Posted in response to Ardeshir Mehta’s post about digital purchasing power being the same thing as cash:

The point is not the purchasing power itself, it is the fact that there always tends to be a scarcity of total individual purchasing power (not total money, there’s oodles of that sloshing around in the system…it’s just that moment to moment not nearly enough is actually in the individual’s hands to spend) created by the current system in ratio to total costs/prices. Hence there can be no stable economic equilibrium which means that the system is one long and continuous ponzi scheme masked by continuous lending by the Banks and the FED which pours more and more money into the system…but as it goes into the system and the system does not and will not create a CONTINUOUS equality of INDIVIDUAL PURCHASING POWER to costs/prices…the disequilibration is never resolved. Why? Because the loans/Debt that the Banks distribute…incurs a cost to both the system and the individual…and so again, the system remains in a disequilibrium.

That also means that the investment climate as a whole is always undermined by the underlying and resulting cost/price inflation. Your investment philosophy is all fine and good, but it is anecdotal and as per the above systemically irrelevant.

A cashless society without a specific guaranteed income is simply unconscious acquiescence in your own domination and control. In fact, without the same guarantee a society with cash is exactly the same.

Posted in response to Steven Lesh about the book Capital and Power:

I noticed that book on Real World Economic Review blog, and I completely agree that this is how the operators of corporations think. It is how they MUST think under the current system. They must think and operate that way because there is no non-inflationary systemic stable ground upon which to stand and so their profits are eroded over time. Capital as Power is an apt title and description of our economic system. Combine that with the unnatural and unbalanced monopoly paradigm of Debt in our current money system and you’re looking at the entire system in its slippery and bald faced enslavement. …And balance the monopoly paradigm of Debt in the area of consumer finance with monetary Gifting to the individual…and the ENTIRE system is transformed, the individual is set economically free, equilibrium becomes possible, value can be maintained, investment is still a crap shoot but it is no longer necessarily an utterly cut throat crap shoot in a basically unethical system and finally, and finally, finance no longer lurks behind the foreign policy of powerful nations applying pressure to extract and exploit in order to survive in an unstable system.

We must decide whether we want power and control and all of its attending problematic inevitabilities to be the zeitgeist of our world….or Grace, which encompasses and allows even power and control…but tempers them if Grace becomes the major emphasis.

Posted in response to Adrian Kuzminski about his contention that a centralized system is necessarily tyrannical:

Me:

The issue is what policy solves the system’s instability and is not only perfectly philosophically reflective of freedom…but actually effects that freedom for both the system and the individual. And a consumer financial policy of monetary grace the free and costless gift to individuals is precisely that policy.

Posted to Steven Lesh:

Steven L.: “How is a Social Credit going to change the way operators of corporations think?”

Me:

It may not change everyone of their minds immediately or even some not at all, but getting everyone to change their mind is not even necessary…because in a system that has set every individual more economically free than they ever have been before and simultaneously has set the system free by always having enough spendable income in their hands with which to purchase a businesses products/services….cut throat domination is no longer necessary and healthy competition will remain as the intelligent businessman’s route to attracting the consumer who now has the power to enable him to survive or not…with their un-extortable, un-manipulable sufficient purchasing power money-vote.

Steven L:

“I think just about everyone agrees the problem with our current monetary and financial systems is its failure to DISTRIBUTE the ‘wealth’ it is more than capable of producing.  You can keep printing money to facilitate that distribution but the problem is it all trickles up not down.”

Me:

The problem with the current system is its failure/inability to create a moment to moment equality of total individual spendable incomes and total costs and so total prices. If the money is there the wealth will be produced and obtained. We live in a monetary system. Money is the means of individual economic freedom, relative or gigantic and not possibly or entirely spendable. In the end I don’t really give damn whether somebody has billions, only that everyone has a dignified existence and the system is capable of flowing and actually does so. Provide the money…the system will spit out the goods.

One also has to keep in mind that Douglas recommended two policy mechanisms, the dividend and the discount which together create and are the anatomy of equilibrium, in other words there is a + of individual incomes and a – to prices. However, the price discount is not applied until after a business has self determinedly found their price so it is not some heavy handed price control mechanism which conservatives are so (correctly) against, and the rebate is completely refunded back to the merchants so it enables the system to avoid price inflation and the business re-claims the discount amounts so they can be whole on their overhead costs and margins. In other words its a proactive win-win proposition.

Ardeshir: 

Hi Steve, You wrote:

Me:

A cashless economy is more quickly and easily able to be tyrannically enforced than one in which people have cash that cannot be electronically “bailed in”. Let’s keep the enslaving system with a little wiggle room instead of the one in which a bank account disappears at 3 AM when no one is looking….until it and we are set free by a balancing paradigm of monetary grace the free gift to the individual.

Adrian Kuzminski:

Let me try this: What seems most unstable — as repeated crashes show — is the current, unaccountable, usurious, too-big-to-fail system. Decentralized systems are almost inconceivable to most people. And though I would argue that decentralization is a necessary condition of a fair and stable banking system, it is not a sufficient one. The free banking system before the Civil War, as I understand it, was decentralized, to be sure, but unstable (it was an unregulated, privatized, usurious system). Some kind of regulation is needed to ensure uniform standards, avoid fraud, etc. The key thing, I believe, is to issue currency at the local level, not through any kind of central bank. No need for a central bank.

Me:

I’m all for rational and ethical regulation, but no amount of regulation is going to change a system dominated by the monopoly paradigm of Debt. That requires an IDEA, A BALANCING PARADIGM to Debt and the only idea that does that balancing and also makes economic sense is GIFTING. Adrian, you’re a philosopher. You know the power of ideas. The system requires a NEW idea…and rational and ethical regulation….but it must be Transformation first!!! Rational and ethical regulation where necessary, and right along with it! Otherwise you only play on Debt’s field. Gifting to the individual decentralizes money which is the means of freedom in a monetary economy. When that policy becomes a reality the real battle will have been won and regulation in order to tweak it will be much more clear and undoubtedly demanded by everyone…so that their economic freedom is maintained.

Adrian Kuzminski: 

You’ve been going on about gifting for a long time on this list, and I don’t know that you’ve made any converts. We probably agree that usurious interest has got to go in the end, but I don’t see anybody talking about that on this list. Debt per se isn’t the problem; the problem is usurious debt. No economy can function without being able to borrow against the future in some way. But there is no reason why borrowers have to pay interest on what they borrow. Isn’t that an IDEA?

Me:

Just as a thought experiment If one takes out 5 0% loans that require a monthly payment of $201 and they only have $1000 in income then we can have insolvency without interest being paid. I’m not saying that interest isn’t A PART of the problem. What I am saying is interest is not the only and not an insurmountable problem. The actual problem is more total costs as a rate of flow than total incomes to liquidate them. As interest is a cost it is a part of the problem, but there are more costs than interest. More COSTS, of whatever kind, than incomes IS the most basic problem….and because Gifting does not add any cost that can be legitimately passed along to the individual or the system, it IS the policy idea that resolves that most basic problem.

As for lack of converts, that’s not actually relevant to the truth. There could be many reasons for that. I have many times here said that I think that Public Banking would be either an excellent competitive force to private banking and/or as a central bank which overseeing the amounts distributed as the dividend and the percentage of the discount as well as disbursing 0% reserves to the private banks…would be a true public interest Bank. Ellen has been gracious enough to let me post here. That’s more than I can say for other bloggers who will tolerate only their agenda being discussed. I do not think that I have failed to be inclusive and accommodative, and I try to post my truth without invective or pulling my punches with the powers that be. I hope that is enough.

Jim:

Steve,
More costs than income is the obvious, visible problem that everyone deals with.  But that would be so mitigated without interest.  We pay on average 40 cents on the dollar (at least) just to cover interest.
Jim

Me:

The fastest and most secure route to non-usurious interest rates is the full program of Social Credit. Interest is only part of the excess costs that constitute that aspect of the gap between total costs and total incomes. Hence prices will continue to rise and incomes will not match them setting in motion the underlying cost and price inflationary nature of the current system. The system, as Steve Keen has iconoclastically shown, tends toward disequilibrium not equilibrium. The discount mechanism of Social Credit was designed to deal with this disequilibrium fact which Douglas posited 90 years before Keen waded through all of the delusive aspects of the reigning macro-economic theory Dynamic Stochastic General Equilibrium (DSGE) and re-discovered it. In fact the discount mechanism of Social Credit deals with both the cost push underlying cause of inflation and the monetary inflation the libertarian types so obsessively and exclusively (but also correctly) focus on.

If one goes after only interest, the problem is not entirely solved and it leaves the door open to continued cost and price inflation and so a way for regressive forces to attempt to invalidate it and go back to some other elite self interested system the same way that they did with Keynesianism which the powers that be morphed into DSGE. As much as I agree with the basic income guarantee (BIG) it is still a half measure without a discount mechanism. You have to deal with all of the slippery but inherent aspects of the system as they will not just go away, and the dividend and discount being the anatomy of economic equilibrium (variable additions to income and variable discounts to retail prices, that is, pluses and minuses that balance the entire system) are the all encompassing and valid economic mechanisms that will do it.

Reforms of and by themselves are not enough. The system must have a paradigm change. Reforms and tweaking right along with the paradigm change such as Public Banking conceived as either a competitive balance to private banking and/or as the central banking agency conceived of in Social Credit theory as the National Credit Office (NCO) are also a part of the overall solution.

Me:  By the way Steve Keen for all of his iconoclastic talents is still utilizing only Minsky’s instability hypothesis which is actually merely the identification of a human frailty and not an actual systemic cause for such instability. He has advocated “a modern debt jubilee” which is a good and correct action presently needed. That a modern debt jubilee perfectly reflects and utilizes the concept of grace as both forgiveness of debt and as the free gift of money with which to pay off debt is…or should be instructive. I do like his Entreprenurial Equity Loans (EEL) but his Property Income Limited Leverage (PILL) is actually more comprehensively handled by the compensated retail discount of Social Credit because after all, a mortgage of leveraged buying of stock are simply the retail products of Banks and the discount reduces the price of such loans as well as all other retail products and services to the consumer.

Adrian Kuzminski:

Douglas argues that there is a gap between total costs and total incomes, a claim widely disputed, it appears. I have not studied his scheme much, but, according to the Wikipedia article on Social Credit, part of this shortfall in his view seems to be because of waste, which he says is included in costs. This seems odd, since we often hear that waste is dealt with as an externality, and so is most conspicuously not included in costs, that is, in prices. His critics seem to say that other costs are in fact cumulatively included in incomes over time. It would seems that inflation can more be explained more simply as a function of usurious rates.

Me:

The waste Douglas refers to is the unnecessary use of time and resources that goes on in plain sight in an attempt to equalize incomes and prices. Superfluous employment that is stultifyingly boring, completely unnecessary and a stupendous waste of resources is all over the place. Of course innovation and AI are reducing it somewhat and that is all well and good…except it reduces aggregate individual incomes at the same time. That economists cannot see the relationships here and that ecologists in fact are not more vocal about such wasted resources particularly in people commuting back and forth to such jobs is both puzzling and frustrating, but the real problem is economists and reformers cannot seem to see that giving individuals a sufficient approximately middle class income….is the obvious answer both to the system’s shortcomings in producing income and alleviating the sting of unemployment as well. Think of all of the wasted money spent on Defense spending that could probably be halved along with other absurd and wasteful incomes….and the system STILL cannot create enough individual incomes to establish an equilibrium. There of course is nothing wrong with employment itself, but the problem is economists are unwilling or unable to envision an economy that has a means of distributing income…other than employment. This is obviously a problem of habitual orthodoxy and orthodox refusal/inability to look. Even with the above wasted resources and income generation equilibrium still eludes the economy because the processes, including employment, of the economy…THEMSELVES produce more costs/prices than incomes (I’m not shouting only emphasizing here)…BECAUSE IT IS THE SYSTEMS, THE NORMAL OPERATIONS OF COMMERCE/THE ECONOMY ITSELF WHICH PRODUCES THE DISEQUITY BETWEEN COSTS/PRICES AND INDIVIDUAL INCOMES. Hence in order to equalize incomes and costs/prices the policy MUST GO DIRECTLY TO THE INDIVIDUAL. (the dividend and discount both are distributed directly to the individual)

“His critics seem to say that other costs are in fact cumulatively included in incomes over time. It would seems that inflation can more be explained more simply as a function of usurious rates.”

DSGE Theorists who say that have been invalidated by the present crisis and by Keen and Douglas before him. Such theorists are too wrapped up in their abstractions to look at the fact that a present time inability to purchase is a moment to moment fact…and so “eventually” never actually arrives. NEVER. Equilibrium is not the tendency of the economy and equilibrium never exists except, and then only apparently, under the most extreme circumstances of the incredibly wasteful and unethical condition known as war. Economists need to get real.

Summing Up and Responding to a Greek Default:

The Troika are probably sterilizing the blow a Grexit will cause them. That and the smallness of the Greek economy will probably enable them to weather default. That’s what happens when you attempt to lay direct siege to/attempt to reform a dominating force that already commands the high ground. You might win a few battles and still lose the war either by attrition, apathy or Time itself where the enemy’s flaws are eventually remedied over several decades by deleveraging and/or a war that so devastates productive capacity that rebuilding it results in “good times” echoing WW II. Or you could take an idea sufficient to the task of balancing the monopoly idea of Debt and that targets the two most chronic problems of technologically advanced economies, namely insufficient individual incomes and price inflation and transform economies world wide. That idea is consumer gifting/monetary grace the free gift in the form of a universal dividend costlessly solving the scarcity of individual incomes and a macro-economic discount to retail prices that is rebated back to participating merchants that prevents price inflation. A Public Bank could become Social Credit’s NCO (National Credit Office) that is charged with compiling the appropriate statistics that will show what the variable monthly dividend and discount should be, and also oversee and disburse the appropriate amount of new credit that the private banks could lend. That would be a public central bank with real power and that was truly acting in the interests of the individual and the system. After such transformation occurred the restored hope and clarity will make the need for regulation of credit and other economic vices like rent and financialization more obvious to a public that has actually been set free.