SOCIAL CREDIT AND INFLATION

Otago Daily Times, Issue 22631, 24 July 1935, Page 6

SOCIAL CREDIT AND INFLATION

TO THE EDITOS Sra,—Tho honesty of “Inquirer" can only be saved at the expense of his mentality. He has shown that he is far from being lacking in mental ability. No other could have conducted a correspondence on this question for months and evaded the real points at issue, while pretending that his opponents were doing that thing themselves.' We can only conclude that he is not sincere in view of his evident mental ability, and it shows no cantankerousness on the part of social creditors that they charge him with insincerity. He has himself made that verdict inevitable. We shall let that aspect of the mutter rest, however, if he will only answer the question put to him in regard to the national debt. He has had great sport with the national dividend of social credit. When the same reasoning which he has Used for months is applied to the unrepaid loan money of the national debt “ Inquirer ” wants to consider anything else but that. In his letter of the 15th he very deftly introduces aspects of the matter that would quickly lead away from the point ■which he dare not squarely face if he is to continue reiteration of his inflation bogey. Time and time again he has apologised for his repetitions, and blamed the necessity on to social creditors who would not answer his questions. This time it is he who will not, and dare not face, or attempt answer, to the question put to him. Of course, it is quite in accordance with the familiar tactics of “ Inquirer ” for him to insist, when he is definitely challenged, that the question put to him now is beside the point, and to attempt to draw the chase away in another direction. The letter mentioned above seeks to draw a distinction between the creation of money by a bank when it lends to an individual and the provision of the loan money raised by a Government. In the first the creation of new money is , granted as an assumption, and the loan of the Government is taken to be only the use of the people’s savings, “ a simple transference of money from private pockets to the Government,” says “Inquirer.” Now, I have not the least doubt that your correspondent would dearly like me to pick on this obviously incorrect statement, but I have no intention of being led away in that manner. That aspect of the matter is well worthy of detailed treatment, but not just now. Wriggle ap he will, “ Inquirer ” is going to be compelled to face the_ implications of his own argument regarding inflation, and it is of no avail whatever for him to pretend that what is now put to him is only a side-issue. That pretence has been overworked badly by “Inquirer himself, and can be dropped now as deceiving no one. Every time he has been brought up to a point where he was required to give answer to something which really threatened to deal with his statements on inflation, he stigmatised such points as “side-issues,” which he would not deal with. Now he is at it again, and would have it accepted that trying to make him face the implication of his own argument in respect to the present system is likely to result in “ becoming involved in an endless discussion of side issues, but as a special concession,’ etc. I assure you that no time will be wasted on this point if “Inquirer” will only give a plain answer to the point put to him in regard to the national debt un- ' repaid loan money. We shall not bother to examine whether banks lend the national debt money and create it for the purpose or whether it is the peoples savings as implied by your correspondent." It is loan money whatever its origin, and it has not been repaid. It has been the cry of “ Inquirer ” that money ■which ia not repaid' to a bank. and cancelled by this repayment must remain in'circulation and cause inflation.' Failing to get “Inquirer ”to face the issues—be hints in bis last letter that he will not continue to argue with me on these so-called ‘ side issues” —I shall try to get an impartial verdict upon the noint and show that your correspondent’s much repeated cry of inflation has no foundation in fact, the truth of this being clearly proved by the non-repayment of the national debts of this and other countries. If failure to repay loan money causes inflation then the thousands of millions of unrepaid national debts would cause inflation to-day. This is not a “ side issue,” and “ Inquirer knows very well that it is not. It suitshis purpose to affect that it is, but I think your readers, believers in Social Credit and its opponents, will agree that I have not misrepresented bis position and that I have hoisted, him with his own argument. The facts of to-day prove that he has no case, and it only needed the situation to be presented in this why for the hollowness of his contentions to be apparent. “Inquirer ” merits the severest condemnation for his scandalous evasions, and cannot complain if the public think the worst of such tactics and their user. I challenge your correspondent once more to explain the absence of inflation together with mountains of unrepaid loan money which your correspondent says must cause inflation. —I am, etc., J. E. B. July 20.

TO THE EDITOR Sir, — “Inquirer's" complaint was well warranted. Derogatory references to the quality of an opposing debater’s intelligence or to the integrity of his motives are irrelevant and unworthy. Moreover, such defects are readily reflected in the matter the opponent advances, so why not get on to the matter and leave the defects umnentioned? Then, to question “ Inquirer’s ” sincerity, on grounds of suspicion alone, is pointless, for it will not move anyone to believe that, were a faultlessly reasoned answer supplied to “ Inquirer,” he would fail to accept it frankly as such, At the same tune it may fairly be said that “ Inquirer ” does not believe- such an answer will (or can) be forthcoming. Such an answer can be found, and_ I shall endeavour to formulate it as briefly as possible. Consideration of certain relevant facts and factors cannot be omitted if the conclusion to be arrived at is, to be of value. I propose first to name these facts and factors, and then to give a direct and logical answer to “ Inquirer s ’ question. . Under the conventions of the present financial system, money does not miraculously jump into, and out of, existence, but moves in well-defined processes. There may be obscurity about some of its movements, but there is no miracle about one one of them, which earnest inquiry will not explode. All money issued to the community, from whatsoever source, comes to the community as debt—a debt of the face value of the money issued. Discharge of the debt, therefore, would consume all money that had been issued in respect of any period, or of any place of activities, or in respect of any piece of work, or indeed in respect of all time or place or of all work ever

undertaken under the system. Accumulation of financial savings 5a therefore an indication, if such were needed, that debts also have been allowed to accumulate. Debts naturally imply debtors, and the debtors are nations, communities (of few or of many units), and individuals. The system which inexorably decrees the constant accumulation of debt is definitely the most potent factor in causing the troubles of humanity to-day. It drives producers and traders to cut costs —mostly wages and salaries —either by reducing rates of pay or by adopting improved methods and reducing the number of earners who receive wages and salaries. So, the cutter of costs, who has succeeded in cutting his own costs, has failed to avoid cutting the other fellow’s prices, and everything is as bad it was or worse, and all pains have been taken in vain. The system establishes a condition of economic insecurity, from which few indeed escape. It causes hopeless struggle, bankruptcies, suicides, deaths, misery, want, and discomfort, in face of the fact that there is no question of the world’s ability to supply a sufficiency of real wealth to satisfy the needs and desires of all, so that the world possesses the ability to prevent, almost entirely, the varying degrees of unhappiness and evils that humanity is suffering. The system makes profitable return essential, and at the same time makes profit impossible, and in this way it restricts business, retards enterprise, and slaughters confidence. It checks consumption when warehouses < are full and multitudes are in want. And it decrees, beyond all appeal, that an increasing percentage of the debtors (nations, communities, and individuals) shall fall victims to it. Undeniable confirmation of this last statement is registered in every actual happening, both past and present, and any statement made to the contrary is pointedly false. Logic and humanity both direct that these evils should at once be wiped out. The just price and the national dividend are essential parts of a proposal calculated to eliminate these evils. Periodically the amounts of both these factors will be mathematically computed on the basis of real wealth, and the amount of purchasing power in sight at the moment. The proposal presents the elements of feasibility. That it is perfect in all its parts is a lot to ask. but it Is so far complete that it is worthy of, a trial in utmost confidence of its eventual success. Difficulties will be met with, but may reasonably be expected to be overcome when encountered. A good plan is essential —a perfect plan, is almost an impossibility. Must we reply to “ Logic and Humanity,” “Your direction shall be given effect to when a plan has been produced which shall be perfect in all its parts and shall command universal approval”? And shall we, with worthy ; fortitude, allow the other fellow to suffer avoidable miseries while we await the advent of the perfect plan? Danger of inflation is the first thought to present itself to most inquirers, but many do not stop at the first hurdle, because it seems to be difficult and the course to be impassable. They push on and find the course to be a fair course that can readily be encompassed. The question of inflation is of secondary importance, and further remark on it is reserved till later. The question that must be unanimously conceded to be of first importance in this connection is: Would the condition set up by inflation (should it eventuate) be prejudicial, or would it be beneficial to the interests of humanity? Let ua picture that which necessarily must obtain. Demand for real wealth (backed With purchasing power) would increase enormously, and would constantly expand to the limit of all physical possibilities. More money would be required than has ever before been in use at the one time, and enterprise and confidence, hand in hand (with fear of irredeemable disaster forever banished) would demand, and use, more money still, and with it would encompass volumes ot supply hitherto undreamed of. Can limit be set in the imagination to the volume of production in these circumstances? Can anyone predict the volume of money that will be required for these operations? or the Acts that will be enaeted and gladly observed regulating its beneficent use? The grazing herd feasts to repletion on the tender grasses of spring, and in full assurance that each season will bring its own supply of food', does not lay by store of the plenteous yield. So man with money, under these conditions, would have' nothing to gain by hoarding it when his very need and desire -would be ever within reach of his rights and efforts to secure it. Taxation would be on a different plane. It would then be a thoroughly sincere process, not, as it is at present, but a gesture of pretence, in that it assumes -to pay all current liabilities, and to provide a Surplus from the pool of yearly incomes—which is’but a reflection of current expenditure, and is not more than sufficient to replace that spent. Should there be any unusual accumulation of money under the new conditions, it will not cause the slightest concern, but will he dealt with Ey taxation. which may then have funds from which to draw an adequate total to discharge all current liabilities and regularly to pay period instalments in reduction of accumulated debt. This -would be accomplished without inflicting hardship or injury on anyone. So. for quite a while, the fear of inflation could have no terrors, and the ingenuity of man, on past performances, would have ample time, and could be depended on, to devise and to establish a financial system that' would be perfectly self-liquidating and that would leave within the community, righteously earned, new money in amount exactly equal to the financial value of the increase of real wealth delivered during’ each period. The vital rub in the whole business is how profit canfbe made to accrue. In the existing system, financial provision is made to meet , this difficulty by maintaining a policy of kinetic accumulating debt and accumulating credit while no organised policy of cancellation of either is attempted. In the Social Credit system the difficulty is met by the establishing of the national dividend and the just price. Under this provision profit unaccompanied with debt will accrue, and financial savings will accumulate. Certain factors already named will tend to employ and to keep within bounds this accumulation, find taxation, without hurt to anyone, in providing for discharge of current and of standing liabilities, will effect all necessary and equitable cancellation. I submit that the matter uttered is of more importance than the author’s name. If the statement of one differs from the statement of another, remark upon the difference is nearly always pointless. All utterances accented for consideration should be judged on their merits, and accepted or rejected as they are found to be sound or unsound. From perusal of his contributions to this subject in ‘your columns, I have formed a very high opinion of the ability and accuracy of “ Inquirer ” in financial analysis. In submitting this aspect of the matter to him I am in hopes that, after he has considered the position as a whole, and has thoroughly tested each factor, he will be found amongst the advocates of Social Credit. He will then be using his undoubtedly fine mental equipment in service of the present suffering generation. and also in the establishment of a State free from all avoidable suffering for future generations to enjoy. And now the answer: As under social credit proposals financial savings will accrue there will obtain under it an accumulation of money or credit the full cancellation of which is not at present directly in evidence in detail.—l am, etc., Q. E. D. July 20. [lt will be necessary for “ Q. E. D.” to present his picture on a smaller canvas in future if space is to be provided for it—Ed. O.D.T.] TO THE EDITOK Sib, —The last letter from “Plain Facts” consisted principally of irrelevant personalities, but in the few lines in which he attempted to deal with inflation he argued that, as the national dividend cheque, would be cancelled when lodged in the bank by my grocer, there the matter would end. Of course that is r.ot so. In fact, so far from the matter ending there, the matter would really begin. The lodgment of the Government cheque would mean more than its cancellation. It would mean that the Gov eminent had become indebted to the bank, and that the bank had become indebted to the grocer. Every cheque issued by the Government would increase its indebtedness to the bank, and how the Government would discharge its ever-growing debt I leave ‘“Plain Facts” to explain. The grocer could claim from the bank cash for the cheque, which would place him in exactly the same position as if the Government had paid me in cash, and I had paid cash for the goods. Surely " Plain Facts ” can see that the cancel-

lation of a cheque does not cancel the credit created by that cheque. Credit can be passed on from one person to another by cheque just as readily as by bank cotes, and may be exchanged for bank notes at any stage. Of course cheques are just as truly paper money as bank notes, and the futility of attempting to get over the inflation difficulty by the substitution of one kind of paper money for another must be evident to anyone who takes the trouble to think —that is, of course, if he is capable of thinking intelligently.—l, am, etc., July 22. . Inquirer.