It is alright to say that each man, woman and child, as member of an organized society, is entitled to the benefits of association. Also, it is exact to say that these benefits should at least guarantee the bare necessities of life for everyone, from the cradle to the grave, in a world which overflows with so much wealth that its biggest problem is to dispose of this wealth.
In a modern distributive economy, this "guarantee to basic necessities" can only be achieved in practice by guaranteeing a periodic amount of purchasing power large enough to obtain the minimum amount of goods that is required to sustain life.
This purchasing power presents itself in two ways: a direct dividend in the form of money and the lowering of the retail prices on products at the time of their purchase by the consumer.
In both cases, the National Credit Office needs a source to draw from: a source from which it will draw to distribute a dividend to all citizens, and from which it will draw to compensate the retailers for the reduction on prices decreed to the buyer's benefit.
This source resides in the national credit.
The idea of credit is synonymous to the idea of confidence. One gives credit to someone else only if he has confidence in that person.
Confidence rests on something; it is founded on something. And the object of confidence can be many.
Thus, the weather forecast gives me confidence that tomorrow will be a pleasant day. My friend's character gives me confidence that he will be loyal to me. My studying gives me confidence that I will succeed in a given exam.
In all of this, there is no question of money. It is confidence regarding other subjects.
If I am a retailer and I sell to a client who promises to pay me in three months time, my confidence rests on my client's future capacity to pay. I give him credit, because I am confident that he will find the money and that he will bring it to me in three months time. This confidence regards finance.
Social Crediters distinguish real credit from financial credit.
When the seventeenth century French settlers reached the shores of the St. Lawrence River, they did not do so without having the confidence that they could make a living in this country. Their confidence rested on the capacity attributed to the New World of being able to provide the necessities of life. This was the New World's real credit.
The colonist who went to settle in the Abitibi Region of Northern Quebec had confidence in the Abitibi. He believed that the Abitibi's forest and soil would allow him to live and raise a family. This was Abitibi's real credit.
The doctor's competence gives confidence to the patient who consults him. This is the doctor's real credit.
Real credit springs from the capacity to produce goods or services that answer needs.
Canada's real credit is Canada's ability to produce and deliver goods and services as, and when, and where required by needs.
Real credit grows with the development of a country's productive capacity. The difference between Canada today and the Canada inhabited only by Natives four centuries ago, shows the growth of Canada's real credit during the course of these four centuries.
Real credit is the country's wealth as expressed by the capacity to provide goods and services.
Financial credit is the country's wealth expressed in terms of money.
Financial credit is the capacity to supply money as, and when, and where required.
The credit given by a retailer to his client is financial credit. The retailer is confident he will be paid in due time.
The credit given by a lender to a borrower is financial credit. The lender has confidence that he will be paid back in due time.
If real credit directly rests upon goods, existing goods or goods that could easily be produced, financial credit rests upon money, money whose presence is expected at the time required.
When politicians speak of the Province's good credit, they mean financial credit, the confidence that money lenders have in the Province's capacity to pay back.
The Province's real credit, for its part, remains the same whether bankers be welcoming or be unyielding.
If finance were at the service of reality, financial credit would reflect real credit.
Alas! This is not the case. In 1930, Canada had not lost its real credit, that is, its productive capacity, and yet it lost its capacity to supply money as to when and where required.
It is this separation, the divorce between real credit and financial credit which distorts economic life.
Real credit can be relied upon: it is the work of Providence, to which is added the work of man and the progress derived from applied science. Financial credit knows all kinds of abrupt changes; it depends on the banks' actions which are directed at earning banking profits more than at securing the good of the people. The banks' actions are subjected to the influences of an international order and by no means in keeping with the facts of production nor with the needs of consumption. The 1930-1940 Depression was a crisis of a financial order on an international scale.
All bank loans are based on real credit. It is our capacity to make and deliver saleable goods which turns the borrower into someone who can be relied upon by the banker.
As we saw before, the loan from the bank, entered to the borrower's credit, acts as money. It is banking credit, based on real credit.
Banking credit, or bookkeeping money, is the conversion by the banker of the borrower's real credit into money. When a loan is granted to the Government, it is the conversion by the banker of the real credit of the country into money.
The conversion of real credit into money is essential. But this monetization carried out by the banks, holds a fundamental flaw. By an inconceivable privilege, banks monetize the real credit of other people into money, and declare themselves the owners of the money thus created. They then lend this money to the very people who are the true owners of the real credit while forcing them into debt in the process.
Furthermore, this monetization of real credit creates a short term money that must be withdrawn from circulation and destroyed at a predetermined time even though the real credit which served as its basis continues to exist.
Take the case of an industrialist who borrows to build a factory. He obtains a credit to be repaid, let us say, within five years. The factory which he builds increases the country's real credit. It is therefore normal that the amount of money in circulation be increased since money should be the reflection of the country's wealth.
But the industrialist must repay the loan within five years. He will therefore add to the prices of his factory's products, not only the production costs, but also a part of what he paid for the factory so as to be able to reimburse the bank.
At the end of five years, all the money that was created will be withdrawn from circulation and returned to its source. Yet the production capacity of the factory still exists. The basis for its monetization still exists, but the money is not there anymore. The country no longer possesses the financial equivalent of its real wealth.
Real credit has a social character, even when private goods are considered.
The factory, mentioned above, would have absolutely no value were it not for the existence of society. Do away with the consumers and what will be left of the factory's worth.
The factory, which is private property, certainly increases its owner's wealth, but at the same time it also increases the country's wealth. And the whole country will benefit from it provided, however, that the products of the factory can be sold.
The banker who lends money based on the borrower's real credit and who forces the borrower to bring back this money, is not only unfair to the private creator of wealth, he is also unfair towards all of society when he limits its claims upon wealth that is produced and offered.
Monetization of real credit can only be exercised by a sovereign authority acting in the name of society itself and must seek not the banker's profit, but the economic welfare of society as a whole.
This is why Social Crediters call for the national monetization of real credit, whether this real credit be the fruit of a public or of a private enterprise.
This monetization must be carried out in an orderly fashion. It must be in keeping with the facts of production and with the needs of consumption.
The national monetization of real credit can be expressed, as banks do, by simple entries of financial credit. But it must not be burdened by interest nor limited to an arbitrary time frame.
Any increase in real wealth increases the basis of monetization and any destruction of real wealth destroys the basis of monetization. Money must disappear only if its basis disappears.
Under the present system, when the banker creates the money which he lends, he simply records it in a ledger to the borrower's credit. The borrower uses it by drawing cheques on this credit as long as some credit remains.
Likewise, the National Credit Office which would monetize any new increase in real credit, would simply record the money thus created into a ledger, to the nation's credit. It is upon this national credit that cheques would be drawn to pay the national dividend to the citizens and to compensate the retailers for the national discount decreed on retail prices.
The administration of this national credit account would in no way be left to chance or to fantasy. It would be entrusted to a national monetary authority, a non-political commission appointed by the Government, which would be charged with administering the national credit according to facts in the same way that Legal Courts appointed by Government pronounce judgments based solely according to the facts in regards of the Law.
It would be a commission of accountants charged with recording the assessment of all production of wealth and of all destruction of wealth. The difference between the two would give the net increase, the basis for the increase of money.
This is not an impossible task. There already exists precise statistics on almost anything that constitutes an increase in the country's wealth: production of capital goods, production of consumer goods, imports, births, etc.; and on anything that constitutes a reduction of the country's wealth: depreciation, wear and tear, fires, consumption (total purchases), exports, deaths, etc.
This would be a good basis for the starting point, the credit commission having to look only for the information it might be lacking.
There is nothing dictatorial in the work of such a commission. It does not dictate to production; it records it. It does not dictate to consumption; it records it. It is the citizens themselves who freely provide the facts; the National Credit Commission simply records these facts and deducts from them the net increase in wealth.
The accounting conforms to realities; it does not contradict them. And the money issued in accord with this bookkeeping would result from the pure facts of production and consumption; facts of a reality which would freely govern the volume of money as opposed to the disorderly system of banking credit where money governs production and consumption.
British author, John Hargrave, gave a concise definition of Social Credit which expresses clearly this freedom of production and consumption, and this submission of money which becomes as flexible as a bookkeeping system:
“Produce what you want; take what you want; keep count of what you produce and of what you take.”
Since nothing would hinder the sale of products, production would rise to new levels until consumer demand is satisfied.
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