All the sectors are linked by a technology-wise system of ratios of standard mutual supplies volumes for production needs in each sector for the purpose of its further development. So, if there are supercritical sector disproportions between purchasing power of current assets and production facilities in their natural expressions, the credit-and0finance system loses its capability to assemble a number of microeconomics into a single macroeconomics, whose performance is stable.
The immediate cause of that course of events at a microlevel is that some businesses cannot afford to purchase (at drastically changing prices [in comparison with the turnover rate of their capital stock per value]) the items they need for their production, ant the others cannot sell (without making losses, i.e. in order to save the purchasing power of their current assets) their output.
Sectors with long lasting (in comparison with the decay time of the pulse D( S+K )) production cycles (among which are industrial and residential construction, shipbuilding, agriculture, etyc.), are most sensitive to such kind of macroeconomic impact, due to a slow response to rapid (in comparison with the duration of their production cycles) changes in the market climate, because their current assets are bound in incomplete projects.
The immediate cause of the financial collapse of such ‘slow’ sectors at a microlevel is that their current assets are bound in incomplete projects, in the output that the customers do not need unless it is complete. And the rapid (in comparison with the duration of the production cycles) changes in nominal price-list caused by the wave D( S+K ) movement, can create a situation when the customer is unable to pay for the job done, or when the purchasing power of their current assets, gained as a result of the sales of their output during previous cycles of the wave D( S+K ) movement, and a s a result of selling the currently produced output at pre-arranged prices, will not be sufficient to continue and support the further production or for the sector development purposes.
The above description of the wave D( S+K ) movement can be strictly proven with the use of mathematics by performing the input-output study in a value form.
The only type of businesses that can flourish in such economic environment are the ones with the fast turnover of capital, and in the first pace those which satisfy degradation-parasite needs spectrum. It happens due to the fact that excessive (comparing to demographically defined wants) nominal effectual demand of some groups of population and the demand of morally damaged groups can only take a shape of satisfaction of degradation-parasite needs, in case a fall in the production spectrum takes place.
Redistribution of apparent instantaneous aggregate nominal paying capacity( S+K ) between the ‘real sector’ markets and parasite speculative markets has a similar effect on the production-consumption exchange . The redistribution of the nominal paying capacity entails the changes in monetary unit energy-backing standard in ‘real sector’ and in the sector of mass consumption.
This is one of the reasons why speculative markets have to be exterminated whenever occasion serves, to prevent the very possibility of the following scenario to be implemented: ‘mass psychosis of already inane stock exchange speculators Ю the collapse of credit-and-finance system as means of macroeconomic assembling.’
In comparison with the economy destruction mechanism caused by nominal paying capacity changes and redistributing we have just described, the energy-backing standard of means of payment is not only the indicator of possible future troubles in money circulation and in production and consumption exchange of goods, but it is also the best indicator and tool of control at the macrolevel. That makes it different from the previously used ‘gold standard.’
Statehood can pursue different policy regarding energy backing standard. It may increase the value of ( S+K ) in direct ratio to the growth rate of the launching of new power station facilities.
It is possible to keep ( S+K ) constant or make it grow (the growth should be a bit retarded in comparison with the growth rate of electric power supplies to the production sector.) In that case the purchasing capacity of a monetary unit will grow on each market, which will be observed as a steady price decrease and the welfare growth of all the groups of society (but not only those groups of population whose nominal incomes and savings are excessive in comparison with demographically determined needs.) Herein, the pay policy must prevent the population from receiving incomes that are excessive in comparison with satisfaction of demographically determined needs (anyway, as soon as a family has purchased a place to live and the means of transport, corresponding to the standards of demographic sufficiency, their incomes, which can be used for personal consumption {not for production or charity purposes} should be limited)
That mode of credit-and finance system performance used to be called ‘Stalin’s policy of planned reduction of prices’. And it is the mode that is most preferable for the majority of population, for those who are ready to work honestly in their profession, those who do not want to change place of work seeking for ‘big money’ or for a possibility to stick like a leech to the ever-living source of unearned incomes.
The factor which prevents the transition of the system into the above mode of performance is cost of borrowing.
Loan itself is the means of quick adjustment of nominal effectual demand to the output supply spectrum (at set prices). When the production-consumption exchange of goods is stable, and when credit-and-finance system performance is steady, the fluctuations in K/(S+K) are mainly seasonal and they change insignificantly for a number of annual production cycles[11]. That is why in succession of a number of annual production cycles interest-free crediting itself does not have any effect on pricing and standard of price.
However, if lending includes interest rate, the interest rate causes:
the outgrowth of nominal prices in comparison with the growth of price-adjusted [12]production spectrum , because the price of the output includes the need to return the loan and the interest.
the irreversible flow of nominal paying capacity of the society from the society to a corporation of usurers, which, when the usurers are free to operate, generates high monopoly purchasing capacity, which an unideaed society cannot fight back.
The two above factors, generated by interest, lead to the loss of purchasing power of the society as a whole, which slows down and stops the sale of the output (regardless its quality and demand for it) and can make credit-and-finance system loose the ability to assemble numerous microeconomies into a single macroeconomy. In that case a particular amount of unreturned interest-generated debt can emerge in a society; that debt will be distributed among all physical and corporate bodies, including a faction of the least happy usurers.
The amount of unreturnable debt may be discharged only by additional issuing of means of payment. In the first case, when usury is free, interest rates, being the vehicle of irreversible price growth, force the state to lower the energy backed monetary unit standard. Such kind of emission always objected to, However, if we refuse from doing so, we will turn the society and its production-and-consumption system into a financial slave of the corporations, because it has been strangled by designedly unreturnable debts and has to work for free to cover the debts, and its consumption is limited by bloodsucking creditors.