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Thank you for all your thoughts and words. I've been thinking about them today.
thank you for taking the time and effort to write all this out. I am not grasping everything you are saying, but I have had greater insights because of your work in this thread.Yes. And my description of how money works globally is completely consistent with Control, Entry, Need, Time and Scale. (I find the order in The Millionaire's Fastlane more logical, where it is: Need, Entry, Control, Scale, Time = CENTS.)
Not only that. The first book I wrote about money, contains something I call the Staircase Diagram. It shows how, monetarily speaking, the entire society looks like when it is a Catallactic society.
The Catallactic society is a society, whereby the Fastlane is the default. Virtually everybody in a Catallactic society is a Fastlaner.
The staircase diagram is a depiction of how all money flows through society, by ordering all companies in society by their order of production. Consumption is of zero order. The bread you buy from a baker is, to the baker, a first-order production good, because he doesn't eat this bread, but sells it to you. You eat it, and therefore you are the consumer. The baker needs flour and ovens, production goods of the second order. To make these ovens, the manufacturer needs steel, a third-order production good, etc.
What I have done, is, theoretically, look at the balance sheets of all these companies, and make them match. The total income of the baker is from everything he sells. There are others who sell cheese, others who sell rice. The grocer sells a lot of different goods. I look at the sum of all their balance sheets, the debit side is the totality of their income. The credit side is the totality of their investment. (All things you find in a shop are first paid for by the shop owner. Only after he has paid for them, and put into his shop, you can buy them. Therefore all the things you find in any shop are investment goods, or capital goods of the first order, and not consumption goods. They become consumption goods after you have bought them, and paid for them!) Through paying for them, he loses ownership over them, and they become your property. The money you have paid him then becomes his property after he has handed over the thing you wanted to buy.
Out of this investment all higher-order goods, raw materials, and all wages are paid. This, by the way, leads to a total refutation of Keynes, who asserted that the economy is based on consumption, which it is not. The so-called 'consumer confidence' has zero impact on the economy. It is the producer confidence that keeps the economy running!
My staircase diagram shows that all wages, payments for raw materials, and all money paid for higher-order production goods comes from investments and investments alone! Nothing comes from consumers! This then leads to the conclusion that if society makes laws against the so-called rich, through taxation, for example, they are hampering the whole production structure, up to destruction, as happens under Socialism and Communism! That is why all forms of socialism and Communism, and even Fascism are, from an economic standpoint, fundamentally flawed. That is why they all collapse.
I show here, without elaborate explanation, (that would require a complete book) my Staircase Diagram. Just try to follow my explanation, and you will understand something very interesting about profits!
View attachment 43551
The staircase diagram represents where all money is, in a society whereby everybody is a Fastlaner!
You see pairs of bars. The yellow + light blue bars on the left are the credit sides. The bars on the right, consisting of a blue part, a brown part, a red part, and, again, a light blue part, represent the debit sides. So the left sides show where all the money comes from, and the right side shows where the money is going.
To be precise, the yellow bars show how all the money in an economy distributes itself over the various production stages. The total amount of money in a society is equal to the sum of all the amounts represented by the yellow bars + one of the leftmost bar, consisting of the brown, red, and light blue parts. This shows that virtually all money in a society is present in the production structure.
I think this conclusion is important for many on this forum because it shows that 'the most money' can be made if you succeed to sell to business owners, companies, or large firms, and not to consumers, because that is where most of the money in society is!
I must warn, however, that if you add the income and expenditures of governments to this staircase diagram, it radically changes. This leads to another staircase diagram, which shows that most money exists either in the form of investment or in the form of government income + expenditures. But that diagram is quite messy, and I think most will not even understand this staircase diagram without an extensive explanation, which I am not going to give here!
The yellow left bars consisting of three yellow parts represent all investments in every order of production. It consists of the amount of money each business owner puts into his business, of income out of stocks, and the light blue part is his profit from the earlier investments. The right bars show where the entrepreneurs then spend all this money. They spend it, first of all, on capital goods of higher-order (the blue bars), on raw materials (the brown parts) on wages (the red parts), and on their own consumption (the light blue part on top of the right bars.)
The two extreme right bars, consisting of one having a brown part, a red part, and a light blue part show the total expenditure on wages, raw materials, and the income out of all profits summed together. The right blue part is then the money that is offered against all consumption goods that are the result of all the production that has taken place in society. After all, capital goods are just a by-product, financed out of investments. And, to complete the description, the large right bar in the leftmost pair is the totality of all consumption goods produced by the entire production structure. This is the part of the total buying power of money put against all consumption goods.
There are two things this bar diagram shows that are right against what many economists (= apologists of governments and banks) claim.
Firstly, all production must be preceded by investment. Therefore, the economic contribution of consumers is nil, nada, zilch, zero! Consumers only consume. They destroy the result of all production. But they must exist because they form the basis of the entire capital structure. After all, the reason why production exists is in its ultimate goal; to make consumption possible. But that is not an economic contribution! In fact, the fewer people consume, the more money is available to support the capital structure, and the greater the number of stages there can be in an economy, the more goods and services there will be produced, and the greater our wealth becomes. This is the exact opposite of what Keynes asserted, and which all people who spread the nonsense of Consumer Confidence assert!
Nevertheless, the investors own the total production structure. And that is a good thing, because when there are a lot of investors, that is, rich people, there is also a lot of money available to support the entire capital structure. In other words, without investors, that is, rich people, the whole capital structure would not exist! There would be no jobs, no machines, no mining, no mass-production, ... no wealth whatsoever!
Furthermore, look at the light blue parts. These are both the consumption expenditures of 'the rich' and their income. They are the result of all investments. They are the difference between investment and income out of sales.
From this, it follows that all profits are the result of the consumption expenditures of the rich!
These two conclusions basically demolish virtually every textbook written about macroeconomics.
My theory on money and value destroys about every belief almost everybody has about how money functions on the micro-scale (= microeconomics)
This part which I have not yet published is not only the work of me but of about 150 years of the best economists who have ever existed, (I have just integrated their work in this simple staircase diagram) It demolishes virtually every textbook on macro-economics I know of, with one exception. The book Capitalism by George Reisman. About at the end of his book, he shows a diagram which I call 'the spiderweb diagram', which is not as good as the above one, but which basically contains the same understanding as is represented in this staircase diagram, with one huge emission.
He hasn't connected it to balance sheets!
Also, this staircase diagram has a forerunner in the main book of Carl Menger, one of the three books on Capital and Interest by Eugen von Böhm-Bawerk, and one of the books of Murray N. Rothbard.
Also, the conclusion that all profits originate from the consumption expenditure of the investors comes from George Reisman! I cannot claim that for myself. It was from a video I found somewhere on Internet, which turned out to be made by him, where he stated and explained this conclusion. This conclusion was so outrageous, that most didn't even hear what he said! Let alone understand it!
After having read Reisman's book for the first time, which I did after I had constructed the above diagram, I recognized in his diagram my own staircase diagram. So he and I have discovered this pattern of Capitalism independently from each other.
In fact, it almost led to a fight between the two of us. I showed it to him, and he then accused me of plagiarism because he could not believe that somebody else had come up with the same understanding! He thought he was unique! In our exchange, I pointed out what my sources of the discovery of this pattern were. He knew then that I had come up with it, independently from him, because these were also his sources.
So, fortunately, our exchange did not escalate into a battle like that one between Newton and Leibniz about the priority of the discovery of integration theory.
I must add, however, that neither the book of Eugen von Böhm-Bawerk, nor that of George Reisman, Carl Menger, or Murray N. Rothbard, realized that this pattern could be derived by connecting production stages to balance sheets! That is where my own contribution to this pattern lies.
Now, what has this to do with CENTS?
Everything!
Because this staircase diagram shows what the financial structure of a Catallactic society looks like. In other words, it shows the monetary structure of a society, whereby everybody 'is on the Fastlane', so to speak. Because all own a piece of this entire staircase diagram.
This staircase diagram, in short, shows that and how it is possible to have a society without governments, without war, and whereby everybody is on the Fastlane, living according to the principle of CENTS!
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