Thanks, Tim. Being fairly new to this group myself, I still have to discover
the exact "house rules" but do believe there is room for enquirers like you as
well as those who want to refine some particular point to the last degree.
Replying to your points, which I'll number in order as in yours.
1. You give what is to me a fairly good description of the state of
macroeconomics as a persuasion. As a scientist, I have always thought of one of
the aspects of Social Credit as a means of bringing a scientific approach to
it, and therefore tend to accent this angle. In passing, I have just read
"Making Modern Economics" by Mark Skousen, dealing with the "Great Thinkers" of
economics. In all its 450+ pages it not once deals with the functions of the
banking system, pretending that all investment is savings-based. It mentions
Douglas once as being "against savings", and does mention the economist who
ascribed business cycles etc. to the effects of sunspots.
2. Most modern money exists as deposits in bank accounts. (M1) It is
transferred by cheques, electronic means and partially by notes and coins. It is
backed simply by the willingness of people to accept it, it has no intrinsic
value whatever. You may get a better understanding of it by realising that notes
and coins in bank tills are not part of the money supply on the M1 definition.
If they were, it would mean that money doubles itself as the deposit is made,
i.e. the ten dollar note retains its value and the ten dollars in the depositer's
account is also money by definition. Notes etc. these days more or less function
like cheques not directed to one source. Short of a robbery, they can not be
issued from a bank without an equivalent sum of money being taken out of some
account to "fill them up" again.
3. Social Credit has always distinguished between real wealth: goods, services
etc, and money. We believe money should be treated as a means of exchange and
that it is harmful to treat it as a commodity, which was justified in the days of
metal currency but not now it has no value in itself. This is more or less basic
philosophy, but money is only worth what it will purchase. We often make the
point that a shipwreckee on a desert island with only a bag of gold (even
that!)is a pauper. Probably you could make a reasoned argument against this
concept, but we believe accepting it is one of the faults in our system.
4. A bank "increases the money supply" when it buys an asset, e.g. a building.
If its cheque is deposited at another bank, it has to accommodate that debt with
it. If deposited with itself, it gets it "for nothing". Either way, the banking
system "gets it for nothing". If they can do it, the nation can, just as the
kings of old could issue gold coins without incurring debt other than the costs
of minting etc. And electronic impulses don't need minting!
5. < www.democrats.org.nz> Leave out the nz and you get the big US Party.
Good hunting. John R.
>From: "Tim Knight" <Tim_Knight@NTLWorld.Com>
>Reply-To: socialcredit@elistas.com >To: <socialcredit@elistas.com> >Subject:
Re: [socialcredit] Social Credit from First Principles >Date: Sat, 16 Apr 2005
12:56:08 +0100 > >John G Rawson kindly replied to my notes requesting help in
getting a grip on what Social Credit people mean by very basic expressions such
as 'money', 'issuing money', 'credit' and 'issuing credit'. Thanks for your
further response John. I have added rejoinders interleaved in your response. >
>John G Rawson wrote: > >I mentioned the different money definitions, because
arguments based on different ones require slightly different slants. In my
opinion, that's why orthodox economists invented them, to try and make some of
their theories more logical. I
always argue from the point of view of M1, including "cheque money" as bank
deposits. One of my favourite theoreticians uses M2. > >Tim Knight now writes: >
>Conventional/orthodox economists (and indeed un-conventional/un-orthodox
economists) cannot come to even a working common definition of these expressions.
I believe that that is not because they/we are all fools and/or knaves (though
many may well be one or both). I believe it is because there is no
economically-meaningful concept there in the first place on which to 'hang' the
expressions. Unfortunately, all commentators respond to my concerns by arguing
the relative merits of the various definitions, without pausing to consider that
they might be arguing about spurious definitions of non-existent concepts. It is
a bit like listening to pseudo-medical practitioners talking about 'the humours',
or pseudo-geographers
arguing about the nature of the edge of the world. If commentators believe that
there is a worthwhile economic distinction between different types of debt, then
they must first establish that there is a worthwhile economic distinction worth
defining, before moving on to argue the relative merits of the different
definitions. One must not start off by arguing what a pre-existing expression
means or ought to mean. That merely begs the question. One must start from
radical analysis to define worthwhile economic concepts, and then choose what to
call those worthwhile economic concepts. When I do that, I always finish my
radical analysis without coming up with anything on which to 'hang' the
expressions 'money', etc.. No-one else seems to even try, or even recognise that
they ought to! > >John G Rawson wrote: > >Yes, Banks most certainly create money,
as electronic impulses, out
of computer keyboards. > >Tim Knight now writes: > >Yes, but what do the
electronic pulses represent? What does a hardcopy bank statement represent? What
does a cash note or coin represent? My concern relates to the economic substance,
not the form of administration. I'm sure you would agree that there is no
economic difference between two blue five pound notes and one orange ten pound
note. They both document a debt of value ten pounds owed by the issuer to the
bearer. The colour and denomination of the bits of paper are completely spurious
in the economic debate. Similarly, what's the economic difference between the
following: > 1.. A debt outstanding between the issuer and the bearer of an item
of cash, recorded as a liability in a cash account by the issuer and as an asset
in a cash account by the bearer, and documented in the form of notes or coin. >
2.. A debt
outstanding between a bank and an account holder, recorded by both in computer
files and/or in paper ledgers, and documented by the bank for reconciliation
purposes in the form of hardcopy and/or electronic statements. > 3.. A debt
outstanding between two banks, recorded by both in computer files and/or in paper
ledgers, and documented by both for reconciliation purposes in the form of
hardcopy and/or electronic statements. > 4.. A debt outstanding between trading
partners, recorded in the payables account of the buyer and the receivables
account of the seller, and documented by the seller in the form of an invoice. >
5.. Etc. etc.. >Again, my concern relates to the economic substance, not the form
of administration. At the end of the day, they are all debts. The form of
administration is irrelevant in the economic debate. > >John G Rawson wrote: >
>You are quite
right in stating that they (states and banks 'issuing' 'money') do not create
wealth. Money is a claim on wealth. > >Tim Knight now writes: > >What's the
economic difference (as opposed to the administrative difference) between
'wealth' and 'a claim on wealth'? They are both recorded as assets in a balance
sheet. Of course, every 'claim on wealth' must appear also as a liability in some
other balance sheet. If I try to answer this question, I find it useful to use
the following definitions: > 1.. I define the owned-wealth (with an 'n') of each
economic entity as anything which is recorded as an asset in its balance sheet,
and for which there is no corresponding liability recorded in any other balance
sheet. This would include real estate, cars, fixed assets of enterprises, stock
of enterprises, goodwill of enterprises, personal expertise, consumer durables,
etc., etc.. The
global aggregate total is the total value of the global economies. > 2.. I
define the owed-wealth (without an 'n') of each economic entity as anything which
is recorded as an asset in its balance sheet, and as an equal liability in the
balance sheet of another economic entity. The global aggregate total is (of
course) zero. > 3.. I define the net-wealth of each economic entity as the
'bottom line' of its balance sheet (i.e. the owned-wealth, plus the owed-wealth
assets, minus the owed-wealth liabilities). The global aggregate total is (of
course) identical to the global aggregate total of owned-wealth. >I suspect your
'claim on wealth' is a subset of what I call owed-wealth. However, if such
'claims on wealth' are to be included in any economic paradigm, then the equal
and opposite liability must surely also be included (i.e. net zero)? Otherwise,
you would be creating
net-wealth 'out of thin air' (i.e. wishful thinking). > >Also, I still see no
economic concept on which to 'hang' the expression 'money'. The global zero-sum
network of owed-wealth is (or ought to be) simply a zero-sum book-keeping
exercise which 'keeps the score' on where we are in our non-barter trading and
employment activity. Those who have sold more than they have bought accumulate a
net positive balance, and those who have bought more than they have sold
accumulate a net negative balance. The grand total (of course) is zero. > >John G
Rawson wrote: > >And yes, you can have "debt free" money. Our 1935 Labour
Government used Reserve Bank credit on a non-repayable basis to fund public
works, housing etc., . > >Tim Knight now writes: > >Surely, you can't make a debt
'debt-free' by simply declaring it to be so! The books have to balance.
Otherwise, you
would be creating net-wealth 'out of thin air' (i.e. wishful thinking). Are you
saying that an instrument was used which was used to discharge the 'trading'
debts created by state spending, but which never appeared in the national
accounts as part of the national debt, and has never been acknowledged as part of
the national debt? If so, I find that difficult to understand! What you have
described looks to me like classical (temporary) deficit financing used in all
economies, but which have to be reversed to neutrality over the long term. The
national accounts would record the owned-wealth assets (i.e. the public works and
housing etc.), and the corresponding owed-wealth liabilities (just like any
economy running a fiscal deficit). Otherwise there would be lots of people with
'claims on wealth' for which there was no economic entity acknowledging those
claims! - a bit like most communist
countries when their economic roofs caved in!. > >John G Rawson wrote: > >I
would recommend to you also that you get hold of Les Hunter's book "Courage to
Change" as listed on our <....democrats.org.nz> website. > >Tim Knight now
writes: > >I will try to get hold of a copy. Do you have the full website
address? > >Thanks once again for your 'engagement' with my predicament! > >Best
Wishes > >Tim Knight >Tim_Knight@NTLWorld.Com >
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