| Subject: | [socialcredit] Re: Extrapolating A+B Part 1 | | Date: | Wednesday, September 21, 2005 08:13:59 (-0700) | | From: | William B. Ryan <w_b_ryan @.....com>
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The fallacious "pond scum" analogy:
The "compound interest formula" is one form in which a
particular financial contract may be stated. It is
not however descriptive of a natural p_r_o_c_e_s_s.
The very same contract may be re-stated in terms of
s_i_m_p_l_e interest when actual payments, from one
party to the other, are made or contemplated.
Scum spreading across a pond is a natural process that
may appropriately be described as e_p_o_n_e_n_t_i_a_l.
It is a process that cannot be described in terms
that are other than exponential.
One is a natural process; the other is a contract.
While it is true that spread of scum across the
surface of a pond is exponential, it is not
necessarily true that pond scum in the aggregate
spreads exponentially; for we have to take into
account scum that has reached the limits of its pond,
the statistical average of ponds forming and depleting
with seasonal weather variations, the total surface
area of ponds in the world amenable to scum, etc. It
is probably true that the total surface area of
actually existing pond scum in the world today is
about the same as it was ten thousand years ago. The
same with mice, rats, and cockroaches.
So, the spread of pond scum in the world, as opposed
to the spread of scum across the surface of an
isolated pond, is n_o_t an exponential process.
The m_a_c_r_o perspective is something quite different
than the m_i_c_r_o perspective.
But, again, the "compound interest formula" describes
a particular form of a contract, not a process. Debt
can be repudiated, defaulted or amortized; whereas
pond scum exists or it doesn't.
In the rudimentary macroeconomic model of Firms, Banks
and Consumers, banks pay interest on positive account
balances, and collect interest on negative balances.
The differential is the gross profit of the banks.
There are consumers and firms who individually have
positive or negative balances with banks.
The positive account balance of the firm or consumer
who spends his income as he receives it, from all
sources, interest or otherwise, will not compound.
The negative account balance of the firm or consumer
who services (or amortizes) his debt according to the
terms of his contract will not compound.
Then, please explain why interest as a mechanism of
trade and commerce should cause debt in the economy as
a whole to compound?
By that I mean interest being e_x_p_e_n_s_e_d to the
point of retail by firms in respect to the income of
final consumers.
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Re: Extrapolating 
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