[GJM] Replying to Peter Challen

[Rodney Shakespeare]

Dear Myro,
I am delighted to know that you are Myro and Bill Ryan is your thesis adviser.  Your discussions together must be most stimulating.
My response is in blue below.

Rodney Shakespeare



----- Original Message ----- 
From: "Myro Ashenopolitus" <new_economics at yahoo.com>
To: "Rodney Shakespeare" <rodney.shakespeare1 at btinternet.com>; "Discussion Forum for Global Justice" <Discussion at globaljusticemovement.net>
Sent: Friday, January 18, 2008 1:57 AM
Subject: Re: [GJM] Replying to Peter Challen


> Rodney, my replies are inserted below:
> -------------------------------------------------
> 
> Dear Ashenopolitus, 
> 
> It is always a pleasure to correspond with educated,
> open-minded and expert people like your good self. 
> 
> 1.  Where is the whopper when I say the banking system
> creates money out of nothing and you say exactly the
> same?
> 
> [Reply: The fact that banks create money out of
> nothing was not one of your whoppers that I cited. But
> I do object to the nefarious spin you put on the term.
>  "Out of nothing" derives from the Latinized legal
> term, "ex nihilo," which means contractual in this
> context.  Modern creditary money is contractual,
> calling for future performance.  When we sit down to
> write a contract, any contract, we will agree on terms
> and conditions that did not exist before we sat down. 
> Hence, they were created "out of nothing" in the
> finalized contract that we will sign.]
"Ex nihilio" means "out of nothing" and your  attempt to deny that meaning is part of the usual conventional attempt to assert that  conventional endogenous money is God's Gift to the universe because it is at the heart of the (purportedly successful) 'free market' system).  Such money is created out of nothing, has interest (and admin cost) added and is NOT  directed to the true purpose of the society and the economy i.e the development and spreading of the ownership of productive capacity (together with the associated consuming capacity).  Such money is also the direct cause of the present global financial crisis.
> -
> 
> Does your education and open-mindedness include being
> logical?  Is Steven Consilio being unfair in
> implicitly accusing you of Orwellian double-think (the
> ability to hold two mutually exclusive ideas
> simultaneously)? 
> 
> 2.  Where is the whopper when I say that the banks do
> not create enough money for the repayment of interest?
> I am sure that you can explain where in the process
> the banks create the money for the interest.
> 
> [Reply: That was explained in my original posting,
> which I'll be glad to expand upon as much as you like.
> The banks as a statistical matter create more than
> enough money to pay interest back to them when they
> write checks for any purpose whatsoever without
> correspondingly debiting any bank customer's account.
> Those checks are deposited into transaction accounts
> that are liabilities of the banks, as is exactly the
> case when they extend the principal of loans.  This
> process is not a mystery and is acknowledged by the
> economics profession.]
There is no need to expand on this any more.  The banks create huge amounts of money -- ALL of it is interest-bearing -- and the only way your reply makes sense is if the banks create more and more such money and so there has to be more and more debt. SO NOW YOU KNOW what is the fundamental cause of the g;lobal financial crisis today -- the banks' continual (and necessary if the present system is to be maintained)  creation of money at interest.  BUT, of course, once confidence collapses as at some stage is inevitable,  the huge amounts of debt and money not properly directed means a collapse.
> -
> 
> 3.  Please display your expertise further in
> explaining your statement that, when interest is
> repaid, it is cancelled.
> 
> [Reply: Because when interest is paid to the banks,
> deposit accounts held by the public are debited,
> without any corresponding credit to any accounts held
> by the public.  The deposit accounts are liabilities
> of the banks to the public, which are reduced when
> payments are made to them for interest or any other
> purpose.  The sum total of bank deposits held by the
> non-bank public are thereby reduced, reducing the
> quantity of money as generally defined.]
Therefore there must be a continued creation of more and more (interest-bearing) money if there is not to be a credit contraction overall.  
> 
> 4. Please also explain how banks pay their employees
> etc if the interest the banks receive is cancelled.
> 
> [Reply: By writing checks, which are their
> liabilities.  When those checks are deposited into
> bank accounts, the sum total of bank deposits thereby
> increase, increasing the quantity of money as
> generally defined.  It's all handled by the ordinary
> rules and conventions of double entry accounting.  Let
> me also comment on another point you made in the
> program, that two things are paid to the banks in
> addition to principal: administrative charge plus
> interest.  Actually, the administrative charge is in
> fact interest, inasmuch as interest is defined, in the
> standard definition, as the amount paid to the banks
> in addition to principal, regardless how it is
> calculated.  The three components of interest are a)
> ordinary business expense, what you call
> administrative charge; b) what is effect an insurance
> premium to cover defaulted loans, which varies by
> credit risk category; and c) profit for the financial
> services that banks supply.  By far the largest amount
> collected through interest by the banks is the
> insurance premium, the next largest is business
> expense, and the smallest is the banks' profit.]
> Again more and more money (not properly directed) must be created if this is to work.  You asre a covnentional economist/banker in mind and spirit.
Yes,  in interest at present there is an element of 'insurance premium' 

I do not think you  understand the effects of compound interest and, moreover,  are only thinking of interest at the branch of a lcoal bank.  What about those huge interntitonal loans at compound interest?

> 
> 5.  I am fascinated by your comments on riba/interest
> and the Qu'ran. I have contact with many Islamic
> scholars and the consensus is undoubtedly that
> interest is riba and that in ancient usage 'usury'
> generally refers to riba.  
> 
> [Reply: The "consensus" is from the Islamic
> fundamentalists you are conferring with. Myro, you are a very naughty boy in saying that I associate with Islamic fundamentalists.  I am sure that your supervisor Bill Ryan would not approve.  Kindly ask  if he agrees with you on this.
 The
> reformist Muslims
I think by "Reformist Muslims" you may be referring to Islamic Banking which, as everybody knows, is really only conventional banking (now bringing he world to disaster) in disguise.  You seem to me to be a loyal supporter of all things conventional.  Is that right? And if it is not right, EXACTLY where do you differ from the conventional??
 are following the path of the
> Christian reformists of five centuries ago, who are
> going back to the original scriptures and language,
> who are finding that in regard to their moral precepts
> the Islamic scriptures are in close agreement with the
> Christian scriptures.  Yes. Distortions in both
> Christianity and Islam, it appears, were made by
> closed minded and rather ignorant medieval
> interpreters, who put their own spin in distorting the
> word of God.  In my earlier post I gave you a citation
> from one American reformist Muslim Internet site.]
> -> By "reformist" you mean Islamic Banking which is, of course, covnentional banking in disguise.  At Harvard in April, 2006 it was made perfectly clear (particularly by a VIP from Citibank) that  Western conventional finance/economis has taken over Islamic economics/finance so that there is no difference.> The modern usage of the word 'usury' (meaning
> 'excessive interest') is another matter.
> 
> [Reply: It is however more in conformity to the
> original meaning of the scriptures in both
> Christianity and Islam.]
> - 
> 
> 6.  I am also completely fascinated by who you are and
> what interests you are (attempting) to represent.
> 
> [Reply: I am amused by the conspiracy theories implied
> by the other posts, from Chris, Steve and others,
> which failed to address even a single point I made in
> my original post, as if they didn't matter.  The
> propensity toward conspiracy theory seems to be a
> characteristic of the "crank" mindset. Myro, you are obviously a very bright young man.  What is your explanation for all those banks writing off billions etc?>  For the sub-prime (and now even prime) mortgage crisis?  Are we going to see people on Wall Street throwing themselves out of windows?  Your considered view on these matters will  be appreciated by all people on GJM.


 As to Bill
> Ryan, I am not Bill Ryan.  I am a graduate student.  I
> do know him very well, and see him almost every day,
> as he is my thesis adviser, as well as being employed
> by him as a research assistant.  My involvement in
> these discussions is part of my assigned research
> project.Excellent!  Please go to www.binaryeconomics.net and examine the diagram on every main page.  Then please tell me what,  if anything,  is wrong with it.
> 
> Rodney Shakespeare
> -Please give my compliments to your supervisor and ask him if he thinks that Social Credit is a good thing instead of being something which is inflaionary, not directed at productive capacity and exclusive of the private sector.
> 
> Sincerely, Myro
> 
> 
> 
> --- Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote:
> 
>> Dear Ashenopolitus,
> [snipped]
>> 
>> 
>> 
>> ----- Original Message ----- 
>> From: "Myro Ashenopolitus" <new_economics at yahoo.com>
>> To: <discussion at globaljusticemovement.net>
>> Sent: Tuesday, January 15, 2008 4:40 PM
>> Subject: [GJM] Replying to Peter Challen
>> 
> Unfortunately, Peter, there are some whoppers from
> both Shakespeare and Yaseen in the first half of the
> program that will turn off educated and open minded
> people to the proposed solutions. 
> 
> For example, Shakespeare's assertion that "one of the
> problems of creating out of nothing is that it creates
> enough money for the principal of the loan but not
> enough for the interest." 
> 
> And Yaseen's assertion that "the Quran condemns
> categorically usury, or interest." 
> 
> First, to address Shakespeare's assertion: 
> 
> We say that banks create money because they credit
> deposit accounts when they create loans.  The ability
> and propensity to transfer deposit balances from
> person to person in transactions is what makes deposit
> accounts effectively money in today's economy. So,
> when loans are granted, money is being created. And,
> when loans are repaid, together with interest, money
> is being canceled. 
> 
> But there is a reciprocal monetary flow from the banks
> when they make payments for ordinary business
> expenses, salaries and wages to their employees,
> dividends to their stockholders, etc., where they also
> credit deposit account balances, which is additional
> to loans in the creation of money.  This puts money
> into circulation not deriving from loans that is
> available to pay interest to the banks in payment for
> financial services rendered. 
> 
> Now, to Yaseen's assertion: 
> 
> The ancient scriptures originally written in Semitic
> languages used two words that were erroneously
> translated or interpreted as "usury." 
> 
> A modern Islamic scholar in the United States writes
> this: 
> 
> 
> http://www.submission.org/islam/interest-usury.html 
> 
> "The Quran forbids usury, not interest. Quite a few
> states in USA have laws against usury. Usury is
> defined as excessive interest. A Dictionary defines
> usury as 'an excessive or inordinate premium for the
> use of money borrowed',  'extortionate interest', or
> 'the practice of taking exorbitant or excessive
> interest.' The Arabic language also makes distinction
> between interest (Fa'eda) and usury (Reba). The Quran
> forbids Reba or usury." 
> 
> Which is perfectly consistent with the modern Jewish
> and Christian perspectives on the matter: 
> 
> http://eh.net/encyclopedia/article/jones.usury 
> 
> "John Calvin's letter on usury of 1545 made it clear
> that when Christ said 'lend hoping for nothing in
> return,' He meant that we should help the poor freely.
> Following the rule of equity, we should judge people
> by their circumstances, not by legal definitions.
> Humanist that he was, Calvin knew there were two
> Hebrew words translated as 'usury.' One, neshek, meant
> 'to bite'; the other, tarbit, meant 'to take
> legitimate increase.' Based on these distinctions,
> Calvin argued that only 'biting' loans were forbidden.
> Thus, one could lend at interest to business people
> who would make a profit using the money. To the
> working poor one could lend without interest, but
> expect the loan to be repaid. To the impoverished one
> should give without expecting repayment." 
> -
> 
> Myro 
> 
> 
> ---------------original message----------------- 
> 
> Date: Thu, 10 Jan 2008 17:23:12 +0000 From: "Peter
> Challen" <peterchallen at googlemail.com> To:
> discussion at globaljusticemovement.net Subject: Re:
> [GJM] An excellent programme 
> 
> I've reached the half-way stage of the programme
> recommended below and use the 'break' to add my
> recommendation to this sanguine critique of a complex
> situation - a remarkable bit of broadcasting. 
> 
> Peter 
> 
> On 10/01/2008, Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote: 
> 
> Dear All. 
> 
> Alright, I know I should not say this (because I am
> one of the speakers with Moeen Yaseen of
> Globalvision2000) but Global Money Crisis: Just Where
> Does the Buck Stop? is an excellent programme. Moeen
> is tremendous!! 
> 
> At last we have managed to put across on television
> some analysis of what is wrong with the global economy
> and also put across some idea of the GJM solution. 
> 
> 
> To see the programe:- go to www.Presstv.com then 
> (left-hand side) Programs then The Agenda then Global 
> 
> === message truncated === 
> 
> 
> 
> 
>      ____________________________________________________________________________________
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