Re: more on A + B
- From: w_b_ryan@xxxxxxxxx
- Date: 11 Apr 2007 07:44:12 -0700
Again, Keith, it was this statement to which I was
objecting:
"...the social credit solution would have a government
office to calculate the precise amount of new claims
to goods and services that should be distributed to
keep the system churning without inflation."
-
There is no need to calculate the *precise* amount at
all. There is no need to calculate any amount
whatsoever so long as the dividend/discount is
introduced gradually from the inception of the
program. The inherent instability decreases as the
"gap" between "prices" and "purchasing power" is
closed.
Before, A + B and A will diverge from each other with
labor displacement, so either A + B or A or both must
diverge from real production. It is impossible with
the orthodox tools to make both change proportionately
with real production, so we have the trade-off we
observe empirically in the Phillips curve.
The monetary authorities have attempted to strike a
balance between moderate inflation and moderate
unemployment, and they have been reasonably successful
in doing so. It also means that the economy is kept
in a permanent condition of under-performance.
If the ratio of B is increasing to A, the ratio of A +
B is increasing to A.
What we want to is introduce an element C through the
dividend/discount such that the ratio A + B remains
constant to A + C through time. The ratio will not
become constant until C is raised sufficiently. You
keep increasing C until, if and when, the ratio
becomes constant.
Up to that point A + B is the dependent variable of C.
The statistical variable we want to look at is the
ratio of A + B, or entrepreneurial spending, to real
production.
If A + B begins to increase in respect of real
production, leading into inflation, you reduce the
rate of increase to C.
The limit will be at a significantly greater level of
economic activity than at present.
-
--- keith wilde <kwilde@xxxxxxxxxxxxxxxxxxx> wrote:
Thanks for this expository effort, Bill. I have spent
quite a lot of time with it, and have also read your
more recent reaction to "Mark".
And I think I have understood fairly well. But I am
still puzzled by just what it is that you disagree
with. My point was that there must be some kind of
government office to perform the functions of the
Credit Authority. I had no intent to be making a claim
to understanding the nature of the function. So when
you observe that "the statistical variable to watch
becomes the relationship of A + B to real production"
I take that as a more accurate statement of the
function. The function remains, however, and I presume
that it would be undertaken by a pre-existing
government statistical agency. Do you agree with that?
Keith
-----------------------------------------------------
"Do you mean the ratio of A+B to A+C, or that A+B is
itself a ratio rather than a sum?"
-------------------------------------------------
------------------------------------------------
A + B is a sum in which the ratio of B is increasing
to A because of labor displacement. If that is the
case, it is impossible for the reflux from A to
amortize A + B without the inclusion of C.
-
"Or is what we want a rate of change in A+B to be
equal to the rate of change in A+C?"
-------------------------------------------------
------------------------------------------------
Not necessarily equal but proportional at any point in
time. You must be clear by what is meant by "rate of
change." I refer you to the attached diagram, with
time depicted on the horizontal axis as flowing from
left to the right.
http://www.geocities.com/socredus/lead-lag.gif
Depicted is quasi-steady state expansion in the first
third of the diagram, steady state in the middle, and
quasi-steady state contraction in the last third. The
lines are drawn as "parallel" or "proportional" except
during the transient periods of change. The vertical
lines represent points in time.
The red and blue lines represent flows in terms of
rates. Their slopes represent increase or decrease to
their rates.
-
Think of C as the throttle pedal in your car. You
don't calculate beforehand how far you will push it
down. You push it down. You have your speedometer
and what you see happening out your windows to
determine how you will adjust the pedal as you go
along.
The Federal Reserve is already injecting central bank
credit into the system through its so-called open
market operations. That credit is in offset to
commercial bank debt. It raises the rate of profit
dollar for dollar as it is injected. It is helping to
close the "gap" between "prices" and "purchasing
power."
Step One of the Social Credit Program would have the
central bank to phase out of its open market
operations while at the same time introducing the
dividend/discount paid at least monthly if not weekly
or daily. The amount to be paid in the
dividend/discount would be roughly equivalent to what
is now being injected through open market operations
in the very beginning. That would be the bottom line.
C would be increased continuously thereafter to the
limit of productive capacity and real demand.
That would have the new credit percolate up from the
point of retail rather than trickling down from Wall
Street, so its effect would be more significant in
terms of economic democracy.
--- KEITH WILDE <keithwilde@xxxxxxxxxxxx> wrote:
OK Bill, you have clarified that it is the term
"precise amount" to which you object. I suspected
that was target of your comment. But it seems to me
that your explanation adds precision to the nature of
required calculations (and data gathering/estimation)
rather than to support the assertion that "there is no
need to calculate any amount whatsoever".
You have in fact affirmed my presumption that "we want
to look at...the ratio of A + B, or entrepreneurial
spending, to real production".
This seems clearly to imply some work for a central
data gathering and analysis agency. That was the
point of my comments to Joe. (I remain interested and
uncertain over just what that activity entails and
what its ramifications and implications might be.)
You add the further precision that "what we want to is
introduce an element C through the dividend/discount
such that the ratio A + B remains constant to A + C
through time".
Do you mean the ratio of A+B to A+C, or that A+B is
itself a ratio rather than a sum? Or is what we want
a rate of change in A+B to be equal to the rate of
change in A+C? "The ratio will not become constant
until C is raised sufficiently. You keep increasing C
until, if and when, the ratio becomes constant."
Keith
----------------------------------------
I believe I asked this question myself--or at least
intended to. Your answer that the measurement is in
physical units looks impossibly cumbersome--a real
challenge to the Credit Authority, if that is where it
is to be done. How do you add them up, especially for
goods intended for retail? And how do services get
included--doctors, nurses, lawyers, accountants,
garbage collectors? To itemize quantities of
individual goods and services on a regular basis seems
like an impossible task?
Keith
----------------------------------------
I think we do it now. We have a fairly good idea how
many bushel baskets of oranges reach the market each
year, Ford automobiles, etc. It's not actually
"itemized" or "measured," but done through sampling
techniques. The information is available in various
statistical abstracts. I imagine it's more difficult
to compile for services than hard goods, but it's
still done. Right?
--- Keith Wilde <keithwilde@xxxxxxxxxxxx> wrote:
[above]
.
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