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Unpayable Debts Bear Bad Fruit

Written by Louis Even on Saturday, 01 September 2018. Posted in Social Credit

Debt-free Financing through Social Credit

Materially speaking, which is the richest country in the world?

Everyone would agree the world's most prosperous country is the United States of America. The United States has the best equipment, the greatest production, and can offer other nations the greatest range of products. It is the country most capable of expanding its productive capacity.

What country has the largest national debt?

The United States has this distinction with a national debt exceeding 20 trillion dollars (in 2018).

The Game is Rigged

Is this not contradictory? How can the richest country be the country with the largest public debt?

In all logic, this is contradictory. But with the present financial system, it is inevitable. The more a country increases its productive capacity and becomes richer, the more indebted it becomes financially.

The same applies to Canada. Compare the country's present wealth to what it was 300, 200, 100, 50 or 25 year ago. You will see that although real wealth has continuously increased over these years, the national debt has also been increasing. This is true for provincial and municipal debts as well.

How can this be?

In a system in which money is only issued in the form of a debt, there can be no increase in money unless it is by increasing the amount of debt. The greater the volume of production, the more money is needed not only to produce but to consume products.

Loans and Deposits

What do you mean by "more money is needed"?

"More money" refers to the volume of money in circulation.

If there was $5 billion in circulation last year, and this year there is $6 billion, $1 billion must have been added. The $1 billion that did not exist last year but that now exists is $1 billion of new money.

This $1 billion did not materialize on its own. Money is not born spontaneously, nor does it fall out of a tree or fall from the sky as does rain or snow.

Government, which asserts it has no money other than that received through taxation and loans, did not create it.

Neither was this $1 billion made by farmers, workers or industrialists. These people make agricultural and industrial products; they do not make money.

The extra $1 billion came into being because private or public borrowers were granted loans that totalled $1 billion. These loans were created by simple bankbook entries, that is, figures were entered by the banker to the credit of a borrower who came to the bank to obtain money (and not because a depositor brought money to the bank).

More precisely, one would have to say that loans would have totalled more than $1 billion over the year, since loan repayments were also made during this period.

Repayments remove money out of circulation. Loans add money to circulation. The total amount of money in circulation increased by $1 billion because the total value of loans exceeded the total value of repayments by $1 billion.

Loans are debts that must be paid back. Repayments cancel debts. If loans exceeded repayments by $1 billion, the debts incurred exceeded the debts paid back by the same amount.

This is how any increase in money creates an increase in debt.

Does the total of repayments sometimes exceed the total of loans?

Yes, for a short period of time. This occurs when banks, taken as a whole, refuse to lend money while insisting they be paid back. In this case, the money in circulation decreases, and soon a recession results. There is then less money to make purchases and pay wages. An economic crisis begins.

But the entire debt can never disappear. All debts cannot be paid back even if all the money that was put into circulation through loans were to be used. The reason is that the borrower goes into debt for an amount greater than the amount borrowed. This is due to the charging of interest on loans.

Since money enters circulation through loans, and since money disappears through repayments that are larger than the loans, this means that, as a whole, more money must be paid back than the money found in circulation. This is not mathematically possible.

This explains why the entire debt cannot be paid back and why people become increasingly indebted.

If this is so, should the sum of all debts not be greater than it is?

The amount of debt would be much greater if some of the debts were not cancelled rather than being repaid.

Some debts are extinguished because of bankruptcies. In such cases, debt is not paid back, or is only partially repaid, and the borrower's collateral is forfeited.

Other than bankruptcies, factories close and farms are abandoned. Misery follows for the dispossessed. This is the bitter fruit of a system that requires that more money be repaid than was created.

A Burden that is Passed onto the Shoulders of Others

Some businesses manage to pay back their loans and interest charges. Others manage to enlarge their businesses without having to borrow money from the banks. Some governments may at times decrease their public debt.

All of this is true. Some will manage. But as a whole, they cannot. Those who succeed in finding $106 where only $100 was created, find the remaining $6 in the circulation of other people's loans. The result is that the latter group of borrowers will have more trouble paying back their own loans.

The success of a few will make the cases of others more desperate.

Businessmen who finance their projects without borrowing do so with money obtained from the public by inflating prices to cover their expenses. This is called self-financing. But self-financing is not some type of automatic financing; it is financing at the expense of consumers. This results in buyers depriving themselves of necessities because inflated prices on some goods exhaust their purchasing power. This is another example of the bad fruit that results from an unnatural and unhealthy financial system.

As for governments who are able to reduce their public debt, it is because they too take from the public more money through taxes than they return into circulation through public spending. With government debt repayments, financed by taxes, the population's reduced volume of money cannot purchase available goods. The result is the same: fewer products are purchased and goods remain unsold. There is total or temporary unemployment for many and businesses close for failing to sell their inventory.

A sick tree will only bear bad fruit. Shifting a burden from one shoulder to the other does not lighten the load; it only creates conflicts of which many exist today.

What occurs between indebted individuals is similar to what occurs between indebted countries. The sources of conflict between individuals are the same as those between nations, and the results are also similar.

Can we not find a financial system that does not force us into debt at the rate at which wealth is created?

Yes; one has been offered for the last 75 years: Social Credit.

Social Credit would not create unpayable debts since it would create money at the rate goods are produced, and remove it from circulation at the pace of consumption.

For a limited time, it is possible to consume more than is produced because of previous surpluses. It is generally impossible to do so as one cannot make a loaf of bread, a pair of boots or a safety pin disappear unless it was first manufactured.

If money was issued according to production and cancelled following consumption, a system of perpetually increasing debt would be inconceivable.

An individual or a group of individuals could still go into debt; but as a whole, public debt would not exist. On the contrary, the increase in real wealth would be expressed by an increase in financial wealth; instead of taxes and inflated prices, individuals would receive dividends and discounts on prices.

The present system is based on a lie and on false accounting. Social Credit offers precise accounting: an exact financial representation of economic realities. The former can only bear bad and bitter fruit; the latter would yield an abundance of good fruit to be shared by everyone.

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