Tim, how did you guess?!
Keep going. I'll answer in my amateurish way and I'm sure the experts
will leap in to correct me. But you could start by trying to fault my
scientific approach to that aspect.
Regards. John
R.
>From: "Tim Knight" <
Tim_Knight@NTLWorld.Com>
>Reply-To:
socialcredit@elistas.com>To:
<
socialcredit@elistas.com>
>Subject:
Re: [socialcredit] Douglas - A + B and the Bankers - January 1925
>Date:
Thu, 19 May 2005 21:49:49 +0100
>
>John,
>
>I had
almost given up, but there is no point me persisting in this forum if no-one
responds constructively to my pleas for help. I get the feeling that I am just
irritating 'the faithful'.
>
>Best Wishes
>
>Tim
Knight
>Tim_Knight@NTLWorld.Com
>
>----- Original Message
-----
> From: John G Rawson
> To: socialcredit@elistas.com
>
Sent: Thursday, May 19, 2005 9:12 PM
> Subject: RE: [socialcredit]
Douglas - A + B and the Bankers - January 1925
>
>
> Tim,
because of your most unusual background of ideas, I think some of us gained
incorrectly the idea you were just trying to "tease" a bit
flippantly.
>
> However, I sympathise. When I tried to improve my
knowledge of the "discount" aspect I got three pages dealing with how a fair
price could be determined and a lot of other circuitous material completely
avoiding my questions.
>
> Do keep trying. I think we need 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: Thu, 19 May 2005
10:06:20 +0100
> >
> >John Rawson wrote:
>
>
> >I will make two points:
> >1. A+B at industry level
can be proven ("geometrically" as in Euclidian method), but at the next stage,
application to the economy as a whole, this can not be done without long and
tedious argument, as demonstrated here regularly.
> >
> >2.
A+B most certainly is the base of the financial proposals of SC. Were it
wrong, we would have little to offer.
> >
> >Tim Knight now
writes:
> >
> >I believe that, if Social Credit is to make
progress, Social Crediters must be willing to interpret the principles of
Social Credit for those approaching the subject from a conventional wisdom
perspective. I agree with John that A + B is (perceived by conventional wisdom
as) central to the Social Credit case.
> >
> >A little while
ago, I read an article, reporting a presentation by Douglas, and titled A + B
and the Bankers - January 1925. It was one of many I had been encouraged to
read. I struggled to understand his point, and sent an e-mail asking for help.
In that e-mail, I presented my (conventional wisdom) interpretation of what he
had said, and asked for help in pinning down what I had missed and/or the
errors in my analysis. I sent that e-mail, not to try to convert Social
Crediters to conventional wisdom, nor even to challenge Social Crediters to a
spurious argument, but to outline why I and so many 'wishful believers' have
so much difficulty in understanding A + B. Unfortunately, no-one offered me
any direct help on that occasion. The only responses I got were accusations
that I was naive and deluded, and must read more of the stuff I couldn't
understand. However, I am determined to try to understand, and I am taking the
liberty of attaching a copy of that e-mail below, in the hope that someone
might be able to help me this time round.
> >
> >Best
Wishes
> >
> >Tim Knight
>
>Tim_Knight@NTLWorld.Com
> >
> >
> >
>
>----- Original Message -----
> >From: Tim Knight
> >To:
Social Credit
> >Sent: Wednesday, April 27, 2005 7:06 PM
>
>Subject: Douglas - A + B and the Bankers - January 1925
>
>
> >
> >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 goods 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/withheld 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/withheld 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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