Spencer Heath Archive

Item 725

Pencil notes by Heath on 3X5 cards.

Sometime after 1936?

 

Original is in item 714.

OVER-UNDER-PRODUCTION

 

     To over-tax is to under-supply.

     Under-supply of finished goods by restrictions on production and exchange (by taxation) makes relative over-supply of raw materials and industrial facilities. This relative over-supply is called “overproduction.” It occurs only in raw materials and the capital goods used to advance them in production.

     Raw materials etc fall in price (exchange value) due to their relative abundance. Scarce finished goods rise (at first gradually) in price (in terms of existing money and credits). With less goods to tax governments issue credits against present goods by way of debts against future production. Those credits (inflation) further raise prices of existing goods. These rising prices induce speculation and speculation makes them rise still higher and faster. Speculation builds high profits (speculative) and builds high private debts (for no services). High prices stimulate production and revive demand for raw materials and capital goods.

     Rising taxation for public extravagance (and to liquidate old public debts while issuing bigger ones) again cuts down the production and supply of consumers’ goods, credits and debts collapse (except legal currency) and the cycle is resumed. At this point accumulated raw materials all lose their demand and value and the so-called “surpluses” appear.

     There can never be any over-supply of either goods or of labor, except when those goods or that labor cannot move forward in production to the point of being finally purchased by consumers.

     Nothing can prevent the movement of goods and of the labor that moves them except taxes or penalties and governmental restrictions enforced by taxes or penalties.