(Jim wrote:-)
Let's look at what Douglas said in regards to usury, even though I'm
somewhat critical of Douglas in regards that he downplayed, or did not
understand, it's full effect.
This quote from Douglas that Jim is
using below is taken from "The New and the Old Economics" pages
15-17.
The debt
differs in nature from the debt created by private finance in exactly
the same way that a debt to foreigners differs from an internal debt-its
repayment actually takes money out of the country. If a rise of prices
has occurred, it is repaid twice over, once in increased prices and
again on redemption. Secondly, there is no provision in this method
of financing for the money required to pay the interest on the
debentures, which, in fact, can only be paid, if it is paid, by the
issue of fresh money to pay it, which, under existing
circumstances, comes from the same source, that is to say, the financial
system.
The quote continues:- "From this
point of view, it is the difference between usury and profit ~ a
difference clearly drawn in the Middle Ages." And so we might
think Douglas is zeroing in on 'interest' as the problem, ( as I
have to admit I, myself, have thought in the past.) But then
he continues, and writes:~ "There is an additional factor, perhaps
more important than any of these, and that is that either by
directly calling in the debentures or by selling the debentures to the
public and calling in public overdrafts, financial institutions can, and
most unquestionably do, recall the money equivalent to the plant value
at a greater rate than the plant
depreciates."
Now if you look at the short
explanation of banking found in the 'Monopoly of Credit', what does it
say about
'interest'? :-
"All costs go
into the price the public pays for its
goods,
and consequently, when depositor No. 10 repays
his banker with 102
pounds obtained from the public
in exchange for
his goods, and THE BANKER, AFTER
PLACING 2 POUNDS,
ORIGINALLY CREATED BY HIMSELF, TO
HIS PROFIT
AND LOSS ACCOUNT..."
Note that Douglas says "originally created by
himself" in refernece to the banker's 'interest', and that "ALL
costs go into the price". 'Interest' is simply another 'B'
cost. As is 'rent', which is also based on time. And
Bill Ryan has added, in answer to another, separate post from Wally
this morning in which the above quote was
used:~
"Notice that Douglas does not say the
interest is
abstracted from the economy. It is transferred
from
depositor No. 10's personal checking account to the
banker's personal checking account in payment for
services
rendered."
(underlining mine)
When listing the
causes of B in A+B you will notice that usury is mention
FIRST.
Douglas is NOT listing the "causes" of 'B' in A+B
below, Jim, he's listing five causes of a deficiency in purchasing
power as compared with collective prices of goods for
sale.
1. Money profits
collected from the public (interest is profit on an
intangible).
2. Savings, i.e., mere abstention from
buying.
3. Investment of savings in new works, which create a new
cost without fresh purchasing power.
4. Difference of circuit
velocity between cost liquidation and price creation which results in
charges being carried over into prices from a previous cost accountancy
cycle. Practically all plant charges are of this nature, and all
payments for material brought in from a previous wage cycle are of the
same nature.
5. Deflation, i.e., sale of securities by banks and
recall of loans.
There are other causes of, at the moment, less
importance.
But why do you do not attack all
other profits, which are listed before his explanation that 'interest'
is a profit on an intangible? Nor number two,
'savings'? Both of which do the same thing that 'interest' does,
do they not? And how does that square with what Douglas says here,
"The effect of the concrete sum distributed in profit is overrated in
the attacks made on the Capitalistic system, and is of small and
diminishing imprtance as compared with the delusive accounting system
which accompanies it, and which acts to reduce consistently the
purchasing power of effort."? I think what you're missing, Jim,
and I hope others more knowledgeable about this will correct me if
I'm wrong, is that numbers one and two above are money that is still in
existence and can still be spent on 'consumer goods'. Number three
has been 'spent. It's been 'invested', it's bought some capital
good and created a new set of costs. Number four is one of the
main problems, where 'financial credit' increasingly begins to lose its
relationship with 'real credit', and number five is of a similar nature.
It seems to me that numbers three , four, and five are where the
'problem' lies. Not with 'interest'. And that's what
Douglas proposed to correct, and why he didn't attack interest.
Re: It's Not Inter
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