(Peter wrote:-) The banks claim of
ownership is a fraud according to Douglas, as we have had
quoted.
(Joe replies:-) But how do the Banks
exercise this "claim of ownership? Is it not only exercisable
through the borrower's inability to repay? And shouldn't that
depend on whether it's the banks or the borrower that've caused this
inability to repay?
For aren't there really two separate
things here? The first is the question of whether or not the
borrower, in the case of an individual business, say, is
capable of providing some good or service that the public actually
wants.
And wants at a price sufficient enough,
whether it's a regularly computed price, as now, or one discounted as
would be all prices through the CPD under SC, for the business to
be profitable.
For if his business has borrowed
'money', it will be from his profits this 'money' will be repaid, will
it not?. If no one wants his product, for whatever reasons ~
maybe he's got a poor product line, maybe he's a poor
manager, runs a sloppy store, can't get along with his customers,
hires poor employees, whatever ~ and he's not profitable
(through his own actions), who takes the hit when he can't
repay?
Now he's in default, and the Bank that lent
him the funds claims whatever he's put up as collateral security, if
anything. Because that Bank is on the hook for whatever portion of
the funds it's advanced him that have been paid out by the borrower to
other parties, and for which the Bank has not yet been repaid by
him.
And though they may have created the credit
out of nothing, it will not exactly be from 'nothing' that they have to
then meet these liabilities. There will be a reduction of the
shareholder's equity in that bank proportional to the size of the
defaulted unpaid loan balance.
Banks can indeed 'go broke' from too many
defaulted loans, and their shareholder's 'capital' can indeed
disappear. (Generally, in Canada, a Bank with too many potentially
'problem' loans would be forced to find more 'capital', probably through
a merger with another bank.
The second thing is the action of the
entire banking system, in the 'macro-economic sense'. Where,
through their policies, ones designed in the belief that they are
'protecting their interests' , they cause a general 'credit contraction'
to occur. Which affects the amount of 'effective demand' present
in the economy in a negative way that causes 'sales' and business
'profit' (from which loans will be repaid) to fall.
In this case the individual business may
have a product that is needed, or genuinely desired, be well managed,
have good employees, excellent customer relations, etc., yet still
fail. Not through the individual actions of the entrepreneur, but
through the actions of the banking system as a whole in causing a credit
crunch, and a pinching off of the business's expected profits and
ability to keep current on its loan repayments.
I don't think Social Credit can do a single
thing in regards to the first instance above. There are always
going to be people who enter businesses, often on borrowed money, and
find they are just not cut out to be in that business. Does the
Bank violate some sacred principle when it forecloses on whatever it can
to try to recover its loss in such instances?
Is it really any different than you putting
collision insurance on your car, having an accident that renders it an
unrepairable write-off, collecting the insurance pay-out, and then
having the insurer try to sell what's left of the wreck to try to offset
some of that pay- out? You have claimed, for the premium fee
you paid when you made the insurance contract, the insured amount of
your vehicle. The insurer, on payment and fulfilment of his part
of that contract, has claimed what's left of your
car.
In the second, 'macro-economic'
instance above , Social Credit can indeed make an enormous
difference. By ensuring that there is always sufficient 'effective
demand' present (in the aggregate) to fully liquidate 'debt' (in the
aggreagate), the greatest single failure factor for most
businesses, the 'risk' of a credit contraction affecting sales and
profit, has been removed. There will still be 'risk' in regards to
individual businesses, but the major one that affects all businesses has
been neutralized.
And by using credit through the CPD, (and
ND), the physical realities of lower cost production through technical
effficiencies, can be reflected in a falling price level without a fall
off in business profit. Inflation, and the present necessary
allowance for it inherent in the interest rate, is also
eliminated. And what we have is the Banks then being paid
primarily for the service they provide, hopefully in a genuine
'competition' with one another. And
what's wrong with that?
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