The Money Masters offers much valuable information about money, banking and government down the ages. It heaps blame on fractional reserve banking but only briefly mentions low real wages that create excess profits. These encourage borrowing to restore living standards and aggregate demand although this cannot be sustained. Nor does The Money Masters explain how exchange rates are set by footloose capital not to optimise trade but for its own benefits.
Part of the reason for the build up of debts is governments’ use of monetary and fiscal policies to manage the deregulated economic system, the so-called Washington Consensus. But buying government debts with newly created, interest free, money, while raising the fractional reserve ratio to 100%, would not resolve these socio-economic problems.
And if government bought its debt with new money, the amount would be several times that needed to sustain the price level. As it did this, some would spend the money to minimise the loss due to inflation, sharply increasing domestic prices. Others would move it abroad either to banks that paid interest or to buy exports with the depreciated currency, also inflationary.
I hope the following figures illustrate my critique for the UK where banking is relatively large. They were taken from the Office for National Statistic in April 2010. My period of circulation is the reciprocal of the velocity of circulation used by economists.
Governments generally fund their deficits by selling bonds to institutional investors. The amount of their debts appears large and interest payments are significant but for several years prior to the Credit Crunch, the UK’s national debt was less than 40% of annual GDP. It is unlikely to exceed 100%. If that were paid off with interest free money as William Still wants, the period of circulation of narrow money would increase by between 4.5 and 12 months. Such increases would be highly inflationary but would only save interest of between 2 and 5% of GDP, assuming bonds earning 5% per year.
The best measure of money in circulation was M1. Its period of circulation is 2.1 months in 1979 and 2.9 months in the year to 1989Q2 when it was withdrawn. In 2009, the period of circulation of M4 is 19.5 months. This is equivalent to 162% of annual GDP; roughly double the UK's national debt.
Inflation is a well known way of escaping a heavy debt burden but capriciously devaluing its debts would damage the reputation of the US, disrupt its economy and hurt many whose income or wealth were not protected against inflation.
The Money Masters cites several who have criticised usury but does not admit that debts can build up in any society in which some may lend to others. This is more likely if real wages are too low, if savings are more than can be profitably invested and if usury is allowed.
Usury has been forbidden from the 6th century BC to the 18th century AD. See for example:
- Deuteronomy, Chapter 15, verses 1-18:
- Laws in which Plato repeatedly forbids usury when setting up Magnesia and even says in 742, a borrower may refuse to return both interest and principal:
- Pope Benedict XIV’s encyclical Vix Pervenit.
I judge these measures worth studying despite our different circumstances.
Islam regards usury a grave sin and [ banking] requires borrower and lender to share the risks and rewards of any project. Sadly this did not stop Arab members of OPEC from depositing oil surpluses in Western banks in the 1970s!
George CA Talbot ( talk) 17:08, 8 December 2010 (UTC)
Thank you for taking care of the article. I am trying to assemble enough wikipedia people to reinstate the article. Nunamiut ( talk) 11:29, 8 June 2014 (UTC)
The Money Masters offers much valuable information about money, banking and government down the ages. It heaps blame on fractional reserve banking but only briefly mentions low real wages that create excess profits. These encourage borrowing to restore living standards and aggregate demand although this cannot be sustained. Nor does The Money Masters explain how exchange rates are set by footloose capital not to optimise trade but for its own benefits.
Part of the reason for the build up of debts is governments’ use of monetary and fiscal policies to manage the deregulated economic system, the so-called Washington Consensus. But buying government debts with newly created, interest free, money, while raising the fractional reserve ratio to 100%, would not resolve these socio-economic problems.
And if government bought its debt with new money, the amount would be several times that needed to sustain the price level. As it did this, some would spend the money to minimise the loss due to inflation, sharply increasing domestic prices. Others would move it abroad either to banks that paid interest or to buy exports with the depreciated currency, also inflationary.
I hope the following figures illustrate my critique for the UK where banking is relatively large. They were taken from the Office for National Statistic in April 2010. My period of circulation is the reciprocal of the velocity of circulation used by economists.
Governments generally fund their deficits by selling bonds to institutional investors. The amount of their debts appears large and interest payments are significant but for several years prior to the Credit Crunch, the UK’s national debt was less than 40% of annual GDP. It is unlikely to exceed 100%. If that were paid off with interest free money as William Still wants, the period of circulation of narrow money would increase by between 4.5 and 12 months. Such increases would be highly inflationary but would only save interest of between 2 and 5% of GDP, assuming bonds earning 5% per year.
The best measure of money in circulation was M1. Its period of circulation is 2.1 months in 1979 and 2.9 months in the year to 1989Q2 when it was withdrawn. In 2009, the period of circulation of M4 is 19.5 months. This is equivalent to 162% of annual GDP; roughly double the UK's national debt.
Inflation is a well known way of escaping a heavy debt burden but capriciously devaluing its debts would damage the reputation of the US, disrupt its economy and hurt many whose income or wealth were not protected against inflation.
The Money Masters cites several who have criticised usury but does not admit that debts can build up in any society in which some may lend to others. This is more likely if real wages are too low, if savings are more than can be profitably invested and if usury is allowed.
Usury has been forbidden from the 6th century BC to the 18th century AD. See for example:
- Deuteronomy, Chapter 15, verses 1-18:
- Laws in which Plato repeatedly forbids usury when setting up Magnesia and even says in 742, a borrower may refuse to return both interest and principal:
- Pope Benedict XIV’s encyclical Vix Pervenit.
I judge these measures worth studying despite our different circumstances.
Islam regards usury a grave sin and [ banking] requires borrower and lender to share the risks and rewards of any project. Sadly this did not stop Arab members of OPEC from depositing oil surpluses in Western banks in the 1970s!
George CA Talbot ( talk) 17:08, 8 December 2010 (UTC)
Thank you for taking care of the article. I am trying to assemble enough wikipedia people to reinstate the article. Nunamiut ( talk) 11:29, 8 June 2014 (UTC)