Integrate monetary Grace as in Gifting into the economy with an ongoing universal Dividend distributed directly to the individual, and a discount to prices at the terminal end of the productive process, that is at retail sale, and you will equilibrate the economy’s most basic disequilibrium.

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Create a Tri-Level Banking and Financial system with:

A. a sovereign central bank whose primary and controlling concept again is Grace as in benevolent, gracious and yet undoubtedly in control of the original creation of money and the ethical distribution of it to individuals as per above, to state and local governments and to commercial entities and individuals via loans by a

B. Public Banking structure which is also guided by the concept of Grace as in prudent and virtuous purposes, has rigorous underwriting standards and whose profits after payment to employees is returned to the government general fund or distributed back to individuals

C.  Private Banking that can aggregate and intermediate only funds that have already been earned/saved and yet cannot leverage such funds up as this would be the sole responsibility of the sovereign central bank.

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Align any regulatory policies with Grace as in integrity and wholeness of the entire system as well as Grace as in consideration for both the individual and the ethical business entities who show their good will and gracious appreciation for a system that actually frees the individual and creates an economy that truly is able to flow freely.

Structurally there would need be little other change as Grace as in transformation…truly is a transformational concept.

Whoa freddy, we’re all narcissists to one degree or another unless or until we do the required inner work to resolve and unify it. Anyone seeking political power you can be assured has plenty of it. YOU are the one showing your conservative/libertarian trollishness.

I’m the only one here who has advocated integrating Wisdom into economic and monetary theory for the last 8-10 years which is the only way to resolve its problems and our personal problems as well.

IMO there is no way to effectively fix the system without a simultaneous implementation of both the dividend and discount. Without a costless gift of money going directlt to the individual the scarcity of such will not resolve, and without a retail price discount the naturally upward tendency in profit making systems will result in inflation. Guys like Steve Keen and movements like MMT come up with correct insights about the economy, but their abstractions lose track of concrete temporal possibilities/inevitabilities. Wisdom is the complete integration of thought and action, philosophy and policy and as Social Credit is based on the pinnacle concept of Wisdom, namely grace as in free gifting its policies look at and handle both the inner and outer truths, workabilities and ethical necessities to resolve the actual problem.

Stuart,

The political problems you refer to are completely real, and Bernie is correct that it will take a new coalition of constituencies and/or an integration of them in order to accomplish new policy. However, the even deeper problem we face is finding an economic and monetary solution that actually works….and no politician has a clue as to what such solution is….because they are all dualistically stuck fighting over whether it is capitalism or socialism when a third unified integration of them is what is required, namely a Social Credit/Wisdomics/Gracenomics whose new Distributive paradigm of individual and systemic monetary grace as in gifting….goes to the heart of the problem and resolves it.

I admire Bernie’s “fire in the belly” and would prefer him over Hilary, but socialism is not the economic or monetary solution any more than neo-classical socialism lite (Clintonism) or Finance Capitalism is. None of these current theories is up to a solution because they miss BOTH the underlying scarcity of individual incomes in ratio to costs/prices AND policies that DIRECTLY resolve them.

Let’s go for a solution, not just another “can kicking” palliative/half solution.

Reserves are simply the liquidity that backs loans made within the system. Hence they must be created and tightly regulated by a truly sovereign government and lent only by a Public Banking structure that is not allowed to be corrupted by the desire to be profitable. Private Banking must be even more tightly restricted and regulated by sanctioning it to only aggregate priorly accumulated profits and savings without the ability to leverage such funds. Thus Banks/brokerages would not be able to leverage individual or commercial accounts, merely create bonds from such funds. The public Banking system, using money created by the sovereign money creating agency, would be able to leverage funds to invest/speculate with, but only for reputable, productive and non-destabilizing purposes.

Without such a tri-level banking/financial system the system is destabilized by greed, wild speculation and lack of ethical and adult responsible control.

The danger of excess reserves is wealthy individual and corporate access to them for illicit or wildly speculative purposes because of their creditability. Another very dangerous possibility is their availability and use for war funding.  For instance, if the current monopoly on credit perceives their dominance being eroded or ended they may very likely have little compunction about starting a war that destroyed everyone’s productive capacity….and then of course they would be happy to lend us all the money to rebuild everything. This colossal waste and equally colossally unethical possibility must be avoided at all costs. 

Of course quite aside from this re-working of the system, monetary grace/monetary gifting must also be integrated into the system in order to correct the systemic imbalance between a simultaneous excess of total costs and hence prices in ratio to total individual incomes created and actually spent. In addition, this imbalance is increasingly being added to by innovation and artificial intelligence as they reduce aggregate individual incomes. 

This problem can only be resolved by an ongoing direct and supplementary gift of income granted by the sovereign monetary authority, a universal Dividend to the individual and by a gifting Discount by retail merchants to consumers which in turn is reciprocally gifted back to such merchants so that they can be whole on their overheads and margins.

Of course every lowered interest rate freed up more individual income….just not (and never) enough to actually effect an equilibrium of total costs/prices and total individual incomes actually available to spend and so liquidate those costs/prices. And there goes Austrian and Keynesian economics into the dust bin of history…and the rise of Wisdomics/Gracenomics.

wisdomicsblog.com

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Beer Drinker,

You are absolutely right. Artisan products will become the new “shadow economy”, but that will simply be enough to reproduce a feudal/barter/mostly austere economy for the overwhelming majority of the populace. We will still have to integrate monetary grace as in monetary Gifting into the regular economy in order to avoid the absurdity of feudal austerity amongst technologically abundant productive capacity to produce.

Every economist and pundit is a nascent advocate of Wisdomics/Gracenomics

wisdomicsblog.com

One thing that economists and accountants need to understand is that Depreciation allowances for businesses do not enable them to avoid the costs of depreciation. They are not grace as in gifts/gifting, but merely a “stay of execution” of costs that must still be paid….if the business is to be profitable and survive. All such allowances for businesses do is make the system temporarily onerous instead of macro-economically utterly onerous.

Luca Rivera:  Luca says: what irresponsible are you talking about? The Working class dope who borrowed money so he could own a home or the Finance, Insurance and Auto Billionairs who leveraged up to to make more billions? Oh, I forgot, only the working slob is irresponsible, the Wall Street group are shrewed. They know the treasury vault is always open to them. Luca says: If you can give AIG billions you can give a working slob a house.

Tony Bennett:   The guilty are everywhere from Wall Street to “home” buyer.

You are fantasizing if think all “working class dope” bought a home as shelter … and should be let off the hook (apologies to those who tried to do the right thing). In the heyday (circa 2005) Home Equity Withdrawl (refinancing with cash out) reached $500 billion / year. The “working class dope” was buying new vehicles / vacation / concert tickets / etc with proceeds that he had no chance of paying back unless housing continued to appreciate to the moon. The reason they got foreclosed is that they either bought a house they had no prayer of making payment when mortgage reset (if they could not understand the mortgage documents … no business buying) … or they HEWed out so much to make future payments unrealistic. Icing on the cake was being allowed to stay in their homes months / years after making last payment.

Me:  Of course there is plenty of blame to go around, but when you factor in the fact that the Banks are the one’s who are in “control” of the system and so are the enablers of its negative effects both individually and systemically…plus the fact that the Banks have already been bailed out….it’s obvious who needs to be bailed out now. That is if you want to return to a semblance of normalcy instead of wallowing in the debt over hang for another 30 years and/or having a war that destroys EVERYONE’S productive capacity. And then we can borrow from the Banks to rebuild it all. We so need to stop being the slaves of the Banking system.

Jim:  +ProfSteveKeen Thank you for sharing this lecture. I really appreciate your goal of ensuring proper accounting in economic models, and my favorite feature in Minsky is the Godley tables. Unfortunately, I believe you have introduced an accounting inconsistency in this lecture’s model in your calculations of GDP which also causes inconsistencies in the gross profits (\pi_G) and net profits (\pi_N). I see several accounting contradictions in the model that result from these calculations. First, since we are not dealing with foreign exchange nor government consumption, GDP should equal the total consumption within the model. There are just two sources of consumption in the model, Cons_W (239.209) and Cons_B (5), which add up to just 244.209 annually, yet the calculated GDP value in the model is 341.727. The model doesn’t provide a source for this additional consumption. (In modeling quarterly turnovers, the quarterly revenue isn’t actually the full balance of Firms, as your GDP calculation assumes.) Second, gross profit should equal the total revenue minus the cost of goods sold. In the model, as defined in the Godley table, there are only two sources of revenue for the Firms, Cons_W and Cons_B, so the total annual revenue is just 244.209 (as calculated above), and if you use the Wages as your cost of goods sold, 239.209 annually, that means gross profit is merely 5, not 102.518 (as calculated from the overstated GDP amount in the current model). Third, Net Profit = total annual revenue – total annual expenses. In the model, therefore, Net Profit should equal (Cons_W+Cons_B) – (Wages+Interest), which is 244.209 – 244.209 or 0 — not 97.518. Likewise, since Net Profit = Gross Profit – Interest, if we start with the correctly calculated annual Gross Profit of 5 and subtract the annual interest payment of 5, this also shows Net Profit is 0. Even the Bank profits are 0 in this model, since their total annual revenue is just 5 and their total annual expenses (Cons_B) is also 5. (Interestingly, it is only because the Banks consume their total annual income that the Firms have the additional 5 units of revenue to be able to pay the interest without an annual loss.) The root cause of these inconsistencies in your model, I believe, is that it assumes the quarterly revenue equals the Firms total bank account (85.4317) and that wages are just 70% of these revenues. In fact, the quarterly revenue is just 61.05225 (i.e. 244.204/4) and ~98% is spent on wages. The current annual net profit amount of 97.518 is a calculation fiction that is not supported by the accounting in the Godley table. There is no source of spending to provide this additional 97.518 income, nor has your model defined how this profit is transferred out of the Firms accounts (e.g. dividends, owner draws, etc.) to explain why their net worth (Assets-Liabilities) doesn’t increase despite these profits. I believe I know how this problem can be fixed to properly account for and explain positive net profits in such a model (even without adding government spending or foreign exchange), but I wanted to bring these accounting inconsistencies to your attention to learn your thoughts about them. Perhaps you address these flaws in later lectures, or perhaps they are resolved in your more advanced models.

Me:  +Jim Nelson Thank you for this post. It makes more concrete the costing/pricing system that is an integral part of commerce/the economy and that economists are generally unaware of. Of course some would say these are merely static numbers, but considering that these realities are ongoing flows of money, costs and prices they are dynamic factors. If you also factor in the costs of depreciation which is an additional cost for virtually all businesses you begin to realize that the deepest systemic problem of the economy is that the rate of flow of total costs and hence total prices is greater than the rate of flow of individual incomes simultaneously produced and actually available to spend….which of course is the Social Credit insight.