| Subject: | Re: [socialcredit] Re: Replying to Radu | | Date: | Tuesday, February 8, 2005 14:23:24 (+0000) | | From: | Timothy Carpenter <timbeau_hk @........uk>
|
Re: [socialcredit] Re: Replying to Radu
Dear Bill, Radu,
I do not think it is advantageous to tout ‘labour displacement’ as an explanation for A+B, as when an economy grows people change jobs and employment can be stable or rising and inside the ‘B’ are countless wages fragments being funded, albeit in the past (Antn)
BUT, Radu, for consumers to spend more now than before either people need to be paid NOW more than before or the people borrow more to fund their spending.
If people are paid more now (to produce more or more employed) then the company must use retained earnings or borrow to fund this wage bill in advance of sales as it has not sold the goods yet that the new salaries are in return for.
As you can see I have more of an argument with the explanations than with the actuality – but it is important to know how and why something is as it is otherwise we have false remedies.
What is not given enough weight is that when consumption falls behind supply, it is the poorer quality, least valued production that languishes on the shelves. In such a situation, the entrepreneur is given VERY SOUND feedback on their product. Lack of demand is not uniform and people always have money for quality or value.
Tim
On 7/2/05 6:48 pm, "William B. Ryan" <w_b_ryan@yahoo.com> wrote:
"I am Romanian and I lived in Romania for 30 years
before moving to the US."
--------------------------
---------------------------
[REPLY] Do you have contacts in Romania still? We
are interested in developing lines of communication
with important and connected people, either directly,
or through the media. If your Romanian (are you
literate in other regional languages too?) is on par
with your English, you would be an effective
propagandist for the cause--once you understand it,
of course. It will be politically impossible to
introduce a radical departure from the status quo in
a continental nation like the U.S. (or the EU) in the
absence of a successful demonstration project in a
smaller economy. With such a demonstration project
in place, it may be possible to find it politically
acceptable to very gradually introduce something like
the national credit (or capital) account as a funding
source for, say, Social Security, as the system
addresses its fiscal crisis, over the next three or
four decades. The national credit account could
provide the handle for the opponents of
"privatization" to hang their hats on.
-
"The theorem A+B, as I understand it, states that
income from production (wages, dividends,
profits)..."
--------------------------
---------------------------
[REPLY] Not profits--salaries, wages and dividends.
Dividends are presumably paid from profits.
-
"...cannot purchase/offset the results of production
(goods, services)."
--------------------------
---------------------------
[REPLY] It does substantially purchase/offset the
accounted for costs of production. It does not do so
completely--assuming the economy is growing or
expanding in terms of productive capacity. It is a
disproportionality that accumulates or compounds with
time, distorting the information that entrepreneurs
and their financiers are receiving back from final
consumers through the retail market, degrading its
utility in respect to the alternative (central
planning). Projects that would appear to be
profitable, in terms of consumer satisfaction, in the
absence of the disproportionality--or accounting
flaw--appear to be unprofitable in the presence of
the disproportionality so are continually scrapped,
compounding waste upon waste.
-
"This is because a portion of retail price includes
capital costs (as tools for production). Is it right
or wrong?"
--------------------------
---------------------------
[REPLY] No. Capital costs are real costs that have
to be expensed into the price of retail goods in any
conceivable accounting system. It's just that with
labor displacement (shorthand for lengthening and
broadening to the structure of production with
INCREASING capitalization in the broadest possible
sense) the rate-of-flow of purchasing power being
paid to final consumers is falling in respect to the
rate-of-flow of costs being impressed (expensed) to
the point of retail. It is nothing more than an
accounting flaw amenable to conscious adjustment.
Simply put, that adjustment requires the introduction
of a national credit (or capital) account to the
economy as a whole, from which dividends will be paid
in supplement to the ordinary (corporate) sources of
personal income. It will allow the books to balance
for the economy as a whole.
-
"If A+B is true, how would you calculate the
imbalance?"
--------------------------
---------------------------
[REPLY] With the principle of gradualism, it is not
necessary to calculate the imbalance. When first
introduced, the dividend will be very small, and
gradually increased.
Douglas saw it as an independent variable that will
determine the level of productive output, within
limits.
Please read this excerpt from Douglas's second book--
as your homework assignment--and report back to me
what you think it says. Tell me if you agree or
disagree, and why:
Please note that it rejects certain orthodox dogma.
---------------------
---------------
From *Credit-Power and Democracy,* originally
serialized in "The New Age," 1920:
"We have already seen that the only possible basis of
*real* credit is a belief, amounting to knowledge, in
the correctness of the credit-estimate of a society,
with all its resources, to deliver goods and services
at a certain rate. If we made this basis our
*financial* basis, then the credit-structure erected
on it can only be destroyed by social suicide--by the
refusal of the community to function. Now, one of
the components of the capacity of a society to
*deliver* goods and services *is the existence of an
effective demand* for those goods and services. It
is not the very slightest use, under existing
conditions, that there are thousands of most
excellent houses vacant in this country, when the
cost of living in them totally exceeds the effective
financial demand of the individuals who would like to
live in them. The houses are there, and the people
are there, but the delivery does not take place.
*The business of a modern and effective financial
system is to issue credit to the consumer, up to the
limit of the productive capacity of the producer, so
that either the consumers' real demand is satiated,
or the producers' capacity is exhausted, whichever
happens first.* This can obviously be done by making
issues of purchasing-power to cover the whole
estimated productive capacity, and taking it back to
the extent that this capacity is diminished from any
cause whatever, a state of affairs which rapidly
results in making everyone 'rich' in the current
sense of the term; which, it should be clearly borne
in mind, does not at all mean that an individual's
real consumption is large--very often quite the
contrary--but that the individual in question has the
mechanism at hand by which to obtain what he does
want..."
-
Radu Seserman <radudelona@yahoo.com> wrote:
William,
Thank you for your time, I just cannot agree with you.
If it is my lack of understanding that be it.
You are right, English is not my main language. I am
Romanian and I lived in Romania for 30 years before
moving to the US. Though I think I understand pretty
well the difference between transfer and offset.
The theorem A+B, as I understand it, states that
income from production (wages, dividends, profits)
cannot purchase/offset the results of production
(goods, services). This is because o portion of retail
price includes capital costs (as tools for
production).
Is is right or wrong?
If A+B is true, how would you calculate the imbalance?
--- william_b_ryan@yahoo.com wrote:
> "You insist on separating retail purchases from
> business purchases, that is completely wrong to me."
> ---------------------
> --------------------
> [REPLY] Radu, if you want to criticize the theorem,
>
> you assume an obligation--that I shall impose as
> list
> moderator--to make some effort to understand what
> the
> theorem is trying to say. I will do my best to
> assist you in that regard.
> The theorem relates the costs of production being
> impressed to the point of retail to the purchasing
> power concurrently being placed into the hands of
> final consumers.
> When a firm purchases something from another firm to
>
> use operationally in the production of goods and
> services, a cost is heading toward the point of
> retail to be charged against retail sales. It is a
> matter of accounting. On the other hand, when a
> final consumer purchases from a firm, a cost heading
>
> toward the point of retail is offset by a retail
> sale. We are looking at the firms sector in its
> relationship to final consumers from the premise
> that
> the purpose of production is consumption.
> Do you understand the difference in meaning between
> "transfer" and "offset"? I ask this because English
>
> does not seem to be your first language. We want to
>
> be clear on our definitions.
> From the perspective of the theorem, retail
> purchases
> and business purchases are totally different things
> though the term "sale" applies to both. It is
> confusion that arises from imprecise language.
> (Incidentally, J. M. Keynes also conflated the
> concepts, as you do, in his theory of "aggregate
> demand." He said that what counts is "aggregate
> demand" or sales in general and not specifically the
>
> level of retail sales.) Keynes thereby displayed a
> profound ignorance of the basic concepts of cost
> accounting.
> Even if you do not agree with the labor displacement
>
> premise to the theorem, you will have to admit that,
>
> for the sake of argument, IF consumer income is
> falling tendentially--for whatever reason--in
> respect
> to the costs of production being impressed to the
> point of retail, the costs of production will never
> fully cancel or "amortize" in reflux to that income.
>
> You will have to admit that as a matter of pure
> logic. Another way to look at costs that will never
>
> fully cancel or amortize in reflux from tendentially
>
> falling consumer income is debt that is increasing
> "exponentially" in respect to real production and
> consumption. The theorem gives an analytical
> explanation to what appears to be indeed the case
> empirically.
> -
> "You reject the process of saving/accumulation as a
> cause to the imbalance between purchasing power and
> goods available."
> ---------------------
> --------------------
> [REPLY] I think you said it was the "cause" of the
> "problem." You have what I should call the "naive"
> or "crude" underconsumption theory, that consumers
> tend to not spend all of their income, but tend to
> "hoard" it. From this it appear the "solution" is
> to
> take steps to encourage "spending." Silvio Gesell
> would do that through a "tax" on money, inducing
> people to spend it faster to avoid the "tax."
> Notice that this theory has the effect of diverting
> attention from imperfections in the banking system
> itself, or the incompetence or malfeasance of its
> administrators. It shifts the blame to the
> psychology of final consumers.
> That same J. M. Keynes, whose theory you emulate,
> whether you realize it or not, said this in 1930 in
> a
> radio address to the people of Britain:
> "Therefore, O patriotic housewives, sally out
> tomorrow early into the streets and go to the
> wonderful sales which are everywhere advertised. You
>
> will do yourselves good - for never were things so
> cheap, cheap beyond your dreams. Lay in a stock of
> household linen, of sheets and blankets to satisfy
> all your needs. And have the added joy that you are
> increasing employment, adding to the wealth of the
> country because you are setting on foot useful
> activities, bringing a chance and a hope to
> Lancashire, Yorkshire, and Belfast."
> http://www.geocities.com/socredus/keynes_saving.txt
> This advice might well have gotten the world out of
> the Great Depression if saving by housewives was
> what
> got the world into the Depression.
> -
> "...prove without any doubt that Douglas considered
> savings a problem for the economic cycle."
> ---------------------
> --------------------
> [REPLY] You completely miss the point that Douglas
> was making. Saving is not a "problem" but
> reasonable
> behavior a rational financial system should
> accommodate. In a sane world it is not the "cause"
> but the "effect" of increasing prosperity.
> -
> "In recent post you expressed A+B theorem in
> mathematical form..."
> ---------------------
> --------------------
> [REPLY] You're quoting Tim Carpenter, I believe,
> not
> me. The algebraic manipulation is his, not mine.
> -
> "Also 'today earnings in the market' are for most of
>
> the time (excluding deflationary periods) HIGHER
> than
> the total price of goods available today."
> ---------------------
> --------------------
> [REPLY] Then how do you explain exponentially
> increasing debt? That question was Douglas's
> "inductive" as opposed to "analytical" argument for
> A+B. It is in his address to the King of Norway of
> 1935. Please read it. That address is a very good
> introduction to the subject of Social Credit.
> "It is not too much to say that the whole economic
> and financial system in its present form stands or
> falls by the contention that the present price
> system
> is self-liquidating, that is to say, that no matter
> what price is charged for an article, there is
> always
> sufficient money distributed through the production
> of that or other articles to buy the article and
> therefore there is nothing inherent in the system,
> so
> far as the price system is concerned, to prevent the
>
> process going on indefinitely.
> "Now I am not going into the analytical proofs of
> the
> fact that this belief is not true, although rigid
> proofs to this effect exist, but I will ask you to
> consider the quite indisputable inductive proofs. I
> will ask you to consider what you see in the world,
> which leads you to assume that the price system is
> not self-liquidating..."
>
http://www.geocities.com/socredus/compendium/money_and_the_price_system.txt
> -
>
=====
Sincerely yours,
Radu Seserman
"You must be the change you wish to see in the world." Gandhi
"Life is meant to be fun!"
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