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Distributist Review said:In the domain of economics, this meant that the rules of the economic game and the institutions necessary for giving them effect should be determined not by what is most beneficial to the powerful few, nor by what enhances the status or aims of any collective, but by the common good of individuals. That ‘common good’ consisted in the fulfillment of the true purpose of economic association: the delivery of those goods and services that people can use with profit to themselves with the least amount of human labour and resource consumption.
Social Credit: An Introduction for Distributists
I would hope that we can all agree that this should be the basic goal of any economy.
So what are the problems according to Social Credit theory? And what are the solutions?
CH Douglas Institute said:What we normally think of as money, i.e., notes and coins, are typically printed and minted by a government authority; but these merely constitute the economy’s small change, as they represent 5% or less of the monetary aggregate at any given moment in time. For all intents and purposes, the creation and issuance of money in the form of credit is the prerogative of the private banks. This means that the private banks, or the private banking system as a whole, exercises a monopoly on credit and since credit constitutes most of the money supply, this bank monopoly is a near total ‘money-*‐monopoly’. But where is it written that all money must come into existence and be injected into the economy in this manner? What if at least some of a nation’s money supply could be created by another agency, let’s say a government or state agency, and be delivered in another form, let us say in a form that is free of debt (or the necessity of repayment) and of any other costs, i.e., in the form of ‘debt-*‐free’ credit?
And what does this lead to?
Instead, what we see is that the debts owed to private banks tend to increase exponentially over time, as governments, businesses, and consumers are forced to borrow more and more money into existence in order to make up for the lack of cost-*‐liquidating consumer purchasing power or income that has been distributed in the normal course of production. The economy’s circular flow can only attain equilibrium between the flow of consumer prices and the flow of consumer incomes by continually increasing society’s collective ‘mortgage’, if you will, by borrowing additional money from the banks for the purposes of distributing more incomes and profits (via additional production) and of providing increased purchasing power in the form of consumer loans. Without the continual injection of new and additional debt-*‐money the economy would collapse.
Which is precisely what we saw during the financial crisis. So what is the alternative?
According to the proposals presented in the interwar years by the founder of the Social Credit movement, Major C.H. Douglas, the most effective, efficient, and just method of returning the financial system to a position of self-*‐liquidation, wherein these massive debts are not allowed to pile up, would be to a) break the private banks’ monopoly on money creation and issuance by b) establishing a National Credit Authority, an organ of the state, to calculate the volume of ‘debt-*‐free’ credit that is needed to balance incomes with prices and to distribute that credit directly to, or indirectly on behalf of, the consumer. This would allow the producer to recover all the costs of production with a fresh flow of adequate cost-*‐liquidating income, leaving no residual debt behind and hence contributing nothing to an ever-*‐increasing mountain of societal debt, while ensuring the full and easy distribution of goods and services to consumers.
The Distribution of the Community's Credit - The Clifford Hugh Douglas Institute for the Study and Promotion of Social Credit
I wanted to start a thread to get a discussion on this topic. I'm still not fully sold on the idea of a national dividend, or compensated prices, but I think it's worth talking about, especially the subject of the creation of money. I think most people do not fully appreciate how most of our money is created, and how a debt based currency is inherently unstable.
So what are your thoughts, or questions?
EDIT: And I botched the title of the thread. Ugh!