OUTLINE OF SOCIAL CREDIT

Poverty Bay Herald, Volume LXI, Issue 18484, 24 August 1934, Page 12

OUTLINE OF SOCIAL CREDIT

(To the Editor of the Herald.) Sir,' —In your issue of yosterday, Mr. Innes.askeq for a simple explanation of social credit. If you will permit me to do 50, I would like to outline, as briefly as possible, the salient points. burial credit is merely a proposed re. form to eliminate a flaw iri the existing monetary system, and to understand the reform it is essential to have some knowledge of the flaw. Now, Ido not think it can be denied (1) that all money comes into existence as a debt to the monetary system; (2) that no one outside the oankiug system can create and issue money; (oj that more than the total of money in existence at any time is owing as a debt; and (4) that all money must ue the creation of the banking system, as anyone else who created money would oe sent to gaol. The system lends,, at interest, the money it creates, and even ii we assum'o it to be true that deposits are loaned we> must still admit that the money or credit represented»in deposits is the creation of the system.. Money or credit is loaned for public works, capital production, and consumable production, and the interest is collected in the price charged for goods and services. • Ail costs are passed mlo prices and charged to the consumers. Now let. us assume that the total of money is £IOOO and tiie interest £SO per annum. How is it possible for anyone to increase tin) total of money to £IOSO to enable principal and interest to bo paid? It cannot be done. If the producers who borrowed the £IOOO atid passed it into purchasing power expect 10 per cent, profit, how can they ,get back £SO for interest and £IOO for profit, in addition to the £IOOO they have paid out, when there is only £IOOO in existence? I do not think it has ever been denied in any reasonable way that, if one producer recovered his costs, profit, and interest, it must he at the expense of another producer who failed to recover his. Under such a system of commercial cannibalism, it must, bo obvious that every profit in production or business is merely tlie reflection of a loss to others in production or business. A technological survey of American industry in 1929 proved that the total of industrial losses in that year were exactly equal to the total of industrial profits. A little thought will convince anyone that such a condition must always exist, unless there is ail abnormal flow of new loan money for public works and capital production to aid the consumption of consumable goods. And Very little further thought will lie necessary to convince anybody that the pool of purchasing power must become lower ami lower us it is drained to pay for public works and capital production in the prices charged for consumable goods. That is the growing chronic shortage of purchasing ‘ power referred to in the Douglas analysis. Now, the Douglas people realise how much worse the last condition will be if the monetary system goes on injecting new loans into purchasing power ana charging up new interest costs in’prices. They say the shortage of money should be made up by a flow of costless credit. The State should not have to borrow for public works, but should exercise its prerogative to create and issue ,money, the only real basis of value being the g ods and services rendered in exchange ilienlor by the community. As this costless money would flow into extinction in tlie consumption of consumable goods loaded with interest and debt charges, the flow would have to be maintained by the issue of new money equal to that extinguished in the repayment of loans. While there was work to do, work would be paid for, but a national dividend would eventually bo paid by the national credit authority to those for whom no work could be’ found, and to pensioners and invalids. The money so created would be costless, but based on goods and services. The people would get the goods, and the producers the money. Apart from tno costless credit, or in conjunction therewith, the just price dis*