| Subject: | [socialcredit] dialog | | Date: | Tuesday, August 3, 2004 10:57:29 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
The interesting dialog appended at the end is
archived at
http://www.geocities.com/new_economics/dialog.txt
Jim intermixes various orthodox and "debt virus"
arguments in his case against the Douglas theory.
My replies are indicated by [Reply 08-03-04].
I invite continued discussion.
----------
-----------------------
From: Jim Schroeder
-
[C. H. Douglas]
Professor Copland begins by remarking as follows:
"Taking the first part of this argument, it is
assumed that the so-called B payments are not
distributed to consumers. This I believe to be the
fundamental fallacy of the Douglas Credit Analysis."
[Jim interjecting]
(And so do I with the exception of interest or debt
retired).
------------------------------
-----------------------
[Reply 08-03-04] B payments are made from one firm to
another, not to consumers.
***
---snip---
[Back to Douglas]
but is the presentation of a claim an purchasing
power already distributed, and is met, if it is met,
by the inclusion of the sum claimed, in: price. B
payments are settlement of the combined claim
produced in this way at every separated stage of
production.
[Jim interjecting]
(This is true, but when a book cost, or overhead is
paid to an outside manufacturer, that money used to
pay him does not disappear. It still exists in that
manufacturer's bank account, and that money can still
be used as purchasing power to clear the product that
the second manufacturer is producing. This seems to
me to be a major - no pun intended - point of
confusion on behalf of Douglas. I will elaborate
further below.)
------------------------------
-----------------------
[Reply 08-03-04] Jim refers to "money" that "does not
disappear." Money paid from one firm to another is
flowing AWAY from the point of retail, at the same
time that costs represented by that payment are
flowing TOWARD the point of retail to be charged
against the goods being sold. B payments are in the
"reflux" portion of the credit money circuit (back to
the banks), whereas A payments are in the "flux"
portion (out from the banks). There is
directionality to production through the division of
labor with the concatenation of time.
When Douglas used the term "purchasing power," he
generally meant purchasing power in the hands of
consumers. He did not use the term to mean "money"
in the quantitative or physical sense anywhere in the
economy.
The Douglas theory is a theory of effective demand
against the costs of production to the point of
retail. The shift in account balances from consumers
to firms (with the displacement of labor) corresponds
to the fall in effective demand in respect to the
costs of production flowing to the point of retail,
if not otherwise compensated through such mechanisms
as the Dividend and Discount.
***
[Back to Douglas]
Fortunately, Professor Copland, while ignoring the
diagram on page 31 of The Monopoly of Credit, the
book from which he is at the moment quoting, includes
a diagram of his own, which confirms my belief. It
will be noticed that in this diagram time is non-
existent,
[Jim interjecting]
(And this has been my criticism of the accounting
proof offered by the banks and a member of the Social
Credit group that states that the loans (debt) and
credits (money) are in balance, and interest has no
affect on this balance because it's bank equity. But
as I've always stated, by the TIME that bank equity
has been spent back in the system, more interest has
accrued, because interest is a function of time).
------------------------------
-----------------------
[Reply 08-03-04] Interest is a function of time, but
the interest accruing on the debt owed by the public
is accruing only on the debt held by the public, not
the equity earned by the banks. Jim seems to think
that interest is somehow accruing to the debt held by
the public on the interest already paid to the banks,
thereby compounding the debt held by the public.
Banks both pay and receive interest. As the public
pays interest to the banks for financial services
rendered, the banks spend the equity the are earning
with the community for ordinary business expenses,
interest owed to the community for deposits of
various kinds, dividends to their stockholders, etc.
***
Bill
From: Jim Schroeder
jschroeder@shaw.ca
July, 2004
I'm going to copy a section that Douglas wrote on A+B
and add comments in red:
[Douglas text]
For the convenience of readers who have not Professor
Copland's paper, or the book in which this theorem is
contained.
It is reprinted herewith:- "A factory or other
productive organization has, besides its economic
function as a producer of goods, a financial aspect-
it may be regarded on the one hand as a device for
the distribution of purchasing power to individuals,
through the media of wages, salaries, and dividends;
and on the other hand, as a manufactory of prices-
financial values. From this standpoint, its payments
may be divided into two groups:-
"Group A-All payments made to individuals (wages,
salaries, and dividends).
"Group B-All payments made to other organisations
(raw materials, bank charges and other external
costs).
"Now, the rate of flow of purchasing power to
individuals is represented by A, but since all
payments go into prices, the rate of flow of prices
cannot be less than A plus B. Since A will not
purchase A plus B a proportion of the product at
least equivalent to B must be distributed by a form
of purchasing power which is not comprised in the
description grouped under A."
[Jim]
(And my criticism of A+B is what Douglas thinks
comprises B, not that B does not exist. I argue that
the only factor that causes B is interest on debt
created money, or what Douglas calls usury. I will
elaborate further below.)
[Back to Douglas text]
It is fortunate that the criticism of Professor
Copland is practically contemporaneous with a
criticism of the same theorem by Professor Robbins,
as it is possible to use either of them to confute
the other. It is, however, obvious that, at any rate,
Professor Copland has not understood, what seems to
me to be, its fairly simple language, and what are
the consequences which might be expected as a result
of its truth.
The A plus B theorem, then, may be said to be first,
an assertion that, under certain circumstances,
almost universal in modern industry, which will
subsequently be specified, purchasing power cannot be
equal to prices, if purchasing power and prices are
both considered as a flow, which is the commonly
accepted and correct method of regarding the matter.
The second aspect of the theorem is that it puts
forward an explanation as to the mechanism through
which this disparity is produced. Obviously, the
correct method of approaching the subject, although
not that commonly employed by professional
economists, is first of all to ascertain if the
situation does, in fact, confirm the theorem. Now,
fortunately, or unfortunately, it is not necessary to
seek very far for this confirmation. I do not suppose
that Professor Copland, or any responsible student of
the economic situation would deny that it is
concerned with a problem of glut, still less would he
contend that it was a problem of scarcity. It is
admitted that we can produce all we want, but cannot
buy or sell to the extent of our productive capacity.
[Jim interjects]
(Agreed!)
[Douglas text]
Without going over the well-known ground covered by
the literature of sabotage, such as the burning of
wheat as fuel because it cannot be sold or to keep up
the price, the destruction of millions of bags of
coffee, the shooting of calves an the Argentine
plains, the restriction of rubber tapping, and merely
emphasising that this glut of actual consumable
products does not take into account the immense
unused productivity represented by half-idle
factories, large bodies of unemployed, decreasing
cultivation of farm lands, and unused processes far
increasing the productivity of agriculture, to name
only a few of these aspects of the matter, it is
quite certain that the introduction of mechanical
power into the economic service of man has at least
multiplied his productive capacity by the ratio of
his muscular energy to the power at his disposal,
that is to say, at least fifty times. It is highly
probable that the multiplying factor is considerably
greater than this. An association of American
engineers and technologists at Columbia University
remarks:
"The advent of technology makes all findings based an
human labour irrelevant, because the rate of energy
conversion of the modern machine is many thousand
times that of man.
The total capacity of U.S. industrial equipment is
one billion horsepower which does the work of ten
billion men or five times the earth's total
population." Both from observation, therefore, and by
scientific deduction, we are justified in regarding
it as beyond all reasonable doubt that, from the
realistic or physical point of view, the world
actually is rich and could be much richer in real
goods and services, and that economic want is an
anachronism.
[Jim interjects]
(Again, agreed so far)
[Back to Douglas text]
On the other hand, we may regard Governments as being
spokesmen of the financial system, since it is by the
sanction of Governments that the existing system is
maintained. It is claimed by these governmental
spokesmen that we are living in a period of great
stringency, that financial economy is necessary, both
of the voluntary or saving description and of the
involuntary description, which may be for the present
purpose described as taxation. Obviously, these two
pictures cannot be at one and the same time true. We
cannot be rich and poor, in an economic sense,
simultaneously. That is to say, the financial system
does not reflect the facts of the physical, economic,
and production system.
[Jim interjects]
(Absolutely)
[Back to Douglas text]
Since fact and logic both demonstrate that we are
rich, while the financial system says that we are
poor, it seems beyond dispute that it is purchasing
power which is lacking, and not goods, or, in other
words, that the collective prices of the goods for
sale are in excess of the purchasing power available
to buy them.
[Jim interjects]
(With all this I absolutely agree with Douglas, I
just disagree with the factors that cause this except
one.)
[Back to Douglas]
Professor Copland seems to have some inkling of this
in his first paragraph, in which he remarks that:
"With many others, Major Douglas finds a disparity
between consumers' spending power and production."
(sic). I am not specially concerned with any claims
to priority, and am, therefore, quite content to
agree that I have an increasing body of acquiescence
on this point, although I do not gather that
Professor Copland admits it. Turning to the specific
criticism of the theorem, Professor Copland begins by
remarking as follows: "Taking the first part of this
argument, it is assumed that the so-called B payments
are not distributed to consumers. This I believe to
be the fundamental fallacy of the Douglas Credit
Analysis."
[Jim interjects]
(And so do I with the exception of interest or debt
retired).
[Back to Douglas]
I think I am justified in retorting to the second
sentence just quoted that I think the first sentence
is conclusive evidence that Professor Copland does
not understand the Douglas Credit Analysis. The B
payments to which he refers are specifically stated
in the enunciation of it, to be payments made from
one producing organisation to another, and are,
beyond dispute, the completion of a cycle of cost
accountancy.
[Jim interjects]
(Yes they are)
[Back to Douglas]
I trust Professor Copland will not consider me unduly
elementary if I explain that a cost is created either
by the application of paid labour to production or by
the allocation of book costs in respect of
previously-incurred expense, or by both together.
Payments to labour distribute purchasing power to
consumers, who supply the labour as workers, and
create costs which go into prices of the goods that
they produce. The allocation of book costs does not
distribute purchasing power,
[Jim interjects]
(This is where I absolutely disagree with Douglas,
and will elaborate on why below.)
[Back to Douglas]
but is the presentation of a claim an purchasing
power already distributed, and is met, if it is met,
by the inclusion of the sum claimed, in: price. B
payments are settlement of the combined claim
produced in this way at every separated stage of
production.
[Jim interjects]
(This is true, but when a book cost, or overhead is
paid to an outside manufacturer, that money used to
pay him does not disappear. It still exists in that
manufacturer's bank account, and that money can still
be used as purchasing power to clear the product that
the second manufacturer is producing. This seems to
me to be a major - no pun intended - point of
confusion on behalf of Douglas. I will elaborate
further below.)
[Back to Douglas]
Fortunately, Professor Copland, while ignoring the
diagram on page 31 of The Monopoly of Credit, the
book from which he is at the moment quoting, includes
a diagram of his own, which confirms my belief. It
will be noticed that in this diagram time is non-
existent,
[Jim interjects]
(And this has been my criticism of the accounting
proof offered by the banks and a member of the Social
Credit group that states that the loans (debt) and
credits (money) are in balance, and interest has no
affect on this balance because it's bank equity. But
as I've always stated, by the TIME that bank equity
has been spent back in the system, more interest has
accrued, because interest is a function of time).
[Back to Douglas]
and apparently, to Professor Copland, is of no
importance.
[Jim interjects]
(Apparently, to some people who use accounting proofs
it's of no importance either)
[Back to Douglas]
That I am not misrepresenting him is, I think, proved
by his remark, on page 16 of his pamphlet, that it is
"not relevant to the point at issue" that "spending
power distributed two years ago is not available for
consumption today. The several stages of production
are in progress at the same time." Let us suppose
that production is divided into five processes, all
of them in progress at the same time. Each of these
five processes pays its workmen weekly, and each pays
£lO in wages. Each one of the factories carrying out
the five processes allocates 100 per cent onto its
direct labour in the form of book charges, which is a
very moderate average overhead charge. For the moment
we will leave out payments for materials. The total
amount of wages distributed in the week is £50. It
seems to me to be merely perverse, to deny that the
price values or claims on the public created in that
week are £ 100 while the purchasing power distributed
is only £50.
[Jim interjects]
(Actually, the purchasing power distributed that week
is $100 because the money that went to "overhead"
went to another manufacturer, and is in his bank
account which is still purchasing power to be used.
[back to Douglas]
When factory No. 4 sells its weekly output to factory
No. 5, it sells it for £80, and factory No. 5, if it
can sell at all, sells for £ 100. If Professor
Copland cannot show me a week in which, in the normal
operation of the cost system, this process is not
going on, the only question at issue is whether the
£50 of overhead charges still exist in the form of
purchasing power. It is not merely relevant; it is
the major portion of the problem.
[Jim interjects]
(It absolutely is the major problem I have with
Douglas' A+B as presented)
[Back to Douglas]
I might remark that if he can show me a factory which
does not allocate book charges, I will show him a
factory which is heading straight for bankruptcy. In
order to decide this question, we have to examine the
nature of the overhead charges, how they were
created, and what financial processes have been
associated with them.
[Jim interjects]
(Yep)
[Back to Douglas]
To make the matter as simple as possible, I shall,
for the moment, assume that overhead charges are
nothing but charges for the use of buildings and
plant, and at a later stage explain how this
definition can be extended. Before, then, each of the
factories in the above illustration could commence
operation, it had to be built and equipped with
machinery. There are two methods by which this
operation could have been financed. The first is that
it could have been financed out of savings, the
method commonly suggested by orthodox financial
authorities as that by which capital expenditure is
financed. It is very questionable whether much modern
finance is done this way.
[Jim interjects]
(Absolutely)
[Back to Douglas]
Assuming this course to be pursued, the money to buy
the plant must have appeared in the cost of some
previous product, and therefore its mere saving
causes a deficiency of purchasing power to that
extent.
[Jim interjects]
(That is true, but the labour used to build the new
factory, which was being used to produce consumer
goods, is now making the economy produce less
consumer goods, because it's building a capital good,
so purchasing power should come out of the system to
reflect this decrease in the production of consumer
goods)
[Back to Douglas]
If it is now applied to pay the wages, etc.,
necessary to produce the new buildings and plant,
quite obviously these new buildings and plant are
produced without the creation or distribution of any
fresh purchasing power. In other words, the money
creates a second price value, but does not produce
any fresh money.
[Jim interjects]
(Fresh money is not needed to cancel costs if it is
circulated more than once, and I think Douglas is
confused in this matter)
[Back to Douglas]
This is the simplest, but by no means the only,
example of a sum of money appearing more than once in
series or chain production, and production cost on
each occasion without creating fresh purchasing
power. From the ordinary point of view, the people
who put up the money are legitimately entitled not
only to a profit on this money, but also to get it
back again in full, since in their case the money may
be assumed to represent past effort, so that the
factories in question must make a charge on each
article turned out which will provide the money to
meet these claims.
[Jim interjects]
(Absolutely, and I have always stated that I agree
that it's fair to charge interest on pre-existing
money saved or invested)
[Back to Douglas]
The only objection to this perfectly fair assumption
is that, in the aggregate, the public have not got
the money. The second method, and probably the method
by which most modern financing is done, under cover
of a smoke screen provided by comparatively small
subscriptions from the public, is that some financial
institution actually creates the money, taking
debentures on the new factories as security.
Ethically, there is every difference between money
created by a stroke of the pen and money acquired as
the result of years of effort, but I am not at the
moment concerned with ethics.
[Jim interjects]
(Absolutely, and that is why when people learn that
bank loans are just created money, they are appalled,
but I agree with Douglas in that I'm not concerned
with the ethical implications of this at the moment.)
[Back to Douglas]
At first sight it is a better method, considered as
an isolated operation. When the new factories come
into existence, new money is distributed to the men
who built the factories. But there are two practical
objections, leaving aside any question of ethics. The
new money or credit is claimed by the financial
institution as its property, and therefore when it is
lent creates a debt against the public.
[Jim interjects]
(Not true, the debt is also a credit. The "property"
of the money belongs to both the bank and the loanee.
This is double entry bookkeeping, as the loan is
entered as a debt (iou) and a credit
(deposit).
[Back to Douglas]
At the same time, being distributed in advance of
consumable goods, it tends towards true inflation.
[Jim interjects]
(I concur, and is the problem with debt created
investment as opposed to real savings).
[Back to Douglas]
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.
[Jim interjects]
(Douglas is right at the precipice here. He has
found his imbalancing factor, and the factor which
forces us to produce more debt, but watch as he steps
away from this revelation)
[Back to Douglas]
From this point of view, it is the difference between
usury and profit-a difference clearly drawn in the
Middle Ages.
[Jim interjects]
(And a difference I've pointed out on many occasion,
so from now on when I speak of interest, I'm going to
use the word usury which Douglas coins here to
maintain clarity, because there is a difference
between interest charged on pre-existing money, and
interest charged on debt created money.)
[Back to Douglas]
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 this plant
depreciates.
[Jin interjects]
(Yes, and this is mostly caused by the charging of
interest, instead of repaying the loan over the
active life of the asset as it depreciates, the
loanee pays back that amount + interest.)
[Back to Douglas]
It is therefore, I think, incontestable that, either
wholly or in part, the purchasing power to pay
overhead charges on a scale which is legitimate from
the plant owner's point of view does not exist,
except in times of wholly excessive capital
production or quite abnormal exportation.
[Jim interjects]
(Yes, but the only "overhead" charge which can't be
paid back without access to more loans is interest
based on usury.)
[Back to Douglas]
It is now necessary to see to what extent this
conception of overhead charges can be extended, and I
think that a little consideration will make it clear
that in, this sense an overhead charge is any charge
in respect of which the actual distributed purchasing
power does not still exist,
[Jim interjects]
(Yes, but it appears that Douglas thinks that when a
cost is cancelled, the money, or credit, that
cancelled that cost ceases to exist, or is cancelled
itself. This is not true, and that credit exists to
cancel more costs as it is circulated, until such a
time as it is used to pay back a debt.)
[Back to Douglas]
and that practically this means any charge created at
a further distance in the past than the period of the
cyclic rate of the circulation of money. There is no
fundamental difference between tools and intermediate
products, and the latter may therefore be included.
Admittedly, at this point we get into a certain
difficulty, both to ascertain the average rate of
circulation of money, and the antiquity of the
various charges made, but the disparity is so great
that, qualitatively, there is no difficulty in
proving the point. In Great Britain, for instance,
the deposits in the Joint Stock Banks are roughly
£2,000,000,000. In rough figures the annual clearings
of the clearing banks amount to £40,000,000,000. It
seems obvious that £2,000,000,000 of deposits must
circulate twenty times in a year to produce these
clearing-house figures, and that therefore the
average rate of circulation is a little over two and
a half weeks.
[Jim interjects]
(Douglas seems to acknowledge the circulation, or
velocity of money, here)
[Back to Douglas]
At this point it may be desirable to deal with the
common error that the circulation of money increases
its purchasing power, an error which seems implicit
on page 19 of Professor Copland's pamphlet, where he
remarks: "A given unit of money will circulate many
times in a unit of time. It will make many payments,
because it has what economists call velocity of
circulation." I think that what Professor Copland
means by this is that, if I pay £ 1 to the butcher
for meat and the butcher pays the £ 1 to the baker
for bread which the baker has supplied to the
butcher, then two debts are liquidated. This is a
complete and major fallacy. The butcher incurred
costs, perhaps from a farmer in respect of cattle
supplied, who in his turn possibly borrowed the £1
from a bank. In any case, if the butcher uses my £ 1
to pay the baker, he has broken the chain of
repayment from me to the farmer and ultimately to the
banker, and the costs which were created when the
farmer sold his cattle to the butcher are not
liquidated.
[Jim interjects]
(But the baker could buy meat from the butcher, who
then has $1 to pay the farmer, who then can use the
one dollar to cancel the debt. The credit doesn't
disappear because it's given to the baker, the baker
can then use the dollar to buy meat in exchange for
the bread which he sold to the butcher, and then the
butcher can use this same dollar to cancel other
costs. Like I stated previously, I can clear the
market of $1,000,000 dollars in costs with one dollar
so long as I circulate it $1,000,000 times. Now if
the cost of the meat the butcher supplies, is exactly
equal to the cost of the cattle which the farmer
supplies to the butcher (i.e. one dollar), and when
receiving the dollar spends it on bread, instead of
spending it on clearing his debt to the farmer, THEN
THE BUTCHER SHOULD GO IN DEBT. He has just spent
money on something for which he has made no profit.
So the butcher should go in debt, to pay back the
farmer, who in turn pays off his debt to the bank.
So now the farmer is out of debt, and the butcher is
in debt. $1 of debt was created to cancel a $1 of
debt, and the aggregate debt did not change. It only
change as to who has the debt)
[Back to Douglas]
The clearing-house figures just quoted contain a
large number of. "butcher-baker" transactions, and
these must be deducted in estimating circulation
rates. The vital fact is, of course, that one unit of
money can circulate an indefinite number of times
through the costing system, in each case creating a
fresh cost or, if it be preferred, a fresh debt
charge, but not fresh purchasing power. It is,
perhaps, unnecessary to contend that the average
antiquity of the debt charges against the population
is more than two and a half weeks. It is certainly a
considerable number of years, but it would be
difficult to say exactly what it is. Categorically,
there are at least the following five causes of a
deficiency of purchasing power as compared with
collective prices of goods for sale:-
1. Money profits collected from the public (interest
is profit on an intangible).
[Jim interjects]
(Interest is what drives profit, because it is the
rate of return of capital - i.e. the opportunity cost
of capital. It is more than just profit on an
intangible, it is profit that is guaranteed to grow
continuously over time, it guarantees that the rate
of growth of debt is greater than the rate of growth
of credits to cancel that debt, and that forces more
debt into the system, and causes an imbalance in
prices.)
[Back to Douglas]
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.
Excluding taxation, which is a separate although
allied subject, all distributed purchasing power is
recovered from the public through the agency of
prices. This is just as true in connection with the
recall of trade loans as in any other form of
expense. It seems obvious, therefore, that, with the
exception of savings, the whole of the above causes
of the difference between purchasing power and prices
can be found in B payments, which are money
ultimately on its way back to the bank,
[Jim interjects]
(Yes, money back to the bank creates less credit in
the system as money is cancelled, but either new
capital projects are created to create more consumer
goods, and hence, the money supply remains constant
or growing, or less and less capital investments are
made, and the amount of consumer goods produced slows
with depreciation, and therefore, less and less money
is needed to clear the market. In either event,
there is no imbalance. The imbalance comes from the
fact that the debt can never be paid off, and access
to more loans is made necessary because of usury.)
[Back to Douglas]
and none of them, with the exception of savings, are
found in A payments, and if we subtract the A
payments distributed in a given week, minus savings
from the total prices claimed in a given week, we
shall get B payments as a measure of the net debt
claims against the public for the week in question.
As bearing upon this, the Association of American
Engineers at Columbia University, previously referred
to, remarks that "the total debt claim against the
physical equipment of all American industry has risen
to the fantastic figure of 218,000,000,000 dollars-a
debt claim on posterity." They correctly remark that
a temporary revival to "prosperity levels" is
possible by increasing the debt claim through a
policy of inflation, but that a downward oscillation
will result from this that is likely to end in the
utter collapse of the price system under which
industry has operated.
The foregoing is sufficient answer to the quotation
from Mr. J. Keynes, which begins: "Let X be equal to
the cost of production of all producers. Then X will
also be equal to the incomes of the public." This is
the well-known logical fallacy known as the petitio
princil, which consists in assuming the truth of the
fact which you have set out to prove and then proving
the assumption from the logical conclusion.
The cost of production is not equal to the incomes of
the public, and therefore the rest of the argument
merely indicates what would happen if it were equal.
[Jim interjects]
(This is true, but the only thing that causes this
imbalance is the cost of interest on debt created
money).
[Back to Douglas]
Professor Copland then goes on to argue that the
whole system of production would have broken down had
my analysis been correct, and mentions the
interesting fact that A payments in Australian
industry are about one-fourth of the total value of
the output of goods in factories. It is well
understood how it has been possible for industry to
carry on up to the present time under the faulty
financial system we have examined, and the two more
important causes are: firstly, the excess of exports
over imports, resulting in taking goods out of the
country and receiving purchasing power in return for
them, thus at one and the same time decreasing the
amount of goods in the country and increasing the
amount of purchasing power in respect of the
remaining goods; and secondly, by a progressively
excessive production of capital goods, the A payments
of which become available to buy the consumable
goods, the method to which reference is made by the
American authorities quoted previously. Both of these
latter processes have now become, in practice,
impossible to any considerable extent, and the
present crisis is the result.
Take care,
Jim
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