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Re: More re Say's william_
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Subject:[socialcredit] Re: [gang8] More re Say's law
Date:Monday, January 21, 2008  12:43:15 (-0800)
From:william_b_ryan <william_b_ryan @.....com>

[Gardiner] "The idea that just by paying workers to
produce goods puts into circulation the wherewithal to
buy them is of course wrong. Say made it clear that
the goods must be saleable. If they are produced with
borrowed money, and sold, they put into circulation
the money to recoup the costs of production but not to
provide a profit. That, as Gunnar has explained, has
to come from new credit creation. (Final demand
inflation.)"
------------------------------------------------------

Not by the rules of double entry accounting, Geoffrey.
 Please see the attached diagram derived from the
knowledge acquired by the Scottish accounting debating
societies by the end of the nineteenth century, the
archives of which being available in the better
research libraries.

In an expanding economy that is accommodated through
credit creation, the entrepreneurial spending curve is
leading the sales curve in reflux.  This means that
the entrepreneurs, as a collective group, are always
spending more than they are simultaneously receiving
back through sales, yet are continuously recording a
profit.  Entrepreneurial profit is obtained by
delaying the *expensing* of the disbursements curve
such that it is charged against future sales, which
are prospectively greater than today's disbursements. 
The method results in an increasing "equity" rather
than "cash" in the hands of the entrepreneurs and
their financial backers.* [see note below]
-

[Gardiner] "Douglas's 'Gap' is when a worker is paid
(with borrowed money) for his work and does not spend
his pay. His pay therefore finances the production of
his own work, but does not put into circulation the
money to buy it. Other new credit creation can make up
the deficit."
------------------------------------------------------

This is closer to Keynes than it is to Douglas. 
Douglas assumed that every dollar received in pay is
always spent after a delay, which was accommodated to
some extent through double entry accounting as
utilized by the entrepreneurs.  With increasing wealth
an increasing percentage of income is spent on
securities and similar investments rather than
immediate consumption, increasing the delay in
spending income on consumption, causing a falling rate
of profit as is reported through double entry
accounting from the point of retail.  This decreasing
"propensity to consume" is in principle easily
accommodated through macroeconomic accounting
adjustment, such as the consumers' dividend and retail
discount.

Douglas was more concerned however with increasing
balances held in the entrepreneurial sector as
compared to the consuming sector, expressed through
his A + B theorem.  These increasing balances,
required for the daily operations of the firms, are
concomitant to the lengthening and broadening of the
structure of production through improving technology
and systems of management, which are in subtrahend to
system flow.  Through the rules of double entry
accounting, these increasing balances are charged
against sales without commensurate income being paid
to final consumers, causing a falling rate of profit
in reflux, which is also in principle easily handled
through macroeconomic accounting adjustment.

Without appropriate macroeconomic accounting
adjustment to the point of retail, the falling rate of
profit greatly inhibits the realization of productive
capacity in satisfying real demand.
-

Bill

* [Note] Evidence Submitted to the Macmillan Committee
of Finance and Industry by C. H. Douglas, M.I.E.E.,
M.I.M.E., M.I.Mech.E. 
(Reprinted from the Official Minutes of Evidence) 
TWENTY-FOURTH DAY Thursday, 1st May, 1930 

Major CLIFFORD HUGH DOUGLAS, M.I.Mech.E., M.I.E.E.
called and examined... 
-

An excerpt:

4488. [Mr. KEYNES] Do you mean that the receipts of
capital are greater than the amount it pays out in
dividends?-- 
[Major DOUGLAS] Yes; that is an obvious statement of
fact; the accounts of any company will show that. 

4489. PROFESSOR GREGORY: What happens to the
difference?-- 
[Major DOUGLAS] It is represented by the fixed assets
in the company which it cannot distribute in the form
of money... 


--------------------original
message-------------------

Re: [gang8] More re Say's law
January 15, 2008

Dirk,
 
We discussed Say very thoroughly some years ago. The
idea that just by paying workers to produce goods puts
into circulation the wherewithal to buy them is of
course wrong. Say made it clear that the goods must be
saleable. If they are produced with borrowed money,
and sold, they put into circulation the money to
recoup the costs of production but not to provide a
profit. That, as Gunnar has explained, has to come
from new credit creation. (Final demand inflation.) 
Douglas's 'Gap' is when a worker is paid (with
borrowed money) for his work and does not spend his
pay. His pay therefore finances the production of his
own work, but does not put into circulation the money
to buy it. Other new credit creation can make up the
deficit.
 
This is a brief summary of our analysis. I may have
put it in one of the books. I fear it might take some
time to find the earlier discussion which, I think,
ended in total agreement.
 
Geoff



     
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