| Subject: | [socialcredit] inflation discussion | | Date: | Friday, November 30, 2007 09:50:07 (-0800) | | From: | william_b_ryan <william_b_ryan @.....com>
|
"Can we assume that the present downward spiral of
indebtedness is irreversible under the present
financial system?"
-------------------------------------------------
I should say that is the case so long as the present
policies persist under the present financial system.
It is not a matter of changing the present financial
system to something fundamentally different. Our task
is to persuade those in charge to change their
policies, which would involve the implementation of
the retail discount and consumer dividend programs.
Practically all the tools required to do so are
already there in the hands of the policy makers, which
wasn't the case when C. H. Douglas first wrote, more
than eighty years ago.
His most thorough explanation of inflation is in his
book *Social Credit,* Part II, Chapter II, found in
our compendium at
http://www.geocities.com/socredus/compendium/chap2part2.txt
The entire text of the book is at
http://www.mondopolitico.com/library/socialcredit/socialcredit.htm
"Wages and salaries costs are purchasing-power, and
collectively are much less than collective prices.
Imagine both collective wages and collective prices to
be diminished by a equal amount -*x*-. This may be
written:
"Costs = purchasing power.
"Costs are < prices.
"Therefore: costs/prices is < 1.
"Therefore: costs minus *x*/prices minus *x* is <
costs/prices.
"An addition to both the numerator and denominator of
the fraction, such as is brought about by a rise of
wages, accompanied by a rise in price, has, of course,
the opposite effect; it brings the ratio of
purchasing-power to prices nearer, though never to
unity, with the result, seen in Germany in the
inflation period, of immense, though unstable,
economic activity, accompanied by great hardship to
the professional and rentier classes, both of whom
have claims to consideration, and a most undesirable
concentration of economic power, resulting infallibly
in the enslavement of the artisan."
This analysis says that, because of labor
displacement, it is impossible to have stable prices
so long as wages are increased, because that involves
an equal addition to both the numerator and
denominator of the fraction. It supplies theoretical
justification to the empirically observed Phillips
Curve, which informs central banks like the Federal
Reserve.
Policy makers at the Federal Reserve believe that the
economy is at best in an unstable equilibrium between
what would otherwise become spiraling inflation or
plummeting employment, which the Federal Reserve can
maintain only through continuous fine-tuning. It is
impossible to maintain full employment unless it is
defined arbitrarily, such as in the NAIRU. So some
measure of inflation and unemployment at the
equilibrium point becomes an inevitability.
The Social Credit solution is to add to the numerator
(the purchasing power side of Douglas' fraction)
without simultaneously adding to the denominator (the
prices side of the fraction), through the retail
discount and dividend programs.
The economy can thereby be brought up to higher levels
of productive activity in the absence of inflation.
Bill Ryan
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