buying the two pairs of shoes from B, A surrendered his
> right to $10 purchasing power and B acquired the right to $1.50 of
> this, the balance going for the repayment of his bank loan and 
> cancellation
> of the money as shown previously. (If he was operating on his
> own capital it would make no diff'erence, for the $8.50 would have to
> go to the replacement of working capital with the same result.)
>
> If B does not repay his bank loan, but spends the whole $10,
> he will have a liability of' $8.50 outstanding which will const:itute
> a debt against future purchasing power. In other words he will have
> to sell over $50 worth of goods without getting any portion of it for
> his own use in order to make good the deficit.
>
> Thus while it is true that in the example quoted,the $10
> bill resulted in $40 worth of' goods reaching consumers, there was
> created a trail of debts against their future purchasing power amounting
> to $10 (the liability against the original issue of the money) plus
> $8.50 (B's undischarged liability) plus $8.50 (C's undischarged
> liability) plus $8.50 (D's undischarged liability), making a total
> of $35.50. Suppose E now meets his obligations of $8.50, he retains
> $1.50 as his net profit, i.e., as purchasing power.
>
> It will be evident that the effect is exactly the same as
> if A bought gasoline, etc., from E, and B, C and D had obtained
> goods from each other "on time", pledging their future purchasing
> power.
>
> The so-called "velocity of circulation" did not increase purchasing 
> power at all.
> The fallacy in the theory lies in the incorrect assumption that money 
> "circulates",
> whereas actually it is issued against production, and withdrawn as 
> purchasing power
> as the goods are bought for consumption.
>
> END OF ESSAY
>
>
>
> On 3-Jun-09, at 4:25 PM, John G Rawson wrote:
>
>> Thanks Swieto. I will reply with an example I first heard from one of 
>> our early great men, at the age of about 4 or 5, and which has stuck 
>> in my mind since then. It is, of course, a bit dated to the time when 
>> expansion would have been accomplished through savings, rather than 
>> the modern parallel method of overdraft/depreciation charges. And not 
>> quite word for word!
>> "A bootmaker saves some of his profits to buy a new and better 
>> machine, for, (say, then,) £100. Therefore, £100 of his takings is 
>> not used to buy groceries etc, but on a capital item.
>> This machine enables him to make boots faster and cheaper, but he 
>> must cost into their price enough to repay his investment.
>> So, as far as his business is concerned, the £100 cost goes into two 
>> sets of prices, but is paid out only once as purchasing power."
>> I know you will say the manufacturer of the machine could use the sum 
>> for private use, but of course his business also has costs.
>> In passing, I will repeat that I decry this and other methods of 
>> trying to "prove" the "B cost gap". I much prefer the scientific 
>> inductive approach of testing against reality. There are several 
>> fields in which the Douglas analysis explains economic conundrums 
>> that orthodox theory can not, so it is the latter which is shown to 
>> be faulty under test.
>> Regards.
>> John R.
>>
>>
>>
>>
>> > Date: Wed, 3 Jun 2009 15:30:44 +0200
>> > From: radosc@radosc.x.pl <mailto:radosc@radosc.x.pl>
>> > To: socialcredit@elistas.com <mailto:socialcredit@elistas.com>
>> > Subject: Re: [socialcredit] Re: 100 percent reserve system
>> >
>> >
>> >
>> > John G Rawson wrote:
>> >
>> > > And reinvestment produces new production (if applied to industry) and
>> > > new costs, without increasing the money supply.
>> >
>> > Could you please explain how reinvestment could NOT increase the money
>> > supply? In my view reinvested money goes to firms which pay salaries 
>> and
>> > dividends which constitute additional purchasing power, new money
>> > supplied from bank to the market.
>> >
>> > Kristof Levandovski
>> >
>> > > Regards.
>> > > John R.
>> > >
>> > >
>> > >
>> > >
>> > > 
>> ------------------------------------------------------------------------
>> > > From: telergy@bigpond.com <mailto:telergy@bigpond.com>
>> > > To: socialcredit@elistas.com <mailto: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 -----
>> > > *From:* John G Rawson <mailto:johngrawson@hotmail.com>
>> > > *To:* Socred elistas <mailto:socialcredit@elistas.com>
>> > > *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 <mailto:telergy@bigpond.com> 
>> <mailto:telergy@bigpond.com>
>> > > To: socialcredit@elistas.com <mailto:socialcredit@elistas.com> 
>> <mailto: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 -----
>> > > *From:* John G Rawson <mailto:johngrawson@hotmail.com>
>> > > *To:* Socred elistas <mailto:socialcredit@elistas.com>
>> > > *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 <mailto:telergy@bigpond.com> 
>> <mailto:telergy@bigpond.com>
>> > > To: socialcredit@elistas.com <mailto:socialcredit@elistas.com> 
>> <mailto: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
>> > > http://www.uea.ac.uk/env/ijccr/abstracts/vol13freire.html
>> > >
>> > > 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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>> > >
>> > >
>> > >
>> > > 
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