🚀 go-pugleaf

                       BANKING MATHEMATICS 
 
November 1996
 
     The problem of exponential growth of debt is created within the 
banking system and therefore a thorough understanding of the banking 
system is helpful. The money system is the only mechanical system 
which is not under the jurisdiction of economists, not engineers. 
Improvements are taking place in all system areas except the financial 
system. It's time engineers turn their attention to this errant system 
from which come all the financial woes of the world.
 
     As an electrical engineer to have specialized in banking systems, 
I will endeavor to explain the inner workings of this mysterious 
system and its effects on users and debt. Though this might sound 
daunting, I think I can present an easy way of handling subjects such 
as: 
 
     - plumbing modeling of flows of money with pipes 
 
     - simple algebra
 
     - exponential functions
 
     - differential equations
 
     - Taylor Series
 
     - Laurent Series 
 
     - Laplace transformations
 
     - control system circuitry
 
ECONOMIC FALLACIES
 
     The two Big Double-thinks of Economics are that:
 
     1) Banks lend their depositors' savings.
 
     2) Interest rates fight inflation;
 
     Banks do not lend out their depositors' funds, they lend out 
brand new money. Interest does not fight inflation, it causes it. 
 
HOW BANKS CREATE MONEY
 
     The inner workings of the engineering design of the global 
"fractional reserve" banking system are mysterious to many but no 
matter how complex the actual process of creating money is, it can 
accurately be simplified to "HAVING THE MONEY PLATES," whether they be 
plates for changing metal to coins, plates for changing paper to 
notes, or plates inside a bank's computer changing electrical blips to 
bank deposits on which checks may be written. 
 
     Since changes in the money supply are regularly reported, money 
must enter the supply from a source and leave through sink. Our 
liquidity system has both a tap and a drain. Since the government 
borrows money itself, it does not have control of the tap. Who 
controls the tap and the drain of the money supply (Fig. 1)?
 
     The easiest way to model our system of financial liquidity is 
with plumbing. All banking systems have the same exterior connections 
to the economy. 
 
Fig. 2
                           PIGGY BANK 
              Deposits    Interest(paid)  Loans Paid
                  |             |             |     
     |------------|-------------|-------------|--------------|
     |            |             |             |              |
     |       |----|-------------|-------------|----|         |
     |       |                                     |         |
     |       |              RESERVOIR              |         |
     |       |                                     |         |
     |       |----|-------------|-------------|----|         |
     |            |             |             |              |
     |------------|-------------|-------------|--------------|
                  |             |             |     
            Withdrawals     Expenses      Loans Made
 
     Fig. 2 is the interior plumbing of a piggy bank reservoir system 
which shows that a deposit is first made into the reservoir and a loan 
is then taken out of the reservoir which causes no increase in money 
supply. Conversely, when a loan is paid, it goes into the reservoir 
and there is no decrease in the money supply. A reservoir piggy bank 
system does not affect the money supply because there is no tap and no 
drain.
 
     Though the Bank of Canada operates a tap and adds a small amount 
of "high-powered" money to the money supply, Graham Towers, a former 
Governor of the Bank of Canada, pointed out that "The banks do not 
lend out the money of their depositors. Each and every time a bank 
makes a loan, new bank credit is created, new deposits, brand new 
money." So a chartered bank has a tap and is not the pure reservoir 
system like a piggy bank model!
 
Fig. 3
                     FRACTIONAL RESERVE BANK
 
              Deposits     Interest(in)   Loan Payments
                  |             |              |     
     |------------|-------------|--------------|-------------|
     |            |             |          |---|---|         |
     |       |----|-------------|----|     | DRAIN |         |
     |       |                       |     |-------|         |
     |       |       RESERVOIR       |                       |
     |       |                       |     |-------|         |
     |       |----|-------------|----|     |  TAP  |         |
     |            |             |          |---|---|         |
     |------------|-------------|--------------|-------------|
                  |             |              |     
            Withdrawals   Bank Expenses    Loans Out
 
     Fig. 3 is the interior plumbing of a chartered bank which shows 
that the loans do not come out of the savings reservoir but come out 
of the tap of new money. When a chartered bank makes a loan, the 
amount of money in circulation goes up. When a loan is repaid, it goes 
down. In the textbook Economics by Lipsey, Sparks, Steiner, it states 
"The banking system as a whole can create deposit money." Therefore, 
the banks all have their very own tap, their very own set of 
electronic money plates. 
 
     The famous "reserve ratio" of a "fractional reserve system" sets 
the limit on the amount of new money the private banks may create. It 
simply means that a fraction of all deposits is sent to the Bank of 
Canada's reservoir and the bank is then allowed to turn on the tap to 
match the deposits remaining in their reservoir. Banks create most of 
the money in circulation. To go step by step through the fractional 
reserve banking system's plumbing with a 10% reserve ratio, let the 
Bank of Canada turn on its tap and put $100 of "high-powered" new 
money into circulation. Each time a loan is made, the borrower always 
eventually deposits it into the banking system. 
 
                                         BoC  Accts    IOUs  New$ 
Deposit old $100: $10 BoC $90 Bank       10   90                
     Loan out new $90 for $90 IOU                      90    90 
Deposit new $90: $9 BoC $90 Bank         9    81             0  
     Loan out new $81 for $81 IOU                      81    81 
Deposit new $81: $8 BoC $73 Bank         8    73             0  
     Loan out new $73 for $73 IOU                      73    73 
Deposit new $73: $7 BoC $66 Bank         7    66             0  
     Loan out new $66 for $66 IOU                      66    66 
 
     [...............................]                                                          
 
Deposit new $10:  $1.00 BoC $9.00 Bank   1    9              0 
     Loan out new $9.00 for $9.00 IOU                  9     9  
Deposit new $9.00: $.90 BoC $8.10 Bank  .90   8.10           0  
     Loan out new $8.10 for $8.10 IOU                  8.10  8.10
Deposit new $8.10: $.81 BoC $7.29 Bank  .81   7.29           0  
     Loan out new $7.29 for $7.29 IOU                  7.29  7.29 
Deposit new $7.29: $.73 BoC $6.56 Bank  .73   6.56           0  
     Loan out new $6.56 for $6.56 IOU                  6.56  6.56
 
     [................... to infinity]                                     
                                        ----  ----     ----  ----
                                        $100  $900     $900  $0 
                                        OLD   NEW      NEW      
 
     Where the system started with only $100, after the expansion is 
over, the Bank of Canada is holding the original $100 as the banks' 
10% reserves and the banks' reservoirs are holding the other $900 of 
the savers' new deposits. So, $900 newly created dollars were added to 
the system by the private fractional reserve banks for every $100 
issued by the Bank of Canada. This limit is the inverse of the reserve 
ration. A reserve ratio of 5% would generate total new money of 1/.05 
= 20 times the initial high-powered Bank of Canada money. This is how 
an ordinary bank creates new money as new loans based not on the 
production possible but on past savings of money. 
 
     Monetary reformers who think that money issued by the banks is 
fraudulent valueless money are incorrect. It is evident that all the 
new money issued is originally backed up by collateral or personal 
IOUs pledged at the time of the loan. 
 
     Monetary reformers who think that banks use $100 to lend out $900 
and collect interest on the whole $900 are incorrect. It is evident 
that most interest is paid to depositors and used for expenses at 
every stage. 
 
HOW BANKS DESTROY MONEY: 
 
     Just as money is newly issued from the tap when a bank makes 
a loan, money is destroyed down the drain when a borrower makes a 
principal payment. Interest payments go back into the reservoir 
and not down the drain. 
 
     When a large withdrawal is made or a large failure is 
written off the banks' books, the reverse reserve ration process 
takes place. Since losses are covered from reserves upon which 
are based the loans, when their reserves go down, they have to 
call that amount in loans. It's quite an automatic doomsday 
mechanism. It was bankers calling in loans which precipitated the 
1929 stock market crash. As people fail to meet their call and 
those loans are written off again reducing the bank  reserves, 
more loans must again be automatically called in. The process 
gets worse and causes the banking system to fail. 
 
     Any cabal of rich men can precipitate such a "credit crunch" 
by simply moving their savings to another country which forces 
the banks in the target country to start calling in loans. Such 
private power over the world's financial system is inappropriate. 
 
HOW BANKS CONCEAL THEIR CREATION OF MONEY: 
 
     The injection of new money from their taps has been well hidden 
from the public view because the Bank Act insists that before any new 
money may be loaned into circulation, old money must be deposited into 
their reservoirs. It's just as if a casino were to insist on old chips 
being put into the safety deposit section before it would issue new 
chips. By merely matching new loans to deposits, this brilliant cover 
for the turning on of the tap misleads observers into falsely 
concluding that a chartered bank operates like a piggy bank. With a 
lawful reason to seek deposits before they can lend, there is no 
outward difference between chartered bank and a piggy bank. Yet, banks 
do not seek deposits to lend to other people. They seek them to 
lawfully turn on the tap of new money leaving depositors' old deposits 
in their accounts. 
 
     It's a fascinatingly tricky mechanism but it's purpose is to 
foster the impression that borrowers are getting savers' deposits and 
that savers therefore deserve to get interest for lending borrowers 
their money. This may have surely been true when banking did operate 
like a piggy bank without the creation of new money but it certainly 
is not true now that banks operate more like a casino banks issuing 
new liquidity. The matching of loans to deposits successfully hides 
the fact that no one is giving up the current use of their money since 
it is new money being loaned out and therefore no one is being 
deprived of the use of their money. 
 
DOUBLE-THINK #1 
 
     Understanding now where bank loans come from, we can see the 
double-think that has been brainwashed into economic thinking. 
According to George Orwell in "1984," to double-think was having the 
ability to accept two contradictory points of view as both 
simultaneously true. 
 
     I noted a perfect example of economic "double-think" in an 
article on the sci.econ Usenet newsgroup on Aug 24 1995 by 
wfhummel@netcom.com (William F. Hummel). In one paragraph, he said: "A 
bank loans money that it receives from other depositors..." This is 
exactly how everyone thinks a savings bank works, just like a piggy 
bank. No source of new money, no tap. Just a reservoir. 
 
     In another paragraph, he said: "The money supply increases 
whenever a bank creates a new loan, and it decreases when the loanee 
pays off the loan." 
 
     Both these statements cannot be true. Either borrowers are 
getting savers' deposits or they are getting new deposits. Though we 
know this is true that piggy banks lend out their depositors' savings, 
we also know that it is not true of the private chartered banks which 
are lending out new money which is expanding the money supply. This is 
one of the great double-thinks of economics. The more you've studied 
economics, the more you learn to believe that loans going out are new 
money at the same time as being old money. 
 
     Try it. Ask any economist where the banks get the money from 
their loans, 99% will answer "from their depositors." Then ask if it 
isn't true that economics books say that banks are creating new money 
when they make loans and they'll agree right away without realizing it 
has just contradicted their previous belief that these new loan funds 
were depositors' old savings funds. 
 
REAL POWER OF CONTROL OF LOAN CREATION: 
 
     The real power of banking is being able to refuse to turn on the 
loans tap for one businessman and foreclose while turning it on for a 
new loan to another businessman so he can buy out the first 
businessman at auction. 
 
CASINO BANK
 
     The major difference between a casino bank and a chartered bank 
is that the liquidity from a casino bank never suffers inflation while 
the liquidity from a chartered bank always suffers inflation. Since 
the hardware of a casino bank, chips of different colors and 
denominations, is functionally identical to the hardware of a 
chartered bank, computer credit pulses and coins or paper of different 
colors and denominations, inflation is not a hardware problem. It is a 
software problem. There is something wrong with the software program 
which regulates how money is put into and taken out of circulation. 
There is nothing wrong with the hardware. It is the operators of the 
taps who are improperly restricting the flows.
 
     To fully appreciate our present predicament, consider a station-
master in a wartime situation who was ordered to ensure that an 
invading army did not capture the rail system in operating condition 
and burned all of the railroad tickets. Our failure to use our 
manpower, materials and tools because there are insufficient monetary 
tickets puts us in the same category as the invading army who failed 
to use the captured railway because they couldn't find any railway 
tickets. To get out of this silly predicament, public control of the 
money tap must be regained from the private banks. 
 
HOW "MORT-GAGE" INTEREST CREATES A DEATH-GAMBLE
 
     The word "mort-gage" is derived from the French word "mort" 
meaning "death" and "gage" meaning "gamble". Bankers create the money 
supply when they make loans. Producers are forced to gamble by 
borrowing newly created Principal(P) to pay for production costs and 
then inflating their prices to recuperate the Principal and 
Interest(P+I) in sales. Because total goods priced at (P+I) can never 
be sold when consumers only have P dollars available, a minimum amount 
of goods must remain unsold and a minimum number of producers must 
fail and suffer foreclosure. The economist Keynes likened the mort-
gage death-gamble to the game of musical chairs. Just as there are 
insufficient chairs for all to survive the musical chairs death-
gamble, so too, there is insufficient money for all to repay (P+I) and 
survive the mort-gage death-gamble.
 
P < principle, I < Interest, i < Interest Rate, t < Time
 
                               PERCENT    ALGEBRA   EXP. FUNC
 
Production costs (principal)     100         P          1
 
Production prices (Debt)        100+i       P+I       exp(it)
 
Purchasable Value                100         P           1
or ratio of money to prices     -----      -----      -------
or survivors                    100+i       P+I       exp(it)
 
Unpurchasable value               i          I             1
or forced unemployment     U=  -----      -----    1 - --------
or non-survivors                100+i       P+I         exp(it)
 
For U=0, let                     i=0        I=0      i=0 or t=0
 
     The odds of survival are always set by the interest rate(i). 
P/(P+I) survive, I/(P+I) do not. 
 
INFLATION
 
     The equation for the minimum inflation (J) we must suffer is the 
same as the equation for unemployment (U) because the fraction of the 
people foreclosed on is the fraction of collateral confiscated.     
 
     Though we are led to believe that            Fig. 4                  
inflation is caused by an increase in                                     
the money chasing the goods (Shift A),            Dollars Assets            
actually, it is caused by a decrease in the                               
collateral backing up the money (Shift B)            \|      |            
due to foreclosures. Though both inflations     ______\      |            
shifts feel the same, the graph shows                 |\     |            
inflation is not the inverse function of              | \    |            
interest, it is the direct function           Shift A |  \   |            
exposing the Big Lie that interest fights             |   \  |            
inflation. (Fig. 4)                                  \|    \ |            
     Most people who have not studied         0_______\_____\|________    
economics, if asked whether interest                  |\     \            
fights or causes inflation, are quick                 | \    |\           
to agree that a merchant must pass on                 |  \   |            
increased interest costs in his prices                |   \  | Shift B    
and therefore it is evident that                      |    \ |            
increased interest costs will result                  |     \|______      
in increased prices. How they then accept             |      \            
politicians who tell them interest fights             |      |\           
inflation is a measure of double-think too. 
 
DIFFERENTIAL EQUATIONS
 
     Where "B" is the original bank balance, "i" is the rate of 
interest and "t" is time, the differential equation for your bank 
account is: 
                    dB        
                   ---  = iB
                    dt
 
     The d stands for "delta" or "change."
     So "dB" is the delta change in the Balance.
     So "dt" is the delta change in the time. 
 
     So the rate of change of your bank balance over time equals your 
balance times the interest rate: iB. We can now examine the problem, 
not over one cycle with algebra, but over time with exponential 
functions. The solution to the differential equation dB/dt=ib is 
exp(it). Exp(it) means that your balance will exponentially double and 
double in time as a function of the interest rate. It is a crooked 
non-linear function. 
 
Fig. 5 
              BALANCE
                 8|         +1*exp(it)    $         
                  |                      $           
                 6|                    $             
                  |                  $                
                 4|               $                   
                  |           $                       
                 2|       $                             
                  $------------------------------               
                  0-------1-------2-------3-> Time  
                 -$------------------------------         
                -2|      -$               
                  |          -$                       
                -4|              -$                   
                  |                 -$                
                -6|                   -$             
                  |                     -$           
                -8|       -1*exp(it)     -$    
                        
     Consider that if two men are in a car accident and one owes the 
other $1. Fig. 5 shows that if there is no interest, the debt stays 
friendly and sociable like the two straight lines for one owing $1 and 
the other being owed $1. The two straight lines from at +$1 and -$1 
represent the growth of their debt and credit. Zero growth. If there 
is interest, the balances start to grow with time and double in time 
T, then again in time T and again and again into the exponential curve 
exp(it). 
 
LAPLACE TRANSFORMATIONS
 
     Laplace Transformations are a branch of mathematics which allows 
engineers to manipulate complex system differential equations 
algebraically. Like magic, we transform tough real world functions 
from real numbers into a function of the Laplace variable "s" in the 
imaginary number dimension. There we do our computations algebraically 
and then reverse transform from the imaginary number dimension to the 
real world solution. Nothing in my engineering studies has ever awed 
me as being more powerful than Laplace Transforms and what can be done 
with them. 
 
TAYLOR SERIES
 
     We want to get the Laplace transform of a bank account which 
makes an original Balance B grow as B*exp(it). We expand the bank 
account function exp(it) into it's Taylor Series:
��-�I� 
exp(it)    =  1  +  it   +  1/2! (it)^2  + 1/3! (it)^3  + ... 
 
LAURENT SERIES 
 
     Taking the Laplace Transform of each component of the Taylor 
Series produces the Laurent Series of the banking system: 
             
LT{exp(it)} = LT{1  +  it   +  1/2! (it)^2  + 1/3! (it)^3  + ...}
 
                 1      i          i^2           i^3       
LAURENT SER. =  --- +  ---  +      ---      +    ---       + ...  
                 s     s^2         s^3           s^4       
 
      1                 i          i^2           i^3                      
   =  -  x  (    1  +  ---  +      ---      +    ---       + ...)
      s                 s          s^2           S^3            
 
      1           1               
   =  -  x  (   -------   )    =  
      s         1 - i/s           
 
          1        
   =    -----   =  USURY BANK ACCOUNT LAPLACE TRANSFORM 
        s - i                        
 
     The moment the debt passes through the (1/(s-i)) usury filter in 
banking system, it starts to grow.
 
     The differential equation for inflation (J) whose solution is (1-
exp(-it)) can be described as:
 
                      dJ^2/dt^2 + (i)dJ/dt   = 0 
 
or                         j''  + (i)j'      = 0 
 
     The Laplace Transformation of the inflation (J) can be is: 
 
                    1 /  ( s^2  +  is )  
 
CONTROL SYSTEMS
 
     With the Laplace transform, it is also possible to draw the 
electrical blueprint of a bank account in the usury banking system:
 
Fig. 6                                    |----------|
                                          | Interest | 
                                     |<---|   i=10%  |<----|
                                     |    |----------|     |
                                     |                     | 
                                     |           |<--------| 
                                     |           |     Old | Balance
                                   + |         + |         |
       -----                      |------|    |------|     |
Input |  1  | Output      Input + | Add  |  + | Add  | New | Balance
------> --- |------->  =  ------->| Node |--->| Node |-------------->
      | s-i |                     |------|    |------| 
       -----              
                            
     Fig. 6 is the control system blueprint of a usury bank account 
which shows that added to any input is the feedback of the interest 
rate times the previous balance which can be positive or negative. 
This net amount is added to the previous balance to produce the new 
balance. This positive feedback makes the system unstable and the root 
of bad vibrations. 
 
     Your $100 volt pulse is the input to the first addition node. 
Added to it is the positive feedback interest voltage from the last 
balance which, to start, was 10% of zero volts. The new net $100 volt 
pulse enters the second addition node where it also is added to the 
old balance, still zero volts, to push the new balance up to $100 
volts. 
     Next year, with no new pulse at the input, added to this zero 
voltage is 10% interest, a pulse of 10 volts. The 10 volt pulse goes 
into the second addition node where it is added to the old balance, 
100, to push the new balance to 110. 
     After 2 years, you'll have 11 more for a balance of 121.
     After 3 years, you'll have 12 more for a balance of 133.
     After 4 years, you'll have 13 more for a balance of 146.
     After 5 years, you'll have 14 more for a balance of 160.
     After 6 years, you'll have 16 more for a balance of 176.
     After 7 years, you'll have 18 more for a balance of 194.
     After 7.2 years, you'll have 6 more for a balance of 200.
     The same growth will apply to an input of -100 volts. 
 
     This demonstrates quite well what's called the "rule of 72."
     Divide the number "72" by the percent interest, in this case 10%, 
and that's approximately the number of years it will take to double, 
in this case 7.2 years, and double, and double, etc. That's what's 
called an exponential function. 
     At 5%,  it should take about 14.4 years to double.
     At 10%, it should take about 7.2 years to double, as shown.
     At 24%, it should take about 3 years to double.
 
     Cycle after cycle with no new inputs, you have the exponential 
growth exp(it) which grows as the above series. It acts just like 
bringing a microphone up to a speaker. The sound from the speaker is 
picked up by the microphone and fed back to make the sound out of the 
speaker louder which is picked up and fed back to make it louder until 
you blow your speaker. Having an unstable positive feedback loop built 
into a system makes that system unstable. 
 
     Negative feedback loops where the feedback from the previous 
balance is subtracted are very useful in stabilizing systems away from 
error but positive feedback always makes the error grow. A physical 
example of negative, positive and no feedback follows:
 
     If you have a bowl and you put a ball in it and then give the 
ball a little shove, it will travel up one side, gravity will bring it 
down and it will rock back and forth until it settles back to the 
middle. That's how engineers use negative feedback to bring back 
things which have been pushed out of normal operation back to normal. 
 
     If you turn the bowl upside down and put the ball at the top, one 
small push and the gravity will make the ball fall faster and faster. 
That's unstable. If you put the ball on a platform and give it a push, 
without friction, it will just continue in rolling steady state. Both 
zero and negative feedback are acceptable while positive feedback is 
always unacceptably unstable. 
 
     Engineers say that systems are stable if the pole of the system 
is in the left-hand plane or on the origin but unstable if the pole is 
in the right-hand plane. 
 
     Knowing that the Laplace Transform of the system is 1/(s-i), the 
denominator is zero when s=+i and therefore, the pole is on the right-
hand side of the origin, hence unstable. 
 
     Eliminating the bad vibrations is as simple as making the 
interest feedback loop in the bank's computer programs zero and using 
only the simple interior circuit known as an "integrator." Currency 
systems presently using these simple "integrator" accounts are now 
known internationally as Greendollar systems of the Local Employment 
Trading System (LETS). 
 
     We know that the LETSystem is an interest-free system and so we 
cut the positive feedback loop to get 1/(s-0). Fig. 7 shows that to 
make the interest positive feedback zero, we simply break the circuit:
 
 
Fig. 7                                 \  |----------|
                                        \ | Interest | 
                                         \|    i=0%  |<----|
                                     |    |----------|     |
                                     |                     | 
                                     |           |<--------| 
                                     |           |     Old | Balance
                                   + |         + |         |
       -----                      |------|    |------|     |
Input |  1  | Output      Input + | Add  |    | Add  | New | Balance
------> --- |------->  =  ------->| Node |--->| Node |-------------->
      | s-0 |                     |------|    |------| 
       -----              
                      
     Fig. 8 is the interior circuit still left in operation which is 
the true electrical control system of the LETS 1/s bank account. This 
is the mathematical circuitry behind all interest-free systems and how 
Greendollars work: 
 
Fig. 8
                                                 |<--------| 
                                                 |     Old | Balance
                                               + |         |
       -----                                  |------|     |
Input |  1  | Output                 Input  + | Add  | New | Balance
------> --- |---------->   ==    ------------>| Node |-------------->
      | s-0 |                                 |------| 
       -----              
 
     Instead of an output which is exponential, crooked, we have an 
output which is linear, straight. Your $100 volt pulse is the input to 
the addition node. Added to it is old balance, starting at zero, to 
push the new balance up to $100 volts. 
 
     Next year, with no new pulse at the input, and with interest 
voltage to add, the balance stays at $100 volts. If another deposit 
comes in, it's added to the old balance to create a new balance. A 
negative coming in will reduce the old balance. But the system is 
always in balance. Positives equal negatives. 
 
     So now we see how Greendollar credit at a LETS bank works. Fig. 9 
shows that when you use Greendollar credit, the amount you have taken 
out which is represented by the top circuit and the amount you owe 
which is represented by the bottom circuit stay the same: 
 
Fig. 9 
                            Cash Balance  
                                 |
             -----          G$100|G$G$G$G$G$G$G$G$G$
   Input +  |  1  | Output       |                                    
  |---------> --- |------------->0-------1-------2->Time  
  |         |  s  |              $                                    
  |          -----         -G$100|
  | +Money
|------|   
| Loan |     
|------|     
  | -Debt                   Debt Balance
  |                              |
  |          -----          G$100|
  |Input +  |  1  | Output       |                                        
  |---------> --- |------------->0-------1-------2->Time  
            |  s  |              |                                        
             -----         -G$100|G$G$G$G$G$G$G$G$G$G$$            
 
     We can also see how a loan at a normal usury bank works. Fig. 10 
shows that while the amount of cash in your wallet is shown by the 
upper circuit, the debt for that $100 shown in the lower circuit            
starts to double and double over time and all the while, all you have            
is original $100 in your possession:
  
Fig. 10                     Cash Balance  
                                 |
             -----           $100|$$$$$$$$$$$$$$$$$$$
   Input +  |  1  | Output       |                                        
  |---------> --- |------------->0-------1-------2->Time  
  |         |  s  |              $                                        
  |          -----          -$100|
  | +Money
|------|   
| Loan |     
|------|     
  | -Debt                     Debt Balance
  |                                |
  |          -------           $100|
  |Input +  |   1   | Output       |                                      
  |---------> ----- |------------->0-------1-------2-------3-> Time
            | s - i |             -$                                 
             -------          -$200|      -$                         
                                   |          -$                     
                              -$400|              -$                 
                                   |                 -$              
                              -$600|                   -$           
                                   |                     -$         
                              -$800|   -$100*exp(it)      -$       
  
     This analysis shows that unemployment and inflation must go to 
zero if the banks' computers, which are now permitted to charge both 
interest and service charges, are restricted to only the service 
charge and the interest charge abolished.
 
     Note that the exponential derivation shows that there are two 
solutions to the mort-gage (death-gamble). The software solution is 
interest rate(i) = 0 by restricting the banks computers to a pure 
service charge and abolishing the interest charge. The hardware 
solution is time(t) = 0 by installing an instantaneous electronic 
cashless marketplace. 
 
GAME MODEL: SERVICE CHARGE VS. INTEREST
 
     In his book `The Theory of Games and Economic Behavior', John Von 
Neumann, one of this century's top mathematicians, stated that 
"important questions in economics arise in a more elementary fashion 
in the theory of games." In the business war for markets, the economy 
decides who sells their goods and who fails to. Models used by 
economists are flawed by guesses and approximations about what the 
economy will choose. The only way to perfectly model the economy is to 
use fair chance to pick the winners and losers.
 
TO PLAY MORT-GAGE:
 
     The necessary game equipment to play "mort-gage" is:
 
     1) 3 types of tokens to represent food, shelter, and energy (the 
tokens can be knives, forks, spoons) 
 
     2) a fair chance mechanism like a coin, cards, dice, etc.; 
 
     3) matches, beans, chips or tokens to represent currency.
 
     Here is how I demonstrated the difference at a dinner party 
between the interest on a business loan and the service charge on a 
Greendollar LETSystem business. The hostess provided a bag of raw 
beans which I used as my model dollars. I used knives as tokens for 
food, forks as tokens for clothing and spoons as tokens for services 
which I put into a bowl representing the market economy in the center 
of the table. 
 
INTEREST-USURY MARKETING METHOD:
 
     In the Interest Game, all borrow 10 but have to inflate their 
prices to recuperate the 11 they owe the bank.
 
     Step 1): I had all 10 guests at the table pledge their watch as 
collateral for a $10 Beandollar loan. At 10% interest, they each owed 
me 11 Beandollars at the end of the loan period.
 
     Step 2) I had all 10 guests spend their $10 Beandollars into the 
market bowl in exchange for a product token. 
 
     Step 3): Once all 10 guests now had a product token for sale, I 
used fair chance to determine who would successfully market their 
product. Starting first with pairs of players with similar product 
tokens for sale, I flipped a coin to determine which the economy chose 
to buy from. Then winner delivered the product token to the market 
bowl and collected $10 Beandollars. After the first round, half the 
players had successfully marketed their product and half had not yet 
sold. Finally, taking diverse pairs, I continued tossing the coin to 
decide who the economy chose to purchase from, the winner delivering 
goods and taking price out of the market. 
 
     Step 4) Since everyone put in 10 and the winners all took 
out 11, eventually, the market bowl ran out of Beandollars with one 
guest still having products unsold. I foreclosed and seized the 
loser's product token and watch. 
 
     Step 5) I explained to the winners how their $100 Beandollars had 
inflated because there were now only 9 watches. 
 
NO-INTEREST LETS MARKETING METHOD:
 
     In the No-interest Service Charge Game, all guests borrowed 11 
and owed 11. The 11th Beandollar borrowed was to pay the bank 
employees a service charge.
 
     Step 1): I had all 10 guests at the table pledge their watch as 
collateral for an $11 Beandollar loan. 
 
     Step 2) I had all 10 guests spend the same $10 Beandollars to 
purchase their production token from the market bowl and then spend 
their last Beandollar into the market to pay for the services of the 
bank employees who facilitated the transactions.
 
     Step 3): I again used the coin to model the decisions of the fair 
market and noted that at the end of the game, all the production was 
sold. 
 
     Step 4): I noted that no one lost their watch even though the 
bankers still got paid. 
 
     Step 5): I noted that at the end of the LETS service charge game, 
there were enough watches for the Beandollars to retain their original 
value, unlike in the Interest Game. I noted that everybody had sold 
all their product tokens because the 11th unit of money had entered 
the market bowl through the bank employees' service charges. 
 
     The very subtle difference between systems is that in the 
Interest Game, the bank demands payment of money it did not create 
while in the LETS Service Charge Game, the bank demands payment of 
money it did create. With exactly enough markets to match the prices 
of goods produced, there can be no foreclosures.
 
     I hope this analysis has helped clear up many of the formerly 
misrepresented and misunderstood aspects of the usury banking system 
as well as explain why usury has been condemned throughout history as 
the greatest crime against humanity. It's the only thing standing 
between mankind and abundant salvation.
 
     Greendollar search starts at: http://www.u-net.com/gmlets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--
John C. "The Engineer" Turmel, Leader, Abolitionist Party of Canada
Box 111 Canada K2C 3L4, Tel/Fax:613-723-2739
All TURMEL topics to newsgroup: can.politics
Help Abolish Interest Rates by visiting www.u-net.com/gmlets