Ed G:
> The thing to keep in mind is that there are two kinds of money. Both are
> used equally as currency to facilitate trade, you their nature is very
> different.
>
> There is Fiat money and Credit money.
>
> Fiat money is issued by the government with the collateral value being the
> trust people have in their government and, in a democracy, in each other.
> It is issued on a permanent basis and circulates (facilitates trade)
> without interest. It cannot be recalled out of circulation except by a
gov.
> tax that demands the tax be paid in Fiat currency.
>
> Credit money is issued (created) by private banks by monetising a
> marketable collateral value. (defrinitions of such collateral were once
> regulated but are now mostly at the discretion of a bank)
>
> It is issued by contract, at interest and disappears when the contract is
> satisfied. (the debt repaid)
I'm not so sure there is a difference, but then I'm no expert. If the
government authorizes something to be money, it's money. A dollar of bank
credit and a paper dollar have identical value. Both change their value
identically if something by which their value is defined, such as the price
level or the US$ exchange rate, rises or falls.
I'll grant that there is a difference in the tangibility or visibility of a
paper dollar versus bank credit. You can put a paper dollar in a cookie jar
and keep it there forever. A particular bank loan, on the other hand,
exists for a limited period and is then either repaid or recalled. However,
if it disappeared, the banks would be out of business. What they do is
repackage it and lend it to someone else.
IMHO, interest is not paid for money. It's paid for a loan. You pay it
simply because someone else has to give money up for a period of time so
that you can use it. You're renting the money just like you rent an
apartment or anything else. We tend to associate interest with bank credit
or the money we borrow via our Visas, but it would apply even if you went to
the bank with a wheelbarrow and brought a loan home in the form of cash.
> Since it uses a part of itself to satisfy the interest, it, like a pyramid
> scheme, cannot all be repaid. The system works because the new issue is
> always a little greater than the amount needed to satisfy the previous
> contracts. which is made possible by the increased value of production
> (technology) by an increasing work force
I'm afraid you've lost me here, Ed.
> The downside is that any increased economic activity must always incurr
> debt. That is, the new assets are always (bookkeeping) balanced by
> liabilities. As a consequence, any net financial assets that people have
> are balanced by the financial debts of others.
Here too. What you may saying is that is that productive assets, and even
our houses, are usually bought on credit, and liabilities therefore have to
be amortized. Once you pay off your mortgage, is there still a liability of
some kind on your house? I don't think so. I would suggest that your house
then becomes a piece of permanent wealth which maintains or increases its
value provided you keep it in good repair. But I may be missing something.
> Therefore, not all of us being equally viable (marketable) economic
> entities, the poor we always have with us.
Well that's what Christ thought, but Marx disagreed with him.
Best,
Ed W.
>
> Regards
> Ed G
>
>
>
> At 06:51 PM 06/05/2001 -0400, you wrote:
> >Victor Milne said:
> >> > As I understand it, the Bank of Canada would charge the government
> >> interest
> >> > comparable to a private bank. However, since the B of C is an agency
of
> >> the
> >> > government, all that it earned in interest would go into the general
> >> > revenues of the government, minus a small administration fee.
> >
> >What a wonderful idea. No doubt the civil service will shoot it down by
> >claiming that they are totally inefficient and undeserving of the extra
> >funds. The only thing I can say is that they haven't had to deal with
both
> >private and public sector. Apparatchiks always have their own myths
that
> >have little to do with the whole of things.
> >
> >Ed Weick then said:
> >It's not an idea which appeals to me at all. The preamble of the Bank of
> >Canada Act says that the role of the Bank "is to regulate credit and
> >currency in the best interests of the economic life of the nation, to
> >control and protect the external value of the national monetary unit and
to
> >mitigate by its influence fluctuations in the general level of
production,
> >trade, prices and employment, so far as may be possible within the scope
of
> >monetary action, and generally to promote the economic and financial
welfare
> >of Canada..."
> >
> >REH Question:
> >You seem to be saying that the only use for the bank is regulatory. Is
that
> >the case?
> >
> >EW continues:
> > To do these things, it is absolutely vital that the Bank
> >remain at arms length from political influence. Government, like all
> >borrowers, must be subject to market tests.
> >
> >REH comment
> >Down here we tend to equate the feeling of this with Corporate Welfare.
> >Corporations are strange little mini-governments under the law with
citizens
> >who gain entrance to their world through the purchase of property
(stocks)
> >or through the lending of money (speculation) which gives you a vote at
the
> >election. The marketplace is really such a nebulous thought that it is
> >difficult to define without resorting to a fantastic mythology about why
> >people buy products and why they do not. The process of advertising
so
> >distorts the true meanings of most of the products that I tend to avoid
most
> >products that are advertised simply because they seem so potentially
> >unreliable. Anything of any value that I purchase I do on
recommendation
> >of my network since I don't have money to waste and I can hold anyone
> >responsible for a careless recommendation including myself. But the
whole
> >idea of buyer beware is such a repugnant thought that when a product
begins
> >to be advertised I immediately consider that it has probably become
> >unreliable and they are trying to squeeze the last little bit of profit
out
> >of something that is past its usefulness. My point is that it is all
> >political and that definition is arbitrary. The only thing you can trust
is
> >that which can be held responsible. A responsible market is an
oxymoron,
> >like the balance of nature. I take the same attitude towards the "wild
> >only" environmentalists. Me, I'm a gardener and grow students and
> >potentials.
> >
> >EW concluded:
> >Making the Bank into the government's money machine would, in my opinion,
be
> >an absolute disaster.
> >
> >REH: concluded:
> >
> >Well, it wasn't a disaster when William Boothe started his match factory
to
> >put the Capitalists out of business who were poisoning the people with
their
> >factories. Boothe's clean factories succeeded in hiring the other
> >factory's workers away to the safer environment. In short he put the
> >polluters out of business. They then approached Boothe who agreed to
sell
> >them his factory at cost as long as they agreed to do away with the old
> >practice of poisoning their workers. There were those who insisted
that
> >such practices were beyond religion but to my way of thinking Boothe and
> >maybe the Quaker Gregg were the few angels in this whole Christianity and
> >Capitalism fiasco. They thought about and cared about the people and
made
> >their factories work within the context of that care.
> >
> >Does the Bank of Canada care about the people or the corporations? It
does
> >not follow that the health of the wealthy means that the health of the
> >common person will improve. Spirituality and Patriotism are supposed to
> >mitigate the harsh realities of the market place and create a nation
where
> >lives are not wasted but grown. How can you value an Einstein? Is
he
> >worth as much as Ford or Kennicutt Copper? The Creator does not give
the
> >qualities of Einstien or Beethoven to the people of most "worth."
> >Though both are gifts to be found in all economic classes, the
development
> >of such is not the case. Is a nation the poorer because they put
Beethoven
> >to work in the Silver Mine at Potosi? or Einstein at Auschwitz?
> >
> >The issue here for me Ed is that I don't believe that your system is for
the
> >development of all the people but for the moneyed class. I certainly
could
> >be selling you short on that but on the one hand you seem to invest the
bank
> >as a kind of Supreme Court of monetary issues but on the other hand the
> >rules favor the wealthy and corporations as the keepers of the wealth of
the
> >nation. Believe me, you and your family will hate HMOs. If the
common
> >man or woman can choose to put the corporations or private banks in their
> >place by giving their money to the bank of the Nation and if that would
then
> >hurt the private banks then is it not possible that the private
institutions
> >are simply wasteful and inefficient? Perhaps it is like the New York
> >Transit. We have both private and public and they shift back and forth
> >every few years as the system on top becomes hidebound and inefficient.
> >Both systems follow the same rules and have to be replaced by the other
> >every few years. That is how they keep each other honest. If we
didn't
> >have the public, the fares would go through the roof, like California's
> >energy costs, on the other hand, the private are more flexible and force
> >technological change and keep the Unions honest as well.
> >
> >REH
> >
> >
> >
> >
> >
> >
> >
> >
> >
>
>
>
