[GJM] Replying to Peter Challen

[Steve Consilvio]

Rodney wrote these comments (this is edited.)  While they were not  
directed at me, I thought I would chime in.


On WednesdayJan 16, 2008, at 1:09 PM, discussion- 
request at globaljusticemovement.net wrote:

> 1.  Where is the whopper when  I say the banking system creates  
> money out of
> nothing and you say exactly the same?

No whopper. It's true, just not limited to the banking system.

>
> 2.  Where is the whopper when I say that the banks do not create  
> enough
> money for the repayment of interest?

Not a whopper per say, but unclear. First you suggest that they  
create money out of thin air, but then you state they don't create  
enough to cover the interest.  So now you know WHY they create more  
money!  There is never enough money because they are always  
reacting.  Like the police, they show up after the crime, except in  
this case it is people doing "business."  If the businesses don't  
have enough money, then they create more so that the status quo is  
maintained.  This is Ben Franklin 101, and the belief that paper  
money would solve the specific problem that a lack of currency creates.


> I am sure that you can explain where
> in the process the banks create the money for the interest.

easy. 2+2=5  If you need to repay the 5, then you use 2+2=6 with your  
customers instead.  If you have to repay the 6, then you use 2+2=7  
with your customers instead, and so on.  Everybody is both a buyer  
and a seller, so they shift everything forward.  Buy low, sell high.   
The bank pays interest to its depositors, so therefore it must charge  
interest to the borrowers.  Isn't the WHERE obvious?  It is the WHY  
that is strange.

>
> 3.  Please display your expertise further in explaining your  
> statement that,
> when interest is repaid, it is cancelled.

The debt is cancelled, but the interest continues to exist as a  
number (value) added into the economy.  The values are never  
subtracted as they shift , they grow progressively and geometrically  
eventually.  This is why more money is constantly needed, the cause  
and effect are both the same.  Creating money (income) out of thin  
air (it doesn't matter who does it) requires creating more money out  
of thin air to pay for it.  One man's profit is another man's expense.
>
> 4. Please also explain how banks pay their employees etc if the  
> interest
> the banks receive is cancelled.

The interest isn't cancelled, it's collected.  Huge difference.  They  
pay their employees with the interest they collected, which is that  
pay plus the amount of interest they pay to depositors.  The banks  
are not evil.  They are stuck in the middle, the same as everyone else.

Think of the economy as a hole in the ground.  The more you dig, the  
deeper the hole gets, but also the pile of dirt gets taller, too.   
People like John Stossell are always writing about how "good"  
capitalism is, because he looks only at what was built (the pile of  
dirt being roads, buildings, etc) and he refuses to look at the huge  
hole that people fall into.  When people fall in, the usual advice is  
to dig.  Then they will have a pile that they can stand on, and maybe  
get out of the first hole, but that just leaves a deeper hole for  
someone else.  And so it goes over generations.  The values keep  
getting bigger.  The cost of living gets higher BECAUSE we work so  
hard.  We gain efficiency by using bigger shovels, but that just  
makes the holes deeper faster too.  The piles of dirt are ALWAYS  
directly related to the size of the hole.  Zero interest and low  
profits will keep the values close (a pricing equilibrium,) high  
interest and high profits will create a large amount of inflation.   
Nobody can outpace inflation, and the more transactions in the  
economy (the more shovelfuls) the greater the problem becomes.  Yet,  
we can't live without shoveling, either.  That is why an equilibrium  
is preferable to both inflation or deflation.

200 years ago, making a profit of 50% would have seen you tarred and  
feathered, today we think of that as "normal."  The same cultural  
change has occurred with the semantics between interest and usury.   
Today usury (using other's definitions) is charging 50% interest, but  
18% is "normal."  But if you go back in history, at one time 6%  
interest was considered "usury," and interest was 2%.  As all the  
values shift upward, the system becomes increasingly insane, but it  
has always been the same insanity.  Imperialism and the search for  
more gold and silver was a result of this mathematical phenomenon.   
They could never have enough money in the system because the value of  
the goods changed too rapidly.  Now we have paper money, but the  
mathematical phenomenon is still the same.  Land that cost 16 beads  
200 years ago costs millions per parcel today.  (Hoarding acerbates  
the problem, but inflation would be present even without hoarding and  
with a zero interest rate.  For-profit transactions are enough to  
imbalance the system initially.)

It isn't the money that is the root of the problem, it is the value  
that we assign to goods as we "trade."  2+2=5 grows into 2 
+2=trillions.  Every transaction adds to the imbalance, one shovelful  
at a time.  The great irony of doublehink is that we call this  
"trade" when in fact it is not a trade at all.  One side wins and the  
other loses.  Buy low, sell high.  There is no even trading (which is  
why planes fly into the "Trade Center," too.)  The red states  
(farmers) and the blue states (factories) and the black states (oil)  
don't trade fairly with one another.  Everyone is to blame equally,  
and everyone is equally a victim, too.

David Hacket Fischer's book The Great Wave documents the social  
effects of inflation (unrest) and pricing equilibriums  
(renaissance's) excellently.  Of course, he does not understand the  
underlying economics, but he tells the narrative wonderfully.  We are  
re-experiencing an old story.  I would suggest everyone taking the  
time to read it.

Math has no mercy, only people do.

peace,
steve consilvio
www.behappyandfree.com
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