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Sent: Tuesday, June 12, 2007 7:36
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Subject: [socialcredit] C. H. Douglas and
the Budget Balancing Act (from"The Social Crediter")
Page 4
THE SOCIAL CREDITER:
For Political and Economic
Realism (Official Journal of the Social Credit Secretariat,
U.K., founded in 1933 by Clifford Hugh Douglas.
A non-party, non-class
organization neither connected with nor supporting any political party, Social
Credit or otherwise.)
March - April, 1988
C.
H. DOUGLAS AND THE BUDGET BALANCING ACT
The British Government’s forthcoming Budget is widely
reported to be likely to show a substantial “surplus” for 1987-88.
Unexpectedly buoyant tax revenues, it is said, account for this and for the
“undershoot” in the Public Sector Borrowing Requirement. Originally estimated
at £4 billion a year ago, it is now expected to be below zero, thereby
enabling a small net reduction in the huge Public Sector Debt for the first
time since the late 1960’s. Expectations of tax-cuts abound and various means
of disposing of “the surplus” are keenly debated.
Under the persuasive influence of media comment, the
citizen might be forgiven for concluding that such a Budget reflects great
credit on the Chancellor. Consciously or unconsciously, he will compare the
state of the national finances with that of his own, which may similarly show
a surplus (or possibly a deficit) on his year’s work.
The more discerning citizen might ruefully note that
he and his fellow taxpayers have been unnecessarily deprived of several
billions of purchasing power, part of which may now be returned to him as a
tax cut, thereby earning for the Chancellor the undeserved plaudits of the
uninformed.
A growing number, it is safe to say, will have the
insight to see the whole process for what it really is, a gigantic confidence
trick played on the population in order to maintain intact the monopoly of
credit creation by the banks. Ever since 1694, when William Paterson inveigled
King William III to grant him the right to print notes in exchange for a loan
of gold, thus simultaneously instituting the “Bank of England” (a private
business) and the National Debt, successive governments have continued to be
beholden to banks for the funds to finance government expenditure, with the
consequence of a National Debt now demanding nearly as much to service it (£17
billion) as the entire Defence budget (£18 billion).
But the full enormity of this confidence trick is only
grasped when it is also understood that the incomes on which taxation is
levied to pay that interest have themselves originated predominantly in
bank-created credits to finance the businesses from which the wages, salaries
and dividends are derived. In The Monopoly of Credit
(1931), C. H. Douglas
summarised this position as follows:
“. . . The great spending departments . . . obtain the
money with which to make their monthly payments by means of drafts upon what
is called the ‘Ways and Means Account’, which is in fact merely a Government
overdraft kept with the Bank of England. The Bank of England treats this
overdraft of the Government as cash which, since it rests upon the credit of
the country, it is clearly entitled to do. The sums received in taxation go to
the reduction of the Government debit on the Ways and Means Account, so that
we have the position that the money which the Government spends is created by
the Bank of England, is loaned to the Government, and is repaid by taxation of
wages, salaries and dividends which were originally derived from this and
other bank loans, which, in turn, have to be repaid.”It will be clear that the
demand for a balanced budget is another form of the claim that all money
belongs to the banks, and so far from being a reflection of the physical facts
of production, is unrelated to them.
Every modern community, so far
as physical facts are concerned, is becoming richer year by year, and this
increase of riches could be greatly accelerated, a fact which is indicated by
a large unemployed population, and a manufacturing system with a capacity
which, although already greatly in excess of present possibilities of sale, is
daily being improved. It
is equally obvious that so long
as this demand for a balanced national budget is admitted, there can be no
economic security, since it involves continuous application to the financial
authorities for permission to live” (The Monopoly of Credit,
Chapter V).
There is a way out of this bankers’ stranglehold on
the national finances. That is to stop all further “borrowing”, (a misnomer
for the use of credits created “out of nothing” on the capacity of the nation
itself to produce its wealth), and to transform the Public Sector Borrowing
Requirement into the Public Sector Credit Requirement. Public Sector spending
must be funded by money, created as now on paper by the Bank of England, but
credited, not debited, to the national accounts and thus being both debt-free
and interest-free.
Lest “printing money” should raise the bogey of
runaway inflation, let it be made abundantly clear that such a reform is no
more than the first essential step. Once the bankers’ monopoly of credit is
broken and control of the money supply is firmly based on the physical facts
of production and consumption, a proportion of the PSCR can be directly
applied to the reduction of prices to the consumer by means of the National
Discount mechanism. In accordance with the basic principle that the True Cost
of Production is Consumption, this mechanism brings sale prices below the
level of cost prices. Prices to consumers would thereby be reduced at the
point of sale, and retailers would be compensated the difference between cost
and sale prices.
Since the entire machinery for administering Valued
Added Tax is already in place and functioning, it is equally available for
carrying through such a major reform. The National Discount could be
introduced, if need be in stages, first by a substantial reduction in the
level of VAT, then as soon as possible by its abolition and reversal to a
negative rate and its extension to all products. All risk of inflation would
thus be eliminated and the way be opened for the National Dividend and the
establishment of true economic democracy.
To quote Douglas further, “In place of the relation of
the individual to the nation being that of a taxpayer it is easily seen to be
that of a shareholder. Instead of paying for the doubtful privilege of being
entitled to a particular brand of passport, its possession entitles him to
draw a dividend, certain, and probably increasing, from the past and present
efforts of the community of which he is a member. The National Debt, which he
did not create, becomes a national credit which is a reflection of the
national capital which he did create. His budget is not required to balance
because his wealth is always increasing” (The Monopoly of Credit,
Chapter 9).
Printed by Lindsay & Co. Ltd .• Edinburgh
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