SOCIAL CREDIT

Hokitika Guardian, 24 July 1933, Page 2

SOCIAL CREDIT

By X. ARTICLE IV. Wo have seen that any country ha* through its government power to issue paper Currency and make it •‘legal tender.” Ibis appeals to the puoiic imagination, ana the question is at once raided as to wily a country should borrow and pay interest on money while they could obtain it interest tree by simply setting the printing presses to wont. This idea is as attractive and elusive as that of “perpetual motion.” Both promise something for nothing; both are half-truths; and both fail absolutely when put to th© practical test. Let u* analyse one l practical example where unuer certain conditions, the issue of interest free currency appeared, to work quite satisfactorily. In a certain country district the resident* decided on erecting a small public hall, at a cost of £l5O. They reckoned the yearly revenue from rental would be £25 at least. Instead of borrowing the money. they appointed a financecommittee and this committee issued 150' tokens, or notes, of a face value of £l. The people of the district, including a sawmiller, storekeeper and tradesmen agreed to accept these notes as currency, and, with these the payments were made for erecting the building. As th©, committee received revenue from rent this was need to redeem the “token” notes, with the result that well within six years they had all been withdrawn from circulation, aikl the people congratulated themselves on escaping payment of any interest, and on possessing a hall which had cost them nothing. This was quite true—as far as it went—but the circumstances which made it practicable had to be taken into consideration.

i,l) The issue was a strictly limited one for a specific object, which was economically sound, insofar as it created a wealth or revenue-producing asset-.

(2) 1 Those who accepted the token notes in payirierit ‘ knew they' could only be circulated amongst those who had agreed to take them, and they were useless for making any outside payments. • ; '. ■ (3) The rental of the hall had to be paid in real money, and not in tokens. j (4) The asset created by the- circulation of these tokens amongst this small circle became the property of the 'individuals comprising this'circle, and represented the accrued interest for the issue of the individual credit of the members of this circle. (5) The financial transaction was preceded by an orthodox and proper economic transaction—in this case the ordering of material and engaging labour to buikl th© hall,

Now, assuming for tlio presont, the Government decided to work on these lines, tile circumstances would be altogether different. The issue might, it is true, in theory bo limited to specifiic revenue producing purposes—such as settling people on the land, as was provided for when money wa« borrowed under the Lands' for Settlement, and Advances to Settlers Acts. But there is no guarantee that in practice it would he limited in this way, or that for every pound so emulated an actual and tangible -asset would be created. Then the “token” issue would become . inextricably involved with the legitimate note issue, and the country would have two currencies, one of which would he useless for making payments or establishing credits outside New Zealand. Certain debts would have to be paid in the recognised currency, with th.g. result that the other would depreciate in value. If the Government then, to obviate this, declared both currencies of equal value a*s legal tender, they would simply depreciate the entire currency to the value-of the “token” currency, and irreparably menace the credit and financial standing of the country. Even if, through the circulation of this ‘‘token” currency, tangible assets were created they would not become the property of the community, hut of the individual, and finally no economic scheme has been evolved as yet which would necessitate or warrant financing on lines which, even if sound in theory under conditions of very limited application would inevitably tend to disaster if applied generally. The safeguards which surrounded the little (scheme which has been quoted as an illustration, could not he applied generally—certainly not under any system of democratic government as yet devised. But a modification of such a scheme, worked through and in conjunction with the banks, might not only be practicable, but no we shall see later may be tb.? only course to be followed to meet- conditions which arc now chaotic.