[GJM] James Robertson

[Rodney Shakespeare]

Peter,
Thankyou for replying.

1.    If  mortgages come from the actual savings of Building Society 
depositors (so that their accounts are at risk)  then at least it can be 
argued that interest (in addtion to the administration cost) is a "reward" 
or something for the depositors.

But if the mortgage comes from a bank which has created the money out of 
nothing (i.e., simply by making a new computer entry) why should the bank 
charge interest in addition  to administration cost? That is highway 
robbery.

You are mixing interest with administration cost.  Of course, genuine 
administration cost should be paid for -- a 0% loan would also have perhaps 
a half per cent administration cost (after all, it is generally done by 
standing order and automatic computer entries).  On a $200,000 loan half per 
cent is $1,000 per year which is ample. (NB However, half per cent on a 
declining balance is an annual percentage rate of considerably more).

Paying for genuine administration cost upholds free market principle but 
paying interest does not -- it distorts the basic market mechanisms.

Borrowing $200,000 and repaying $600,000 is an outrage which is not 
accountable to administration cost and nor should it be due to inflation. 
Inflation is not due to the fairies: it happens because the banking system 
endlessly creates money out of nothing.  Your reference to "depository 
money" is a load of nonsense.  Today's money is not gold and -- you do not 
appear to have noticed -- it keeps increasing.

2.  You appear to be remarkably sanguine about the financial system and say 
that 10% of the sub-prime loans have failed and about 90% percent are 
current.  If that is so, then God help us -- the present crisis  (caused by 
the failing 10%) will become catastrophic if another 10% go down (which is 
what a lot of people think will happen).

3.  Yes, administration cost includes salaries and can include an element of 
risk premium.  But -- to listen to you -- a thing called "interest" does not 
really exist in the real world.  When Nigeria paid back eight times the 
original principal of a loan, there was virtually no administration cost 
because  the administration was done by the Nigerians.  Interest is 
generally a rip-off and a distortion of the market mechanisms.

4.  I am pleased to note that you think your country could be improved. 
Accusing Steven Nieman of being against the American way of life looked very 
much as if  -- like a Cheyney or a Bush failing to mention the Bremer 
Orders-- you were trying to wrap yourself in the American flag instead of 
debating properly.


Rodney Shakespeare.



----- Original Message ----- 
From: "Peter Hogwood" <p_t_hogwood at yahoo.com>
To: "Discussion Forum for Global Justice" 
<discussion at globaljusticemovement.net>; <socialcredit at elistas.com>
Sent: Saturday, March 22, 2008 11:02 PM
Subject: Re: [GJM] James Robertson


> Rodney, my replies are inserted [Reply]:
>
> Peter Hogwood
> Certified Public Accountant
> Monroe, Louisiana
> -
>
> Dear Peter,
>
> With reference to your reply to Steven Nieman on home
> loans.
>
> 1.    You appear to be convinced of the virtues of the
> present American 'free market' and refer to contracts
> freely entered into by the parties.  In your view, are
> the "sub-prime" mortgages now damaging the financial
> system freely entered into by the parties?
>
> Moreover, do you generally approve of them and the
> circumstances which produced them?
> ---------------------------------------------
>
> [Reply]:  I generally approve of them but there was
> certainly fraud involved with some of them.  It should
> be noted that only about ten percent of them are in
> default or in arrears, which is certainly a
> significant number, but which also means that ninety
> percent of them are current.
> -
>
> 2.  If the banking system were to be limited in its
> present ability to create money out of nothing, would
> you think it a good idea for home loans (ultimately
> coming from the national bank) to be issued at 0%
> interest (but, of course, with an administration
> cost)?  Plus,  of course, criminal penalties for
> deliberate falsifications of income and valuation.
> ---------------------------------------------
>
> [Reply]:  "Out of nothing" simply means that
> depository money is created by contracts written on
> paper, rather than something tangible dug out of the
> ground, like gold.  There is nothing nefarious about
> the phrase whatsoever.
>
> I prefer the principle that the purchasers of goods
> and services should generally pay for the costs of
> supplying them, which would not be the case for zero
> percent loans.  It distorts the very concept of the
> free enterprise economy.
>
> What you call administration cost is only one of the
> three important elements of interest that borrowers
> pay for the service called bank credit.
> Administration cost would I presume apply to salaries,
> wages and ordinary business expenses of the financial
> sector.  The largest element within interest is what
> is effect an insurance premium charged for loan
> defaults within the particular risk category, which is
> why low risk loans cost less than high risk loans.  I
> understand that you propose something called credit
> risk insurance, but how can you guarantee that such
> insurance would cost less than the insurance premium
> already built into the interest rate?  The smallest
> element in interest is the profit paid to the
> financial sector.
>
> 3.  You ask what planet Steve Nieman lives on.
>
> That is a most interesting question.  May I ask if,
> taking account of the failings now becoming apparent
> in the American (and global) financial system, you
> feel that people in the USA are living on the best of
> all possible planets?
> ---------------------------------------------
>
> [Reply]:  I certainly do believe it is the best of all
> existing countries, but not necessarily the best
> possible country or world, which is why we struggle to
> better things.
> -
>
>
> Thankyou.
>
> Rodney Shakespeare.
>
>
> --- Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote:
> [snipped]
>
>