| Subject: | [socialcredit] Re: Comments on Richard C. Cook's concept of "credit" | | Date: | Sunday, August 26, 2007 10:49:10 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
|
I have inserted some brief comments [Comment].
Bill Ryan
-
From: Richard Cook [mailto: rickycook21@hotmail.com]
Sent: 20. ágúst 2007 13:41
To: gunnar.tomasson@verizon.net
Subject: RE: FW: [gang8] Comments on Richard C. Cook's
concept of "credit"
I need to know a lot more about what you mean by
Entrepreneurial Production and Factor Services to be
able to comment. What is critical is that it's been
noted for a very long time that the distribution of
purchasing power by a firm does not equate to the
prices they charge for goods and services.
They key is to figure out why and what to do about it.
One of the key factors is certainly retained earnings
by the firm which is used for future growth.
------------------------------------------------
From: GUNNAR TOMASSON [mailto:gunnar. tomasson@
verizon.net]
Sent: 20. ágúst 2007 14:29
To: 'Richard Cook'
Subject: RE: FW: [gang8] Comments on Richard C. Cook's
concept of "credit"
Dear Mr. Cook.
The vocabulary is essentially that of Joseph A.
Schumpeter and John Maynard Keynes in 'A Theory of
Economic Development' (1911 in German and English
translation in 1934) and 'The General Theory etc.'
(1936), respectively.
The economy's production of goods and services is
envisaged as taking place at the initiative of
Entrepreneurs, who buy Factor Services (labor and
non-labor 'inputs') for the production process in
exchange for money/tickets as eventual claims on Final
Goods and Services.
The payments by Entrepreneurs to Suppliers of Factor
Services represent the Factor Supply Cost of a market
economy's output of Final Goods and Services.
In the hands of Suppliers of Factor Services, the
payments by Entrepreneurs represent the Factor Income
generated by the production process in question.
-------------------------------------------------
--------------------------------------------------
[Comment] In the modern analysis, firms are demarcated
from consumers. Spendable income to the owners of
factor services are salaries, wages and dividends.
Factor income as you define it is not fully
distributed as salaries, wages and dividends to final
consumers in a normally expanding economy, but,
because of labor displacement, accumulates
increasingly into working account balances held by
firms.
-
For Entrepreneurs to make a Net Profit (Sales Proceeds
of Final Output - Factor Supply Cost of Final Output)
- and this is of the essence in Entrepreneurial Market
Economies where the profit motive drives production -
Nominal Aggregate Demand for Final Output must exceed
the Factor Supply Cost of Final Output by some amount
X, where X is Aggregate Entrepreneurial Profit. At the
end of my comments on your work, this X is referred to
as Final Demand Inflation.
-------------------------------------------------
--------------------------------------------------
[Comment] This completely misconstrues profit in
double entry accounting. In double entry accounting
Net Profit is Sales minus Expense, where expense is
determined by the rules of double entry accounting.
See the first attached diagram also archived at
http://geocities.com/socredus/compendium/accounting_profit.gif
In (the hypothetical condition of) a normally
expanding economy, disbursements by firms are always
exceeding sales receipts by firms, yet firms are
always recording a profit.
-
In turn, Final Demand Inflation can only come about
through new credit creation/monetary expansion whereby
the sum total of the economy's demand for final output
of goods and services is made to exceed its factor
supply cost.
Gunnar
-------------------------------------------------
--------------------------------------------------
[Comment] Because of labor displacement (meaning
lengthening and broadening to the structure of
production resulting from improving technology and
organization), salaries, wages and dividends are
always falling in respect to the costs of production
being impressed to the point of retail, which would
result in a falling rate of profit which would induce
entrepreneurs to continually choke off production
short of potential, if it were not for the continuing
expansion of consumer credit.
The stimulating effect of expanding consumer credit is
transient in nature, and must come to an end at some
point, because of the increasing difficulty of
amortizing that increasing credit from income which is
falling in respect to the costs of production.
Consumer credit has become extremely important in
today's economy. See the second attached diagram
(from Bud Conrad) also archived at
http://www.geocities.com/new_economics/conrad-borrowing-2005.gif
Notice that credit extended to Households exceeds that
to any other sector, in significant reversal from a
half-century earlier.
____________________________________________________________________________________
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