| Subject: | [socialcredit] Re: Warning Democracy | | Date: | Monday, July 30, 2007 10:44:46 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
Peter, this is an example of Douglas "thinking out
loud," and is not to be taken too seriously in
isolation. Douglas is suggesting that the bank
credits of the firms could be marked up to correspond
to their profit in fixed assets that are depreciated
into expense, apparently to negate their depreciation,
thereby lowering prices charged to the public.
Douglas himself qualifies this suggestion by stating:
"It [meaning this suggestion] would undoubtedly
strengthen the hand of the manufacturer, and in itself
would do little to meet the twin difficulties of
forced exports and decreased human labour per unit of
production, both of which are vital to a comprehensive
solution."
The comprehensive and quite practical solution that he
pushed throughout his thirty-year public career was
the dividend and retail discount.
----------------------------------------------
Chapter XVI, The Starting-Point of Money
...Supposing for the moment that this process goes on
uninterruptedly, a time must inevitably arrive in
which the concern in question, while its accounts show
a profit, yet has no money, i.e. liquid bank credit.
There are only two courses open to it; it can apply to
the public for more money, that is to say, it can
increase its capital, which of course is merely a
preliminary to the repetition of the process and
further depletes its available market, or it can go to
the bank and obtain a loan on the security of its
fixed capital.
The meaning of this requires the most careful
attention, because it is the core of the industrial
situation.
Money, using the word in its most comprehensive sense
to include amongst other things bank credit, is an
effective demand for goods and services. The
undertaking which we are considering borrows from the
bank bank-money in exchange for a lien on its own
property.
At the cost of labouring the point, let it be repeated
that a lien on the fixed capital is given in return
for a loan of bank credit.
It is now well understood that in such a case the bank
is not lending money deposited by other people; it is
lending credit which it has created by a process of
book-keeping, and which costs it nothing. The thing
which is lent is in essence of the same nature as a
printed bank or Treasury note, the intrinsic cost of
which was that of the printing and paper. So that we
have the situation, that in return for something of
which the bank has the monopoly, but yet which cost it
nothing, the physical assets of the undertaking have
become mortgaged.
Further, and taking the industrial situation as a
whole, the mortgage can never be paid off, because the
mortgagee is in possession of the only medium, i.e.
bank credit, by means of which the mortgagor can
obtain release.
It will at once be seen that this situation is
intrinsically bound up with the fact that effective
demand starts from the banks and is regarded by them
as their property.
A little consideration further, however, will make it
clear that any possible justification for this
situation must rest on the assumption that the bank
system is a governing system possessed, either by
common consent or inherent virtue, of supreme economic
sovereignty.
Now, as is fairly well known, this is not my view. But
it is not very much use holding such a view if the
situation is inescapable as, of course, it is not.
Ultimately, a properly co-ordinated system of credit
issue and price regulation, which will in effect place
the point of issue of purchasing power with the
consumer, from whom fundamentally it arises, and to
whom in essence it belongs, is the only solution of
the difficulty, but it is clear enough that we are
approaching, and that fairly closely, to a situation
threatening the productive system itself.
With a view to meeting this situation one of the first
requisites is to deal with the immobilisation of bank
credits in fixed assets.
There are many ways of doing this, and perhaps one of
the simplest would be the automatic writing up of the
bankcredits of any limited company to correspond with
the increase in its fixed assets, as certified by a
chartered accountant during a given accounting period.
The effect of this, so long as the result was not
defeated by rings of prices, would be to lower prices
by enabling competitive concerns to get a proportion
of their overhead charges out of prices charged for
their product.
It would undoubtedly strengthen the hand of the
manufacturer, and in itself would do little to meet
the twin difficulties of forced exports and decreased
human labour per unit of production, both of which are
vital to a comprehensive solution.
But it would at any rate deliver us from the
mismanagement of the financial hierarchy, and in so
doing would stimulate the initiative of the class
which appears to have the right type of mind for the
attainment of a more permanent solution.
-
------------original message--------------------
The section in Warning Democracy, entitled "The
starting point of money", I have referred to
previously. This explains the issues behind the policy
of the 'just price mechanism' and brings out a the
obvious comparison between credits to industry and the
alternative many support and believe is the policy
Douglas puts along side the Dividend.
The option of credits to industry is that it breaks
the control of industrial policy which the banks
current hold where as the discount merely increases
the power of consumer demand. The pertinant part is
the 'writing up' of the fixed assets so they arent
included in the price of goods produced. Thus the
price goes down increasing the power of the consumer
and reducing the leverage of banks on industrial
policy.
Naturally the dependance of regular new debt into the
system via both consumers and industry reduces.
Just as an aside after the last subject of banks
creating new credit to pay overheads, I expect they
still passed these costs onto the consumer. Here we
have a Douglas scheme whereby new credit is awarded to
industry in order to eliminate costs in prices they
shouldnt be paying and increasing the liquidity of
industrial businesses.
Peter
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