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Sunday, September 23, 2012

Social Credit is Salvation Through Deflation

By: Socred - B.A., SCMP

One of the primary criticisms of Social Credit is that it is inflationary. Gary North has written a critique of Social Credit entitled “Salvation Through Inflation”. The purpose of this essay is to demonstrate the claims that Social Credit policies are inflationary are fallacious, and to demonstrate that its policies are in fact the only way to reduce prices given that labour is being replaced by capital in production. Economists define inflation as too much money chasing too few goods. They argue that an increase in the money supply with a relatively fixed amount of goods and services for sale tends to increase the price of those goods and services. This assumption is based upon the quantity theory of money, which is critiqued in another article on this blog.

Douglas said there were two forces that governed prices: 1) the upper limit of price is governed by supply and demand, or what the good or service will fetch on the open market, and 2) the lower limit of price is governed by the cost of production and the rules of cost accountancy. Economists focus solely on the forces of supply and demand and their effect on prices, but they tend to ignore the rules of accrual accounting and its effect on prices. As such, economists always see rising prices as a result of too much effective demand, which they believe is the result of too much money being created. Their only policy recommendation to eliminate, or reduce, inflation is to reduce the quantity of money being created. The quantity theory of money ignores how money is created by banks as a debt. It also ignores the fact that the creation of money for capital production is prior to said capital being able to produce any consumer goods.

When physical capital (machines, raw materials, factories etc…) is created it is generally financed through loans from banks. This increases the money supply at the time the capital is being constructed, and this money makes its way to consumers as effective demand through wages, salaries and dividends. Since the capital is being constructed, it is not capable of creating any new consumer goods, so the income disbursed in its creation makes its way to consumer goods and services already on the market. This has a tendency to inflate the price of those goods and services, and this is what economists would call “too much money chasing too few goods”. But is it too much money? The money disbursed via the construction of capital has to be given to consumers, because eventually said income will be part of the cost of that capital. If that money was not disbursed, consumers would not have enough income to pay for the capital as it was expensed at a later point in time. In other words, rising prices at the time capital is being created is not caused by “too much money”: it’s caused by income making its way to consumers prior to the capital being built being able to produce any consumer goods and services. This income is necessary to defray the cost of the capital being created, but it is not used to purchase the consumer goods said capital produces, because consumers have to use it to purchase goods and services at the time the capital is constructed in order to meet the needs of living.

Once the capital is constructed its costs are generally capitalized and expensed over a period of time using the rules of accrual accounting. Douglas’s A+B theorem divides costs into two categories: 1) A = income = wages, salaries and dividends, and 2) B = payments to other organizations. Over any given time an organization will distribute A in income and charge A+B in prices. This is true for all organizations. Consequently if we sum all of the income disbursed in an economy over a period of time it will always be less than the total prices generated over the same period of time. If this is true, how has the economy not collapsed? It has not collapsed because income in the creation of capital is distributed prior to the capital’s costs entering the market and being charged to the consumer. So long as capital is being created, and debt/money is increasing in order to finance its creation, the economy functions fairly well. As soon as the capital’s costs enter the costs of consumer goods, income is insufficient to defray those costs, unless more capital is being contructed, because the income disbursed to create the capital was used to purchase consumer goods at the time the capital was created.

As labour is displaced in production by capital, B costs increase relative to A costs. How does this influence prices? Price = A+B, and if B is increasing relative to A, then any attempt to stabilize or increase A (income) has to be met with rising prices. Conversely, any attempt to stabilize prices (A+B) has to be met by falling incomes (A). In other words, even if there’s not “too much money chasing too few goods”, prices will rise so long as the government tries to stabilize or increase incomes. Inflation is systemic given the rules of cost accountancy coupled with the fact that labour is being replaced by capital in production and a policy of full employment is being pursued. This is why the government accepts “limited” inflation: they are afraid of the effects of reducing prices will have on people’s incomes and economic activity.

Fortunately, there is a solution, and it’s the only mathematically viable solution. The solution is reduce prices at the point of retail with monies with no cost attached to them. If money passes through the productive system, it has to have a cost attached to it, but if the money is given directly to the consumer it does not. Prices can be reduced to the consumer via a price rebate distributed with debt/cost free money given to the consumer. For instance, if the price of the good or service is $100 and the rebate to the consumer is $25, then the price of the good/service has been reduced by $25 to $75. The retailer receives $100 and the consumer pays $75 – the difference is made up via the creation of new debt free money.

In summary, prices are governed by two limits – supply and demand and the cost of production. The quantity theory of money, and the belief that inflation is only caused by too much money chasing too few goods, focuses solely on supply and demand and assumes that prices are only governed by these factors. However, prices are also governed by costs and the rules of accrual accounting. The fact that labour is being displaced in production, combined with a policy of full employment, increases the costs of production and consquently prices, even though consumers have inadequate incomes to purchase all of production. The only way to eliminate this type of inflation is to give consumers a price rebate at the point of retail. Therefore, not only is Social Credit not inflationary, but its policies are the only viable way to eliminate the real cause of most inflation today which is the displacement of labour in production coupled with full employment policies.

Saturday, February 18, 2012

What Do These People Have In Common

1. Anonymous posted a concern and was immediately responded;
2. Somebody sends an e-mail directly to me and was immediately answered;
3. Someone texted me several times in the middle of the night about a demand letter;
4. I called the defaulter about his worries, at my own expense;
5. Requests for call diverts were accommodated;
6. All concerns were addressed immediately to the satisfaction of the defaulters.

Answer:
http://failuretopaycreditcard.blogspot.com/2009/12/parable-of-ten-lepers.html

Saturday, February 11, 2012

Anti-Child Abuse Law

RA 7610

"Child abuse" refers to the maltreatment, whether habitual or not, of the child which includes any of the following:

(1) Psychological and physical abuse, neglect, cruelty, sexual abuse and emotional maltreatment;

(2) Any act by deeds or words which debases, degrades or demeans the intrinsic worth and dignity of a child as a human being;

Kasama na doon ang mga ginagawa ng mga collectors!

Penalty : Minimum six (6) years imprisonment

Procedures:
1. Before dealing with collectors, ask for his ID and Agency;
2. If he berates you and you child, STOP talking altogether to him ( talikuran mo) ;
3. Call the emergency number of your barangay/police ( 911) para ipahuli ito;
4. Pag-umalis, file a blotter at ipa-dampot later on.

Saturday, February 4, 2012

Spread The Word

Sunday, January 29, 2012

What to do when credit card collectors harass you

Monday, 02 May 2011 11:05 Lifestyle - Real Life

By Dolly Palisada

YOU are a credit card defaulter. Your credit card debt has blown out of proportion. The amount is so huge you can no longer pay it in full. A few months after, a credit card collector comes knocking at your door, harassing you, threatening to sue you or try pulling out your properties to settle your account.

In the Philippines, you hear horror stories of harassment and intimidation by credit card collectors. To equip yourself with basic information of your rights, here are several useful pointers that you may use in a likely scenario:

1. You have the right to ask the debt collector a copy of your Statement of Account (SOA) duly signed by the bank. A demand letter or an offer letter showing a discounted rate of your debt is not your SOA. If they provide you an SOA, make sure to verify it with the bank for its authenticity. Make your request clear or adopt a mantra: No SOA, No Pay.

2. You have the right to decide on how much you can afford to pay your debt. Do this by sending a proposal letter through email or the post office for your proposed mode of repayment and it should be according to your financial capacity.

3. Once you confirm agreement, it should be officially written (never a verbal one). A written proof is what you need in case they deny your payments.

4. In case of disagreement in the proposal, then don’t pay. Challenge the collecting agency to pursue the case in court where it is handled properly. It should be noted that credit card debt, done in good faith (such as bankruptcy, unemployment, etc) is not a criminal act but a simple case of breach of contract therefore constitute a civil case. Credit card debt eventually turns into criminal act at the issuance of bouncing checks (estafa) or was stolen and used by another person.

5. In some cases, collecting agencies may use police presence as shock factor to knock at your door: will dangle a piece of paper in your face as “warrant of arrest” but will not allow you to read it. These are one of the many ploys to pressure you out of your wits to pay your debt. Don’t panic. Instead, get their names, their precinct and their car’s plate number. You may also take a picture of their faces through your phone camera or press start a video. Again, be wary that this is not the job of policemen, barangay captains or kagawads. File a complaint or case against them for abuse of authority if they keep on harassing you.
6. Credit card collection agencies will use guises and disguises for the sole purpose of collecting money from you. Commonly used are “LBC uniformed men” to enter your home by announcing a package delivery. Once you allow them to enter the house, they will reveal their true identity and will try by all means to purge money from you or pull-out appliances at your house to swap for your debt. At times they will claim to be the sheriff of the court and extort money from you. Be vigilant and tell them to go or you file a criminal case against them for trespassing, extortion or unjust vexation.

7. Some initial pressures used by credit card collectors are in the form of text messages or persistent calls. Messages may say you have a pending warrant of arrest or will contain details of court case number, name of the judge, branch of court and time of hearing. The purpose of this is to sow panic and fear. However, a text message containing information of an impending warrant of arrest is a give away. A proper court will not issue such nonsense. Warrant of arrest is for criminal cases and credit card debt is a civil issue. It should be noted that warrant of arrests are personally delivered by court authorities by surprise and not over the phone or texts messages, fax or email messages.

8. What is RA 8484? Most often, this republic act is used by collecting agents to intimidate defaulters. In essence, Republic Act 8484 is also known as the Access Devices Regulation Act of 1998. In layman’s language, an access device means any card, plate, code, account number, electronic serial number, personal identification number and other telecommunication services, equipment or instrumentalities-identifier or other means of account access that can be used to obtain money, goods, services or any other thing of value to initiate a transfer of funds. RA 8484 is also applicable to person/persons who applied for a credit card using fake identity/identities which is classified as a fraudulent act and has nothing to do with your credit card debt or non-payment of debt.

9. Having said all that, it is worth mentioning as well that credit card defaulters can still travel abroad. Do not believe if collectors will threaten to file a hold departure order against you because it’s merely a bluff. For those getting an NBI clearance for work or other purposes, don’t believe in hearsay that you cannot get your clearance despite your standing debt. Take note that NBI records reveal criminal cases only and not civil cases.

Are credit card debt collectors telling lies? Yes. It’s their modus operandi to put pressure on the defaulter to collect money. We know they are only doing their jobs but a defaulter has rights as well to protect themselves from such harassments. Collecting agencies are paid for by the banks to collect debts. For as long as you’re not running away from your responsibilities, or you’re not in hiding, then move on with life and learn a great deal from the experience.