Reply To A Poster On RWER Blog 06/02/2018

L:  I don’t understand how this process prevents price inflation. Every person in the process understands what the monetary authority’s role is. The seller (Person 1) sets his selling price freely. The buyer (Person 2) is offered and buys the product at 50% of the seller’s selling price. Then Person 3, being somehow assured that the buyer actually paid 50% of the seller’s selling price, rebates to the seller the 50% discount involved in the sale.

Apparently the buyer understands that the seller is going to be gifted the amount of the discount by Person 3, (the monetary sovereign), and the seller also knows this. So the selling price (before the discount is deducted) is really just twice what the buyer knows he is going to pay, and the seller knows that the sovereign is going to pay him another 100% of what the buyer pays. The 50% the sovereign pays the seller is created ex nihilo (out of nothing). Everybody knows this what happens.

Where in this process is the condition that the selling price cannot be freely and arbitrarily increased to the next buyer? What am I missing?

Me:  You’re missing, that part of the ability to opt into the policies is that you do not arbitrarily increase your prices except for a legitimate additional cost. Nobody will be fooled if prices are magically increased by 30-40%….right before the policies are implemented or incrementally month by month by a lesser percentage. I mean to paraphrase what one of my favorite cartoon characters used to say, “Consumers might be dumb, but they’re not Stuuuupid” …and neither will the monetary authority be so, and any enterprise who tried to de-stabilize such a beneficial system for all in such a manner would immediately lose their discount privileges…..and rather promptly go out of business.

You’re also not looking at the updated versions of the policies which includes a second 20% discount/rebate policy implemented at the point of sale of every business model to their next consuming business model on the route toward final retail sale where the 50% discount/rebate occurs. Of course if you accept the 20% discount and then don’t pass it on (that’s what the 20% discount is called, a 20% pass on discount) to the next business model….then you’re out of the the privilege to get rebated and you have to get all of your best competitive price….while your more ethical and intelligent competitor only needs to get 80% because of the rebate.

Only a fool without ethics and a desire to only profit more instead of embracing the beatific chains of ethics would reject a system that freed all, enabled him/her to better profit and actually make the system flow freely….and once the system’s efficacy was apparent to all, those who did embrace a more decent ethic would have a very strong bully pulpit to “nudge” even the most die hard and deluded “free” market/libertarian type advocate toward honest participation in a system of rational, ethical and workable control.

The universal dividend and the two discount/rebate policies will finally make fiat money systems work for all agents and resolve the major problems of financialization, chronic inflation, disequilibrium, debt deflation and austerity. The fears and “realities of Life” seemingly inherent in the old paradigm will get swept away by the new paradigm and its zeitgeist. That’s the history of human progress and paradigm changes.

L:  The governmental cost of administering and enforcing compliance for this business requirement would be huge, but I assume it would create no government debt. Right?

Me:  When you have a system that not only eliminates the possibility of inflation with the discount/rebate policies, but implements what everyone considers impossible…that is, integrating price deflation painlessly and beneficially into profit making systems….because its discount/rebate policies take effect at the very expression point for any and all price inflation…then as an advocate of MMT and fiat money systems you should be overjoyed because with these policies you’ve discovered not only an automatic monetary stabilizer but a paradigm changing monetary and economic inverting/transforming discovery. Inversion/transformation of a problematic duality/ratio is probably the primary signature of paradigm changes. Hence you no longer have to worry about inflation or have the “need” to try to curb it via taxation…and so you can directly fund any and all government.

In other words it enables a truly directly distributive monetary system…..that serves man instead of requiring him to slavishly serve the system.

Me:  Along with these normal strictures regarding policy opt in and participation business owners might want to ponder what the beneficial effects the doubling of everyone’s potential purchasing power and the lowering of price at the same time would mean to their increased profitability. Stable periods of copious amounts of available individual income being the ideal state of the economy…and then when you toss in price deflation with that you’d have an even better situation than the US found itself in after WW II when the anomaly of the middle class in capitalism occurred and lasted for about 25 years.

L:  Is there someone here who can describe how the system works–how at each stage of production/consumption the two parties (seller and buyer) are motivated to perform their necessary exchanges of goods and money so that there can be no inflation and the gifts and discounts are assured???
Craig doesn’t want to talk about anything but the assertion that it will solve all the problems with the present paradigm and that I ought to be happy about that.
I want to walk though each transaction from mfg to retail sale and see what the motivators for the participants are at each step. I’ve asked for that but the answer hasn’t been given.

Me:  You’re adding complexity to the policies that is unnecessary. They are implemented exactly as described, and the reason why they will be opted into by virtually every enterprise is that it’s “an offer no enterprise can refuse” because:

1) why wouldn’t they want to be able to sell their products for 20% less….and still get their best competitive price with the rebating of their discount back to them???
2) if they mysteriously didn’t want to opt in and even one of their competitors did…how long do you think it would take for their competition to take a large chunk of their market share???
3) why would any retail business not want 2-2.5 times as much free and available individual income out there to purchase their products/services?
4) with the $1000/mo. dividend now able to purchase $2000-2500 of goods/services/mo. with the discount/rebate policies you’d have the immediate end to poverty because every two adult household would be making between $48 to $60k even if they didn’t do a lick, and much more of course if they were employed, even part time. So what would be the reason for both individuals and enterprise to pay transfer taxes for welfare, unemployment insurance etc.??? No reason at all because they are now totally redundant. Nice little savings
there for every agent.
5) Consider that MMTers and other heterodox economists, intelligent as they are, still can’t seem to think their way out of the wet paper bag of the current monetary paradigm of Debt Only, and hence can’t see that monetary gifting integrated into fiat monetary systems will result in the beneficially abundant and bounding effects of these policies….and also make it possible for the money system to be completely directly distributive (re-distributive taxation is waaay old paradigm) and hence income taxes for both the individual and enterprise would only need to be say 2-3% (just enough to be “pleasantly” reminded that the government is sovereign….and benevolent if you can force yourself to abide by the rules….while also benefiting from them as we see from these examples). Do these temporal universe policy effects sound like nice little incentives for businesses to opt into???

L:  Craig, here you go again. Nice sales pitch… without addressing the needed complexity I asked you to discuss. Maybe someone else here will have answers.

Me:  I think honest people here can see that there is reality in what I have said and explained in the above posts. If you’re looking for an explanation of the specific business model to business model implementation of the policies that could be rather easily enumerated as well. For instance the miner reduces his ore by 20% to the transporting industry if the miner or producer don’t do that themselves and gets that amount rebated back to them, the transport industry reduces their charges to the producer and receives their rebate, the producer reduces it charges to the transporter/wholesaler and gets its rebate, the transporter/wholesaler reduces its charges to the retailer and receives their rebate and the retailer reduces their prices by 50% to the consumer…rebate. Capital goods producers “pass on” the 20% discount the same as any other model to the producing business model, rebate. All service business models would reduce their charges by 20% if their services were to a business and 50% to any individual, rebate.

All of this takes place within the integrated underlying infrastructure of double entry bookkeeping which accounts for all such discounts and rebates by any and all business types and models including boutique or niche types. Any returned or damaged merchandise is accounted for in the returns and allowances and/or credit for damaged goods accounts. Complexity is delineated by the tool of accounting which is probably one of the top three or four human inventions.

It doesn’t accomplish or prove anything to sit back and level a general charge. Ask a specific question…and a learned accountant would undoubtedly be able to give you a precise answer.

L:  More scientific? …refusal to confront/accept specific attempts to explain??? You have made no attempt to explain. And certainly nothing you have said is in any way scientific.

Me:  Double entry bookkeeping is not scientific?

Looking directly at the moment to moment operations of the economy and

1) deciphering the fact that the pricing, money and accounting systems are all digital in the sense that equal amounts of debits and credits sum to zero,

2) that the point of retail sale is the macro-economic summing and terminating point for all costs including profit and

3) simultaneously the terminal expression point for any and all price inflation for any item or service and then

4) crafting digital policies around these insights that resolve chronic inflation, individual, commercial and macro-economic income scarcity and actually make price deflation a beneficial fact in profit making economies.

I’m in agreement with 99% of what heterodox economists say are the problems, I’m simply saying that they are long on theory and woefully short on effective policies. Paradigms old or new are tricky to perceive and think outside of, but when one does actually look at and see them and also recognizes the above digital and economic significances….everything changes.

*************************************************

L:  This is an interesting article. The critical concepts of MMT are all included. I would add that although you must pay your taxes with the fiat currency, the sovereign DOES NOT spend it. It extinguishes it after crediting you with the payment. ALL government spending is done with newly created money. After all, since it has an unlimited source of money freely available by creation, it has absolutely zero need for taxes as a source. In actuality there is no need for budgeting either. That is only a necessary trade-off for entities in the system who are strictly USERS of the currency. To me, these features of a fiat money system are critically important.

Me: MMT has money creation correct and other insights about fiat money systems, but concerns itself primarily with government debt which is a rather small subset of total debt/private debt which strangles the economic system nationally and internationally. IMO their contention that inflation will not follow increased government stimulus is almost as hollow an orthodoxy as the conservative/libertarian claim of general equilibrium. When an economy is controlled neither on the lower bound of cost nor the upper bound of price that is the definition of chaos not equilibrium or even disequilibrium and combined with an inherent scarcity of free and available individual income the temptation to raise prices by business owners to garner more profit when more money comes into the system is inevitable. Such chaos cries out for rational, ethical and flowing order.

That order could be established by theorists looking where they currently aren’t, namely the moment to moment operations of commerce where incredibly significant economic and policy insights are to be found in the nature of double entry bookkeeping, the point of sale from one business model to the next and at final retail sale.

 

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