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Money is issued as financial income as it is
expended upon production--creating an accumulation of financial costs
accordingly. These costs must be liquidated by consumer
expenditure--inasmuch as consumption is the last function in each
cycle of the economic process. The incomes distributed during the
production process are insufficient to liquidate the full volume of prices
generated in any given cycle and to give consumers at large access to the entire
physical output or wealth represented by these financial prices. Applied
to the national economy as a whole, this is a macroeconomic statement.
Social Credit would issue and distribute supplementary consumer income to
meet this deficiency of buying power. No differentiation is made between
earned money income and credits issued to supplement income--they merge into
a general stream of financial income which is then available to meet the
full financial costs of production of each production cycle. The full
stream of financial income is required to liquidate the totality of financial
costs generated in each production cycle. If some income from
this combined income (earned from engagement in production in addition to that
received from outside the price-system as a consumption credit) is not spent on
the final product of a given cycle, the costs of that cycle remained
unliquidated. If any of this financial income is spent on any form of
economic activity which produces goods for sale, then this income will generate
new (i.e., additional) financial costs and prices, thereby producing a further
discrepancy of general purchasing-power. This will be factored into
the next national accounting period in order to determine the deficiency created
by this re-investment of savings (saved incomes) which has created new financial
costs without creating new purchasing-power. Whether production is
initiated via the issue of new credits directly for production and repayble to
the source of issue or initiated by the application of financial savings does
not matter. In either case, the result is a shortfall of effective
(cost-liquidating) demand and compensation must be made via new consumption
credits. In either case new production is facilitated by the issue of
new credits--whether through production or from the consumer. If I recall
correctly, Douglas commented that a central problem is that the
producer presently receives his income from the banks instead of the
consumer. This is the way in which I understand the matter.
The problem is that producers withdraw income from
consumers in retail prices expenditures incurred in respect of the cost of
capital. These included charges in respect to capital are allocated
charges which are added to price and they do not simultaneously create new and
equivalent purchasing-power. But to prematurely withdraw and cancel consumer
purchasing-power in this matter implies that the physical capital itself at the
present point of time has been cancelled or fully depreciated. This is a
gross misrepresentation of reality inasmuch as real or physical capital
depletes slowly over future years. True cost as measured by Social Credit
is the mean rate of consumption divided by the mean rate of production.
The final or "Just" price of consumer goods must reflect this fact and requires
that the consumer must not only be debited with capital depreciation but must be
credited with capital appreciation (measured in money terms)--which latter is
vastly greater than the former. Money should be withdrawn via prices only
at the rate determined by the ratio of national consumption to national
production, which ratio is normally and increasingly less than a numerical value
of one. Under the present system money incomes are withdrawn and cancelled
prematurely via the price-mechanism and Social Credit wants to "slow down" this
rate of cancellation. Realistically, costs and prices should be falling
over time instead of rising as they do under the existing orthodox financial
regime. This is the way in which I understand the matter.
However, in a Social Credit dispensation new
attitudes would arise which are different to those developed under the
constraints and depredations of the present defective money system.
Savings would become valued only primarily as a temporary means to
facilitate larger purchases rather than as a form of indefinite hoarding out of
fear of future insecurity. Social Credit aims at the "Life
Abundant". Money may be saved but spoilage and obsolescence will render it
valueless. Life, in the economic sense, can only be realized by the
expenditure of financial income on currently available consumer goods and
services. Remember that Douglas said we want to build a new society on a
foundation of absolute economic security for the individual. Savings would
not be directed to new superfluous, wasteful, destructive and leisure-robbing
activity merely to generate additional financial income to compensate a
previous deficiency in order that the consumer might access previously produced
goods. Society no longer would be required to produce guns in order to
access butter. Confidence would supercede fear and our attitudes and
subsequent patterns of behaviour would become different from those
which have developed previously because of society's past subjection
to the restrictions and vissicitudes of the existing system, whereby money is
only issued, ultimately, for production and not for consumption. We
want to make possible the immediate and dynamic ability of the consumer to
access the full physical outflow of consumer wealth from the production system
in each cycle--without being required to commit to any further future effort or
financial borrowing against future income. We desire to bring about a
sharing society accomplished by means of a mechanism of distribution--not by
means of a mechanism for effecting re-distribution. Again, this is
the way in which I understand the matter.
Comments are welcome.
Sincerely
Wally
----- Original Message -----
Sent: Wednesday, December 07, 2005 9:20
PM
Subject: Re: [socialcredit] Questions in
regards to Dec. 'Triumph of the Past' Swanwick #2
I can only say that I find the Swanwick principle #2 the
hardest part of Douglas's proposals to swallow. Particularly, does this
recommendation apply to all business capital, including fixed capital assets,
or simply to working capital for day to day operation? And, if fixed capital
is intended, does this imply that private capital investment is prohibited?
Perhaps some of the experts here can give me some answers.
----- Original Message -----
Sent: Wednesday, December 07, 2005 9:16
AM
Subject: [socialcredit] Questions in
regards to Dec. 'Triumph of the Past' Swanwick #2
The expanded version of Swanwick principle # 2,
as printed in (I believe) the second edition of 'Warning Democracy', and as
reproduced on the NZ Social Credit Ass'n's website states:- "That the
credits required to finance production shall be supplied not from savings
but from new credits relative to production, and shall be recalled only
in the ratio of general depreciation to general
appreciation."
I believe it's been established
previously that in the first and third editions of 'Warning Democracy' the
last part has been omitted, and the quote ends 'relative to new
production', as it appears in the original rendition. I don't recall
now if it was ever determined why there was a change, and then a change
back. Does anyone know?
Michael opines that the "national dividend" be
used only to purchase 'consumer goods', and not 'stocks and bonds'.
How is it to be determined just 'what' the 'national dividend' in the hands
of each of us as recipients will be spent on?
There is nothing I've seen in Douglas
that distinguishes 'money' received from the 'national dividend' from any
other 'money'.
It isn't of the nature of a 'Prosperity
Certificate', for instance. Nor, under what might be called 'normal'
circumstances, where control over 'credit' wasn't being contested between
two 'governments', would it be in a tangible form restricted in what it
could be used for. Does it not seem feasible that Douglas, in the
expanded version of Swanwick # 2 above is referring to a macro-economic
concept "the ratio (over the whole economy) of general depreciation to
general appreciation", with ALL 'money' being analogous and concerned only
with 'flows', not with what each individual who gets a 'national dividend'
spends it on?
If I used my 'national dividend' to purchase
'stocks and bonds' held by someone else, is it not conceivable that the
seller might be using the money received to then purchase 'consumer
goods'? What's changed? If I used my 'national dividend' to
purchase capital stock, say when a firm makes an intial public offering, how
would this differ from my using my 'earnings' to do the same thing?
Does not Swanwick # 2 simply encompass the changes in 'flows' at the
macro-economic level so that the 'natioanal dividend' and 'compensated price
discount' can be adjusted in future accordingly?
Joe
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