[GJM] Shakespeare's theory
Rodney Shakespeare
rodney.shakespeare1 at btinternet.com
Mon Mar 24 15:43:31 MDT 2008
Peter,
1. Home loans -- $100,000 to $300,000
a) You naturally assume inflation because you have to. Inflation is caused by the present banking system which has to create more and more interest-bearing money if the system is not to collapse (which it eventually does).
However, even if there is no inflation, the repayment would (depending on the precise terms etc) still be about $200,000. That's at least $80,000 too much ($20,000, for administration).
b) You say that people should own their own homes (agreed) yet when binary economics (at www.binaryeconomics.net) proposes interest-free loans for homes (which would allow more and more people to own homes) your inherent tendency to wild language causes you to allege that my "crank theory" (the 0% loan) is aimed at disparaging home ownership.
A little quiet reflection will enable you to realise that 0% home loans would increase home ownership and it will be helpful if you specifically acknowledge that.
2.. My "sublime ignorance"
Goodness me, that inherent tendency to wild language is appearing again. Not only are you accusing me of "sublime ignorance" but you are revealing your own ignorance ignorance of the Soviet system -- they certainly did not want people owning their homes. Worse, you are being deliberately ignorant about binary economics which (as everybody knows, except you) wants home ownership and productive capital ownership for everybody. Yes, everybody. However, in your book, no doubt, that is communism. Please confirm.
3. Margrit Kennedy
Margrit Kennedy, Interest and Inflation Free Money (1995) points out that interest affects virtually everything in a large way (I think she says something about 50% of the cost of goods and services) and that 80% of the population, overall, lose from interest; 10% are even; and 10% gain.
I mention these figures to encourage you to re-think your idolatry of the institution of interest.
4. Creation of interest-bearing money insufficient to repay principal and interest becasue only principal created.
Many authors (e.g., Ellen Brown, Web of Debt; Bernard Lietaer who helped design the Euro) refer to this. Since 97%+ of the new money supply is created as debt by the banks (and there are plenty of quotes to support that including the Reserve Bank of Chicago which also makes it clear that banks do not lend deposits) it is a matter of simple mathematics that if $1000 is created at, say, 10% over five years, that means up to $500 interest is paid, and the total to be repaid up to $1,500 but only $1,000 has been created. So repayment of the $500 is impossible without further creation of interest-bearing money and so on..........The impossibility results from the combination of the 97% figure and the addition of interest but no creation for interest. Have you, as a responsible USA citizen, noticed the present (and sharply rising) levels of USA debt? Who do you blame? The fairies?
Rodney Shakespeare.
----- Original Message -----
From: "Peter Hogwood" <p_t_hogwood at yahoo.com>
To: <discussion at globaljusticemovement.net>
Sent: Monday, March 24, 2008 7:35 PM
Subject: Shakespeare's theory
> Rodney, some brief replies below [Reply]:
>
> "3. Home loan -- $100,000 to $300,000 You have said
> that the banks only lend liabilities to themselves.
> The original liability was $100,000. Why should the
> bank receive $300,000? On your own argument you say
> $200,000 is being repaid. Well, that's $80,000 too
> much."
> ------------------------------------------------------
>
> [Reply] In your example, $100 thousand is borrowed,
> and $300 thousand is repaid over thirty years, a
> difference of $200 thousand over principal. But the
> $300 thousand is not in terms of the value of dollars
> when the loan was entered, but paid over thirty years
> with ever cheapening dollars due to inflation. So in
> real terms the ratio is not anything like three to one
> over principal. Also, that would have to be at an
> interest rate significantly higher than the rate
> prevailing over the last serveral years. Moreover,
> during that thirty years the borrower gets to live in
> the house at a significant savings over the rent he
> would have paid if he had merely rented the house.
> So, again in real terms, the situation is not nearly
> so dire as you present. In the course of two or three
> generations the availability of the long term mortgage
> has enabled nearly three quarters of the population in
> the Western democracies to transform from renters and
> employee tenants to owners of their own homes. A
> magnificent achievement, I should say, that you
> disparage through your crank theory.
> -
>
> "If you read the History page at
> www.binaryeconomics.net you will see that Pravda
> thought binary economics is extreme right-wing and
> Friedman thought it extreme left-wing (as you do).
> You mind is locked in old-paradigm thinking."
> ------------------------------------------------------
>
> [Reply] I said nothing about right or left wing, but
> that it was the Soviet system of finance that you wish
> to emulate, in your sublime ignorance.
> -
>
> "6. Fifty false assumptions You dispute that the
> system creates money sufficient for the repayment of
> the principal but not for the repayment of the
> interest as well. You say that the system disburses
> loans plus salaries, dividends etc sufficient to repay
> back the principal of loans and the interest.
>
> "That can only be true IF more and more
> interest-bearing money is being created all the time
> in an ever-expanding monetary boom with, at some
> point, inevitable catastrophic results. And THAT is a
> major area where your comprehension of economic
> reality profoundly fails."
> ------------------------------------------------------
>
> [Reply] Then please explain why that has to be the
> case. Please explain why salaries, wages, dividends
> plus ordinary business expenses being paid by the
> banks to the more general community are not sufficient
> for the more general community to pay interest back to
> the banks for the financial services they are
> receiving.
>
> Peter Hogwood
>
>
> --- Rodney Shakespeare
> <rodney.shakespeare1 at btinternet.com> wrote:
>
>> Dear Peter,
>>
>> On interest being profit I suppose we are really
>> arguing about whether or
>> not the profit is unnecessarily huge plus the
>> detrimental effects of that
>> profit (distortions in the market and two lots of
>> financing required). I
>> will also be saying that you are taking a narrow
>> accounting view all the
>> time. Moreover, you want the profit but, when the
>> going gets rough, not the
>> liability; and you have absolutely no understanding
>> of economic matters like
>> Say's Theorem.
>>
>> 1. a) Nigeria loan
>> In the year 2000 President Obasanjo of Nigeria,
>> commenting on his countryâ?Ts
>> debt to international creditors, said:â?'
>>
>>
>>
>> â?oAll 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.â?
>>
>>
>>
>> This does not give all the information you asked for
>> but there is sufficient
>> to show that the difference between interest-bearing
>> and interest-free loans
>> particularly as in this case, virtually all the
>> administration cost is borne
>> by the borrower. A default premium is hardly
>> conscionable if the original
>> principal has been repaid. 16 + 28 = 44 (that's
>> nearly nine times the
>> original principal) and, moreover, in the year
>> 2000 the 28 would still be
>> accruing interest.
>>
>>
>>
>> b) The UK Humber Bridge
>>
>> The story is as follows. A bridge over the river
>> Humber 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 £28,000,000. Because of price
>> inflation, difficult
>> ground conditions, labour relations difficulties and
>> adverse weather, the
>> cost rose to £98,000,000 but, by the time the
>> bridge opened to traffic in
>> 1981, interest charges had taken the cost up to
>> £151,000,000.
>>
>> At which point an important fact should be noted â"?
>> 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 in operational terms.
>>
>> 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
>> £164,000,000. However, by 1992 â"? only ten years
>> later â"? it had shot up to
>> an amazing £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 £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!
>>
>> NB Default premium is not involved and virtually all
>> the administration
>> cost is done by the Humber authorities.
>>
>>
>>
>> c) America's infrastructure.
>>
>> With the Humber example in mind, kindly consider the
>> USA's infrastructure
>> and tell me whether you think interest does, or does
>> not, involve a
>> (roughly) doubling or trebling of the original cost.
>> It's your levees and
>> bridges which are in question and you are being
>> asked whether you wish to
>> pay more than double the necessary cost.
>>
>>
>>
>> 2. You say banks are lending liabilities to
>> themselves and not to the
>> lending public.
>> Really? The liabilities are now liabilities to
>> the public. The Federal
>> Reserve (Bank of England etc) are now lending
>> billions of public money to
>> the banking system, are they not? The banks want
>> the profits and not the
>> losses.
>>
>> You are taking much too narrow a view of things (a
>> very narrow accounting
>> view) and are failing to see the wider implications
>> of creating money out of
>> nothing; adding interest; and, in particular, not
>> directing it where it
>> should be directed. When the system crashes you
>> will still be declaring the
>> Sublime Perfection of the existing system (although,
>> like Voltaire's
>> Pangloss, will be adding in respect of the disaster
>> that Everything Is For
>> the Best in this Best of All Possible Worlds).
>>
>> 3. Home loan -- $100,000 to $300,000
>> You have said that the banks only lend liabilities
>> to themselves. The
>> original liability was $100,000. Why should the
>> bank receive $300,000? On
>> your own argument you say $200,000 is being repaid.
>> Well, that's $80,000
>> too much.
>>
>> Moreover, inflation is directly due to banking
>> practice which requires TWO
>> lots of financing (one for production and one for
>> consumption). Again,
>> taking only a narrow accounting view, you are not
>> seeing the wider issues
>> of economics and finance and have the fond belief
>> that accounting is
>> something which is not related to the wider real
>> world.
>>
>> If you are not prepared to relate your arguments to
>> the wider world and the
>> implications for poverty and well-being etc, you
>> should not be debating with
>> me.
>>
>> 4. Full costs of financial services.
>> You say the allocations are not on market principles
>> if the customers are
>> not paying the full costs of the financial services.
>>
>> They are paying two to three times the full costs.
>>
>> Your case on this would look better if the banks
>> were not (at this very
>> moment) demanding billions and billions (no doubt
>> soon to be trillions)
>> instead of taking the full liabilities they have
>> created.
>>
>> 5. Development and spreading of productive capacity
>> Without the development and the spreading of both
>> productive
> === message truncated ===
>
>
>
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