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The following is reproduced from C. Marshall
Hattersley's "Wealth, Want and War", a well written book on 'social
credit' first published in 1937 in England.
Martin Hattersley, a regular contributor to this
List, and long actively involved in 'Social Credit' in Canada, is C. Marshall
Hattersley's son. I can't help but notice the similarity of ideas in some
of Martin's recent posts.
I would be most interested in whether others who
have studied Douglas find what Mr. Hattersley, Sr., has written below
consistent with methods Douglas might have advocated. And where they might
vary, and why.
From the chapter entitled "Questions and Answers",
page 239, Section (87):-
"The banks would not be "abolished" as some
people seem to suggest. Rather they would be retained to continue their
useful services as repositories of the people's money and as most efficient
debt-collectors. What is good in the existing machinery must be
retained. But monetary policy must not be left in the hands of the banking
houses.
"This raises a difficulty. The power of the
banking system (including the Central Bank) to create ''promises to pay" is only
limited by the amount of legal tender at its command, and it might be feared
that any substantial increase in legal tender ~ or in Government "promises to
pay" legal tender on demand, which would amount to the same thing in
practice ~ would give to the banking system the power to expand the amount of
its "promises" to a possibly dangerous extent. Many followers of Major
Douglas see no harm in this, believing that so long as the amount of money on
the buying side of the market is adequate, no complications can arise from
further money introduced by the banks at the producers' end. They claim
that any undue stimulation of consumption would soon find its reflection in a
higher price-factor or even in a negative discount or sales tax. Probably,
however, this view is unduly sanguine. If there is to be a proper equation
between the money in circulation and the power to deliver goods, there should be
only one controlling authority, and that authority should be the
State.
"As a first step in monetary reorganization the
Government should appoint a date from which it would assume full responsibility
for all notes outstanding. Bank notes would be replaced by Treasury Notes,
and there would be a reversal of the process carried out in 1928 when Treasury
Notes were temporarily deemed to be bank notes, and were shortly after replaced
by notes printed for the purpose by the Bank of England.
"Even when this had been done, the issue of
additional legal tender by the Government would still leave it possible for the
banks to use it as the basis of additional "promises" up to at least ten times
its amount.. An issue of national money of an amount fully justified by
circumstancves might become the basis of monetary expansion quite out of harmony
with the requirements of the situation. It would be no solution for the
government to issue as legal tender only a fraction of the new money from time
to time required for there would be no certaintythat the banks would expand
their promises in proportion, and if they did, such expansion would not
necessarily increase consumers' purchasing power until it had passed,
through industry, to the pockets of the people. Besides, why should the
people rely on the banks for nine-tenths of their money? The creation of
new money by the banks is at the same time a creation of new debt : it bears
interest by reason of its very existence, and on the way to the pockets of the
people it creates as many new costs as it subsequently cancels. The
creation and variation of the whole of the community's money (of which currency
forms but a small part) should be the prerogative of the State. What then
about bank-created money already in existence? The amount is considerable
(over 2 billion pounds) and some people think it should be wholly replaced by
legal tender. It seems better, however, to accept the situation, and to
authorise the retention of a "fiduciary issue" of "promises" of definitely
limited amount, in order to permit of a change over with as little friction as
possible. It is accordingly suggested that the amount of bank's
liabilities to depositors at any time uncovered by legal tender in their
possession should be by law established at its present figure. The result
would be that the total amount of money in circulation would afterwards vary
only with the action of the issue department of the State and to the same
extent.
"There would have to be reasonable elasticity in
enforcing this obligation, and probably the most convenient method would be to
enact that the banks should pay a definite and substantial tax on all excess or
deficiency of uncovered "promises". The State would only be concerned with
the aggregate variation, and the allocation of the "uncovered promises" between
banks themselves could be fixed by a joint committee appointed from their own
number" *
* " It must not be inferred that Major
Douglas necessarily concurs in the views expressed in this
section."
Joe | 
From "Wealth, Want
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