It seems to me that if one simply gets the ideas of inherent and inevitable factors diminishing the circular flow of money, (are we going to eliminate individual saving, business profits, re-investments, pooling of money in stagnant and only slightly re-circulating financial vehicles like bonds?) additional costs above the costs of total finance (depreciation, interest, repairs to productive facilities) and becoming more aware of the costing/expensing/pricing circuit which insures that any money actually re-circulating back through the economy is vastly diminished simply because the nominal amount of money being paid to business/commercial agents is transformed by that “re-circulating” into business revenue….and so becomes no where near an equivalent amount of individual income…..that the moment to moment scarcity ratio of total individual incomes to total costs/prices…would become much more apparent.
It requires that one think like a cost accountant and a macro-economist at the same time.
EB: Thanks. I don’t really see the part about depreciation, but I definitely see there is a gap. There is a gap because some of the recipients of the money put it under the mattress or otherwise don’t spend it, or invest it in speculative ventures in the financialized economy where it just grows exponentially like a parasite without ever getting returned to the consumer economy. I don’t see the part about the money being extinguished. Let’s say I borrow $1000 from my grandmother, who takes it out of her safe; I pay workers and materials and a bit to myself, set the price to cover all those costs, all the money is spent on the product, and I repay the loan to my grandmother, who puts it back in her safe. How is that any different from borrowing from a bank that gives me bank credit in my checking account, I pay workers and materials and a bit to myself, set the price to cover all the costs, all the money is spent on the product, and I repay the banker, who zeros out the debit in my account. Even if I spent the money on a sewing machine long before producing the product, the seller of the sewing machine would have the money and could spend it on my product when it was finished. I can see the problem if the banker charges interest, but you all don’t want me to talk about that!
Me: Of course running a business is a lot more involved and difficult than that…because of all the reasons Douglas enumerated as the costing aspects of the gap like depreciation that have to be figured into your prices. That’s and the fact of the scarcity ratio insight about individual incomes is why 80% of new start ups go “belly up” within 3 years.
It’s obvious to me that Douglas’s analysis is correct. It’s also obvious to me that economists are really good at deluding themselves and like most people are addicted to their own orthodoxies. Frankly I don’t even care whether Douglas was right or not because his costless discount policy remedies would increase everyone’s purchasing power in and of itself and so would be a good economic result that no economist or politician has been able to accomplish since forever.
The more I look at the discount policy the better and more general its effects become real to me. I would prefer that everyone 18 and older get like a $1500/mo dividend and then the discount be like 40%, but even if you idiotically insisted on keeping the welfare system via re-distributive taxation in place by dropping the dividend just to avoid the protestations of the numskull authoritarian/conservative/libertarian types who are still hung up in old covenant mosaic edicts and other false orthodoxies…and then set the rebated discount percentage at 90% you’d potentially increase the purchasing power of everyone with a job by 90%!!! Now what economist or politician can claim they’ve done anything close to that? Only one of the dual policies of social credit, especially if it was aligned with abundance….would do more to usher in stable prosperity than all of the “epicycle” theories of scientific economists have managed…for like 5000 years!
Joe and Manu,
Correct me if I am wrong but the four things necessary to understand about depreciation and depreciation allowances and the basic problem are:
1) depreciation is an ADDITIONAL cost over and above total financial outlays and costs and
2) depreciation allowances are not forgiveness of costs merely stays of execution of them and so must be planned for and factored into prices as ADDITIONAL costs and
3) No ADDITIONAL individual income is created by the banks to liquidate the flow of those ADDITIONAL costs
4) Hence within the paradigms of Debt, Loan and For Production ONLY there is no resolution of the problem of the flow of these and other ADDITIONAL economic costs which means you cannot cost cut your way out of this problem, and neither can you just continue to throw loan upon loan at it because even at 0% interest that just ends up creating an ADDITIONAL flow of costs that bankrupts individuals and businesses and creates a condition of reductio ad absurdum for government that merely props up the real problem, namely the curiously overlooked above monopolistic paradigms of finance. Its debt deflation which is Steve Keen’s (apparently) unconscious abstract once removed macro-economic re-discovery that Douglas came to via the direct observation of the empirical data, their relationships to each other and doing the calculus on them….within the cost accounting perspective.
And so the only resolution of the problem is the awakening to and implementation of a new paradigm of direct and reciprocal monetary gifting.