John David: Ezra Pound lived in the town I grew up in, in Pennsylvania.

Me:  Yes, and Ezra Pound was an advocate of Social Credit so he came by his awareness of the monopoly control of money via Douglas. Pound of course got so frustrated with the intransigence and manipulations of the Banks that he ended up advocating fascism and got locked away and vilified for it. A lesson we can all learn from. The money system is intricate and complex and can send us down rabbit holes to no where and lead us economically, politically and philosophically to where one thing looks like its opposite…unless one integrates and considers the primacy of ethics, the enlightening empirical data found in the subset of double entry bookkeeping known as cost accounting and realizes that even though the hulking mass of the physical universe appears to be the primary reality it is actually the ideas/the natural metaphysical concepts/the generally held ideas/paradigms in men’s minds that are primary and where the actual power to change society exist.

John David:  Steve,

You might want to change “men’s” to “people’s” or such in your last line.

Me:  Yes, “people’s” would be better.

Pound actually lived in Italy I believe and advocated for fascism as a result. Of course being an advocate of SOCIAL Credit and the Italian equivalent of Nazi National SOCIALISM the powers that be in England and America could easily construe him as a socialist. Again, one needs to be dutifully aware of the agendas in society that confuse more than enlighten.

Peter,
Keen and every other economist who is not also a student of accounting in general and aware of the subset of cost accounting and its economic implications are missing the most underlying cause of inflation, namely the fact that as a flow businesses create more costs than they simultaneously create in individual incomes….with which to liquidate such costs. As every enterprise is bound by the cost accounting convention that ALL COSTS MUST GO INTO PRICE…the economy, even completely unregulated and left entirely to itself IS AND REMAINS INHERENTLY COST INFLATIONARY. Keen has only recently discovered the importance of accounting, but is still splashing around on the surface of debits and credits attempting to sort out stock/flow inconsistencies, and even with impassioned calls by myself to go to the 3 and 4 dimensional level (in other words the real time non-abstract level) of the subset of double entry bookkeeping known as cost accounting….doesn’t seem interested in doing so. So much for his thoroughgoing iconoclasm. Seems like orthodoxy hides even in the most unorthodox economist’s minds. And conservative/libertarian economists and pundits? They apparently are so conditioned to BELIEVE in general equilibrium, which to his credit Keen has thoroughgoingly debunked, that you couldn’t get them to actually look at the above realities even if you put a gun to their head let alone try to get them to do so with mere words.

Tony Bennett:  “As every enterprise is bound by the cost accounting convention that ALL COSTS MUST GO INTO PRICE…the economy, even completely unregulated and left entirely to itself IS AND REMAINS INHERENTLY COST INFLATIONARY.”

Say what?

Have you ever heard of write offs?

Costs get written off (the balance sheet) all the time by going concerns … or else bankruptcy.

Me:  @Tony Bennett:

“Have you ever heard of write offs?

Costs get written off (the balance sheet) all the time by going concerns … or else bankruptcy.”

These write offs are basically “one off”, individual/anecdotal and do not come close to approaching total excess macro-economic costs ever increasing throughout the entire productive process from resource extraction on through to retail sale.

But you are correct that unless businesses are lucky/cut throat enough to garner sufficient revenues to be profitable….despite the inherent scarcity of total individual incomes in ratio to total costs….they WILL go bankrupt. This basic and powerful economic reality and metric is the primary reason why a large percentage of business start ups go bankrupt within a few years.

peterblogdanovich:  Who said:
Economics is the science of confusing stocks with flows?
Keen’s main contribution is his approach to modeling. It is rigorous, and it is dynamic. As you note it is not currently as detailed as some might like. All models are toy economies to some extent. The impressive thing Keen shows is even trivial three agent models (banks, firms, and labor/consumers) rigorously dynamically modeled exhibit many behaviors we have seen. The correlation between unemployment and the acceleration in debt is .94 here and .92 in Japan over the trailing decades. That’s a pretty good agreement between model and data especially when Krugman insists it is zero. More elaborate models of firms, banks, and consumers are quite possible and doubtless will reveal more. I’m a big fan of his for these reasons. Go Steve!

Me:  @peterblogdanovich

Oh I give Keen his due. I have complimented his iconoclasm and even suggested that it was deserving of a Nobel prize, but I still have to speak truth to power regarding his missing of the dynamic nature and flow of excess costs in ratio to incomes continually and simultaneously produced.

dtj:  chdr said “regarding his missing of the dynamic nature and flow of excess costs in ratio to incomes continually and simultaneously produced”

A product or service won’t be produced unless it can be sold for a profit. Thus, selling price = “total costs to produce” plus “markup” to obtain profit. Keen does talk about profit coming from “markup”, but it is unclear to me how he accounts for this in his models. I think chdr is alluding to this dilemma?

When looking from the point of view of one firm, in order for that firm’s profit to be realized, value must be generated somewhere else in the economy in order to pay for it. Or newly generated debt could pay for it. The system has to have an inflationary/expansionary bias in order for things to balance out.

Me:  Yes, profits and savings are also a part of “the Gap” between costs/prices and individual incomes. Douglas said that 90 years ago. Now I hasten to add that this does not mean profits and savings themselves are evil or something like a reactionary socialist might claim, but the fact remains that the economy left entirely to its own normal operations…IS STILL SYSTEMICALLY/INHERENTLY COST INFLATIONARY. And apparently Keen misses the point that for continuous growth via continuous borrowing….DOES NOT RESOLVE THIS INHERENT CONDITION BECAUSE IT INCLUDES ADDITIONAL COSTS. Now interest is not the basic problem either which is the “scarlet woman” of monetary cranks, it is merely an additional cost. There are all manner of additional costs and diminutions from the circular flow that create “the Gap”, but the original and most basic economic cause is probably depreciation costs which are obviously additional to any financial costs, and as a modern economy becomes more and more capital intensive and less and less labor intensive…..the gap between costs/prices and individual incomes becomes wider and wider.

All of the leading reform movements and cutting edge theories have an aspect of the pinnacle wisdom concept of Grace as the idea behind their reforms. Wisdomics/Gracenomics was the first theory to recognize this, and while it was not the first to actually discover Grace as the defining philosophical concept it is the first and only theory to fully flesh out, discover new insights about and emphasize the linguistic, philosophical, ethical and spiritual alignments of the concept of Grace with the classical goals of economics.

Grace is beyond orthodoxy, beyond equilibrium, beyond numerical balance and beyond mere flow. It is the ultimate integration, it is in fact integrating as in continuous integration as in process and unity of opposites. It is ascension as in ethical transformation. It is greater efficiency as in prudent economy and resource conservation, and yet enables such efficiencies within profit making systems. Grace is non-entropy transforming and re-directing the utterly entropic nature of the economic system, which being completely embedded in the the temporal universe is subject to the laws of thermo-dynamics and hence randomness and increasing cost of maintenance. Grace is the embodiment of the superlative in every positive, constructive and ethical way. And having said that it is also the most practical and workable concept as well, as Wisdom is the integration of the best thinking/philosophy and best acting/policy…..or it wouldn’t be Wisdom.

Reversing the basic metric of income deflation and cost inflation.

Action/policy, if it is to be integral and have integrity, should always come from prior thinking/philosophy, and be logically (and if it is in regard to a human system) ethically aligned with it. This in fact enables such policy to actually be logical and ethical.  It also enables much more clarity as it has a solid mental foundation from which to proceed toward policy/action. 

The purpose of Life is not necessarily or only work. The purpose of Life is….a positive and constructive purpose whatever that may be to the individual.  Thus the overweening importance of employment as a purpose fawned over by politicians and economists, despite the fact that employment is rapidly becoming much harder to find due to innovation and artificial intelligence, is economically and philosophically flawed. “Man does not live by bread alone.”

And there is another reason why focusing only on employment is wrong. If the rate of flow of total costs/prices routinely and in the unfettered operation of the economy exceeds the rate of flow of total individual incomes…..then the system…no matter how much employment there is….cannot possibly be stable, and over time must and will collapse. Employment obviously has a long way to go yet, but unless you integrate a costless policy of monetary Gifting that goes first and directly to the individual instead of into the system itself…you’re only palliating the problem and putting undue stress on the system and the individual. 

We are not homo economicus. We are homo sapiens, i.e. wise and discerning man. Let us live up to our species designation and let us speak this truth and the following demand to our financial, political and economic elites:

“Let us be free in a truly free and free flowing system where monetary grace as in the free gift is policy and reflects the ultimate purpose of Life….building a graciously free society where the experience and practice of grace, which is Love in action, is more prevalent and more naturally and easily expressed.”

In other words Wisdom/thinking and Grace/acting is factoring all relevant data and circumstances and also sorting out the primary factors and making sure they are considered first, last and always.

I must add here that we still do not have a candidate, republican or democratic, who doesn’t require additional monetary/accounting and economic education and an open mind to same. Actual solutions require integrative combination….not agenda mongering and/or false and/or unworkable orthodoxies ground up into a gruel that satisfies no one and simply allows the financial powers that be to remain in control.

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Actually I like the title “Secret Agenda in Libya: Preserving a Corrupt Global Monetary Scheme” very much and it doesn’t directly mention Hilary at least in the title. Pointing at the naked domination of the emperor/Finance will raise consciousness and hopefully make pols less willing to get along by going along with its utterly unethical agendas.

An excellent description of the actual process and system Wally…which despite examination/confusion economists are apparently unconscious of. 🙂