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Message 4812
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| Subject: | [socialcredit] Re: credit | | Date: | Monday, May 28, 2007 10:08:39 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
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I have inserted some commentary into your text below:
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Dear Bill:
"An increase in the rate of saving for the economy as
a whole would have a depressing effect on production
inasmuch as it would reduce sales over the retail
counter..."
Bill, I think this is where Douglas got it wrong - I
also believe Keynes was confused in the same area.
One man's saving - deferred consumption if you like -
is simply another man's borrowing. It has to be. By
the very act of keeping their books balanced, the
banks and all other financial institutions enforce
that Iron Rule.
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[Reply] I have no disagreement with this statement.
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In creditary economics things are ordered differently,
even if their heart is in a not dissuimilar place. My
underlying principle - or rather will be, when my book
is completed and published ! - is something I call the
First Law of Creditary Economics : "the more credit
agreements an economy can sustain, then the greater
division of labour it may attain."
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[Reply] And I have no disagreement with this
statement.
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Who actually holds them at any one time, although not
irrelevant, is secondary.
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[Reply] It is both relevant and important and has
everything to do with the conventions of double entry
accounting.
We demarcate the economy conceptually into three
fundamental sectors: Firms, Consumers, and Finance.
Firms sell goods, services AND securities to
consumers. I am defining "securities" very broadly.
Consumers purchase goods, services AND securities from
firms. Finance is facilitative of the whole process.
From an accounting standpoint, the sale by firms of
goods and services is handled quite differently than
the sale of securities in terms of calculating profit
and loss.
In their sales mixture, a decreasing ratio of sales of
goods and services in respect of their sale of
securities to final consumers is reflected in a
decreasing rate of profit, so the tendency by firms
would be to reduce their production accordingly, if
that were all there was to it.
Notice my qualifier, "if that were all there was to
it."
Keynes, in one of his incarnations, thought that was
indeed all there was to it, and advocated
Gesellist-like measures to get people to spend their
money faster. See for example his radio address at
http://www.geocities.com/socredus/keynes_saving.txt in
the midst of the Great Depression.
In Douglas' theory, two things are happening in the
modern industrialized economy:
With increasing wealth, consumers are increasing their
ratio of securities in their purchasing in respect to
their purchasing of goods and services--something that
Keyness called in his jargon, a decreasing "propensity
to consume."
With labor displacement--the broadening and deepening
to the structure of production with advancing
technology and division of labor--the ratio of the
costs of production being impressed to the point of
retail is increasing in respect to the purchasing
power being paid to consumers--the A + B theorem.
What this does is pinch off production short of
productive capacity and real demand, as the rate of
profit falls.
Which is easily correctable through macroeconomic
accounting adjustment sustaining the rate of profit.
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However the crucial word there is "may" - I do not
write "will". Particularly in our modern economy, too
much new credit is frittered on non-productive
activities, and that can only be inflationary, rather
than expansionary.
So in creditiary economics, I also believe the
mathematically and pragmatically suspect "quantity
theory of money"
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[Reply] It is indeed fallacious if we take its terms
to be independent variables.
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has to be replaced by this "qualitative theory of
credit." That is where I do agree with Keynes - I am
almost certain it was he who dreamt up the "Borrowing
: Control and Guarantees Act" which went onto the
British Statute Book in July 1946 - a most
inconvenient few months after he had suddenly died. It
would have precisely implemented my "quality theory of
credit", although I would do it through the
accountancy guidelines imposed on banks, rather than
by a team of civils servants crawling through their
books. Keynes was an instinctive authoritarian, I by
contrast am a great believer in self-policing and
Exception Management.
I am convinced Keynes was slipping his little Act onto
the Statute Book with the minimum of puiblicity and
explanation because the big banks would have been up
in arms if they had figured out, or been told, the
economic insight and therefore control system which it
would have facilitated. I have been right through
Keynes's private papers at the Public Record Office
here in London at Kew and, remarkably, found no
reference even though the Act has his fingerprints all
over it. I think he was playing a very clever game.
I also think Keynes's own thinking evolved
substantially after he first came to prominence in the
mid 1920s. So 1920s Keynesianism is different from
1930s Keynesianism (that ghastly General Theory of his
- most pretentious) and different again from 1940s
Keynesianism - Geoffrey even spotted a place in GT
where it seems Keynes changed his mid half-way through
the same paragraph. With no word processor to hand,
going back and changing everything was a bit of an
ordeal!
And it was something very similar to my proposed
"quality theory of credit" which the Japanese used to
extraordinarily good effect in the 1950s and well into
the 1960s to restore their war-wrecked economy until a
younger generation took over and eventually lost the
plot.
Chris
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