Subject: Re: TURMEL: The Third Way

From: [email-masked] (John Turmel)
Date: Sun, 9 Jul 1995 05:00:50 GMT

Subject: Re: TURMEL: The Third Way
 
     [email-masked] (Frank Ch. Eigler) wrote: 
 
>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.)
>
     Spend it all on what? If you buy a house, the house is the 
collateral for the chips issued. If you buy a car, it is too. All 
we ask is that you repay your loan as fast as the collateral 
depreciates. 
     Sure there would be an explosion on the money supply but all 
backed up with collateral or markers. 
     There would be a commensurate explosion in employment and 
economic activity. 
     You must lose the "Edgie the economist" knee-jerk reaction 
that an increase in chips necessarily means inflation. It doesn't 
if there is collateral to back up the new chips or that your 
economic enterprise is capable of repayment of the depreciation. 
 
>: >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.
>
     Of course, when I say that people borrow 100 and owe 110, it 
necessarily implies that the banker loaned out 100 and is owed 
110. 
     But to say that because the person owes an extra 10 which 
was never issued into circulation and because the bank is to get 
and extra which was never issued into circulation doesn't mean 
the loans therefore balance. 
     Besides, the banks do not lend out their depositors funds. 
Each and every time a bank makes a new loan, new bank credit is 
created, brand new money. (Graham Towers, Governor of the Bank of 
Canada to the Banking Committee in 1939) Check any Economics 
textbook on how banks create new money. So if they're lending out 
new money, they're not lending out their depositors old money. 
 
>: >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'.
>
     But important questions in economics do arise in a more 
elementary fashion using a game to model economic activity with. 
 
J.C. Turmel

---

From: [email-masked] (Frank Ch. Eigler)
Date: Mon, 10 Jul 1995 20:44:28 GMT

John Turmel ([email-masked]) wrote:
[...]
: >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.)
:      Spend it all on what? If you buy a house, the house is the 
: collateral for the chips issued. If you buy a car, it is too. All 
: we ask is that you repay your loan as fast as the collateral 
: depreciates.  [...]

How about spending it on entertainment, going boating, going to the
moon and back, hiring a dozen masseurs with accompanying
belly-dancers.  In other words, *services*.  Or perhaps *renting*
equipment or a home.  I'd own no more physical property than before
the massive loans.  (Thus I don't have to repay the loan on the
account of depreciation.)  But I could enjoy the value of the money
regardless!  All for a loan that's given against my iffy future
income. 

:      Sure there would be an explosion on the money supply but all 
: backed up with collateral or markers. 

Not necessarily!

[...]
: >In other words, the borrow/owe relationship is inverted for a
: >net lender when compared with a net borrower.
:
:      Of course, when I say that people borrow 100 and owe 110, it 
: necessarily implies that the banker loaned out 100 and is owed 
: 110.

Yes, and your scenarios consistently exclude the banker as one
of the players, leading to the seeming imbalance.

:      But to say that because the person owes an extra 10 which 
: was never issued into circulation and because the bank is to get 
: and extra which was never issued into circulation doesn't mean 
: the loans therefore balance.

Why not?  It seems to exactly add up, if you agree that the
bankers are just one of the bunch.

:      Besides, the banks do not lend out their depositors funds. 
: [...] So if they're lending out new money, they're not lending
: out their depositors old money. 

Why does this matter?

[...]
: >The theory of games does not use randomness in every problem.
: >A `game' != `game of chance'.
: >
:      But important questions in economics do arise in a more 
: elementary fashion using a game to model economic activity with. 

Huh?  So are you agreeing with my cutesy inequality or not?

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