Monday, November 14, 2016
Major Douglas and the "Social Credit" cult
I see that there are still some people around who believe in the "Social Credit" movement founded in the 1930s on the madcap ideas of Major C.H. Douglas. Douglas was a clever engineer with an enquiring mind. He did not restrict his reading to engineering. And one day he made a most interesting discovery: There was far more money in circulation than the government had ever issued. How come? He could have asked economists and bankers why but instead he made up his own explanation for it.
He decided that it was the fault of the banks. Bank bashing goes back nearly a thousand years, if you count the expulsion of the Jews from England by Edward Longshanks in 1290 A.D., so it was no wonder Major Douglas eyed the banks with suspicion.
But the theory he came up with was really weird. He decided that the banks lent out money they did not have. He decided that a banker could have a ledger with $5,000 lent to Bill Blogs at the top of it and the $5,000 would somehow magically end up in the pocket of Bill Bloggs.
He was aided in this preposterous theory by something known as Fractional Reserve Banking. Under FRB, banks don't have to keep all their deposits under lock and key. They can lend out (say) 80% of their deposits because most people leave their money in the bank for safekeeping. They don't all suddenly withdraw all their money at once. On the rare occasion that DOES happen it is called a "run" and is sparked by some panic or other.
So major Douglas opined that the $5,000 to Bill Bloggs came out of the funds that were available for lending after the reserves were set aside. What the good Major didn't realize was that banks have a legal obligation to lend no more than their deposits minus reserves. Only the government is allowed to print money and any bank that tried to do so would have the government come crashing down on its head. The money for Bill Bloggs had to come from deposits. It could not be conjured up out of thin air.
So how does it all really work? It's so simple it should be taught in grade school. What happens on average is that when Bill Bloggs gets his loan from Bank A, he promptly deposits most of it in another bank -- or even the same bank. Say he deposits $4,000 of his $5,000 in Bank B. That bank now has a nice little deposit that it can lend on. The original depositors who gave bank A the deposit of $5,000 to mind still have $5,000 to their name and can draw on it at any time while Bill Bloggs now has $4,000 to his name in bank B and can draw on that at any time. Add those two together and the citizens of the place where the banks are located now have a total of $9,000 to their name ($5,000 plus $4,000). $4,000 of money has seemingly been created out of thin air.
So that was what Major Douglas saw. There was far more money in the banks than there "should" have been. And he was nearly right in attributing that extra money to the banks. It was the banking system as a whole that created the money, not any individual bank. No bank benefited from the "created" money. Only the community as a whole did. Economists refer to the whole thing as the "velocity of circulation".
If you Google "Major Douglas"or "Social Credit" you will get up heaps of sites claiming that Major Douglas was right. What I have just said is usually found only in Economics textbooks. I taught senior High School Economics for a couple of years so that is why I know about it
The above example is of course simplified. The money held in reserve is not cash. Cash only forms a small part of the money supply. Most of the money supply exists in the form of credit balances. So banks keep only a minor amount of their deposits in cash. Most of their reserves are amounts they have to their credit with the central bank.
I am afraid that the picture below made me a bit teary
The caption on it was: "My veteran grandpa was asked by a little girl if he would do it all again. He said, "Yes, for you.""
I suppose that I am a sentimental old fool but a tiny part of my excuse might be that I am a former member of Her Majesty's Australian Armed Forces. Would a Leftist be moved by that picture? I can't imagine it.
An open confession of Leftist hate
Although he lives in the penthouse high above the crowd, it might be tough for President-elect Donald J. Trump to get some rest when he gets home.
Thousands of protesters chanted “New York Hates You” and “Not My President” in front of Trump’s flagship New York building, the Trump Tower.
Protesters filled 5th Avenue for five blocks, essentially closing down an iconic, much-visited neighborhood of midtown Manhattan. Those who weren’t holding signs raised their middle fingers – many of them taking selfies of the gesture — toward the glassy black 58-story tower that had become a symbol of the Trump candidacy.
The New York protest appeared to be the largest of dozens of anti-Trump demonstrations taking place elsewhere in the country, in Chicago, Boston, Oakland, Portland and other mostly Democratic cities.
The New York crowd was dominated by young people, many of whom had just voted in their first presidential election and were aghast at the results. Tourists in an open-top sightseeing bus that had been surrounded in the clogged street also yelled their opposition to Trump.
"I hate everything about Donald Trump,” said Jaime Reuter, 19, a student at Pace University in Manhattan. "Something has to be done."
A Blow to the Non-Elite Elite
There were a lot of losers in this election, well beyond Hillary Clinton and the smug, incompetent pollsters and know-it-all, groupthink pundits who embarrassed themselves.
From hacked email troves we received a glimpse of the bankrupt values of Washington journalists, lawyers, politicians, lobbyists and wealthy donors. Despite their brand-name Ivy League degrees and 1 percenter resumes, dozens of the highly paid grandees who run our country and shape our news appear petty and spiteful — and clueless about the America that exists beyond their Beltway habitat.
Leveraging rich people for favors and money seems an obsession. They brag about wealth and status in the fashion of preteens.
Journalists often violated their own ethics codes during the campaign. Political analyst Donna Brazile even leaked debate topics to the Clinton team. Washington Post columnist Dana Milbank reportedly asked the Democratic National Committee to provide him with anti-Trump research.
Reading about the characters who inhabit the Clinton campaign email trove, one wonders about the purpose of their Yale degrees, their tenures at Goldman Sachs, even their very stints in the Clinton campaign. Was the end game to lose their souls?
One big loser is the Obama Justice Department — or rather the very concept of justice as administered by the present administration. It has gone the tainted way of the IRS, VA and NSA. The Justice Department clearly pressured the FBI to limit its investigation of pay-for-play corruption at the Clinton Foundation and the State Department.
Seemingly every few weeks of the campaign, FBI Director James Comey flip-flopped — depending on whether the most recent pressure on him came from rank-and-file FBI agents, the Clinton campaign or his boss, Attorney General Loretta Lynch.
Lynch met with Bill Clinton in a secret “accidental” encounter on an airport tarmac while Hillary Clinton was under investigation. Immunity was granted to several Clinton aides without the FBI obtaining much cooperation in return. Clinton techies invoked the Fifth Amendment in refusing to testify before Congress.
Clinton campaign organizer John Podesta was in direct contact with his old friend, Peter Kadzik, a high-ranking Justice Department official who was tipping off the Clinton campaign about an impending hearing and a legal filing regarding Clinton’s emails. Until he was reassigned, Kadzik was in charge of the Justice Department’s probe of the Huma Abedin/Anthony Weiner email trove.
A special prosecutor should have been appointed. But Democrats and Republicans alike had long ago soured on the use of special prosecutors. Democrats felt Ken Starr went way beyond his mandates in pursuing Bill Clinton’s excesses. Republicans charged that Lawrence Walsh’s investigation of the Iran-Contra affair had turned into a witch hunt.
But now, it is clear why there was — and still is — a need for special prosecutors in some instances. In an election year, the Obama Justice Department certainly cannot investigate Obama’s former secretary of state and heir to the Obama presidency — much less itself.
Another election casualty is the practice of extended voting. The recent trend to open state polls early and over several days is proving a terrible idea. Campaigns (think 1980, 1992 and 2000) are often not over until the last week. When millions of people vote days or even weeks before Election Day, what the candidates say or do in the critical final days becomes irrelevant. When a candidate urges citizens, “Vote early,” it is synonymous with, “Vote quickly, before more dirt surfaces about my ongoing scandals.”
Voting should return to a single event, rather than becoming a daily tracking poll.
President Obama lost big time as well. He emerged from his virtual seclusion to campaign on behalf of Clinton in a way never before seen with a sitting president. By Election Day, Obama had resorted to making fun of Donald Trump’s baseball hats, and took the low road of claiming that Trump would tolerate the Ku Klux Klan.
While encouraging Latinos to vote during an interview with actress Gina Rodriguez, Obama seemingly condoned voting by illegal immigrants when he said that Immigration and Customs Enforcement would not be investigating voter rolls. A Trump victory, along with a Republican majority in both houses of Congress, is a repudiation of the Obama administration’s legacy and its effort to navigate around the law.
The high-tech industry and Silicon Valley lost as well. The new high-tech class prides itself on its laid-back attitude rather than its super-wealth — casual clothes, hip tastes and cool informality. But in fact, we have learned from WikiLeaks that the 21st-century high-tech aristocracy is more conniving and more status-conscious — and far more powerful — than were Gilded Age capitalists such as John D. Rockefeller and Andrew Carnegie.
Billionaire CEO Eric Schmidt of Google advised the Clinton campaign to hire “low paid” urban campaign operatives, apparently in hopes that his efforts would earn him some sort of informal Svengali advisory role in a hoped-for Clinton administration. A leaked email from tech executive Sheryl Sandberg revealed that Facebook’s Mark Zuckerberg wanted to meet with people on the Clinton team who could help him understand “political operations to advance public policy goals.”
It became easy to say that a “crude” Trump and a “crooked” Clinton polluted the 2016 campaign. The real culprits were a corrupt Washington elite, who were as biased as they were incompetent — and clueless about how disliked they were by the very America they held in such contempt.
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Posted by JR at 1:12 AM