For entrepreneurs, it allows
them to recoup current investment from future sales. This facilitates
the organization of the developing factors of production into their most
efficient combination, as judged ultimately by final consumers in free
markets. The availability of investment credit not constrained by the
prior existence of monetary hoards was the great financial innovation that
made possible the Industrial Revolution.
Disagree - "investment credit" is as old as the division of
labor.
The expectation,
then, for both consumers and entrepreneurs, is that their future income will
increase proportionately to their current spending, which will enable them to
amortize or repay their respective debts as they become due. Expressed
mathematically, the expectation, as a statistical matter for the economy as a
whole, is that income plotted as a curve against time is a tracking curve to
spending.
Disagree - the "business cycle" has deflated
such "expectations" countless times in history.
There is a way to
explain the "debt virus" without recourse to the stupid fallacy that interest
on bank loans is its root cause. In that explanation the "debt virus"
will manifest even if the interest on bank loans could somehow become
zero.
Why "stupid"?
If the period of
production is lengthening - which is what is happening with industrialization
- it can be demonstrated that the costs of production are increasing
disproportionately compared to the disbursement of
income.
Where is the proof for the proposition that
"The period of production is lengthening"?
Computerized "on-time" inventory management is
the rage these days - it shortens the period of
production.
The reason for
this is that with industrialization the account balances held by firms are
increasing quantitatively in ratio to the account balances held by consumers,
yet the account balances held by firms represents costs that are being charged
against production for consumption [*].
Accounting practices have no bearing on
the "period of production".
If the costs of
production are increasing disproportionately compared to consumer income, it
is impossible for the reflux from consumer income to proportionately amortize
debt all the way up the chain of production.
Economics 101 - all "costs of
production" = "income" of suppliers of factor inputs a.k.a.
"consumers".
The result is
debt that is increasing exponentially to production.
See previous comment.
It is a dilemma
in accounting and nothing more.
See previous comment.
As such it is
amenable to conscious adjustment.
Better go back to basics - Economics
101.
Gunnar