SOCIAL_INS: Re: OWNERSHIP: sleight-of-hand, with smoke and mirrors

[Mbindnerdc@aol.com]

John, 

Let me venture a guess, and Rodney can tell us if I am on the mark.  

I would see the Federal Reserve designating a certain amount of available 
credit in a given period and allocating this to its 12 regions, which would 
then figure out how to allocate it within their regions and member banks.  At 
some level, a member bank or one of the 12 regional banks would hold a 
competition for funding (although there may simply be an open  compotetion with 
continual proposal submission and awards).  A locality would put together a 
bond issue package the same way it does so no, except that the broker would 
borrow the money from the federal reserve at no interest rather than the  
municipal bond market.  Of course, the question I still have is what happens to 
the muni-market.  Does it go away?  Does it only handle junk bonds or does the 
Fed lend the money to those localities most in need first?  Currently, the bond 
market and rating agencies look at audit results for localities and rate their 
credit worthiness.  Would the fed take up this function?  Should the fed take 
up this function (as he who pays the money calls the tune).

Of course, finance could also be extended to a more local level, with 
neighborhood associations or business development districts borrowing at no 
interest with payback coming from property taxes.  In that case, I can see 
local banks issuing the credit, although the allocation question still remains: 
 do poor communities get no interest loans or the ones who are more likely to 
pay it back - or do both?

I can visual the system very well - and I think I have captured how it works.  
I am not sure it is not a bad thing to shift credit creation from the free 
market to the Federal Reserve - because by creating money in this way this is 
exactly what will occur, reclaiming the creation of money from the private 
sector and having the public sector do it.  

Both systems contain methods of allocating available funds to individuals.  The 
current uses an open market dominated by wealth.  The proposed system does not 
- it relies on the government to decide how much is allocated to what purpose 
(public works, capital homesteading, home mortgages, educational loans, etc.)  
Of course, the list will grow.  I mentioned foreign aid just this week, which 
Rodney found iteresting.  I understand that investment must be capital 
(although people will argue that human capital is important) or 
self-liquidating, so it is likely that consumer credit is out of the picture - 
although no credit market is more exploitive to the poor - so there will be 
intense pressure in this area.  The point I am getting to is that BE will trade 
the current free market scheme for what is essentially the public allocation of 
credit, with all the problems that this entails.  Problems don't go away, you 
just get different ones.

Again, I favor an employer based system, where employee-owned firms designate a 
certain amount of their payroll for the allocation of shares to the employees 
(either directly or initiailly through privating FICA) and with the employer 
making (and marketing) home mortgage loans, educational loans and consumer and 
health care lines of credit against salary - all at no interest if the firm is 
wholly employee-owned or at an interest rate sufficient to compensate 
non-employee owners for the use of capital.  I am perfectly comfortable having 
these firms borrow from the Fed at no interest rather than from the credit 
markets, as well as them borrowing from the Fed to essentially buy their way 
out of paying FICA taxes by financing the old age and survivors insurance (for 
survivors of workers over 60) taxes paid by themselves and their employees. I 
would imagine that capital investment by employee-owned firms might also 
receive consideration for no interest loans under the plan I suggest.  It 
really is possible to have BE and FICA privatization at the same time, its just 
that different units borrow the money.

Of course, the extent to which no-interest money is created will impact how 
much credit the fed can allow to be created, and may likely result in the 
severe contraction of that system - if not its elimination.  If we buy out the 
rich from corporate ownership, tax them (as I propose) to pay off the debt, and 
vastly limit their access to credit - although they will be left with quite an 
amount of cash with wish to invest in what?  If employee-owned firms assist 
their employees in realizing home ownership, as I propose, not much land will 
be available for speculation, so real estate investment by the rich is out.  I 
think all that will be left to them is to make art horribly expensive - leading 
to an explosion of painters and sculptors.  Visualize it, all that dough with 
nowhere to go.

Mike

In a message dated Fri, 20 Sep 2002 9:11:20 AM Eastern Standard Time, John 
Médaille <john@medaille.com> writes:

>At 10:43 AM 9/20/2002 +0100, Rodney Shakespeare wrote:
>
>>Are the Kelsos completley wrong?  If so, why.    Perhaps John would like to
>>give his view on what an accurate statement of this matter might be.  Saying
>>my statement is wrong will not suffice if an alternative statement is not
>>provided.
>
>This is not rocket science, Rodney; you simply figure the discounted cash 
>flow at some presumed rate of inflation. I did not say you were wrong; I 
>said you have overstated the case; you have stated the case in a form that 
>indicates that current and future dollars have a constant value. This is 
>simply wrong. Now you can assert that in some future system there will be 
>no inflation. Fine. But you are making assertions about lending under the 
>current system which simply are not correct.
>
>
>>2.    John says "  But it is clear that you are not going to explain your
>>system, at least not
>>  so that one as slow as I can understand."
>>PERLEEZZ!!  I am doing everything I possibly can to explain and John is
>>fully aware that there are two books (Seven Steps and Binary Economics)
>>setting things out.
>>Also it is not helpful to say "so that one as slow as I can understand."  It
>>is not helpful because I trust that my record on this group is of making
>>every effort at clarity and willingness to explain and it is not helpful
>>when somebody (who has in the past shown plenty of evidence of grasping as
>>much of subjects as I or anybody else does) starts playing the "I must be
>>too slow" game.  Stop it, John!
>
>Well, you assert your own clarity, but there seem to be a lot of people on 
>this forum who don't understand, and a lot more who have dropped out 
>thinking that they will never understand it. So you might ask yourself if 
>you are being as clear as you claim. And yes, I did read Binary Economics. 
>Twice. It suffers from the same vagueness that your posts do.
>
>
>>3.    I gave a full  explanation of the basic overall mechanism but, alas,
>>you have summarised it inaccurately.
>>
>>     I will try a three sentence summary -- there is a central creation of
>>interest-free money spent on constructing  capital assets, particularly
>>market-driven projects,  and the money is recouped and is then cancellable.
>
>That's actually a one sentence summary--the other two sentences are about 
>some other system, not yours. So now let's see if we can give some content 
>to these words:
>
>"there is a central creation of
>interest-free money spent on constructing  capital assets"
>
>What does this term "creation" mean? You don't like "printing" or 
>"conjuring", so let's go with "create". What physically happens when they 
>"create" this money? Do they just declare that they have the funds on 
>deposit and start the project? What? Do the dollars just "show up" in the 
>gov'ts accounts after they are (printed, conjured, created)? There must be 
>some process associated with these words (whatever word you choose), and 
>that process is what I would like to know about.
>
>"the money is recouped"
>
>How? Through taxes I presume. So, iow, you raise the taxes sufficient to 
>cover current construction projects. Is that it? What is the time period 
>for this "recoupment"? One year? The life of the asset? The time-frame of 
>construction? Some arbitrary period? What?
>
>"and is then cancellable."
>
>Again, what does this mean? What physically happens when the money is 
>"cancelled"? How is it actually taken out of circulation?
>
>Rodney, these are necessary questions, imo. I do not understand the 
>reluctance to answer them. I don't see how anybody can evaluate what you 
>are saying unless you do answer them.
>
>>In contrast, at present, there is a banking system creation of
>>interest-bearing money which is not necessarily spent on capital and, on
>>repayment, is probably not always cancelled.   The government is not
>>repaying but the taxpayers do (in the case of public projects) and the
>>corporation does the repaying (in the case of private, wide ownership
>>projects).
>>
>>My objection to the use of the term "printing money" is becasue, in any
>>meaningful sense, such money is usually NOT repayable and cancellable, bears
>>no interest, and is likely to be very inflationary because it is not
>>repayable and cancellable and, in any case,  is not concerned with
>>productive capacity.
>
>The problem is, I don't see the difference between what you are proposing 
>and the statement, "we raise taxes sufficient to cover current construction 
>projects."
>
>I would appreciate your help in trying to appreciate what you are saying.
>
>
>John C. Médaille
>
>"A dead thing can go with the stream...
>but only a living thing can go against it."
>         -G. K. Chesterton
>http://www.medaille.com/distributivism.htm
>john@medaille.com
>
>