[GJM] Shakespeare's theory

[Peter Hogwood]

"1.    When the bank pays an employee, where does the
money come from?  Unless there is a virtual forgery,
the answer has to be from income -- but you seem to be
unwilling to say that clearly."
--------------------------------------------------

[Reply]:  When a bank advances the money extended on a
loan, the money has NOT come from income.  It is a
credit to a deposit balance, which is a liability of
the bank.  The offsetting asset placed on the bank's
books is the borrower's promissory note.  At that
point there is no net change to the bank's net worth.

When the bank credits a deposit balance in paying a
bill,  as opposed to extending a loan, it
correspondingly debits in the same amount an internal
tabulation perhaps called "expense."  So the bank's
net worth has decreased by the amount of the payment,
inasmuch as liabilities have increased in respect of
assets.
-

"2.    You say that banks accommodate their own
deficit spending.   
"a)     Do they pay back the money they have borrowed
from themselves?"
--------------------------------------------------

[Reply]:  Prospectively they will more than offset
their deficit spending through interest income and
other fees, earning a profit.
-

"b)    Do they charge themselves interest?"
--------------------------------------------------

[Reply]:  What would be the point in that?  In such a
case their interest expense would necessarily be
exactly equal to their interest income from the
transaction.  A complete wash in terms of accounting.

Peter



--- Rodney Shakespeare
<rodney.shakespeare1 at btinternet.com> wrote:

> Peter,
> 
> The situation is far from clear.
> 
> 1.    When the bank pays an employee, where  does
> the money come from?  Unless there is a virtual
> forgery, the answer has to be from income -- but you
> seem to be unwilling to say that clearly.
> 
> 2.    You say that banks accommodate their own
> deficit spending.   
> a)     Do they pay back the money they have borrowed
> from themselves?
> b)    Do they charge themselves interest? 
> 
> 3.  I have received an invitation to join
> socialcredit at elistas.com.  I have replied to
> subscribe  and will do so for a while and hope that,
> during my sojourn,  Bill Ryan will refrain from his
> past practice of deliberately suppressing my emails
> to the list.
> 
> 
> Rodney Shakespeare.
> 
> 
> ----- Original Message ----- 
> From: "Peter Hogwood" <p_t_hogwood at yahoo.com>
> To: <discussion at globaljusticemovement.net>;
> <socialcredit at elistas.com>
> Sent: Wednesday, March 26, 2008 2:57 PM
> Subject: Re: [GJM] Shakespeare's theory
> 
> 
> > "...you are saying that the bank is simply
> creating
> > out of nothing money (normally called 'printed
> money'
> > or some such) which is not repayable. It is simply
> > printing money for itself.  Do you really mean
> that?
> > It's bad enough that the banks create increasing
> > amounts of repayable interest-bearing money.  But
> you
> > are clearly saying that they also create large
> amounts
> > of non-repayable money (for their own benefit). 
> If I
> > did that I would be called a forger. "
> >
>
-----------------------------------------------------
> > 
> > [Reply]:  The banks are not committing forgery
> because
> > they are crediting their own liability accounts,
> their
> > customer deposit accounts, when they pay expenses
> and
> > dividends, which they may do by the rules of
> double
> > entry accounting.  The corresponding debits are to
> > certain designated "equity" or "capital" accounts
> > within the banks, reducing the banks' net worth. 
> The
> > banks are losing money unless there is offsetting
> > income, as with any business.
> > -
> > 
> > "And what on earth do you mean by talking about
> > reciprocal economic activity? Where is the
> reciprocity
> > when one of the parties (the bank) is simply
> forging
> > money?"
> >
>
-----------------------------------------------------
> > 
> > [Reply]:  The banks have the legal right and
> > capability to credit their own liability accounts,
> so
> > it's not forgery.  Their liability accounts in the
> > form of customer deposits function as money in
> today's
> > economy.  The reciprocity is in the fact that the
> > banks are purchasing goods and services from the
> more
> > general community and the more general community
> is
> > purchasing financial services from the banks.
> > -
> > 
> > "3.  You then state that, as a statistical matter,
> > firms are always disbursing more than they are
> > receiving back through sales, yet they are always
> > booking a profit. 
> > 
> > "This statement only makes sense if you say that
> firms
> > are able to disburse more than they receive back
> > through sales because they are borrowing money
> with
> > which to do it.  So why didn't you say this?"
> >
>
-----------------------------------------------------
> > 
> > [Reply]:  Firms deficit spend in a growing economy
> > with accommodation by the banks.
> > -
> > 
> > "You then show your gobbledy-gook diagram (which
> does
> > not show what is on the y axis) and I presume it
> is
> > the Ryan/Hogwood inversion of Douglas's A+ B
> theorem. 
> > Am I right or wrong?"
> >
>
-----------------------------------------------------
> > 
> > [Reply]:  Time is the x axis, nominal monetary
> values
> > are the y axis.  It is the macroeconomic
> accounting
> > model as developed in the Scottish accounting
> debating
> > societies during the latter half of the nineteenth
> > century.  The elaboration of the A + B theorem is
> > predicated on an extension of this model.  See:
> >
>
http://geocities.com/socredus/compendium/steady-state.gif
> > -
> > 
> > "5.  And you finish with a piece of weirdo
> > goobledy-gook:- " Since the banks are banks,
> > accommodation by the banks is not necessary for
> the
> > banks." 
> > 
> > "Is this what Rice University taught you?"
> >
>
-----------------------------------------------------
> > 
> > [Reply]:  Let me rephrase it slightly:  The banks
> > don't have to have accommodation from the banks,
> as
> > with other firms, because they are the banks. 
> They
> > accommodate their own deficit spending.  Ordinary
> > firms require accommodation because their
> individual
> > promissory notes are not generally recognized.
> > 
> > My major at Rice was accounting, and I had and
> > continue to have conversations with Bill Ryan, who
> is
> > an accounting historian.  I am professionally
> employed
> > as an accountant. 
> > 
> > Peter
> > 
> > 
> > 
> > --- Rodney Shakespeare
> > <rodney.shakespeare1 at btinternet.com> wrote:
> > 
> >> Peter,
> >>  Is this mixture of the banal, the incredible and
> >> the unintelligible the 
> >> sort of thing you and Ryan get up to at
> >> socialcredit at elistias.com?  Is this 
> >> your version of Social Credit?
> >> 
> >> 1.    Yes, the figures in bank accounts are money
> >> which can be spent (even 
> >> though you may have to repay it to the bank).
> >> 
> >> Yes, when a bank loans you money it puts money
> into
> >> your bank account. (But 
> >> this money is money which must be repaid -- a
> point
> >> which seems to have 
> >> slipped your mind).
> >> 
> >> Yes, the figures in your bank account can also
> rise
> >> because you or other 
> >> people put money into it. (For Heaven's sake, I
> can
> >> scarcely believe I am 
> >> writing this)
> >> 
> >> And, yes, the bank all the time creates the
> money,
> >> repayable money, which it 
> >> puts into the bank accounts.
> >> 
> >> 2.    At which point your arms start windmilling
> and
> >> you run off into Raving 
> 
=== message truncated ===



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