1. How long do wages and salaries stay in the economy before they are cancelled out of existence by the repayment of bank credit. This would involve research into their repayment of mortgages and personal loans, but also the bank loan repayments that result from their purchases from others. Total aggregate personal income calculated in a similar way to which it was done in the Prototype National Accounts published in this website, and juxtaposed against total bank debt capital repayments would be a good place to start. If these figures can be had monthly, quarterly and yearly it would comprise a large part of the answer. It would also reveal how dependent the economy is upon new capital loans. The duration of personal incomes as effective purchasing power in the economy before they are extinguished by cancelling bank debts, would help in understanding any deficiency of effective consumer purchasing power in that economy.
2. The average duration for which bank financed new capital works and items stay in the economy as costs. This is about depreciation rates and write-offs for various classes of capital expenditures, and in the aggregated whole of bank financed new capital items. When such capital expenditure is for the manufacture of industrial products or machinery, these will carry forward the original depreciation to their clients in turn. Industrial capital may carry forward the original depreciation through several generations of “machines which make machines which make machines” as it were. How does the longevity of costs impact upon or necessitate economic stimulation in the avoidance of recession? Only the repayment of bank loans extinguishes money, and only the personal consumption of end products ends cost transference. The relationship between these two extinguishments once known, may have serious value in managing an economy’s stimulation in public policy.
3. How does the propensity of banks to make residential loans impact upon house prices? While the supply of housing and the demand for it is always a factor, the supply of money for housing loans is a most (and perhaps the most) significant factor in fueling and enabling demand in many locations. If loans to families who only own one home (or wish to) were at very minimal interest rates and mortgages to their full value were permissible, and loans to others were at an interest rate three times higher and banks were only permitted to hold mortgages to the value of one half of their purchase price or valuation, how would house prices be impacted. Egalitarian societies may wish to know something of these types of questions in formulating policy, especially when home ownership is progressively declining for people of average means. How critical and decisive is the Banks’ residential lending to the housing market?
4. If banks were disallowed from lending other than for purposes of production, how would this impact the economy? Firstly, it may act as a spur to production. Secondly, if the prototype accounts published on this site are even approximately correct, consumption would be disabled to the extent that aggregate personal incomes fall short of total consumer production. This would necessitate some type of quantitative easing for people.
As financing housing is a form of financing consumption and it would therefore be disallowed, how would home acquisition be funded? The only remaining way would appear to be to limit it to the amount of bank deposits which are made available to Building Societies or Housing Co-operatives by depositors.
Two thirds of the money supplies of for instance, the UK, the US and Australia, were originally brought into existence as residential housing loans by banks. Once this process is interrupted, the need for a people’s quantitative easing will be greatly increased. Were this done as a National Dividend and debited only to the National Balance Sheet, the progressive replacement of mortgage finance by the free distribution of the national profit to consumers would have profound social, economic and even likely political implications.
In this point there is probably room for several PHD theses.
5. What role can “democracy” play in economics? The question has now been asked “Should national Governments do normal commercial books of account for the entity for which they act in trust, that is, for the Nation considered as a collective whole?” Now that this has happened, no matter whether it is answered or not, nor how, this question can never now be unasked.
The question of what role democracy should play in politics took centuries to resolve as it moved inexorably towards universal suffrage from exclusions based upon class, wealth and gender. The same conundrum has now arrived in economics. How?
Commercial Balance Sheets and Profit and Loss Accounts are always drawn up from the perspective of the corporation’s shareholders. Outside of the consideration of the assessment of Goodwill, the interests of staff, clients or suppliers is irrelevant. In National Accounts then, who are the Nation’s shareholders from whose perspective these accounts must be drawn? As the whole political experience pointed towards universal suffrage, does economic democracy suggest some form of universal proprietorship? There are two “Yes” answers.
The one, normally associated with socialism, is that everybody owns everything, and it follows therefore that as the state acts in trust for all in this matter, it has all, and the people, except in high theory, own nothing. The capitalist approach is that except in high theory, the shareholders have nothing except their right to share equally in the distribution of profit.
The philosophical and political questions associated with some hypothesized future universal distribution of a National Dividend are only tangential to economics. Are the economic consequences of such analogous to a bowling ball coming down the alley?
6. What are the prospects of National Governments being able to maintain control of their national currencies in a world of digital money forms and easy international transfers?
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