Subject: Re: TURMEL: The Third Way

From: [email-masked] (John Turmel)
Date: Thu, 6 Jul 1995 03:45:25 GMT

Subject: Re: TURMEL: The Third Way
 
     [email-masked] (Frank Ch. Eigler) wrote:
 
John Turmel ([email-masked]) wrote:
>: [...] 
>: >Also, are you not worried that the interest free one-to-one
>: >collateral scheme would limit the availability of credit?
>: >Companies would not be able to borrow money against future
>: >income (as opposed to backing loans by their existing
>: >capital). 
>
>:      There's no reason money-chips cannot be loaned against 
>: future income. It's the same as a casino issuing chips based on 
>: collateral offered and based on the borrower's marker. His 
>: promise to pay. So though backing up loans by their existing 
>: capital is a start, so is backing it up with future income. 
>
>But, I thought, backing the poker chips against present physical
>capital was your means of ensuring that their value does not
>decrease.  If I can start borrowing against my future income,
>wouldn't the money supply explode just as with fractional reserve
>banking, or interest-based loans, leading to similar inflation?
>In fact, isn't borrowing money against money equivalent to the
>present system?
>  
     Yes, the present system allocates credit on people's 
collateral and on their word. 
     The present Greendollar systems allocate Greendollar credit 
on the basis of only their word. 
     Yet, this doesn't cause any inflation because the credit is 
backed up one-to-one with a promise to pay which is valued at the 
same value as collateral. 
     Besides, what do you do with the money you borrowed? Your 
debt account went up and your cash account went up. You purchased 
things meaning that though your cash account went down and your 
asset account went up. 
     What do people who have sold you something do with that new 
money. Their cash account went up and their asset account went 
down. Then they paid their debts incurred for the production and 
their cash account went down and their debt account went down. 
     The net result is that you owe the system instead of the 
person who supplied you with the asset. Quite equitable and with 
no eventual change to the money supply so why should there be any 
inflationary shift? 
          
>: >The interest system encourages adventurous bankers
>: >to issue money for such enterprises, at an appropriate level
>: >of risk and reward to the banker.
>
>:      But the interest itself creates the risk which is why mort-
>: gage comes from the French words "mort" and "death." 
>:      If everybody borrows 10 and everybody owes 11, the demand 
>: for the 11th token of money which was never put into circulation 
>: creates an automatic shortage which causes foreclosure of the 
>: losers.  [...]
>
>But there is no burden on anyone to ensure that everyone must be
>a winner.  The losers get there because they generally deserve
>to.
>
     I draw a distinction between people becoming losers because 
they're lousy producers and people becoming losers due to a fixed 
rule of the game. 
     10 robots all borrow $100,000 to buy the wherewithall to 
produce identical shoes. All 10 robots owe $110,000 and hence 
must price their shoes at $110,000. The economy which has 
received 10x($100,000) paid by the robots for the production of 
the shoes can only but 10x($100,000) out of a total prices of 
10x($110,000) leaving $100,000 worth of shoes unsold. 
     One of the robots must fail and be foreclosed on and it is 
not a case of bad management so that it deserves to be the loser. 
One of the robots is foreclosed upon because there was 
insufficient money issued into circulation to purchase all the 
shoes. 
     It is this fixed amount of failure with no regard to good or 
bad management that I object to. 
     Of course, looking at the good or bad management masks the 
fact that there is a ratio of producers pushed into foreclosure 
independent of their management. 
 
>Besides, it is never the case that `everybody borrows 10 and
>everybody owes 11' in the present banking system.  The banks,
>being members of the `everybody' set, borrow 11 and owe 10,
>balancing the numbers.
>
     Please. This is a first. Borrowing 11 and owing 10? I've 
heard of bankers getting preferential interest rates borrowing 
$100 and owing $101 while everyone else would owe $110 but I've 
never heard of anyone borrowing 110 and owing 100.  
     And even if somehow some bankers could do that, it certainly 
wouldn't be anywhere close to the volume of loans that go to the 
mass of borrowers in the economy. 
     You'd better provide some proof as right now I think it's a 
pretty ridiculous statement. 
 
>: [...] 
>: GAME MODEL: SERVICE CHARGE VS. INTEREST
>: [...] The only way to perfectly model the economy is to use fair 
>: chance to pick the winners and losers.
>
>Are you saying that the market is completely random?  What of
>competitive
>
     No, but I'm saying that to fairly model the economy, it is 
better to use a fair gamble, model the test thousands of times 
and use statistical analysis to derive the general result than to 
guess at variables in an econometric model. 
     Why, are you saying Von Neumann was wrong when he said that 
"important question in economics arise in a more elementary 
fashion in the theory of games?"
 
John "The Engineer" Turmel

---

From: [email-masked] (Frank Ch. Eigler)
Date: Fri, 7 Jul 1995 12:25:41 GMT

John Turmel ([email-masked]) wrote:
[...]
: >[...]
: >If I can start borrowing against my future income,
: >wouldn't the money supply explode just as with fractional reserve
: >banking, or interest-based loans, leading to similar inflation?
: >[...]

: [...]
:      Besides, what do you do with the money you borrowed? Your 
: debt account went up and your cash account went up. You purchased 
: things meaning that though your cash account went down and your 
: asset account went up. 

Well, if I were playing with your proposed system, I could borrow
money now against my entire lifetime's earnings, and spend it all.
If others do the same, we'd have an explosion of the money
supply, no?  Immediate inflation, no?  (And corporations have no
lifetimes to limit them.)

: [...]
  
: >Besides, it is never the case that `everybody borrows 10 and
: >everybody owes 11' in the present banking system.  The banks,
: >being members of the `everybody' set, borrow 11 and owe 10,
: >balancing the numbers.
:
:      Please. This is a first. Borrowing 11 and owing 10? I've 
: heard of bankers getting preferential interest rates borrowing 
: $100 and owing $101 while everyone else would owe $110 but I've 
: never heard of anyone borrowing 110 and owing 100.  
: [...]
:      You'd better provide some proof as right now I think it's a 
: pretty ridiculous statement. 

Okay, by example.  Person A invests $200 in Bank B.  It
promises to pay him 5% interest.  (Thus the bank borrows $200,
owes $210, so far).  Bank B makes a loan of $200 to person C.  It
charges that person 10% interest.  (Thus the bank has a new $220
as a debit, $20 profit)  In total, the bank `borrowed' $200+$20,
but owes $210.

In other words, the borrow/owe relationship is inverted for a
net lender when compared with a net borrower.

: >Are you saying that the market is completely random?  What of
: >competitive
: [...]
:      Why, are you saying Von Neumann was wrong when he said that 
: "important question in economics arise in a more elementary 
: fashion in the theory of games?"

The theory of games does not use randomness in every problem.
A `game' != `game of chance'.

-- 
Frank Ch. Eigler // [email-masked]
                // [email-masked]
               // [email-masked]