tag:blogger.com,1999:blog-481838326205496616.post7730563263808662013..comments2023-10-22T08:57:00.454-04:00Comments on Twelfth Bough: Ron Paul and Economic Theories (and other backwards thinking)A. Peasanthttp://www.blogger.com/profile/01929646095992796530noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-481838326205496616.post-22964385519947703722012-02-02T11:42:34.758-05:002012-02-02T11:42:34.758-05:00Another country without debt and a real national b...Another country without debt and a real national bank was Germany in the years 1933-1945. In 4 years they eliminated the debt from WW1 and at the same time they achieved to re-construct the destroyed land. The rest is well known.Or not?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-55895079444517804982012-01-30T07:10:10.428-05:002012-01-30T07:10:10.428-05:00Jim,
you may or may not be aware that you have en...Jim,<br /><br />you may or may not be aware that you have entered into a conversation taking place over several posts:<br /><br />http://winterpatriot.com/node/671<br /><br />http://twelfthbough.blogspot.com/2011/12/bs-labs.html<br /><br />the comment threads are full of questions and answers, some of which may be of interest to you.<br /><br />i am closing this thread. either James or i may do another post on the topic and then we can resume the conversation.A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-32239946215001321302012-01-29T20:21:22.482-05:002012-01-29T20:21:22.482-05:00Hi Jim,
The points you are continually raising ar...Hi Jim,<br /><br />The points you are continually raising are by and large of a semantic or nit-picking nature. I have addressed them before and yet you restate them. It seems to me that you are trying to muddy the water for other readers and, as such, are behaving like a troll or shill.<br /><br />The purpose of my article was to simplify much economic jargon and verbal 'sleight of hand' and to point out the fundamental relationship between the amount of the money supply and the amount of production taking place in an economy and that that is the key to all economic management in spite of all the talk from economists and politicians.<br /><br /><br />Furthermore, my original post was specifically addressing Ron Paul's economic platform, and the lack of specifics about who issues the money supply. Perhaps, before we go any further, you can state your position on what you agree with in my article and whether you agree that economists and politicians use a lot of economic jargon to confuse the public. <br /><br />Please state what is your position on Ron Paul, as this together with the above items would be very pertinent to other people following this thread.jameshttp://www.winterpatriot.comnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-20764490434964051352012-01-29T14:39:17.081-05:002012-01-29T14:39:17.081-05:00Hi James:
I think you and I can agree that classi...Hi James:<br /><br />I think you and I can agree that classical economics, or the "Austrian" variety is complete nonsense. Their models assume equilibrium and are static. Further, they have a very poor understanding of money and how it's created.<br /><br /><br />In your article, you are using the quantity theory of money in your analysis. My point is that this theory is a "complete myth". It is merely an instance of begging the question.<br /><br />Your equation P=MV does not separate prices from the quantity of goods sold. You claim that an increase in money will increase Q, but not P until the economy is at a state of full employment. This is the argument that Keynes made. The history of the last 70 years proves him wrong. Inflation exists even when the economy is not at full employment. This is because economists do not fully understand the cause of "cost push" inflation. <br /><br />If capital is replacing labour in production, then overhead charges (B costs) are increasing relative to income (A costs). Price equal A (income) + B (overhead charges). Any attempt to increase or stabalize income (A) must be met with rising prices (A+B) if B is continuously increasing relative to A. In other words, the primary cause of inflation is the attempt to increase income as labour is becoming a decreasing factor in production.<br /><br />Keynesianism is inflationary. This is because the mechanism by which Keynes suggested new money be introduced is through production, which means that it all has an associated cost attached to it. The Social Credit mechanisms distribute that money directly to the consumer, so it does not have a cost attached to it, and therefore is not inflationary.<br /><br />The quantity theory of money implicitly assumes that money is a stock, when in reality, money is a flow. Credit is either flowing from the bank creating costs, or flowing back to the bank cancelling them. This is true at all times, not just in a Social Credit society.<br /><br />Take care.Jimhttps://www.blogger.com/profile/17417302721095051992noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-22194688889836550272012-01-26T04:49:52.811-05:002012-01-26T04:49:52.811-05:00Socred said-
My point was that the variable "...Socred said-<br /><em>My point was that the variable "V" in the equation MV=PQ is merely an instance of petitio principia (begging the question), and does not define anything "real" because money does not circulate.</em><br /><br />This is restating your point from your previous comment, Socred, to which I've already offered an answer. In any case, the velocity of money is not part of my overall argument nor the subject of my article. Early on in my article I said,<br />“V= the velocity of the Money Supply i.e. how fast people spend the money they get. In boom times the money supply (M) will turnover 1.1 times overall in a given year. In depressed times it will turn over 0.9 times. SO for our purposes we can say it turns over on average of 1.0 times which also means we can leave it out of our calculations without affecting the outcome.<br /><br />So simplifying this down, Production and therefore employment) will rise (or shrink) to the level of Money (M) available to purchase said production.”<br /><br />So I'm saying the P=M (or as you would say, PQ=M) because the GDP of a nation is roughly equal to the Money Supply. I've left Velocity out of it.<br /><br /><br /><em>Further, the quantity theory of money treats money as if it was a "stock", when it should be regarded as a "flow".</em><br /><br />You have stated this previously, too. And I have already answered it, too.<br /><br /><em>There is a great comment about this by Geoffrey Dobbs in his introdution to C.H. Douglas' book "The Monopoly of Credit":<br /><br />"However much it is sophisticated, the argument is essentially the simple one that, <strong>if</strong> inflation is due to too much of a homogenous quantitative entity called 'money', to add more 'money' will make it worse. But 'money' is not a homogeneous entity, it is a loan, which is travelling either outward, creating debt, or inward, cancelling it."</em><br /><br />This quote is made up of two statements with no connection between them (except perhaps being contradictory about the nature of money) and therefore they fail to make an argument.<br /><br />The rest of your comment might be true and relevant if we had a Douglas Social Credit system in place. But we haven't. In any case, this is not what my article is about. My article is about (apart from the foolishness of gold backed currencies) the necessity for governments to issue into the economy monies with no attendant interest. One way to do this would be Douglas' Social Dividend. But there are other ways too. All would allow the full production to be purchased and so have a fully functioning economy and prosperity for all. <br /><br />This rules out laissez-faire economics, such as Ron Paul is advocating, as a sensible economic strategy. On this I think you and I, together with Douglas and Keynes, are agreed.jameshttp://www.winterpatriot.comnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-90405440651333786082012-01-25T12:20:51.916-05:002012-01-25T12:20:51.916-05:00Hi James:
My point was that the variable "V&...Hi James:<br /><br />My point was that the variable "V" in the equation MV=PQ is merely an instance of petitio principia (begging the question), and does not define anything "real" because money does not circulate.<br /><br />Further, the quantity theory of money treats money as if it was a "stock", when it should be regarded as a "flow".<br /><br />There is a great comment about this by Geoffrey Dobbs in his introdution to C.H. Douglas' book "The Monopoly of Credit":<br /><br />"However much it is sophisticated, the argument is essentially the simple one that, if inflation is due to too much of a homogenous quantitative entity called 'money', to add more 'money' will make it worse. But 'money' is not a homogeneous entity, it is a loan, which is travelling either outward, creating debt, or inward, cancelling it."<br /><br />I agree that increases in the quantity of money can increase production, but I disagree that when potential production has been maximized that further increases will necessarily cause inflation. <br /><br />I will give you an example. An important policy in Social Credit is the price rebate. Pretend the National Credit Authority makes a mistake, and erroneously calculates the size of the rebate to be 100%. This means that if a company charges $100 for article X, then the National Credit Authority will rebate the consumer $100. Effectively, the price of article X is $0 to the consumer.<br /><br />Now you may argue that this will lead to the retailer charging more and more for article X - let's say $200. But this does not matter, because the consumer will be rebated $200, and the article still costs him $0.<br /><br />I would not recommend that this be the size of the rebate, but I use this extreme example to make a point.<br /><br />Money is a flow, and you can actually reduce prices and increase the money supply if you introduce money as a "reverse flow", or a price rebate given to consumers at the point of retail.<br /><br />Not only will production not be handcuffed by the quantity of money in a Social Credit society, but prices will actually fall, which is exactly what should happen as efficiencies in production are realized. The rate at which they fall will depend on the ratio of consumption/(potential production).Socredhttps://www.blogger.com/profile/03930579002329295431noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-42058064959669076882012-01-25T06:49:11.643-05:002012-01-25T06:49:11.643-05:00Thanks for your comment, Socred. You said, "T...Thanks for your comment, Socred. You said, <em>"The biggest obstacle to my understanding of Social Credit was my belief in the "quantity theory of money". C.H. Douglas dismissed this theory when he said, "the velocity of circulation of money is a complete myth”.</em><br /><br />I agree that currency can 'circulate' but not credit, strictly speaking. That credit is created and extinguished at each transaction, is another way of looking at it. But money, and credit in particular, is an abstract notion so it follows that the 'velocity' is an analogy when applied to credit or the Money Supply. Using the term 'velocity' has the disadvantage of reinforcing the 'commodity nature' of money in peoples minds which is erroneous, of course. But for general discussion, i believe it is still a useful way of explaining the nature of this relationship of money to production (or Q as you state it)<br /><br />So I agree that the 'velocity' part is technically a myth but it is really down to semantics and does not invalidate the P(Q)=MV proposition as you suggest in your article at the link you provided (thanks).<br /><br />I have some other differences on it to you. (a note for readers, Socred uses PQ [price X quantilty]- in place of my use of P [the value of Production]. They are effectively the same)<br /><br />From your article-"<em>The quantity theory of money can be simply expressed by the equation: MV=PQ, where M is the quantity of money in the economy, V is that money’s “velocity of circulation”, P is the average price level, and Q is real output. Proponents of the theorem generally argue that Q and V are constant, or at least not influenced by the quantity of money. This implies that any change in the quantity of money has a direct relationship with price levels."</em><br /><br />That is not my argument in relation to Q, at least, except in the case where the productive capacity is already fully employed. After this point is reached, an increase in the money supply will lead to an increase in prices because there is no production expansion possible to absorb the extra money. <br /><br />That is an important qualification because it is often the case that there is excess productive capacity available and is not being used because the Money Supply is kept deliberately short causing chronic under employment. And it is these very conditions that we all (except bankers, of course) want to avoid. An increase in money supply will not lead to increase in prices under those circumstances.<br /><br />So this is a valid argument for Social Credit being distributed directly to consumers as Douglass advocated.<br /><br />Getting back to Velocity, if V was the 'balancing item' to give validity to the equation P(Q)=MV then you would have a point if in practice V varied largely. But it doesn't. Which leaves the direct relationship between money supply and the level (quantity) of production quite evident.jameshttp://www.winterpatriot.comnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-79162668068718852212012-01-24T18:52:33.385-05:002012-01-24T18:52:33.385-05:00also, sorry i see it's Socred not Sacred.also, sorry i see it's Socred not Sacred.A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-49913686447028214682012-01-24T18:46:23.302-05:002012-01-24T18:46:23.302-05:00hi Sacred,
thank you for your comment. i don't...hi Sacred,<br />thank you for your comment. i don't know where it went but i just saw it today in the queue. i will forward it to James who is the expert here on social credit. apologies for the delay!<br /><br />AP.A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-1399636267442667562012-01-21T11:31:08.287-05:002012-01-21T11:31:08.287-05:00Hi:
I read your article and agree with most of wh...Hi:<br /><br />I read your article and agree with most of what you wrote.<br /><br />The biggest obstacle to my understanding of Social Credit was my belief in the "quantity theory of money". C.H. Douglas dismissed this theory when he said, "the velocity of circulation of money is a complete myth”. And the Alberta Social Credit published a critical article on the quantity theory of money in the Alberta Post War Reconstruction Committe's report when they said, "The fallacy in the theory lies in the incorrect assumption that money 'circulates', whereas it is issued against production, and withdrawn as purchasing power as the goods are bought for consumption."<br /><br />http://social-credit.blogspot.com/2010/03/alberta-post-war-reconstruction.html<br /><br />I have written a critical article on the quantity theory of money and how it relates to Social Credit at my blog:<br /><br />http://social-credit.blogspot.com/2011/01/quantity-theory-of-money.html<br /><br />Take care.Socredhttps://www.blogger.com/profile/03930579002329295431noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-52832822494696415742011-12-26T22:52:39.663-05:002011-12-26T22:52:39.663-05:00Hi Pez, it hit east of here and wasn't that ba...Hi Pez, it hit east of here and wasn't that bad as the media were making it out to be..they really made a deal out of it this time, but it is always major paranoia around here at Christmas time as Darwin was destroyed in 1974 by a cyclone, so in the local collective psyche, it is a harnessable fear to be benefitted by the media, supermarkets and government.<br />Happy days to you :)<br />cheers A13A13https://www.blogger.com/profile/00819669787748984989noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-11369786195594873412011-12-25T18:25:05.703-05:002011-12-25T18:25:05.703-05:00hey A13, did you get past the cyclone all right??hey A13, did you get past the cyclone all right??A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-725711509909686422011-12-25T18:13:30.854-05:002011-12-25T18:13:30.854-05:00Hi Pez, Merry Christmas :)
Big Cheers and a toast ...Hi Pez, Merry Christmas :)<br />Big Cheers and a toast of Glu wine to you xxxx<br />A13A13https://www.blogger.com/profile/00819669787748984989noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-83714584961533017592011-12-23T18:25:47.222-05:002011-12-23T18:25:47.222-05:00hi dubs, good to see you around!
hi questioning,...hi dubs, good to see you around! <br /><br />hi questioning, good to see you around too! all thanks to James for putting this together. he has taught me so much about economics.A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-35228359106687657352011-12-23T16:45:05.540-05:002011-12-23T16:45:05.540-05:00(hat tip) finally got a regular PC for the moment....(hat tip) finally got a regular PC for the moment. Thank you again for all you do. this portion of the secret beyond the narrative is THE core of the Gordian Knot.questioningnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-85687995955925266432011-12-22T21:03:56.507-05:002011-12-22T21:03:56.507-05:00Hello Peasant
You are absolutely right, it is what...Hello Peasant<br />You are absolutely right, it is what comes after the fed that is important. There seems to be no mention of that and the strange el diablo sign RP keeps sporting is not too encouraging either. <br /><br />DublinmickAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-70534063124888555882011-12-22T15:48:20.533-05:002011-12-22T15:48:20.533-05:00thanks Aan.
Mark, i noticed that very similarity ...thanks Aan.<br /><br />Mark, i noticed that very similarity while reading your latest...<br /><br /><i>Oddly enough, economists are relied upon by pretty much every developed culture for "expert testimony", and - much like Washington Post Opinion writers - nobody ever seems to remember all the times they've been wrong before.</i><br /><br />in fact i agree wholeheartedly with your entire comment. as James is my witness, my eyes glaze over immediately at any discussion of economics, and it is only by his herculean patience in explaining this to my poor brain that i ever came to understand this whole thing about the money being backed by the productivity of the people. and i have an mba, which just goes to show you that any smart person can become an idiot with enough formal education.A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-72570889654701869182011-12-22T13:10:29.328-05:002011-12-22T13:10:29.328-05:00Oddly enough, economists are relied upon by pretty...Oddly enough, economists are relied upon by pretty much every developed culture for "expert testimony", and - much like Washington Post Opinion writers - nobody ever seems to remember all the times they've been wrong before.<br /><br />Mathematics and, by extension, economics are beyond most people; figuring and correlating are tiresome and nowhere near as much fun as reading about what Lindsay Lohan is up to today. Consequently, most people are quite happy to leave economic forecasting to economists and are soft targets for manipulation, owing to their disinterest in getting involved themselves.<br /><br />The simpler economics can be rendered for common understanding, the better. As soon as those fond of arguments revolving around economics start to expound on PPP and inflation, the average person's eyes glaze over and after a few more minutes, they begin to rock and such their thumb. A post that breaks it down so Everyman can see where things just don't add up, as this one does, is a real public service.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-12506460523281870312011-12-22T10:34:15.388-05:002011-12-22T10:34:15.388-05:00I like your comment: "Ron Paul is the garbage...I like your comment: "Ron Paul is the garbage man for the bankers. His job is to get the fed out of the way so they can replace it and start fresh."<br /><br />- AangirfanAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-11212528413334947632011-12-22T06:07:08.398-05:002011-12-22T06:07:08.398-05:00hi Mark,
A few years ago, someone did a large surv...hi Mark,<br />A few years ago, someone did a large survey of economists' predictions and found they were no better than random chance. I tiny bit worse, in fact, irrc. It was published in one of the major newspapers, maybe even the NYT!<br /><br />So the office boy with a dartboard could have done an equal job at it for a lot less pay. Hell, I would have done it for a lot less pay given that it would only take a few minutes to write up my predictions.<br /><br />I imagine soothsayers (whom I liken economists to in my more frustrated moments) would have a better batting rate. <br /><br />But you are exactly right, Mark. Their poor performance points directly to at least one fundamental variable not being taken into account or at least being totally unpredictable to them. Though the timing at least is unpredictable to everyone. Everyone except a small group of bankers, that is. <br /><br />Meanwhile economists are looking at effects and interpreting them as causes with a little help in that direction over the years from such luminaries as Milton Friedman.jameshttp://www.winterpatriot.comnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-80057964943974233172011-12-21T20:06:39.308-05:002011-12-21T20:06:39.308-05:00hi Edo, glad to see you again. i will check out yo...hi Edo, glad to see you again. i will check out your link in the next day or so. sounds intriguing.<br /><br />R. Olausen i'm not sure i follow but will leave you to James.<br /><br />hi Mark, you have spotted the trap -- it's that last step about the gold. funny that they don't talk about that on the teevee. too busy gloating over Putin probably...A. Peasanthttps://www.blogger.com/profile/01929646095992796530noreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-36411094008985588612011-12-21T17:59:23.871-05:002011-12-21T17:59:23.871-05:00hullo, R. Olausen. The story about the earth relat...hullo, R. Olausen. The story about the earth relative to the universe was an analogy and probably third or fourth hand, if it comes to that :) .<br /><br />The only mathematics involved in my argument about economics is simple arithmetic.<br /><br /><em>I bet you thought it was only the economy that mattered"</em><br /><br />How much would you like to bet on that proposition?jameshttp://www.winterpatriot.comnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-56983309991127085992011-12-21T17:39:29.912-05:002011-12-21T17:39:29.912-05:00Brilliant! Can it really be this simple? It also s...Brilliant! Can it really be this simple? It also suggests why economists are regularly and almost universally wrong at economic forecasting; projecting out beyond the next couple of months is a fool's errand, based on all the factors that can effect pretty much every one of the variables except for the money supply.<br /><br />Although I don't have a lot of time for Ron Paul - while I must acknowledge he is head and shoulders above the current Republican crop for intellect - I did think that gold standard thing of his made sense. It never occurred to me to look out one step further; what's gold going to be worth, and who's going to determine it?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-7189129925467290462011-12-21T16:35:24.082-05:002011-12-21T16:35:24.082-05:00In my sixth decade I have come to be believe the E...In my sixth decade I have come to be believe the Earth is the centre of the universe. I doubt the writer is doing anything more than relating 2nd hand science. Mathematics is elegant enough to wear either position but only one position allows the earth and its inhabitants a profound dignity and pride of place. I suspect some very high placed people secretly believe the same. I bet you thought it was only the economy that mattered. R. Olausen.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-481838326205496616.post-5383047386609125672011-12-21T13:33:41.660-05:002011-12-21T13:33:41.660-05:00hi Switters, Buelahman. The post deals with two is...hi Switters, Buelahman. The post deals with two issues, gold backed currency and laissez-faire economics. I probably should have made them the subjects of two separate posts.<br /><br />There's a lot of info, for sure, and what i've written, once taken in, causes a lot of other things to be reviewed. It can be very disorienting for a while. But keep coming back to the facts and what <em>you know</em> to be true.<br /><br />Then if a guy with a nobel prize for economics looks like an idiot, then so be it. If a guy offering hope is leading people off the right track, then so be it, too. It's not like it hasn't happened before.<br /><br />The people running the system know they have to keep offering hope to keep those of us with heart in the game. Obama was the last one and RP (knowingly or not) by all the signs is the next. So someone like RP is a necessary part of the system.<br /><br />All this says there is no hope from within the system and that is a very disheartening thing to face. It has a lot of implications, too, but that doesn't mean there is no hope. There is, but only after the first lesson of dealing with psychopaths is thoroughly learnt. And that is that the only way to deal with psychopaths is not to deal with them which is what Buelahman is saying by calling for non-compliance. The best ways are non-confrontational like throwing out the teevee for a start and by simply doing something else.<br /><br />I'm not saying RP is a psychopath but he is dealing with them and their psychopathic system. he will be managed (as i'm trying to point out) and compromised. It's what they do and it is their system.jameshttp://www.winterpatriot.comnoreply@blogger.com