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The following is extracted from "The Douglas System of
Social Credit" to which Bill Ryan has just provided a link (that works) in his
previous post. For those of you who do not have access to that book
other ways,. what's contained therein is a tract very well worth reading in
its entirety. It is interesting to speculate whether what Douglas
proposed back in 1934 would still have relevance to the situation in New Zealand
today, and form the basis for a solution more appropriate than what some New
Zealanders have proposed on here. Of course, only they would
know.
"Now New Zealand, from which I have just come, had a
monetary inquiry, and the
monetary inquiry was, for reasons connected with
the debt, the large debt to
London, practically incapable of discussing the
existing monetary system, so
that the line I took with New Zealand was this:
"We will assume that the
existing monetary system is perfect, and we will
make suggestions for the
amelioration of the existing situation within the
lines of the existing monetary
system, and we will see how they
work."
Broadly speaking, the suggestions were something like this (and I
shall have
much pleasure in depositing an actual copy with the prime
minister for the use
of this house): "We know quite well that the core of
this problem is in the
disparity between the real wealth available and the
monetization of that wealth;
that it is within the power of monetization of
real wealth that this power of
credit lies. Now certain institutions alone
have the power of monetizing wealth,
and we will take that power as it
stands, and we will go to the banks and say:
`Now you have the best possible
precedent in the Bank of England for limiting
your dividends to 6%--which is
the dividend invariably paid by that bank. We
will by our law-making
powers limit your dividend to 6%. Then we will ask you
to do this, and
if you do not do it we will ask you your reasons for your
objection; we will
ask you to make a return of the whole of your assets both
real and personal,
at their market price at the present time and at the price at
which they are
held on your balance sheet for the purpose of your annual balance
sheet'."
REAL VALUE OF BANK ASSETS
I may say in digression
that there is very little doubt that if we had any
conception of the market
price of the assets held by the financial institutions
we should be very
much surprised at the real profits that they are making. There
is an
enormous difference between the disclosed value of the assets either held
by
banks or held in lien by banks, in many cases under a lien which never can be
realized, and the figures under which these assets are held for balance
sheet
purposes.
We say: You will make this return, and where it is
found that the disclosed
market value of your assets is in excess of the
value for which they are held
for balance sheet purposes, we will not take
those assets from you, we will not
tax you even on those assets; but we will
merely ask you very kindly to exercise
your exclusive rights of monetizing
that value, and we will transfer that
monetized value to a suspense account.
We will use that suspense account for
providing every individual of the
population of New Zealand over 21, with shares
in public issues of debenture
stocks or preference stocks which will be paid for
out of this suspense
account, and will be ear-marked as not good security for
loans and
non-transferable. We will allot those shares to the individual so long
as he
is a naturalized or natural-born subject of New Zealand, thus providing
those individuals with the beginnings of a dividend share in all
undertakings,
without having taxed anybody to provide the purchasing power.
In addition to
that we will go to the insurance companies and we will ask
them for the same
returns and we will monetize that return. The
difference of those values
through the newly formed New Zealand Reserve
Bank, we will apply to the
retirement of the overdrafts and the loans of
agricultural and other producing
concerns, so that these farmers and
agriculturists who have become practically
hopelessly in debt to financial
institutions may have those overdrafts and loans
retired without the
taxation of anybody. The money which is created by the New
Zealand
Reserve Bank for that purpose will be automatically retired by the
payment
of those overdrafts, on the well known principle that the repayment of a
loan destroys a deposit.
Under those conditions you will immediately
make it possible for a number of
producing organizations which are now
moribund, and which cannot meet their
interest charges, to go back into
production and employment. And on the other
hand, by the other suspension
account to which I referred, you will begin, and
will proceed at no small
rate to provide every individual with a stake in all
undertakings in a way
which is not a tax on other people, but with the necessary
purchasing power
to buy the productions of the country, without it being
necessary for them
to pass through the turn-stiles of the factory, as we may
say.
That
does not meet certain other difficulties which arise under these existing
financial systems but it does directly focus the attention of the public
upon
that locus of the difficulty, and it does bring up in our opinion for
public
discussion this question of the right to monetize, or still more
important, not
to monetize, existing real wealth. That, under existing
conditions, seems to me
to be one way to attack this citadel of real wealth.
When that citadel falls (as
it must fall, I feel confident, in a few years'
time, but it is better perhaps
that it should fall by successive steps, than
by a catastrophic shock) it will
undoubtedly involve certain measures for
the control and reduction of prices,
measures with which I think you are all
probably to some extent familiar in this
house. But none of these
theoretical objectives can be properly attained so
long as this monopoly of
credit remains unchanged."
Joe
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