| Subject: | [socialcredit] the non-neutrality of money | | Date: | Saturday, July 26, 2008 09:59:29 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
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"...from a financial point of view, the money supply has been inflated, and the
community as a whole has therefore paid for the new capital through the loss in
value of their monetary holdings. While the capital is being created (say the
many years spent constructing a new oilsands plant), no new wealth is available
for consumers."
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Quite obviously no new wealth is created by the particular plant until it is
completed and in production. But this statement of yours falsely assumes that
money is neutral, that the only thing an increasing money supply causes is
increasing prices.
In reality, while the construction of the plant is being financed with new
credit, the rate of profit by other firms is increasing with the increasing
spending, inducing the increasing production of real goods and services into
final consumption. The problem of inflation has more to do with the way new
credit is introduced than the fact that it is introduced.
In Social Credit theory, the ratio of A is naturally falling to B with labor
displacement, so the ratio of A to A + B, the costs of production in double entry
accounting, is falling, causing a continual long-term fall to the rate of profit,
continually suppressing production in terms of productive potential and real
demand.
The rate of investment is A + B. If A + B is accommodated through new loans,
the ratio of A to A + B is increased (rather than decreased) if the flow of A + B
is accelerating, and therefore the rate of profit is increased, since A + B is
expensed against sales after a delay, while A refluxes into retail sales rather
quickly. So the stimulus of an increasing A takes effect before the consequent
expensing of an increasing A + B. But this stimulative effect continues only so
long as the flow of A + B is accelerating. This means that prices are
exponentially increasing eventually into hyperinflation, if not stopped. But
while it lasts the stimulating effect is very real, in terms of real production
and consumption. Look at Douglas's 1923 testimony in Ottawa on the Austrian
inflation.
http://www.geocities.com/socredus/Douglas_1923_second_day_Part_3.txt
Far less inflationary are the Social Credit dividend and retail discount
programs, where new credit is rationally introduced at the point of retail rather
than directly as loans for investment. In the Social Credit program, more and
more investment is financed from retained profits rather than loans. Prices are
therefore ameliorated rather than exacerbated.
Some statements from Douglas regarding the non-neutrality of money:
"...the true assets of banks collectively consist of the difference between the
total amount of legal tender, or Government money, which exists, and the total
amount of bank credit money, not only which does exist, but which might exist,
and which is kept out of existence by the fiat of the banking executive."
Swanwick, 1924.
http://geocities.com/socredus/compendium/swanwick1924.txt
"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 consumer's real demand is satiated, or the producers' capacity is
exhausted, whichever happens first."
Chapter X, *Credit-Power and Democracy*, 1920.
http://geocities.com/socredus/compendium/chapter10.txt
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the non-neutrality
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