Re: Extrapolating A+B Part 1
- From: "william_b_ryan@xxxxxxxxxxx" <william_b_ryan@xxxxxxxxxxx>
- Date: 19 Sep 2005 02:03:24 -0700
"The function that makes the inactive depositors account balance grow
as you describe is the same function that makes the balance of a debt
grow..."
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How and why? It is incumbent on you to explain. So far you have not
explained but merely asserted.
We know how "the function" works on an inactive (non-performing)
balance according to the MIT students in the example you cite. In that
example the bank's debt to its non-bank depositor grows exponentially.
Please explain the mechanism that causes the non-bank public's debt to
the banking sector in the aggregate to grow exponentially in the
o_p_p_o_s_i_t_e direction.
Does not the term "amortize" infer that debt is d_e_c_r_e_a_s_i_n_g not
increasing?
-
"The argument of the hypothetical situation where 100% of dividends and
interest taken in by the banks is paid out with no time lag and all
money is always available to pay debts is unrealistic."
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The false assumption implicit here is that there is a fixed quantity of
money that accumulates into account balances held by banks in receiving
interest, causing the "medium of exchange" to withdraw from
circulation.
In respect to banks, the creditary theorem that Douglas enunciated in
his book *Social Credit* is that loans create deposits; the repayment
of loans cancel deposits.
-
"For this to work there would have to be a pefect orchestration of all
payments where the slightest slip would send the system spinning into
disequilibrium."
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Time lags are accommodated by the conventions of double-entry
accounting. Loans are amortized through time. Contracts of all types
are fulfilled through time.
The fallacy in your mind is, it seems, that a debt in the amount of X
due and payable in one year (or whatever) is exactly equivalent in
value to a debt in the amount of X due and payable in fifty years or a
thousand years. That if X is "borrowed" today, X and only X should be
repaid regardless of the term of the loan.
-
"The only way to compensate a force is by applying an equal and
opposite force..."
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We are not dealing with forces or anything tangible where the laws of
physics apply. We are discussing modern creditary money, a species of
contract in the manifold of social relations.
But the statement is nonsense even within the context of physics. Have
you never heard of the concept of vector? Did you not know that
sailboats can sail against the wind, utilizing wind power alone?
-
"The difficulty in following this argument comes from the inability to
cleary differentiate the concept of receiving money from the concept of
interest accrual."
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Yes, there is a difference. The one is accrual to an isolated inactive
account. The other relates to actual transactions. Your MIT example
related where the debt accruing was from a bank to its non-bank
depositor, illustrating that banks not only receive interest but p_a_y
interest.
If banks both receive interest from the public and pay interest to the
public, as well as paying ordinary business expenses and dividends to
the public, please explain why interest should cause debt to polarize -
with the banks in the aggregate becoming net creditor, and the public
net debtor?
I insist you answer this specific question.
-
-------------original message------------------
From: "Marc Gauvin" <gauvin@xxxxxxxxxx>
Date: Mon, 19 Sep 2005 02:17:58 +0200
Subject: Re: Extrapolating A+B Part 1
Sent: Monday, September 19, 2005 2:13 AM
William,
1) The function that makes the inactive depositors account balance grow
as you describe is the same function that makes the balance of a debt
grow so the design of both represent first order +ve feedback loops.
2) Now, there is a residual difference that I pointed out between the
aggregate rate of debt growth and that of funds on deposits. Put
simply, exp x minus exp y where x>y = exp z >0. If the total of all
money created as principal and lent into circulation has a
corresponding debt growth that is faster than any other growth i.e.
principal deposits then the difference between (debt + interest on
debt) and (deposits + interest on deposits) has to be positive i.e
always a residual exponential debt unpaid and there is no alternative
source of new money free of debt growth to compensate the difference.
The argument of the hypothetical situation where 100% of dividends and
interest taken in by the banks is paid out with no time lag and all
money is always available to pay debts is unrealistic. For this to work
there would have to be a pefect orchestration of all payments where the
slightest slip would send the system spinning into disequilibrium. The
only way to compensate a force is by applying an equal and opposite
force, likewise the only realistic way to compensate for exp x on debt
is whith exp x on deposits. The difficulty in following this argument
comes from the inability to cleary differentiate the concept of
receiving money from the concept of interest accrual. Interest debt
grows as a function of itself and not as a function of anything else,
receiving monies can be a function of other parameters in the system
but the two are not equivalent.
Best,
Marc
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- Extrapolating A+B Part 1
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