Re: profit = dividends? [EMAIL PROTECTED] Feb 19, 2003 20:27 PST This theorem breaks down when one considers the second and third level breakdown of B. In every B, there is an A + B. The equation can be thus stated
A1 + (A2 + (A3 + (A4 + 0))) where A4+0 = B3 and A3 + B3 = B2, etc. Eventually, only households get the money, if only as a journal entry in an enterprise where stock is held. Theoretically each transaction can be broken down to a household level. [cut] Michael Bindner ------------------------------------ [Bill in reply to Michael Bidner] What you say is true but it is irrelevant to the theorem. A + B is akin to relating vectors in a force field. It is the rate of price generation as compared the rate of disbursement of purchasing power in the process of production. If the rates remain proportionate through time, everything is okay. With labor displacement (a long-term factor) and other factors both long-term and short term, the rates will diverge. -- Re: profit = dividends? [EMAIL PROTECTED] Feb 20, 2003 06:14 PST Why do you assume that the benefits don't accrue to the owners of the group b payment instantly? In fact, in accrual accounting, all payments are identified with the period in which they are earned. Theoretically, there is no lag. The owners of the group payment know what they are receiving when they receive it - in the last spending spree the owners of many group b assets borrowed against these earnings to fuel consumption. Michael Bindner ------------------------------------ [Bill in reply to Michael Bidner] Again, what you say is true but it is irrelevant to the theorem. Accrued assets are not purchasing power yet are charged into the prices of production as they depreciate. You refer to loans to finance consumption. Yes, they work fine so long as income increases in tandem with spending. In the case of consumer loans, the spending curve leads the amortization curve. This works only if the income curve is increasing proportionately to the amortization curve. If, however, the income curve is falling in respect to the prices of production (which must be the case if there is labor displacement), the effect is that you are merely shifting debt from firms to consumers. The debt itself is still increasing exponentially inflating the bubble that will at some point burst. Think of it this way: You purchase a house that is financed by a loan which you amortize over time. The nominal value of your increasing equity is not equal to the amortization but proportionate to it. The house is an asset. If you are a business, that asset will be priced into production as it depreciates. But the money that the depreciation represents no longer exists yet consumers are expected to pay it from money which they never received. Consumers could borrow it, or firms could borrow it for the production of ever more assets. -- Dear Friends, Where Michael Bindner says the A+B Theorem breaks down is exactly where it comes into its own. B can be thought of as reimbursements for past cumulative A, whereas A stands for current A. What technology wants to do, if we let it, is make things cheaper, that is, make current A less than past cumulative A. It may clarify things to say that current A-payments for the final stage of production go into current price, but current A-payments for capital production (being an earlier stage of consumer production) do not. (They will go into a future price.) Michael Lane Triumph of the Past ------------------------------------ [Bill in reply to Michael Lane] It's more than reimbursement for past cumulative A, because B includes reimbursement for sums which consumers never received. It is equal to cumulative A only in dynamic stasis (with the further unrealistic assumption that the economy has always been in stasis), where B of the retail sector equals the A of all other sectors, so that retail A plus B equals the A of the entire firms sector. A variation of A + B is the "double circuit" - which is another aspect to this multidimensional concept - where the B circuit represents the flow from banks to firms back to banks - creating price values in the process that have no correspondence to consumer income. Assets are created thereby which are charged into prices through depreciation. The difference between this and the "asset price inflation" that Michael Hudson talks about is that such speculative activity financed by bank credit is not charged into prices that have to be recovered from consumers directly. It represents a circuit that is extraneous to either A or B. The problem is if the bubble from that extraneous circuit collapses, the banking system comes down with it, paralyzing the real economy, which is what happened in 1929. -- _____________________________________________________________ Get 25MB, POP3, Spam Filtering with LYCOS MAIL PLUS for $19.95/year. http://login.mail.lycos.com/brandPage.shtml?pageId=plus&ref=lmtplus ==^================================================================ This email was sent to: archive@mail-archive.com EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html ==^================================================================
