Reciprocal System #540 "The Road to Permanent Prosperity" ch9-The Markets B [Thomas Newsome]

Transcript

hello everyone welcome to my channel this is an educational Channel and uh we take a look at Great theories of everything and um try to uh slice and dice them and figure out how they can uh help you in your own life if your Paradigm shifting your Awakening to 5D Consciousness your formation of a holistic worldview and anything else that you might um want to plug a theory of everything into uh something that you can uh have for life and it applies in all cases and uh today is our 540th video that we've done on the reciprocal system of theory from Dewey B Larson and Larsson was an American engineer and he's got books on physics and astrophysics and chemistry and astronomy but he's also got books on economics as well as metaphysics including philosophy religion psychology and uh we're looking at one of his books on economics today called the road to per permanent Prosperity uh we're about to uh we're in uh chapter n of that book now uh Larson is one of the uh few scientists to construct his cosmology based on motion the universe is not made out of matter it's not made out of energy but it's made out of motion and for Larson motion was the relationship between space and time in fact he originally just called it space time but then he began began calling it motion uh he also referred to it as change in three dimensions and um for Larsson motion is the relationship between space and time that sets up a reciprocal relationship between space and time all of our scientific quantities are fractions with space or time as the numerator and time or space as the denominator uh when Larsa refers to motion he's uh in particular referring to what he calls scalar motion which is a more generalized kind of motion that has a magnitude but no specific Direction which you can Envision using a balloon that you uh put dots on and if you blow up the balloon all the dots will be moving away from each other if you contract the balloon they will all be moving toward each other but in no specific Direction every dot will be moving toward toward or away every other Dot and uh it so every dot is moving in every direction but no specific direction that outward motion Larson referred to that as the progression the inward motion Larson referred to as gravitation and uh he goes from there um also in his first postulate um is that uh the motion uh comes in three dimensions and those are what he calls scalar Dimensions um it actually takes three dimensions of U like three dimensions of XYZ coordinates of space to represent just one scalar Dimension and there are three scalar Dimensions so um you know system goes beyond uh really our stationary reference system he uses what he calls the natural reference system which is a moving reference system um following the progression of the natural reference system the natural reference system is moving outward at unit speed uh because that was another part of his um uh his first po poate is that uh space and time and motion are come in discrete units and uh so they're quantized only whole numbers and one unit of space in one unit of time space over time being speed one unit of space and one unit of time uh is the speed of light and that is the speed of the progression the progression is always moving in all directions at all times at the rate of one unit of space per one unit of time and that is the progression of the natural reference system and phenomena occur as a result of harnessing that um zero Z Point Energy more or less and um that comes from reversing the progression and and um it has to be reversed uh in three dimensions and uh that's how we get to gravity H which is um basically um T amount to matter but Larson also applies his theories to things like economics and um in this book here Larson um you know kind of goes against many of the economists who have the idea that uh uh economics is kind of just like a liberal arts uh thing that's squishy and that you can um impose your uh philosophy upon it but Larson says no econom economics is a physics it is a science and um you have to comply with the laws um or else your your you know economic mechanism is going to collapse just like a machine or a bridge or a building that you built if it doesn't comply with the laws uh with the facts then it's not going to work it's going to collapse um and and uh you know then after you're after you're done with that and you comply then you can worry about the philosophical political sociological Viewpoint that you're trying to uh forward and uh then Larson tries to break these things down to their first principles um using the Robinson Caruso Island deserted island example of a a you know an individual econ economic system and then gradually introducing more and more complexities into it Larson arrives at a reciprocal relationship between production and consumption those are the two fundamental quantities of an economic system and the iron law of Economics is work or starve and uh he goes from there articulates a number of principles um worker starve Goods only play pay for goods um and uh uh production and consumption both involve Goods um when you produce them they are purchasing power when you uh consume them they are articles of consumption and um they are the same thing from different points of view um and he's about to articulate principle number five here U as we get started this kind of an equilibrium relation the knowledge that certain quantities always add up to zero is one of the most powerful tools of mathematical analysis and in view of the importance of the point just brought out it is desirable to express it as another of the fundamental principles of economic science science principle five the income to the producer from Goods produced is exactly equal to the expenditures for labor and the services of capital the net result to the producer is zero in order to get a clear picture of the basic relations and the application of principle 5 it is necessary to differentiate clearly between the producer corporate or otherwise and the supplier of capital these are two separate and distinct economic entities even though they may often be combined in a single individual there are many persons who furnish capital for a productive Enterprise and also direct the productive activities but in so doing they are performing two separate economic functions just as the farmer is both a producer and a consumer all that has been said with respect to Corporation ations also applies to these individuals in their capacity in their capacity as producers as suppliers of capital however they stand in the same relation to the economic system in general as the suppliers of Labor here is another significant truth that has been covered up by the confusion and complexities of modern economic life all income received by producers of any category over and above the cost of goods uh purchased from other producers is paid out to or credited to the account of the suppliers of Labor and the services of capital all payments are made in the same kind of money all go to persons whose intention is to use them sooner or later for buying goods in the markets this is equally true whether earnings on Capital are paid out in dividends or plowed back into the business and there is no way by which we can differentiate between wage dollars and interest or profit dollars once they are in the hands or the accounts of the recipients there is one school of thought which insists that it is wrong to permit any payment to individuals for the services of capital except perhaps interest which for some strange reason does not not seem to be quite as reprehensible as rent or profits but questions of right and wrong in the moral sense are beyond the scope of economic science and of this work as long as payments of this nature are being made we cannot get a true picture of economic conditions if we ignore them or allow sentiment or Prejudice to Cloud our vision so that we fail to see them in their proper setting the objective of the present inquiry is to determine the facts the true relation of these payments to the primary economic processes from this standpoint the answer is clear a dollar paid for the services of capital has exactly the same economic status as a dollar dollar paid for labor so far as the general operation of the economic system is concerned labor and the services of capital are equivalent items one point worthy of special attention is that the owner of capital retains ownership and does not surrender it to the producer he merely tells the services of capital just as he sells labor he merely sells the services of capital of this Capital just as he sells labor his personal services ultimate ownership of capital always rests with individuals from the standpoint of the corporation the entire net worth of the business including undivided profits is a liability an amount which the corporation use ow which the corporation owes to its stockholders and the books of the corporation so indicate hence investment is purely a consumer function the cost of Capital Improvements always comes out of the funds belonging to individuals it is immaterial from the standpoint whether the money is actually paid out to the stockholders and reinvested by them or whether the producer uses it directly for the increase of capital or builds up re reserves of marketable assets to help bridge over difficult times in the investment of surplus corporate funds the officers of the corporation are performing the functions of a trustee acting on behalf of the actual owners of the funds many economists are inclined to regard corporate reserves as quite distinct from consumer assets apparently because the individual stockholder in most cases has little voice in the determination of policies with respect to the accumulation and utilization of such reserves this present analysis however ever is concerned with the facts not with mental reactions and from p a purely factual standpoint there is no difference between capital deliberately invested in a business and capital involuntarily invested when a corporation builds reserves of one kind or another the effect of an action is determined by the nature of the action that is taken not by the nature of the influences that caused it to be taken it is true that corporate reserves are more readily available for meeting operating requirements as distinguished from needs for additional Capital than funds which have already been paid out to the stockholders as dividends and to that extent these [Music] reserves have the status of producer money reservoirs however the stockholders own the funds in these reservoirs just as they do all other assets of the corporation so these funds have the same economic status as any other Capital assets after the current expenses of an Enterprise the amounts owed to other products other producers for material and services the cost of Labor the cost of capital employed on a Time basis taxes and various miscellaneous items have been paid and reserves have been set aside to cover depreciation and other deferred liabilities any amount remaining out of current income is added to the earned surplus of the corporation one of those corporate assets which as has been pointed out are owned by the individual stockholders of the corporation this addition to the earned Surplus the net profit for the current period is the compensation for the services of Capital supplied by the stockholders irrespective of whether or not it it is currently paid out in the form of dividends here is one of the many places where the injection of sociological viewpoints and prejudices into economic thought has had a serious effect in confus confusing the issues the economic theorists exhibit a curious reluctance to classify profits in accordance with their true economic function as a wage of capital a payment for useful services rendered by capital goods and a strange assortment of doctrines has been Advanced ranging all the way from the Absurd contention that profits at least the so-called pure profit any excess above the normal interest rate are an unearned and unjustified charge against the general economy to weird theories which are based on the assumption that profits are at distracted from the circulating money stream and are not available for consumer buying the truth is that profits are the price of Junior Capital risk capital in exactly the same way in which interest is the price of senior capital or debt Capital those who accept interest and condemn profits and the profit motive are allowing their sociological prejudices to lead them into a flagrant inconsistency neither Capital nor any other uh form of wealth is essential to life but wealth does enable us to live a more pleasant and comfortable life and all forms of wealth therefore have economic value thus the cost of using Capital cannot be escaped any more than the cost of Labor can be avoided this is just as true under Socialism or any other Collective economic system as it is in the United States today turning to a collective economy eliminates the name profits but nothing more those who favor collectivism because they are opposed to profits are closing their eyes to the economic facts as the cost of the services of capital still has to be met under some other name we cannot evade the inconvenient ban on something for nothing that stands in the way of so many ingenious schemes under many circumstances there is no actual payment for the capital or other wealth to that is utilized and in such cases the existence of the cost factor is often overlooked the man who has paid uh $100,000 for his house may be inclined to feel that he can um now enjoy its use without cost since no further payments have been made but this individual simply is simply deceiving himself this $100,000 for his house um may be inclined uh to feel that he can um I'm sorry but that they've gotten rid of all the spaces again I'm trying to read without the spaces uh feel that he can um now en enjoy uh its use without cost since no further payments have been made but this individual is simply deceiving himself if $100,000 were not tied up in the house he could invest it in something that would give him an income of at least $6,000 per year and forfeiting this income is just as real a cost as the amount that he would have to pay in rent if he did not own his home a state-owned industry that has um a million doll plant is in exactly the same position the million dollars invested in the plant would have earned $60,000 annually if the money had been put um to use elsewhere the cost of having this much Capital fixed in the new plant is there therefore about $60,000 annually if the money had been put to use elsewhere the cost of having um this much capital is uh fixed in the new plant is therefore about $60,000 per year regardless of the fact that the collective is System of bookkeeping requires no actual payment or recording of the am amount as long as the productive capacity of the human race is finite the services of wealth have an economic value and there will be an equivalent cost attached to the use of wealth as capital the use of money as a measure of value does not affect the situation one way or another those economists such as shumer who contends that in a communistic or non-exchange Society in general there would be no interest as an independent value phenomenon um are being confused by the money aspect of interest payments to the point where they are mistaking the book book keeping for the essence of the phenomenon itself sher's assertion that interest attaches to money and not to Goods is totally wrong interest rent and profits are payments for the services of wealth and whether they are paid in money or in Goods or in the loss of services that would have been enjoyed if the wealth were otherwise utilized is merely a detail as Frank Knight has pointed out quote a moment's reflection on the cruso situation should make it clear that a purely monetary theory of interest is simply nonsense neither the Communists nor the cusos can have the service of wealth free of charge here again those who have centered their attention on the social forms rather than on the economic functions have been misled by what they see if we look at activities involving the use of capital from a purely economic standpoint and avoid differentiating between actions that are economically equivalent we get a totally different picture let us consider a typical example of a capital investment an engineering firm designs an improved type of oil refinery and offers a package deal whereby it handles the entire construction and delivers the complete unit at a fixed price each prospective purchaser then faces only the problem of how to raise the necessary capital and each proceeds in its own way to do so company a issues bonds for the purpose of uh for the purpose and thus borrows the money from the individual purchasers of the bonds company B elects to use a method of financing that is currently popular it arranges with an insurance company to build and own the plant and it then leases the plant on a long-term basis company C finds that it has sufficient reserves to enable pay pay for the plant out of its own treasury across the international border in socialistic state D the government taxes its citizens to raise the necessary Capital now let us look at these transactions from a purely economic standpoint first we find that in all cases the capital comes from Individual suppliers in case a it comes from the individuals who are now Bond holders in case b it comes from funds belonging to the individual policy holders of the insurance company in case C it comes from the individual stockholders of the company who own all of the assets of the company including the cash reserves in case D it comes from the individual taxpayers in all cases the cost to the individual suppliers of capital is is the same they must forego whatever gains or satisfactions they would otherwise have obtained from the use of the money elsewhere next we note that in all cases the individual suppliers retain ownership of the capital the bond holders in case a merely lend their money the insurance company policy holders in case b own the plant after it is built and so do the stockholders in case C in the state of D the ownership is theoretically vested in the citizens of the state but since we can in general equate citizens with taxpayers particularly in a collectivist economy where a large part of the taxation is concealed and broadly based the taxpayers own the plant for which they have supplied the capital finally we can see that in all cases the individual suppliers of capital expect to be compensated by the production Agency for the use of their capital in case a the bond holders receive interest in case b the policy holders of the insurance company receive rent in case C the stockholders of the company receive profits in case D the citizen taxpayers also receive the residue after other production expenses have been met what we call profits in the individual enterprise economy but they do not recognize them under that name because the payment is indirect and not clearly identified as to its origin the profits in this case are either returned to the general funds of the state in which case the individual citizens benefit by being accessed uh be by being assessed less taxes than would otherwise be necessary or they are used for other Capital requirements or they are distributed to the citizens in the form of lower prices it is then evident that we can describe the general economic process involved in all four cases in exactly the same words the production agency obtains labor and the services of capital from Individual suppliers utilizes them to produce goods and with the proceeds thereof compensates the suppliers of Labor and the services of capital for the services utilized from the economic standpoint the general process is the same in all of these cases whatever differences may exist in the details the important conclusion to be drawn from this identity so far as the point now at issue is concerned is that the payment made by the production agency the producer to the individual suppliers of capital have identically the same function in all cases they are nothing other than compensation for the services of of capital regardless of whether they call them interest rent or profits or bury them under some vague classification of socialistic benefits the economic purpose of the payment is the same in all cases the only difference is in the basis on which the payment is made interest is related to the amount of capital that is supplied rent is related to the specific capital goods that are furnished and profits are related to the output of the production process essent essentially the same situation exists with respect to the labor payments all such payments are made for the same economic purpose as compensation for the services for services but there are different differences in the basis on which payment is made some payments are made on a Time basis daily or hourly wages monthly or annual salaries Etc While others are made on an output basis that is at a certain rate per output unit in industrial industrial production this is called a pieace work rate elsewhere such terms as royalty fee or commission are used work such as that performed by authors or inventors is mainly handled on the value output basis since the commercial value of the product has little or no relation to the amount of time spent in producing it there are even cases where the price to be paid is established on a contingent basis so that no payment at all is made unless certain specified results are achieved just why the economists have been unable to see that profits are the peace work or royalty rate of payment for the services of capital is a mystery of the first order they all recognize that labor is paid either on a Time basis or on an output basis and they recognize that interest and and rent are payments for the services of capital on a Time basis the existence of payments for the services of capital on an output basis would seem to follow almost automatically and it should not take any great perspicacity to see that the profits are payments of this kind furthermore there it is generally conceded that the average percentage return on invested capital is approximately the same whether it is received in the form of Interest rent or profits shumer for in instance refers to the phenomena observed by Theory from time immemorial that all returns in the economic system seen from a certain aspect tend to equality it seems almost incredible that such an obvious clue to the nature of profits should have been ignored but the economist's own admissions show that they have looked the situation straight in the eye and have still been unable to see profits in their true perspective Frasier for one simply does not see the analogy between peace work rates and profits in practice he says the distinctions between time rates and peace rates are only important in the case of incomes from labor property incomes are regularly calculated in relation to time not to services rendered um okay I think we don't have far to go in this chapter but um we're basically out of time and uh so we will wrap up this chapter tomorrow and uh start uh fresh here with chapter 10 uh which is called price levels all right so thanks for tuning in today um stay tuned for tomorrow's uh exciting episode and uh have a great