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Financing Consumers

Written by Louis Even on Friday, 01 January 2021. Posted in Social Credit

The following article was written by Louis Even in 1936. Note that a new stove cost $48 at the time. Even so, the diagnosis of the problem and the proposed solution remain valid in 2021. We must finance not only production but also consumption. Goods are manufactured to be used, not looked at. In today’s financial system, however, financing both production and consumption can only be accomplished by incurring perpetual debt.

There are two opposing economic schools of thought today in the political world and in the universities. One is the vision of British economist, John Maynard Keynes (1883-1946), who believed that governments should intervene in times of crisis in order to stimulate the economy, even if it means increasing the debt burden. The other school of thought was developed by Ludwig Von Mises (1881-1973), founder of the Austrian School of Economics. Von Mises believed that the state should not intervene in times of crisis, but rather that debt should be paid while cutting state services, including those offered for the needy, and even a return to the Gold Standard.

As a general rule, one could classify Keynes’ disciples further to the left on the political spectrum, and those of von Mises further to the right. In Canada, for example, one could say that Liberal party supporters would follow Keynes. They would stimulate the economy at the cost of deficits. Conservative party supporters would advocate for Von Mises’ approach, preferring to balance the budget at the cost of cuts and austerity measures.

Look at the cartoon. Even though the gentlemen, identified as Stimulus and Austerity, state opposite positions they are both rooted in today’s financial system in which money is created as debt. Indeed, if we did not borrow money there would literally be none in circulation. Hence the economy as it is structured is a dead-end system. There are only two unpalatable options: either we indebt ourselves for life or starve to death repaying debts.

Economic Democracy, also known as Social Credit, the monetary reform system developed by Scottish engineer, Clifford Hugh Douglas (1879-1952), and taught by Louis Even (1885-1974), offers hope beyond the two impossible options. A system of Economic Democracy would facilitate both the development of a nation’s resources without debt and allow consumers to choose from the products available that best meet their needs by providing purchasing power to each citizen.

We can compare money to a type of voting ballot. When consumers use money to buy the products and services they want, they are essentially voting for that particular product or service. In order to stay in business, the producer manufactures the goods which receive the most ‘votes’.

Alain Pilote

Social Credit monetary policy holds that individual sovereignty is not a status reserved for a privileged few but that each person is sovereign. Each person is a consumer and it is the consumer, rightly in charge, who is constrained by a clique of financiers and overlooked in the current financial system.

Enthusiasts of fascism say that governments need strong men, or at least one strong man who rules without consulting those governed. Others offer the communist ideal: a form of dictatorship nourished by bitter hatred and always accompanied by bloody destruction. Still, others hold to the political party and ballot system, in which, they say, the people choose their leaders. (Of course we can look at elected leaders and speculate that they too are being governed.)

Under all these forms of rule in our world there is indeed a dictatorship; one which controls the destinies of nations because it controls money. It is of no consequence to this dictatorship which type of government is in place. The international bankers who regulate the credit of the nation care little about “who makes the laws of the nation”. They remain indifferent to reforms. To them it only matters that they administer credit and control money. More curious is the fact that even our best social scientists will carefully scrutinize every other factor but not examine this tender spot. Precisely around this strategic point there stands a shrewd sentinel. Powerful yet silent, he keeps watch and does extremely well in finding scapegoats.

The consumer is sacrificed

Production today is no longer a problem. Steam, electricity, oil, chemistry and automation are at our service. We should be living like kings yet poverty reigns. With mountains of products waiting to be purchased, and so many needs still unsatisfied, products continue to accumulate and people become more desperate.

Production exists for the purpose of consumption. Why then is production, which is presently operated at less than full capacity by at least one third, not regulated according to the needs of the consumer? Instead, production is configured to the amount of money allowed to circulate by the banking system. The potential for consumption should regulate production but it is the availability of money that is instead in charge. This situation is managed by a cabal of tyrants whose one aim is to keep the supply of money scarce.

Production in itself is not wealth. It is the demand that gives production its true value; consumption drives value.

We can automate and multiply production but if goods do not reach the consumer there is no real improvement in the level of material comfort. As long as products remain in warehouses and on store shelves, they do nothing to add to the well-being and comfort of families and individuals. Progress is not measured by the level of production but by the level of consumption. Consumption presupposes production; you cannot have the former without the latter, but it is possible to have the latter without the former. Production without consumption becomes a burden; a liability. A store filled with products that do not sell must liquidate. The producer whose goods are not in demand must cease producing. It is the consumer who animates the industry. Why then is he or she the one that is sacrificed?

Instead of financing production, would it not be better to think in terms of financing consumption? The consumer in turn would finance the producer by his purchases.

It is possible to finance production without financing consumption. The result though is insufficient purchasing power and goods that cannot be purchased. An effective solution is to finance the consumer so that production and consumption are in balance.

In today’s system, the money masters create new money everyday but this money is mostly for the production side. When both goods and purchasing power are on the same side how will products reach the consumer? For the producer, it is no better. For him, this new money created by the banks is a debt he is bound to the bankers to repay. The producer will turn to the consumer, whose pockets are already empty, to cover the capital and interest payments charged by the banks. Either the producer will despair because he will not be able to sell his products, or the consumer will do so from not being able to buy them.

Faced with this impossible situation, those who govern (but who are not really governing at all!) grovel at the feet of the bankers. They beg them for crumbs to hand out as a dole to the sons and daughters of the nation. The bankers, in return, grant just enough to prevent a revolt by the people while at the same time creating for them new bonds (or chains) to enslave them. Humanity may suffer and perish — but the system, the control of money by men who have neither hearts nor feelings, but who are considered as gods, must be preserved. Has there ever existed such a form of idolatry?

This diabolical game is played out in America, Europe, and every civilized country in the world. “There are in the world 30 million unemployed receiving assistance, and some 30 million without assistance. Counting their dependents, this totals up to 250,000,000 undernourished people” (From, “Vu”, May 30, 1936).

The journal “Vu” also added that each year, according to the official statistics of 50 civilized countries, 2,400,000 persons die of hunger and an additional 1,200,000 commit suicide for reasons directly linked to lack of food.

After witnessing the atrocities of war in an age of enlightenment, we are faced with the disaster of hunger in an age of abundance. This can only lead to death through revolutions and civil wars.

It would be so simple for mankind to thrive if we would only distribute the daily bread which is so abundantly furnished to us by our Heavenly Father. It is to Him that we are indebted for all natural wealth, as well as for the brains and brawn capable of transforming this natural wealth and making it available to send out to the four corners of the earth!

Financing consumers

Financing consumers means furnishing them with the purchasing power necessary to access the fruits of production.

It is not a question of making money available to each individual consumer in order to permit him to satisfy his every need and desire. Nor is it a question of distributing purchasing power equally among everyone. Social Credit takes into consideration both the consumers and the production system as a whole. There will always be social inequalities, just as there will always be inequalities between individuals, whether physical or intellectual. However, a system which can distribute a part of the surplus in the form of a Dividend to each citizen of the country would make poverty and privation a relic of the past. Furthermore, with a system of government that financed consumption, which, in turn, financed production, exploitation would end. This will become clearer as we study this subject more fully. If we can demonstrate that Social Credit serves the consumer well, then we can prove that Social Credit will serve all humanity, since each man is a consumer. A financial system which serves man, the consumer, is a servant; but a system like the one we have today, which keeps man in a state of incomprehensible deprivation, is a master. Should man be the servant to a financial system, or should the financial system serve man?

In the present system, the purchasing power of the consumer comes from salaries and wages paid during the course of production and from interest and dividends distributed to investors. Yet, the total purchasing power of the country is less than the total of the prices of products offered to the consumer. This is an undeniable fact. The difference becomes greater as production is increasingly automated. The introduction of machines to replace 10, 20 or even 100 men is not done with the view that production will decrease but with the opposite expectation. Mechanization multiplies output while reducing the number of workers. The result is more products on one side and less purchasing power on the other. Then, suffering, because of unemployment. In a reasonable system such as Social Credit, surplus production would sell and there would be more time for leisure and personal development.

It has been said that if some consumers lack purchasing power, others have too much and that limiting or redistributing these fortunes is the solution. Granted that certain wealthy persons have scandalously accumulated their millions, especially due to their control of the credit supply, even during the Great Depression, the fact remains that, even if their great wealth were divided up among every inhabitant of the country, the purchasing power of each Canadian would only be increased by about $21 per year. The end result would be generalized poverty.

The same calculations were done in England, where there are great fortunes alongside extreme poverty. A redistribution of existing wealth would give each individual Englishman approximately $25 more per year. Obviously this is not anywhere near what it would require to finance the present or potential fruits of English production and imports! Social Credit pursues a completely different outcome.

(Editor’s note: From the book “Stable Money” by W. E. Turner, published in 1966, on page 63: “We quote, as did columnist Neal O’Hara in June 1950, the French statistician to the effect that if all the world’s wealth were divided evenly among the earth’s inhabitants, we’d have about $2.81 each.”)

That is to say that the volume of all money, regardless of how it is dispersed, is still insufficient to buy the total sum of products.

Do not conclude from the preceding considerations that we wish to absolve the injustices that, more often than not, explain these vast fortunes, or that we are ready to bow our heads each time the name of a millionaire is mentioned. With Social Credit it would not be that way. Instead, by financing all consumers, rather than all producers, by abolishing the private control of credit and by distributing the required new money directly to each consumer, Social Credit would guarantee the best means for dethroning the gods of exploitation, breaking the power of monopolies and fairly distributing prosperity.

It must be noted that under a Social Credit economic system, personal savings would remain intact. Only new money would be distributed to the consumer at the rate necessary to establish a balance between purchasing power and the capacity to produce actual wealth. This new money would differ from the current system of bank credit, in that it would be more sound. Instead of being based on a supposed future production, it would be based on actual production. This would be more effective because it would not be debt-money that must be returned with interest to the banking institution that issued it. It would not be a loan: the consumer receiving it would neither have to pay it back nor pay interest on it.

It would truly be new money and not, as in social assistance programs, money already in existence, taken from Peter and given to Paul. This new money would be created especially for the purpose of being distributed to the consumer as purchasing power. The money provided to the consumer would not have inflationary potential since its volume would be determined by the production both available and required by the consumer.

— You intend therefore to create money?

— Certainly, and there is nothing new in this. At present, new money is created everyday and in much greater amounts than our Social Credit system would ever have to issue. The manufacturers of money today, the banks, must continuously create money because they are continuously destroying it. It is the destruction of money that makes these money masters wealthier because the borrowers return to the bank the principal amount and an additional interest payment. It is the constant creation and destruction of money which binds all work and the whole of society to a dependency on the banking system. When the hand that manufactures money operates less quickly than the hand that destroys it, the total amount in circulation decreases, and vice versa.

Social Credit will operate to ensure the continuous flow of production and will create the money necessary for this end. In the same measure that producers increase wealth, the consumer will be enabled to access it by the distribution of purchasing power in the form of a Dividend. The consumer will buy what is produced and both producer and distributor will benefit. No one will suffer as a result of the creation of this new money.

In a Social Credit system there will be no interest charged on the money distributed to the consumer, neither will reimbursement be demanded. There would be no reason for this.

— But, you might say, if money continues to be issued in this way, we will end up having too much in circulation. This will cause inflation!

— New money will only be issued to “fill in the gap”, so to speak, when unsold goods remain on store shelves. This only happens when there are more goods than purchasing power. In order for there to be too much money, there would have had to have been a decrease in production. This scenario is unimaginable when the means to produce is in place and consumers have sufficient purchasing power. Inflation and deflation are products of the banking system which is driven by the pursuit of profit and control.

With these obstacles out of the way, one could expect a continuous flow of technological advancement limited only by the capacity of the producing system or the overindulgence of consumers as a whole. An end to progress is not foreseeable. Undoubtedly though, there are limits to the consumption of certain categories of goods, such as food and clothing. But society has other legitimate and even noble aspirations and this is especially true for the person who no longer has to obsess from morning until night simply to provide for his basic needs.

By what means does Social Credit propose to distribute money that is lacking so that consumption is financed? — By a double mechanism: the Compensated Discount and the Dividend. We will touch on these topics in another article.

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