Chapter 1.


Single Business Profit System


This is a very serious book about economic systems. Maybe it will seem strange to
you that the first thing we will talk about is cookies. Almost all four year old
children could tell you that you can not take more cookies out of a cookie jar than
there are cookies in the jar. This is the first law of all systems. You cannot take
more out of any system than there is in it.

We presently use the profit system as our main way to produce and distribute.
During some indefinite period, people invest 100 billion dollars and expect to get
back 110 billion. The basic law of systems tells us that we cannot put 100 billion
into the system and take out 110 billion. Yet at the present time, investors are
taking more money out of the system than they are putting into it. This seems like a
contradiction. We observe the profit system working, seemingly in spite of system
law.

We need to look further if we wish to explain the seeming contradiction. Let's
assume we give a fourth grade child a piece of paper and a pencil. We ask the child
to draw a kindergarten style sailboat.

"Mary, here is a penny to pay you for making the sailboat. I own it now, and wish
to sell it. Let us act like you wish to buy this sailboat picture."

"O.K.," says Mary. "How much do you ant for it?"
"I want two pennies so that I can make a profit," I tell her.

"But," says Mary, "I only have one penny. I can't buy the sailboat." Kids tend to
have clear vision if it is about something in their experience.

"I will let you sign an IOU for one penny. With the penny you earned plus the one
penny IOU you can buy the sailboat picture," I tell Mary. The deal is completed.
Note that by using debt, both production and distribution has been accomplished.

Aha! We have begun to explain what seemed like contradiction between cookie jar
law and the 110 billion dollar return on a 100 billion dollar investment. A profit
system demands a "money" increase or it will not work. Let us reword that
statement, and call it the law of the profit system. Enough buying power must be
injected into the system to allow profit or else the system fails.

This conclusion slipped up on us so easily it may be hard to recognize its great
importance. Using cookie jar law, we have found a direct cause and effect
explanation of how either prosperity or depressions occur.

You are likely disturbed because IOUs were used as the money increase in our
sailboat example. How about gold? Or silver? Diamonds?

Following centuries of custom, money was raw gold, raw silver, or coins made
from gold or silver. A person was rich if he found enough gold or silver. A nation
was rich if enough gold or silver was found within the nation. When our nation
was young and tiny, the finding of gold and silver increased the money enough that
the profit system worked. During the last 100 years, finding of gold and silver has
been far less than needed for prosperity.

Growth of great quantities of IOUs, or debt, has been needed to enable operation of
the profit system. Strangely, debt such as IOUs is often used as money. That is
why IOUs were used in the sailboat example. The seeming contradiction of a
working profit system is explained by debt.

Using system law as a tool, you can find cause and effect explanations for
countless profit system conditions. Those explanations may be very unlike those
you have learned before.

If you brought a stack of college economics textbooks home from a bookstore, not
one book would cover the cookie jar law of systems. Not one would derive the
cause and effect idea that a profit system cannot work unless buying power
increases enough to pay profit. During 200 years, many stories have tried to
explain operation of capitalism, which is what people often call our profit system.
Those stories fall short because they fail to apply the right approach, which is use
of system law to analyze the basic profit system process.

Conclusions in those books are based on coincidence. Reasoning by coincidence
may be correct, but also is often wrong, like the four year old girl who told her
mother, "Each time I put my pajamas on, it makes it get dark outside." Using
system law in our study of the profit system, we can be free of errors caused by