Posted To RWER Blog 04/03/2018

Me:  Historically the dominant power in any current paradigm is the clue to both where the paradigmatic problem lies and to what the oppositional concept of the new one is.

Catholic church-monopolistic control and indirect absolution only via the sacraments
Protestant Reformation-breaks up the monopoly and integrates the concept of a direct relationship with God

Ptolemaic cosmology was terra centric and egocentrically co-opted by the church
Helio-centrism’s change of planetary position and primacy humbled the church and was one of the primary building blocks of science as the dominant paradigm of inquiry

Finance dominates the individual, every other business model and the entire economic system with its parasitic and monopolistic monetary paradigm of Debt/burden Only
Monetary Gifting/freedom-freeness and its aligned policies insight-fully and intelligently implemented at the point of retail sale breaks up the monopoly, rejuvenates profit making systems and likely reverses the disintegration of western civilization we currently see looming up right before our eyes

There are many other examples. Paradigmatic thinking isn’t that hard to do if you know a little history, the signatures of paradigm change…and have the guts to speak the truth.

MAM:  Thanks for your comment, Craig.
Indeed, In the contemporary world we face a systemic crisis where multiple dimensions converge, including an economic crisis, a financial crisis, a climate crisis, an energy crisis, a food crisis, and an ethical crisis. A paradogn shift is required.

The resistance against neoliberal globalisation has already pointed to the limits of such globalisation.

We need to move foward and certainly deepen the discussion about paradigm shifts.

Me:  Thank you Maria. Paradigm shifts are also tipping points, and these occurrences are generally accompanied by a new invention and/or insight. The new insight that economics needs is not to be found in some abstraction, but rather where virtually no economist is looking, that is, the day to day operations of commerce specifically at the point of retail sale. When one puts together the fact that modern technologically advanced economies are income constrained and the following stable datums the new paradigm and its very policy expression becomes apparent:

1) The point of retail sale is the terminal end of the entire legitimate economic/productive process that is, where production becomes consumption

2) The point of retail sale at the end of the economic process and also the point of sale of every business model’s retail product to its follow on consumer is the terminal summing point of all costs including profit for every item, and as cost accounting correctly enforces its convention that all costs must go into price, it is also the terminal summing point of prices for every item as well. Thus retail sale is the terminal expression point of any price inflation.

3) The money system, pricing system and accounting system are all digital in nature, that is equal amounts of money debited and credited equals 0.

4) Thus tying a monetary policy of a discount/rebate directly to the point of retail sale at the end and throughout the entire pattern of the economy will have paradigmatically transformational and beneficial effects for the individual, every enterprise and the system as a whole.

KZ:  Econoclast, regulators tell lots of ironical jokes about the situation you describe. But they all come down to the same ending – lots more mouths to feed. When a service or product is moved from provision as a public good to a “competitive” private market the number of people (including companies) lining up for benefits (a piece of the money pie) grows. In the case of public (now private) education those added to the list include: school administrators, school faculty, stockholders, advertisers, consultants, legislators, politicians, the media, and many more. Consequently, the price of the now “competitive” education for the lost student increases. Often many fold.

E:  I still want that study that would show details about what has happened to this still-public university. Perhaps it could show us how many of those joking regulators are captured and by whom.
I live in a state whose highest-paid public employee enjoys a million dollars a year from the public employee’s retirement system, an unfunded liability that is a major factor in the current budgetary crisis afflicting most counties in the state, a couple heading for bankruptcy. An example of the chickens coming home to roost from bad management of the public trust.
How many more mouths to feed could there be at a public university whose student body size was capped back then and still remains the same? Not enough to account for a tuition increase of 1000x!

Me: Ken and Econoclast,

You do realize that when you’ve replaced the monopoly paradigm of Debt Only with the primacy of the new paradigm of Monetary Gifting you’ve also ended the paradox of thrift which means that systemically the economic virtue of thrift is no longer inhibited. Pair this with the fact that with a sufficiently large dividend policy transfer taxation immediately becomes redundant and is able to be eliminated. Then take the insight that MMTers largely punt on, that is that by merely maintaining legal tender laws re-distributive taxation to fund government is basically unnecessary and you can eliminate income tax costs for both enterprise and the individual as well. Finally, as private finance is post retail sale and thus exposed as parasitical and a huge source of additional systemic costs, a public national bank/national monetary authority would be able to eliminate virtually all of those costs too.

Further policy and regulation encouraging competition and innovation would be a part of such a system, and even though the disruptive factor of AI will inevitably militate toward a falling employment participation rate there are a large variety of regulatory and assistive ways to turn that apparent negative into a positive if we simply align such efforts with all of the aspects of the concept that is behind the new paradigm of Monetary Gifting.

C:  Those policies are spectacularly inflationary, trillions of dollars of new spending, probably more than all current government spending put together. So they cannot work, they would just make things a lot worse. Really isn’t much more to say about it than that.

Me:  Uh, you forgot that retail sale is the terminal expression point of all monetary/price inflation, and with a 50% discount at that point as well as a reflective discount/rebate policy at the point of sale between business models along the entire economic process toward its ending point at retail sale….how does that translate into inflation????

Paradigm changes are made of such problem resolutions.

C:  It is not too clear what you mean by discount/rebate policy. If you spend $10 on food say, the government gives you $5?. The retailer gives you back $5? But in any case, sellers can change prices so that 50% of the new price is still twice or ten or 100 times the old one. I repeat, the first policy is spectacularly inflationary and the second seems likely to be if it were described more precisely.

Me:  The retail merchant gives the consumer a 50% discount on every product or service they sell. The merchant’s accounting department presents the proof of sale and discount and a monetary authority specifically mandated to distribute the total discounts back to the merchant does so, so they can be whole on their overheads and margins of profit. Simple, elegant and effective.

A reflective discount/rebate policy of sufficient percentage (say 10%) to insure business participation and that exceeded the spread of prices between competitors could also be implemented between business models on the path toward retail sale.

Commodity markets? They could largely operate as before, although we’ll need to stop the complete idiocy of thinking we can have a business model with a virtual monopoly on credit and credit’s forms within a primary ethic of profit. That is just insanity. A publicly administered banking system guided by the new ethical concept behind the new monetary and economic paradigm might grant rationally limited leverage for speculation. Also, as a publicly administered bank has no need to profit any notes created by it could be 0% and in fact finance could also then be legitimately folded into the end of the economic process and thus be able to further benefit both enterprise and the individual via the discount/rebate policy. Private finance/financial services would be reduced to advising and intermediation of monies already created and saved.

And by the way hyper-inflations never occur without certain catastrophic circumstances preceding them like heavy indebtedness, war and/or a large loss of productive capacity, and complicit central bank issuance of credit to leverage and short the currency afterwards.

You “normal” garden variety inflation of 3-4% per annum under normally competitive non-catastrophic circumstances would be inconsequential with the 50% discount/rebate and dividend policies in effect.

C:  Thanks for the clarification. In other words, for each sale, merchants get from the government a sum equal to what the consumer actually paid. Or every time you buy something, the government goes halfsies with you, but lets you have the whole thing you bought. A sales based universal dividend to retailers or to consumers. This is very clearly spectacularly inflationary, probably even more than the universal dividend to every person, which would set off massive inflation just by itself. As I said there is not much else to say. So I won’t.

Me:  Not looking at/not comprehending the fact that retail sale being the terminal end of the economic process where production becomes consumption and is at the same time the terminal expression point for any kind of inflation….will not make your assertion of inflation correct. Carry on.

DT:  This discussion seems to have moved by 4 April to “Privatisation of Public Education”, where Craig goes some way to spelling out what he is talking about, but which Calgagus (at 7.24 pm) says would by “spectacularly inflationary”. My concern is that if Craig were right we would be spending more rather than less, at a time when it is becoming obvious the world’s ecology can’t take any more; and in any case I can’t see the point of is giving with one hand only to take back with the other: allowing sellers to overcharge and then funding buyers with a 50% value added tax.

In a nutshell, my own propositions are that economics can never work so long as it isn’t honest (it now claiming paradoxically that credit is not given but owed); and that people will buy no more than is necessary only if they are constantly reminded (e.g. by their credit card account) that they need to earn their keep by recycling what they consume.

Me:  Sellers do not overcharge as the 10% “pass on” discount/rebate from one business model to the next in the progression toward the end of the economic/productive process at retail sale prevents garden variety inflation, and then the 50% retail sale discount/rebate integrates price deflation “almost miraculously” into profit making systems. Such miraculous-ness by the way is another of the signatures of paradigm change.

As for the ecology its true we need to be sane in our economic policies regarding it, but I don’t think throughput has reached anywhere near its peak, and factors that are truly critical and need to be reduced via innovation and AI like green house gasses etc. would be completely financially accomplished in a new paradigm that ended the saturation and domination of the economy with debt.

Debt Only is the current problematic paradigm. First rate intellects like Steve Keen stand looking at that fact when they point out that whenever the rate of increase in private debt falls it signals the beginning of a recession…unless of course we borrow even more which just leaves us between a rock and a hard place, but he gives no remedy for it except one-off and fragmentary policy.

Having recognized the significances of the point of retail sale and the fact that the money, pricing and accounting system’s nature are all digital I’m attempting to alert economists to the policies that being direct and reciprocal monetary gifting are the very expression of the new paradigm and that will enable us all to thrive and the economy to attain freeflowingness-free fall. Then obtaining Maslow’s bodily and mental security we can move on up to more rational thinking regarding the ecology.

R:  When things are not working, go back to first principles not another layer of complexity.

Me:  “When things are not working, go back to first principles not another layer of complexity.”

This is precisely the insight necessary, and turning from terminal abstraction to looking directly at basics like the point of retail sale, deciphering its significances and also recognizing the fact that the money, pricing and accounting systems are all digital in nature…will make the orthodox scales fall from our eyes.

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