[GJM] Replying to Peter Challen

[Rodney Shakespeare]

Dear Myro,

I am pleased to help progress your research.

1.  You say that "some significant amount of the money that the banks create 
is not interest-bearing, that which they create when they write checks for 
expenditures in the ordinary course of business,  including dividends to 
their stockholders......."

You say they create money to pay their stockholders?  Really?  That is 
saying they create debt-free non-repayable money to pay their stockholders 
because I am not aware that stockholders have to repay their dividends the 
next day, or even ever.

You have made a most  extraordinary  statement.  If true, is there anything 
which stops the banks creating as much money as they like for any purpose 
they like?

What seems to be happening is that you are revealing banking practice as 
much more corrupt than ever I thought it to be.  Please do carry on.

2.    You are a callow youth and have no respect  for the wisdom which comes 
with age..   Do not try being abusive to me by talking about a small clique 
of supporters and obscure and little watched television channels.  You have 
the support merely of one person -- a slightly mad supervisor called Bill 
Ryan who has multiple personalities -- one for each day of the week, 
apparently.  Does he also wear different coloured hats?

Moreover, we at GJM not only have an accurate diagnosis of the global 
financial crisis but we have the solution.  In short, events are moving our 
way  and they are not moving in the direction of your supervisor and,  if 
they did, heaven help the events.

3.  You say "when the banks spend for any purpose whatsoever, the money 
supply is increased".   This is another remarkable statement supporting the 
one above to the effect that the banks can create debt-free money for any 
purpose they like.  Is this your idea or your supervisor's?  Frankly, it can 
only be your supervisor's expressed on a day when he had called himself 
Hieronymous Bosch or something and was wearing a purple cap.

4.  As regards an international contract having compound interest (you deny 
such things exist and ask for an example) I refer to
President Obasanjo of Nigeria in 2000.  Commenting on his country's debt to 
international creditors, he said:-



"All that we had borrowed up to 1985 or 1986 was around $5 billion and we 
have paid about $16 billion yet we are still being told that we owe about 
$28 billion.  That $28 billion came about because of the injustice in the 
foreign creditors' interest rates.  If you ask me what is the worst thing in 
the world, I will say it is compound interest."


5.  Myro, you are being very naughty on this Islamic fundamentalist business 
particularly  because what you mean by modern "reformists" is Islamic 
Banking which, as I have explained briefly, is only a version of 
conventional banking.  Kindly take your guidance from me in this matter and 
not from your supervisor Bill Ryan,  particularly on Fridays.

6.  I am very glad to see you have had a look at the diagram at 
www.binaryeconomics.net.  Unfortunately your understanding of it is probably 
as bad as your supervisor's  and I just say there are no boards of 
supervisors.  I suggest you do a little more proper research --  that means 
reading big books, Myro, and not just pressing computer buttons which you 
(and, believe me, your supervisor) are very good at.

7.  I said halving the cost of capital projects.  That is wrong.  I should 
have said thirding or quartering and if you want me to raise the example of 
the Humber Bridge, I will.

8.  I asked you to give my compliments to your supervisor.  Did you do it? 
And what sort of hat was he wearing?

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 10:36 PM
Subject: Re: [GJM] Replying to Peter Challen


> [Shakespeare] "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."
> ------------------------------------------------------
>
> In two previous postings I've demonstrated that this
> is a false assertion.  Some significant amount of the
> money that the banks create is not interest bearing,
> that which they create when the write checks for
> expenditures in the ordinary course of business,
> including dividends to their stockholders, which
> becomes available to the general community to pay
> interest back to the banks.  It is not simply rhetoric
> that the economy is a wheel of commerce, Rodney.  This
> is generally accepted by most educated persons, so
> when you go beyond your small clique of supporters to
> present your ideas outside of obscure and little
> watched cable channels, if you have the opportunity,
> you're going to have a real problem.
>
> [Shakespeare] "Therefore there must be a continued
> creation of more and more (interest-bearing) money if
> there is not to be a credit contraction overall."
> ------------------------------------------------------
>
> This doesn't follow from what I said, which was that
> the payment of interest cancels money, but when banks
> spend for any purpose whatsoever, the money supply is
> increased, enabling interest to be paid back to the
> banks in reciprocal economic activity.  The receipt of
> interest and the spending are going on simultaneously.
> Again, it is a wheel of commerce.
>
> [Shakespeare] "I do not think you understand the
> effects of compound interest and, moreover, are only
> thinking of interest at the branch of a local bank.
> What about those huge international loans at compound
> interest?"
> ------------------------------------------------------
>
> It is impossible for you to supply even a single
> example of an international loan contract that calls
> for compound interest, because it simply does not
> exist.
>
> [Shakespeare] "Myro, you are a very naughty boy in
> saying that I associate with Islamic fundamentalists."
> ------------------------------------------------------
>
> You object to the term "fundamentalists" which I used
> to contrast them with the modern "reformists."  Please
> address the point about the Arabic words from the
> Quran: "fa'eda" meaning interest, and "reba" meaning
> usury.  Interest is not usurious per se.
>
> [Shakespeare] "Please go to
> http://www.binaryeconomics.net and examine the diagram
> on the main page.  Then please tell me what, if
> anything, is wrong with it."
> ------------------------------------------------------
>
> I've looked at it.  Since this list does not forward
> attachments, I've appended the textual statement from
> the diagram below.  There are several things wrong
> with it, beginning with the concept of interest-free
> loans for "productive" purposes.
>
> What is proposed is an economy without the
> entrepreneur, with that function being replaced by
> boards of bureaucrats determining what is
> "productive." It is the elimination of the private
> enterprise competitive profit and loss system, where
> consumers in markets through their purchasing
> decisions decide what is "productive."  Do you not
> realize that is essentially the financial structure of
> the old Soviet Union that is doomed to failure for the
> same reason that the Soviet Union ultimately failed?
>
> It makes the same error that I've addressed in
> previous posts that "administrative cost" and
> "interest" are allegedly separate things, whereas in
> truth "administrative cost" is one of the three
> components of interest, along with the insurance
> premium for defaulted loans and the banks' profit.
>
> Therefore the "halving or more the cost" bit is
> fallacious, and naive to say the least, because the
> real costs of supplying credit will remain, being
> hidden, and will probably increase, due to
> bureaucratic inefficiency as compared to the free
> market.
>
> [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
> inflationary, not directed at productive capacity and
> exclusive of the private sector.
> ------------------------------------------------------
>
> I've had many conversations with him about Social
> Credit.  He says that your characterization of it is
> complete nonsense.
>
> Myro
>
> -------------------------------------------------------------
> ------------------------------------------------------------
>
> Textual statement from Rodney's diagram:
>
> "A gradual rise to 100% banking reserves requirement
> stops the banking system from creating money out of
> nothing.  Interest-free loans for productive purposes
> then come from central banks and are lent to approved
> institutions which may charge for administrative cost
> but may NOT add interest as they lend for 1) small
> business micro finance, 2) homes, 3) public capital,
> 4) environmental projects, 5) medium and large
> business IF wider ownership is promoted, and 6)
> student loans, thereby halving or more the cost."
>
>
>
> --- Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote:
>
>> 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
>>
> === message truncated ===
>
>
>
> 
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