When I read these articles I can't help but wonder at whether Peter Ewart has ever tried to "value-add" anything himself?

Has he ever used his own money, or gone out on a limb and borrowed some, risking all his personal possessions as collateral in the process, to engage in some actual "value-adding"?

Realizing full well that even though his new value-added venture may be an incorporated company, the concept of "limited liability" has to be signed away by a "PERSONAL guarantee" to get the loan?

That if his foray into the world of value-adding ends up with him having a plant that adds nothing more than COST to his chosen product, and if that COST can't subsequently be fully recovered in the PRICE he gets for it, he realises he faces not only business, but PERSONAL bankruptcy, as well?

That knowing this, he'd still risk it all, and put his, or his Banker's, "money where his mouth is", so to speak, so certain that "value-added" was the way to go, and so confidant that, despite the litany of failed attempts by others to do what he's now going to try to do, HE can make it work?

Now I ask you, Peter, if you are so sure this is the correct direction in which we should be moving, IN THIS WORLD AS IT *ACTUALLY* IS, then why don't you, and all the others who share your confidence in "value-adding" do just that? Go do some yourself.

Either 'individually', or through pooling your financial resources and co-operatively sharing the risk?

Being completely cognizant that if the venture doesn't immediately return the kind of "value" you hope to "add", you might just have to reach ever more deeper into your OWN pockets to cover the losses until it does.

The same as all the rest of us who ARE actually in business, on the scale you imagine business should be conducted at, have had to do.

For any kind of "value-adding" to work, two things have to be present. The first is an ongoing ACTUAL, not 'imagined', CONSUMER DEMAND for the product you hope to produce; and the second is a way to make that actual demand, if it exists, EFFECTIVE.

You have to be able to get a Price for the product that covers ALL its Costs, plus an additional Profit, or you've added no "value" whatsoever.

Unless you imagine there is some "value-added" in continually WORKING to lose money.

Personally, I can't imagine just what the "value" of that is at all ~ you can achieve exactly the same result doing nothing. And save the trees, the energy, the environment, and everything else those who are always bitching about man's use of these things want us to 'save'.

Assuming that there actually IS, here, or somewhere else in the world, a real CONSUMER DEMAND for 'value-added' wood products and other like manufactures from BC, then the problem is just HOW do we make that demand EFFECTIVE?

It certainly ISN'T going to be accomplished the way we're trying to do that now, by building 'super-mills' to "capture" foreign markets.

Nor will it ever BE ABLE to be done, so long as ALL Costs have to be recovered in Prices met solely from current Incomes which are only a PART, (and an ever declining PART), of those Costs.

The foundation laid in this article are very romantic. In fact, it deviates from the facts, in my opinion.

The First Nations most certainly had to live off the land. That is the nature of hunters and gatherer societies the world over. Did this make them special or unique in any way? I cannot see that. The “world view” which was available to them was very local due to circumstances.

The newcomers were first explorers whose primary objective was to locate fur and trade routes for the companies they worked for. That “industry” was an extractive one which provided raw materials to the clothing industry in Europe. THAT was the primary purpose of the “founders” and that continues as the primary purpose of the activities of this part of the world, this part of the country and this part of the province to this day.

In a nutshell, we have been living off the fat of the land.

In the past, when that fat no longer existed, hunters and gatherers moved on to new locations that had not yet been picked clean. So did those who followed. Gold seekers built communities such as Barkerville in remote locations. The gold ran out. The towns were generally abandoned. Many other mining towns grew and died for the same reasons. We should know those stories since we still see that happening around us to this day. Communities that grew up around sawmills saw the same thing. A mill along the railways built to extract goods from the hinterlands shuts down and the community shuts down with it. The line between here and Jasper is dotted with them.

The building of the pulp mills here was probably the last major attempt at extracting product from this region. What was once the largest single concentration of pulp production facilities in the world made Prince George the fastest growing community in Canada for up to a decade. Population projections by StatsBC in the mid 1970’s were for a city exceeding 200,000 within 25 years. The projections by StatsBC for 2035 are for under 100,000.

What a difference a generation makes.

Extractive communities, as hunter and gatherer communities, have a finite lifetime. When the resources run out, the communities die. Even if one hunts for more of the same resources and finds them, the life of the community is only extended.

Those extractive communities that have survived the depletion of the founding resources have created other opportunities typically based on human resources rather than land based resources. They have built a critical mass of interdependent manufacture and trade of goods and services which service the population base and, through developing a palette of specialty goods and services in excess of those needed locally, have plugged into the regional, national and international marketplace. As a result of their success, they have been able to attract the very “resource” they need to survive – people.

The world presents us with a shifting reality. What was once thought to be wealth creation enterprise no longer is. We no longer need the human capital we once needed to farm, to extract resources, to manufacture those large item purchases. Where we do need masses to produce consumables we have shifted the manufacturing to low cost labour countries. Even that notion is about to show its cracks and provide us with new opportunities.

BUT, we have to be smart enough to understand that shift and to see the opportunity when it happens.

We know how to explore. We know how to mine for minerals as well as lumber. We can keep on eking out a living using those tools for a while yet. But if we wish to take the next big step and assure a continuing place in the urban geography of BC, we have to learn how to explore for opportunities that more successful communities than ours have been able to take advantage of for some time.

Sink your teeth into this article in the G&M.
http://www.theglobeandmail.com/report-on-business/chinas-loss-is-thunder-bays-gain/article1571068/?cmpid=rss1&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheGlobeAndMail-Business+(The+Globe+and+Mail+-+Business+News)

In my mind, the key thought expressed in that article?

“If the yuan continues to rise as China responds to U.S. pressure, the Chinese advantage could erode, allowing even more jobs to migrate to other regions, or back to North America, says Prof. Chan, associate vice-president of international affairs at McMaster.”

The question I have to ask after reading that article is this:
Why is Mr. Metcalf picking up his stick production and moving it to a new factory on the outskirts of Thunder Bay as opposed to Prince George? The company, Global Sticks, is based in Vancouver. He started to look for alternative plant sites in British Columbia, Siberia, Serbia and Ukraine. On the Internet, he learned a place called Thunder Bay boasted an abundant supply of white birch. We have birch waiting to be used but no one is looking at it as a resource to be used. And let us not forget, Vancouver and Prince George are the cheapest place to do business according to KPMG.

I find it quite odd that socredible seems threatened by the mere concept of value adding of wood products?

I tried in part 6 to explain the other realities to the current "all eggs in one basket" approach to manufacturing and why we need this changed. Again I say that diversification of products and ownership is a far better approach than simply demanding a prescribed level of "value added". Governments get very confused by this term and how it can be achieved.

People can look at this issue from an overall "public's best interests" and necesary future adaptation or they can peek through a knothole experience of their own past and preach it is hopeless.

All types of boats have sunk from the very largest to the very smallest and yet people seem to simply take for granted that the largest boat must be the best boat. Take that theory one step further and you get the infamous reliance on the presumption that the great ship is "unsinkable". If the great ship is unsinkable then why would you need small life boats? don't need those little boats as we are told?
That's the boat WE ARE NOW IN!

Does the B.C. Interior have an abundant supply of suitable white birch? If it doesn't it would explain why Ontario was chosen for the mill's re-location.

"Nor will it ever BE ABLE to be done, so long as ALL Costs have to be recovered in Prices met solely from current Incomes which are only a PART, (and an ever declining PART), of those Costs."

I look at it quite differently. Incomes continue, in the final analysis, to be the only part of the cost of any good and service. That income may be in the form of wages/salaries, profits, and interest.

There is no social or economic value to oil or any other mineral in the ground, other than the value we make of it whether the end product is a fuel, a lubricant, a plastic, a transmission cable or whatever. The same goes for timber, other than because it is a living thing, there is an ecological value in that case.

It takes labour to explore, to plan, to extract, to build the machinery that extracts, to transport, to build the transportation systems, to market, to house the people, to feed the people, to clothe the people, to provide transportation for the people, etc.

The list is actually endless and the further you get away from the more central components, the closer you get to components which are so diverse in their market reach, that a slump in one of the many industries they service barely affects them.

It takes a major shake-up in the entire world-wide integrated social and economic system, as we have been seeing and continue to see, to touch those industries which are lucky enough to have a very diverse market.

The mineral industry, as with most industries these days, is a clustered industry. A limited number of communities can be close to the extraction part of the cluster. That would include us to some extent, although Tumbler Ridge is much closer than PG is. A much larger part of PG’s industry has become the service cluster to several primary industries. However, that service is limited to immediate needs and most of those services are marketable only in a local context. Thus we do not manufacture equipment that is sold on a national or international market. We acquire it, store it, re-sell it, and maintain it. Sweden, Japan, Russia, Denmark, and a cluster of other countries manufacture the big ticket items.

Could we compete in that market?

Should we compete in that market?

Generally speaking, if we answer yes to the first question, we would actually be saying that we could buck the Canadian trend. We would not only have to overcome local psyches, but also national. We have no national strategy to support research to any extent. We have no national strategy to support particular industries to any extent in order to compete with other countries. Our national approach is typically a knee jerk reaction as a result of lobbying by industry.

As for the second question, should we compete in other portions of industrial clusters, I think if we want to solidify our place in the world, we not only should, but we will have to. The time when we can rely on our resources is coming to an end. Our main saviour at this time has been the Tar Sands. We have a petro dollar. In addition, our other extractive industries have been propping up the dollar. We are seeing a nose dive of that dollar over the past few days because the market perceives that the need for our resources will diminish unless the world economy picks up again. The US$, on the other hand, is the one that people flock to, despite the fact that they have to rely on resources from other parts of the world more and more.

So, should we add value to the products we produce? We do that in virtually everything we do, otherwise we would not survive. Diversifying what we add value to is the important thing. Why? Because we must broaden our markets in order to flatten the curve of our economic peaks and valleys.

If someone was TRULY adding value to wood products I'd have no feeling of being "threatened" by that at all,
Woodchipper. In fact, I'm all for it.

But when value-added plants are built, subsidised by public funds, simply to provide "employment" FIRST, with little or no consideration of whether the "products"
they'll turn out are needed or wanted ~ with that being a SECONDARY consideration at best ~ then, yes,
I do feel "threatened" by that. And so should anyone else who is actually "value-adding" in the true sense of that phrase.

For when you start to "commoditize" what had been "specialty" products, artificially that way, you'll destroy the genuine value-adder by replacing him with a phoney one, who'll only in turn subsequently fail, too.

There are many ways in which a government could support secondary industries without directly subsidising them through the public purse. Ways which would be beneficial to all.

Gus:-"I look at it quite differently. Incomes continue, in the final analysis, to be the only part of the cost of any good and service. That income may be in the form of wages/salaries, profits, and interest."
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Yes, that's true, Gus. But you're leaving out the element of TIME. To say that the 'costs' of some product were distributed as 'incomes' AT SOME TIME, (which they were) does NOT mean that the 'money' that made up those 'incomes' is still in existence AT A DIFFERENT TIME, when those 'costs' are finalised as 'prices'.

Most 'incomes' are spent as received.

Whereas 'costs' are continually carried forward into 'price', and as production becomes more complex this process is continually lengthened and broadened through increasing divisions of labour.

That there IS 'money' to meet those 'prices' AT THAT TIME, often
means that THAT 'money' has created its OWN 'costs' that will have to subsequently be liquidated at some FUTURE TIME.

If an economy were permanently in a condition that economists call "quasi-steady state expansion" this would never be any problem. What this means is that everything in the economy is expanding through time exactly parallel to everything else, separated only by the actual time it takes things to happen.

But in EVERY modern industrial economy there is a deviation from a condition of "quasi steady state" through ongoing labour displacement. And what this means is that overall labour 'incomes', still the main source of 'incomes' for most people, are FALLING in ratio to the overall 'costs' of production continually being impressed into 'prices' at the point of final retail.

This being so, those 'incomes' can NEVER fully liquidate the 'costs' they were once were. Exponentially increasing debt currently makes up the balance of this gap, while it can.

This is a tremendous waster of the world's resources. Since all 'money, ultimately, is only currently issued as debt in respect of Production, never as a grant in aid of Consumption, this FORCES the continual production of superfluous and completely unnecessary products in order to distribute enough 'incomes' to buy the products that are needed and wanted at the cost of their making.

Keep in mind that in any 'creditary' economy ~ and all modern economies are creditary~ Bank loans create deposits, and the repayment of those loans cancels those deposits.

When a period of expansion takes place in the economy there is an increase in Bank credit being issued as loans to fund that expansion.

This 'credit' is taken back in 'price' of goods CURRENTLY on the market, and because this 'credit' precedes any MORE goods on the market it RAISES the prices of goods already for sale. Inflation, in other words.

This recovers the new credit, ('money')prematurely, and sends it back to the Bank for cancellation at a faster RATE than the 'costs' THAT 'credit'was issued in respect of can be cancelled through 'price' when THOSE goods come on the market, creating a disparity between overall 'prices' and 'incomes' available to meet them.

It is a good sign that you are all for "value added" socredible, because what you are actually criticising is the way government ONCE acted/attempted to stimulate this sector, IN THE PAST.

But just think about this critisism for a moment and you would certainly know that all sizes and shapes of the forest industry have been subsidised in the past.
Not just the value added companies which produced products that MIGHT become a commodoty, but blatently subsidising multinational companies who were manufacturing products which were already established as the most basic possible commodoties.

The complaint you have socredible is based upon a totally inept attempt to appease public demands for changing our industry from a commodoty only agenda to that with a larger group of owners making products which typically sell for more,which employ more workers per unit of input (our limited forest resource)and diversifying OUR economy. That public demand actually makes sense to the wellbeing and sustainability of our economy.

The second issue you frequently raise is that a creation of a value added facility must also involve making a value added product which no one wants and therefore WILL NEVER WANT.

How do you suppose that new products are to be developed, markets be established, when nay sayers and governments discourage and actually prevent such entrepreneurs from doing this?

Since you claim to know this dilemma which involves financing a new business which creates a new value added product type, perhaps you can explain to me how you would convince a banker to lend you money when governments obviously and blatently subsidise only the biggest comodoty producers? OK, so you didn't get that loan to build a proper facility and it isn't quite efficent enough and it fails before it can perfect the process and develop its markets and prove its viabilty.

Governments rely on this outcome to justify thier approach to perpetuating this cycle and blessing the multinationals with anything they want, which by the way is ALL OF IT. By the way, why do you think we have had a softwood war with the US for all this time? They see what happens in Canada and so do the bankers and some of the public and yet our governments still refuse to level the playing field and actually serve its people instead of a few corporate giants.

There's a lot of truth in what you're saying, Woodchipper. And, though it may surprise you, I do agree with much of it. I, too, dislike the continually increasing concentration that has taken place in the forest industry the way it is evolving.

But you're looking at it from much the same perspective and level that most people, like Peter Ewart, are also looking at it, and trying to find a solution there. At what we might call the "micro-economic" level.

Which, unfortunately, is just NOT where one is going to be found. Or we would have found it by now. In my opinion, we've got to go up a bit, to the "macro-economic" level FIRST, and makes some needed corrections there, in the WHOLE economy, if we ever hope to see the kind of industry here that will be both
sustainable and better serve all our needs.

I'm not sure if you can call it subsidizing the value added sector if you give them tax incentives as an industry province wide that generates economic activity employing people, which in turn spins off secondary sources of revenue for government that aren't directly measured in the income statement of the company itself as a 'profit'.

I think Peter is saying government needs to be more involved in regulating the use of Crown resources as per adding value to the resource and incentivizing the economics of any new industry that could generate value in more ways than just corporate profits for foreign shareholders and bankers.

Building an economy is much different than building an individual profit center and much more complex with many more integrated parts (ie taxation, regulation, infrastructure ect). Basing an outlook on a single plant and its products, and then comparing that with the easy profits of a monopoly doesn't make the argument against a national value added strategy, but rather is limited in scope to the company itself, which based in isolation might have merit, but when brought into the great context losses all its merit.

IMHO

Agreed we need to be looking at the macro economic level and not so much at the micro economic level, but that macro should also include government plans for the use of Crown resources, as well as taxation that doesn't smoother an industry needlessly from an industrial sector level.

Mackenzie might be a good example of the integration of industry and its knock on effects.

Once Canfor Mackenzie (saw mill) shut down that was the end of their local pulp mill. The pulp mill had chip supply contracts from the days when they had more control over the saw mills, and thus the saw mills were getting a raw deal on their chips, and the pulp mill was making all the profits.

The second the saw mills shut down the pulp mill assets became worthless because of the specialized nature of the pulp mill, which limited its flex-ability in options... regardless of how efficient and profitable the operations of the pulp mill were.

The Mackenzie pulp mill is a specialize pulp mill that is designed to produce high quality paper like toilet paper and film paper ect. A value added pulp with a lot of potential. The problem is its a mill that can't efficiently process the core of a raw log due to its specialized process that is unlike the other pulp mills in the north, which can in fact run their production with a raw log core unhindering production.

The biggest mistake the Mackenzie pulp mill ever made was when they removed their rail line access for bringing in long haul chips (ie Houston or Smithers today), and based their ongoing reliance on chip contracts with local saw mills that they inherited. They were getting the split off product at a waste product prices monopolizing all the profit value from the commodities they purchased from the local saw mills. This was short term financial harvesting of the company by foreign financiers at the long term viability of the mill.

Canfor saw the opportunity and put the knife in deep knowing full well they were in the drivers seat once the economic crisis hit and the Mackenzie pulp mill had a huge build up of inventory they couldn't get out to market because of CN rail car shortages that essentially tied up all the pulp mills working capital in warehoused inventory.

The Mackenzie pulp mill called their bluff for a short time with a raw log chipping operation to supply them with chips to keep their operations going. They could not process the log core chips from the raw log and it sealed their fate as an ongoing operation. Once shut down and sold there was no way Canfor would honor prior chip supply contracts and will be likely the last one to agree to supply the pulp mill in the future (on Canfor's terms this time around).

The Mackenzie pulp mill is entirely reliant on the outer chips of the log, thus the chips left over from the lumber milling process. Its likely why they have a couple of huge stockpiles of chips sitting idle in Mackenzie today (raw log processed chips).

Going forward this puts the new owners of the pulp mill in a bit of a dilema. They need the saw mill chips to stay running, but Canfor could just as easily ship those chips to their pulp mills in PG unless they get the price they want for them. Pulp prices are good, but so are lumber prices right now... its a game of economic chicken so to speak, and the danger is the saw mills in re-balancing the financial transfer pricing arrangements kills the golden goose by demanding to much... but make no mistake Canfor holds the cards in this arrangement and they will be setting a transfer price that not only makes their saw mill profitable even in bad times, but will probably soak the Mackenzie pulp mill for a premium over what Canfor will pay for wood chips at their own mill due to the limited options the Mackenzie pulp mill has? This could have a spin off effect of supporting pulp prices?

How this plays out will be interesting and puts a new twist into the 'value added' sector debate IMO. Obviously the people, citizens, and communities don't have much of a say in this, as its corporate brinksmanship on a grand scale... one can only hope that people in positions of authority realize what the ramifications of their decisions have on the other stakeholders at the table?

BTW The Mackenzie Pulp mill took its first b-train loads of sawdust today and the word is they may try to open as early as late June pushed up from this fall. That's good news not only for Mackenzie, but place like Chetwynd and Fort St James as well for the split off product opportunities of all their saw mills that will be supplying the pulp mill with its commodities (chips, hog, saw dust ect)... mills that rather than being strangled by bad contracts are able to enter into fresh contracts that reflect the real value of their split off products thus in a way subsidizing their lumber products....

Time Will Tell

Woodchipper, just to let you know, I am still involved in "value-adding" myself, and my Firm also sells lumber to several other individuals who are taking the process even further.

So I'm hardly "anti" value-adding. I just don't see it as the great panacea for all our forest industry's ailments, though. Or even most of them.

In my business, we purchase the logs that would be 'problem' logs to larger commodity lumber, or high-end specialty lumber manufacturers. Some are too low grade for them; some have defects that can't be determined with any degree of certainty by a scaler; some have been mis-manufactured by the logger, bucked wrong, etc.; some are minor species, like western white pine. All are logs which would be difficult to fill most specific lumber orders from, except possibly studs ~ and there's plenty of better material around to make studs out of faster and cheaper.

We cut these logs "on spec", into whatever we think they'll best make that might sell. That's really the only way they can be successfully cut. Experience has taught us what to make, and when, and what not to. Even so, it's a risky business with nothing sure about it.

We buy this material on a payment for actual useable lumber recovered basis, rather than by so much per cubic meter. This ensures that the provider gets paid for what is actually there, and also that we are not paying for material which turns out to be totally useless for lumber.

The suppliers still do have a cubic meter scale to relate our lumber recovery to, only they are paid strictly on the latter.

This involves having a high degree of trust on their part that we will not "beat them", which we'd be foolish to do in any case, since for what we're doing to work, long term, everyone has to be able to make a buck at it.

We have regular suppliers with whom we've dealt for years, including in the the past two major companies, Crown Zellerbach Canada and Weldwood (both now defunct ~ but not from dealing with us! ~ but rather victims of 'corporate concentration'.)

(Or maybe, 'disintegration' in the case of Crown Zee, since virtually everything it once owned has been spun off in a multitude of different directions. To no apparent advantage to anyone, so far as I can see.)

Both, we found, were fine companies to deal with, and the people involved on the ground on their side dedicated to achieving the best utilisation possible of wood that would otherwise be waste. Likewise our current main suppliers, who are not major companies, though one is associated closely with one

Occasionally, in both these former major Firms, this resulted in their local management having to justify the actions they were taking in selling logs this way to the "bean-counters" at corporate headquarters. Who didn't always seem to be immediately able to realize there's a "physical" reality that "figures" with that $ sign in front of them were based on, but they soon learned.

The people who further value-add our product are not people you'll ever see nominated for a "Business of the Year" award at the local Chamber of Commerce. They are all "owner operators", who are very inconspicuous, purposefully, in what they're doing. They've found a niche, sometimes one which is quite lucrative, in other cases not nearly so, but obviously still adequate to keep going doing something they like to do. They don't crave notoriety, nor competition. Nor the meddling of the bureaucrat.

In a few cases other members of their families are involved in their production processes, or in peddling their products. Mostly, though, they work alone. They advertise very little, if at all, and depend on "word of mouth" from contented customers to bring them more business. I would wager there are probably hundreds just like them all over BC.

A few have tried to expand, and hire employees. Far fewer have ever succeeded. The problems encountered going this route simply weren't worth it.

For value adding to work in a setting involving waged labour, in my opinion, you have to start with something that has little or no value in the first place. It is extremely difficult to value-add any product that already has a modicum of value in it ~ especially when using employees.

All too often you'll end up with value-subtracted. And the further up the supposed chain of value this occurs, the greater the loss. For often what has then become essentially a 'waste' product when it's ruined near the final stage of the process, loses you all the 'cost' you've put into it up to that point.

Unlike the simple, lowly 8' 2x4, which can always be re-manned back to a smaller size, many high end value added items are simply value-less waste when the inevitable fall-down occurs late in the process. The question then becomes, "Can you get enough 'extra' out of the products that have survived the full value-added process to cover their costs and also the costs of those that haven't?" Too many times the answer is "No."

First this question of macro OR micro economics as which holds the key to redirecting our collective course.

Dismissing the improvements possible via a "one-off" micro level effort of an entrepreneur might make sense until you factor the possibilities of numerous such efforts being operated AND MOST importantly the aggregate potential should all these be operated in an environment which actually supports this type of localised small/medium business model.

I agree this isn't the whole game, but it is an important part of it.

"Gus. But you're leaving out the element of TIME"

I have not left out TIME, in my view. When it takes several years do develop a mine, even reaching into a decade, and then get the results incorporated into a car, and it takes 80 years to get to the next rotation of interior spruce, I most certainly have not left out TIME.

Money is an accounting tool. It keep an account of something that I might pay for through the effort of labour (INCOME) that is given to someone else for their use, and I get a promise in return that is honoured by the government if it is in money, or honoured by an organization if it is a cheque or other form of tender or guarantee.

When I "spend" it, it is not lost. I get something in return (also called an INCOME)and it keeps on moving through the system. In other words, there is the EXPENSE part of the ledger and the INCOME part of the ledger.

If I make smart or lucky "purchases" or "investments" with my money, I benefit more from the EARNINGS than those who do not make smart purchases and investements.

Then there are the "intangibles". Part of my INCOME will go to pruchasing those things which keeps me on this earth - food, shelter, clothing, recreation, common society costs (taxes to governments, condominium fees for strata residents, etc.) Those are some of the social benefits that are difficult to quantify and, in some cases, out of the control of the individual.

It is, in my opinion, in that area of social COSTS and VALUES that the main changes have been happening throughout history.

The amount of time we are willing to give up in order to have someone serve us a drink on some far away southern island has changed considerably over the centuries. Two weeks' gross INCOME of the average wage earner in PG will get you there. it is accessible to a large percentage of the population if they wish it. That was not the case 50 years ago.

Has that INCOME been lost when spent? Lost to you, yes. It has been spent. You have received something in return. The INCOME has been passed on to others for their redistribution which my include putting it in a sock under the mattress.

Socredible, I think the problem is that you are not keeping an accounting of all things and may not even wish to. In my opinion, you have substatnial "shrinkage" in your system of cost accounting.

Let me say something about the concept of "VALUE ADDED" in relative terms.

In relation to a product, value is added along a chain or through a cluster to a final user.

In the case of a hamburger it is relatively easy. The end product to the literal consumer is the food item. In a sense it ends when you have eaten it and have received the energy as well as the enjoyment of eating it and possbily even the social interaction that goes along with the act of eating with others around the tabel. In another sense it ends when you dispose of it down the toilet and it flushes to the sewage treatment plant.

Actually, it does not end there. You are paying to operate the disposal plant through taxes or utility user fees in that instance. If dilution and natural biological processes take care of the rest, then the earth and other living organisma remove their nutrients and the cycle continues. If that does not happen, then there are cleanup operations which have to be paid for by whoever is found responsible.

Back to the hamburger. The final COST of the hamburger is made up of probably hundreds of players along the way. When you cook the hamburger at home on a grille, it is fewer than when you buy it from a fast food chain or from a local family restaurant. The actual cost and participants in the INCOME along the manufacturing chain could be spread all over the world in either case.

I believe the VALUE ADDED we are really talking about and should be really interested in is the part thi community and its region plays in adding value.

While waht some may be looking for is some new product at the end of the product chain, what I think we should be looking for is how to be included in more components of the production chain. How to develop some of the parts of the cluster here in Prince George and region.

That means understanding how various clusters work, including those that may not be associated with raw products traditional to this region. In fact, that may be the most lucrative areas to look at.

So, I think our job is not so much to see what more we can do to add value to a 2x4, although I am not saying we should stop doing that, but to relate the assets we have here to opportunities in joining production clusters in industries we have not been involved with to any great extent.

Gus:-"Has that INCOME been lost when spent? Lost to you, yes. It has been spent. You have received something in return. The INCOME has been passed on to others for their redistribution which my include putting it in a sock under the mattress."
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A given sum of money can transfer many goods or services from person to person as it circulates throughout the economy, but it can only liquidate ONE set of 'costs' equal to itself. And it does this when it returns to the Bank from whence it came.

If a sum of money on it's journey from the Bank, through the costing process of industry returns to the Bank at a faster rate than the goods (or services) its creation has enabled are actually CONSUMED, you then have a situtation where there are goods "on the market" with a PRICE-tag in 'money' on them, but no equivalent amount of actual 'money' available to the public to meet that price.

Unless someone borrows some more money ~ which, because all money, even so-called Consumer credit, is ultimately issued for PRODUCTION as a loan, never as a grant in aid of Consumption ~ creates ANOTHER set of COSTS, which then have to be liquidated the same way.

As I said earlier, in a hypothtical "steady state" economy, or an actual "quasi steady state" one, that is always in expansion, this presents no real problem.

But when the modern economy deviates from that condition, primarally through generic "labour displacement" and a consequent loss of incomes to Consumers, it matters a great deal. For the gap between prices and incomes must then be bridged by exponentially increasing debt, which cannot in its totality ever be repaid. And that's where we are today.

Define your use of the word "Bank".

My assumption ..... this is the bank of which you speak.

http://www.bankofcanada.ca/en/index.html

In which case you will have to re-write your rebuttal ....

A "Bank" is a manufacturer of fungible "financial credit", Gus. ANY Bank, not just the Bank of Canada. New credit is created when ANY Bank credits any deposit account through its lending or spending, for any reason.

Loans create deposits, as does the purchase of securities by the Banks, as does their spending for any other purpose, such as operating expenses, including paying their customers interest on their deposits.

The repayment of those loans, or sale of those securities by the Bank, cancels those deposits.

Money does circulate, but it more importantly ebbs and flows, as there is a flux of Bank created funds distributed through the 'costing' process of industry to initiate and facilitate Production, and a reflux of those funds flowing back to the Banks, and to extinction, as that production sells and becomes Consumption.

The dynamic nature of this process allows interest to be taken in subtrahend to the continual flow, WITHOUT, as is often wrongly assumed, increasing debt.

The public often harbours a misconception about 'fractional reserve' banking. It believes that if the Bank's reserve ratio was, say, 10%, then of every $ 1,000 a customer brought in for deposit, the Bank could loan out $ 900, retaining the other $ 100 in reserve for meeting its requirements for cash.

This is NOT the way it works. When
$ 1,000 is deposited in the Bank by a customer, the Banker looks at what that sum is 10% OF. And on that deposit base, $ 10,000 in new credit can then be created and loaned out. Banks NEVER lend their customer deposits, with the very rare exception of loans to other Banks. These deposits are their LIABILITIES, and you can't lend a liability.

When a Bank makes you a loan, it is exchanging your personal creditary instrument, your Promissory Note, a contractual obligation calling on you to pay the face value of the loan, plus specified interest, on or over some FUTURE time, for a deposit in the face value of the loan accesable by you NOW through the Bank's creditary instruments, including, if you so desire, cash. The depoisit so created is the Bank's LIABILITY, your Note received, its ASSET. Its' books always balance.

Banks also make money on the insurance side creating money out of nothing with derivative scams that get bailed out by AIG insurance paid for with government debt. The shortage you are talking about in the monetary system is made up in the slush funds given the banking elite through their off the record derivative contracts... this then is laundered into the general economy as legitimate currency further devaluing the currencies true value.

In that case you and I fundamentally disagree.

I think that Clifford Douglas' theory has some merit to it, but it fails in its full application to the real world.

In my opinion, the notion that all money originates as debt is a fallacy. The other fallacy, as I see it and as evident of what I have written above, is that B payments are not considered as income as A payments are.

There are many other theories which explain the situation we find ourselves in at the moment which, of course, is not all that unique. We have had a pretty good run since the end of the depression and the second world war.

Quite frankly, I found the local impact was worse in 1981 than it has been so far. Of course, we may not have seen the end of it yet.

Nice discussion, but I think it might be more productive if we discuss how to improve the distribution of purchasing power in a world which has abundant goods to give most people living in industrialized nations a good living standard.

Eagleone ... please do not be offended, but is there any way that you can try to remove words such as "scams", "slush funds", "elite", "laundered" from your posts and replace them with less politically charged and more objective language?

I find that they add nothing to an argument and suspect they they tend to turn off those people you may wish to convince that your arguments have substance. :-)

Try this:

"Banks also make money on the insurance side creating money out of nothing with derivative funds that get bailed out by AIG insurance paid for with government debt.

The shortage you are talking about in the monetary system is made up in the funds given the banking establishments through their off the record derivative contracts... this then is injected into the general economy further devaluing the currencies true value."

The notion that ALL money originates as 'debt' IS a fallacy, Gus. When a Bank credits your deposit account with interest it is creating "debt-free" money.

When it spends for its operating expenses, which start the moment it opens its doors, BEFORE a single dollar in interest has been received from any loans it has made, it's creating "debt-free money". The system is creditary.

In the economy as a whole, in any period of economic expansion, the statistical Firm (the collective average of ALL Firms) is always spending MORE than it is receiving back in Sales at any SAME moment in TIME, yet in such a period the statistical Firm is also booking a 'Profit'.

This is made possible by the rules and conventions of double-entry cost accounting, which delays, in accounting, through EXPENSING *today's* spending against *tomorrow's* Sales, which are prospectively greater than *today's* Sales as a result of the spending for expansion. In a period of economic contraction this process reverses.

There is really no physical reason for a period of economic contraction, unless more people are dying than are being born, or the actual resources needed to sustain life run out.

Many resources have temporarally 'run out' at various times and various places all down through history. But the effects of this have been greatly modified in the modern national economy, taken as a whole, by ongoing scientific discovery and invention.

An example would be the large long timbers which used to be a great BC export item in the 1920's and '30's. "Jap squares", as they were called, though Japan wasn't the destination of all of them by any means.

Some mills could cut timbers up to 36 x 36 inches in dimension, and 110 feet long. The trees that could make such timbers are largely long gone, or off-limits now in Parks or other reserves.

But that doesn't mean large long "timbers" are no longer available, for we've developed glu-lam beams, and subsequently, parallam ones. And they could be made in even larger or longer dimensions, if necessary, than the 'natural' ones could.

There are probably thousands, if not more, of like examples in virtually every area of human endeavour. Clifford Douglas recognised that, as a professional engineer by training. He also recognised that 'money' was simply a way by which we deal with things.

The A+B Theorem is what is called a "reductio ad absurdum" argument, Gus. It is an "accounting" theorem, not an "economic" one.

socredible, you should consider your own column here at Opinion250.com .

At the very least you might consider signing off on some of your numerous and lengthy posts, especially the ones that attack the opinions of those who do identify themselves. That would make for a better experience at this end. IMHO it is not a debate when one hides behind a nickname. It would do much for your credibility (pun intended)if you would identify yourself once in a while.

So incredible... I do not usually read beyond your first post anyway.
Good luck with your business plan...
Sincerely,
John Grogan

socredible, you should consider your own column here at Opinion250.com .

At the very least you might consider signing off on some of your numerous and lengthy posts, especially the ones that attack the opinions of those who do identify themselves. That would make for a better experience at this end. IMHO it is not a debate when one hides behind a nickname. It would do much for your credibility (pun intended)if you would identify yourself once in a while.

So incredible... I do not usually read beyond your first post anyway.
Good luck with your business plan...
Sincerely,
John Grogan

If you mean that I'm "destructively" attacking the opinions of Peter Ewart, who is the only one on here who has identified himself, other than yourself, (and for all I know "John Grogan" could be a pseudonym, too), that is not my intent.

I hope any criticism of Mr. Ewart's ideas I offer will be taken "constructively". I believe he is sincere in his desire to see a better British Columbia, as are all the others who've particpated in these discussions.

I don't think he's "thought the whole thing through", though, and I'd like to assist him in the hopes that he may see beyond where he currently thinks the problems facing our forest industry lie. And how they might actually be corrected.

If I were retired, or a man of independent means, I would have no problem whatsoever identifying myself. I am neither, yet. And being conscious that we do NOT in this country, or Province, have what could be described as "economic democracy", and that those in positions of power whom I may offend have the very real means to do me and my business harm, I will remain "socredible" on here, for now.

Eagleone:-"Banks also make money on the insurance side creating money out of nothing with derivative scams that get bailed out by AIG insurance paid for with government debt. The shortage you are talking about in the monetary system is made up in the slush funds given the banking elite through their off the record derivative contracts... this then is laundered into the general economy as legitimate currency further devaluing the currencies true value."
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Not quite, Eagle, but there are elements of truth in what you're saying here. The problem I'm taking about would still exist if derivitives didn't, and banking was squeaky clean in all its aspects.

Gus:-"Nice discussion, but I think it might be more productive if we discuss how to improve the distribution of purchasing power in a world which has abundant goods to give most people living in industrialized nations a good living standard."
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What should be obvious is that if collective 'incomes' DISTRIBUTED in any given cycle, or period, of Production are LESS than collective 'costs' plus the final seller's profit being impressed into all 'prices' at the point of final sale in that SAME cycle of Production, then in their totalities, distributed 'incomes' alone will NOT be able to FULLY liquidate those 'costs' through 'prices' ~ unless there is a way to make overall 'prices', to the recipients and spenders of those 'incomes', LESS than 'cost'.

Or make up the difference in some other way.

We currently DO make up that difference in some other ways. Primarally through increasing debt, much of which will be incapable of repayment, and/or receiving export credits for running a so-called "favourable" balance of trade with other countries.

Physically, this latter is not "favourable" at all, for we are shipping more real wealth out of our country than we are receiving back in alternate real wealth from abroad in exchange for it. And importing some other country's 'money', which we CAN'T spend on it's products, but rather the Bank of Canada converts to Canadian money to make up the deficiency instead.

This makes a mockery of the concept of international 'trade', the only sane purpose of which is "barter" to diversify each country's consumption.

If we are successful traders, or seemingly so, our dollar rises, our exports become more expensive abroad, and we become uncompetitive globally, leading to unemployment through plant closures or further labour displacement as we strive to increase productivity.

If the process is reversed, our dollar falls, and we are 'giving' away increasing amounts of our real wealth just for the privilege of saying we're 'working'. In reality, those who'd refuse to work for less pay, are then getting an involuntary pay cut unknowingly.

Ww do this while we can, for soon the recipients of our products are trying to find ways to keep them out, lest they unemploy THEIR workers engaged in the same pursuits. It is a totally ridiculous system for all concerned.

We also make up the deficiency by selling goods below cost domestically, currently resulting, if such a practice is long carried on, in the bankruptcy of the seller, and producer.

But there is a better solution. To enable that last above WITHOUT causing the bankruptcy of sellers or producers,

And that is to continue to let retail 'prices' be determined by the merchant just as they are now, only to the Consumer REBATE those 'prices' at the time of purchase. With 'new credit' issued by the Banking system that has not been "costed" into any production.

We could rebate all retail prices by whatever fraction TOTAL NATIONAL CONSUMPTION BEARS TO TOTAL NATIONAL PRODUCTION over the same, immediately previous, cycle of Production. The statistics to determine this already exist.

Overall Consumption will normally always be LESS than overall Production. Indeed, it cannot be more, not for long anyways, since it is physically impossible to always Consume more than is being, or has been, Produced.

When we REBATE Consumer 'prices' this way several things happen. First, we introduce continually needed new credit into the system, without which 'profits' in business cannot be maintained.

Without maintaining those 'profits' Bank loans cannot continue to be amortised as contracted. And a rise in defaults brings the inevitable contraction of credit, which only makes the economic situation worse, as we are now witnessing.

We can introduce this new credit in the abscence of inflation, since 'prices' to the Consumer have FALLEN, not risen, (like they did when we held an Olympic Games, or will if we build a Site C dam), while the merchant has not taken any loss.

Because there are lower prices, Consumers earned incomes go further, resulting in increased sales, and a rise in economic activity and more employment. This allows our existing plant capacity to be more fully utilised, and the necessity to pre-maturely scrap and replace perfectly good smaller plants with ever larger new ones, simply to make flawed accounting seem as if it's working, is greatly reduced.

By lowering 'prices' this way, each unit of Canadian currency buys MORE in Canadian goods. Interest rates are forestalled from rising, because the necessity to factor in expected inflation is eliminated, while the greatest factor in interest cost ~ a premium for the risk of loan default ~ has had the largest single cause of business default, the contraction of credit, neutered.

Where will the 'money' come from to do this, you ask? Right where it comes from now. The Banking system. The creators of financial credit. We could even pay them for doing the job. It involves no loss to them whatsoever, except the loss of THEIR current dominance over our economy and government.

It is certainly NOT the "only way to go". There are other ways to do it, most certainly. But if you believe that not only "Consumer Demand IS the origin of all economic activity", but that "Consumer Demand SHOULD BE the ONLY origin of all SANE economic activity", then you'll have to show me a better way to enable that.