Posted on a Thread on Ellen Brown’s Public Banking forum:
Scott Baker: Excellent article. I continue to believe Michael Hudson is the smartest and most accurate economist alive.
However, Hudson wrote this article where he prescribes debt forgiveness in 2012. Since then, he has told me that he is writing a book wherein he prescribes both Land Value Taxation and Sovereign Money (aka debt-free money) as a cure for our twin rentier-take-all and unsustainable debt problems. I don’t know how close that is to publication at this point, but I do know he is well aware of the work of Stephen Zarlenga, whose conferences he has attended and with whom he’s sparred on occasion, and the Lincoln Greenbacks, etc.
He is absolutely correct, however, on his theme in this article showing how finance-capitalism has turned the goal of capitalism upside-down, into one of rent extraction and de-industrialization, leaving behind bankrupt companies and millions of unemployed or under-employed former middle class workers. What we used to more accurately call “corporate raiding” is now called “private equity” as if it was something nobler than just “equity” in a growing company. Prof. William Lazonick’s recent work backs up Hudson’s claim that most profits are spent on stock buybacks and dividends (over 90%), leaving practically nothing for innovation and R&D. Apple is now the world’s largest buyback company, spending more than any other in buying its own stock. This pleases “activist” shareholders like Carl Ichan, and large C-suite shareholders like Tim Cook, but does nothing to build the company for the future. Ironically, this is reflected in the stock price, which trades at a below market average P/E multiple, because investors think the company has lost is innovation mojo.
Meanwhile, as Hudson and Ellen Brown both point out, in different aspects, pension funds are being looted, or even potentially turned into bank equity, in order to even further enrich the neo-feudal overloads, which are now the banks, as Hudson says.
The market is neither “free” nor “fair.” If it was either of these things, all the TBTF banks would have been allowed to fail, none would receive a bailout, and producers could keep what they produced. Instead, as Hudson and others have pointed out, we have a regressive tax system (if you include low-taxed capital gains, and you should since that’s where the wealthy make most of their money), an increasing burden of payroll taxes (in themselves regressive due to the income cap) with no guarantee that either SS or Medicare will be there when people retire, or even that their deferred income will even be kept for them and not absconded by the banks, who now essentially own the economy.
The cures – Sovereign Money and Public Banking – in conjunction with rentier-busting tax reform, are well-known to alternative economic thinkers like us, and we don’t even have to get bogged down in all the details at this point, because even a rough approximation of the cure would be 10X better than the current disease which now threatens not only the economy, but the ecology, of the world.
Me: I have always admired Michael Hudson and Henry George and have mentioned that several times here. But what happens after only their reforms are enacted…and profits and the value of individuals’ incomes still continue to erode?
Rent and all of the other negative economic effects of finance capitalism doesn’t penetrate to the core of the problem…which is that the system of commerce itself enforces inflation, because even in the completely unimpeded flow of exchange (libertarian economic theory) as well as despite any palliative measures to correct it (Keynesian, Georgist, Socialist etc. theories) “the rate of flow of total costs/prices exceeds the rate of flow of total individual incomes.” The actual solution is to address and directly deal with both the lack of individual income (dividend) and the tendency of commerce itself to be cost inflationary (retail discount). I’m sorry, but graciously I suggest to you that every economic theorist and every reformer…is a nascent Social Crediter.
I’m not an absolutist about Social Credit either. My motto is Transformation first! Rational and ethical regulation…right along with it! As I suggested in a recent thread certain reforms could and should also be implemented that include Public Banking and optional taxation and/or investment incentives. We could also do what I have also previously suggested: a “big dividend, gradual jubilee” type means of quickly resetting the economy so as to avoid the war we are hurtling toward by for the next 48 months giving everyone 18 and over who has debt…a monthly payment of $5000, $4000 of which must go to debt reduction until their debts are completely discharged, at which time (and anytime within that 48 month period if one’s debts are completely eliminated) one receives only the additional $1000 per month. And of course right along with it a compensated retail discount mechanism is also implemented just to insure the virtual mathematical equilibrium of total prices and total individual incomes….through each moment of Time.
There’s something for every economic theorist, every reformer and every political perspective in such transformation and reform. And it isolates any theoretical, political, corporate or financial laggards as merely bought, self interested and/or utterly unwise and foolishly risking war….just to continue the present enslavement by debt.
https://wisdomicsblog.com/
Robert Bows:
“… the rate of flow of total costs/prices exceeds the rate of flow of total individual incomes.”
I’ve seen this a few times. I would like to see the argument/proof for this, independent of an economy where the currency is privately owned and created, with principal and interest charged for its use.
Also, isn’t Land Value Taxation a capitulation to those who have acquired land through a corrupt system? Doesn’t economics need the equivalent of a Truth and Reconciliation Commission?
If economists can’t say what they mean in simple, clear terms, then either there is something to be gained from mystifying what they are doing, or they themselves do not really understand what they claim to understand. –Rosa Luxemburg
Me: Sure Robert. You just have to go to the cost accounting statistics of any and every enterprise regarding the individual incomes produced and the corresponding total costs simultaneously produced and understand that, that ratio….is continually maintained…because cost is not a static factor in economics/commerce….it is in fact the most deeply embedded dynamic, i.e. continuing factor therein. And it’s also the scientific explanation of the problem….because it is also falsifiable in that (momentarily) there can be an equality or slight over production of individual incomes….but only during times of the out ethics and insanity of a World War and/or some equally crazed and wasteful period of capital production…and then right after those delightful circumstances it’s right back to “the rate of flow of total costs/prices exceeding the rate of flow of total individual incomes” again…and the status quo reality of the individual serving the system instead of the system serving the individual.
Look at the actual statistics and the actual dynamics of Commerce/the economy itself. There is the proof.
Robert Bows:
Steve,
I asked if there was some kind of proof ‘independent of an economy where the currency is privately owned and created, with principal and interest charged for its use”; so, looking at the U.S. economy would not prove anything, because the currency itself is inflationary.
For example, one reason prices inflate is that the payment of interest on business loans is, in terms of accounting, included as an expense; so the price goes up without any increase in value.
Bob
Me: Bob,
As I have posted here before, and as Social Credit theory has proposed, there would need to be a separate monetary authority constitutionally created that would issue interest free credit directly to the individual and the monies to rebate back to participating merchants for their discounts to prices, thereby equating individual incomes and prices continuously in a free flowing equilibrium as opposed to the imagined but not accurate BELIEF that the economy would create such all by itself. Actually you could merely legally legislate that the central bank make those same direct payments to individuals and to retail merchants, but I like the constitutionally created and mandated program better because then some dipstick pol at the behest of the Banks and/or a group of corporations and wealthy individuals…could not overturn it.
One needs to understand the deepest reason why the currency and prices inflate. And Social Credit’s deep insight/correct and statistically verifiable metric IS that understanding.
Finally, Social Credit does not deny monetary inflation takes place, but correctly shows that it must occur…because the more deeply underlying and inherent price inflationary reality of commerce itself demands it…otherwise the economy would forthrightly go into a deflationary depression. And this is exactly what we see occurring continuously in the economy, that is the continuous injection of more and more money into the economy….instead of a lesser amount given directly to the individual.
Me: “For example, one reason prices inflate is that the payment of interest on business loans is, in terms of accounting, included as an expense; so the price goes up without any increase in value.”
That is a confirmation of Douglas’s A + B theorem actually, but only one of I believe 6 aspects that contribute to “the Gap”. As I have posted Rents, savings, profit itself and the time lags between when savings and/or profits are re-invested also contribute to the gap. And finally, probably the biggest contributor to the gap is the tremendous waste of time, effort and resources that appears necessary in a vain attempt to equate incomes and consumer prices. Such economic sabotage could be eliminated by the dividend and discount…without any worry regarding the loss of employment and with a tremendous reduction in resource usage as well.
Robert Bows: Thanks, Steve.
When you say “Such economic sabotage could be eliminated by the dividend and discount,” I am curious as to how Social Credit suggests that the gap be monitored. For example, if there were a consumer price index that was focused on the price of a basket of goods and services that were deemed integral to “life, liberty, and the pursuit of happiness” (say food, clothing, shelter, education, health care, and cultural tools [art]), and that the price of these goods and services (i.e., the ratio of the money supply to these goods and services that were in circulation) were monitored on a local level, then are you saying the dividend and discount could be used to maintain price stability?
Bob
Me: Bob,
The gap could be monitored by aggregating both consumption and price statistics for a given period of time. This is not beyond our cybernetic capabilities even now. The dividend would then be issued to virtually maintain an equilibrium between those two combined metrics, and then, as the economy/commerce itself will still tend to go out of equilibrium throughout the passage of time, the discount percentage based on the ratio of total cost of consumption over total cost of production for a prescribed time would be computed and prices lowered by that percentage as a result. With the dividend and discount in effect costs/prices would be free to actually fall as innovation and artificial intelligence reduced the rational need for human labor. I just posted to this effect on https://wisdomicsblog.com/ in response to a Steve Keen video correctly de-bunking DSGE’s assumption of falling marginal costs that once again shows how Keen is correct in what he says, but is still behind the curve on the philosophy and policies that will actually resolve the economy’s deepest problem. Hence the title of my blog post is: Steve Keen: Nascent Social Crediter
Social Credit/Wisdomics/Gracenomics/ Gracientialism 