In-Reply-To: <001e01c9ae2f$8efcd500$6500a8c0@cc.shawcable.net>
Hi Joe.
I couldn't possibly know what the effects of the dividend were upon
Alaska, but I was certainly surprised and delighted when I first heard of
it :-) And I never did get answers to all the questions I asked of the
Alaska authorities at the time.
Your question about the effect upon retail prices is a good one. For it is
my belief that orthodox economists have never quite grasped what is at
work when they formulated their "Law" that increased money supply leads to
increased prices. Few of them have ever sat in a company boardroom when
the agony over the possibility of increasing prices is thrashed out.
With very few exceptions companies struggle to even cover their costs,
never mind actually make a profit :-( and the gut calculation about their
customers ability to pay more, even if their competitors allowed them to
raise prices, is the stuff of almost any price rise likely hood.
In my opinion this inflation/deflation frenzy is more about the returns to
investors than it is a worry to people with a rising income. The only real
sufferers in an inflationary situation are those with truly fixed incomes.
Yes I know it is inconvenient, chopping off noughts is always
problematical, and it would be better if there was some stability, but
that utopia has to await a sensible monetary system, does it not ?
Ken.
-------- Original Message --------
From: "Joe Thomson" <thomsonhiyu@shaw.ca>
To: <socialcredit@elistas.com>
Date: Thu, 26 Mar 2009 08:26:03 -0800
This all comes back to a question that I raised several years ago, Jim,
not long after you and I first joined this group. I still don't know the
answer to it.
As I remember, it concerned whether consumer prices, in general,
increased in Alaska around the time the annual oil dividend was paid out?
Or did they remain pretty much the same? Was there simply an increased
turnover due to the increase in purchasing power after dividend payout
time? Or did prices take a sudden jump upwards in anticipation of there
being more money available?
I certainly don't know, nor have I been able to find out yet.
It seems to me that pretty much the same question arises in a period of
economic expansion. Certainly if there are enough large capital projects
underway simultaneously consumer prices do rise, and there is an illusion
of prosperity, (which, in a sense, for many people, is going to be more
than an illusion ~ they are actually increasing their standard of living ~
even if they're only enabled to go into hock to do it.)
But the question Douglas raised remains, "Who is really ever advantaged by
higher prices?" Yet a 'deflation' seems to be more feared than an
'inflation'. I would imagine perhaps because you can't get a proper
feedback of consumer demand when everyone is holding off buying everything
they can 'today' in expectation of a cheaper price in the market
'tomorrow' that, for all but essentials, never really comes.
Too many question, still too few answers. Or maybe I'm just missing them.
Joe
----- Original Message -----
From: Jim
To: socialcredit@elistas.com
Sent: Wednesday, March 25, 2009 2:01 PM
Subject: Re: [socialcredit] Re: depreciation
"Now do you see how 'depreciation' allowances INCREASE purchasing power
in a period (the year you bought the tractor, in this case) of economic
expansion? "
The "gap" identified by Douglas is the gap between purchasing power and
PRICES.
Increasing purchasing power will have absolutely no effect if prices are
increased by an equivalent amount.
There are TWO factors that effect prices.
1) Costs
2) What an item will fetch
An analysis of depreciation expensed over time is an analysis of COSTS.
Take care,
Jim Schroeder
http://social-credit.blogspot.com/
----- Original Message -----
From: John G Rawson
To: Socred elistas
Sent: Wednesday, March 25, 2009 2:48 PM
Subject: RE: [socialcredit] Re: depreciation
Joe, if, and only if, the tractor was purchased through new credits,
not savings, the investment in its purchase put new money into circulation.
That has absolutely nothing whatever to do with the costing of its
purchase into prices later, which process raises costs, not purchasing
power.
Regards.
John R.
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From: thomsonhiyu@shaw.ca
To: socialcredit@elistas.com
Date: Wed, 25 Mar 2009 08:32:49 -0800
Subject: Re: [socialcredit] Re: depreciation
(John Rawson wrote:-) (from Bill Ryan) "... the gap is eliminated by
the process of depreciation." Depreciation charges are not part of the
cost of general production? They are in my case, and I don't see how this
becomes reversed when put into the economy as a whole.
(Joe replies:-) Let's say you buy a new tractor for your farm.
Whether you pay for it from 'savings' or from 'borrowing' we'll leave
aside for the moment. The tractor costs you $ 10,000, say. And we'll
say you expect it will last 10 years. You're going to run it until the
wheels fall off.
You don't recover the FULL cost of the tractor in the year you've
purchased it.
You can't raise the price of your tropicals that much, your
competitors will undersell you. Nor does it allow you to produce that
many more of them to put on the market in that year to get the full $
10,000 you've spent back. In that year.
So you 'expense' the tractor over it's expected lifespan. To do so
you have to recover $ 1,000 per year in depreciation costs from the sale
of your tropicals over each of the next 10 years.
Now however you have paid for the tractor, whether from 'savings', or
from 'borrowing', you have spent
$ 10,000 into the economy in 'costs' the year you purchased the
tractor. That's "economic expansion", is it not? The purchase of the
tractor is going to hopefully allow you to improve your business.
But you are only going to have to recover $ 1,000 of that in 'prices'
in that year to cover your 'depreciation'. And every other year, for the
next 9 years.
Now do you see how 'depreciation' allowances INCREASE purchasing power
in a period (the year you bought the tractor, in this case) of economic
expansion? Expand that to the WHOLE economy in a period, probably
extending over several years, of economic expansion. More is being spent
in total 'costs' than is simultaneously being recovered in 'prices', yet
through accounting conventions Firms can still book profits.
Regards,
Joe
----- Original Message -----
From: John G Rawson
To: Socred elistas
Sent: Tuesday, March 24, 2009 12:24 PM
Subject: RE: [socialcredit] Re: depreciation
Thanks Bill.
I think it is reasonable to deal in normal English rather then
accounting jargon.
However, yes, I was imprecise. Under true old capitalism, with
capital created out of savings, items paid for by that method would tend
to cause a "gap". However, they would do it by reducing purchasing power
paid out rather than increasing the price of goods.
"... the gap is eliminated by the process of depreciation."
Depreciation charges are not part of the cost of general production? They
are in my case, and I don't see how this becomes reversed when put into
the economy as a whole.
Regards.
John R.
> Date: Tue, 24 Mar 2009 07:36:30 -0700
> From: william_b_ryan@yahoo.com
> To: socialcredit@elistas.com
> Subject: [socialcredit] Re: depreciation
>
>
> "...instead of the cost of a new machine being costed (by saving
method) into prices in one year, it is spread of over succeeding ones. It
is still the cause of a potential "gap". I fail to see how something that
causes it can reduce it in any year."
> -----------------------------------------------------
> ------------------------------------------------------
>
> I don't know what the "saving method" is. It's not a term from
accounting. How is it the cause of a potential gap? If the new machine is
not depreciated but expensed immediately, there is indeed a gap between
disbursements and receipts in an expanding economy. Cash flow accounting
would report a continuous loss. By delaying the expensing of the
disbursement utilized to purchase the machine, it is expensed against
future income that is prospectively greater than today's disbursements. So
the gap is eliminated through the process of depreciation. And it isn't
entirely through depreciation, although depreciation is the larger part of
it. Dividends are never expensed. The purchase of land is never expensed,
although there are capital gains and losses when it is sold.
>
> --------------------original message------------------
>
> Subject: RE: [socialcredit] depreciation
> Date: Sunday, March 22, 2009 07:50:04 (+0000) From: John G Rawson
<johngrawson @.......com>
> In reply to: Message 6471 (written by william_b_ryan)
>
> Thanks, Bill. I don't see where I am confused when your major
paragraphs tell me exactly what I understand. To cut the bull out of it,
instead of the cost of a new machine being costed (by saving method) into
prices in one year, it is spread of over succeeding ones. It is still the
cause of a potential "gap". I fail to see how something that causes it can
reduce it in any year. The only way it could do that would be by injecting
purchasing power in some way, and any such effect must be secondary to the
main process. Diagrams or not, how this can directly reduce the gap in any
year is beyond me. And if you can not explain it without them, I believe
they must be "loaded", to say the least.
> Regards.
> John R.
>
> Date: Sat, 21 Mar 2009 14:36:03 -0700
> From: william_b_ryan@yahoo.com
> To: socialcredit@elistas.com
> Subject: [socialcredit] depreciation
>
> "...tell me how depreciation allowances can inject purchasing
power into the economy except through saving taxation, therefore
increasing profit to make dividends possible."
> --------------------------------------------------------
> ---------------------------------------------------------
>
> You're simply confused as to what depreciation is and what
depreciation does.
>
> Depreciation is the delaying of the expensing of a disbursement.
At some point in time a disbursement is made; at a later point in time the
disbursement is expensed. Usually it is expensed over a series of points
in time through a schedule. The theory being that an asset purchased
becomes an expense only as the asset wears out through time. The effect
for the economy as a whole, where there are many firms depreciating
assets, is that the disbursements curve for the economy as a whole is
delayed through time in becoming the expense curve that is charged against
the sales curve into final consumption.
>
> Actual disbursements are delayed before they reflux back into
sales. Think of a pipeline that contains a volume within the pipeline that
is analogous to account balances. The input into the pipeline is analogous
to disbursements; the output is analogous to the reflux into sales. It
takes time for any molecule entering the pipeline to traverse the pipeline
and exit. This is true whether the rate of input is increasing,
decreasing, or remaining constant. This is an actual physical delay. The
delay caused by depreciation, on the other hand, is dependent on the rules
and conventions of accounting, which are quite arbitrary.
>
> I refer you once again to the two attached drawings, one in PDF,
the other in GIF.
>
> They are stylized with straight lines, indicating quasi-steady
state, where everything is changing, but everything is changing
proportionately to everything else.
>
> Look at where the curves are sloping upward. This would be during
a period of normal expansion. The disbursements curve leads the receipts
curve. The differential between the curves indicates accumulation into
account balances. The receipts curve is the disbursements curve delayed in
time. For the purposes of this illustration the delay is assumed to be
constant.
>
> Also notice that at any point in time, the rate of disbursements
is always exceeding the simultaneous rate of receipts. That is to say
there is always a negative cash flow on the part of the firms.
>
> This would seem to indicate a "gap" between "prices" and
"purchasing power" if that were all there was to it.
>
> But double entry accounting delays the disbursements curve more
than the corresponding physical delay, such that it when it is expensed
against sales, sales is greater than expense. This yields a positive rate
of profit according to the rules and conventions of accounting.
>
> Note that during the period of expansion, firms have a negative
cash flow, but a positive rate of profit. During the period of expansion,
account balances are accumulating.
>
> During the period of contraction, firms have a positive cash flow,
but a negative rate of profit. During the period of contraction, account
balances are depleting.
>
> So during the period of expansion, because of the delay in
expensing caused by depreciation, there is no actual "gap" between
"prices" and "purchasing power."
>
> During the period of contraction, again caused by depreciation,
there is indeed a "gap" between "prices" and "purchasing power."
>
> The A + B theorem itself relates to something different than this
actual "gap" during the period of contraction. It relates to the
continuous fall in the rate of profit that results from labor
displacement, which operates equally during periods of expansion, stasis,
and contraction. The fall is the result of a flow in double entry
accounting that reports a falling rate of profit even though productive
capacity is increasing, and real demand remains to be satiated. If
anything, double entry accounting should ideally be reporting an
increasing rate of profit. The flaw reports misinformation to the
entrepreneurs and their financiers causing them to be always pulling back
from existing projects, and shifting their resources into newer projects,
that has nothing to do with actual changes in physical conditions or real
demand. This misinformation is very wasteful of productive capacity.
>
> Social Credit is about applying macroeconomic accounting
adjustments to correct for this flaw. The desired result is truth in
accounting. It is analogous to applying leap year adjustments to the
calendar to adjust for the fact that the Earth does not rotate about the
Sun in exactly 365 days.
>
>
> ----------------original message---------------------
>
> Subject: RE: [socialcredit] Time and Social Credit--replying to
Rawson
> Date: Saturday, March 7, 2009 21:35:20 (+0000) From: John G Rawson
<johngrawson @.......com>
> In reply to: Message 6402 (written by Joe Thomson)
>
> Joe, I think I know all that. But tell me how depreciation
allowances can inject purchasing power into the economy except through
saving taxation, therefore increasing profit to make dividends possible.
And please, stop using "macroeconomy" as a magic word that excuses
illogic. It means the total economy, which is what Social Credit studies
all the time. I have never got away from it; I don't think any other
correspondents have either.
> Regards.
> John R.
>
>
>
>
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