I think when people find out at March 31st year end that their pensions can no longer hide the loses and they find out that in a lot of cases they no longer have a pension... then things will get disorderly at that time.

Until then I don't think anybody has seen the personal effect to their own portfolio of what has been going on in the financial world... the pension funds haven't reported the carnage yet that they've been trying to hide for fear of their funds crashing. We'll start hearing about the institutional loses, as they were heavy in the hedge funds and were highly leveraged, and when this news starts to leak out its going to be ugly for everyone. The S&P was down as much as in the great depression as a percentage (40%+).

The Americans just told the world to stuff it on their debts as they go to a zero interest rate effectively telling the world they will not pay interest on their debts anymore. Once the world realizes this it makes one wonder how trade will take place with the Americans? I guess the fact we are no longer in a world of free markets is the answer... meaning that we are no longer in a world were markets have the appearance of being regulated by laws and market forces, but rather a new era of government managed economies where the people that got us into this will no longer hide who the winers and losers will be in the economy based on who has the better political connections. To me it looks like institutionalized corpocracy and they are no longer going to even bother trying to hide it... I don't see how any of that provides for any prospect of economic stability. Smart money will be trying to find out how to protect as much of their wealth as possible and this will contribute to the problems unless the US Fed can find another ponzi scheme to prevent their collapse (they've exhausted global oil, housing, and trade with the Asian manufacturing tigers as ponzi backstops for the dollar debt growth and have only one option left)... the next ponzi scheme we will all be forced into will be a new world currency and with it a new world governance that all nations will be forced into because of this managed crisis from the banksters in charge of credit.

I'm a pessimist considering how our governments have dealt with this. This is the end days of democracy IMO... brought down by the world of finance. All nations will I think surrender their sovereignty to the new global currency out of fear. The US Federal Reserve banksters will ensure we have war if that is what is needed to finalize their plans.

Our only hope to avoid a corpocracy dictatorship IMO is if the Americans wake up and dump the US Federal Reserve and the dollar of the US Fed as well as cancels all the derivative markets and makes those markets illegal in the future... either that or Canada ceases to do trade with the Americans... both are not likely to ever happen.

2009 will be an interesting year and a turning point for mankind... either for the good or bad, but it will be a turning point IMO.

How many people racked up the credit cards a little more to keep retail sales strong? I suspect everyone just increased their personal debtloads a little more.

"I think when people find out at March 31st year end that their pensions can no longer hide the loses and they find out that in a lot of cases they no longer have a pension... then things will get disorderly at that time. "

Oh come on. People are well aware of their losses and Mar. 31st is not the armageddon date you proclaim it to be.

"Until then I don't think anybody has seen the personal effect to their own portfolio of what has been going on in the financial world..."

Bad assumption. Do you ever get tired of writing these 'chicken little' posts?

MrPG I'm not talking so much about your self directed RRSP's... for those people the loses are fairly transparent. Other people have company pensions or government pensions with rich expected payouts that simply can not happen now that they have been nearly wiped out. That will be the next shoe to drop IMO is when these pension fund managers start lining up to break the bad news.

The guiding principle of business is that 'prices' shall not be less than 'costs'. And, if business is to be continued, that they be sufficiently more than 'costs' to provide a continued inducement to keep that business going.

No one wants to work for less wages than what it costs to live, nor can they for long without becoming hopelessly indebted with no chance of repayment. And no business can continue long if it cannot, at the very least, recover its costs fully in its prices.

In our modern economy 'costs' are no longer synonomous with distributed 'incomes',(salaries and wages), but rise far above them. This is because they also increasingly include charges for 'capital', (largely for depreciation of plant and equipment, etc.)

This is certainly obvious in manufacturing, and it should be just as obvious in retailing as well. For there it is also true.

Capital 'costs' are "allocated" amounts. Bookkeeping figures recorded as 'costs', and carried forward into 'prices'.

While these charges represent 'incomes' that WERE distributed at some point in the PAST, (when the plant and equipment, etc., that makes or distributes the 'consumer goods' we all need and want, was created and installed), those 'incomes' PAID AT THAT TIME were, for the most part, spent in the PAST.

Their spending was absorbed in a likely RISE in CONSUMER goods prices AT THAT TIME.

And those dollars are no longer available as 'money' NOW, IN THE PRESENT, to meet current 'prices'necessary to be charged as the 'consumer goods' themselves they've created come onto the market at the point of final retail.

Unless there is a constant expansion in the production of more 'capital' goods, (things the public does not 'buy' for 'consumption' at all, yet, through 'prices' (or taxes) it will be forced IN THE FUTURE to try to pay for as these 'capital' goods depreciate ~ simply because there's no one else TO pay for them), an ever increasing amount of already available 'consumer' goods CAN NOT be sold at prices suffiecient to recover the costs of making them.

Now here's the question. If we can NOT, through 'prices', fully pay for what we've DONE, from the incomes already distributed to us in the course of doing it, how then are we supposed to fully pay for what we are now DOING? Or are going to have to do in the future?

We can NOT, save for recourse to ever exapanding debt that is growing entirely out of proportion to the rise in actual productivity, or our means of ever repaying it. The current financial crisis bears witness to that.

We have governments in the US and Canada and BC, who are currently all singing the same tune in regards to 'stimulating' the economy by "infrastructure" spending. To try to 'spend' us publicly out of debts we can not otherwise repay privately. It will not work.

It's always nice to have "infrastructure". Everyone wants more and better roads, hospitals, schools, etc., etc. But do we really want to pay for that infrastructure two or three times over? Because that is exactly what we're going to end up trying to do.

It's creation will have the same effect as any other 'capital' spending has. It will RAISE consumer product prices, and ON A DOLLAR BASIS, the profit level of the suppliers of those goods. But while it's raising those prices and those profits, on that dollar basis, it is also FILCHING THE PURCHASING POWER OF EACH DOLLAR ITSELF.

You, as a worker, may indeed end up making 'more' as you or your Union tries to negotiate pay increases to 'keep up'. But you'll never 'keep up'. Because in terms of what EACH dollar you receive will actually BUY, you're continually going behind!

Prices will ALWAYS advance faster than incomes. There is only one answer to this dilemma. CONSUMER incomes have to be augmented by DISTRIBUTIONS of 'money' (NOT 're-distributions', through taxation, which is the failed policy of socialism), THAT IS NOT 'COSTED' INTO ANY PRODUCTION.

This 'money' is created exactly as 'money' is created now, by the Banking system, through 'bookkeeping' entries. The only difference is that it's creation and distribution will enable "incomes", taken collectively for the country as a whole, to fully equal "prices" of all goods and services, again taken collectively, OVER ANY SAME CHOSEN TIME PERIOD.

It is in the manner of a 'macro-economic' accounting correction. No different than any business does now, when it makes a 'micro-economic' accounting correction in regards to the value of its inventory, etc.

That correction, at the 'micro-economic' level, might be made to reflect what it's inventory might actually sell for, if it's become shop-worn, or out of fashion, etc.

Rather than carrying it on the books at its original costs, which it might likely never sell for, the business 'writes it down' to a figure more in line with what it expects to actually get for it. It makes it's 'figures' more closely represent the 'facts' ~ which is the sole purpose of anything to do with 'bookkeeping', and its expanded form, 'finance'.

We are simply doing 'macro-economically' what every business already does on an individual basis. When we do this, CONSUMER DEMAND, what each and every one of us actually WANTS in the way of goods and services, can be made and maintained fully as "EFFECTIVE" DEMAND.

We begin to produce to serve CONSUMER needs and desires. Not just to "make work" to provide an "excuse" to pay someone an income that's going to be filched away from him before he can ever access the things he thinks he's working for.

Socred you read the problem alright, but your solution is just another form of monetary inflation. I would agree that if we are going to have monetary inflation, then the benefits should be spread throughout society, rather than being distributed to banksters to abuse our market economy with... but the fact remains its still a ponzi scheme solution you are conjuring up to fix the other ponzi scheme coming to an end. That IMO only buys time and is no real long term solution.

What we really need is a conservative monetary policy, which is the complete opposite of what we have now... now we have a socialist expansionist monetary policy redistributing wealth from the productive economy to the paper backed banksters.

Our problem is that monetary policy has no laws and is all voodoo policy to generate the results for those at the top of the pyramid. This messes up all honesty and integrity of the market system. Moving interest rates and expanding money supply does wonders in the short term, but always has a long term price that comes due at some point, and really is only a way to pick winners and losers based on the discounts to debt for the favored investor classes.

If we wish to have an honest and moral economy, then we need to have our monetary supply fixed to our labor and production and not to the needs of the banksters paper economy. In a free market if you don't manage your books you go bankrupt and someone else fills the opportunity when it becomes profitable... that doesn't apply no more to the large corporations and banks and they know it and that is a large part of the problem (no more accountability to market forces).

Reflect on the following exposé by renowned insiders:

Napoleon Bonaparte
“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”


Niccolo Machiavelli
“For the great majority of mankind are satisfied with appearances as though they were realities, and are often more influenced by the things that seem than by those that are.”

President James Madison
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control of governments by controlling money and its issuance.”

President Abraham Lincoln
“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy.”

President James A Garfield
“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”

The Rt. Hon. Reginald McKenna – Chancellor of the Exchequer
“I am afraid that the ordinary citizen will not like to be told that the banks can, and do, create money. The amount of money in existence varies only with the action of the banks in increasing and decreasing deposits and bank purchases. Every loan, overdraft, or bank purchase creates a deposit and every repayment of a loan, overdraft or bank sale destroys a deposit. And they who control the credit of a nation direct the policy of governments, and hold in the hollow of their hands the destiny of the people.”

Sir Josiah Stamp – Bank of England
“Banking was conceived in inequity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the costs of your own salary, let them continue to create deposits.”

President Woodrow Wilson
“A great Industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world – no longer a government of free opinion, no longer a government by conviction and vote of majority, but a government by the opinion and duress of small groups of dominant men.
“I am a most unhappy man. I have unwittingly ruined my country.”
(President regretted signing into law the Federal Reserve Act)

Supreme Court Justice Felix Frankfurter
“The real rulers in Washington are invisible and exercise power from behind the scenes.”

Louis T. McFadden, Chairman of Banking & Currency Committee
In 1932:
“The truth is the Federal Reserve Board has usurped the Government of the United States. It controls everything here and it controls all our foreign relations. It makes and breaks government at will …”
In 1933:
“Roosevelt has brought with him from Wall Street James P. Warburg, son of Paul M. Warburg, Organizer and first Chairman of the Board of the Federal Reserve System…”
In 1950:
“This same Warburg had the audacity and arrogance to proclaim before the U.S. Senate: ‘We shall have World Government whether or not we like it. The only question is whether World Government will be achieved by Conquest or Consent’.”

Senator Barry Goldwater
“Most Americans have no real understanding of the operation of the international money-lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States.”

Henry Ford
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

"MrPG I'm not talking so much about your self directed RRSP's... for those people the loses are fairly transparent. Other people have company pensions or government pensions with rich expected payouts that simply can not happen now that they have been nearly wiped out."

Again, these things can be monitored by the employee and depending on who you work for, updates are sent monthly, bi-monthly, or you can check online. I don't think this will surprise as many people as much as you think.

I worked for a company once here in town on 1st avenue that had a company run pension fund and the owner of the company was using the funds to expand his business into Alberta and no one was the wiser until contract time and he told us all our pension funds were lost due to bad investments and that we no longer had any pension funds other than like 10% of the original that was contributed.

The solution for the company was to get the union to approve taking the pension funds of the less senior employees and give it to the more senior employees closer to retirement... because it was a group plan all under one umbrella. Some guys lost more than $40,000 from their pension... I lost $9000 and they left me with only $600 after 6-years service. We had no warning that this was coming until it came time to negotiate our contract (we also were forced into a 40% cut in pay), because we had no access to the what was going on with our retirement plan. I quit my job the day the new contract took effect, because I could no longer work for a company that didn't respect its employees retirement funds (to say nothing of the pay cut)... others just had to suck it up.

If it could happen then during boom times, then it surely can happen now when the financial markets have melted down... and I don't agree that people have transparency over their company run pension funds. Many people will soon realize there will be no retirement for them as they had planned. I learned early not to trust retirement on a company pension fund.

I'll say it again... the fund managers are hiding their loses and we will not realize this until they have to submit their year end reports. The loses of the last three months have not even been published yet.

Funds I think will surprise everyone with the loses would include the new ICBC markets investment fund, government pension funds of all types, municipal investment funds, corporate group pension funds (especially the type with the guaranteed payouts.. ponzi'ish), and anyone that had retirement funds in a hedge account.

The people invested with Bernie Madoff thought they were getting a 12% return until just three weeks ago when they found out the fund had no value at all and they lost $50 billion. The only reason people found out was because of a whistle blower from his own family... and not because of financial regulators doing their job protecting peoples investments, or because the financial reports he was distributing were accurate. The Madoff hedge fund melt down and rip off is only one example of many in the coming weeks IMO.

The last few years it was the big pension funds Madoff used to keep his ponzi scheme going because they were the only ones with a large enough pool of funds to keep his gig afloat and of that $50 billion those fund have yet to be reported to their investors of the funds that invested in the Madoff hedge fund. This has caused a huge tidal wave of deleveraging in the fund industry that is only now starting with the $50 billion dollar hole at the core of their industry from only one of the funds.

Soon cash flow will be king, because paper savings will be worthless...

Eagleone wrote:-"Socred you read the problem alright, but your solution is just another form of monetary inflation."

No, it is not, Eagle. "Credit issue" (new bank loans) and "price making" (sales of goods and services into final consumption) are the positive and negative sides of exactly the same thing.

What is issued as 'credit' in 'costs', is retrieved and repaid through 'prices'.

All this does is facilitate the movement of 'production' through 'distribution' and into 'consumption'. We 'produce' PRIMARILY to 'consume'. Finance just aids the process, or should.

So far as 'finance' goes, each cycle of 'production' should be, (but right now is increasingly not), fully financially self-liquidating.

Just as "consumer goods" prices will always RISE with an increase in the supply of money issued to fund "capital goods" that do not come within the immediate buying range of the public, so, too, can an increase in the supply of money be used to LOWER "consumer goods" prices AT THE TIME OF PURCHASE.

And in such a circumstance it is impossible to get 'inflation', since the definition of inflation is "an increase in the quantity of money accompanied by a commensurate rise in prices". And we've just LOWERED them.

In this instance we are increasing the quantity of money, only applying that increase to LOWER the prices of consumables TO THE CONSUMER below the full FINANCIAL "costs" of production which must be recovered by the merchant and manufacturer if they are to repay their loans and stay in business. Which is something quite different from 'inflation'. I believe it's called 'prosperity'.

While there should definitely be greater government oversight and regulation of our whole financial and banking systems, this in itself will not solve the underlying problem that's caused the present financial crisis. Nor would a complete government takeover of all the banks. Nor the complete elimination of interest on all loans, if such a thing were even possible or desirable (which I doubt it would be.)

The real problem lies in a flaw in the conventions of accounting as they are presently applied. This flaw is correctable. It's correction involves properly relating "costs" and "prices" in respect to TIME and 'money'.

To put it briefly, we are at present charged, or 'debited', in the prices of everything we buy sums representing capital 'depreciation'. This is entirely right and proper from the standpoint of industrial cost accountancy.

But we are NOT fully 'credited' as consumers with capital 'APPRECIATION' (our ever increasing capacity to produce and deliver goods and services more efficiently that each successive application of 'capital' makes possible.) Which is normally much greater.

This puts us in the unenviable position of having to try to pay for both the product and the plant that produced it. But only getting delivery of the product. We don't want the plant. As consumers it's of no use to us. But we do want, and need, the product. So if we're to pay for both, should we not be "given" money sufficent to allow our 'earned' incomes to do just that through reductions in prices? Make finance do this, and the basic problem that causes all the other financial perversions recently witnessed will be eliminated.

Reflect on the following from Cabaret:

Money makes the world go around,
the world go around, the world go around,
Money makes the world go around,
it makes the world go round.

A mark, a yen, a buck or a pound,
a buck or a pound, a buck or a pound,
Is all that makes the world go around,
that clinking clanking sound,
Can make the world go round.

If you happen to be rich, and you feel like a night's entertainment,
You can pay for a gay escapade.
If you happen to be rich, and alone and you need a companion,
You can ring ting-a-ling for the maid.
If you happen to be rich and you find you are left by your lover,
Tho you moan and you groan quite a lot,
You can take it on the chin,
call a cab and begin to recover on your fourteen carat yacht.

When you haven't any coal in the stove and you freeze in the winter
And you curse to the wind at your fate.
When you haven't any shoes on your feet and your coat's thin as paper
And you look thirty pounds underweight,
When you go to get a word of advice from the fat little pastor,
he will tell you to love evermore.
But when hunger comes to rap, rat-a-tat, rat-a-tat, at the window
See how love flies out the door.

For money makes the world go around, the world go around,
the world go around.
Money makes the world go around,
the clinking, clanking sound
of Money, money, money, money,
Money, money, money, money,
Get a little, get a little,
Money, money, money, money,
Mark, a yen, a buck or a pound,
That clinking, clanking clunking sound
is all that makes the world go round,
It makes the world go round.

MONEY, n. A blessing that is of no advantage to us excepting when we part with it. An evidence of culture and a passport to polite society. Supportable property. ------ Ambrose Bierce

WALL STREET, n. A symbol for sin for every devil to rebuke. That Wall Street is a den of thieves is a belief that serves every unsuccessful thief in place of a hope in Heaven. -------- Ambrose Bierce

Socred, are you saying we need local currencies for regional economies to smooth the flow of capital imbalances. I would agree with that... where say the local government issues a local currency supported by the full faith in government accountability and with any banking profits going to reducing taxation. In this way liquidity in the regional market place can be managed regardless of the international finance problems elsewhere? In this way we encourage regional sustainable economies that maximizes local productivity, commerce, and ensures the economy has cash flow at the local level with a true moral market system as long as one trades in the local economy.

I think your explanation of credit and prices is flawed. It assumes that value is not created through production, discovery, or otherwise human effort that creates value which has a monetary equivalents.

What I think you are saying is we need a capacitor to bridge the differential between money supplied to the economy and costs of production and I would argue that we will always have that differential and that is what economics is all about due to the nature of a complex economy.

I admit that the current system is designed to enrich banker multinational control of the economy through paper manipulations that are detrimental to the production economy. Its perversion is obvious to anyone that realizes only 5 banks control 95% of the $500 trillion dollar global derivative market and these are the same banks getting all the bail out funds and their whole point of the derivative markets is to manipulate the production economy with a leverage not available to the real capital and equity holders, but yet provide the ability for the banks to speculate their agenda without using their own capital. The whole system is a fraud starting and ending with derivatives and related paper financial transactions.

When they make paper money on paper money (derivatives) they are in effect making your argument a moot point because the banks are by-passing the central banks in their production of new money (lots and lots of new free money... more than enough to cover 'prices')... the issue is how that money then flows back into our economy distorting everything else and allocated for the interest of the bankers greed and not the general economy. I bet if our governments looked off shore they would find trillions stolen by the bankers in this fashion.

Maybe we need regional currencies that we can trust and count on as a way to protect and ensure liquidity for goods and service produced and traded at the local level? With strong regional economies we could then take on and dismantle the international criminal banking network?

lol nice poem Gus. I like it.

A lot of rhetoric, not much common sense. If income will never keep up with costs, then how come we all have (and expect) so much more in the way of material goods than our fathers? Even on a single income , owning a house (in most places) is the kind of dream we expect to realize well before our folks did.
If any of you actully think that people with RRSP's, etc. invested in the market (through funds, etc.) are not ALREADY aware that they have taken a major hit then you underestimate the intelligence of most Canadians, or the pervasiveness of the chicken Little media.
Bens point is well made, there is, as yet no real recession here (other than by strict definition maybe). We are not suffering, we arent giving up our pets (how pathetic) or cutting out christmas (how sad) or getting therapy for PDS (post downturn syndrome). These are stories from the media, playing up our economic woes, and thereby ensuring that the worst case scenario comes to pass.
Merry CHristmas and a happy new year. Enjoy yourselves, realize just how wealthy you are and stop trying so hard to see the end of the world as we know it.

Damn! I just read mrpg up there, stealing my 'chicken little ' fire!

Ha. No problem caran, more than a few people can see through eagle's rants.

Eagle, whether we have 'regional currencies', or use what we already have, makes no difference. It is not necessary to have a different currency for us to make the very necessary changes I've tried to explain.

We could quite easily use Canadian currency, and all the other existing apparatus to enact such changes, i.e., the Bank of
Canada, data from Statistics Canada, and its Provincial counterparts, and the supervisory bureaucracy that already regulates all financial institutions in this country.

This would certainly be a lot easier than trying to set up a 'regional currency', which would require a costly duplication of existing facilities, and probably wouldn't be "accepted" as money by many people in any case.

Caranmacil wrote:-" If income will never keep up with costs, then how come we all have (and expect) so much more in the way of material goods than our fathers?"

Debt. Let the banks stop lending, for all the various things they now lend to enable people to buy, and just see how long people are able to have "so much more in the way of material goods than our fathers." We're seeing some of that now, in the USA. And 'consumer credit' is still available to the more 'creditworthy' there. Watch and see what happens if it's choked off completely.


Caranmacil continues:- "Even on a single income , owning a house (in most places) is the kind of dream we expect to realize well before our folks did."

I'd question that, Caranmacil. My parents had a mortgage on their home in the early 1950's and the interest rate on it was 3.25% for the full twenty year term. The payment was the same, each month, for the full twenty years. (They paid it off years early ~ couldn't stand the Bank getting all that intertest!) You don't see those kind of mortgage loans now. Some people may be able to build equity by 'flipping' houses in a rising market, and trading down to a cheaper house. but that's another issue.

We tend to forget that new home mortgages are a fairly recent financial product offered by Banks. A lot of housing prior to World War Two was 'company' housing, often provided by the mill, or mine, or smelter, or whatever, that needed to attract and retain a workforce.

And often did so by constructing housing, and then selling it under a private mortgage to the employee-homeowner. Banks were very much restricted in advancing what we now call 'consumer credit' in those days. And in what they could charge in interest on loans in general. They did not like 'long-term' loans, and it wasn't until the inception of CMHC 'government' loan guarantees that they entered the home mortgage field.

We had an entry of the Banks into the 'consumer' credit lending field in general partly because such a move was necessary due to the fact that there IS an ever growing disparity between overall prices, and the overall incomes necessary to liquidate them.

We expected that the shortfall could always be made up by "exports" for which international credit was received instead of alternate "imports". But you can't always 'export' more than you 'import' without your country becoming physically 'poorer'. And that's only the half of it!

Eagleone wrote:-"I think your explanation of credit and prices is flawed. It assumes that value is not created through production, discovery, or otherwise human effort that creates value which has a monetary equivalents."

Yes, Eagle, all those things do have "value", expressed in "monetary equivalents", but there is not necessarily any more "money" itself in existence because of that. That's part of the problem.

The production of "goods and services", and the production of "money", are two SEPARATE processes. There is no certain nexus between the two.




(Eagle continues:-) "What I think you are saying is we need a capacitor to bridge the differential between money supplied to the economy and costs of production and I would argue that we will always have that differential and that is what economics is all about due to the nature of a complex economy."

The best analogy is like a Leap Year. The calendar is like the present financial system. All in all , both serve our needs quite well, but, both are also flawed.

If we didn't add an extra day to the calendar every four years the months would get more and more out of whack with the things in the natural world we want them to represent. And before long our calendar would be quite useless in accurately tracking the seasons, and other things we might want to track with it.

And so it is with the financial system. Each 'cycle of production' is not now fully 'financially' self-liquidating, even though all the 'actual' costs of production are fully met as production occurs. Or it couldn't occur. There is no such thing as a "debt" in nature.

To correct this, in the economy as a whole, we need to augment the "incomes" we are presently paid, which form a PART of the "costs" of each succesive cycle of production, with enough 'money' to make up the OTHER part of those "costs" of THAT 'cycle of production'. Just like the Leap Year, that brings the numerical reflection of reality, only "money" in this case, back into sync with reality itself.

If we don't do this, we'll end up as we are presently ending up. With 'debts' that can never fully be repaid, banks that are scared to lend, and a genuine growing 'poverty' in the midst of a physically possible 'plenty'. There is nothing to lose, except for the Bank's losing the 'power' which their present monopoly of credit has over us. They'll end up losing that anyways, but otherwise not before we've all paid a terrible price in wasted human effort.

Socred, to do that I would think you would need to fire all the economists and the great majority of the people in finance, because they would all be out of work wouldn't they?

I think I see what your talking about, but I can't see how you would do it without heavily managing foreign currency trading and so free trade as we know it would be impossible (not a bad thing either).

My question for your hypothetical Socred, is how do you account for the savings side of things (ie bond holders of treasury?)? Isn't that a factor of your missing gap? If we were to have a financial leap each year to cover the gap then how would one determine the value of that leap... would it be the growth of the economy or a targeted profit guideline set by the government for the overall economy in general acting as a natural pendulum to wealth distribution?

The current system is set up for unaccountable insider trading, speculation troubles, as well as market fixing through currency and interest rate manipulations... all favoring the elite banking class, so any thing that reduces that would be worth considering IMO. I think we will have to see the whole system collapse before we would have a government that would do anything to fix the current problems, but by then they may have already given all their sovereignty away for 'security'... so its catch-22 in a way. Time will tell....

"Free trade" only makes sense internationally in a 'barter' type exchange, where we are exchanging our 'relative surpluses' of actual goods and/or services, for some other country's alternate 'relative surpluses'.

We produce an enormous variety of things in this country far in excess than we could ever hope to internally consume entirely ourselves.

There are other, alternate, things which are produced under the same situation in other countries. It only makes sense for us to attempt to trade our 'relative surpluses' for theirs. Both parties to the transaction benefit in such an exchange, since the 'consumption' of each country involved can then be more sensibly diversified.

The so-called "free-trade" we have today is really no such thing. It is a perverse attempt to dump otherwise unsaleable product into another country's market, NOT to receive an equivalency in alternate goods back from that country, but rather to provide an excuse for the Bank of Canada to do some financial ledgerdemain and create some "debt-free" additions to the Canadian money supply, ("debt-free" in that this money is not "costed" into any production, as are bank loans).

This "debt-free" money allows the 'gap' between overall PRICES of all goods FOR SALE IN CANADA, and the amount of overall INCOMES paid out that need to be available to fully liquidate those PRICES, to be closed.

The questions we should be asking, is "WHY" do we have to do this? And to "WHOSE" advantage do we do it? For in reality it financially impoverishes the country receiving our "exports", while at the same time it progressively enslaves the workforce here. In what amounts to a perverse "race to the bottom", as we compete internationally to dump ever more goods on foreign markets that don't really want them, and have no real way to pay us for them even if they did.

Rather than being able to fully pay FOR what we've done FROM what we've done, which would be the case if the 'figures' properly reflected the physical 'facts', we can currently only pay for what we've DONE from what we're DOING, or are going to HAVE TO DO. Ergo, we are FORCED to try to engage in a phoney 'trade' internationally, for "money", instead of being FREE to really trade internationally for alternate "product".

Eagle asks:-"My question for your hypothetical Socred, is how do you account for the savings side of things (ie bond holders of treasury?)? Isn't that a factor of your missing gap?"
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Yes, it is, Eagle. Both pure 'savings', as in complete abstinence from spending ~ and also where you've 'invested' your savings.

You account for that through what we are currently missing in our overall, or 'macro-economic', national accounting ~ by having a National Balance Sheet complete with a "Capital Account".

Currently, the country does not have its books arranged in the manner that any business would have its books arranged. So we can not properly record and adjust the effects of savings and investment in making and maintaining total 'prices' equal to total 'incomes'. That's not difficult to correct. We already collect all the data, we just don't use it.

Eagleone continues:- "If we were to have a financial leap each year to cover the gap then how would one determine the value of that leap... would it be the growth of the economy or a targeted profit guideline set by the government for the overall economy in general acting as a natural pendulum to wealth distribution?"
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The "leap year" is just an analogy, Eagle. To show that it is no more the 'calendar' that DETERMINES the 'seasons', than it is 'money' that DETERMINES 'physical reality'.

Either we can do things, or we can't. That's the 'physical reality'. If we CAN do them ~ if they are "physically possible, socially desirable, and morally correct" ~completely, actually doable , in other words ~ it is as abolutely ridiculous to say they 'can't be done' because there is 'no money'. Just as it would be absolutely ridiculous to create 'money' to try to do things that physically 'can't be done'. The FACTS should always determine the FIGURES. Not the other way around. Whether we're dealing with calendars or money.

The "value of that leap", as you call it, is determined by equating total "production" over any chosen time period, (preferrably far less than a year~ possibly a week, or a month), with total "consumption" over that same time period.

Physically, the true cost of total "production" is actual total "consumption" over the same time.

That is the ONLY "price" that "production" can be totally sold into final "consumption" at without incurring further, unrepayable debt.

The 'true' cost of 'production is actually continually falling over time, through increases in productive efficiency. But becase the FINANCIAL "costs" of production do NOT properly reflect this, unrepayable debt charges are carried over from one cycle of production to the next. They grow exponentially, over time, until the financial system collapses.

As we continue to displace labour, and labour incomes, with 'capital costs' for increasing productivity, this accentuates the problem. Earned incomes, overall, are continually FALLING in ratio to the overall costs of production being impressed into prices at the point of final retail.

This is true even if those who are still working receive large pay increases for their extra productivity, since those pay increases just flow through and add to prices.

To correct the problem, we have to augment CONSUMER incomes with sufficient new credit ("money") to bring overall prices into a proper nexus with overall incomes. We can do this by selling product at retail for less than it's financial costs by 'rebating' consumers a percentage of the price they pay based on the same percentage overall production exceeds overall consumption by, over whatever time period we choose.

Eagle wrote:-"Socred, to do that I would think you would need to fire all the economists and the great majority of the people in finance, because they would all be out of work wouldn't they?"

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I wouldn't dispute that at all, Eagle. We should note that both Stephen Harper and David Emerson, and a number of others who've stode the "corridors of power", (supposedly, anyways)in recent decades have been "economists".

I'd like to say that perhaps they should've studied "accounting" instead. Because that's what really seems to "make the world go round".

But then we've got Gordon Campbell, who must have done just that to get his MBA degree....

Kind of makes you wonder, sometimes.

Eagle wrote:- "I think we will have to see the whole system collapse before we would have a government that would do anything to fix the current problems, but by then they may have already given all their sovereignty away for 'security'... so its catch-22 in a way. Time will tell...."
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It's unlikely the "government" would ever do what it should do even if the system did completely collapse, Eagle. The people, and there are an ever growing number of them, who are out to "get rich quick" through 'day-trading', or 'speculating in real estate', or 'futures contracts', or are convicned in their minds that somehow some similar scheme they're into will enable them to prosper through "buying low, and selling high", are a much more vocal group than those of us still trying to glean an income as a result of actual effort.

They'll have the ear of government, the upper echelons of them, and the 'wannabes' below them will back them up. They cannot discern the difference between the 'quantity' of dollars in their hands and what each one of those dollars will actually 'buy'. So they will, in their sublime ignorance and greed, continue to debase the very currency they crave until they have it all, and find out it will buy them nothing.

Socredible: houses in the 50's were how big as compared to now? I dont see a lot of houses being built lee than 1900 squeare feet these days (though there is the question of counting basement areas in some cases. I consider that buying ones own house (asopposed to company housing, etc ) as proof that we are better off. My dad bought his house in 1972 and paid it off in 25 years. His dad inherited his but his uncles did not manage to buy homes at all. I bought a much larger place here in PG without much problem (certanly less than my father had. Both he and I are average for our cohort. I expect my kids will buy even sooner than i could. I am not talking 50 year mortgages in Vancouver. For a PG home, if you have a decent job, you can swing it. And it wont be a 700 square footer.
At the same time, people own two or three cars, all of which run, most of whch are fairly new, and most of which have more luxury features than my parents couldhave imagined. Certainly a lot of these cars are purchased on credit, as are the big screen TV's , stereos, ATV's , Sailboats, cottages, yearly holidays overseas, etc. However, the average debt figures for canadians do not reflect much more than what one would own on , say the main vehicle. The rest is owned and enjoyed as wealth. When i was a kid in a well to do neighbourhood in Kelowna , only the rich could afford a holiday involving air travel every year. Now people fly away each winter like it is a right.
I suppose my point is that you are not going to get much support for the idea that the system is on the verge of collapse and that drastic action is required when most of us are living a lifestyle unimaginable by any previous generation. Moreover, most of the cooler heads out there can remember other doom and gloom scenarios that went, well no where. I for one suspect, that our current 'crisis' will soon be remembered as just another recession.