Re: TURMEL: Ben Franklin, Prof. Flaherty, on Death gamble

From: Bill Ryan (william_b_ryan_at_hotmail.com)
Date: 11/04/04 

Date: 4 Nov 2004 05:01:39 -0800

On January 1 the next year there is $100b in the
economy, of which $55 billion is due and payable to
the banker. As the banker receives his
$5 billion interest income, he spends it back into
the community, as does every businessman, so that
when July 1 comes around, there is a total of $55
billion in the economy, due and payable to the
banker. 55 = 55. Case closed on interest per se being
the cause of the problem.
----------------------------------------
Actually, in this case there would be $50 billion in
the economy on July 1. But the assumption is that
there are always two overlapping loans in the economy
rather than just one. More correctly stated, when
the first $50 billion loan is repaid an equivalent
$50 billion is lent, ad infinitum, so there is always
$100 billion in circulation, including the $10
billion spent annually by the banker, if the economy
is "evenly rotating." $55 billion is always payable
to the banker at each semiannual "due" date out of
the total circulating medium of $100 billion. The
banker is collecting $10 billion annually in payment
for financial services rendered.

william_b_ryan@hotmail.com (Bill Ryan) wrote in message news:<45bb7944.0411030905.7df26509@posting.google.com>...
> The "Ben Franklin" quote appended below is a complete
> fabrication that dates back to post United States
> Civil War "Greenbacker" propaganda, deriving from the
> political controversies of that era. The real Ben
> Franklin of three generations earlier never said any
> such thing.
>
> Now, regarding the alleged "death gamble" :-
>
> JCT: It all sounds so simple until you do the
> accounting. You have to take into account the growth
> due to interest in each cycle. No matter what your
> last piece of debt, the growth on it always makes it
> larger than any money left.
>
> $100 is created but $110 is due.
> ----------------------
> -------------------
> [REPLY] Nothing is due until the terms of the
> contract say it is due.
> ->
>
> JCT: After 6 months, you pay 55.
> ----------------------
> -------------------
> [REPLY] At that point he has effectively paid
> twenty percent annualized interest on a principal of
> $50.00, which he just repaid. According to the
> terms of his contract he still "owes" $55.00 as
> stipulated above.
> ->
>
> JCT: $5, not $10 in interest stays in circulation,
> $50 is knocked off and out against the principal. You
> owe $50, you have $45, the bank has $5.
> ----------------------
> -------------------
> [REPLY] But you started with the stipulation that
> $100.00 was created and $110.00 was "due." The
> payment of $55.00 leaves $55.00 still "due," does it
> not?
> ->
>
> JCT: When you earn it from the banker and come to pay
> out the remaining $50, you're still faced with the
> 10% on the remaining $50 for the last half year.
> ----------------------
> -------------------
> [REPLY] Not ten percent but five dollars for the
> full year on the remaining principal of $50.00. The
> effective interest on the totality of the contract is
> greater than ten percent because $5.00 in interest
> was paid on $50.00 that was borrowed for only six
> months.
> ->
>
> JCT: $2.50 can never be paid. The interest on the
> last installment can never be paid.
> ----------------------
> -------------------
> [REPLY] This utterly fallacious conclusion requires
> the assumptions that there is no money in existence
> other than the funds created by this one loan, and
> the economy is not an ongoing process with many
> overlapping loans facilitating production,
> distribution and consumption:
>
> "Imagine that the only money in the entire economy
> is MCB [bank created money], that all money is
> created and loaned on January 1, and that principal
> plus interest at 10 percent is due on the following
> January 1. These assumptions granted, if say, $100
> billion is created and loaned on one January 1,
> then $110b would be due and payable the following
> January 1. Clearly, however, if only $100 billion
> has been created there is only $100 billion in the
> system and thus the $110 billion of principal plus
> interest cannot be paid..."
>
> Well, yes. Beyond the fact there are many
> overlapping loans in the real economy, all we have
> to modify for this simplistic argument to collapse
> is that there are two loans rather than one,
> staggered, say, six months apart. On January 1,
> $50 billion is loaned a ten percent, due and
> payable in one year. Six months later, July 1, $50
> billion is loaned at ten percent, due and payable
> in one year. On January 1 the next year there is
> $100b in the economy, of which $55 billion is due and
> payable to the banker. As the banker receives his
> $5 billion interest income, he spends it back into the
> community as does every businessman, so that when
> July 1 comes around, there is a total of $55
> billion in the economy, due and payable to the
> banker. 55 = 55. Case closed on interest per se
> being the cause of the problem.
>
> The only way that "debt virus" can be salvaged in
> any form is to demonstrate that bankers somehow
> "underconsume" in a manner that is different than
> is the case for any other group of transactors in
> the economy. The mechanism how this can occur
> needs to be actually described, not merely assumed
> as some sort of unspecified "constant" that
> "correlates" to observed data.
>
> The ordinary "lag" between the receipt of a dollar
> in income and spending that dollar is handled by the
> "lag" in expensing the "costs" that dollar represents
> through the conventions of accrual accounting.
>
> There are ways around the conundrum that make
> sense.
>
> If the rate of spending from income falls with
> increasing wealth, sales must fall in respect to
> the costs of production. If income falls as
> compared to the costs of production with labor
> displacement, spending from income must fall in
> respect to the costs of production.
>
> Both effects can be compensated through accounting
> adjustment at the point of retail. The first
> through retail discounts. The second through
> consumer dividends.
>
> See:
> http://www.geocities.com/socredus/compendium
> -
>
>
> The Bogus Franklin
>
> [When Benjamin Franklin was asked how the colonies
> were prosperous when England was in hardship]
> Franklin told them: "Why, that is simple! In the
> Colonies, we issue our own paper money. It's called
> 'Colonial Scrip.' We issue it to pay the government's
> approved expenses and charities. We make sure it's
> issued in proper proportion to make the goods pass
> easily from the producers to the consumers. In other
> words, we make sure there is always adequate money in
> circulation for the needs of the economy.
>
> "In this manner, by creating ourselves our own paper
> money, we control its purchasing power, and we have
> no interest to pay, to anyone. You see, a legitimate
> government can both spend and lend money into
> circulation, while banks can only lend significant
> amounts of their promissory bank notes, for they can
> neither give away nor spend but a tiny fraction of
> the money the people need. Thus, when your bankers
> here in England place money in circulation, there is
> always a debt principal to be returned and usury to
> be paid. The result is that you have always too
> little credit in circulation to give the workers full
> employment. You do not have too many workers, you
> have too little money in circulation, and that which
> circulates, all bears the endless burden of unpayable
> debt and usury."
> -

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