Re: TURMEL: Interest and Inflation

From: Castlef (joejmd_at_yahoo.com)
Date: 11/16/04 

Date: 16 Nov 2004 15:10:34 -0800

william_b_ryan@hotmail.com (Bill Ryan) wrote in message news:<45bb7944.0411160726.4f680a87@posting.google.com>...
> For example in a casino...when someone brings new
> chips to the table it is not inflation because they
> put in the collateral for those chips...
> --------------------------
> ----------------------
> [REPLY] The casino metaphor has absolutely no
> relevance to an economy, where production,
> distribution and consumption take place. Gambling is
> a zero sum game where the casino operator skims off
> the top making it statistically positive sum for him
> but negative sum for the participants.

You should really read through before writing such nonsense. If you
have already failed to acknowledge that this is a discussion about
tokens and how they relate to collateral then everything you've
written since is also nonsense. We are not talking about gambling here
or casino's... we are talking about TOkens... used in casinos.

> -
>
> But when people get loans they generally give an IOU
> and not collateral which is a "promise to pay"
> --------------------------
> ----------------------
> [REPLY] The might or they might not supply
> collateral. It depends on the terms of the contract
> between the parties. But it is *credit* that is
> being monetized by banks, not collateral. The
> collateral is collateral not money.
> -

DOn't waste my time and tell me that "collateral is collateral not
money" .
I will try to state it for you so that you are not confused.....
although my point will be the same, which you seem to be missing.
Instead of saying "the IOU is a promise of collateral to be
produced".... The IOU is a promise to pay back with money... and
obviously they could not procure this money without working or
producing a corresponding collateral of their work.

>
> or in other words the collateral isn't produced yet
> but is promised.
> --------------------------
> ----------------------
> [REPLY] The collateral is collateral. The contract
> is a loan not a sale agreement. What is promised
> between the parties is that the terms of the
> agreement will be fulfilled through the progress of
> time.
> -
>
> Logically from this you can see that the point of
> inflation is then the point where someone does not
> produce the collateral
> --------------------------
> ----------------------
> [REPLY] You should be embarrassed to associate the
> term "logic" with such nonsensical gibberish
> -
YOu continually argue with me, and make inane statements, and you
repeatedly do not even read or understand what I write. I bring up
tokens used in a casino and you go off on a tangent about gambling.

>
> Increasing interest rates increases foreclosure,
> causes unemployment and also stagnates production.
> --------------------------
> ----------------------
> [REPLY] This is so bass ackwards. Increasing
> interest rates are generally associated with
> inflation. Increasing foreclosures are generally
> associated with deflation.
> -

     You seem to have a basic misunderstanding of fundamentals. Every
economist knows that increasing interest rates reduces production and
leads to more Lay offs and foreclosures. And yes , in addition to
higher interest rates "tight money" where not as many loans are given
out resulting in not enough currency or deflation will also increase
foreclosure in addition to higher interest rates.

14. Why are interest charges important?
For many reasons. First, interest plays a large part in the cost of
living. All business firms borrow to conduct their operations—some
more than others. These include firms at every stage of production. So
interest is a charge which is added on at each link of the production
chain. This is a cost which must eventually be paid by the consumer.
If it is not paid by consumers, output cannot be sustained. Thus,
interest rates also are a determining factor of the level of business
activity. Additionally, interest rates influence production because
interest rates influence the amount business spends for investment in
plant and equipment, the third largest amount of spending for the
country's annual output. (Interest has this effect because a part of
the country's annual investment is financed by borrowing.)

15. Do interest rate changes and tight money have other effects?
Yes. Consider what happens when the Government is restricting money
and credit. Firms find loans difficult to obtain and investment
tumbles. Small business is especially hard hit because the larger
firms tend to have their credit needs catered to first. Further, when
investment falls, firms which produce machinery or build factories
find their orders slumping and lay off workers while cutting their own
orders for goods. The economy pays for high interest in incomes not
earned and in output not produced.

16. What is the "efficiency cost" of high interest?
When investment is cut by high interest two things happen. (1)
Business does not take as much advantage of the new, more efficient
tools to produce goods as it might. (2) Industry slows down the rate
of expansion of the total output capacity of the country's factories.
The result of these twin effects is that tomorrow's workers work with
less efficient machinery and fewer machines than they might. Having
fewer and less efficient tools, tomorrow's workers of course produce
less than the could. In other words, the rate of growth output
slackens when high interest prevails

http://dewoody.net/money/

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