| Hello Bill McGunnigle,
You have asked for my views on inflation. I consider it to be a violation of the natural law of cost as Douglas defined the latter--and therefore a violation of natural law, as such. Inflation is properly regarded as a financial information indicator of economic inefficiency and is a continuous and increasing misrepresentation and denial of the historical progress of the industrial arts, derived from the "Unearned Increment of Association" and the "Cultural Heritage" as described by C. H. Douglas, in terms of its stupendous advances in process efficiency achieved by the augmenting of limited human efficiency with--so far as we know--the unlimited efficiency of advancing refinements of technological process, that is, the ability to derive increasing units of physical output with decreasing units of physical input. While old debts may become easier to liquidate for the borrower consequent to inflation of prices and payment of larger incomes, this is a "losing game" because the manner in which the current price-system operates in conjunction with the banking or credit system requires that even more debt is required to carry on the processes of production and consumption because prices generated are increasingly greater than financial incomes to liquidate them. Society is on a financial treadmill upon which it must run ever faster while slipping backward as the treadmill is being continuously raised to a steeper angle. While often advantageous to speculators, a continuous rise in prices is ruinous to those on fixed incomes and drives them into financial privation. It makes planning by individuals, businesses, institutions and governments an uncertain and hazardous enterprise. Social Credit aims to establish economic security for all persons--so, as Douglas put it, they can sit under their own fig tree unafraid. Inflation derives from debt and acceptance of debt is acceptance of something which from a personal standpoint is immoral. If I take from another person's substance how can I guarantee with certainty that I will be able to restore that substance to its original owner? Of course, under the present system any attempt to restrict the creation of credit (namely, debt) will diminish monetary demand, making it impossible for consumers to purchase past production and, thereby, restricting sales which is followed by restriction of production and often bankruptcy for the producer. That is the intrinsic nature and design of the orthodox monetary and price system. But Social Credit policy is to ensure that effective demand is always maintained at an optimum level to ensure that consumer cannot only access production fully but provide the financial means of liquidating all the financial cost of production through consumer credits which liquidate former debt but do not register as new debt. Social Credit policy is counter-inflationary without being economically restrictive. A Social Credit dispensation should not be confused or intermingled with the existing order--inasmuch as they are two different and incompatible systems and attempting to reconcile the two generates hopeless confusion. International trade is overemphasized under the present system which is driven to increasingly destructive competition for export markets, primarily to alleviate the inherent shortage of purchasing-power which exists in each nation state or political jurisdiction. Nations should not be driven to attempt to export more of their real wealth than they receive in return merely to compensate for internal monetary deficiency. International trade should be a relaxed system of exchange, essentially a system of "barter"--unlike the phrenetic struggle to export which exists at present and is the major cause of world conflict culminating in war. Inflation leads to increasing failure of smaller units of economic function and their absorption by larger units, quite aside from actual relative efficiency. It is therefore contributory to the centralization of power and wealth and to the increasing intervention and expansion of the state as governments increase their spending to compensate the deficiency of earned incomes as compared with rising prices in the private sector.
I append below in red a letter which I have just sent out to our county mayor and all councillors: (Seemingly appreciative replies are coming in.)
Letters Editor
November
25, 2007 Sherwood Park News
Re the outrageous increase in property taxes and utility
rates proposed by the County of Strathcona for 2008, largely justified because
of the escalation of price inflation, I submit that inflation is a violation of
natural law and that public officials accept it as a natural phenomenon to
which society must passively adjust is a
major error leading to increasingly calamitous consequences. Moreover, the goal of a balanced
budget under the existing system
of banking and cost accountancy is a fundamental error which makes unavoidable
a growing tax burden. Technically,
it implies that the economy is static, that we consume all of our physical
capital currently and that the issuer of credit, i.e., the banking system, owns
all capital. Further, blaming
price inflation on monetary demand overlooks the faulty financial accountancy
underlying the fundamental problem which is excess financial cost accumulation--which results in a non- self-liquidating price system. Consumer prices include allocated capital charges,
additions to price which are necessary from an accountancy standpoint but which
do not distribute equivalent incomes within the same cycle of production. That is, money is collected from
consumers prematurely, and cancelled in repayment of bank debt incurred
previously by loans issued to producers, as if to represent that our real
capital is being consumed currently, whereas it is actually consumed or depreciated
over a considerable period of time. The resultant disparity, i.e., “gap”, growing
increasingly as capital replaces labour as a factor of production, between
final consumer prices and distributed effective consumer income, is currently
‘bridged’ by ever expanding issues of credit issued, or created, via repayable
bank loans. This is the faulty
approach bequeathed to us by the late economist John Maynard Keynes. Of course, it means that financial
costs in respect of one cycle of production are not fully liquidated within
that cycle but merely passed on, or ‘carried over,’ as an inflationary charge
to be recovered from future cycles of production. That is, one cannot
liquidate, formally and finally, financial charges of today by issues of bank
credit (i.e. debt) which become a further charge carried forward against future
cycles of production. Such issues of credit may allow a large measure of
consumer access to final consumer goods, at the expense of exponentially
burgeoning debt with decreasing financial liquidity and progressive price
inflation, but they do not cancel the financial costs of production as
currently accounted—even though the real, i.e., physical, costs of production
have been fully met when consumer goods take their finalized form and are ready
for purchase. The essential problem is that the consumer is charged in
prices, quite properly, with capital depreciation, but, quite wrongly, not
credited with capital appreciation, which latter historically greatly exceeds
the former. Realistically, we should have over the passage of time a
falling price-level with a growing source of income received independently of
any incomes earned through paid work by participation in commerce or industry. The core mechanisms proposed by the late Cliffford Hugh
Douglas to rectify this revealed progressive error in national accountancy were
the National Dividend and the Compensated Price (compensation of consumer
prices at point of retail sale) financed by non- cost-creating consumer
‘credits’ issued, without being recorded as repayable debt, from outside the
price-system to increase financial independence for the individual citizen and
to effect a continuously falling price-level as the true physical cost of
production falls over time. The true cost of production is the mean ratio, measured in
monetary units, of national consumption divided by that of production--always
becoming increasingly less than a numerical value of one, as real efficiency
increases with the use of new technology. Inflation of prices thus will be seen
to be a fundamental misrepresentation of physical reality. Money is essentially
an information system. Inflation of prices is an indication of inefficiency or
economic failure and is an abstract financial denial of the magnificent real advances
which modern civilization has made in the realm of actual physical production
efficiency. These new "Social Credit" consumption
credits advocated by Douglas
would as always already have previous debt claims against them in retail prices
and will be cancelled, just as money issued via consumer bank loans at present
is cancelled, when businesses receive them via retail sales and use them to
repay their issuing banks in settlement of their earlier commercial loans
contracted in the usual manner for the facilitation of business operations.
Money recovered by industry via price and replaced to capital reserve has an
effect similar to its use for repayment of existing bank loans inasmuch as it
is no longer available as consumer income and can only again become so by
reissue for a new cycle of production which creates a whole new and additional
set of financial costs. Social Credit challenges the historic orthodox acceptance
of Say's Law which states axiomatically that for every financial cost of
production incurred an equivalent amount of financial purchasing power is
issued and no overall deficiency of income can exist. While it may be true that
"at one time or another" in the past an equivalent amount of
financial payments may have been issued, this is of little help or consolation
to consumers driven into increasing reliance on debt because an increasing
proportion of such income has been prematurely cancelled as effective income
and is no longer available for purchase of goods which are currently emanating
from the production system. How long is the suffering general public going to tolerate
the burden of escalating debt, price inflation and increasing taxation without
demanding a reversal through implementation of a realistic financial policy?
Yours faithfully
Wallace M. Klinck
. . . . . . . . . . . . . . . . . . . .
Sherwood Park, AB T8H 2C5
Tel (780) 467-4885
On 27-Nov-07, at 3:37 PM, William Hugh McGunnigle wrote: Hi Wallace Thanks for your endorsement of my comments. I will send them to Peter, but do not have an e-mail address for Kristof. I have posted the comments on elistas and, hopefully, he will see them from that source. I am still having trouble accessing some of the e-mails not placed on my "white list". This is wonderful when the e-mails are spam rubbish, but annoying when I am trying to establish a discourse with a new person over the internet. Generally I can get John Rawson to post them on to me through his computer. Incidently what are your views on inflationary pressures? I am not convinced that all inflation is a bad thing. Provided that incomes keep pace with inflationary pressures, in the long term, debts, like mortgages, become a progressively smaller and smaller percentage of your disposable income, and disposable income is the driving force behind consumer spending. Thus, over time, your ability to "consume" must increase, and this will alleviate some of the problems involved in the "production gap". The only loser here appears to be the "lender" ie the banking system. I have noticed that it is the banking fraternity that makes the biggest noise about keeping inflation down. Do you feel that this is significant? I do feel that, given the way our present banking system operates, that prosperity for all relies on constant slow inflation under that system. Bankers of course would always baulk at any process that systematically removes from them the ability to control currency issue to their disadvantage. Inflationary pressures do exactly that. Is my reasoning faulty? I have met with mixed reception to the idea that some inflation is a good thing under the present financial operators. Are we being brainwashed by the financial operators into thinking that inflation is bad? Would appreciate your comments? I believe that curbing inflation in our present financial climate is financial sucide, and certain to cause international trade stagnation. I am far from certain about these conclusions because they appear to be totally contary to all that is presently taught about financial management. However the present system does have major drawbacks many of which revolve around the money supply which of course is directly involved in inflationary pressures. regards Bill McGunnigle ----- Original Message ----- Sent: Tuesday, November 27, 2007 9:50 PM Subject: Re: [socialcredit] Re: Request for William B. Ryan
Yes, Bill (McGunnigle). Following are my comments re an exchange between Bill Ryan and Peter Challen wherein Bill referred critically to Gary North's anti-Social Credit "diatribe" Social Credit: Salvation through Inflation:
Thanks, Bill. (Attention Peter)
That's right, I bought North's book shortly after it appeared on the market and my impression was that it was intemperate, non-objective and motivated by an almost blind ideological/theological bias against, amounting almost to an outrage at--the prospects of anyone getting "something for nothing." Hence his regard for the Social Credit "consumption credits" with such outright and uncompromising disdain. I was in contact with his office and attempted to introduce some reasoned moderation into the discourse. While being treated politely, I am sure that not the smallest dent was made in the prevailing ideological armour at that location. I believe, Peter, that in a recent communique you stated that interest, per se, was the fundamental fault in the financial system. I would agree with Bill and different Social Credit authors that this is a red herring, unfortunately all too frequently promoted, because it neglects Douglas's discussion of the more basic accountancy flaw related to financial cost creation as this ensues under orthodox finance with the replacement of human labour by non-human capital factors. Interest is just another element in the overall flows of costs and incomes. If suitable corrections to the financial system were implemented the question of consumer debt would cease to be a problem and the burden of interest (or "usury") consequently would no longer be of significance. I think it would be a fatal error, when being pursued by a horse-drawn chariot to attempt to detach the horse while still standing in front of the free-wheeling chariot. Perhaps, Bill, you would like to forward to Peter your comments today to another correspondent, viz., Kristof Levandovski--of Poland, I believe.
Sincerely
Wally
On 26-Nov-07, at 6:03 PM, William Hugh McGunnigle wrote:Hi
Subsequent to the comments by Kristof and Bill Ryan
The observations by Bill are very valid. Much of the present world imbalance in trade is the result of the so called "Free Trade" reforms that are being foisted upon the world by transnational companies. The effect is to move the centres of production away from areas with high production costs due to high labour costs eg North America, Europe and paradoxically Japan into areas where labour costs are considerably less eg China and India. Removal of tarrifs puts countries with high labour costs at a distinct disadvantage. Furthermore a large percentage of the lower labour costs in places like China and India is bought at a considerable environmental price because companies in those countries do not adher to the strict and stringent environmental laws prevalent in places like Europe and parts of North America. There is a hidden problem too in the "deskilling" of the previous world industrial leaders labour force as the industries are moved away. This causes widespread unemployment and this is a harbinger of civil unrest. Unemployment always breeds crime and civil disorder.
Although a many monetary reformers think along the lines that Bill mentions ie abolition of interest etc. This, in itself, does not address the fundamental problem namely that consumption is dependant upon disposable income and the only source of disposable income for the vast bulk of society is salaries and wages. Consequently as the job market shrinks so does income. Fiddling with the banking system and altering the rules will not alter that problem. Similarly the Keyensian solution of deliberate government spending on ( possibly) infrastucture to provide work to enable people to have a living income on a spend now pay later basis only creates a higher degree of indeptedness. The prosperity enjoyed by the Western world since the end of WW2 has been at the expense of Western governments and their people becoming greater and greater deptors. The USA in particular runs the highest level of indeptedness of all. Unfortunately the present system cannot continue without that indeptedness increasing still further due to the facts previously stated by Bill that wages and salaries are always less than optimum industrial output. There will always be a gap between the two ( Prodution Gap)
Social Credit is a viable and effective way of providing the extra finance to bridge the " production gap" and ensure that everyone can benefit from improvements in industrial efficiency. I agree with Bill. The present system of accounting in banking circles is very efficient. It does not need major alterations, although I do baulk at saying it is perfect. Nevertheless it is operating under axioms that operated in the 16th century and not the 21st century, and it does need to be updated so that the financial shortages responsible for so much poverty in the world can be corrected. I trust that my comments have been helpful in the discussion
Bill McGunnigle
----- Original Message ----- From: <william_b_ryan@yahoo.com>
To: <socialcredit@elistas.com>
Sent: Tuesday, November 27, 2007 8:41 AM
Subject: Re: [socialcredit] Re: Request for William B. Ryan
I thought I gave you a serious answer, Kristof. I
certainly didn't intend it to be a joke.
The best financial reform is along the lines of
Douglas' national dividend and retail discount
programs.
I am quite disdainful of most of what passes as
"monetary reform," which generally involves some
fundamental change to the structure of the financial
system, such as the abolition of interest, and/or the
spending of money into circulation exclusively by the
government. The structure of the present financial
system is itself very nearly perfect.
The problem is at the macreconomic level due to a flaw
in accounting, where the costs of production are being
expensed against retail sales at an accelerating rate
in respect to sales, which is explained through the A
+ B theorem, or something similar.
The solution are rationally applied credits from the
central bank to the accounts of final consumers, in a
form of accounting adjustment, boosting effective
demand, bringing the expensing of costs to the point
of retail into proportionality with sales, thereby
sustaining the rate of profit in the dynamically
growing economy, with naturally occurring labor
displacement.
The present continuous fall to the rate of profit
induces entrepreneurs to continually pinch off
production short of real demand and productive
capacity, causing the permanency of poverty in the
midst of plenty through much waste of resources. It
is an illusion of scarcity due to financial
inadequacy.
Beyond that I would suggest a protectionist foreign
trade policy, protecting domestic industry against
predatory foreign competition. The strength of the
American economy was built during the nineteenth
century behind a tariff wall, allowing free trade and
competition between the states, with similar cultures
and standards.
Bill
--- Swieto Radosci <radosc@radosc.x.pl> wrote:
From: <william_b_ryan@yahoo.com>:
> I think I said, Kristof, that I do not call myself
a
> social crediter, but do admit to being profoundly
> influenced by the writings of . I do not
> admit to agreeing with every word that he wrote,
but
> admit to not understanding much of it. One of the
> purposes of this list is to help us gain an
> understanding of what he really wrote and said.
The undrerstanding of what C. H. Douglas wrote or
said is not of my
particular concern. More what today reformists do
with his inspirations and
inuitions.
I agree with Douglas's general idea of the deficit
of purchasing power in
the growing areas of the globe. I calculated that
deficit on real numbers
taken from Polish corporation where I served as CEO
and for sure Douglas was
right showing us this problem comparable to the
unefficiency of heart-pump
in human body. Purchasing power leaks out of
producing communities and
producers are forced to extend specialization and
import-export practicies.
If they don't, they alternatively hang on growing
debt.
Now we have world-blood deficit in many places and
plentitude of it in
others - a zero balance situation from the double
accounting point of view,
but close to heart breake from the social one. I
personally attribute that
deficit of purchasing power to logistic (energetic)
and educational
(informatic, including money as information)
problems of our civilization.
In my opinion local money could serve better than
"retail discount programs"
proposed by Douglas - as local by-passes on global
defficiency in money
distribution.
National dividend is ok but it strongly affects the
way national budget is
created, so it is not easy to implement from
grassroots.
But, William, I asked you about your personal
opinion on Douglas proposals
in present socio-legal environment and you answered
by a joke... Please
answer seriously.
Kristof Levandovski
____________________________________________________________________________________
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