Me: Of course the money goes somewhere. It gets pooled into lots of different places one instance of which in America is it goes into various financial instruments discoverable in what are called CAFR’s (Comprehensive Annual Financial Reports) which are taxes on the city and state level accumulated to pay for all manner of governmental needs and services. Nationally this cumulatively translates into trillions of dollars.And that is only one example. Basically any business profit or individual saving held in account in the aggregate is a huge sum of money with very little of it becoming individual income that is withheld from the circular flow of the economy. Not that trying to track money flows is a bad thing, but it plays along the surface of the debit-credit appearance of accounting and consequently doesn’t penetrate to the real problem which is the effects on individual incomes found in the subset of double entry bookkeeping known as cost accounting. Cost accounting takes one below that two dimensional surface and into the three dimensionality of the micro-economy…where the deepest cause of our economic instability is to be found.
When a new business or any business expansion is funded those funds are used to pay for a variety of things including capital equipment and the construction of the productive facilities. These capital costs are paid for in the initial financing and yet they must be replaced. The costs of replacing them are additionally charged to the consumer because the rules of cost accounting state that ALL costs MUST go into price…and yet there are no additional funds over and above the normal and largely fixed flow of incomes produced…in order to liquidate those additional costs and hence prices. This most basic scarcity of individual incomes combined with the above (and other) diminutions of money to the circular flow is what drives the “necessity” of continual borrowing which of course only obscures/palliates the problem because loans of course exact an additional cost to both the individual and the system and hence do not solve the underlying disequity of costs/prices and individual incomes actually available to liquidate those costs/prices.individual incomes actually available to liquidate those costs/prices.scarcity of individual incomes (and other) diminutions of money to the circular flow is what drives the “necessity” of continual borrowing which of course only obscures/palliates the problem because loans of course exact an additional cost to both the individual and the system and hence do not solve the underlying disequity of costs/prices and individual incomes actually available to liquidate those costs/prices.
The two salient points in the above are:
1) the economy is most basically unstable because the rate of flow of total costs/prices always tends to exceed the rate of flow of total individual incomes simultaneously created and available to liquidate those costs/prices and
2) RE-distributive taxation is incapable of resolving problem number one and is also very inefficient.
A Distributive monetary policy that included a continuing supplementary dividend paid directly to the individual would transform the economy setting both the individual free and enabling the system to become free flowing. Utilize a macro-economic discount to prices to the consumer that is rebated back to participating merchants and the economy (which is going to continue to be unstable in its normal processes) and the virtual equilibrium created by the dividend is maintained. Finally, a Distributive funding of government will make it much more efficient.
Me: “I think you’re explaining the basic concept that savings subtracts from aggregate demand,” On the one hand yes, people tend or should we say attempt to save and that is a part of the Social Credit “Gap”. And of course 5-6% have no problem with saving, but that leaves the remaining 94-95% in mostly check to check wage slavery. This aspect of the Gap is a big problem in and of itself. However what I’m also saying is in the normal course of the economy costs increase at a higher rate of flow than do individual incomes actually available to liquidate them. This is true on both ends of the economic process as cost push inflation and monetary inflation particularly of assets…as we have recently observed. The example of how this occurs within the micro-economy with every business that has capital costs that have been originally purchased by financing, but must be replaced and the additional costs must go into price by cost accounting convention. Depreciation allowances mitigate these costs somewhat FOR THE BUSINESS, but not at all for the individual. Any event or normal operation in the economy that either reduces actually spendable income in the hands of the individual, or that adds costs to a business such as the replacement costs of capital equipment above and does not provide an equal ADDITIONAL distribution of individual income adds to the Gap. The normal operations of the economic/commercial system actually contain within them the seeds of its own instability, both as human tendency as Minsky is actually pointing at and also as a flaw in the conventions of cost accounting that correctly allows depreciation to mitigate replacement of capital costs for business, but does not grant the individual any capital appreciation…to pay for it. This is also why a direct distribution to the individual is necessary BEFORE or INSTEAD of injecting it into the system first. Yes a debt jubilee is actually perfectly reflective of what the correct ongoing policies should be….so that we won’t periodically have to have a debt jubilee. “Social security is essentially a monthly social credit to seniors,” Yes, and it is wholly re-distributive, that is not supplementary, and actually the merest of palliatives. A directly Distributive adult-long payment is necessary if we actually want to solve the instability of the economy instead of merely palliating the problem. “There are the normal moral objections to a social credit,…” Yes, but in my opinion those objections (laziness, entitlement etc.) are actually not well founded. The vast majority of us are purpose driven and will find a constructive purpose even if set economically free by a dividend for life. And actually, if the system is unstable because there is not enough available to spend income…..enforcing that utterly unethical condition on the individual and the business entities in the economy far out weighs any anecdotal freely chosen or unconscious behavior by a small fraction of individuals who momentarily don’t deal well with their own economic freedom. “Now, convincing our political establishment to deliver good policy is a whole different challenge!” I completely agree with this. The issue has to be framed in both its actual slavery versus freedom character and also be “sold” to traditionally productive businesses who actually have a natural mutual interest in the individual having spendable income at all times. We need another Martin Luther King, Jr./Mahatma Gandhi type leader to awaken the populace and herd the entirety of the political apparatus in the correct direction. And thank you very much for the reply. It’s always good to flesh things out.
Response to another Steve Keen youtube video:
Respectively submitted:
z = zero as in a zero cost paradigm of consumer financial Gifting that balances the monopolistic paradigm of Debt only
Also, if individual incomes/labor costs are only a subset of total costs and the cost accounting convention that all costs must go into prices is continually enforced for virtually every enterprise in the economy…then how is cost/price inflation not an additional dynamic factor to model?
And as the already disruptive, only beginning and accelerating factors of innovation and AI are eroding aggregate demand at the same time…how is a direct and costless monetary supplement to the individual that avoids and short circuits the already cost/price inflationary nature of commerce/the economy…not an essential policy/policies?
Social Credit/Wisdomics/Gracenomics/ Gracientialism 