Tim, have yoiu read thedata I sent you? John R.
>From: "Tim Knight"
<Tim_Knight@NTLWorld.Com> >Reply-To: socialcredit@elistas.com >To: "Social
Credit" <socialcredit@elistas.com> >Subject: [socialcredit] Douglas - A + B and
the Bankers - January 1925 >Date: Wed, 27 Apr 2005 19:06:06 +0100 > >I have been
trying to get a grip on Social Credit, and in particular on A+B. I wonder if
someone could help me? > >In his paper 'A + B and the Bankers - January 1925',
Douglas describes a capitalist production scenario lasting six years: > a.. In
year 1, £100 of wages produce £100 of production goods and £0 of consumer goods.
Thus, there is an £100 excess of 'purchasing power' (the £100 of wages) when
compared to the £0 of consumer goods available. In effect, the citizens
are forced to 'save' their £100 wages by investing in the £100 of production
goods (via the banks and the enterprises). The citizens have a net cashflow of
plus £100, and the enterprises have a net cashflow of minus £100. > b.. In each
of years 2-6 , £100 of wages plus £20 of production goods (depreciation) produce
£120 of consumer goods. Thus, there is an £20 shortfall of 'new purchasing power'
(the £100 of wages paid that year) when compared to the £120 of consumer goods
available. In effect, the workers are forced to 'un-save' £20 of their first-year
wages in order to purchase the £120 of consumer goods available. The citizens
have a net cashflow of minus £20 (£100 wages minus £120 spending), and the
enterprises have a net cashflow of plus £20 (£120 sales minus £100 wages). >Thus,
during the course of the six years: > a.. The workers earn £600 in total. > b..
The workers
save/lend £100 in year 1, and unsave/unlend £20 in each of years 2-6 (net zero).
> c.. The enterprises borrow/invest £100 in year 1, and unborrow/uninvest £20
in each of years 2-6 (net zero - corresponding to the value of the now-knackered
production goods). > d.. The enterprises make £600 consumer goods in total. > e..
The enterprises sell £600 consumer goods in total. > f.. The workers purchase
£600 consumer goods in total. >What's the problem????????? > >It seems to me that
Douglas's A+B argument is based on a myopic perspective which includes only the
production phase of a capitalist proposition (as per years 2-6 above), and
ignores the precisely-equal and opposite impact of the investment phase of that
same capitalist proposition (as per year 1 above). In fact, at all times, there
is a cumulative excess of 'purchasing power' (the value of total production) when
compared to the total value of consumer goods produced. That excess corresponds
to the current depreciated value of production goods, which rises to £100 during
the investment phase (as per year 1 above), and which reduces to zero during the
production phase (as per years 2-6 above). > >In practice, of course, there is no
reason to believe that citizens would actually use their available 'spending
power' to purchase consumer godds as described above. In each year they may well
try to spend more (resulting in inflation) or less (leaving enterprises with
unsold consumer goods, and possibly deflation). > >In practice, of course, the
overall economy comprises a multitude of such capitalist propositions at every
given time, some in their investment phase (as per year 1 above), and some in
their production phase (as per years 2-6 above). Thus, the net impact on the
overall economy
at any given time depends on the net balance of investment/production at that
time. Nevertheless, at every given time, there will be a de-facto cumulative net
value of borrowing/investment by enterprises, which corresponds to the current
depreciated value of production goods. This de-facto net value was determined by
enterprises when they made/witheld historic borrowing/investment decisions. >
>Fortunately, citizens/workers/investors/savers have their own life cycles.
They tend to save whilst working, and unsave in old age (by cashing pensions,
dissipating savings, and purchasing annuities). Again, in practice, the overall
economy comprises a multitude of such citizens at every given time, some in their
saving phase, and some in their unsaving phase. Nevertheless, at every given
time, there will be a de-facto cumulative net value of saving/lending by
citizens. This de-facto net
value was determined by citizens when they made/witheld historic employment and
retail purchase decisions. > >Of course, the de-facto net value of saving/lending
by citizens is mathematically equal and opposite to the de-facto net value of
borrowing/investing by enterprises (banks, bond markets and stock markets simply
intermediate the lending/borrowing; in the form of a zero-sum network of debts).
> >However, that does not mean that the propensity of citizens to save/lend is
equal and opposite to the propensity of enterprises to borrow/invest. In fact,
quite the opposite is true: > a.. If a boom is anticipated, citizens try to
unsave/un-lend and enterprises try to borrow/invest. All economic agents
(citizens and enterprises) simultaneously try to move negatively in their net
debt positions. Given that debt is a zero-sum game, this can only end in tears
(in a
self-fulfilling boom). > b.. If a bust is anticipated, citizens try to save/lend
and enterprises try to un-borrow/un-invest. All economic agents (citizens and
enterprises) simultaneously try to move positively in their net debt positions.
Given that debt is a zero-sum game, this can only end in tears (in a
self-fulfilling bust). >Hence the business cycles. > >Have I missed something? I
would very much appreciate your help here. > >Best Wishes > >Tim Knight
>Tim_Knight@NTLWorld.Com >
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