| Subject: | Re: [socialcredit] Re: more on -- typo in para eight (and three): Wally quoting Douglas | | Date: | Friday, July 30, 2004 10:50:01 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
| In reply to: | Message 35 (written by Jessop Sutton) |
Douglas was metaphorically describing the effects of
credit contraction. Note that the contraction that
Douglas talks about in this example has no
correspondence to the amount of interest that banks
credit to their profit-loss accounts, which they
collect from their customers. A net $100 pay down on
principal (for the economy as a whole) immobilizes
$100 worth of goods already produced, that can never
be sold at cost in the absence of an equivalent
offsetting loan. Continuous credit contraction
results in the progressive collapse of the industrial
economy.
The nature of double entry accounting is that while
we consume the goods reaching the retail market
today, we are actually paying the costs of production
for the goods produced yesterday that we have already
consumed. We therefore spend our income from today's
production for yesterday's production. Our ability
to pay for today's production tomorrow is entirely
dependent on tomorrow's income.
For this reason, income must - or ideally should -
remain proportional to the costs of production
through time. The most spectacular contraction,
whether from malfeasance or incompetence, resulted in
the Great Depression of the 1930s that engulfed
nearly the entire world.
Labor displacement creates a special kind credit
contraction, in diverting income increasingly from
consumers to firms--"short circuiting" back to the
banks without ever reaching the pockets of consumers.
It is a long-term phenomenon, in contrast to the
rapid collapse that led to the Depression.
It may not be apparent that it is credit contraction
in the statistics, since A+B may not change; at the
same time the ratio of A to B is falling.
--- Jessop Sutton <sutton@kingsley.co.za> wrote:
> On Tuesday 27 Jul 2004 10:45 am, Wallace M. Klinck
> wrote:
>
> > "Depositor No. 10 having happily obtained his
> overdraft, pays it out to his
> > empoyees in wages and salaries. These wages and
> salaries, TOGETHER WITH
> > THE BANKERS INTEREST, all go into costs. All
> costs go into the price the
> > public pays for its goods, and consequently, when
> depostior 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, sets the
> 100 pounds received
> > against the phantom credit previously created, and
> cancels both of them,
> > there are 100 pounds worth more goods in the world
> which are
> > immobilized--of which no one, not even the banker,
> except potentially, has
> > the money equivalent."
> ===============================
>
> But "Depositor No. 10" only received the
> wherewithall to repay his loan from
> other parties who purchased his goods, possibly with
> money originally created
> as loans by some banks somewhere and which still
> have to be repaid. Is this
> not so?
>
> Also "depostior No. 10 repays his banker with 102
> pounds obtained from the
> public in exchange for his goods . . . . . . . . . .
> . there are 100 pounds
> worth more goods in the world which are immobilized
> . . . . . .." Has the
> system not removed the goods from the world through
> the process of
> consumption?
>
> Jessop.
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