Credit Creation - Hallmark of a Sovereign Nation
Mr. Mueller - 10:59pm May 5, 1999
The fundamental of finance is credit creation.
All monies in circulation have a beginning. This beginning of money, which is called
"credit" at the banker's end, is always a "debt" with receipients
of such credit. All credit is subject to interst charges, which makes the repayment
of any loan a mathematical impossibility. Why? Because NO ONE CREATES MONEY INTO
CIRCULATION MERELY BY BEING INDUSTRIOUS! ONLY THE BANKER ISSUES NEW MONEY! And since
the money lender will never create the interest portion of a term debt into circulation,
any economy is bound to callapse after a while for lack of hard cash (credit) to
finance the basic economic requirements of a nation. See, when a 1000 Dollars loan
translates into 1500 Dollars paid back to the lender after 5 years, then some other
borrower got cheated out of 500 Dollars he needed to pay back his own debt, FOR ALL
MONEY IN CIRCULATION IS OWED TO THE BANKS AND WAS AT ONE TIME OR ANOTHER BORROWED
INTO EXISTENCE, wheter it be a private citizen, business man, industrial owner or
any level of government. Their borrowed money is the money in circulation. And just
because some borrowers are successful in paying back their loans with interest on
time, that does not mean that he created the extra 500 Dollars by being industrious.
Some other borrower was made a guaranteed loser by the first one's success.
reason we don't notice a total collapse of western economies is that all Governments
go progressively deeper into debt, which on a short term offsets the technical inability
of a multitude of borrowers to repay their loans with interest. And how does the
before-stated information relate to IRAQ? Very simply in that a sovereign Iraq has
the power to create its own credit responsibly and without cost to an international
banker. For ANYTHING WHICH IS PHYSICALLY POSSIBLE CAN ALSO BE MADE FINANCIALLY POSSIBLE.
The only real assets of a nation are not its financial resources, but rather its
natural resources lying within its boundaries in the form of minerals, oil, gas,
arable land, people with know-how, and so on. And these real resources can indeed
be extracted by means of a responsible way of handling the national issueing of credit
based on the nation's resources. Yet this form of handling the nation's money supply
- even where properly administered - is only a stepping stone in the evolution of
a society to a higher level of economics: one that is functioning without cash currency
at all. Perhaps more on that later. Mr. Mueller.
romanow replies: - 08:36pm May 16, 1999
Dear Mr. Mueller:
appear to believe that there is no problem with Germany and Iraq paying in each other's
respective currencies. This presumes both an international banking system and a rate
of exchange. It is true given the above. However both nations need faith in the other's
rate of exchange. Fixed rates of exchange have historically been subject to leakage
when they diverge from the percieved real rate. Denial of such a real rate sooner
or later leads to the whipcrack devaluation that the Russian Rouble faced in '80s
and Southeast Asia faced in the '90s. How do you see the creation of credit by a
bank affecting this picture? And what by the way does any of this have to do with
Mueller - 01:53am May 17, 1999
Dear Mr. Romanow,
To start out
with, my article has nothing to do with privatization. It was the system operator
(webmaster) who placed the IMF / World Bank issue under this heading and so I decided
to use it as a springboard for my thoughts. And now to your concerns.
I do believe in the possibility of nations dealing with their respective currencies
in their trade relations. What I despise is U.S. Dollar monopoly in the area of international
trade. Exchange rate fixing should be a matter between trading nations and not for
the handful of international financiers to decide as they subject various currencies
to much pressure from underevaluation for as long as the U.S. Dollar is their standard
for measuring the value of other currencies. There is a difference between an international
banking system and an inter-NATIONAL banking system. The first one is controlled
by the financial elite whereas the second one is controlled by national governments
deciding upon the value of their currencies. The confidence in "each other's"
currencies is easily established provided the trading nations control their credit
properly and without value deterioration through inflation. When a currency is stable
the rate can be fixed for a long time.
What you call "whip-crack"
devaluation is caused by unsound monetary policies (usually inflation) or an irresponsible
form of credit creation (the printing of too much money all at once, mostly to pay
for government overspending). Where such conditions exist one cannot have a fixed
exchange rate. Faith in each other's currencies has nothing to do with creating a
stable trade environment. Only sound financial decisions can achieve that. Lastly,
credit creation is always going on for as long as governments, industry, business
and private individuals keep borrowing. The amounts of public borrowing can have
an effect on an exchange rate if too much of it is going on all at once. The factors
which destabilize a country's currency more than borrowing are
1) the rate of
interest on loans, and
2) the amount of direct plus indirect taxation.
hope I have made myself clear enough. - Mr. Mueller.
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