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Re: More re Say's william_
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Re: Regarding "int Martin H
RE: Summarising John G R
RE: Summarising John G R
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Re: More re Say's william_
Re: Summarising William
Gordon Brown at WE Eric Enc
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What is the actual william_
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The Use of Social william_
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The "Gap" John G R
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MADAGASCAR : a soc Franšois
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Subject:Re: [socialcredit] The 'Gap'
Date:Tuesday, February 19, 2008  18:30:41 (+0100)
From:Per Almgren <almgren_per @.....com>
In reply to:Message 5262 (written by Martin Hattersley)

Martin Hattersley skrev:
Folks -

Re: "The gap"

I have not taken part in the discussion on the amount of the alleged "gap"
between purchasing power and prices, hoping that there would be some
definite and constructive input on the subject, After all, it's now roughly
ninety years since Douglas first identified the A+B situation.

Some of the problem arises from the fact that Douglas, when he first
identified the discrepancy between the rate of flow of costs in his
business, and the rate of flow of incomes paid out to liquidate those costs,
did not take into consideration the situation where bank financing is being
used by other companies to create capital, paying wages to workers, long
before product reaches the market on which the workers' wages would be
spent. (As Hughes points out, there are no less than five identifiable
versions of the A+B theorem to be found in Douglas, and this is a cause of

This lack of synchronicity is the fundamental situation that causes the
repeated "trade cycles" of boom and depression, inflation and deflation in
our economies, and the cancerous emphasis on 'growth' even at the expense of
inflation, necessary to prevent stagnation and depression. That inflation,
of course, is the way in which the community as a whole, whose money is
losing value, is forced to provide the real weath that makes the borrower,
and ultimately the banker, able to buy something they otherwise could not

In Alberta this is now going on on an enormous scale. A typical oilsands
project may employ 8,000 workers over a four year period, erecting a plant
that will not put anything on the market until after that period is over.
That's likely a 2 billion dollar wage bill, let alone the far greater amount
paid out in purchasing the materials that go into the plant.

The 8,000 employees who built the plant will be replaced by 800 when the
plant goes on stream. So wages distributed will likely go down from $500
million per year to $50 million. If the plant has cost $12 billion, and is
depreciated over 20 years, there's then an additional $600 billion in
capital costs to be repaid every year - bank created credit that will have
to be cancelled. Quite some 'gap' - unless the slack is taken up by yet one
more plant!

When I worked in Ottawa, I did quite a bit of work making use of StatsCan's
"National Accounts, Income and Expenditure" and the Bank of Canada
Statistical Summary to trace the flow of money through the different parts
of the economy. I did find from this that it was possible to make an
accurate correlation between certain cash flows in the economy, and the rate
of inflation or deflation of prices. My analysis of this in Canada over a
period of nearly 50 years was contained in my brief to the MacDonald Royal
Commission on the Economy, a copy of which I attach in case anyone is
interested. The key elements in the study are the figures for 'residual
error' (which I assumed was not an error, but the consequence of variations
in the amount of M3 money being introduced into the economy), and the figure
for National Savings (which is a residual figure, and, when increased
indebtedness to the banks when the money supply is increased is taken into
account, likely very much overstated).

I did make some attempt to follow this up after 1983, but this was the
beginning of the age of plastic money, and it seemed almost impossible
thereafter to get a useful figure of the amount of purchasing power in
existence at any time. My experience in studying the years 1926-1983 was
that the price level was extremely sensitive to variations in the quantity
of money, so much so that using month end figures did not give any valuable
results, while an averaging of the weekly figures gave a match.

I think a few conclusions follow from this. One is, that the 'gap' is a
figure that varies substantially according to the amount of bank-financied
capital investment taking place in the economy at any time. It would
therefore not be politically possible to base a regular dividend program on
it. However, a 'just price' program, which would reduce prices in times of
recession, and could very well be used to reduce excess profits as a sales
tax in times of boom, would be feasible and advisable, if our current system
of allowing the banking system to create the majority of what passes for
money in the community is to be continued, which Douglas seems to envisage.

The idea of a National Dividend, or Guaranteed Annual Income, still appeals
to me greatly, and has been recommended by many bodies who have reviewed the
whole question of poverty and the ever increasing gap between rich and poor.
A capitalist economic system works on a basis whereby the world's resources,
whether physical or intellectual, have been monopolized by those who are
able to "enclose the commons", so creating wage-slavery, homelessness and
unemployment, while obtaining the profits of their monopolies for
themselves. That is why I suggest that Henry George's 'single tax' on what
were once communally owned resources (including the resource of financial
credit currently monopolized by the banking system) is the optimal source
for providing such a basic income to all.

Per Almgren:
Henry George's single tax may be part of a solution, but I think that the main amount of financing
ought to be directly from each citizens and organizations part of their part of the actual liquidity
(M3), with exception of a special account of each citizens into which his or her basic income is

I realize that this goes a good way beyond orthodox Douglas Social Credit -
but my own view is that it is about time that Social Credit suggested
something that was practical, politically desirable, and explainable to the
public, otherwise we are living in never-never land and  wasting our time.

Per Almgren:
I agree.

Martin Hattersley, 5929-189 St.,
Phone & Fax: (780) 483-5442
e-mail <jmartinh@shaw.ca>
Some introductory materials to the discussion topic of this list are at
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