Reciprocal System #555 "The Road to Permanent Prosperity" ch15-Money and Credit A [Thomas Newsome]

Transcript

hello everyone and welcome to my channel this is an educational Channel and we take deep hard looks at uh great theories of everything ancient and modern and uh try to size them up and figure out how you might be able to use them for your Paradigm shifting your Awakening to 5D Consciousness or your formation of a holistic worldview and uh today is our 555th video on the reciprocal system of theory from Dewey B Larson and Mr Larson uh lived from 1898 until 1990 he left behind many books and articles he's got books on physics and chemistry and astronomy and he's got books on uh economics we're looking at one of those today he's also got a book on metaphysics including philosophy religion biology and psychology his colleagues have other books on on other articles on many other subjects um basically Larsson has [Music] one you know one Central Theory and and then he plugs it into every subject the basic idea is that uh Larson's universe is not a universe of matter it's not a universe of energy but is a universe of motion other people have uh attempted to construct a universe of motion in the past uh such as Renee deart Thomas Hobs but uh they have not succeeded in turning it into a generalized Theory uh LaRon says because they were not able to Define motion in a proper manner Larson does that he says by defining motion as the relationship between space and time that is a reciprocal relationship um meaning that basically uh motion is a fraction with space or time as the numerator and time or space as the the denominator think of speed I was walking at 3 miles Hour 3 miles of space in 1 hour of time space over time is speed now if you decide to double the speed you say I'm power walking at 10 uh 6 miles hour uh that would be one way that you could double the speed but another way would be to say that I was power walking at 3 mil per half hour you can double the space or you can have the time they're both the same because of that reciprocal relationship between space and time but this doesn't just apply to speed in Larson system all of our scientific quantities are forms of motion and can be expressed in space-time terms in a fraction with space or time is numerator time or space is the denominator time or space can have multiple exponents so you can have uh for example acceleration space over time to the second power or Force time over space to the second power or matter time to the third power over space to the third power pressure is time over space to the fourth power and uh all the other scientific quantities also have their space-time uh coordinates so to speak um now when Larson is referring to to motion he's referring to a more generalized generic kind of motion that he calls scalar motion motion that has a magnitude but one that has no specific Direction um the only direction is either in or out you can Envision a scalar motion using uh a balloon that you put dots on with a magic marker if you blow up the balloon all the dots will be moved moving away from one another every dot will be moving away from every other dot but in no specific Direction every dot will in a sense be moving in every direction outward and if you turn around and contract that balloon all the dots will be moving toward each other but you won't be able to impute any type of direction to the movement unless you define a reference point if you arbitrarily say that one of these dots is my reference point and so therefore is not moving then you can start to make up directions so the directional aspect is part of the reference system not part of the motion itself now when Larson applies this to economics um you know he has an economic system in motion so he emphasizes things like rates and um uh Dynamics non-static aspects he also emphasizes the scientific um nature of Economics uh that you can't just economics is not one of the social sciences that you just put your ideological viewpoint on and say this is my policy you know I believe in Equitable treatment and so that is my policy and I'm going to construct my economics around that he calls that the sociological approach of economics and says that it's wrongheaded because uh economics has to comply with the fact and with the science um just like if you were building a house it has to comply with the laws of physics and then you can decide what color it will be or you know what um specific ideological viewpoints that you you know want to but first it's got to comply with the laws of physics and so lson dispenses with uh the sociological approach he also constructs uh the first principles based on an economic system on a deserted island and then starts to uh introduce complications into that um and he finds that the two reciprocal aspects of Economics are production and consumption and that um you know those take the place of space and time in his system uh he comes up with about 17 different principles that he claims are scientifically exact mathematically exact and um you know such as only Goods can pay for goods and say law which is that um you know the amount of production uh produces purchasing power in the exact amount amount needed to pay for the goods and um so that's uh if you'd like to get a you know a better understanding of Larson's economic system you probably want to go back and start at chapter 1 uh right now we are about to start chapter 15 um and uh chapter 15 is called money and credit um um and also if you'd like to get a deeper understanding of reciprocal system you probably want to watch one of my uh 474 first 474 videos on the subject where I go a little bit uh deeper into the explanation of larsson's two fundamental postulates his theoretical universe and his uh deductive process and uh what those what are the ramifications what do they mean and then how did they get applied to uh science in particular but then also into economics and metaphysics okay now before I start with the chapter on money and credit I'm going to read the last paragraph here of the previous chapter which is chapter 14 on business Cycles so we can kind of get a an understanding of what he's talking about with business cycles and then get started with the chapter on money and credit furthermore such a program is not powerful enough to meet a major emergency as there is a limit to the load that taxpayers can or will support a limit that is nonetheless real when the government tries to hide it by Financial juggling as the number of persons on government jobs or government support becomes greater and the number of persons that fo put the bill becomes smaller this limit emerges as a painful reality and the program bogs down just when it is needed most um he's really talking about a program to address something like a uh depression the direct connection between the magnitude of the national wealth and the violence of economic fluctuations that was pointed out in an earlier paragraph me means that even more powerful anti-depression measures will be needed in the future if the economy remains uncontrolled as wealth increases the amplitude of the cyclical fluctuations also increases that is depressions become worse unless we adopt a program which will actually control the flow of money purchasing power to prevent the cyclical fluctuations some program that is not like the deficit spending policy a burden on taxpayers and hence subject to collapse at the very time when it is most urgently needed we can look forward to even worse situations than that which was experienced in the 1930s okay so when Larson Larson has a prescription for what to do in a downturn economic down downturn to prevent there from being a depression this book is called the road to permanent Prosperity Larson concedes that there is a business cycle there is a cycle of booms and busts or or you know um Prosper relative prosperity and then a contraction but that that contraction uh through proper uh government monitoring of the of the reservoirs the um the storage of money at uh particularly um that is how it can be regulated and it can be regulated unobtrusively and um effectively so he's going to be you know kind of getting into that here in the last half of this book uh how that's done and how it's you know properly done okay chapter 15 money and Credit in the preceding discussion has been sufficient to treat the circulating medium from a functional Viewpoint without inqu inquiring into the nature and characteristics of the media actually used for this purpose when we take up a consideration of practical control measures however more detailed information will be required at the time at this time therefore we will make a more extensive examination of money and credit there is a possibility that credit may have been employed on a limited scale in even the most primitive economies but the first extensive use of an auxiliary medium of exchange began with the introduction of money it should not be assumed that money was an invention something that originated from a kind of a Flash of Genius that our courts talk about in their p uh patent decisions rather it was a slow development a slow and gradual growth from Small Beginnings in the early days of barter all transactions were undoubtedly direct exchanges but as trade increased more and more situations would naturally arise wherein individuals having Goods to dispose of were unable to find buyers that could offer suitable Goods in exchange under such conditions particularly if the original goods were perishable there was clearly an advantage to be gained by accepting some unwanted commodity that could later be exchanged in an additional transaction with a third person for the goods that were actually desired the more ready acceptance this intermediate commodity could command the more advantageous it would be for the purpose consequently there was a gradual tendency toward the use of only the most readily accepted commodity as the exchange medium this had the additional advantage of providing a standard of value whereby the relative worth of different Goods could be more easily established the information that is available about the use of money under primitive conditions indicates that utility was originally the controlling factor in each local area some commodity in general use took on the functions of the exchange medium in one place this was cattle in another shells in a third salt cakes and so on But as time went on it became apparent that other characteristics were more important than widespread utility since adequate utility to some consumers was sufficient to ensure acceptance of an otherwise suitable commodity even though it might be of no use to most people as an article of consumption aside from this reasonable amount of utility the requirements that a commodity should meet in order to be fully satisfactory for necessary purposes are that it should be permanent uniform easily recognizable for what it is easily subdivided easily stored easily transported and available in sufficient quantities to serve the monetary purpose but not too plentiful so that its value per unit will be relatively great and the amount to be handled will be correspondingly small on this basis the rare Metals particularly gold and silver gradually preempted the field as brought out earlier these characteristics which make a commodity suitable for use as money are primarily those which reduce fluctuations in value to a minimum and thus permit use as purchasing power without very much limitation as to time and location gold is a better medium of exchange than Salt cakes not because it possesses any essential quality which salt cakes lack but because it possesses the desirable qualities in a greater degree and its value is therefore more stable it should not be overlooked however that gold is money only because it is a commodity with a utility as such independent of its utility as a medium of exchange only Goods can play the part of intrinsic money that is money which exists as such in its own right and not as a representation of something else that commodity which is accepted as the most stable form of value currently available or at least one of the the most stable forms is money in the earlier Pages which stress uh much stress was laid on the fact that goods are not only articles of consumption but also constitute purchasing power the converse is also true intrinsic money is an article of consumption as well as purchasing power it is also true that the relative value of gold compared with other Goods is affected very materially by the extent to which it is utilized as money but it would not be intrinsic money at all if it lacked a value independent of its utility as an exchange medium originally its value as money and its value as a commodity were equal at that time if an individual desired to convert his assets into the most stable form the answer was intrinsic money Greater St stability of value could be attained by exchanging those assets for money and still greater stability could be attained by exchanging this other money for gold once he had possession of gold he could go no further any remaining element of instability had to be accepted as unavoidable the development of of other types of circulating media in the modern economies has changed this picture very materially in earlier days when governments were unstable and private business enterprises were subject to a multitude of uncertainties nothing but the physical possession of intrinsic money was satisfactory but as sound economic and political institutions gradually evolved it became possible to take a step forward by storing the monetary commodity and circulating claim against the intrinsic money rather than passing the physical commodity from hand to hand such token money is far more convenient and as long as it is fully covered by intrinsic money in storage and convertible on demand it meets all of the requirements of a satisfactory medium of exchange it was inevitable however that the money issuing agencies both government and private should soon learn that they were not forced to limit their issues of token money to the amount of intrinsic money on hand as long as there was enough available to meet the demands of those who actually did present the claims for Redemption but the additional issues of money claims which took place under this policy did not constitute the same kind of money this was no longer token money a representation of intrinsic money in storage this was credit money and it had all the peculiarities and weaknesses associated with the use of credit credit is a device for reversing the time order of economic transactions reversing the time order of economic transactions in the normal exchange process C the results of past effort are exchanged for goods to satisfy present and future wants by means of credit the time sequence can be reversed and present wants can be met by pledging future effort credit is not peculiar to any one type of economic organization it simply reverses the time order of economic processes whatever these normal processes May B when trade is carried on by barter credit enables obtaining Goods first and later producing other Goods with which to make payment in modern practice money is first obtained by means of a credit transaction then spent for goods production follows and the proceeds are used to make payment in the final step of the process in a barter economyedit credit operates through barter in a money economy it operates by means of money recognizing that credit is a money transaction in the present day economy contributes materially to a clear understanding of its relation to the general operation of the economic system it is true that direct credit dealings between merchants and consumers may take place without the aid of the monetary mechanism under certain circum uh certain conditions consumers who buy goods from Merchants stocks on open accounts or deferred payment plans are drawing directly from the credit Reservoir and the original transaction involves no money such transactions show up physically as reductions in the merchants [Music] inventories in spite of the large amount of business done on a credit basis however very little of it is carried through to completion without the use of money at one stage or another normally the merchants must proceed at once to replenish their stocks after sales if they borrow money from banks for this purpose the transactions revert back to the same status as if the consumers had borrowed from the banks if they happen to have enough money reserves of their own to finance the credit business without the help of banks the result is merely a withdraw from their money storage rather than Bank storage this means that we can measure the changes in the money reservoirs and from them determine the variations that have taken place in both money and credit any increase in credit aside from the small amount of pure credit dealings must be reflected either by withdrawals of money from storage or by an increase in the amount of credit money outstanding which is likewise a reservoir withdrawal if an individual saves part of his income and deposits it in a bank instead of spending it he has put this money into storage and the active money purchasing power has been reduced by this amount but when the bank turns around and lends the money to some other person for use in the Goods Market the ultimate effect is exactly the same as if the first individual had spent the money himself the original storage transaction has been reversed by a withdrawal from money storage the deposits or the money storage thus constitutes uh constitute a source thus Source from which loans or withdrawals from Storage are made and if we limited the supply of money to the amount of intrinsic money available that is if we use nothing but the intrinsic money itself or token money representing intrinsic money actually present in our vaults Bank credit could not be extended in excess of the money stored the total deposits plus the capital and surplus funds of the banking institutions as a publication of the Federal Reserve System expresses the foregoing quote the Practical experience of each individual Banker is that his ability to make the loans or acquire the Investments making up his portfolio of earning assets derives from his receipt of the depositor money but this same the same publication goes on to say quote on the other hand we have seen that the bulk of the deposits now existing have originated through expansion of bank loans or Investments by a multiple of the reserve funds available to commercial Banks as a group end quote and it admits that this constitutes quote an apparent Paradox that is the source of much confusion to banking students end quote in their explanation of the way in which banks create the deposits the authors of this publication utilize the example summarized in the following table and um this table is kind of botched in the uh copy here that I'm reading from um let's see if we can parse what it says from his description in the original situation uh situation one the bank had deposits of 100 and loans and Investments amounting to 80 leaving a reserve of 20 or 20% of the demand deposits the legal requirement assumed for the purpose [Music] of um the illustration the Federal Reserve System now makes additional reserves available to the bank bringing the total reserves up to 30 as indicated in column 2 The Reserve ratio is now 27.3% and three out of 11 and the bank is able to expand band its loans and deposits up to 120 and 150 respectively as shown in column 3 before the limiting ratio of 20% is again reached this shows the author say quote that the issuance of a given amount of high-powered money the dollars created by the Federal Reserve action that become Bank Reserves they explained are often called high power dollars to distinguish them from ordinary deposit dollars by the Federal Reserve uh will generate a volume of ordinary money that is several times as large as the amount issued now let us ask what is wrong with this picture the authors admit that in order to achieve the results specified the proceeds of the additional loans must remain on deposit and they are so shown in the T tabulation So this generated volume of money is money that cannot be used to illustrate this point let us see what happens if the borrowers of the deposit money created by the bank do try to do try to use it they draw checks against the new deposits shown in column three cutting the total deposits back to 110 the bank must maintain reserves amounting to 20% of this amount the new Total of loans and Investments therefore cannot exceed 88 which means that assets amounting to 32 must be sold to balance the accounts thus the 10 received from the Federal Reserve only provided eight for actual use the remainder of the 40 that was loaned on the strength of the additional Federal Reserve credit vanished as soon as an attempt was made to use it high-powered money is a myth the bank can lend for use by its customers any money that is actually obtained from some outside Source from depositors from its stock holders from the Federal Reserve System but it cannot lend anything more it cannot create any money for Lending purposes as the Federal Reserve publication that was quoted admits this is the Practical experience of each individual banker and any comprehensive theoretical study must necessarily arrive at the same conclusion economics economists have generally regarded the setting up of credit on the books to the bank as the significant banking transaction and they assert that deposits are mainly created by the Banks themselves since they regard the deposits as money this means that the banks are the principal sources of the money supply but this conclusion is the result of a failure to appreciate the significance of money storage in the operation of the economic system when we get the proper perspective we realize that banks are primarily reservoirs in the money stream we can see that the mere creation of a deposit by means of credit accomplishes nothing in itself the loan by the bank to the customer and the deposit of the funds in the bank by the customer are two transactions not merely one even though they take place simultaneously and may be handled by means of a single piece of paper the two transactions have opposite effects um okay I think we're going to stop right there and uh get ready to uh start up at this location when we resume tomorrow um on chapter 15 money and credit okay so thank you for tuning in today and have a great