Reciprocal System #576 "The Road to Permanent Prosperity" ch23-Boom Dampeners B [Thomas Newsome]

Transcript

hello and welcome to my channel this channel is for educational purposes and generally we look at Great theories of everything uh all-encompassing theories cosmologies Grand unified theories and um try to make sense of them compare and contrast Maybe and uh you know uh give a little bit of insight into how you can use these things in your own life uh to enhance your experience to help you with your Paradigm shifting your Awakening to 5D Consciousness and your formation of a holistic worldview today is our 576 video on the reciprocal system of theory from Dewey B Larson and Mr LaRon was an American engineer who lived in the 20th century he died back in 1990 but left behind many great books um most of them are on science topics physics and chemistry astronomy um but he also has a book on metaphysics and two books on economics his uh associates also have uh contributed uh in other fields geology meteorology crypto history conspiracy theories and all of these works are based on the same Theory uh which Larson articulated in his uh 1959 fundamental po two fundamental postulates the first postulate states that the universe is composed entirely of one component motion existing in three dimensions in discrete units and with two reciprocal aspects space and time okay so that's the basic gu basic guide idea um larsson's not the first person to propose a universe made out of motion but uh probably is the first to make it uh work and coherent into a generalized Theory mainly by describing motion as the relationship between space and time I was running at 10 m hour speed 10 miles of space in one hour of time space over time but not just speed but all of our scientific quantities are fractions with space or time as the numerator and time or space as the denominator with uh the idea that space or time can have multiple exponents so you can have you know space to the thir power or time to the fourth power or space to the second power or whatever so uh you know matter energy force pressure Power electric charge capacitance um viscosity these are all fractions with space or time as the numerator and time or space as the denominator and and um that serves as a very good check on uh classical Theory but also um gives you some insight into some various things for example uh pressure is time over space to the fourth power well you can think of pressure as energy per volume cuz energy is time over space and volume is space to the third power so you can think of pressure as energy per volume you can also think of pressure as Force per area because pressure is um time to the time over space to the four uh force is time over space squared and then area is space to the second power so you can think of pressure also as Force per area anyway when we get into uh e economics which is what we're doing today we're going through larsson's second book on economics called the road to permanent Prosperity this first book was called the road to Full Employment and he uses the same principles the universe of motion economic system of motion um with two reciprocal aspects in this case being um production and consumption and um he attempts to put uh economics on a scientific footing rather than you know it's kind of a squishy social science uh background of sociology and politics um but to actually say you know your economic system just like your uh engineering uh it has to be in harmony with the laws of physics that is the most important thing and uh once we get a grasp of how the economic system actually works then we can iously um you know manipulated in order to um maintain permanent Prosperity which basically comes from avoiding the boom and bust cycle uh especially the busts and lowering the amplitude of that curve so that the economic system is always kind of humming as opposed to you know um the wild fluctuations of booms and busts and Larson shows us how to do that in this book um we are in chapter 23 of this book right now getting toward the end uh this chapter is called boom dampeners and if you'd like to uh get back to the start of this book uh you want to go back in my archives about uh 7 weeks and go to the start of the book and go forward from there um you will probably be able to understand quite a few of the things in this reading today uh without having done that but to get a fuller picture uh go back seven weeks also um if you'd like to get more information on the reciprocal system proper the fundamental postulates their consequences ramifications and importance and um their uh derivation or uh using them to derive a theoretical universe and then uh Larson's basic uh his history appro uh histor History of Science approach uh to um his postulates uh check out any of my first 474 vide videos on this subject but for now we're going to uh take over here um in the middle of chapter 23 boom dampeners and so Larson is explaining in this chapter um you know techniques for lowering the amplitude of that curve um and uh kind of trying to eliminate the uh boom and bust cycle of um the economic system okay um we're going to back up about half a paragraph um Larson tends to write pretty long sentences and paragraphs and I kind of got caught in the middle of one last time and uh was unable to finish it before my time ran out so uh we're going to back up and start from there as explained in chapter 15 the pyramiding of credit that this plan is intended to prevent is wholly elusory the reserves can be blown up into demand deposits to be sure but this means nothing as the economic effect of the loans that create the deposits is opposite to that of the deposit and these effects cancel each other the bank created deposits disappear if an attempt is made to use them demands made upon them must be met by money withdrawn from the Bank Reserves or obtained from outside sources the objective at which the 100% Reserve plan is aiming is thus in operation already only the monetary authorities uh like the Federal Reserve can issue new money okay now we're uh onto the discussion the failure of the attempts that have thus far been made to control the business cycle and the general realization that for all we know and despite all of the optimistic pronouncements to the contrary another Great Depression May strike at any moment has inevitably led to doubts as to whether eon EIC stability is possible at all under our economic organization comments along this line have been remarkably similar over a long period of time uh in 1953 Frank H Knight took a pessimistic view saying the business cycle quote is extremely hard to deal with probably impossible to correct adequately without destroying the essential freedoms of economic life for the ordinary citizen as well as for business itself end quote Thorp and Quant uh in 1959 questioned both the competence of the controllers and the adequacy of their tools quote the first question that arises is whether or not any men or institution can have enough economic knowledge and wisdom so that there is a strong possibility that they will do more good than harm secondly are the uh instruments which are available to them such as to be effective end quote uh I guess that's a question secondly are the instruments which are available to them such as to be effective this work answers both of Thorp and Quant questions in the affirmative a systematic analysis of economic processes has revealed the precise cause of economic fluctuations and once the cause is known the nature of the remedy becomes obvious it remains only to devise or to select from among those already available effective measures of this nature that will accomplish the objective without undesirable collateral effects all of the proposals discussed in chapter 22 and the preceding portions of this chapter are completely worthless for control purposes taken in conjunction with the fact that none of the measures thus far tried has achieved any significant degree of control of the cycle this may give the impression that the skepticism expressed by the economists quoted in the preceding paragraph is well founded but the truth is that adequate tools for the purpose are readily available once we recognize exactly what we want to accomplish and have the criteria by which we are able to determine what actions will contribute toward that end at this point we will proceed with a discussion of the proposals of group two those which actually are of some value in a control program because they have some effect in reducing the amplitude of the cyclical fluctuations okay this section is called curtailment of speculative credit quote since 1933 the Federal Reserve has been Direct Ed by law to restrain the undue use of bank credit for speculation in Securities real estate or Commodities end quote the principal in uh the principal instrument now utilized for this purposes the power to change the margin requirements on security purpose uh purchases when market prices are below normal levels in uh below Norm normal levels the margin requirements are lowered making it easier to buy when prices go up the margins are raised decreasing the ability of the speculators to Pyramid large Holdings on inadequate Equity foundations this program has a definite value as a means of reducing economic fluctuations in fact the choking of an incipient speculative boom may very well serve to prevent a major disturbance of General Credit conditions margin control should therefore be listed as one of the desirable components of a well-rounded stabilization program okay this section is called relating margin requirement to earnings one of the objections to the control of the security Market by raising and lowering Market margin requirements in the manner in which this is now done is the human element involved in making the decisions as to when action should be taken and as to the magnitude of the change perhaps action may be taken at the wrong time or delayed until it is ineffective there is more than a suspicion that some of the credit control measures taken prior to the 19 28 uh 29 boom were just the opposite of what should have been done it is also true that this method of Regulation necessarily involves proceeding by a succession of jumps rather than operating smoothly and unobtrusively as an ideal control would do it would clearly add much to the effectiveness of the control if it could be made automatic rather than depending on human judgment in recognition of these facts it has been proposed that the margin requirements be based on average corporate earnings rather than on arbitrary Federal Reserve policies although there are some rather obvious difficulties involved in putting such a plan into operation the idea does seem to have considerable Merit particularly in connection with a complete economic stabilization program such as that which will be developed in the sub subsequent Pages such a full-scale program will tend to stabilize corporate earnings to a substantial degree and will avoid many of the complications that might be encountered in applying the plan under present conditions where earnings are so highly volatile the section is called relating margin requirements to the long-term price trend a modification of the foregoing proposal that should make the control operation smoother and less open to objections would base the margin requirements on the relation of current prices to the long-term Trend it is unsound policy to permit borrowing on values in in excess of this long-term Trend values that as a whole are purely fictitious and will disappear as soon as any economic stress develops putting the General Credit structure into a vulnerable position at the peak of the 1929 Boom the long-term trend of common stock prices on the New York Stock Exchange in terms of the most commonly quoted price index was in the neighborhood of 100 if the margin requirement were 50% the loan value would have been about 50 actually the average price in the Market at that time was around 220 instead of 100 the additional 120 was a f fictitious value created by speculation not a real value and the lending of anything more than than 50 on a market valuation of 220 was unsound Finance as the aftermath definitely proved in order to maintain the 50% margin on a real value basis the legal margin at the peak should have been nearly 80% some recognition is already being given to these points the Federal Reserve explains that quote modern supervisory appraisal of Bank assets emphasizes sustainable banking values rather than current market values in this way Bank supervisory authorities and examiners try to exclude from Bank asset valuation the transitory influences associated with economic fluctuations end quote present day margin requirements are clearly more realistic than those which prevailed prior to 1930 however the situation will never be fully satisfactory as long as the control over the valuation is merely something that the authorities try to exercise in an unsystematic way the undesirable aspects of present practice will be fully overcome only when when the valuation for Lending purposes is put on a definite and specific basis that eliminates human judgment the desirability of strict control over the speculative use of credit is particularly indicated by the point brought out in principle 13 the fact that increases in the prices of Securities real estate and other Capital assets already in the hands of consumers Finance themselves and hence such prices can gyate wildly up and down without any regard for realities as far as the original enthusiasm or the subsequent pessimism of the speculators can overcome good judgment in lending on the strength of speculative value increases Bankers are filling their vaults with nothing more substantial than dreams a particularly attractive feature of the proposed automatic system of margin control is that it can also be applied to the making of loans on Real Estate Security by Banks and other lending institutions subject to governmental supervision much of our present trouble originates from fluctuating real estate values and in some respects effects this is more serious than the stock market situation on the whole the losses in stock market operations are borne by those who can absorb them without undue personal hardship but the worker who loses his home because inflated values are punctured has suffered a real catastrophe and it is not surprising that he should thereafter lend a ready ear to the political and economic extremist there can be a certain amount of variation even on a cash basis but there is no question as to the responsibility of credit for the major swings prohibition of loans exceeding a specified percentage of the valuation adjusted to the long-term Trend would have a definite stabilizing effect there will no doubt be some criticism of this idea on the ground that it will make the acquisition of a home very difficult when prices are high but the obvious answer is that such purchases should be curtailed when prices are abnormally High the individual who has to wait until prices come back to normal levels will be well compensated for The Waiting by getting his house for a more reasonable price all right this section is called adjusting credit to the business level it has been suggested that stabilization of business activity could be accomplished at least in part by limiting the amount of increase in credit to conform to the long-term trend of increase in business volume The Advocates of this measure point out that the annual increase in business is in the neighborhood of 4 to 5% and that whenever the increase in credit exceeds this percentage by any substantial amount a speculative boom develops ultimately terminating in some kind of collapse this idea of credit limitation is entirely in line with the principles developed here in which show that credit is one of the important causes of variations in economic activity but it does have some serious weaknesses if the limitation is to be effective it cannot have any significant amount of flexibility and this may seriously handicap the banking system in its task of taking care of short-term fluctuation furthermore it does not have the direct connection with the flow of purchasing power that is essential to get prompt and certain results from application of the controls we therefore cannot count on credit policies as full-scale economic control measures but there are some kinds of credit control which can profitably be used for the purpose now under under consideration that of dampening the cyclical swings in the United States such controls are exercised mainly by the Federal Reserve System and it is significant that the governors of that system are confident that their actions are actually contributing to the stabilization of the economy the following is a quotation from one of their official Publications quote Federal Reserve influence on the flow of bank credit and money effects decisions to spend lend and save throughout the economy Reserve banking policy thus contributes to stable economic progress end quote the section is called restriction of consumer credit consumers utilize short short-term credit principally for the per purchase of durable goods and financing improvements of property and utilize long-term credit mostly for financing construction or purchase of homes these requirements are not very sensitive to minor changes in the interest rates and the available tools of the banking system are therefore relatively inefficient in controlling the volume of this kind of credit when some curtailment is advisable as in Wartime it is usually necessary to resort to some direct prohibition such as that contained in regulation W issued during World War II such restrictions on individual freedom of action are highly unpopular and it is quite unlikely that any program designed to operate through the medium of direct Consumer Credit Control would have enough popular support to make it feasible even if it did theoretically have some good features borrowing for business purposes on the other hand is usually an unemotional transaction and it is also much more sensitive to changes in the interest rate and in the case with which credit can be obtained I'm sorry in the ease with which credit can be obtained it is therefore more amable to purposeful control all of the credit control measures that will be discussed in the subsequent pages are aimed primarily at influencing the amount of business borrowing this section is is called manipulation of the rediscount rate with considerable experience has been gained um considerable experience has been gained with the use of the Federal Reserve rediscount rate as a means of controlling credit by law the Federal Reserve board has been given the power to raise or lower the rate charged the member banks for money which they secure by rediscounting eligible paper at the federal reserve banks in as much as this rediscount rate affects the cost of money to the banks any change has an indirect effect on the interest rates charged by the Banks and on their willingness to lend and hence either encourages or discourages borrowing depending on the the nature of the change that is made the results that have been obtained by the use of this device indicate that it is effective to some degree in re restricting credit during a boom but does practically nothing toward increasing borrowing during a depression the explanation is that the Federal Reserve has the upper hand during the Boom the member Bank have already made loans to the extent of their own resources and they cannot go any farther without rediscounting at the Federal Reserve Bank on the other hand the limit to borrowing during a depression or even a recession of any consequence results from a scarcity of wouldbe borrowers who have both the inclination to borrow and the ability to meet the stringent collateral requirements that are imposed under these conditions the member banks have plenty of excess reserves of their own to meet the needs of those borrowers whom they consider good risks and the easy credit policy of the Federal Reserve System has a little or no influence on the transactions the need for adjustments in the rediscount rate will be reduced to a minimum when measures of the type that will be discussed in chapters 24 and 25 are put into effect for the purposes for the purpose of an actual control of the business cycle but if the Federal Reserve System is to retain its power to create new money ability to adjust the rediscount rate would seem to be a desirable adjunct as a means of EX exercising a certain amount of influence over the demand for this new money okay um I think we're going to have to stop right there um there's still a good deal more discussion going on here for the rest of this chapter I guess um and um this looks like a good stopping point uh if I can figure out where that was um okay um we're stop there for today and we will take over from that up juncture tomorrow and uh thanks for tuning in today have a wonderful day