The National Credit Account

on Wednesday, 28 December 2016. Posted in From Debt to Prosperity (book)

From debt to prosperity - Chapter IX

If we want money to work for us instead of against us we must use Credit-money instead of Debt-money. We can only enable the economic system to deliver wanted goods and services by closing the gap between buying power and prices. As more debt-financed relief programs fail to bridge this gap the necessity for action becomes increasingly plain. Equally obvious should be the fact that the most effective method to close the gap is to raise buying power and lower prices at the same time.

But how can this be done in practical operation? It is self-evident that any lasting and general prosperity depends upon maintaining a constant balance between a high rate of production and an equally high level of consumption. This balance results from continuously satisfying the vital needs of consumers with the actual physical goods of producers. To make their demand for goods effective consumers must have suf­ficient money to buy the goods. Demand, without money to implement it, is impotent, ineffective. The only actual limit to the satisfaction of the shopping nation’s need for goods is the limit of our productive capacity, of which we are now utilizing only a small fraction.

Therefore sufficient money must be available to express accurate­ly the demand for wanted goods. Money, being the bridge between de­sire and goods, must depend upon our Real Credit; that is to say, the rate at which we as a nation can deliver the goods and services we require to live.1

In other words, money must reflect the true facts of our Real Wealth. Since money is the accepted means to express the effective de­mand for available goods, the balance between our ability to produce and our ability to buy and consume what is produced must be accomplished by money.

Permanent business recovery requires then that we level up con­sumption to balance with production. The nation as shoppers and con­sumers of goods must be able to buy what we produce. If America as shopper is to buy the output of America-producer we must begin to raise consumption up to the level of productive capacity. This can be ac­complished only by controlling the total amount of money in circula­tion so that it will be increased or expanded at exactly the same rate as production and consumption are increased. Only in this way can the bal­ance between production and consumption be maintained, and the de­sires of consumers for goods be satisfied in permanent prosperity.

A money system that is sound, that delivers wanted goods to shop­pers for consumption, must be a true expression of Real Credit. Furthermore Financial Credit must be fully equal to this Real Credit. Otherwise money cannot reflect the true facts of our Real Wealth. “The re-identification of Real Credit with financial credit is the vital issue.”2

What Must be Done

Two things are necessary to make the money system reflect our Real Credit. Both must be done by the government of the United States, acting as the representative of the people. Both can easily be done by existing governmental agencies.

We have seen that the first necessity is to restore to the nation its Constitutional right to control our own money system. The government must exercise its sovereign power to control the money supply of the nation. This includes credit as well as currency. This action is the first requirement for permanent business recovery.

Second, the government must gather together the facts and figures of our ability to produce and deliver useful wanted goods for consump­tion. As we have seen, our Real Credit rests upon this solid foundation.

Once the nation regains constitutional control of its own money system, the immediate practical step proposed by Social Credit is to ap­point a non-political Federal Credit Commission. As its primary duty this Commission would take a national inventory of our actual produc­tive capacity for wanted goods. Based on this capacity to produce wealth a National Credit Account would be established in the Uni­ted States Treasury.

The National Credit Account is simply a business statement show­ing the known facts of our ability to produce wealth in goods compared with cur ability to buy those goods, to consume them. This Account pro­vides the practical means by which the government can monetize the nation’s Real Wealth, that is, to express its value in money. The purpose of this Account is to keep the price-values created in the nation’s work­shop of wealth in constant balance with the money-tickets distributed for shopping. Its object is to provide a constant supply of credit corre­lated exactly with our supply of goods.

Social Credit proposes to supply the money necessary to level up the balance between production and consumption by means of the Na­tional Credit Account. This money will be created as credit by the Gov­ernment, acting through the United States Treasury. The money itself will be Sound Money in every sense of the word, for its value will be based upon the Real Credit of the United States.

Monetizing our Real Wealth means the transformation of our pres­ent vast Real Credit into its financial equivalent. This is necessarily a bookkeeping operation, exactly like the present creation of money. But Social Credit requires that instead of the nation’s money supply being created in the bookkeeping of the private banking system as debt, it would be created in the bookkeeping of the United States Treasury as credit.

How to Do It

The non-political Federal Credit Commission would gather together and show in a national balance sheet all the facts of our enormous pro­ductive capacity as compared with our present limited, restricted con­sumption of goods. The nation would be credited with its production of wealth and charged with its consumption. This balance sheet would show the real limit of the national Credit. By means of this business-like method the surplus of production over consumption would be made available as credit to increase consumption.

Sufficient money in the form of credit would then be issued by the Treasury direct to consumers to enable them to buy all the wanted goods produced. This credit-money will be exactly sufficient in quantity to enable our established productive capacity to deliver goods and services to shoppers for consumption. The amount of the money must therefore be based on the current relationship between production and consump­tion.

In essence the National Credit Account is simply a statement of the facts of the nation’s business, of the production and consumption of Real Wealth over a given period, reflecting the truth of our Real Credit. This Real Credit is transformed into Financial Credit in the book­keeping of the United States Treasury by the constitutional power of the Government.

The administration of the National Credit Account would be the duty of the Federal Credit Commission, a non-political body of com­missioners comparable in authority in the realm of business to the Supreme Court in law. The members of this commission would be ap­pointed by the President, by and with the consent of the Senate, to serve for a definite term of office. The membership of the commission would change in rotation as seven year terms of office expire. The commission could not be politically influenced because its work would deal only with the facts of production and consumption.

But we must understand clearly the most important point to be grasped about this controlled issuance of credit-money based on the Real Credit of the nation. The money thus created is backed 100% by the Wealth of the nation, its ability to produce and deliver wanted goods and services.4 This wealth, created by the industries of the nation, is an Asset. Social Credit recognizes this wealth as an added national value, a true asset, not as a debt to the banking system.

A rough example in round numbers will illustrate in a general way how the National Credit Account provides the facts necessary to mone­tizing our Real Wealth:


At quarterely intervals, the Federal Credit Commission would submit the following statement of Real Credit to the U.S. Treasury — NATIONAL CREDIT ACCOUNT (figures in billions of dollars)
Credit (Additions to Real Wealth) Debit (Substractions from Real Wealth)
(a) Shoppers goods 70 (Shopper’s goods at retail including National Dividende spent)  
(b) Capital goods 25 2. Exports 6
2. Imports 3 (Real Wealth sent abroad)  
 (Real Wealth received)   3. Depreciation 9
3. Appreciation 2 (Wear and tear on plants, business equipment, etc.)  
(Increase in commercial capitalized value of operating assets)   4.  Payments on National Debt ?
4.  Payments on Foreign Debts ? (Spent to retire bonds held by banks, reduce Taxation, etc.)  
(Received from other nations)      

Total ADDITION to Real Wealth



Total SUBSTRACTION from Real Wealth




(Surplus Net Enrichment of Real Wealth)


Available to finance additionnal consumption.

(By means of Discount and Dividend)

(These figures are merely illustrative, not factual)


In terms of this example, based on the Real Credit of the United States, the Treasury could issue 25 Billion dollars in CREDIT-money, thus transforming this Real Credit into Financial Credit available to consumers for shopping.

Banks and Bankers — An Important Necessity

The institution and keeping of the National Credit Account does not require any “nationalization” of the banks. As a matter of fact, such nationalization would be a great mistake. “I am not myself, for instance, an advocate of the nationalization of banks. I believe this again to be one of those misapprehensions so common in regard to these matters, for the nationalization of banks is merely an administrative change: it does not mean a change in policy, and a mere administrative change cannot be expected to produce any result whatever in regard to this matter. A change in monetary policy can be made without interfering with the administration or ownership of a single bank in the world.”5 Only monetary policy need be under national control. The present banking system could just as efficiently carry out a policy for the national benefit as today it carries out policies for its own private profit.

While Social Credit would do away with the monopoly over the supply of money as now maintained by the banking system, it would preserve banks and protect bankers. The government would assume, as its proper constitutional function, full authority for the supply of money. But this change does not imply any violence, nor does it con­template putting the banks out of business. As proposed in the United States, Social Credit would save the banking system for private owner­ship. The banks would operate under the supervision of the Government as agencies of the Treasury. They would handle money, accept deposits and carry on the bookkeeping necessary to the use of cheques and the transaction of business. In fact “ ... the bank as repositories of the peo­ple’s money and as efficient debt collectors, are most useful institutions, and banking is one of the fine arts of the modern world. The machinery of the banks should as far as possible be retained — perhaps extended — although monetary policy should be withdrawn from private control.”6

This simply means that the banks would no longer hold as a monop­oly the power to create and destroy money as they do today. Business and individuals alike need the facilities of the banking system to carry on their activities. All the useful functions of banking must be preserved for the service and convenience of business. But the banking system would also be the means through which the government dispenses money and credit to consumers. Bank loans as a service to business would be backed by cash on hand, not created “out of nothing” as a debt. Fees for service rendered would be the bankers’ recompense instead of inter­est on money created as debt.

The Social Credit proposals would require and reward the ability of every capable and public-spirited banker, “since their function as bookkeepers and agents of the National Credit Authority still requires to be carried on.”7 The opportunities of bankers for rendering valuable and profitable service to the public would multiply as increasing pros­perity is achieved.

The National Credit Account, reflecting our Real Wealth and equating Financial Credit with Real Credit, would provide sufficient circulating credit-money for business and consumers. The practical operation of the National Credit Account means the transfer of the control of credit from the banking system to the government as the representative of all its citizen-consumers.

No confusion or discarding of present business practice need at­tend the introduction of the National Credit Account. In fact the first steps in this direction have already been taken by the Government, through its purchase of bank stocks for the purpose of operating the De­posit Insurance Plan. The government has used its authority to deter­mine the eligibility of banks for participation in this plan. This is in reality the beginning of widespread recognition of the necessity for Government control of monetary policy, even though, in a strange para­dox, the Deposit Insurance Plan was necessary to bolster up public confidence in our present inadequate banking system.

Public opinion will bring pressure to bear when enough of us realize that artificial scarcity continues and the present shortage of buying power is increased because self-made methods of the banking system restrict our supply of money. When the facts are known public demand will change this situation. Is it not absurdly stupid that banks continue to monopolize money and credit only by our consent? The Government is empowered by the Constitution to issue and control the value of money. Why should it not exercise this right? Yet we not only allow the banking system to continue its monopoly, but even the government itself borrows its own credit, piling up an increasing burden of public debt to the banks!

A Guarantee Against Inflation

The suggestion that the government create money to be issued as buying power to the nation’s shoppers may cause some people to fear “inflation” as a result. “This word inflation is one which is always raised by bankers and those whose interests are with bankers, when any ques­tion of modification to the money system is raised ... The first thing to realize is the true meaning of inflation. Inflation is not an increase of purchasing power, it is an increase in the number or amount of money tokens, whether paper or otherwise, accompanied by an increase in price, so that both the money-to-spend side is, in figures, raised and the price side is also, in figures, raised. That is true inflation.”8

It is common knowledge that inflation is dangerous because it is characterized by rising prices, ruinous to the buying power of wage earners. But Social Credit would avoid and prevent inflation by auto­matically controlling the money supply, not only in its issuance but in relation to the wealth in goods against which it is issued. The amount of money issued through the National Credit Account would be so regu­lated as to avoid both inflation and deflation. The panics, crashes and depressions of the past would no longer threaten the security of our economic life. Social Credit would positively insure the direct control of money in relation to goods — a relative stability of prices and values — by means of the Just Price.

The Twofold Use of Consumer Credit

The money created on the basis of the National Credit Account would be used in two ways to close the gap between buying power and prices, to overcome the present shortage of purchasing power. The first way is called the Just Price and is designed to increase the buying power of every shopper’s dollar while preventing the inflation of prices. The second way is called the National Dividend. Let us con­sider first the Just Price.



1) “Real credit is a correct estimate... as to the capacity of a community to deliver goods and services as, when, and where required.” C. H. Douglas, New and Old Economics, Section I.

See also: “From Debt to Prosperity,” reference to REAL CREDIT, Chapter 2, p. 28.

2) C. H. Douglas.

3) Furthermore, no more than four of the commissioners could be members of the same political party.

4) “We are simply saying in effect : ‘Credit, convertible into money, is a correct estimate of the capacity of society with its plant, culture, organization, and moral, to deliver goods and services desired by individuals.”’

C. H. Douglas, Credit Power and Democracy, pp. 133-4.

5) Speech by Major C. H. Douglas, at Oslo, Norway, 1935.

6) C. Marshall Hattersley, This Age of Plenty, p. 194.

7) A. R. Orage, Fortune, November 1933.

8) Speech given by C. H. Douglas at Oslo, Norway, 1935.

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