DOUGLAS CREDIT

Wanganui Chronicle, Volume 76, Issue 76, 31 March 1933, Page 4

DOUGLAS CREDIT

Sir,—Air. Jack, in your issue ol March 28, has raised a point which i have been, working up tv. fhe demun . stration. of how tne investing of sa\ mgs in capital goods by a cunmiuuit} creates a lack of purchasing power Ja typical analysis of treatises on “the Douglas Social Credit System,’ and is the main, delusion which, sup ports the A plus B theorem. The analysis is best described by means of a diary of a community with a total income of £19,000 P.A. as follows: — First Year: Incomes amounted tu £lO,OOO and £IO,UOO worth of goods were produced and bought and consumed with the income. {Second Year: Incomes and value ui goods produced were £lO,OOO and £3oou of income was saved and only £7OOO worth of goods were con sumed, leaving £3OOO worth unsold auu to be carried over into the third yea>. Third Year: The usual £lO,OOO worth of goods were made and consumed an i the £3OO savings from the second year were spent in extending plant, thus distributing spending power and allowing the surplus goods of second year to be bought and consumed. Fourth Year; The old portion of the plant produced its usual £IU,OUU woiti. of goods, which were consumed, bui the new portion issued £2OO purchas ing power and placed on the market goods to the value of £350 (£2OO labour dividends, etc., plus £l5O overheads), thus leaving a deficiency in purchasing power of £l5O. The above analysis assumes that ia tho first place the community had no savings in reserve, but if it had to start with £3OOO in savings, the diary would have been as follows: First Year; Incomes and production amounted to £lO,OOO and all goods were consumed and banking accounttotalled £3OOO, none of which was I interfered with. Second Year: The usual £lO,OOO worth of goods wore produced and ; consumed and the £3OOO savings was ; lent to extend the plant. Third Year; The old portion of the - plant produced the usual £lO,OOO worth ■ which was all consumed. The new por- ' tion of plant distributed £2OO in pur ' chasing power and priced the goods at 1 £350 (£2UO profits, wages, etc., plus £l5O overheads), hence the value oi goods issued this year exceeds the purchasing power by £l5O, which was made up by the community spondinu £l5O of its savings from second year However, since the factory recover©'! £l5O of the cost of erection, this warepaid to the people from whom the money was borrowed, who then banker it, bringing the total savings back to £3OOO again. Thus in the third' year, although no extra purchasing power was at first issued in wages, salaries, etc. to make up for overheads, it was borrowed for the time being from savings and paio back again to savings when part of the loans to build the factories were repaid and therefore, although £ls'' will be loaded into the price of goods each year until the new plant is paid for, it will be balanced by the repay rnent of the loans on capital extension. This process will go on until the 22nd year, when tne extension oi plant will be paid for and th© communities’ savings will still stand us they did in the first year, at £3OOO, ready for further renewals and extensions to plant to compensate depreciation. A study of the above two diaries should show that a community can invest in capital expenditure with out causing any discrepancy between goods for sale and purchasing power to buy them, providing it Has a floating surplus in the form of savings, ano it is not a normal state of affairs for banking accounts to be completely de pleted. I agree with your correspondent, “Plain Talk,” that the practical aspect of “social credit” is important, but to be practical a scheme must be technically sound, and it is unwise to

allow one s eninusrasm cuiupjex any particular scheme to dominate one’s thinking; logic will alway.- h : 1 to the truth, and it is only by pa' ■ analysis that it can be reached, was once enthusiastic about ■■ ism,” but since 1 have, got to th'bottom, my enthusiasm has cooled ofl« Alajor Douglas has diagnosed our economic maladies wrongly; he J that any community cannot al aP times and under any conditions purchase the total output of its industry; I don’t agree with him on this poir ': however, I admit that sometimes • community cannot purchase all ,;i goods on sale and at other time.-. •’ cannot spend all the purchasing pow' r it possesses, as there is at tho t-’o“ insufficient consumable goods bei'g made. There is a serious flaw in ~ a r economic system and I agree with Major lAouglas that the issue of purchasing power is the way to clear the depression by getting rid of surplu" goods and causing a demand for labour and reinstating the unemployed ’«» make more goods, but I don’t agr ( ‘* with his method of issuing th's© i a doctor administering a drug; t © right measure will cure while an over dose will kill. There are many diver’** systems for issuing those “tickets, and I feel there is one system to suit our circumstances; the problem is to fill a “gap,” which mathematically occurs between prices and purchasing power, but to stabilise rate of production with rate of consumption, an I if social credit were controlled according to the Douglas formulae it would end in vicious inflation. We are ,n need of a social credit svstem. hut n ot the Douglas svstem. Yours truly. “STUDENT.”