Chapter 17 — The National Credit



It is very nice to say that each man, woman, and child, as a member of an organized society, is entitled to the benefits of association. It is also exact to point out that these benefits must guarantee at least the bare necessities of life to everybody, from the cradle to the grave, in a world which overflows with so much wealth that its biggest problem is to dispose of this wealth.

And we have seen that the practical expression of the guarantee of the bare necessities of life is, in the modern distributive economy, the assurance of a sufficient periodical purchasing power to get the minimum of necessary goods for the maintenance of life.

This purchasing power is presented in two ways: a direct dividend in money, and the lowering of the retail prices of products at the time of their purchase by the ultimate consumer.

In both cases, the National Credit Office needs a source to draw from: where to draw from to distribute the dividends to all citizens; where to draw from to compensate the retailers for the price deductions decreed in favour of the buyers.

This source rests in the national credit.

Two kinds of credit

The idea of credit is synonymous with the idea of confidence. One gives credit to someone only if one has confidence in him.

Any confidence rests on something, on a foundation. And this object of confidence can be varied.

Thus, the weather forecasts can make me confident that tomorrow will be a beautiful day. My friend's character can make me confident that he will be loyal to me. My studies make me confident of my success in such and such an exam.

In all this, there is no question of money. It is confidence regarding other subjects.

If, moreover, I am a retailer, and I sell to a client who promises to pay me in three months' time, my confidence is influenced by my client's future capacity to pay. I give him credit, because I am confident that he will find money, and that he will bring it to me in three months' time. This confidence regards finance.

The Social Crediters distinguish between real credit and financial credit.

Real credit

When the French of the seventeenth century came to settle on the shores of the St. Lawrence River, in what was later known as Canada, they did not move without having confidence that they would be able to live in this country. Their confidence rested on the capacity attributed to the New World of being able to provide the necessary things of life. It was the New World's real credit.

The settler who goes to settle in Northern Quebec has confidence in that area. He believes that Northern Quebec's forest and soil will allow him to live and raise a family. It is Northern Quebec's real credit.

The doctor's competence gives confidence to the patient who consults him. It is the doctor's real credit.

Real credit springs from the capacity to produce things or services answering needs.

Canada's real credit is Canada's ability to produce and deliver goods and services, when and where required.

Real credit grows with the development of the country's productive capacity. The difference between Canada today and the Canada inhabited only by the Indians, four centuries ago, marks the growth of Canada's real credit during the course of these four centuries.

Real credit is the country's wealth expressed in possible goods and services.

Financial credit

Financial credit is the country's wealth expressed in money.

Financial credit is the capacity to supply money, when and where required.

A retailer's credit given to his client is financial credit. The retailer is confident of being paid according to set terms.

A lender's credit given to a borrower is financial credit. The lender is confident that he will be paid back according to set terms.

If real credit directly concerns things, existing or easily realizable goods, financial credit is about money, which is expected to be present when required.

When politicians talk about the province's good credit, they talk about financial credit, about the confidence that money lenders have in the province's capacity to repay. However, the province's real credit stays the same, whether the bankers be welcoming or stern.

With finance having to be at the service of realities, financial credit must relate to real credit.

Alas! this is not the case. Thus, in 1930, Canada had not lost its real credit, its capacity to produce, and yet it lost its capacity to supply money where it was required.

It is the separation, the divorce, between real credit and financial credit, that falsifies economic life.

Real credit is reliable: it is the conjoint work of Providence, men's work, progress from applied science. Financial credit reflects all the sudden turns; it depends on the banks' action, and the banks' action, pursuing the bankers' profits more than the good of the people, is, besides, submitted to influences of international order, by no means in keeping with the facts of production, nor the needs of consumption. The 1930-1940 Depression was a crisis of financial order, on an international scale.

The flawed expression in money of real credit

Actually, all loans by the banks are based on real credit. It is the capacity to produce and deliver salable goods which make the borrower a reliable subject for the banker.

The loan from the banks, inscribed to the borrower's credit, as we have seen it, serves as money. It is banking credit, based on real credit.

Banking credit, or bookkeeping money, is the banker's conversion of the borrower's real credit into money. If it is a loan to the Government, it is the conversion of the country's real credit into money.

The conversion of real credit into money is necessary. But, the conversion thus made by the banks includes a fundamental flaw. By an inconceivable privilege, banks convert the real credit of other people into money, and declare themselves the owners of the money thus created, which they lend to other originators of real credit by getting them into debt.

Moreover, this conversion of real credit creates temporary money, which must be withdrawn and destroyed after a term fixed in advance, even when the real credit, which serves it as a base, continues to exist.

Take the case of an industrialist who borrows to erect a factory. He gets a credit to be repaid, let us say, during the course of five years. The factory which he builds increases the country's real credit. It is therefore proper that money, which must be the reflection of the country's wealth, increases at the same time.

But the industrialist must repay the loan during the course of five years. He will therefore apply to the prices of the products of his factory, not only the production costs, but a part of the price of his factory, so that he can effect the repayment.

At the end of five years, all the created money will be withdrawn from circulation and returned to its source. And yet the production capacity of the factory is still there. The base for this conversion into money is still there, but the money is not there any more. The country does not possess the financial equivalent of its real wealth.

The social nature of money

Moreover, real credit has a social nature, even if the matter concerns private goods.

The factory, which we have just quoted as an example, would have absolutely no value if it were not for the existence of society. Just suppress the consumers, and tell me what the factory will be worth.

The factory, which is private property, certainly increases the private owner's wealth, but at the same time, it also increases the country's wealth. And the whole country will benefit from it, provided, however, that the products of the factory can be sold.

The banker, who lends money created on the borrower's real credit, and who forces the borrower to bring back this money, is not only unjust to the private creator of wealth, he is also unjust to all of society, whose claims on the produced and offered wealth he restrains.

The conversion into money of real credit can only be exercised by a sovereign authority, acting in the name of society itself, and pursuing, not the banker's profit, but the economic welfare of society as a whole.

The national conversion of real credit into money

This is why the Social Crediters call for the national conversion of real credit into money, whether this real credit be the fruit of a public or of a private firm.

This conversion must be made orderly. It must be in keeping with the facts of production, and with the needs of consumption.

The national conversion of real credit into money can very well be carried out, as in the banks, by the simple inscription of financial credit: bookkeeping money. But it must not be loaded with interest, nor limited to an arbitrary term.

Any increase of real wealth increases the base for this conversion into money, and any destruction of real wealth destroys this base. The money must not disappear unless its base disappears.

The national credit account

Under the present system, when the banker creates the money which he lends, he simply records it into a ledger (or a computer), to the borrower's credit. The borrower uses it by drawing cheques on this credit, as long as any credit remains.

Likewise, a Social Credit Government, which would convert into money the increase of the real credit proportionately, would simply record the money thus created into a ledger, to the nation's credit. It is on this national credit that cheques would be drawn to pay the national dividend to the citizens, and to compensate the retailers for the national discount decreed on retail prices.

The administration of this national credit account would have nothing arbitrary, nor anything capricious about it. It would be administered by a national monetary authority, a non-political commission, appointed by the Government, but charged with administering the national credit in accordance with the data of production and consumption, just as judges, appointed by the Government, judge only in accordance with facts in regard to law.

It would be a commission of accountants, charged to record the value of all production and of all destruction of wealth. The difference between these two evaluations would give the net increase, the base for the increase of money.

This is not an impossible task. There already exists precise statistics on almost anything that constitutes the country's increase of goods: production of capital goods, production of consumer goods, imports, births, etc.; and on anything that constitutes the country's reduction of goods: depreciation, wear and tear, fires, consumption (total purchases), exports, deaths, etc.

This would be a good base to start from, the credit commission looking for information which it might be lacking.

There is absolutely nothing dictatorial in the work of such a commission. It does not dictate the production; it records it. It does not dictate the consumption; it records it. It is the citizens themselves who, freely, produce and consume, thus providing the data for total production and consumption; the national credit commission simply records this data and deduces the net enrichment increase from it.

Bookkeeping conforms to realities; it does not misrepresent them. And the money that is issued according to this bookkeeping would result from the free acts of production and consumption which would govern the volume of money, as opposed to the disordered system of banking credit, where money governs production and consumption.

A British author, John Hargrave, made up a very simple definition of Social Credit. This definition expresses very well this freedom of production and consumption, and this submission of money, as flexible as a bookkeeping system:

“Produce what you want; take what you want; keep count of what you produce and of what you take.”

Since nothing would hinder the sale of production, this system would rise to high levels, as long as there were orders from consumers. It is this production increase which would determine the amount of national credit to be distributed in the form of dividends or of national discounts.

If the citizens, enjoying a satisfying standard of living, would prefer to devote themselves more to free occupations and less to the production of marketable goods, it would bring about the gradual development of a leisure economy, the logical outcome of progress, which replaces human labour by the machine while increasing production.

The increase of leisure (free activities) is an objective much more conformable to human aspirations, and more rational in an economy of plenty, than full employment, a goal aspired to so avidly today.

But, to substitute the pursuit of leisure for the pursuit of full employment, the cult of freedom for the cult of servitude, we must first admit an income which is made up of dividends for all, and not an income made up only of wages and salaries.

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