How long before someone mentions social credit?

On Monday September 29, 2008, the US Congress shocked everyone by voting down a $700billion rescue package for investment banks. I’m not going to get into the details of that, it is already being well covered by the zeitgeist. But it is clearly a historic moment, and I predict it will the one people look back on as the day when the debt-based financial system became terminally ill.

The financial system used throughout the Western world has been rotten from the day it was first introduced. In this system, money can only ever be created by making a debt. The more a society produces, the more debt it gets itself into. The US national debt today stands at $9,896,734,646,582, or $32,467 for each citizen of the United States. It grows at an estimated $2.42 billion every day. (Australia’s national debt is currently $585 billion.) It doesn’t take a genius to know that that money is never getting repayed. In fact, it’s impossible. If you add up every single bit of money in the entire country right now, it will be less than the debt.

In a debt-based financial system, there is always more debt in existence than there is money to pay it. Consider any bank. If everyone goes to withdraw their money at the same time, there won’t be enough. The bank has bigger debts to its customers than it can possibly afford to pay.

The current financial crisis has come about because banks have been lending money to people who can’t pay it back. The debt to the bank becomes worthless and then the bank can’t pay its own debts so it collapses, and all the money it owes people becomes worthless too. If employers can’t get money from their bank to pay the money they owe their employees, the employees can’t pay their debts. If people can’t pay their debts to the landlord, the landlord can’t pay the mortgage so the debt to the bank becomes worthless and around we go again. It’s not a recession - it’s a depression.

When the whole money system is based on debt, everyone is always concerned about what they owe, and the total amount owed by everybody is always more than the total amount of money there is to pay. That’s why prices rise and we get inflation. That’s why governments create taxes, to try to pay down the public debt. And all the while, interest is being charged to the debt so it gets even further out of reach every day. And that folks, is the banking system.

Would you credit it?

The current financial system is fucked. It has only ever worked while people believe in it and don’t think too much about it, but those days are over. Not since the Great Depression of 1929 have things been this bad for the banks, and no-one had the internet back then.

At first, everyone’s attention was on the rescue package. Now it is about whether a ‘rescue’ is the right approach. There will be talk of good debt vs bad debt, but not till the whole thing comes crashing down will there be much talk of whether debt was the right approach at all.

Sooner or later, someone is going to mention Social Credit. It’s a policy that was first put forward by British engineer Clifford Hugh Douglas in the 1920s, before the huge crash of 1929. In a social credit system, the main motivator isn’t debt, it’s production.

Put simply, the more a society produces, the wealthier it is. A system of money then should be based on what each member of society produces. When something is produced, it is recorded as an increase in wealth. When it is consumed, it is recorded as a decrease in wealth. In a social credit system, there is no need for inflation or interest. The national debt becomes the national dividend.

I posted a series of articles about social credit on my personal blog earlier this year. As the financial system dies a loud and painful death, I will probably post some more. In the meantime, I wonder when someone in the press will mention it. Anyone want to make a prediction?

Finally, consider this. Following are the words of an orthodox economist in Elmar O’Duffy’s satirical 1933 book Asses in Clover.

“Suppose a party of people were wrecked on a desert island, what do you think would be the first thing they’d do? Obviously they would look around for a man with money to employ them in gathering fruit. If there were no capitalist among them, or if he didn’t see his way to make a profit out of the business, they would all remain unemployed and starve to death, no matter how fertile the island might be.”

Wanna bet? Here is a story of five men who find themselves marooned on a desert island and how they fared…

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