[GJM] Replying to Peter Challen -- debt-free issuance and Tower Number Seven

Tue Jan 22 03:21:23 MST 2008

Dear Myro,

Thanks for replying.
1.  You are stating that the banks create repayable money and also non-repayable money and the latter comes about when the banks pay expenses/stockholder dividends etc.  May I ask if there is any limit to this non-repayable (debt-free) creation?  And if I wrote to your Bernanke man or to the Governor of the Bank of England, would they agree with you?

2.You do not accept  the  "debt virus thesis".  OK, that's your view -- but I suppose you will soon be telling me that the impending financial collapse is in no way due to the continual creation of more and more debt.

3.  On compound interest (Nigerian example) you now admit compound interest is involved and so it is no longer necessary  for me to report you to your supervisor for having an obdurate attitude.  

Moreover, I am pleased to note that you make the point that the interest only compounds when the repayment schedule is in some way in default.  This point  tells me you are obviously a young man with a responsible attitude to debt and life.  You will go far.  

4.  On interpretation of Islamic terms etc, it is not that I close my mind to contrary views but that I am on Islamic lists and the debates on the shades of what is or is not riba are endless and, at some point, you have to  make a sensible judgement.  Maybe you would like to join IBFNET (the Islamic Development Bank says it has over 5,500 members even though the main webpage figure is lower), for example, whereon you will see what I mean. 
STOP PRESS!   Today on IBF NET somebody is asking if there is any information on the Islamic view on seigniorage!  Myro, this is a good chance to forward your studies 

5.  On the Humber Bridge, the information I gave speaks for itself.

6.   I will not be sending you emails (sent to me) which are private.  I just say that I trust you, and all other members of this list (and this boring lecture applies to me as well)  in future to do our best to behave reasonably to each other (with latitude for occasional minor lapses, of course).

7.  11th September, 2001 -- Tower Number Seven
Today is Tuesday and the day when you are able to see Bill Ryan.  Don't forget now -- the question is what caused Tower Number Seven to collapse when no aeroplane touched it and it was (I think) about two hundred yards away from the two buildings which did collapse.   And how did they know in advance Number Seven  was going to collapse?  And why is this matter continually brushed aside as of no significance?And, of course, why didn't all the other buildings in the area collapse as well when they, too, were not touched?  

In particular, is it not a fair explanation of the 911 events to say that the US government knew the attack was going to happen and decided to help things along, as it were?

Rodney Shakespeare.

PS  Yesterday was an American national holiday and I am very pleased to see that, by writing your email, for example, you were working hard and not watching the Houston Hooligans football team (or whatever )with a greasy hotdog in your hand.  

----- Original Message ----- 
From: "Myro Ashenopolitus" <new_economics at yahoo.com>
To: "Discussion Forum for Global Justice" <discussion at globaljusticemovement.net>
Sent: Tuesday, January 22, 2008 5:17 AM
Subject: Re: [GJM] Replying to Peter Challen -- debt-free issuance and Tower Number Seven

> Rodney, my replies are inserted below [Reply].
> 
> Myro
> ------------------------------------------------------
> 
> Dear Myro,
> 
> This correspondence is quite extraordinary.  I deal
> here with the money-creation aspects but there are two
> post-scripts.
> 
> 1.  By avowing that the banks create money are you 
> saying they create interest-bearing (repayable) 
> money;  or debt-free  (non-repayable) money?  Or both?
> ------------------------------------------------------
> 
> [Reply]  Both.  The sum total of customer accounts are
> credited both when loans are granted and when bank
> checks written for ordinary business expenses plus
> dividends to stockholders are deposited.
> - 
> 
> You have stated that the banks create money to pay
> their stockholders.  That can only mean that you are
> saying they create debt-free, non-repayable money with
> which to do it.  Stock dividends are not repayable.
> 
> I am not aware that this particular creation of
> debt-free money is generally admitted.  Are you in
> agreement with others about this, or is this your own
> view (which does not necessarily mean it is wrong)?
> ------------------------------------------------------
> 
> [Reply] There is no controversy whatsoever over the
> mechanics.  It's just that the vast majority of
> economists who understand the mechanics are not
> directly responding to "debt virus" adherents like
> you.  They simply do not regard the "debt virus"
> thesis to be worthy of serious consideration.
> -
> 
> 2. I quoted President Obasanjo on compound interest
> (and, yes, did not supply the original contract).  It
> is astonishing that you deny the existence of compound
> interest and appear to be saying that all such
> references to compound interest are lies,
> fabrications, screw loose etc.  I am gob-smacked by
> your evident belief that compound interest is never
> involved in these international transactions.
> 
> May I ask -- again --  if others agree with you on
> this?  Of course, being the only person to have such a
> view does not invalidate it but -- goodness me! --
> your independent reasoning appears to be taking you
> into unusual territory.
> ------------------------------------------------------
> 
> [Reply] Loan contracts contemplate their amortization,
> which means that interest is paid when due.  Only when
> interest is not paid when due does it compound to
> principal, against which interest is being charged. 
> Such lending contracts are in default and are not
> being paid according to their terms and conditions. 
> So the enormous numbers being written up become quite
> meaningless, and become impossible to pay, and
> inevitably become written off or down at some
> point--which is exactly what happened in Nigeria,
> whose debt was written down and forgiven by two thirds
> before Obasanjo left office.
> -
> 
> 3.  As regards the meaning of the Arabic terms on riba
> etc, I am daily on Islamic lists where they argue
> endlessly about such things and, rather than get
> involved with Arabic translation, historical context
> and the like, I prefer to take the views of those who
> are  the most balanced and sensible and, in
> particular, those with whom I discuss face to face.
> ------------------------------------------------------
> 
> [Reply] In other words, you "prefer" to "take the
> views" of those who agree with you, and close your
> eyes and mind to contrary views.
> -
> 
> 4.    Here is the Humber Bridge information you asked
> for.  Please do not bother asking if I have the
> original contracts.
> 
> The Humber Bridge
> 
> A bridge over the river Humber (in the UK ) was
> required.  The materials and expertise were available;
> the finance was by the UK government which provided
> interest-bearing loans; and construction was begun in
> 1972 at an estimated cost of Â£28,000,000.  Because of
> price inflation, difficult ground conditions, labour
> relations difficulties and adverse weather, the cost
> rose to Â£98,000,000 but, by the time the bridge
> opened to traffic in 1981, interest charges had taken
> the cost up to Â£151,000,000.
> 
> At which point an important fact should be noted?
> every year since being opened in 1981 the bridge has
> made an operating profit i.e., its running costs
> (basically, repair, maintenance and staff salaries)
> are exceeded by the fees it receives from travellers
> crossing the river Humber.  Put simply, itâ?Ts a
> money-maker.
> 
> With that fact in mind, now consider what happened in
> the years that followed.  In 1982, because of compound
> interest, the debt was up to Â£164,000,000.  However,
> by 1992? only ten years later? it had shot up to an
> amazing Â£439,000,000!  Wow!!
> 
> Whereon, to stop the huge repayment burden falling on
> the Humberside residents, the UK government intervened
> to reduce the rates of interest, write off amounts and
> give grants of Â£40m per year so that the debt was
> effectively pegged for six years.  Further
> â?~re-structuringâ?T then took place to reduce the
> debt, i.e., a large proportion of it was cancelled. 
> Readers are advised not to even think of the horrific
> level the debt would be at today if the government had
> not â?~re-structuredâ?T the debt by cancelling a large
> part of what was due.
> 
> The story of the Humber Bridge then gets egregiously
> preposterous and completely outrageous.  The original
> money was lent, at interest, by the UK government,
> which had borrowed the money at interest!  Thus,
> today, the National Debt carries the burden and the UK
> public as a whole (as opposed to the residents of
> Humberside) will be eternally paying for the
> never-ending interest on the Humber Bridge!
> ------------------------------------------------------
> 
> [Reply] Let me begin by criticizing one of your last
> assertions here, another really big whopper: the one
> about the "original money" being lent "at interest, by
> the UK government, which had borrowed the money at
> interest!"  It is true that the construction money was
> lent by the UK government to the bridge authority, but
> as with all disbursements by the UK government, most
> of it is covered by taxation, not by borrowing.  Let's
> say, for the sake of discussion, I don't know what the
> actual ratio was at the time, that the ratio of
> government disbursements covered by taxation was
> eighty percent at the time, with twenty percent being
> covered by borrowing, it is only correct to assert
> that twenty percent of the funds advanced to the
> bridge authority for the bridge's construction was
> borrowed in the first instance by the UK government,
> the rest being covered by taxation.  As for that
> twenty percent, the UK government pays the very lowest
> interest rates on its debt, much lower than the
> "market rates" charged by the UK government to the
> bridge authority, during a period of high inflation
> and rising interest rates.  So the UK government had
> effectively purchased for itself a steady stream of
> money from bridge tolls, a form of tax on the users of
> the Humber Bridge.  So the actual situation is not
> nearly as dire as the superficial examination of the
> numbers would seem to suggest.
> 
> This is from the bridge's official site:
> 
> http://www.humberbridge.co.uk/finance.php
> 
> "Construction of the Humber Bridge began in 1972,
> funded by Government loans. The cost (original
> estimate Â£28m) soon grew to Â£98m as a result of high
> price inflation during the construction period and
> delays caused by ground conditions, labour relations
> difficulties and adverse weather. By the time the
> bridge opened to traffic in 1981, loan charges had
> already brought the bridge debt up to Â£151m. Every
> year since opening the bridge has made substantial
> operating profit but initially this was insufficient
> to cover the loan charges, so interest was capitalised
> and the debt continually increased. In 1998 an
> agreement with the government led to the project being
> re-financed. It is now anticipated that the
> construction loans will be paid off by 2032. Despite
> the bridge's escalated construction cost, the user
> benefits (arising from mileage savings) are very large
> and exceed the cost of the project by a considerable
> margin."
> -
> 
> Rodney Shakespeare.
> 
> PS
> 
> 1. Myro, I consider my relationship with you to be
> something akin to the paternal one and so I come under
> an obligation to tell you when there comes to my
> notice what others are saying about you.  One email
> gives extensive detail of some of your activities and
> I suggest it is time to set boyish escapades behind
> you (we all behave badly at some time or another)  and
> move on to more positive activity.
> ------------------------------------------------------
> 
> [Reply] Why don't you email me a copy of the email
> that "gives extensive detail of some of [my]
> activities." Please be aware that we have dossiers on
> you and your colleagues in our research project.
> -
> 
> 2.  Please ask Bill Ryan your supervisor what is his
> view on the collapse of (9/11/2001) World Trade Center
> tower Number Seven -- that's the building which
> collapsed (around 4.30 in the afternoon) into its own
> footprint without being hit by an aeroplane.  GJM
> members will be delighted to hear Bill's considered
> view on this matter.
> ------------------------------------------------------
> 
> [Reply]  Obviously, you have some sort of conspiracy
> theory about that building.  It's the Martin Luther
> King federal holiday here, and I won't have the
> opportunity to see Ryan before Tuesday.  I'll ask him
> about this once I see him.
> 
> 
> --- Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote:
> [snipped]
> 
> 
>      ____________________________________________________________________________________
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