| Subject: | Re: [socialcredit] Re: Warning Democracy | | Date: | Tuesday, July 31, 2007 00:35:45 (-0600) | | From: | Wallace Klinck <wmklinck @....ca>
|
| In reply to: | Message 4940 (written by william_b_ryan) |
I certainly agree that Douglas was merely reflecting to himself
regarding a theoretical possibility as regards a "solution" to the
defect which he uncovered in conventional or orthodox financial cost
accountancy. As Bill has pointed out, Douglas continued his
"discussion with himself" to conclude that this theoretical
"solutuion" was actually quite inadequate from a practical standpoint
as a means to fully resolve the full span of real economic and social
problems which Social Credit policy seeks to correct. Social Credit
policy is, of course, primarily to strengthen the hand of the
individual consumer--not that of the producer, the banking
institutions nor the state. Douglas was merely initiating in his own
cognition an analysis before following it through to what he
concluded was a proper solution--as, I think, a reading of the full
text should clearly reveal. Logical thought is a process which has a
beginning and proceeds toward a conclusion. For this reason making
assumptions before a complete reading of Douglas (or any other
author) is a hazardous practice which can, and often does, lead to
misapprehension and confusion.
Sincerely
Wally
On 30-Jul-07, at 11:44 AM, william_b_ryan@yahoo.com wrote:
> 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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