Douglas Credit System

Dominion, Volume 26, Issue 280, 22 August 1933, Page 11

Douglas Credit System

Sir, —Mr. Stuart Wilson’s letter in Friday's issue was surprising, seeing that he had been twice told there would be no financial loss in retiring notes under the Douglas system. Let us then put it another way: Real credit is the units of real wealth (goods and services), not money. Financial credit is a mere matter of bookkeeping to enable real credit to be drawn on. Financial credit is to-day issued by the banks and is created. When National credit is based on production and issued as required, the cycle is completed when the credit or money is spent and returns to the bank; i.e., the credit comes back when some production is consumed. Thus there is a reduction in the real wealth .by that much, and the notes or credit can be retired by an entry crediting consumer credit and debiting national wealth, or can be issued again as money, as required. ~ . Mr. Wilson must get the idea that money or credit is not a commodity, but a medium of exchange, and as it will be issued, based on production (i.e., total goods available for sale), and the. “just price” factor will control the price.- of goods, there cannot be inflation. If Mr. Wilson will read this letter in conjunction with Mr. P. Fitzherbert’s which also appeared in your Friday’s issue it may help him to grasp the new idea. It is very difficult to explain these matters in such limited space, but if he will buy a booklet called “Need we Repudiate” at anv Douglas centre, it will help him. Under the Douglas plan the issue of credit is removed from both the politician and the banker and vested in the consumer, thus restoring the.issue of all forms of money to the Nation. One interesting point which occurs in the Douglas system arises in the failure of the earth to produce, or destruction by the elements, wind. rain. etc. A grower obtains a loan of £lOO from the bank for growing a crop, upon presentation of invoices for purchase of seed, fertiliser and implements. He then pays out, say, £BO on labour cost, wages, etc. In the event of the crop failing—on which the grower has already contracted a debt of £lB0 — the bank under the Douglas plan could write off the hundred pounds advance and debit some to the national wealth account, as the community is that much poorer by the failure of the crops through no fault of the grower and he would. lose only the £BO in wages, etc., which is a business risk. The' community loss would be shared by the nation, suth loss being caused by an act of God. The credit has also fulfilled its function, having been expended on seed, machinery, etc., and the community who own the credit has benefited by the expenditure. This certainly seems a very reasonable and desirable arrangement.—l am. etc.. O EQUITY. Wellington. August 21.

Sir.—Mr. W. Stuart Wilson complains that hb has not been supplied with an answer to certain questions addressed to Mr. Bernard Thompson. It is necessary to mention that Mr. Wilson on August 11 accepted Mr. Thompson’s invitation to visit the Douglas headquarters for enlightenment on these matters, but it would appear that he has failed to do this, judging from the tone of his letter which appeared in your columns to-day. It is rather amusing to students of the Douglas Social Credit proposals, to read the futile efforts of critics to find flaws and legitimate objections to the solid proposals propounded by Major Douglas, but they are all confronted with the two solid facts, on which the fundamental principle of sound finance adopted by Major Douglas is based: (1) The actual cost of production is the power of consumption. (2) The purchasing power of any industry is not sufficient to purchase the product of that industry, or in other words there is not sufficient purchasing power in existence to purchase the consumable product. The Douglas proposals provide a means to bridge the gap, but unfortunately it will not fit in with the present banking system. I quite agree with Mr. Wilson when he states that no workman has any justification for taking 15/- for leaning on his shovel. Neither has the banking system any justification for taking from the producer 7 per cent, or S per cent, of the product of his labour, by the creation, of credit which i« supported by the assets

of the producer: If the farmer fails to mortgage such assets to the bank ng system, he must lean on has farmin, shovel and when hunger and misery staie him in the face, he.has t<? resort to rehe work. Of course, in such a case he: ui.i obtain relief by “knuckling under to the banking system, reasonable person can blame the individual lanks for the conduct of their business which has bee carried on quite legitimately ly in accordance with bankin- practic but it is the banking system which has failed to function satisfactorily for tl distribution of the abundant wealth of dm world and it is becoming clearer everv day. that this system will have to be reconstructed if civilisation is to remain intact. —lam. etc.. AB.C. Palmerston North. August 20.