The dialog between Keynes, Professor Gregory and Major Douglas relates to the A+B theorem:
We may analytically divide the manufacturing sector into two departments: that department purchasing machines that displace labor; and that department producing the machines that it sells to the department that uses the machines. We are talking about machines whose net effect is to displace labor and not the mere replacement of machines that have worn out that already displaced labor in the past.
The department purchasing the machines finance the purchase of the machines through bank loans representing new financial credit, let us say. That department is neither earning a profit or sustaining a loss through its purchase transactions from the other department. It is merely exchanging one form of asset--money borrowed from the banks--for another form of asset--the machines. The machines will be expensed into production into final consumption through depreciation without proportional concurrent disbursement of purchasing power to consumers (A payments in social credit jargon) to offset the depreciation they are asked to pay.
The department receiving the money for the machines (B payments in social credit jargon) will use the money to accelerate the pay down of the bank debt carried on its books. That money thereby ceases to exist as effective purchasing power and becomes unavailable for the payment of dividends. The department however does book profit from the transactions which exist in the form of booked valuation of the surplus of assets over liabilities earned on its sales to the other department.
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