|
Sorry, I hit send instead of paste:
Radu:
There is no inbalance in your example because there
is no capitalized cost. Also, like I said, it does depend where money comes from
because if the loan is recalled before the final consumer good makes it's way to
the market,
then there is a inbalance. I guess maybe we're
arguing "semantics" between savings and capitalized costs. Someone doesn't
"save" unless they intend to put the cost of that product in another
product. Someone doesn't "save" and purchase a car. A company saves
when it purchases fixed assets, and then enters them as an asset and depreciates
them over the couse of their intended life. This is the inbalancing factor
I agree, and Douglas states it when he says:
"4474. Mr. Keynes: If they are paid through another
business, then that business will pay the amount as part of its cost of
production to individuals? Is that it?
Douglas: Yes, I quite understand the difficulty.
The real weight to be attached to this undoubted statement of fact is whether
the transfers from one firm to another are financed by either trade credit, or
from a firm’s own credit, let us say it’s working capital, or by a bank’s
credit. The exact weight which that has in the whole of the statements depends
on a very large extent on that. If B payments are really financed from working
capital, then that working capital must, I think, inevitably have been obtained
by the process of investment which is criticized under (b) in the same precis.
That is to say, the whole of the savings which have formed the working capital
of that concern must previously have appeared in the cost of
production."
Douglas, and A+B, are saying that "fixed assets"
are creating prices in which there is no equivalent income, because the cost is
capitalized. I'll again quote from the MacMillan Commission:
4477. Mr. Keynes: It’s working capital is required to
meet its expenditure under Group A during the period of production just as much
as Group B, so what you are saying now does not seem to me to distinguish
between Group A and Group B?
Douglas: Yes it does, because in Group A you are paying
out to the consumer; all the payments under Group B are purchasing power,
which, if it was obtained by re-investment, was originally in the hands of the
public and never gets back into the hands of the public at
all.
4486. Mr. Keynes: And if in the interval you had to have
new machines to replace old ones you would have to have individuals to produce
them. How does that differ from any other form of consumption?
Douglas: Because you are not starting from zero. You are
starting from a world as is.
4487. Mr. Keynes: How does that bear on the
matter?
Douglas: It bears on the matter that you have a
tremendous amount of real capital which at the present time is creating prices
and which has not contributed anything like that amount of purchasing power.
4488. Mr. Keynes: Do you mean that the receipts of
capital are greater than the amount it pays out in dividends?
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?
Douglas: It is represented by the fixed assets in the
company which it cannot distribute in the form of
money.
I really like this analogy used by Douglas as
well:
4494. Professor Gregory: It has made $10,000
profit?
Douglas: Of course it has made $10,000 assets. This is
jumping from money to the goods all the time: it has made certain prices, things
to which you attach prices and which are valued in its assets as lets say $8000.
But the money portion of those assets does not amount to $10,000, and it has
already recovered the cost of them from the consumer. It is exactly the same
thing as going to a man who has had 30,000 acres of land left him by will and
saying, “That is $1 dollar an acre; now you have got to pay $10,000 in death
duties.” The man has not got $30,000. He has got 30,000 acres of land which has
a price of $1 an acre. He has not got $30,000.
Perhaps we are in agreement and don't know it because of the use of different
sematics. Do you agree with the above conclusions by Douglas?
Take care,
Jim
----- Original Message -----
Sent: Tuesday, February 15, 2005 10:27
PM
Subject: Re: [socialcredit] Re: The MacMillan
Presentation follow up
> Sorry Jim,
> You quite miss what I was saying. You continue to
look
> at portions of the economic cycle and draw wrong
>
conclusions. Also by not being concerned where the
> money come from, it
means we do not care where the
> bank has the money and not that money
should not be
> repaid as you understood. Actually if you read all
my
> post you will see all money are paid back to the bank.
> If you
can find any imbalance in the model I
> presented, I will review my
position, otherwise I wish
> you well.
> --- Jim <jschroeder@shaw.ca> wrote:
>
> > Radu:
> >
> > Your argument depends on this
simple thesis:
> >
> > You state, "We are not concerned
where
> > the money is coming from because is FIAT money, the
>
> bank can make it out of thin air."
> >
> > That is where
you are mistaken. We are concerned
> > where the money
comes
> > from, because if it comes from the bank as credit
>
> (which most money does),
> > then it needs to be REPAID, and
if:
> >
> > "....any portion of the loans concerned in any
stage
> > of the production of an
> > article is repaid to a
bank before the articles,
> > into the cost of which they
> >
enter, has finally and irrevocably been sold to its
> > ultimate
consumer."
> >
> >
> http://www.capitalownership.org/lib/DouglasBankers.pdf
> >
> > Then you have a disequilibrium.
And the only remedy
> > is:
> >
> > "In order either
to resell it (in addition to normal
> > trade in new articles)
>
> or to use it in such a way that it forms a cost in
> > production,
a fresh loan
> > has to be granted upon it."
> >
>
>
> http://www.capitalownership.org/lib/DouglasBankers.pdf
> >
> > But the "fresh loan" creates a new set
of costs, so
> > if the fresh loan is
> > used to cancel a
previous set of costs, then it
> > can't be used to cancel the
>
> costs it generated in it's coming into existence.
> >
>
> Again, the problem is that the costs are
> > capitalized.
>
>
> > Look at the example Douglas gave, and I'll modify it
>
> slightly:
> >
> > Imagine I borrow $1000 from the bank,
and ask
> > someone to build a house for
> > me. In
exchange for the house, I give the worker
> > $1000. I have a
debt of
> > $1000, I have a house, and the worker now has my
>
> $1000. Pretend I re-sell
> > it back to him. So now
the worker has the house,
> > and I have the $1000, and
> > I
still have $1000 debt. Now suppose I cancel the
> > debt so that
the $1000
> > ceases to exist. There are two possible
scenarios:
> >
> > 1) The worker just lives in the
house and
> > "consumes" it as it depreciates.
> > In this
scenario, everything balances because no
> > cost is carried forward
in
> > another production cycle because the cost of
> >
consumer goods are cancelled
> > upon purchase.
> >
>
> 2) The worker uses the house to make shoes (as in
> >
Douglas' example). He
> > then enters the house as an "asset" on
his books,
> > and depreciates it over
> > the course of the
entire life of the house. This
> > depreciation expense
is
> > then added into the price of his shoes; however, he
> >
is creating a cost which
> > he does not pay out in the form of any
income (wage,
> > dividend, interest).
> > It is simply a
price value that exists where income
> > does not. And it
exists
> > because the house was "capitalized" (i.e. accounted
>
> as an asset, and
> > expensed as depreciation in the cost of the
shoes).
> > In this example
> > prices>income, and
B>0.
> >
> > If I had not paid back the original $1000 to
the
> > bank, then there would be
> > enough money to cover
the depreciation costs of the
> > house which show up in
> >
the shoes, but then there would also be $1000 debt
> > that is not paid
back.
> >
> > Take care,
> >
> >
Jim
> > ----- Original Message -----
> > From: "Radu
Seserman" <radudelona@yahoo.com>
> >
To: <socialcredit@elistas.com>
>
> Sent: Tuesday, February 15, 2005 4:16 AM
> > Subject: Re:
[socialcredit] Re: The MacMillan
> > Presentation follow up
>
>
> >
> > > Hello Jim,
> > > I am sorry
Jim but you only choose to see only
> > part of
> > > the
equation and then say 'the rest is missing'.
> > It is
> >
> like looking at a house from outside, you see one
> > or
>
> > two walls and then think the house will collapse.
> >
If
> > > you go around the corner you will find a new wall
>
> but
> > > forget about the one you just lost sight of.
>
> > What is missing in Douglas explanation is the fact
> > >
that by creating the loan you create the equal
> > amount
> >
> of purchasing power.
> > >
> > > Look at a full
economic cycle described in the
> > model
> > > below and
you will see there is problem. Just you
> > have
> > > to
consider the whole cycle and not just pieces of
> > it.
> >
>
> > > Lets assume that the 'economy' is formed by a
>
> bank,
> > > company X and company Y. Lets analyze a
full
> > economic
> > > cycle:
> > >
>
> > Company X makes $900 loan to pay $500 wages + $400
> >
B
> > > costs. The company will pay $100 dividends. So
> >
company
> > > X will sell their output for $1000(production
>
> costs +
> > > wages + dividends). The B costs can only go
to
> > company
> > > Y. The $400 can be viewed as
prepayments for
> > supplies
> > > (this is
contra-intuitive but analytically
> > correct) or
> > >
they are more realistically payments to close a
> > > previous
economic cycle. So by using the $400 to
> > close
> > > out
the previous economic cycle we take $400 out
> > of
> > >
this cycle. At the end we will need to be $400
> > short
> >
> for our economic cycle, so overall everything
> > balances
>
> > out. What we give to previous cycle in cash we
> > have
to
> > > receive back from a future cycle. What goods
we
> > > trasfer in from previous cycle we must transfer
>
> out to
> > > a future cycle. We are now in 'current'
cycle.
> > > Lets go back to our cycle. We are not concerned
>
> where
> > > the money is coming from because is FIAT
money,
> > the
> > > bank can make it out of thin air. So
company A
> > workers
> > > received $500. They will spend
them $150 buying
> > > company X output and the balance of $350 will
be
> > > available to buy company Y output.
> > >
Company X at this point has a loan of a $900, sold
> > > $150 worth
of products therefore has $150 cash and
> > > products worth $850.
They can pay now $100
> > dividends
> > > so they are left
with $50 plus the product not
> > sold
> > > yet.
>
> > So lets recap where we are at this point:
> > > - the bank
has a loan $900
> > > - company X paid A & B type payments, has
$50
> > cash,
> > > products worth $850, a loan to be paid
of $900.
> > > - purchasing power available in the system:
$350
> > wages
> > > not spent, $100 dividends not
spent
> > > - $400 'lent' to previous economic cycle
> >
>
> > > Now company Y comes into play. It has no savings
>
> so it
> > > will have to borrow the entire amount need to
do
> > > business, as company X did. So will borrow lets
>
> say
> > > $1500. It will buy $625 materials from company
X
> > and
> > > will pay as A type payments $875.
For
> > simplification
> > > dividends are included in
wages. So X company has
> > > $1500 worth of products to
sell.
> > > Lets recap again where we are:
> > > - the
bank has $2400 in loans ($900 + $1500)
> > > - company X has $675 in
cash and $225 worth of
> > > products and a loan to pay of
$900
> > > - company Y has $1500 worth of products and a
loan
> > to
> > > pay of $1500
> > > -
purchasing power available: $350 unspent wages
> > from
> >
> company X, $100 unspent dividends from company X,
> > $875
>
> > A type payments from company Y, for a total of
> >
$1325.
> > > - $400 'lent' to previous economic cycle for
goods
> > > transferred to current economic cycle.
> >
>
> > > So company X sells its last products for $225 and
>
> pays
> > > off the loan. Available purchasing power
becomes
> > $1100
> > > that is applied toward company Y
products and we
> > are
> > > left with $400 worth of
products that have to be
> > > transferred to the next economic
cycle as we need
> > to
> > > offset the initial transfer
from the previous
> > cycle.
> > > As we do this transfer
and move into the next
> > cycle
> > > company Y sells all
its products and pays off its
> > > loan.
> > >
>
> > So Jim, there is no money missing, everything
> >
balances
> > > out as long as everybody is spending and nobody
is
> > > saving money. You can take this model and multiply
>
> > infinitely and it will operate with no flaw. You
> >
can
> > > add more participants to cycle, enhance the model
>
> with
> > > more elements as interest which will convert to
A
> > type
> > > payments at the bank, lost production
which will
> > > reduce dividends, etc.
> > > The
only problem with this model is the very first
> > set
> >
> of supplies, you remember when company X purchase
> > $400
>
> > worth of goods from previous cycle; where it comes
> > >
from. I guess we are today lucky enough that at
> > the
> >
> beginning of human kind they did not know much
> > about
>
> > economics and at a moment grabbed a branch from a
> >
tree
> > > to start 'producing' food.
> > >
> >
> My best wishes,
> > > Radu Seserman
> > >
>
> >
> > >
> > > --- Jim <jschroeder@shaw.ca> wrote:
>
> >
> > > > Hi Radu:
> > > >
> >
> > Yes, the workmen acquired the house, and because
> > >
> they capitalized the costs of the house, those
> > costs
>
> > > were carried forward in the cost of the shoes.
> >
If
> > > > they merely chose to consume the house, as
most
> > > > people do, then the cost would not be
carried
> > > > forward.
> > > >
> > >
> Let me give you another example. If you buy a
> > bag
a
> > > > potato chips, one the bag is purchased, the
cost
> > > > disappears. However; when the potato
chip
> > company
> > > > buys a potato, the cost of the
potato does not
> > > > disappear, it is carried forward into the
cost
> > of
> > > > the potato chip.
> > >
>
> > > > If the workers just decided to live in the
>
> house,
> > > > then the cost of the house would not have
been
> > > > "capitalized" and carried forward in any
other
> > > > consumer good. But because the house was
used
> > as a
> > > > factory for shoes, it's
depreciation expense was
> > put
> > > > into the cost
of the shoes.
> > > >
> > > > I must add one other
qualifier. It's also
> > important
> > > > to note
that the original bank loan that created
> > the
> > > >
money for the house was paid back (i.e Douglas
> > > > ripped up
the money). If that loan remained
> > unpaid
> > >
> for the entire time the factory was producing
> > shoes,
>
> > > then the $1000 would still exist, and the money
> > >
> necessary to cancel the cost of the
> > depreiciation
> >
> > expense added into the shoes would disappear.
> > >
>
> > > > A+B is described brilliantly by Douglas in
this
> > > > succinct paragraph:
> > > >
>
> > > "This is exactly what happens when any portion
> >
of
> > > > the loans concerned in any stage of the
> >
production
> > > > of an article is repaid to abank before
the
> > > > articles, into the cost of which they enter,
has
> > > > finally and irrevocably been sold to its
> >
ultimate
> > > > consumer. In order either to resell it
(in
> > addition
> > > > to normal trade in new
articles) or to use it in
> > > > such a way that it forms a cost
in production, a
> > > > fresh loan has to be granted upon
it."
> > > >
> > > > I will also say that Bill's
problem he describes
> > as
> > > > labour displacement
means that B costs are
> > > > constantly becomming a greater
portion of the
> > cost
> > > > of goods. And the
problem described by Douglas
> > is
> > > > becomming
more and more urgent to address. But
> > I
> > > >
will say that B costs would exist without labour
> > > >
displacement, and that it is their mere
> > existence
> > >
> which makes price > income, because the only
> > income
>
> > > that exists in any time period is what Douglas
> > >
> called A costs.
> > > >
> > > > Take
care,
> > > >
> > > > Jim
> > >
>
> > > > ----- Original Message -----
> > > >
From: "Radu Seserman" <radudelona@yahoo.com>
> > > > To: <socialcredit@elistas.com>
>
> > > Sent: Sunday, February 13, 2005 6:49 PM
> > > >
Subject: Re: [socialcredit] Re: The MacMillan
> > > >
Presentation follow up
> > > >
> > > >
>
> > > > The workmen paid $1000 to purchase the house,
> >
do
> > > > you
> > > > > remember? He could not
depreciate something he
> > did
> > > > not
> >
> > > acquire. If the house would just pop-up in his
> > >
> back
> > > > > yard as gift, act of god, donation etc.
he
> > could
> > > > not
> > > > >
depreciate it.
> > > > > Sorry, but for me your argument does
not
> > stand.
> > > > >
> > > > >
Radu Seserman
> > > > >
> > > > > --- Joe
Thomson <thomsonhiyu@shaw.ca> wrote:
>
> > > >
> > > > > > Radu's comment: The problem
exist only if
> > the
> > > > > > workmen
>
> > > > > decides to save the depreciation as he
> >
> > recuperates
> > > > > > it.
> > >
> > >
> > > > >
> > > >
> >
>
> >
>
----------------------------------------------------------
> > >
> > > But just when did they 'pay out' the
> > > >
'depreciation'
> > > > > > that they're going to
>
> > > > > 'recuperate' it from? They never did.
They
> > > > > > 'allocated' a charge for
> > >
> > > depreciation on their books, and expensed a
> > >
> portion
> > > > > > of that charge into the
>
> > > > > price of every pair of shoes. But no
money
> > was
> > > > > > 'paid out' to
anyone. For
> > > > > > them to succeed in their
business, either
> > > > someone
> > > > > >
else must fail in theirs;
> > > > > > or there must be a
fresh sum of money
> > injected
> > > > into
>
> > > > > the economy as a whole
> > > > > >
someplace by way of loans, creating another
> > > > > >
debt-charge against future
> > > > > > production; or we
need the accounting
> > > > corrections
> > > >
> > Douglas proposed.
> > > > > >
> > >
> > > Joe
> > > > > >
> > > > >
>
> > > > > >
> > > > >
> >
> >
> > >
> >
>
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> > > > >
> >
> > >
> > > > > =====
> > > > >
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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> > > =====
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> > 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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>
> "You must be the change
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