| Subject: | Re: [socialcredit] Re: The MacMillan Presentation follow up | | Date: | Tuesday, February 15, 2005 21:27:20 (-0800) | | From: | Radu Seserman <radudelona @.....com>
|
| In reply to: | Message 569 (written by Jim) |
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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> > 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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