-->Bill, the difference I think in our approach is: (1) I have stated that interest can only come from subsequent creations of credit (ie. bank lending). If at any time I borrowed from a bank with an attached repayment of interest and from that point on no new lending occurred there would be insufficient money to repay "someone's" debt.<--
Douglas's point about "B" was that it is on the way back to the banks; it is not available for the payment of interest or principal without furthering borrowing. That means there are different determinants to the "costs of production" and the flow of consumer "purchasing power" considered as "rates." They do not automatically coincide. Say's "law" cannot be a law in the sense of being a natural law, such as the law of gravity.
It is difficult to think of profit as it really exists in double-entry accounting, because our minds like to think in terms of "money" being a tangible thing--like "coins" or "banknotes." We like to think that profit is getting back more money than we have spent. Marx put it this way: M -> C -> M', Profit = M' - M. It is the "common sense" way of looking at it.
In this case, as in so many other cases, common sense fails us. Douglas was one of the very few to have ever recognized this. He saw that money is credit but credit is not necessarily money. In this he is one of the singular productive geniuses in the history of mankind. We will be learning from him for years to come. Credit is an abstract concept that requires thinking "out of the box," which Douglas was able to do. We lesser mortals can only hope to follow his method, which we will glimpse as we grow in understanding.
Profit in accounting (whether received by entrepreneurs or bankers--what they call "interest") is not the surplus of cash received over cash disbursed. It is the increasing ratio of assets to liabilities.
With that increasing ratio your credit line with the banks is increasing (individual banks also have credit lines with "the banks"). With that increasing ratio--and I am speaking in terms of the economy as a whole--increasing costs, reflecting increasing production and productive capacity, are being passed along to consumers, which is the relatively increasing "B" component to a+b. But the money corresponding to "B" is in your hands or at your call via your increasing credit line, not the hands of consumers.
The "A" component is therefore decreasing in terms of a+b, yet consumers are expected to pay the totality of the proportional equivalent to a+b from their "A". So your sales to consumers are falling in respect of your costs, which you bridge by going further into debt to the banks (if you are a bank you go further in debt to the other banks).
You may try to shift some of that debt to consumers to boost sales. You might implore government to fill the gap. Regardless, debt is increasing *exponentially* or disproportionately in the economy as a whole as compared to increasing production. Sooner or later somthing will have to break.
Two possibilities reveal themselves in terms of policy: The "monetary authority" will control the "money supply" so that wages increase proportionately to increasing production, in which case the price level rises exponentially, morphing into hyper- inflation; or the authority will control the money supply so that the price level remains proportional to increasing production, in which case wages fall exponentially, with collapsing "employment."
In recent years, the monetary authority has been attempting to chart a "middle course" between these two extremes.
But that is the "common sense" solution.
It is definitely not the "best" solution.
Bill
---original message--- From: Victor Bridger <[EMAIL PROTECTED]> Subject: Re: [SOCIAL CREDIT] to Victor Date: Sat, 12 Jul 2003 17:27:56 +1000
Bill. the difference , I think in our approach is: (1) I have stated that interest can only come from subsequent creations of credit (ie. bank lending). If at any time I borrowed from a bank with an attached repayment of interest and from that point on no new lending occurred there would be insufficient money to repay "someone's" debt. (2) I still adhere to my statement that money is not an asset (at least not in Social Credit) terminology. It is a "claim, a means" by which an asset or anything else may be obtained. By itself money is a nothing and I agree with Douglas that it is psychological in that it can be anything we want it to be provided it is acceptable by others, as per our definition of Money. (3) I have attached in PDF an extract from Douglas's "Monopoly of Credit" in which he clearly accepts that money is a liability not an asset. He refers to "Fixed Assets and Money Assets" in his following explanation but the use of Money Assets is a reference to the fact that these "Assets" can be converted to or are a claim on money and also included Cash at call. It is simply a recognition that "Money" is or should be a reflection of reality i.e., those things he has shown under assets. Vic
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