SOCIAL CREDIT

Hokitika Guardian, 25 July 1933, Page 3

SOCIAL CREDIT

By X. ARTICLE V. , _ , j : ... Tho fi e who have followed these art- j ides so far will see how the slogan, now i so popular, “costless credit,” o'iginateS. < It is on the face of it .a very attractive i proposition—a very soothing ointment for the sores and erupt.eng from which | humanity is now suffering. But un- 1 fortunately there is a fly in it. One. brand which is now being extensively advertised is the “Douglas credit system,” to which I have already briefly referred. Its aims and objects have . been set out at such length, and in a manner so directly calculated to appeal • to ;tho .public imagination that the fact that it is based on fallacious economics, is completely hidden. TheA .plus B theorem is based on the false j promise that of wealth produced by in- j du s try only portion reverts to the pro-, ducer and is basis for the issue of j currency in such form as may be ic(juiced ; whereas in actual practice all J wealth produced provides purchasing power, and directly or indirectly passes j into ,o'irculation. J ]f it, docs not immediately do so it is owing to the “fear complex” or lack _ of confidence on the part of the holder j that the money cannot be safely reinvested. in industry. But even then :“J is invested in Government (bonds | or placed on fixed deposit, in the (banks; and thev in turn have to use it some way to earn interest. The*.second and; perhaps most dangerous fallacy (lor the A plus B theorem has been abandoned j by some, of the ..Douglas Credit sup-J porters) is that credits should be given based on “‘ he .nation’s-productive Capa- J f .jty as ft going, concern” —ft payment “due to every citizen and C|.nite apart' from any question of employment.” This is a deliberate promise of somel.hing for nothing 'based on the danger- J ous assumption that the individual has the right to this ‘-something,” quite irrespective of whether, he is either able nr willing to give anything in return, j Xo wonder the scheme has been con-, ' detnned a s “camouflaged Bolshevism.” j a ... nation can only obtain credit -for ; its actual production, not on its alleged ' capacity for. production, just a.y the individual'can only claim financial credit, (or wages) for work performed; not on j his asserted capacity to perform work. • 'As stated previously an economic trans-j action must precede a financial trails-, action, and this law is not .set fl«3idc ( by the apparent contestdic*i<m boat in ■ most cases capital expenditure ha s to| he arranged, for and incurred before any wealth*'..'is produced. The omio transaction”- really comm'eircK vvhen a definite economic, work is undertaken, and the date when returns may be expected may be more or less accurately -assessed. The lawg governing borrowing on a sound economic basis provide that the money borrowed must be for reproductive work, which will not only enable interest to be paid on the money borrowed, hut the principal in time to be repaid in the loom of a sinking fundi As a gainst , the sums so borrowed—or credits so established currency - rnay 'be * issued; and if “costless currency” is net to become ( valuer less currency,” the same law governing its issue must apply. We have seen that paper currency is only 1.0. ti. and this -by its very nature- asunie s that -it is convertible on denv'iid with tangib.e wealth. It is so exchanged as it passes from hand to hand. But one© it io realised that the issue of such currenty : has got out of control—that it can be • issued freely by ■ any. t Government at the-dictates of political expediency, irrespective of the economic lovys which should govern it, and• that in consequence it: is becoming.: of les e and less Value 'according - to world standards, j tlie• results' would-betas follows • First a terrific inflation .of prices of all goods which .require to be imported; then demands for’higherwages to meet increased cost of living; then' large in- . crease' in costs of all articles produced locally-; then inflation of all property values. There would, however, be no ink-ease 'in • the value, of our -exports, outside interest could not be paid in the depreciated: currency, ’ and large sums would have to be paid away to , provide an exchange equalisation fund, j The vicious circle, of---inflation ■ would j continue until, ai, wag the. case widi the mark and tlie rouble. the pfiper became valueless. The credit of the country would be so seriously affected that repudiatibn and national insolvency would be inevitable. Tiffs, however, is not likely to happen to British people. But tlie danger of the spread of visionary schemes based on faulty roaieoumg and fallacious economics is greater now than it would be in normal tunes. Because! the world is in such a state of. chaos just now more drastic remedies must be applied th n those which 'proved effective in the past. Each country will have to .provide credits for economically sound schemes for settling people on tho land; and also for completing necessary public works and opening up and developing natural resources. - The demand for j ■credits for these purposes will be so j great- that financial operations will have to be- resorted, to which at present might be regarded as unorthodox. The problem of rehabilitating the world is

too great for tho batiks alone. But it is also too great to be 'dealt 'with without their advice and assistance, as tho principle,s of sound banking and sound economics must govern the decisions'of our statesmen it' they a,ye to be based on wisdom and a .permanent solution of present difficulties is to be found.