| Subject: | Re: [socialcredit] Re: The MacMillan Presentation follow up | | Date: | Wednesday, February 16, 2005 09:17:53 (-0700) | | From: | Jim <jschroeder @....ca>
|
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:
----- 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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