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Subject:[socialcredit] Re: Question regarding A + B
Date:Monday, March 17, 2008  13:15:30 (-0700)
From:william_b_ryan <william_b_ryan @.....com>

Joe, the question that I put is one of the arguments
against A + B.  I do have an answer (based on
increasing account balances held by firms as opposed
to final consumers that are expensed against sales
through time) but I wanted to read other perspectives,
which you and Martin have graciously supplied.  As to
being an argument against A + B, you know that the
Kelsonians (or "Binarians") propose the "full payout"
of profits in dividends, and the broadening or
spreading of capital ownership, which is a kind of
"propensity to consume" argument.  They start from the
premise that something like eighty percent of
production is from capital not labor.  But because
capital is so narrowly owned, the argument goes, the
owners of capital could not possibly spend the
totality of prospective dividend income on consumption
if it were fully paid out in dividends.  In other
words, the owners of narrowly distributed capital have
a very low "propensity to consume" from dividend
income, so the solution to the "gap" between "prices"
and "purchasing power" is to broadly disperse capital
ownership through financial gimmicks like the ESOP,
thereby broadly distributing dividend income to those
with a higher "propensity to consume."  The Kelsonian
proposal is riddled with fallacies, as I have
demonstrated in several years of discussion on the now
defunct Ownership list.
-

"Maybe I'm way off base in trying to follow what
you're saying here, Bill, but it seems to me that
there still would be a 'gap'. Doesn't the product
actually have to sell before there is any profit
booked that could subsequently be distributed as
dividends?"
------------------------------------------

It depends very much on whether you're looking at the
situation from a "micro" or "macro" perspective.  By
the rules of double-entry accounting you can only pay
dividends from accumulated profit rather than paid in
capital, so this implies a "before" or "after"
situation.  But if you'll look at the diagram for the
creditary economy as a whole in quasi steady-state at
http://geocities.com/socredus/compendium/steady-state.gif
you'll see that the A curve, representing salaries,
wages and dividends leads the sales curve, so the
dividends curve presumably will be leading the sales
curve in reflux to dividends.  This must surely be the
case if dividends have completely replaced salaries
and wages in a hypothetical fully automated economy
that is growing.  This is because the behavior of a
continuous dynamic process differs from the behavior
of a discreet process that is an element of the
continuous dynamic process.  For example, individuals
are born and die in their individual life cycles, but
the society as a whole is continuous, in that the
phenomena of being born and dying are occurring
simultaneously in the society as a whole.  If the
population is increasing, the rate of births is
exceeding the rate of deaths at any point in time. 
From the micro-economic sense, profit is a
relationship that is changing through time, and not a
quantifiably measurable thing.  In the mathematical
sense of double-entry accounting, profit is a
measurement of the rate of change in sales in
comparison to the rate of change of investment.  It is
an algorithm that estimates that changing ratio.  Look
again at the diagram.  The A + B curve appears to
"lead" the sales curve, but in reality the A + B curve
is very much a dependent variable of the sales curve,
because sales very much determine continued investment
by entrepreneurs.  Social Credit proposes to augment
investment through the augmentation of sales through
accounting adjustment (the dividend and retail
discount), thereby preserving the sovereignty of the
final consumer.


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

(Bill Ryan wrote:-)  I've described the "gap" between
"prices" and "purchasing power" as resulting from a
falling ratio of A to B in the ratio, A/A + B.  But A
includes dividends as well as wages and salaries.  As
wages are decreased with advancing technology and
organization, could not prices be decreased and
dividends increased from increasing profits such that
the ratio remains constant, and hence no "gap"? 

(Joe asks:-)  Maybe I'm way off base in trying to
follow what you're saying here, Bill, but it seems to
me that there still would be a "gap". Doesn't the
product actually have to sell before there is any
profit booked that could subsequently be distributed
as dividends? 

If wages are decreased where is the effective demand
for the product going to come from?  Would a consumer
be able to borrow based solely on the expectation he
could repay his spending through his share of future
dividends?  Assuming, of course, that he holds any
shares in the first place in Companies that do pay
dividends. 

Even if prices are reduced too, aren't current wages
only a 'part' of prices, and wouldn't there still be
'past' costs that have to be recovered in them?  Would
the increase in volume be enough to cover those by
itself? Or wouldn't  there still need to be an
augmentation to "A" not costed into prices in the
nature of a ND or CPD? 

Like I say, maybe I've got this all wrong..  If so,
perhaps you could take us through the whole accounting
process in a little more detail.



     
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