1:   Book Review:

The Politics of Money — Towards Sustainability and Economic Democracy
By Frances Hutchinson, Mary Mellow and Wendy Olsen, Pluto Press, London & Sterling, Virginia, 2002

William Krehm

Time there was when Social Credit  spoke its own arcane language  not easy for outsiders to understand.  That is no longer so. Anybody  seriously concerned with money  sooner or later must come to terms  with Major Douglas; and in that  respect the Social Crediters are  meeting the rest of us more than half  way. This is the second excellent book  co-authored by Ms. Hutchinson that  not only unrolls Major Douglas’s  ideas, but presents him in the context  of other great thinkers such as Karl  Marx and Thorstein Veblen. That is  an immense help, since, like Marx,  Douglas has not been happy in some  of his followers. Particularly was that  the case in Canada.

Douglas devised his idiosyncratic tools  because he felt he needed them to  pursue some penetrating observations  of his own. Money and its creation he  identified as the root of much of  society’s troubles – much as Freud did  sex. While many orthodox economists  dismiss money as “neutral” and  attribute importance only to the “real”  factors of production, they in fact call  to mind the attitude of Victorians  towards mating. Though supposedly  practiced only in holy marriage and  there only for procreation, from  Gladstone to Oscar Wilde, sex played  an obsessive part in their lives.

So, too, with the “neutrality of  money.” “Of the total international  transactions of a trillion or so dollars  each day, 95% are purely financial.  Globalization is not about trade; it is  about money. Global trade as a  percentage of national output is very  little different to what it was at the  end of the nineteenth century –  around 40% (1999). Investors no  longer put their money into factories  or merchant ships but, instead, into a  plethora of overlapping ‘financial  products’ such as futures, derivatives,  hedge funds or currency speculation.”

And corresponding to the institution  of marriage, “there is also a theoretical  assumption that economic activity is  organized within an orderly circular  flow. People sell their resources  (labour, land, capital) so that tangible  goods and services can be produced.  In exchange they receive money. That  money they take to the market place  and buy the goods and services they  require. This completes the circle. The  assumption is that, left to itself, the  circle will meet all economic needs.  No one will produce more than can  be sold, no one will be left without. If  everything is not in order, the money  and interest rates may need to be  adjusted so that the quantity of money  does not exceed the quantity of goods  available for exchange. Next, economists distinguish between wants  backed by money (effective demand)  and needs that may exist but do not  register as economic ‘facts.’ Economists also tend to assume that money  prices have a natural equilibrium, e.g.,  an equilibrium exchange rate, as does  the interest rate.

“Academic economists are judged by  their publications in a ‘Diamond list’  seen as representing the best international journals constructed by Peter  Diamond, an orthodox economist.  The Diamond list concentrated on  journals which espoused orthodoxy,  such as the Economic Journal and  omitted several important heterodox  journals, such as the Cambridge Journal  of Economics. In the US there is evidence of a purge during the 1990s of  non-neo-classical and non-mathematically oriented economists from  university faculties. This has been  described as a ‘stalinization’ of the  profession with history of economic  thought particularly targeted.”

The Ultimate Pollution of Nature — Proclaiming Capital- ism a “Natural” System

“Central to the definition of orthodox  economics as a science is the assumption [that] capitalism is the natural  system. Its essence is the money/ market system. There is no alternative,  because the ‘free’ market is the only  route to political freedom.

“Within the classical theory which  underpins conservative macro-analysis  of the self-sustaining economy, money  is purely a measuring device having no  influence on economic outcomes.  Commodities exchange for commodities, while money merely facilitates the  exchange. There are two key ideas  within this view: first that money is  neutral and without history – it simply  exists as a technical resource; sec- ondly, a circular model of the economy.”

“People are seen as utility-maximizers  in all aspects of their life. Politics is  taken out and replaced by economics.  The irony is that economics itself is  what Hazel Henderson has aptly  termed ‘politics in disguise.’

“The non-existence of time is directly  related to the non-existence of capital  within the circular flow model. The  study of economics postulates three  physical factors of production: land,  labour and capital. The owners of  each factor receive a money reward  (rent, wages or interest) for the  ‘disutility’ of allowing the factor to be  consumed in the production process.  Abstinence, the failure to consume,  normally considered the source of  physical capital is a logical impossibility. Once the circular flow is established, the productive forces of land  and labour sell in exchange for  consumption goods. Whether the  goods produced are ‘producers’ goods’  or ‘consumers’ goods’ is immaterial. In  each period the real services of labour  and land are exchanged for consumption goods produced in the previous  period. Each good sees two periods,  the one in which it is produced, and  the one in which it is consumed.  ‘Capital’ cannot be stored up because  there are no gaps in the continuity  between the process of production  and the process of consumption.  Counting abstinence as a legitimate  cost would involve counting the same  item twice (Schumpeter).”

Shockingly, the neo-classical circular  model holds even many of the great  rebels in thrall. Keynes’s final rebuttal  of the self-balancing model [at least in  public] still adhered to its basic  paradigm. Despite Karl Marx’s  astounding anticipation of the most  involved curves that the contemporary  financial sector can pitch, “many 20th  century Marxists have followed the  orthodox path of erasing finance from  the study of economics (Alan Free- man). For Freeman, capitalist power  stems from the financially based  institutional constructs of legally  enforced contract and sale. Unfortunately, Marx’s labour theory of value  has been interpreted from the neo- classical simultaneous methodological  standpoint, in which the profit rate is  everywhere actually equal, technology  does not change, and the market  always clears during each act of  circulation, and money is a pure  numéraire. In this analysis money and  time do not exist.

“The model of orthodox economics  fuses and confuses wealth production  with money making. Within a capitalist  economy production would not occur  if there was not a product. The  starting point for establishing an  alternative framework must be to  question the construction. Separating  production from wealth creation  follows an old tradition that can be  traced back to Aristotle. Daly and  Cobb define chrematistics as the branch  of political economy relating to the  manipulation of property and wealth  to maximize the short-term monetary  exchange value to the owner. By  contrast oikonomia is ‘the management  of the household to increase its use to  its members over the long run.’  Mainstream neo-classical economics  has not only fused chrematistics and  oikonomia, it has concentrated on the  former to the exclusion of the latter.

“The fossilization of economic  thought renders economists increasingly incapable of offering coherent  explanations of economic phenomena.  It would appear that the aim of  neo-liberal economic theory is to  dominate all other theories, just as the  aim of market capitalism has been to  eclipse all value systems beyond those  of the money economy.”

Why the Spartans Outlawed  Money

“Evidence of the use of money dates  back to 3000 BC, and the earliest  writings were statements of accounts.  There is evidence that communal grain  stores were used as a banking resource  in ancient Egypt with what were  effectively cheques exchanged between  depositors. However, until modern  times the use of money to settle  everyday social obligations was  virtually unknown. Money was used in  exceptional circumstances, in times of  famine, hard times generally, for travel  and warfare. What is new is a society  driven by money, banking and credit.  With Marx we agree that the role of  money in acquiring the means of  sustenance is the critical feature of  modernity. Concern about usury in the  Old Testament also shows that the  idea of lending money for interest is  very old and religious laws against that  were carried into both Christianity and  Islam. Usury is still against Islamic  law.”

Indeed, it is the very taking of interest  [“riba”] rather than just “usury” that is  proscribed in the Koran. Profit from  risk-taking was on the other hand  allowed. Venice, whose trade was to a  large extent with Islamic lands, devised  risk partnerships between traders who  accompanied their goods and the  financiers who stayed behind that were  acceptable to the Muslims Venice dealt  with.

“The Lydians of Greek Asia Minor are  credited with the invention of money  as coin. In the seventh century BC  they were striking coins from electrum, a gold-silver alloy occurring  naturally near their capital Sardis.  Their King Croesus became a symbol  of the accumulation of riches. The  distrust of money led to its being  outlawed in Sparta. Aristotle records  the marginal status of bankers in  Athens.

“For James Buchan ‘since money is a  purely social construct it is of concern  that trust in money displaces other  values like a cuckoo in the nest.’ This  is the victory of money that Margaret  Thatcher infamously celebrated when  she said there was no such thing as  society, only individuals and their  families.

“What money does is enable things to  happen. Money is not a neutral  instrument within trade. It creates the  very potential of trade. Control of, or  access to the creation of money is vital  to social and political power. Evidence  for this exists in the ‘John Law’  phenomenon, an aspect of economic  history which James Buchan argues  has been largely hidden from main- stream economics.

“Law was the son of a goldsmith/ banker from Edinburgh born in 1671.  After a rakish youth (including killing  someone in a duel) he tried in 1705 to  get Scotland to issue paper money to  get out of an economic crisis. Law  argued that what was needed was  ‘stimulatory paper currency.’ He based  the issue of paper money on the  future productivity of land and  rejected more traditional options such  as exchange controls, coining plate,  ‘raising the Money’ (devaluation), or a  sovereign loan (viz. Bank of England).

“Still with an English warrant on his  head, Law had to leave Scotland after  the Act of Union in 1707 and continued promoting a ‘bank of issue’ in  Paris. He was expelled from the city.  Law’s last chance came to put his  ideas into practice in Regency France,  bankrupt after years of war and court  extravagance. In 1715 Law opened a  private bank which operated with only  one-sixteenth of its equity in coin. The  bank’s paper became highly valued  and by 1717 was used to pay taxes. By  1718 the bank was effectively nationalized and used to capitalize the state of  Louisiana. John Law became effectively Prime Minister and all national  debt and credit was taken on by him.  He converted rentes and billets into a  national commercial venture and the  entire liquid capital flowed into the  company. The word ‘millionaire’ was  coined for him as he owned a lot of  France and half the present US. As  Buchan points out, effectively the  entire nation became a nation of  traders.

“In many ways Law’s speculative  ventures would have been at home  today. He tried to buy into the English  Indies market by selling short, but the  market carried on rising and he ended  up paying £372,000 for stocks contracted at £180,000. To maintain  liquidity he increased money supply;  this led to inflation. By 1720 it was all  over and, in final irony, London and  Amsterdam crashed not long afterward with their own bubbles.

“Schumpeter argued that the 17th  century ‘cowboy’ experimenter in  banking Law fully realized the business potentialities of the discovery that  money – and hence that capital in the  monetary sense – can be created.’  James Buchan agrees with Marx that  he was a mixture of swindler and  prophet.

“For Schumpeter when money has no  intrinsic value it is possible to manage  the quantity of money, paving the way  for ‘management of currency and  credit as a means of managing the  economic process.’ Recognition of this  destroys the concept of the equilibrating circular flow. Law observed  that once a commodity like silver and  gold is used as money in coinage, its  value changes. And once such a  commodity like silver is used almost  exclusively as money, it can easily be  replaced by one that has no commodity value at all like paper. Law saw  money as ‘pure function’ and attacked  the bullionists like John Locke who  argued for a gold standard. Buchan  goes on: ‘Law believed money was a  distillation of human relations and  might be turned to create a prosperous and just society and he  damned near pulled it off.’

“Thereby lies an irony. While, as we  have argued, money values are social,  or at least relative rather than natural,  the presumed ‘naturalness’ of the  economy justifies extreme inequality  even to the present day. It is taken for  granted that there is no economic basis  to question what ‘the economy’ is  doing, whether making weapons,  trafficking in women, enslaving  children, using environmentally  destructive productive methods, or  trading in drugs. The will of the  people can only be expressed through  the cash register.

“Before Adam Smith it was assumed  that bankers were intermediary lenders  of other peoples’ money. However,  economic outcomes are affected when  such sums are lent out again and again  ‘before the first borrower has been repaid.’ It  would be logically possible for a  cloakroom attendant at a restaurant to  hire out the coats of diners while they  were eating. But it would be impossible for two people – the owner and  the hirer – to wear the same coat at  the same time. However, that is  exactly what happens when a banker  makes a new loan. It changes the  quantity of money in existence. ‘While  I cannot ride a claim to a horse, I can,  under certain conditions, do exactly  the same with claims to money as with  money itself. In short, the institutions  of banking and finance create the  money supply through a range of  mechanisms ultimately endorsed by  statutory authority.

“Real goods and services are created  by labour’s use of the natural re- sources of the planet. Money, the  defining element with¬in the formal  economy, is created by financial  institutions. [However], banks and  financial institutions need to stay in  business and the statutory framework  is constantly adapted to take account  of changing practice. With the development of off-shore financial havens  (not tax havens), the legal loopholes  are increasingly difficult to police,  while international finance has become  a law unto itself.

“When a bank issues a loan, it needs  reserves of some kind to guard against  the whole value of its outstanding  commitments being presented at the  same time. These fractional reserves  may take the form of cash and coins  held by the commercial bank, together  with the bank’s deposits with the  central bank. In theory the  government/statutory authority,  through the central bank, can regulate  the money supply by manipulating  reserves and reserve requirements.  [Such] evolving financial practice is  progressively endorsed by the statutory authority.

“Although the banking system as a  whole creates 97% of new money as  loans, it was, until very recently,  assumed that the money creation  process was regulated by a central  banking authority through its ability to  regulate the issue of notes and coins.  However, the money created by banks  is not the same as notes and coins,  which have a tangible existence. We  could call the former ‘bookkeeping  money’ and the latter ‘pocket money.’  Pocket money, when used by ordinary  people for their everyday transactions  is normally regarded as real, tangible  money, ‘as good as gold.’ Book- keeping money has no existence  outside a bank or financial institution.  To use bookkeeping money one needs  a bank account. Bookkeeping money  determines the quantity of cash in the  economy.”

The Credit Card Takes Over

“Since the 1980s in the US and the  UK money has been increasingly  issued into the economy through  credit card borrowing, giving rise to  ‘credit card capitalism.’ Credit cards  were originally issued as a company  currency. The first Diner’s Club card  of 1949 was issued by oil companies  to create brand loyalty and a symbol  of creditworthiness. VISA issued by  the Bank of America in 1958 is now a  network of 20,000 banks, and the  largest mutual company in the world,  of up to 600 million card-holders. The  important change with the widespread  use of credit cards is that the responsibility for the issuing of debt money  into the economy and thereby ensuring its vitality now rests with  consumers.” A form of economic  democracy? “That ignores the role of  advertising and the problems of those  burdened with consumer debts. Credit  cards also make a mockery of the idea  of a control of money issue in an  economy where nearly every store  now has its own credit card. The  non-bank financial markets have their  own deposit banks, money-market  funds that can be lent repeatedly  (multiplied) without limit. Lending to  the financial sector – up 40% since  1998 – is a turbo-charged credit  machine into financial assets and  corporate balance sheets.”

“The importance of the enclosure of  land as private property is that many  of the resources communities held  would have been in the form of  common land. Common resources are  those which have no deeds of owner- ship but are regularly used for farming  or harnessing subsistence. Under these  conditions most people would have  gathered, hunted, gardened and  herded, growing and preparing their  own food. The emergence of capitalist  market society together with industrial  patterns of resource use including  agricultural production has broken  down the direct relationship between  people and the source of their subsist- ence for at least two-thirds of the  world’s population. Self-provisioning  has been replaced by waged labour  contractually engaged ‘through a  network of society-embracing markets.’ It was this compulsion into  waged labour, ironically described as  ‘free,’ which Marx argued made  capitalism a unique form of exploitation.

According to John Locke (1632-1704),  although God gave the land to be held  in common, it was the duty of individuals to improve [it] with their own  labour. Where the land is made more  valuable and profitable, common  possession must give way to private  property. According to this theory,  land has value in itself. Hence when  an individual encloses waste or  common land, and labours to improve  it, they add to, rather than take away  from communal welfare.

The Escalation of Unsustainable Practices

“Such improvements enabled the  individual household or firm to  produce commodities for sale for  money in distant markets. In the  process it created the illusion that  unsustainable practices could be  escalated indefinitely.

“The process of absorbing the commons into the market system continues apace today. Forest people in  particular are struggling for the  retention of the commons of tropical  rain forests from Sarawak to the  Amazon. Across the globe indigenous  peoples are launching anti-globalization campaigns.

“Equally, the state can guarantee the  rights of the international, global  capitalist elite class to plunder the  social and ecological commons,  placing the short-term profit of  powerful individuals and corporations  before the common good. In the eyes  of many people organizations like the  World Bank, IMF and WTO are just  that, agents of property regimes that  seek to transfer all resources into  capitalist corporate regimes.

“Capitalism is the enclosure not only  of land but also of tools and knowledge for the purpose of private  financial gain. As Veblen has argued,  all invention is based on the common  cultural inheritance built up over  countless generations. Although the  fencing of land is commonly portrayed  as a means of introducing more  ‘efficient’ farming methods, it entailed  far more than mere fencing. Loss of  subsistence access through enclosure,  exclusion or patenting leads to a loss  of social inheritance and knowledge.

“Intellectual property has now become  an important aspect of world trade.  The patenting of seed in particular is  causing a loss of species as well as  denying poorer people access to their  traditional plants. Often this is be- cause the seed has been hybridized  and patented. What this might mean  in the longer run is that hardy species  developed over millennia to resist  salinisaion, drought or low temperatures, or forage animals that can live  in difficult terrain, will be lost forever.”

Enclosing Intellectual Property

“To live, people must do paid work or  find a source of money income. The  entire edifice of economic theorizing  has been built upon the false premise  that things exchange for things and not  for money. That was why Marx was so  outraged at the argument put forward  by Jean Baptiste Say that in every sale  there is a purchase, and in every  purchase a sale, exactly as in barter.  Marx is quite clear that money, not  commodities, is the focus of the  market economy.

“Only if money is eliminated is it  possible to regard ‘capital’ as the  commodities or ‘things’ comprising a  necessary element in the productive  process: hence the common misapprehension that ownership of the physical  rather than the financial means of  production is the key issue in the  control and production of wealth. It is  also possible to be drawn into the  debate on booms, slumps, inflation,  stagflation, unemployment and the  general tendency for a falling rate of  profit without challenging the conceptualization of a formal economy which  is assumed to be providing for  universal welfare through the production of things. According to Freeman  and his colleagues the study of  economics which ignores the central  role of money in the economy has  also invaded Marxist economics.  Economics must be situated in real  time and the real world.”

Striving Towards Exponential Growth

That is far truer than Alan Freeman  seems to realize. Not only have money  prices and money profits replaced the  prime role of commodities in the  economy, but the rate of growth of  the profit already obtained by public  corporations in a single year, is by  grace of an alleged knowledge extrapolated into the remote future and then  discounted for present value and  incorporated into present price. The  knowledge of such items is supposed  available from equilibrium points  located with “derivatives.” The result:  market prices of successfully pro- moted stocks strive towards the  exponential curve which is the mathematics of the atom bomb.

Man shapes his theories under the  influence of his technology. Marx’s  view of the society’s future, was  obviously inspired by the railway- building age in which it was conceived: its course was plotted via  foreseeable stations to the socialist  terminal. This is what Veblen identified as Marx’s “teleological” aspect  (Hutchinson et al., p.106). With our  contemporary economists, the major  influence is the split atom. It is the  model not only for the stock market  but for the entire economy.1

Veblen laid a finger on the vulnerable  “romantic” side of Marxism (“a  sequence of theory”). “Capitalism  relies on two basic mechanisms of  cultural conditioning. First, the  conditioning of ‘chronic dissatisfaction’ associated with emulative consumption (consumerism) – the  ‘spiritual’ poverty of labouring for a  money wage, going into debt to  acquire and consume more objects  offering the illusion of leisure and  status. He enriched the language and  sociology with the term ‘conspicuous  consumption’ that increasingly drives  our world. Second, patriotism and  military discipline to maintain its  aggressive imperialist expansion.”

This might well have been written not  in 1899, but the day before yesterday.

“Veblen provides a neat example of  the ‘double-think’ of neo-classical  economics when the factors of  production are described in purely  material terms. [He cites] John Bates  Clark, an early American marginalist,  dismissing the notion of capital as  financial (money) value. In his view, it  would be more accurate to regard  capital as ‘a fund of productive goods.’  However, Veblen refers to Clark’s  own contradictory example of the  transfer of capital from a whaling ship  to a cotton mill. Plainly, ‘capital goods  are not purchase and sale.’ Finance  capital intervenes to change the nature  of exchange” (Hutchinson, p. 113).  “Capitalism upsets all concepts of  ‘natural’ returns to the factors of  production.”

Veblen emphasized the rigidities into  which the concept of “class” led  Marxists. “The complexities of class  within capitalized money/market  systems have been somewhat obscured by Marxist thinking that  narrows the emphasis to capital-labour  relations. This not only ignores the  problems of unpaid work but cannot  make connection with the position of  debt-based, small-scale property  ownership such as the peasant land- holder. Veblen questioned Marx’s  prediction that agribusiness would  absorb the small proprietor, converting them to landless labour. As  early as 1906 Veblen suggested that  socialists and small peasant farmers  should have common cause in resisting finance capitalism. However,  Veblen was a voice in the wilderness.  Henceforth, the small farmer, classed  as ‘bourgeois’ by ‘socialists’, sought to  oppose the hated financial capitalism  by adopting an ideology on the far  right.”

Broadening the Marxian  Class Concept

More recently, under the impact of  other cultures, this has begun  changing with leftist politicians lending  a sympathetic ear to land claims of  indigenous peoples. In India Marxists  are recognizing the links between the  rural bourgeoisie and urban industrial- ists, that is influenced by the caste  system. The authors of the book  under review bring to centre-stage the  exploitation that occurs within families  where the women’s unpaid labour is  not recognized. “Social class is now  just part of the set of resource factors  and interrelated subjectivities such as  gender and ethnicity that go into  shaping social relations.”

Obviously, the Social Credit people,  no less than other reformers, will have  to invest further effort in grasping  how society is to move to the solution  of the seemingly impossible problems  that beset the world today. In an  earlier issue of ER (May 2004) we  paid tribute to an earlier volume  co-authored by Ms. Hutchinson in  disclosing to us what had previously  eluded us – what Douglas was saying  with his A and B theorem. It was not  capital budgeting, for capital budgeting  recognized the capital investment in  equipment, buildings and much else  that would come back to the producer  only over a long period. During that  time capital debt would have to be  financed. That was the entry through  which exploitative financial capital  took over. It had therefore to be  bridged with a social dividend that  could be justified by the heritage of all  in previous generations who contributed in various ways to make possible  the institutions, science, technology  and social cohesion that made produc- tion possible in our day – slaves,  martyrs, inventors, civic leaders,  jurists. That social dividend would  help make it possible to carry on  production without being at the mercy  of finance capital. Producers’ banks  would make their contribution to this  end. That, however, does not mean  that in addition to Douglas’s A and B  accountancy, we have no need of  standard accrual accountancy (i.e.,  capital budgeting) that would keep us  informed of when the total investment  is to return and with what profits.

These two distinct gauges of the  efficiency of a firm – or the economy  as a whole – correspond to twin  complementary concepts. One is  liquidity that the Douglas A & B  theorem addresses; and solvency  which has to do with the existence of  enough assets, liquid or otherwise, to  cover the institution’s debt.

One of the goals of the A & B  Theorem is to avoid the need for  external financing of the productive  process. To close this monetary gap  while production is being completed  and the income from the sale has  come in, Douglas depended upon the  Social Dividend. This would help the  producers organize their own financing.

Rethinking the “Inflation”  Concept

There is another important detail that  our Social Credit friends should look  into. In recent election campaigns on  all continents we have witnessed a  fixation on balancing the national  budget. That of course, conflicts with  what we learned in the 1930s at a  shattering cost. But so long as our  central banks insist on identifying any  rise of price indexes with inflation, we  risk repeating that experience. Since  World War II, the market economy  has become a pluralistic one, in which  more and more human and physical  infrastructures are needed to serve  ever more complicated technologies  and intense urbanization. And these  only the state can provide. The  resulting taxation, however, inevitably  becomes a deepening layer of price.  Thirty-five years ago I identified this  as “the social lien.” This must be  distinguished from inflation that  properly refers to price rise resulting  from an excess of demand over  supply. Economic Historians (notably  the late Ferdinand Braudel) have  grasped the point. Economists have  remained blind to it. Recognizing it  would undermine the vested interests  served by the self-balancing market  construct, that dispatches all social and  environmental concerns as  “externalities”. Economic policy has  become increasingly identified with  balancing the national budget that is  increasingly in deficit because of  governments’ insistence on treating  public investment as current spending.

Unless serious accountancy is introduced into our price theory, there will  be no possibility of bringing in  anything resembling the “social  dividend.”

William Krehm

1. The exponential function will repay a  little attention. It is constructed to the  specification that the rate of growth equals  the value already attained by the function  itself. That implies, of course, that the  same is the case with the higher derivatives to infinity.

The formula is: 

Differentiating the function for the rate of  growth: 1 being a constant doesn’t grow  and hence becomes zero and x grows as  the variable itself becomes 1 to replace the  vanished first term on the left. The  denominator of the next term is chosen so  that its first derivative becomes x to  replace the previous second term, and so  on to infinity. Being an infinite series it  doesn’t matter that the first term disappears and the expression shifts to the  right. There are an infinite number of  terms available on the right to absorb the  losses on the left. As they occur you pass  on to the next higher derivative. In graph  form this is a curve that starts almost  horizontal but in no time at all stands  vertical.

–from Economic Reform, August &  September 2004