-Caveat Lector-
from LETS Digest #46
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As always, Caveat Lector.
Om
K
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Message: 10
Date: Tue, 23 Feb 1999 05:15:24 -0500 (EST)
From: [EMAIL PROTECTED] (John Turmel)
Subject: TURMEL: Consequences of interest-free money
>Date: Sun Feb 21 14:51:32 1999
>From: [EMAIL PROTECTED] ("Charles Michael")
>Subject: [lets] Re: Consequences of interest free money?
>Hi all, Some really stimulating debates lately. Here's a few ideas.
>A standard and well proven aspect of the law of supply and demand is
>that, when you make an important commodity (money) free of cost (o%
>interest on loans) then demand for that commodity skyrockets. That is
>why, for example, when a country establishes a national health care
>system that appears to make all medical services "free" then you
>quickly get waiting lists and queing because demand quickly outstrips
>available supply.
JCT: Actually, there will be a service charge associated with
each transaction. And of course, all loans must be repaid so it's not
as if we're just giving away money like we're giving away medical
services so the analogy is not correct. As well, it's impossible to
outstrip supply. Gambling casinos have been offering such interest-
free loans of chips for decades if not centuries with none of the
suggested problems.
>In the LETS banking system that is under discussion, creating new
>credit for a loan requires a mere push of a button. So, no shortage
>there. However, there are limits to the supply of goods that will be
>demanded by the new money that will be created by all those loans.
JCT: You're putting the cart before the horse. Rather than issue
the money and then hope the goods will be there to be bought, once the
goods have been ordered and produced, then the money is issued. Loans
will never be created unless the product is actually there to be
bought. It's a often-made economic assumption that with a zero
interest rate, people will all borrow a billion dollars just so they
can have a billion dollars. In reality, using their Visa cards then as
they do today, the loan won't be created until they are purchasing the
goods and if there are no goods to be purchased, no loans are
forthcoming. But even if we allowed people to borrow a couple of
suitcases of money because they chose to, who would it hurt if they
walked around with their two suitcases of money until they realized
that it's not doing the many good since they could use their credit
cards when they need to so they're lugging all non-to-be-used money
around for nothing.
>Given 0% interest, the cost of buying a house or car will drop
>drastically.
JCT: Actually, the cost of the house won't change, only the cost
of buying it will and only drop by the amount of the interest. So
instead of the cost of buying a $100,000 house being $300,000, the
cost of buying the $100,000 house will be $100,000 plus a dollar per
monthly payment for the banker's service charge. The men who built the
house will still receive the same money they would have, it's only the
men who created the loan who get dollars rather than hundreds of
thousands of dollars.
>Avalanches of people will rush to take out loans that will be fully
>collateralized by the houses and cars they purchase.
JCT: Okay, this is true. Every person will try to buy their
apartment, every person will try to buy their home, every person will
try to buy their transportation, every person will try to buy their
tools.
>Soon every carpenter, plumber, building materials supplier and car
>maker will be working flat out to 110% of capacity.
JCT: Operating at 110% of capacity is an economics notion, much
like living beyond our means by eating next year's crop. Yes, they
will all be working to full capacity though never beyond their means.
No, they can't work beyond 100%. All I've ever promised is 100%. And
of course, the boom will also generate unskilled labor jobs for all
those people who owe for the houses they've purchased.
>Now we have a classic demand pull inflation with too many LETS
>dollars chasing a limited supply of goods and services.
JCT: This is jumping to a conclusion based on the fact that
you've assumed that everyone is running around with suitcases of money
and nothing to spend it on when they are really only running around
with their interest-free credit cards looking for something to buy
with it. No LETS dollars were ever created until the point of sale,
until the point of capture, never during the chase.
I don't doubt that after prices go down by the amount of interest
manufacturers no longer have to pay, that prices will then be bid up
by the law of supply and demand and that's okay as long as everyone
realizes that they are bidding with hours of their own labor they'll
have to pay back.
>The point here is that simply collateralizing loans will not ensure
>0% inflation!
JCT: Remember that no new loans are issued by cashier's cage
until someone has a home or other asset to be collateralized. So there
can be no inflation. You just have to remember that it's not a case of
money being lent into circulation for no reason. The cashier only
lends it into circulation when the buyer provides the sales slip for
the collateral being bought.
You must never forget that it operates exactly like a casino
cashier using tokens worth Hours of labor. I keep stressing that
you'll never see the simplicity of this stuff until you look at it
like the casino cashier does. From the cashier's point of view, as
long as he never issues loans until someone comes up with the deed to
the property being bought, he really doesn't have to worry about any
of the concerns that preoccupy those people who haven't worked the
cage but think problems can still arise.
>There is an offset though. Firms will also be slurping up free money
>to build new facilities to meet the skyrocketing demand for goods and
>services.
JCT: I wish you wouldn't call it "free money," because that
evokes confusion. It's not free. There's a service charge for
cashier's time and the printing or computer time. Still, as fast as
new facilities can be built, that's as fast as new currency will be
issued into circulation to pay for it and as fast as those facilities
depreciate, that's as fast as the new currency will be retired from
circulation by the person stewarding the facility.
>Yet, in an economy already operating at capacity, their demand for
>capital goods will just contribute to the problem of excess demand.
JCT: How can they be building new collateral if they're already
operating at capacity? Being able to operated at 110% capacity is an
idea you'll have to lose if you want to understand LETS banking. If
you're operating at capacity, there's no one left to need any extra
loans to pay for.
>So, at this point, will we need a LETS central bank to "tighten" up
>the availability of new money in order to "cool down" the economy?
JCT: You've jumped to the conclusion that people who are already
operating at maximum capacity somehow manage to create even more. This
is physically impossible and so is the problem that's is caused by
this physical impossibility.
>Would they balance supply and demand, for example, by mandating that
>LETS banks require a certain minimum down payment on consumer loans
>while allowing unlimited expansion of commercial loans that serve to
>finance new factories and facilities that increase the supply of
>goods and services?
JCT: We'll consider the problem of operating at over maximum
capacity if it ever happens. I'd bet against 110% capacity ever.
>Also, those firms will try to produce goods and services using the
>cheapest combination of land, labor and capital.
JCT: Not anymore they won't. In the days where there was
insufficient money for all manufacturers to sell their products, they
all had to use the cheapest, dirtiest, combination possible. When
exactly the right amount of money is issued to match the price tags on
the products, then it won't matter if the better materials, cleaner
fuels, etc. are used in their production. Non-polluting production
will finally be affordable.
>With LETS capital now being free, will they not lean toward capital
>intensive rather than labor intensive production? Does this not mean
>that more and more robots will be hired in place of humans?
JCT: Sure, except that the paychecks of the newly-hired robots
will be confiscated and given as a dividend to all those people who
were replaced by the robots. I don't mind the robots doing all the
work as long as humans do all the consuming.
>If unemployment rises, wages will be pushed down (assuming the LETS
>central bank does not permit continual demand pull inflation as
>described above)? If wages are pushed down over time, will that not
>start to erode the benefit of lower prices created by the
>elimination of usury in the first place?
JCT: First of all, it's not unemployment if you're getting the
robot's paycheck, it's called leisure. You're assuming that laid-off
workers wouldn't get the robot paychecks and remain the wage slaves
they are today.
And I'd think that with robots doing most of the work, we'll have
to pay a premium to be served by a human or to purchase something made
by a human. Sure you can go to the robot foodomat and eat very cheaply
but to go to an expensive restaurant and be served by a staff of
talented humans will really cost a premium. The same for a sweater
knitted by a grandmother rather than one knitted by a robot. No one
will care if you choose the eat cheap standardized fare at the
foodomat in your standardized sweater though many will choose to pay
the premium for the more highly-prized human element.
>Would a social credit type system be called for?
JCT: LETS Green currencies are all social credits. Credits only
become anti-social when interest is charged to create the deathgamble
among the borrowers.
>A requirement that companies share some of their profits communally
>so that unemployment does not do so much damage? Just some thoughts
>to stimulate discussion. Cheers to everyone! Charles Michael
JCT: All the problems raised just cannot occur if the currency is
operated like poker chips based on time at labor. No matter how
elementary that running poker chips sounds, you must master it or
you'll be asking these kinds of questions forever and we're way beyond
that point. Those of us who have mastered poker chip banking realize
that our time is best spent discussing how to implement the system
globally rather than handling the concerns that cannot and have never
cropped up. You must get some poker chips and test the problems for
yourself to fully accept how simple an inflation-free and involuntary-
unemployment-free system is to operate.
>Date: Sun Feb 21 15:46:10 1999
>From: [EMAIL PROTECTED] ("Paul Dumais")
>>The point here is that simply collateralizing loans will
>>not ensure 0% inflation!
>I fully agree. Good argument.
JCT: If you think accept that any price rise is inflation, then
I'll never be able to convince you that one-to-one collateralizing of
loans ensures 0% Shift B inflation of the I/(P+I) kind. You see, if
the tomato crop is damaged and I have to pay a few extra Hours labor
for my share of the reduced tomato crop, I don't call that price rise
inflation because I still got the same amount of farmer's time even if
it was represented by less tomatoes. I call this a price rise for the
farmer's time due to supply and demand forces, not inflation. I only
call inflation that artificial price rise due to the interest
component for which I have received no energy:
I'll pay the time price for army and police to handle strife;
I'll pay the time for doctors, nurses who protect my life;
I'll pay the time for all engaged repairing road and sewer;
I'll pay the time for social servants helping out the poor;
I'll even pay the time for bureaucrats with no regret;
But I refuse to pay the time for interest on debt.
See the difference? In the first five cases, I'm paying for
people's time, real engineering energy, power times Time. Only in the
last case am I paying for money's time and money does not work. Though
people might think their interest is money earned by their money, it's
actually money earned by wage slaves from whom it is stolen. If you're
getting something for no nothing, someone else is getting nothing for
something. It's the reason the great Socred philosopher Adelard Turmel
stated "Interest is theft." When you look at Rothschild with his
billions, you know he didn't earn that money by working for it. Others
worked for it and it was stolen for him by the system.
>>Would they balance supply and demand, for example, by mandating that
>>LETS banks require a certain minimum down payment on consumer loans
>>while allowing unlimited expansion of commercial loans that serve to
>>finance new factories and facilities that increase the supply of
>>goods and services?
>The inflation problem you speak of would probably be just at the
>initial phases of the introduction interest free loans.
JCT: Again, you've assumed that the cashier would issue interest-
free loans with no collateral pledged for purchase just because people
want them. This is not how it would be done. Sure, they could borrow
some currency based on promised future labor like most LETS permit now
but the cashiers would be empowered to issue the bulk of loans only
when the collateral deed had been produced.
>The economy would eventually reach a steady state where the money's
>value would remain stable (as long as loan issuing policy remains
>stable). Knowing this, a smart person would save rather than spend
>during times when his money is becoming undervalued (inflation).
JCT: At no time will his Hour of labor become undervalued. An
Hour will always be worth an Hour. I think this issue of our currency
inflating can be eliminated if we stay on the time standard in our
discussions.
>With all the demand for services, he could make big bucks providing
>these goods and services and then resume spending when his dollars
>are worth more.
JCT: He could make big Hours by providing big Hours, not the
normal 40 Hours a week but perhaps even 80 Hours and then resume
spending when his hours are worth more but they will be worth more
only due to increased technology, for no other reason.
>I suggest that this knowledge would moderate the effect of the
>process you described above.
JCT: While it is true that saved Hours will buy more and more due
to this this increment-of-technology, that will be true for everyone
and there will be no real reason for foregoing your present spending
since you'll never be able to spend all your savings anyway. We'll all
be too rich; if anyone can conceive of the notion of everyone in the
family being rich.
>I would wait and see if the unemployment you describe actually does
>occur.
JCT: I too would be interested in how unemployment could arise
after expecting not only 100% capacity, but 110% capacity,
>I'm optimistic that with with interest free currency issued
>via a policy which doesn't artificially restrict the availability of
>money, we'll see people spending more money to employ more people.
>Let me give you an optimistic example. Suppose we have a
>democratically controlled interest free currency.
JCT: How the currency is controlled will not be a democratic
issue. It will be done pursuant to the rule of one-to-one with
collateral. How people choose to spend their currency, especially
large civic projects, etc, may be democratically decided, but not the
bank cashier's function. That will be rigorously systematized.
>The demand for traditional forms of human labour will always
>decrease because of technology. This is a good thing. This means
>many of the things we buy will be cheaper and we won't need to spend
>as many hours in a factory to produce them. So where do we get our
>income? As always we will get it from each other! People will
>realize that money is not scarce with an interest free system. It is
>exactly as scarce as the democratically controlled currency body
>wants it to be.
JCT: If you had looked at your bank of poker chips, you'd realize
that they are valuable not because of their scarcity but because of
their pledged collateral backing them up. Considering there is an
infinite supply ready to go, the question of scarcity is moot.
>So even if the currency started to become too scarce or not scarce
>enough, people would vote to slightly alter the currency issuing
>policy to ensure just the right scarcity or value.
JCT: If the bank cashier has ensured that every token issued was
backed up by collateral, why would people have to vote to change its
currency or value? And of course, since the value is "set" at the
start of the game by the cashier, it's a given that no one is allowed
to change its value. Ever.
>This would prevent the rich from hoarding too much money since
>hoarding by the few generates a sense by the vast majority that
>money is too scarce and they would vote to increase the money's
>availability. This might cause a bit of inflation which would really
>only hurt those few who have decided to hoard their money.
JCT: Since there are always enough chips for anyone who needs
more, why would anyone sense that money is too scarce because someone
wants to hoard of this plentiful supply? Whether the players want to
hoard their chips or not is of absolutely no concern to the cashier
who issued them.
>So it is my theory that unemployment is caused by the artificial
>scarcity of money caused by the autocratic issuing policies of banks
>and by interest charges.
JCT: Let's be precise that "involuntary" unemployment is caused
by the artificial scarcity of money caused by the banks' interest
charges.
>If we institute an interest free currency who's issuing is stable
>but democratically controlled, there will always be enough money to
>employ everyone! With no incentive to hoard money, the rich and
>needy alike will want to spend. Spending and employment go hand in
>hand. So unemployment is caused by not enough money in circulation.
>This scarcity is caused by a combination of the banks' loan
>policies, interest charges and hoarding of money.
JCT: Hoarding is only a problem in a system where money is kept
short. The cashier in a system where there is an abundant supply ready
to be issued when needed has no concerns about hoarding.
>I think we'll start seeing people employing each other for leisure
>activities. There will be far more leisure services (clubs, interest
>groups, bird watching, scuba diving). People will start doing work
>which doesn't involve much in the way of natural resources (tree,
>minerals). We'll have the ability to reduce our ecological footprint
>while employing ourselves in leisurely pursuits. It's difficult to
>imagine what our world would be like so I'm going to just go ahead
>and give it a try. Do you want to help me? Paul Dumais
JCT: Go right ahead. There's nothing more pleasant than
visualizing what our future heaven will be like. Actually, it's not
all that hard. It's the same life as the rich enjoy today with the
incentive to offer some service to the community in return but without
any poor people begging for alms or trying to mug you.
My Bible poem at http://www.cyberclass.net/turmel/pombible.htm
has my view of a life on Earth without interest which I called
"Heaven":
WHAT HEAVEN IS
If you were to be asked what for you would be heavenly?
There'd be no executions and no alleys, certainly.
There would be lots of food and drink, some clothing and a home,
A razor and some shaving cream, a toothbrush and a comb.
If you had also trappings of a great technology,
All of the tools and gadgets that use electricity.
Communications, education, entertainment, wealth,
A staff of competent physicians watching over health.
Most labor that is tedious is done by robots who,
Release you to explore the universe God made for you.
And best of all you'd want your friends to share in your success,
That's why all of us will end up in heaven, I profess.
In Heaven, all will have their friends and family by their side.
Though evil ones are silenced by a guilt they cannot hide.
Within Acts 24:15, he says it's understood,
There will be resurrection of both wicked and the good.
But John 5:28 points out the day those in their graves,
Will rise up for the judgment of the Lord on who he saves,
"The good will be rewarded with a life's eternity,
But wicked ones will stand condemned for their iniquity."
And so our Earth, this little speck of blue dust in the sky,
Can be a Heaven here on Earth, we do not have to die.
Even Christ said that Heaven is just like our usurious Hell, the
only thing producing the hellish alleys where men weep and gnash their
teeth being interest. So if you force borrowers to fight to the death
in a death-gamble, you've made a Hell out of what could have been a
Heaven. It's the main reason Christ told us not to lend money at
interest.
So go ahead an contemplate how heavenly life on earth would be
without the debt slavery of usurious debt. I've been doing it for 20
years and it's a view I would wish on everyone. Actually, when it came
to contemplating the heaven of an interest-free world, Christ did say:
"For I tell you that many prophets and righteous men longed to
see what you see but did not see it, and to hear what you hear and did
not hear it."
So go ahead, see and hear about our future interest-free Heaven.
--
John C. "The Engineer" Turmel, Founder, Abolitionist Party of Canada
915-2045 Carling Ave., Ottawa, K2A 1G5, Tel/Fax: 613-728-2196
LETS Abolish Interest Rates http://www.cyberclass.net/turmel
For TURMEL topic http://www.onelist.com/subscribe.cgi/lets
--
John C. "The Engineer" Turmel, Founder, Abolitionist Party of Canada
915-2045 Carling Ave., Ottawa, K2A 1G5, Tel/Fax: 613-728-2196
LETS Abolish Interest Rates http://www.cyberclass.net/turmel
For TURMEL topic http://www.onelist.com/subscribe.cgi/lets
_________________________________________________________________________-----
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Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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