[GJM] Replying to Peter Challen

[Rodney Shakespeare]

Dear Michael,

1. I am delighted to see you intervening on GJM because the gang8 list --  
where you normally reside -- has no answer  to the unfolding global 
financial crisis.  I have also listened to two of your excellent and very 
spirited radio broadcasts.

2.  As regards your email below, the existing system creates money, adds 
interest (compounded, and admin cost) and does NOT direct it at the 
development and spreading of productive (and the associated consuming) 
capacity (e.g. anything from training Grameen women to  spreading ownership 
in the large corporations).  Without doing so you will never get Say's 
Theorem -- that producers and consumers must be the same people --  
implemented.  Say's Theorem is a theorem and not a present reality (so as to 
be a Law).

Yes, the money is created by keyboard strokes.

3.  Thankyou for  confirming that the ancient demunciations against usury 
were denunciations against any interest for consumer and agrarian debts.

4.  As regards commercial interest-bearing debt bearing interest in ancient 
times, what is historical is historical  but I should like to ask you a key 
question for modern times:--

Is there any reason why (when admin cost is allowed and collateral taken) 
there should be interest today on any loan connected with the development 
and spreading of productive (and the associated consuming) capacity?  Can 
not such loans issue interest-free from the national bank and be 
administered by the banking system?

Thankyou.

Season's Compliments
Rodney Shakespeare


----- Original Message ----- 
From: "Michael Hudson" <michael.hudson at earthlink.net>
To: "Myro Ashenopolitus" <new_economics at yahoo.com>; "Rodney Shakespeare" 
<rodney.shakespeare1 at btinternet.com>; "Discussion Forum for Global Justice" 
<Discussion at globaljusticemovement.net>
Sent: Friday, January 18, 2008 1:39 PM
Subject: Re: [GJM] Replying to Peter Challen


> Dear Peter,
>    The argument may be clarified in two ways.
>    Regarding the banking system's ability to create money ex nihilo, it is
> true that it takes two to tango. Banks no longer print banknotes and put
> them into circulation. When they create credit, they need a customer to 
> sign
> an IOU. The bank then credits the customer's account with a loan
> corresponding to the IOU -- less whatever "fees" the bank charges,
> extortionate as these may be. In this sense banks DO need customers. But 
> in
> popular language, the credit is created simply with a few keyboard 
> strokes,
> as they say.
>    Re riba and ancient interest, your informant is wrong (hardly
> surprising, given his position). The denunciations against usury in
> antiquity were indeed against charging ANY interest as such (not just "too
> much"). However, what is missed is that the usury that was denounced was
> that associated with consumer loans -- mainly "barley debts" and other
> agrarian personal debts owed to tax collectors and "merchants" (damgar in
> Babylonian).
>    It is important to recognize that when Near Eastern rulers "proclaimed
> order" (Babylonian andurarum) and when Lev. 25 calls for the Jubilee Year
> (cognate deror), they referred only to these personal and agrarian debts.
> EXCLUDED from debt cancellations -- and from the Jubilee Year -- were
> commercial "silver" debts among merchants.
>    So there always was commercial interest-bearing debt, settled among
> merchants, traders and other businessmen, that were recognized as socially
> helpful. This stems from a time when the Sumerian temples and palaces were
> the first creditors, advancing consignments of handicrafts and even silver
> to long-distance traders, and also leasing or "privatizing" means of
> production, land, workshops etc. to individuals for a stipulated rental
> return.
>    In the Middle Ages, the early history  of cuneiform law and practice 
> was
> unknown. Hence, writers saw only the biblical strictures against consumer
> debts, owed from the poor to the well-to-do. The commercial sphere of 
> debts
> had been left alone, and has been reconstructed only from private archives
> and royal documents such as the Edict of Ammisaduqa.
>    The details can be found in Debt and Economic Renewal in the ancient
> Near East, ed. Michael Hudson and Marc Van De Mieroop (CDL Press, 2000).
>    Michael Hudson
>
>
>