Saturday, May 16, 2009

Our Disadvantage Continues ("after a fashion")

Hugh Kenner's reading of Pound/Douglas corroborates Davis's: "bank credit alone is what creates the illusion of a functioning money supply" (The Pound Era, p. 310). Kenner, too, following Pound, following Adams, notes that our ignorance keeps it going.

And no one understands any of this, and yet the system keeps running, after a fashion. It keeps running, Douglas thought, thanks to constant diversification. Encountering a clog in houses, the economy diversifies into back scratchers, golf carts, scented dog-bones, and so long as it can generate new demands it can postpone the Damoclean stasis. But creating newer and newer sets of insurmountable costs, drawing on more and ever more bank credit (some day to be called), "misdirected effort which appears in cost forms a continuous and increasing diluent to the purchasing value of effort in general." (312)

This diversification through the innovation of "useless or superfluous articles" (313) has, of course, (and perhaps beyond Douglas's expectations) today been carried into useless and superfluous financial instruments (derivatives), whose purpose is to support distribution through "the illusion of a functioning money supply". In fact, the "money supply" is derived from credit innovations (just as clogs in the housing market could be dealt with by surges in the dog-bone market).

The economy is not a means to satisfy needs, nor even to fill demand. It is simply a set of opportunities for people to get rich.

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