Re: Basic Income and Taxation

["William B.Ryan" <william_b_ryan@xxxxxxx>]

They are right in one sense and egregiously wrong in the other.  It is true
that interest is not a "negative feed-back" mechanism that saps
purchasing power.  Bankers spend their income just like all other
businessmen.  Bankers are not suppliers of tangible goods and services
subject to the law of supply and demand, however, like the price of
strawberries down at the corner fruit stand.  In this respect banking is
analogous to the services provided at the county court house.  Any written
contract can be filed or recorded there.  To be enforceable certain
contracts are required to be filed there.  The upper limit to the fees the
court house charges for this service is not determined by supply and
demand in a free market.  The fees charged are entirely arbitrary but
subject to public oversight.  Banking and by extension all financial
services is a similar type of monopoly whose prices should be controlled
in the interest of the general welfare.  Bankers should be permitted to
earn a reasonable profit over their actual "out of pocket" expenses.
Financial services should be treated as a public utility.

Flaherty and Hummel are wrong in assuming that since they have
demonstrated the fallaciousness of the "interest is the root of all evil"
hypothesis, they have thereby demonstrated that there is no inherent
tendency for debt to grow exponentially compared to consumable production.
They are closing their eyes to empirically observable fact in the manner
of John-Baptiste Say
http://www.geocities.com/CapitolHill/Senate/7018/say.html

The definitive analytical refutation of Say's law is Douglas' A + B
theorem.

Say's law is dependent upon the special condition of steady-state growth.
Expressed in terms of Douglas' theorem, the ratio of A + B remains
constant to A.  Once the shifting parameters of the real world are
admitted into the discussion, Say's law becomes invalid immediately.

"If growth is labor displacing, the ratio of B payments is increasing to A
payments. This could be accommodated by credit expansion into the B
circuit; or, it could be accommodated by reducing A payments, and
diverting these funds into the B circuit. In neither case could increases
in proportional B payments derive from consumer or manufacturing sector
saving. But the second case would require the manufacturing sector to sell
to the consuming sector at a continuous loss on a cash flow basis. It is
credit expansion in a growing economy that enables the manufacturing
sector to sell to the consuming sector at cost, plus profit. For an
economy in assumed even rotation, this should correspond to the real
increase in consumable goods and services. The dilemma is that while
credit expansion into the B circuit is occurring, the manufacturing
sector's market is contracting due to labor displacement, resulting in a
falling rate of profit."

That is to say, labor displacement (from new technology or cheap imports)
causes the costs of production (A + B) to diverge exponentially from the
purchasing power (A) placed into the hands of final consumers.
Resultantly, the sovereignty of consumers to determine the direction of
future production (what is to be produced and what is not to be produced)
through their spending, saving and investing decisions in free markets is
usurped by the financier.  The entrepreneur is subservient to him, not the
consumer. The doctrine of laissez-faire becomes a mirage.

Bill Ryan william_b_ryan@xxxxxxx
Internet: http://www.geocities.com/socialcredit
-----------

Mike Coburn <michael.l.coburn@xxxxxxx> wrote:
> Edward Flaherty wrote:
>
> > william_b_ryan@xxxxxxxxxxx wrote:
> >
> > > The A + B theorem concludes that in a pure system of endogenous
> > > credit, debt must compound exponentially compared to consumable
> > > production. That is to say, the ratio of debt to GDP will increase
> > > without limit in a system where the totality of the money supply

comes
> > > into existence through loans.
> >
> > This is the Debt Virus fallacy which William Hummell and I debunked
> > a long time ago. See http://www.cofc.edu/~flaherty/virus.pdf or
> > http://www.cofc.edu/~flaherty/antidote.html So-called "debt-free"
> > money is automatically injected into the economy through the
> > banking system. The money absorbed by the banks in the form
> > of interest is returned to the economy as banks pay their operating
> > costs, purchase assets, and pay dividends to shareholders.
> >
> > --
> > Edward Flaherty
> > School of Business & Economics
> > College of Charleston
> > flahertye@xxxxxxxx
> > Office phone: (843) 953-7166
> > Fax: (843) 953-5697
> > Web site: http://www.cofc.edu/~flaherty/index.html
>
And you and Hummel are still just as incorrect today as you were then.
Interest on fiat currency serves no purpose other than to provide a
mechanism whereby the manipulators of the currency may subsist upon the
creative efforts of the real producers in the economy. To the limited
extent that finance is a necessary bookkeeping task then such fees should
be tolerated. And tolerated no further.


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