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Message 982
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| Subject: | [socialcredit] The Rabbit | | Date: | Tuesday, April 19, 2005 04:38:14 (-0700) | | From: | William B. Ryan <w_b_ryan @.....com>
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I think Professor Gunning may have been triggered
to go over the deep end with my implication that
his train of logic may be representative of what
we might expect from "a creature called rabbit."
I suppose this dialog has devolved into a war of
sorts. The Social Credit movement was first
attacked by the "Austrians" when Hayek, during the
time he was in the service of the Fabian socialists
when employed at their London School of Economics.
At that time, Hayek was the humble (but well paid)
servant of totalitarianism. That was followed by
Mises, then Gary North, in his malicious diatribe,
*Salvation Through Inflation,* about ten years ago,
now Professor Gunning.
This medium of the Internet allows responses to be
placed into the public record, which I am doing,
and will continue to do. You may be assured I
will use that medium to its fullest advantage.
The following is excerpted from the series of
messages that preceding the one re-posted by
Professor Gunning today:
http://groups.yahoo.com/group/austrianschoolofeconomics/message/1590
From: "William B. Ryan" <w_b_ryan@...>
Date: Mon Nov 17, 2003 2:06 pm
Subject: a creature called rabbit
What I mean concerns the questions posed to Bill.
Suppose that he supports the view that in the modern
U.S. banking system, money creation by one bank is
ordinarily offset by money destruction by the same
bank or by other banks unless the Federal Reserve
Board deliberately chooses to make it otherwise.
Pat Gunning
----------------------------------------
[Ryan responding to Prof. Gunning]
I do not support that view. [And] I completely reject
the money multiplier concept.
The Fed is the concertmaster in the following sense:
Imagine that all the banks in a closed system
associate between themselves so that checks drawn on
any one bank may be deposited in any other bank. One
of the banks is chosen to be the clearing bank at
which the member banks maintain clearing accounts
that we will henceforth call reserves. All of the
banks including the clearing bank continue performing
the ordinary functions of banking. Each of the banks
may grant loans without limit so long as it maintains
a sufficient balance in its reserve account to cover
checks that may be deposited in other banks. The
clearing bank is the exception in that it is
unconstrained by reserves because every check it
writes clears back to itself and does not detract
from its ability to grant loans.
If each bank including the clearing bank expands
credit in tandem with every other bank, clearings
between banks will always net to zero regardless of
the quantity of aggregate reserves. Therefore credit
may be expanded without limit unconstrained by
reserves so long as all the banks continue to operate
in perfect tandem. If any single bank departs from
the prevailing practice, it will gain or lose
reserves to other banks, which enhances or detracts
from its ability to grant further loans. Each bank
therefore competitively attempts to gain reserves
from other banks and attempts to avoid losing
reserves to other banks.
This juxtapositioning between banks would effectively
place an upper limit on bank credit expansion were it
not for the fact that the clearing bank writes checks
for loans that clear back to itself. So the
independent credit policy of the clearing bank sets
the upper limit to system wide credit expansion. It
is however the upper limit, not the lower limit,
which is zero. Credit actually granted to the public
is necessarily somewhere between zero and the upper
limit subject to change in bank policy contingent on
the demand for credit from members of the public.
Douglas' theorem from *Social Credit* first published
in 1924 holds as a statistical matter between zero
and the upper limit which is continually shifting:
"In respect of financial institutions, let deposits =
D, loans etc. = L, cash in hand = C, and capital = K.
Then: assets = L + C, liabilities = D + K, so that L
+ C = D + K. Differentiating with respect to time:
dL/dt + dC/dt = dD/dt; K being fixed, dK/dt = 0.
Assuming cash in hand is kept constant, dC/dt = 0.
Therefore dL/dt = dD/dt, which means that loans
create deposits and the repayment of loans cancel
deposits."
--
[Message from Professor Gunning]
15 Nov 2003 11:17:07 +0800
Speaking of apparently misguided proposals, here's a
puzzle. Can anyone solve it?
What is wrong with the following proposal?
I propose that we increase the quantity of money by
just enough to finance a 10% subsidy to retailers of
consumer goods. The result, I predict, will be
approximately a 10% decrease in consumer goods
prices. (This program is advocated by a movement
called "Social Credit." For those who might be
interested, here is some background.
http://en.wikipedia.org/wiki/Social_Credit
Pat Gunning
----------------------------------------
[Ryan responding to Prof. Gunning]
Professor Gunning posted this Saturday to his
austrianschoolofeconomics group at Yahoo. All I can
say is that it causes me to empathize with Eimar
O'Duffy's allegory that man will be replaced by a
creature called rabbit, certainly if this is a fair
indication of the ability of man to communicate with
man. We've been at this for how many days now with
Professor Gunning, two weeks is it? For him to now
so misstate the social credit position is to me
beyond comprehension. O'Duffy may well have had it
right. It certainly does indicate a failure to
communicate. I am not however assigning blame as to
who is at fault for that failure.
Social Credit does NOT propose an increase to the
quantity of money. It DOES propose a credit applied
at the point of retail - as a matter of accounting -
to enable demand to match supply. That's all that
Social Credit proposes. The percentage is determined
by what is required to accommodate that match. If
nothing is required then the credit is zero, period.
Social Credit analysis - based on the A + B theorem
in the form of reductio ad absurdum - concludes there
is a defect in the system of accounting which
entrepreneurs use to measure the effectiveness of
their decisions that is not resolvable at the level
of the individual firm.
Therefore, accounting adjustment at the macroeconomic
level of the economy considered in statistical whole
is required for capitalism to reach technical
efficiency.
The wikipedia article that he references contains
numerous gross errors in statement of fact. For the
moment I'll touch on two:
[Quoting the Wikipedia article to which Prof. Gunning
referred]
"Douglas believed that Social Credit could fix this
problem by ensuring that there was always enough
money (credits) issued to buy all the goods that
could be produced. His solution is outlined in three
core demands:
"1. For a "National Credit Office" to calculate on a
statistical basis the amount of credit that should be
circulating in the economy."
---------------
[Replying to the Wikeipedia article]
The singular purpose of the national credit account
is to calculate and apply the necessary credit to the
point of retail that enables demand to match supply
as a matter of accounting. The "amount of
credit...circulating in the economy" is determined
exactly as it is determined now -- by the interaction
of the institution of banking with the public.
--
[Quoting the Wikipedia article to which Prof. Gunning
referred]
"2. For a price adjustment mechanism to absorb
windfall
profits in times of inflation, and return them to
people in terms of subsidized, lower prices when the
cost of goods on the market exceeds the money
available to buy them."
---------------
[Replying to the Wikeipedia article]
Social Credit has never proposed a "price adjustment
mechanism." Social Credit has never proposed that
something be taken now and returned later. As I
recall, that was the Keynesian Abba Lerner's
"functional finance" proposal based on his
understanding of the "trade cycle."
Social Credit is pure credit applied at the point of
retail or directly to consumers in the form of
dividends in the manner of accounting adjustment.
It thereby augments not interferes with the utility
of the market.
For a good introduction to Social Credit in Major
Douglas' own words, see
http://www.geocities.com/socredus/compendium/money_and_the_price_system.txt
I am cross posting this to Professor Gunning's group.
Bill Ryan
-------------------------------------------
From Eimar O'Duffy's *Kingdom of Assinaria* as quoted
by Robert Hogan:
This depression was followed by a great war which
destroyed most of the civilized world and reduced the
few remaining inhabitants to a primitive pastoral
existence. In a few more years, the society of men
has been succeeded by a society of rabbits, and in
the last chapter two of the Gods "observed a dim star
among the drifting millions flash suddenly, and go
out." One of the Gods muses that, "There ends
another of my experiments."
And the second God inquires, "A successful one?"
"'Nay, a miserable failure, though at one time it
gave good promise. That star gave birth to a number
of planets, on one of which I evolved, after much
thought and toil, a strange creature called Man. At
first he was truly interesting, but he reached his
zenith too quickly, and then rapidly declined.
During his last few hundred years, when he was
already far gone in decay, he achieved a mastery of
natural forces that was marvelous in a race so
stupid, but his wickedness and folly were such that
it did him more harm than good. In the end I
superseded him by a somewhat lower creature called
rabbit; but this had no great potentialities either
for good or evil, and so nothing came of it. A few
million years ago the planet fell back into its
parent sun, which has now itself come to an end.'
"'Did these Men that you have mentioned achieve
nothing of lasting worth?' asked the other God.
"'Almost nothing,' replied the first. 'A few of them
did occasionally show some glimmerings of divine
wisdom to which their fellows paid no heed. That,
and some trifles of tolerable music, is their only
memorial. If you listen you may catch some echo of
the latter still moving among the spheres.'
"The Gods were silent; and the ghost of the Ninth
Symphony came stealing through the ether."
This is an effectively wry conclusion to a highly
talented writer's major work...
http://www.geocities.com/new_economics/assinaria.txt
--
http://groups.yahoo.com/group/austrianschoolofeconomics/message/1596
From: "William B. Ryan" <w_b_ryan@...>
Date: Tue Nov 18, 2003 9:11 am
Subject: Re: [Austrian School of Economics] a creature
called rabbit w_b_ryan
Misstatements of fact:
"For some reason, I was added to the list and
starting receiving its emails."
-----
Professor Gunning himself subscribed to the list at
Topica. He was sent an invitation to which he
replied affirmatively. Topica software then
automatically sent a confirmation message to which he
again replied affirmatively for a second time. Only
at that point did Topica begin to transmit
socialcredit messages to him.
[the allegation]
"Bill claimed to be an economist."
-----
I never claimed to be an economist. You will not
find that claim in any message that I have ever
posted to the list socialcredit. Nor have I ever
privately communicated that claim to Professor
Gunning. Having said that, it should be noted that
the "austrians" have a traditional proclivity for
withholding the term from anyone but themselves and
their close relatives. This follows Mises who
assigned the term only to the "austrians" and their
predecessors. Which seems incongruous since
Professor Mises' own advanced academic credentials
were in law, not economics.
-
[the allegation]
"I don't know why he posted the message here."
-----
I am a list subscriber. I responded to a message
posted to this list that directly related to social
credit that contained several gross misstatements of
fact.
[the allegation]
"So, hopefully, we will be spared future cross-
postings."
-----
So much for an open mind. And -- So much for
considering "austrian" economics to be anything other
than cultic pseudo-science. It is very much faith
based, as is evident from Gunning's commentary in the
socialcredit@... archives. I will compile
them and post a link to them later.
For an example of the methodology, take note of his
response to my message. It does not address even a
single substantive point I made in my message.
Merely an "apology" for list members having to endure
my "cross posting" followed by further misstatements,
this time about myself personally.
I do sincerely thank Professor Gunning for an
interesting and informative discussion.
I will be cross posting this message to
socialcredit@...
Bill Ryan
--
--- Pat <gunning@fcu.edu.tw> wrote:
> David, you asked who Mr. Ryan is.
>
> I wrote the following message shortly after Ryan
> joined this list. He
> later stopped the cross posting and engaged in some
> discussions on this
> list relating to government, anarchy, and
> philosophy; but did not seem
> to know any Austrian economics. He started cross
> posting again several
> months ago. I asked him to stop and he responded in
> the same way he has
> in the most recent exchange. So far as I can tell,
> his goal at present
> is to disrupt the list. Since he restarted his
> cross-posting, I have not
> ordinarily seen his posts unless someone includes
> them in a response.
> They are filtered directly into my trash bin.
>
> Ryan seems to have had some kind of breakdown around
> December 2004, when
> he began cross posting numerous messages. Since
> then, he seems to have
> lost all sense of propriety.
>
> /From:/ Pat Gunning <gunning@...>
> /Date:/ Tue Nov 18, 2003 3:12 am
> /Subject:/ Re: [Austrian School of Economics] a
> creature called rabbit
> gunning@...
> Send Email
>
<http://groups.yahoo.com/group/austrianschoolofeconomics/post?postID=RuLmcjtAuhLug2t_i4nWM-eyW_eJxPRYO8XNMjq5TYkFHL-eeFfLcU9XewDTVt72eR2j0LZ0vNr7LXNIf0s7qwX61uQEng>;
>
> Dear list:
>
> The posting by Bill Ryan relates to a debate we have
> been having on a
> different list -- the "Social Credit" list, which he
> moderates. For some
> reason, I was added to the list and starting
> receiving its emails. Since
> I had not heard of this "Social Credit" idea and
> since I have a strong
> interest in credit, I asked a few questions. Bill
> claimed to be an
> economist. One email led to another and another and
> eventually he and I
> were engaged in a debate. The final result was a
> complete impasse, as
> evidenced by the message relating to the Fed's
> ability to control the
> amount of bank money creation. He denied this; I
> affirmed it.
>
> Bill posted his message to his list and to this one.
> I don't know why he
> posted the message here. However, I have since
> unsubscribed to his list.
> So, hopefully, we will be spared future
> cross-postings.
>
> Sorry :-[
>
>
> --
> Pat Gunning, Feng Chia University, Taiwan
> pgunningp@hotmail.com
> New book: UNDERSTANDING DEMOCRACY: AN INTRODUCTION
> TO PUBLIC
> CHOICE
> http://nomadpress.com/public_choice/
> http://mail.ebtnet.net/~manta/public_choice/
>
> Web pages on Praxeological Economics, Democracy,
> Taiwan,
> Ludwig von Mises, Austrian Economics, and my
> University
> Classes;
> http://www.constitution.org/pd/gunning/welcome.htm
> and
> http://knight.fcu.edu.tw/~gunning/welcome.htm
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