| Subject: | [socialcredit] Re: Part 2, Extrapolating A+B | | Date: | Monday, October 10, 2005 16:42:23 (-0400) | | From: | wesburt <wesburt @....com>
|
Dear Bill,
When I first saw your Flux-Reflux diagram, Fig14
attached, it simply did not compute for me. But
after you used it, a few months back, to explain
the action of bank credit in an economy, and in
the message below to explain the relation of
income to spending in a business or household, I
now find that Fig14 adds a helpful extra perspective
to the several points of view already on Dr. W. C.
Priest's web site below. This extra perspective is particularly helpful
in presenting the published data
on inflation and the profile of the M1 money supply
shown in Fig2-3, from 1959 to date in the US.
Fig14a embellishes fig14 with a few dates and
extension lines such as draftsman would use on
a blue print for a machine or a house. It follows
Martin Hattersley's observation that the flow of
money in the real economy is much like the flow
of fluid in the automatic transmission of a recent
model automobile. I recall a New Zealander, at that
time, remarked that their automobiles had manual
transmissions.
When Fig14 shows bank credit, as in revision "a,"
M1 (the only money in the economy) is the distance
($) between the flux and reflux lines. M0 is the part
of M1 that continuously circulates between business and household
checking accounts to define the total
of A + B transactions, which amount to 250% of GDP
(annual gross domestic product). This flow of M0 is
nearly synchronous with the production of real wealth.
I say "nearly" synchronous, because the ratio of M0
disbursed during the billing period and the real
wealth produced during that same period has varied,
in the United States, from 0.98-99, prior to the "great transformation"
of the 1890s, to 1.023, and increasing, since the 1890s. That 2.3%/year,
and increasing, rate
of inflation since the 1890s is the only exponential
function I can find in an industrial economy, and it is completely
independent of debt owed or interest paid
inside the economy. That run-a-way, out of control
condition, is the root cause of the 20th century
malfunctions of the US economy, except for the perturbations caused by
misguided attempts to
regulate the economy by deficit spending. Notice
that Karl Polanyi's "great transformation" was
completed at least thirteen years before the Federal
Reserve system, and the direct tax on all income,
were established in 1913. Those two additions to
our economy are able to further impair the operation
of the economy, if mismanaged, but they cannot
correct the root cause of its 20th century malfunctions.
The root cause is an imbalance of purchasing power,
over the income distribution shown in Fig8d.gif. An
imbalance caused by our failure of our government
to capitalize the whole cost of human development
as completely as our corporations capitalize the
whole cost of their capital development.
It seems, to me anyway, that the input/output,
flux/reflux, relationship of Fig14 applies as well to a
business or household as it does to the real part
of a national economy; with the limitation that only
the federal government, and/or, its designated banking industry can
create M1 money. Businesses and
households, in marked contrast, have to earn their
money by producing wealth and receiving their due
share of the flow of M0 as $sales, salary, or wages.
In the home work assignment in your post below, Bill,
you wrote:
"Let the flux represent the rate of spending by
the statistical entrepreneur, and the reflux
represent receipts over his sales counter.
Inasmuch as he is always receiving back less
than he is spending, how is it possible for him
to record a profit?
I assume that the statistical entrepreneur had accumulated a positive
balance in his checking
account of M1 minus M0 at T0. At T1 he has
complete records of his spending, along the dotted
line that defines the top of M0, and, of his sales
receipts along the reflux line which defines the
bottom of M0. If his M0 at T1 is less than M0 at
T0, he would have booked a profit for the T1 minus
T0 period. Rather like balancing a check book.
An equally interesting feature of the profile of M1 as
shown in Fig14a is that in the course of expanding
from $250 Billion in 1970 to $1.369 Billion today, M1
held nearly constant at $1,200 Billion for eight years,
1994 to 2002. Recall also, that in 1970, Federal debt
held by the banks accounted for about half of M1.
The other half of M1 being corporate debt held by
the banks. By 1994, corporate debt had vanished
from M1, so the taxpayers pay the entire interest
on M1 and corporations enjoy interest-free working
capital as a courtesy of the consumers.
During that eight years; the CPI increased at
3.3%/year, real wealth production increased at
2.2%/year according to John L Perkins, so M0 must
have increased by 5.5%/year to support the CPI and
productivity increases between 1994 and 2002. And
all this while holding M1 constant. That's what I call
fine tuning of the economy.
Where did I go wrong, Bill? Or should we be teaching
Fig14a and the rest of Dr. W, Curtiss Priest's web site
to our ten year old sixth graders so they can grow
up to become members of Congress and make the
whole Law of Moses the law of the United States?
Kind regards,
Wes Burt
--------- Forwarded message ----------
From: "William B. Ryan" <w_b_ryan@yahoo.com>
To: ijccr@yahoogroups.com, socialcredit@elistas.com
Date: Thu, 29 Sep 2005 08:12:10 -0700 (PDT)
Subject: [socialcredit] Part 2: Extrapolating A+B
--- Per Almgren <info@nordspar.se> wrote:
"If the lenders use all their interest and other types
of income to buy goods and services, there will be no
exponential growth of the debt in the society. In that
case all interest costs will turn back as income to
the rest of the society.
"If the lenders choose to only use part of their
income to buy goods and services, the payers of
interest won't get back all the interest paid as an
income."
--------------------------------------------
--- "William B. Ryan" responds:
Although you will be reluctant to admit it, with this
you have now effectively abandoned the argument that
interest "causes" anything. In its place you now
substitute the bankers' underconsumption thesis.
Intellectually, it is a big step forward. I'm not
being facetious.
But the underconsumption thesis in general (not just
limiting it to the bankers) is itself based upon a
rather subtle fallacy, which I'll introduce here.
I again append the flux-reflux diagram.
http://www.geocities.com/socredus/compendium/flux_reflux2.gif
If now we take the flux to represent income, and the
reflux as representing spending from income, there is
always a residuum represented by the gray shaded area.
At any point in time the statistical recipient of
income will have spent something less than the income
he has received.
-
The economy is a physical process. It takes time for
action to be accomplished.
Homework assignment: Let the flux represent the rate
of spending by the statistical entrepreneur, and the
reflux represent receipts over his sales counter.
Inasmuch as he is always receiving back less than he
is spending, how is it possible for him to record a
profit?
-
--- Per Almgren <info@nordspar.se> wrote:
Subject: The condition for interest causing
exponential debt growth
Date: Wednesday, September 28, 2005
If the lenders use all their interest and other types
of income to buy goods and services, there will be no
exponential growth of the debt in the society. In that
case all interest costs will turn back as income to
the rest of the society.
~~~~~~ Balance of text snipped by Wes Burt ~~~~~~
The Optimum Policy (TOP) is shown on
Dr. W. Curtiss Priest's web site at:
<http://www.epie.org/cyber-soc/default.htm>;
~~ Either refute it or incorporate it
in your public policy proposals. ~~
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Re: Part 2, Extrap
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