Hi Bill, Thanks for your comments below. There are a couple of things that I will respond to and commence with the final three paragraphs. I am fully aware o= f Douglas=92s approach to Interest, Profit and Saving, and I have never contradicted his view and have never said that he was against Interest, Profit and Saving. I am also aware that many who think they have the answer=
to the problem of debt etc. zone in on interest charges and which they sometimes refer to usury. It may well be that some interest charges are too= high and may be classified as usurious but this is an entirely different subject which has nothing to do with this discussion. Thus those paragraphs= are superfluous in answer to my earlier comments. If I may move to the opening paragraph I believe you have digressed from th= e original statement re interest. The=94 arbitrarily concocted discrete transactions=94, were very simple exa= mples which I would have though were self evident in that it demonstrated that unless a further borrowing occurred and if such further borrowing incurred an interest charge then it is absolutely that further borrowing must occur etc. with the corollary of increased debt. To answer your specific questions. 1. =93Where is the =93rate=94 that Douglas talked about?=94 The rate of flo= w of money out of and into the banking system in my simple example could be whatever you wish it to be. In this particular case we could say the time between the original loan to Trader A and the repayment to the bank was one= year. In the sense of =93rate of flow=94 as Douglas used it, it (the rate)= is a statement of numerical proportion prevailing or to prevail between two sets= of things both of which may be unspecified, but in this case an amount of money. The =93rate of flow=94 of money in my example is one year. 2. =93You allow only the banker to make a profit=94. I could have added a profit to the sale by Trader, which would have only increased the amount that he would have had to borrow. Whether it is one transaction between two= people or transactions between two million the same situation would apply. If you take my example and add 10 more transactions adding a profit to each= transaction it simply means that more lending must occur to meet the final price, which would involve greater interest charges because greater amounts= have to be borrowed. 3. =93Where are the consumers?=94 I would have thought it obvious that the consumer in my example was Trader B. 4. =93Where is the flow of time=94. I have answered this under (1) above. You are correct in stating =93there are many overlapping transactions that = are occurring CONTINUOUSLY=94. Extending my example to take in many transaction= s, overlapping and occurring continuously does not negate my example. It just adds to the problem and at an increasing rate, because the one year that I stipulated would be split into many time periods with increased lending and= borrowing with an exponential growth of debt. The fact that banks may spend= all of their profits (which they do not) may add to the money supply but no= t at the same time as the borrowing occurs and certainly not at the same rate= . I feel that this discussion can achieve nothing unless there is an agreemen= t with what you stated in quoting Douglas, =93"Douglas's point about "B" was that it is on the way back to the banks; it is not available for the paymen= t of interest or principal without furthering borrowing."=94. I agree entirely with Douglas and stated this in my first comment, =93I hav= e stated that interest can only come from subsequent creations of credit (ie.= bank lending)=94. I suggest that your model in which you state, =93So if R includes interest,= which it most certainly will, L includes not only principal but the disbursement of financial sector expenses, such that the expenses disbursed= by the financial sector to the rest of the economy exactly equals the receipt of interest=97ALWAYS=94, is contrary to what Douglas stipulated. It appears to= me, and I could be wrong, to resemble Keynes theory of equilibrium which is demonstrably wrong. Finally, either one agrees with the proposition that incomes generated in any given period of production are less that prices generated in the same period, or one does not. Interest is the Price of Money and that Price is established immediately the loan is established, and that price cannot be met UNTIL Trader A has received an income which cannot occur UNTIL after he= has sold his product, which cannot occur UNTIL Trader B borrows the money t= o purchase. The interest may be recorded in bookkeeping as a profit to the bank but profit is not synonymous with income and certainly even if it was in the case of my example, the bank could not spend it because it has not been received. Whilst it can be recognized that in commercial operations businesses may spend before money is received on the basis of the debtors they have. However these debts must eventually be received or the bubble will burst and they will find themselves in trouble. The Price (the interes= t charge) established is greater than the income in that period. It certainly= cannot be income to the borrower who does not have it to pay, even if he tried to repay his loan the next week. There would still be a proportion of= his interest to repay which he would not have. Vic ----- Original Message -----=20 From: "William B. Ryan" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Thursday, July 17, 2003 3:07 AM Subject: Re: [SOCIAL CREDIT] to Victor > Vic, there's no simple reply to this. These are > arbitrarily concocted discrete transactions. Where > is the "rate" that Douglas talked about? You allow > only the banker to make a profit. Where are the > consumers? Where is the flow of time? Dynamic > *processes* have to be looked at *statistically*. > There are many overlapping transactions that are > occurring CONTINUOUSLY. > > More realistically, take your "banker" to represent > the financial sector, your "trader A" to represent > the manufacturing sector, and "trader B" to represent > the retail sector. The manufacturing and retail > sectors may be aggregated as Douglas did in his > "double circuit" depicted in the attached diagram, > also archived at > http://www.geocities.com/socredus/compendium . > > B depicts the financial sector, M the manufacturing > sector, and C the consuming sector. > > There are two primary circuits: From B to M to B; > and from M to C to M. > > L depicts the flux of loans and R the reflux in > amortization. > > W depicts the flux of salaries, wages and dividends, > and P the reflux in sales into final consumption. > > In dynamic steady state, L =3D R and W =3D P ALWAYS. It > is the very definition of steady state. Notice I > avoid the term "equilibrium." > > So if R includes interest, which it most certainly > will, L includes not only principal but the > disbursement of financial sector expenses, such that > the expenses disbursed by the financial sector to the > rest of the economy exactly equals the receipt of > interest--ALWAYS. > > If there is deviation from steady state such that > there is EXPANSION, L is greater than R and W is > greater than P--ALWAYS. > > The differential is represented by net flow into > account balances represented by i, for interest, p, > for profit, and s, for saving--which are HOMOLOGUES. > > Virtually the same argument the cranks make against > interest can be, and has been, made against profit > and saving. > > The cranks zero in on interest, the socialists zero > in on profit, the Gesellists zero in on saving--but > they are the same fallacious argument. It's just > that they don't realize it. And this includes the > majority of credentialed economists. > > Douglas did realize it, and that's what makes him a > genius--for being the first to realize it. That's > why you will never find in anything that Douglas > wrote or said an argument to abolish interest, profit > or saving--because they are each necessary elements > of the market system. > > We cannot control or improve the system unless we > understand it. > > If we don't understand it we are likely to make > things worse. > > > > ---original message--- > From: Victor Bridger <[EMAIL PROTECTED]> > Date: Mon, 14 Jul 2003 17:12:50 +1000 > > Hi Bill, > I think there has been a digression away from the central simple statemen= t > re interest. I am not concerned with any effects that may arise because o= f > the interest factor on a borrowing and the expenditure of the debt which > goes into prices and the interest which also must be added to price. The > recovery of price and any profit does allow the original borrower to repa= y > his loan, but unless there is a continuance of borrowing the money received > from the one who provided the profit must obtain a profit which would > include the interest charge other wise his debt could not be repaid. > > A simple example: > > There exists a bank. > There exists two traders. > > Trader A borrows from the bank $1000 @ 10% and producers goods which he > sells to Trader B at cost%. the selling price must be $1000 plus $100 i.e., > $1100 > Trader B borrows $1100 from the bank @ 10% to purchase from Trader A who > repays his bank $1100 . > Trader B now has a debt of $1210 . > Trader A has no money. > Trader B has a debt of $1210 and unless someone borrows more so that he can > recoup his borrowing plus interest there is insufficient money for him to= do > so. The debt of course has increased. > I reiterate, that interest can only come from subsequent creations of > credit, i.e., bank lending, and when this does occur there is an increase= in > debt. > > I find this in line with your comment re Douglas below: "Douglas's point > about "B" was that it is on the way back to the banks; it is not availabl= e > for the payment of interest or principal without furthering > borrowing." > Vic > > _________________________________________________________________ > Help STOP SPAM with the new MSN 8 and get 2 months FREE* > http://join.msn.com/?page=3Dfeatures/junkmail > > > ==^================================================================ This email was sent to: [EMAIL PROTECTED] EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. 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