Sorry, Wally. I see that as a highly intelligent comment on inflation and its causes but not a definition per se.
Inflation these days is measured simply as "rising prices", with no other parameters considered in the measurement. Ever, to my knowledge. Therefore its only precise definition can be just that, "rising prices". (Or the equivalent, depregiating value of money.)
This is not just a personal comment. The SC movement in NZ has held this view for about fifty years.
Regards.
John R.
From: wmklinck@shaw.ca
To: socialcredit@elistas.com
Date: Mon, 28 Jul 2008 02:39:50 -0600
Subject: Re: [socialcredit] the non-neutrality of money
The following comments by C. H. Douglas pertaining to inflation were received from an associate during private e-mail exchanges:
The best definition of inflation I've seen was written by C.H. Douglas in his book "Economic Democracy" as follows:
"All large scale business is settled on a credit basis. In the case of commodities in general retail demand, the price tends to rise above the cost limit, because sums distributed in advance of the completion of large works (or sums distributed for the production of destruction - i.e. war), when completed, are paid for by an expansion of credit. This process involves a continuous inflation of currency, a rise in prices, and a consequent dilution in purchasing power.
The reason that the decrease in the consumer's purchasing power has not been so great as would be suggested by these considerations is, of course, largely due to intrinsic cheapening processes which would, if not defeated by this dilution of the consumer's purchasing power, have brought down prices faster than they have risen.
There are thus two processes at work; an intrinsic cheapening of the product by better methods, and an artificial decrease in purchasing power due to what is in effect charging of the cost of all waste and inefficiency to the consumer. And it is clear under this system the greater the volume of production the larger will be the absolute value of waste which the consumer has to pay for (war being the ultimate form of waste), whether he will or no, because as the bank credits are created at the instance of manufacture, and repaid out of prices, each article produced dilutes, by the ratio of its book price to all credits outstanding, the absolute purchasing power of money held by any individual."
C.H. Douglas "Economic Democracy" 5th edition pge 73-74 (parenthesis added)
[Correspondent's comment]: From a Social Credit point of view, the massive waste taking place due the Bush's deficit financed military adventures , and the wages that have been distributed in respect of this wasteful production, have all gone to inflate the prices of consumer goods like gasoline and food.
On 26-Jul-08, at 9:12 PM, Martin Hattersley wrote:
When I worked on research in Ottawa, I spent a good deal of time analyzing
the connection between cash flows in the economy and changes in the price
index, and I satisfied myself that there was a definite connection between
the two, which could be demonstrated by an examination of the statistics
over a period of more than 55 years.
I attach the relevant part of my brief to the Macdonald Royal Commission in
that regard, and if anyone wishes to punch holes in it, please feel free to
express your opinions.
Martin Hattersley, 5929-189 St.,
EDMONTON AB CANADA T6M 2J1
Phone (780) 483-5442
e-mail <jmartinh@shaw.ca>
----- Original Message -----
From: "John G Rawson" <johngrawson@hotmail.com>
To: <socialcredit@elistas.com>
Sent: Saturday, July 26, 2008 4:50 PM
Subject: RE: [socialcredit] the non-neutrality of money
I sugggest this argument needs to go back and resolve the definition of
inflation, because it has assumed that it is necessarily caused by increase
of the money supply.
Inflation these days is determined by measuring increased prices, with no
reference whatever to the money supply. Therefore its only practical
definition can be "Rising prices".
Orthodox economists recognise both demand-pull inflation caused by undue
increase in purchasing power and cost-push inflation caused by, for example,
rising oil prices which may generate no immediate increase in retail buying
ability. A corollary of the A+B model is that cost-push inflation is endemic
to the system.
It is a pity to see Social Crediters "suckered into" the prime argument of
the finance industry against monetary reform, i.e. the supposed inflationary
effects of any change.
Regards.
John R.> Date: Sat, 26 Jul 2008 09:59:29 -0700> From:
william_b_ryan@yahoo.com> To: socialcredit@elistas.com> Subject:
[socialcredit] the non-neutrality of money> > "...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."> ---------------------------------------------------------> >
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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