Re: Compounding debt

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

Replies [reply2] inserted:

> However we find that in practice the banker will try
> to save or invest at least part of that profit,
> resulting in a substantial time lag before the
> monetary resource can be returned to the community...
> -----------------------------
> [reply] But this is true for all recipients of all
> types of income.  There is always a lag between the
> time a dollar is received and its disbursement.  The
> flow is measured in terms of rates into and out of
> account balances--so many dollars per unit time.
> Account balances are the residuum of the flow.
> Please answer this question:  How do positive account
> balances held by bankers differ in any significant
> respect from positive account balances held by any
> economic transactor?


   The key word above is "substantial". With many types of
   investment the money is not liquid, ie it is locked away for
   a long time (months or years). In other words it's not M1,
   and mostly not even M2. By contrast, bank spending on
   salaries, dividends, overheads etc mostly goes into checking
   accounts and is cleared within a matter of days.
----------------------------------------
[reply2]  You avoid the question that I posed.
Please answer it.  What you have done is to convert
"debt virus" into a simple banker's underconsumption
hypothesis - that bankers do not spend all of their
income.  Positive account balances would seem to
infer that income recipients have not spent all of
their income.  In what way does the banker's
underconsumption differ in any significant respect
from underconsumption by any other transactor?  By
the way, though Douglas is usually categorized among
the "underconsumptionists" - A + B is not in fact a
theory of underconsumption.  As we progress through
our continuing discussion, I will demonstrate that
underconsumption theories are invariably fallacious.
That includes Gesellism and its more sophisticated
variant, Keynesianism.
--

I don't understand these creative accounting tricks -
    they sound very dodgy.
----------------------------------------
[reply2]  They are not accounting tricks.  I am
describing how double entry accounting has worked for
centuries.  Disbursements are not "expensed" against
current sales but are expensed against future sales.
That is to say, individual disbursements are expensed
after a time lag, which varies from zero to infinity.
For the economy as a whole, we may think of a
disbursements curve, being the composite of
individual disbursements, and its lagging expense
curve, being the composite of individual expenses.
In terms of cash flow, think of disbursements as
being the flux, and sales as being in reflux to the
flux, such that sales lag disbursements.  At the
point of retail expense is charged against sales,
prospectively yielding profit.  See the attached
diagram also archived at
http://www.geocities.com/socredus/compendium/flux-reflux.jpg
illustrating the theorem of accrual
accounting.  T1 is the disbursements curve; T2 are
sales in reflux; T3 is the expense curve, which is
nothing more than the disbursements curve delayed in
time through accounting convention.  At any point in
time, depicted at TX, T1 > T2 > T3.  Profit is T2 -
T3, yielding a positive rate of profit.




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