Saturday, February 5, 2011


"Gang8 - devoted to Creditary Economics"

Google Analytics tracks visits to this blog and to my Google Site, and reminds me daily that I must work harder to create something that more people will be interested in. The other day there was a spike of activity on the Site. The "Traffic Sources Overview" in Analytics led me to a Yahoo group called Gang8 and Message #15567:

"Gang," writes Dirk Bezemer,

I came across this wonderful site

He provides a link to my site and says, "Half right, half mistaken." My ego grew three sizes that day.

Responding to Dirk, Arno Mong Daastoel said,

Credit (and interest) is toxic only when it is spent unwisely, resulting in BAD (unpayable) debt. Debt is neutral both ethically and economically and not bad per ce.

And Dirk responded to Arno:

Agreed, Arno, that's the mistaken part. Also that there is money-money and credit-money. The correct part is that there are 'different moneys' and that the 'composition of money' matters. But remember that Keynes liked to read the 'monetary cranks' (like Gesell)- they made him think.

Hey, if Dirk is comparing me to Gesell, that ain't half bad. And if he is sayin I made him think, this is high praise.

For Dirk, a question: If there is not "money-money and credit-money" then how can the ratio of debt-to-M1 vary?

And to Arno I would suggest that the risk of credit-use "resulting in BAD (unpayable) debt" is far greater when the reliance on credit is excessive, than when it is moderate.

Arno's first response was to refuse to consider the possibility that debt can become a problem simply by accumulating. This seems to me particularly closed-minded unless Arno has already worked out an explanation. But the thing Arno says -- Credit is toxic only when it is spent unwisely -- is not explanation. It is proclamation.

Consider the source. The home page of the group says Gang8 is "devoted to Creditary Economics." So the group would want to assume that "debt is not bad." The group would want to assume that "Credit is toxic only when it is spent unwisely." No matter how much debt accumulates, the group would want to assume that it isn't a problem.

It is an assumption that must be challenged.

// UPDATE 10:24 A.M.
There are now additional posts in the thread. There is more now to consider than the views I captured above.

Just briefly, I want to suggest that Gang8 does not seem to consider the cost of a high credit/money ratio. Nor do they seem to treat monetized federal debt as interest-free, non-credit money. Just briefly.


Tschäff said...

Been a reader of Gang8 going back to 2004. Great little cove where ideas are freely exchanged and discussed. Endless source of food for thought.

You are still using debt to money concept when the two must be equal always. If a bank makes a $1000 loan, a $1000 deposit is created... If the federal gov spends $1000, bank accounts rise by that amount. I wish you would take the time to read Bell's paper The Hierarchy of Money. Its free relatively short and easy to understand. It will answer a lot of the questions you have. Follow that with Where do profits come from that I linked to in my last comment. Do that and you'll be far better equiped to think about money.

The Arthurian said...

The Hierarchy of Brusque

I'm looking at WFHummel's excerpt of Bell's paper.

Seven paragraphs in, I am already bored. This is pointless and repetitive.

It had my interest by opening with a reference to Keynes. But even in Hummel's (presumably shortened) version, it takes two paragraphs to say that money as a standard-of-value is not identical to money as a medium-of-exchange.

Then we have the "Why" of it, which gets us to tax liabilities. This is stated and explained and provided with example, and summarized -- all in the third paragraph. And, after too many words per unit of concept on multi-layered IOUs, we return to "payment of taxes" as the underlying "why" again in paragraph seven.

The simple fact is, "the dollar" is our standard-of-value. Fact. Please don't explain to me why the fact is the fact. And definitely please don't explain it twice.

And then again in paragraph number eight. And again again in paragraph number nine.

I would reduce the thing to a clear fragment on multi-layered IOUs, and finish with Hummel's final paragraph, which holds but one sentence.

Words dilute meaning.

Tschäff said...

I'd recommend the original, it's much more readable and you'll get a lot more from it.