I believe in South Africa it works exactly as in the United States. Neither the central nor the commercial banks purchase securities directly from the government but through intermediaries, which determines the "market price" that is paid for the securities. The intermediaries take a rake-off in the process.
Let me ask you this, If you go to the bank and borrow a sum of money, assuming the money is newly created for the purpose, are you "spending" it into circulation or is it being "lent" into circulation? The fact that you can't see the difference is evidence you are the victim of newspeak, if not the perpetrator, as I'm sure you're not. That's what newspeak does; it clouds our thinking. We lose our free will and consciousness. Modern governments are budget constrained in that they have to cover the totality of what they spend from tax collections or the sale of securities, which is tantamount to borrowing. The spending that is covered by the sale of securities is also budget constrained in that future tax collections must be sufficient to amortize (redeem) the securities as they come due. A "balanced" budget simply means that the taxation curve plotted against time superimposes the spending curve. A "deficit" budget means that the taxation curve is delayed in respect to spending, but must remain "proportionate" to spending if the securities are to be amortized, otherwise it becomes a Ponzi situation where the debt (and debt service) is compounding in respect to spending. The Social Credit thesis is that income falls (due to "labor displacement" etc.) in ratio to the costs of production which means that as a general matter it is not possible to amortize debt. In regard to government it means that if it is a government that wants to hold the line on debt, it must increasingly reduce spending from tax collections in respect to money diverted to amortization, which means that services supplied by government must continually degrade. That seems to be the situation throughout the world. Historically, the United States presidential election of 1896 marked the point where the power of government to spend money into circulation was stripped from government. Henceforth, what government spent had to be taxed or borrowed. It was no longer allowed to "print" money to spend. Money became the monopoly of the banks, which would lend, not spend. The Social Credit perspective is that somebody has to spend to make up the shortfall from falling income-- whether the banks, government, or the people. The Social Crediters (who are not really Greenbackers) would prefer that it be the people and offer suggestions as to measures (consumers' dividend, compensated prices, etc.) to make that possible. It only works if that spending is neither tracked by the requirement to amortize or tax. If the spending is tracked by amortization, the stimulus from that spending lasts only transiently because the tracking amortization curve must inevitably overtake the spending curve, which is why Keynesianism works only in the short-term. The benefit from increased deficit spending is fleeting and becomes counter- productive. The shortfall is irrationally covered by "favorable" balance in trade, which creates the incentive to enslave your domestic workforce to capture foreign markets with cheap goods, in exchange for money that comes into your economy free of debt. Social Credit is the rational alternative for everyone concerned. --------- Original Message --------- DATE: Thu, 18 Sep 2003 09:29:06 From: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Cc: >Bill >I regret I am guilty of the newspeak here!! I paraphrased the passage and >added that bit in. For the record, the passage reads: > >[SARB as Controller of notes issues] >�Since its inception the Reserve Bank has had the sole right to the issue of >bank notes and coins. This cash comes into general circulation through the >purchase of assets (usually financial assests) by the bank. By the purchase >of government stock and assets from banks, credit is actually made available >by the Reserve Bank to government and banks. The Reserve Bank is largely >guided by the public�s cash requirements (�till money requirements�) in its >issues of notes and coins.� > >The sentence structure is misleading. I believe the one sentence should read: > �By the purchase of government stock [from government] and [of] assets from >banks, credit is actually made available by the Reserve Bank to government >and banks.� > >I see it as spent into circulation a) by government in the form of social >pensions and grants paid out in cash (cash is standard practice here), and b) >by businesses and sundry employers drawing cash from banks for change >requirements and for the payment of wages in cash. I suppose the latter >should be seen as being lent into circulation if it drawn against an >overdraft facility? > >On your other email, you ask: > >>Does it purchase directly from government or >>indirectly through the so-called "open market" as in >>the United States? > >I answer �as far as I understand it�. In this function, the Reserve Bank >purchases directly from government so that government is really creating new >money (credit). In its other function, which is its primary function, the >Reserve Bank buys and sells government bonds and other instruments on the >open market as a mechanism to protect the value of the Rand. Here is a quote >from a Reserve Bank reply to a query of mine: � Currently its main task, as >defined in terms of the South African Reserve Bank Act and in the >Constitution of the RSA, is to protect the value of the currency, i.e. to >keep inflation as low as possible. This is very much in line with >contemporary central banking practice all over the world.� > >The Reserve Bank strategy is to control the economy by market-orientated >actions rather than by direct interventions (instructions). The Bank can, >however, act directly by increasing or decreasing the legal (cash) reserve >rquirement, but they try not to resort to such harsh measures. > >I don�t know if this explains it satisfactorily, Bill, but I could develope it >at fuller length if necessary. By and large, the government, through the >Treasury and the Reserve Bank, are fairly well responsible for the money >supply in the country. The Reserve Bank is not controlled by private >interests, though there has been an unhealthy motion adopted at the recent >Annual General Meeting which could open a crack in the system. It alarms me >greatly, but fortumately it would need ratification by Parliament. I have >writtten to the Minister of Finance about it and await his reply. > >Jessop. >---------------- > >On Wednesday 17 Sep 2003 9:40 am, you wrote: >> One more thing, Jessop. Is this paraphrase of the >> source or is it quoted verbatim? If it is verbatim >> it is very cunningly crafted. Notice it says the >> "cash has been spent into circulation." I do not >> believe any of it is spent into circulation. I >> believe all of it is lent into circulation or the >> significant portion of it, even in South Africa. The >> Moslerite William Hummel challenged me on this the >> other day by claiming that the Fed when it purchases >> securities is "spending" money. It is true that it >> "purchases" securities but that is tantamount to >> lending. It is not the same thing as purchasing the >> products of industry. This is part of the "newspeak" >> we are apparently being subjected to throughout the >> world. The term "fiat" used to mean government money >> spent into circulation like the nineteenth century >> greenbacks. Now they are using the term for bank >> credit lent into circulation with the inference that >> it's exactly the same thing. Do you see what is >> happening here? It is an inversion of the meaning of >> words and is a subtle though powerful form of >> deception. >> >> >Over here, The South African Reserve Bank has the sole right to issue new >> > note and coinage currency. The Bank issues new notes and coins according >> > to the public�s cash requirements (aka �till money requirements�). The >> > cash comes into general circulation when the Reserve Bank buys government >> > stock from the government or financial assets from the banks. In the >> > process, credit is made available to government or banks who then draw >> > cash as required to spend. The cash then has been spent into circulation. >> >(Sources: SARB and �Basic Macro-Economis�, by L J Fourie & F van den >> > Bogaerde, published by I L van Schaik.) ____________________________________________________________ University of Phoenix Online. 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