“DEFLATION IS THE PRINCIPLE MEANS BY WHICH BANKERS INCREASE THEIR WEALTH”

To the best of my knowledge, no one has ever said this before — so pay
attention, because it gives you the full picture of how the money power is
capturing possession of all the world. Here it is. I have no way of
spreading the word. — Dick Eastman
Yakima, Washington July 15, 2017
——————————————————-
a theoretical breakthrough in economics that the common man must learn about
and do something about

by Dick Eastman

We always thought that bankers add to their wealth by the interest they earn
on their loans. We knew they created a deposits for us in exchange for our
obligation to pay back to them afterwards the amount of that loan, plus
interest. Such “lending,” we all understand, is where the economy gets its
money supply. The new deposit gives the economy new purchasing power and
there is that much more money in the economy for people to bid for goods and
services in the market economy. The subsequent payments — “debt servicing”
of course then reduces the amount of purchasing power; the principal goes
back to the bank as a collected receivable, canceling out the liability
created for the bank when they created the deposit for the borrower. BUT
WHAT OF THE INTEREST? Certainly it is the bankers’ primary source of
income, but, and here is the breakthrough discovery, the interest earned is
not the primary way the biggest bankers increase their wealth. Their income
is interest, but their mainstay and reliance is upon, keeping those interest
earnings from returning to the real economy, because when the amount of the
deposit is returned to the banks plus the compound interest — the result on
the entire economy is severe deflation — and when there is deflation, all
of the bonds and idle cash balances (unspent interest earnings) increase in
value — because when there is less money in the economy everything is
cheaper — residential properties forced on the market by homebuyer default,
businesses forced on the market because of fall in consumer demand, public
utilities forced on the market because tax revenues of government are lower
than planned — all due to money destroyed by repayment of principal plus
interest earnings kept from returning to circulation by bankers who gain in
wealth, not from interest earned on their loans, but from deflation caused
by withholding the interest we debtors have paid on loans. The bankers,
don’t want to earn interest, they want to take over the real property —
land and other assets, that working people have created and developed. Do
the bankers really play this game, of get rich through deflation which they
cause by not returning interest to the economy as consumers and investors?
Yes. But what about periods of inflation, when bankers provide easy money
for an economic boom? Yes, bankers do sometimes give the people easy
money — inflation — but those times play a part in the
wealth-by-deflation-windfall. Inflation merely rewinds the machine for
another round of wealth-by-deflation.

The business cycle is caused by this game being played.

1. Easy money to encourage production. But as times are good, everyone
wants to borrow money and the banks choose to increase interest rates —
saying they do so because of inflation — but really they do so because they
need those higher rates to end the boom when they want the boom ended.
Note: If they were really charging competitive interest rates, interest
rates would be lower in a boom because the risk of business failure by the
borrower or job loss or insufficient tax revenue is so much smaller.

2. The banks call in loans and stop issuing loans when they want the
inflationary boom to turn to deflationary hard times — less loans, harder
to get loans, businesses fail or downsize, letting go employees or cutting
wages or hours — less money means fewer sales — and that means budgets are
busted and there are defaults and foreclosures and bankruptcies — and that
is good for the bankers sitting on their unspent interest earnings —
because all of the foreclosed housing units, bankrupted and distressed
businesses and distress sale public utilities come on the market and are
bought up cheap. And when they have harvested with deflation what they
sowed with easy money, they are ready to rewind their mechanism again with
another period of easy money.

The economist Irving Fisher rightly expounded his debt-deflation theory of
economic depressions, but he could not see how the depression got started.
Now you know. It is a game of wealth making through deflation harvesting of
an economy previously built by a boom.

One more feature of the game of wealth through deflation that the big
bankers’ play. How do they hide the monetary contraction so that their game
is not too obvious? By keeping the idle interest income either in domestic
bank deposits — as excess reserves — or held in paper currency — their
held-back money is still counted as part of the M1 Money Supply (cash held
by the public plus deposits) — so it not recognized as lost to the domestic
economy. But since the holders of these balances never transact investment
or consumption purchases with them or re-lend them, the funds are never
transferred and so while they are “money supply” their velocity of
circulation is effectively zero and so they contribute nothing to national
purchases and may as well not exist as far as the domestic real economy is
concerned. But economists don’t measure velocity directly, and so this fact
is unnoticed and not taken into account when wondering where the economic
stagnation in the real economy is coming from.

And that is my theory in its first exposition. I know it is right.

I hope you will share it with others. I hope I live to write a clearer and
more thorough exposition — but I tell you all of the elements are here.
Study it. Think about it. Test it against current economic thinking. You
will see I am right. It will be obvious to you.

Sincerely,

Dick Eastman
Yakima, Washington

Advertisements

About oldickeastman

Born 1949 Oakland High School 1967 Lake Forest College B.A. Western Michigan M.A. Texas A & M University M.S. and two years completed in the doctoral program in economics, passing prelims in Macroeconomics I am living in Yakima, Washington and spend much of my retirement writing on public issues.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s