Social Credit would put an end to the international bankers’ control of economic life. They fear Social Credit to such an extent that they use every trick in the book to prevent its adoption. One of the frequently used tactics of the financiers is to falsify the principles of Social Credit and present them in a ridiculous way in the media to prevent more people from considering the viability of the principles.
When we try to explain Social Credit to someone who has never read MICHAEL, they react by repeating the lies of the financiers: “This Social Credit of yours doesn’t make any sense! To print money just like that, without limits, will surely lead us straight to inflation!” With this analysis they believe they have settled the matter, when in fact they know nothing about the circulation of money in a Social Credit system or about the Compensated Discount and the National Dividend.
What the unwitting public heard was a fake version of Social Credit, a version smeared by the financiers. We now present you with a true summary of Social Credit, based on two documents that were written by Louis Even: The True Meaning of Social Credit and A Sound and Efficient Financial System.
Let us first define the words “social credit”. Instead of money being created by the banks, with interest charges, i.e. “bank credit”, money would be created debt-free by society, a “social credit”. The goal of Social Credit is that money be an exact expression of economic realities. Social Credit has never been about issuing or about printing money any which way, irresponsibly or without limits (as financiers would like people to believe), or according to the whims of politicians. Social Credit advocates the following:
The Government would appoint an independent body, a commission of accountants who would form a “National Credit Office” that would be assigned the task of establishing accurate bookkeeping. Money would be issued at the rate production is carried out, and would be retrieved from circulation at the rate at which goods and services are consumed. An equilibrium would thus be achieved between the productive capacity and the capacity to pay; between prices and purchasing power.
What the White Berets are seeking is that the Government cease borrowing money from private banks, money that it can instead create itself, interest-free, through its Central Bank. Graham Towers, the first governor of the Bank of Canada, stated in 1939 before a House of Commons committee, that this was entirely feasible, after being asked, “Why should a government pay interest on money that it can itself create free of interest?”
During the Second World War, the Bank of Canada created as much as 50% of the country’s money, without inflation. Today, it creates less than 2%. The remaining 98% is created by private banks as loans. Many people are unaware of this fact. They do not know that private banks, unlike other lenders, create the money they lend out of nothing and that they do not circulate their depositors’ money as loans.
Whether money is created by the Bank of Canada or by private banks, it needs to be created somewhere. It is made of the same figures, it is based upon the same production, our country’s production. The only difference (a sizable one indeed) is that if the Government borrows money from its own Central Bank, it does not create debt.
One hundred dollars created debt-free by the Central Bank, or one hundred dollars created by a private bank, with interest charges; which of the two options will cause inflation? A child of 10 would know the answer is the money that is created by the private bank. Inflation is the increase in prices owing to an increase in the costs of production, and the interest that producers have to pay to the banks are a part of these costs.
The fact, which remains hardest to believe and contrary to the most basic logic is that economists insist that inflation can be stopped by raising interest rates, when in fact, any rise in interest rates must inevitably lead to price increases. It is they who promote this “strange” system, not we, the Social Crediters of MICHAEL.
But there is more to Social Credit than the mere question of money creation. There is the matter of a Dividend and a Compensated Discount.
Since wages alone will not buy all of the production being made (salaries will only cover part of the costs related to the production of any product), the National Credit Office would distribute to each citizen a monthly Dividend, an amount of money used to fill the gap in purchasing power, and to guarantee that everyone receives a share of their country’s goods. This Dividend would be based on the two greatest factors in modern production, the inheritance of natural resources and of the inventions from generations past, both of these being God’s gifts to us, which therefore belong to all. Those who are still employed at production would continue receiving their wages, but all, whether employed or not, would receive a Dividend.
A Dividend to all is a formula that is far better than any form of Social Security, Employment Insurance and other forms of social welfare, since it would not be drawn from the taxes of the working person but would be financed by money newly created by the National Credit Office. No one would be supported by the tax-payer. It would be an inheritance owed to each of the country’s citizens, who are, so to say, the shareholders of the company known as Canada Co. Ltd. in the case of Canada.
Unlike forms of social security, the Dividend does not require intrusive scrutiny and does not penalize those who wish to work. Far from encouraging laziness, it would allow people to take part in activities of their choosing where they could use their talents. Should people choose not to work, Dividends would decrease, since they are based upon production that exists. Without this new type of purchasing power, not tied to employment, progress becomes a curse instead of an ally: by eliminating the need for human labor, progress takes from the workers their only source of income; their only supply of purchasing power.
No inflation possible
Thanks to the discount mechanism, no inflation will result. A discount pushes prices down while inflation means that prices are increasing. The best way to prevent prices from going up is to lower them! The discount on prices is the exact opposite of a sales tax: instead of paying more for products through added taxes, consumers would pay less through a discount. No one would complain.
People who say that Social Credit will cause inflation are talking through their hat, since they are unaware of the existence of the Compensated Discount. If Social Credit’s only objective was to print money, the fear of inflation would be justified but Social Credit includes a mechanism to counter the danger of inflation.
There are three basic principles in Social Credit: 1. Money issued debt-free by the Government, the representative of society, according to production, and retrieved from circulation at the rate at which goods are consumed; 2. A monthly Dividend is provided to each citizen; 3. A Compensated Discount. All three are needed; they stand like a tripod. Remove one of these three principles, and the system collapses.
The mechanism of Social Credit, as summarized in the preceding paragraph, has only one goal, which is to finance the production of goods that truly meet needs, and to finance the distribution of these goods so that those needs may be met. A review of the attached figure will show that money does not accumulate at any time; it follows the path taken by production, entering circulation at the rate at which production takes place, and taking the route of its return toward its source (the National Credit Office) at the rate at which goods are consumed (at the time they are bought at the retailer’s). At all times, money is the exact expression of reality: money appears when a new product appears, and disappears when this product disappears, in other words, when it is consumed. Where is inflation to be found?
This opens up new worlds and untold possibilities. For these possibilities to become part of reality, all must study Social Credit. To this end, everyone must become a subscriber to MICHAEL My fellow reader, this is where your responsibility begins. Since you understand Social Credit, it is your duty to make it known to others by asking them to subscribe to MICHAEL.
Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.