Monday, September 9, 2013

The Problem with “Social Credit”, I: The Critique


In response to a recent “plug” for Capital Homesteading we inserted in a FaceBook posting about “living wage” legislation now before Congress, somebody responded, “What we need is Social Credit and the Universal Unconditional Basic Income Guaranteed.”

That sounds nice, but there might be one or two problems there.  Before we go into that, however, we should understand what “social credit” is.  As described in the Wikipedia entry on social credit,

Social credit is an interdisciplinary distributive philosophy developed by C. H. Douglas (1879–1952), a British engineer, who wrote a book by that name in 1924. It encompasses the fields of economics, political science, history, accounting, and physics. Its policies are designed, according to Douglas, to disperse economic and political power to individuals. Douglas once wrote, ‘Systems were made for men, and not men for systems, and the interest of man which is self-development, is above all systems, whether theological, political or economic.’ Douglas said that Social Crediters want to build a new civilization based upon "absolute economic security" for the individual, where ‘they shall sit every man under his vine and under his fig tree; and none shall make them afraid.’ In his words, ‘what we really demand of existence is not that we shall be put into somebody else's Utopia, but we shall be put in a position to construct a Utopia of our own.’”

Douglas’s theory is that, while anyone can own capital, the fruits of ownership belong to the people as a whole.  This is because production is the result of accumulated human knowledge that belongs to everyone.  So that everyone can receive the benefit of production and that purchasing power can be kept at a par with production, the government decides how much money to create periodically and uses it to meet costs of government, with the balance distributed to each person as a guaranteed “National Dividend.”  This will, at one and the same time, abolish taxes and ensure that all production is consumed, bringing the economy back into balance and ending the business cycle.

As we said, there are a few problems here, but before we begin our brief analysis, we should note that “Social Crediter” is not a misspelling.  It is spelled that way to distinguish a social crediter from the ordinary meaning of “creditor.”

Hilaire Belloc’s Analysis

Let’s start with the Chesterbelloc that, in its heyday, struck fear into the hearts of socialists everywhere.  (Today’s neo-distributism, as it must be termed, has degenerated into another form of socialism.)

Hilaire Belloc’s take on “the Douglas Scheme” as he called social credit in An Essay on the Restoration of Property (1936) is that it was flawed because it focused only on income, not on the critical issue of production and who owns the means of production.  In this, as in other matters, Douglas’s analysis is Keynesian, while Keynes’s analysis developed out of the “chartalism” of Georg Friedrich Knapp, and described (in English; Knapp published his theories in German beginning in the 1880s) in The State Theory of Money (1924).

Yes, social credit would “guarantee” everyone an income, but — especially given the fact that Douglas recognized that the purpose of production is consumption — the income would not be tied in any way directly to production.  The disconnect between production and income would not be restored as Douglas believed, but exacerbated.

As we have seen recently, in a chilling replay of the massive non-productive money creation for speculative purposes that preceded the Crash of 1929, huge amounts of debt-backed government money are being poured into the stock market.  This gives the illusion of “growth” as prices go up and the Dow soars.

At the same time, businesses are being starved for credit.  The productive capacity of the country is being undermined as jobs and capital shift to other countries with lower wages.  Yes, the Douglas scheme would provide people with a “guaranteed” income, but that income would purchase less and less as productive capacity continues to deteriorate.  Like Keynes, Douglas thought production would take care of itself.  It doesn’t.

Dr. Harold G. Moulton

The analysis of Dr. Harold Moulton of the Brookings Institution is that Douglas took a “one-sided” view of money and credit, and applied it to a “fallacy of composition” that equated an entire economy with a single business enterprise; the “A + B Theorem” falls apart because it fails to take into account that a dollar expended in one area is also a dollar of income in another.  As Moulton explained,

“The fallacy in Major Douglas’ analysis is that he concentrates attention upon a single business rather than upon the national economy as a whole.  These ‘external’ payments to other organizations do not involve sending the money outside the country, and hence their disbursement is a part of the national income as a whole.” (The Formation of Capital, 1935, p. 180.)

The Natural Law

With respect to a natural law analysis, social credit redefines what it means for something to be “owned.”  By issuing money backed only by the government’s promise that it is worth something, the government takes away the usufruct, i.e., enjoyment of the fruits of capital ownership.  It does this by manipulating the currency, treating “money” as a non-repayable debt the nation owes itself, which is theoretically unsound; a “non-repayable debt” is an oxymoron.  Since property is not the thing owned, but the right to be an owner, and the rights to control the thing owned and enjoy the income it generates, social credit effectively abolishes private property.

#30#

32 comments:

Matt said...

Nice post! love reading your post!

Michael D. Greaney said...

Thanks. It's good to get a positive reaction now and then.

Oliver Heydorn said...

I am glad to see that more and more people are looking into Social Credit. I am afraid, however, that the Social Credit that you are critiquing here is a straw-man. All of your objections can be answered and have been answered. Regarding the National Dividend, for example, it is indexed to productivity. No production, no dividend. In no way was Douglas advocating a promiscuous or imprudent creation of money (debt-free money) to consumers. Rather, he wanted to bring the financial capacity to consume in line with the financial capacity to produce. Right now we fill the gap between final prices and purchasing power mainly with debt-money, with the necessity for more work duly attached as the condition for its issuance.

I have recently published two books on the subject: "Social Credit Economics" and "The Economics of Social Credit and Catholic Social Teaching." They are available via amazon.com

Michael D. Greaney said...

Actually, the problems concerning social credit have not been addressed. Douglas's proposal is based on his theory that the results of production, i.e., the marketable goods and services generated by capital instruments, belong to everybody because the general heritage of mankind out of which the capital instruments were created belongs to everybody. This confuses knowledge, with the application of knowledge. Yes, knowledge is the common heritage of mankind, but the application of that knowledge belongs to whoever applies it. Taking away the fruits of ownership, as Douglas proposed through the national dividend, is theft, as it takes away what makes property, property. Social credit is, not to put too fine a point on it, a form of socialism, albeit through indirect abolition of private property by taking away enjoyment of the fruits and control, rather than attacking title directly. This was the same thing that George, Ryan, and Keynes did, following the principles that Knapp outlined in his chartalism, the basis of "Modern Monetary Theory," which has nearly destroyed the global economy.

Oliver Heydorn said...

Hi there,

No, the dividend does not do away with private ownership of the means of production at all or with the specific benefits that serve as an incentive in a free market to produce: private profit. In fact, Douglas was very much in favour of maintaining and supporting free enterprise (private ownership of production, free markets, entrepreneurship, functionalist profit, etc.) What the dividend does is to universalize the beneficial ownership of that aspect or proportion of production which is due to the cultural heritage, the unearned increment of association, and natural resources. Each person becomes a private owner of part (not all) of the factors of production which are then combined by the private business owner to yield goods and services. It is as if every individual was given, at birth, a set of shares in the nation's productive capacity which would earn him or her a dividend on the operation of real capital in the production process. What could be more capitalist than that? SC is the universalization of capitalism and is directly in keeping with the distributist ideal that private productive property should be widely and equitably (though not necessarily equally) distributed. Moreover, the dividend is necessary to balance the rate of flow of final prices with the rate of flow of purchasing power, as salaries, wages, and dividends are not enough to purchase in full what we produce - hence the ever increasing mountains of unrepayable debts - public and private.

Social Credit has nothing in common with socialism at all. It denies the validity of class warfare, rejects the collectivistic ownership of the means of production, rejects central planning, rejects the redistribution of wealth via taxation and the Welfare State, and rejects excessive government regulation or control of the economy. A SC economy would be much freer and fairer than anything we have at present.

Dean E Malone said...

Michael, you speak without understanding that is inexcusable because 1) the things you attribute Douglas as saying are NOT TRUE and 2) your analysis is so full of holes it is laughable. Do you realize that MILLIONS of words have been published on social credit over the last century by hundreds of authors and that Douglas's proposals have been analyzed fifty ways from Friday and have NEVER been refuted. Douglas himself took on ministers of finance and economists in public debates and lectured parliaments. Let's just deal with what you said in your last post in response to Oliver. You said "Douglas's proposal is based on his theory that the results of production, i.e., the marketable goods and services generated by capital instruments, belong to everybody because the general heritage of mankind out of which the capital instruments were created belongs to everybody." NOT TRUE. He said society owns the incremental productivity of technology because our forefathers created it. Who gets credit for inventing the wheel? When one farmer can produce enough wheat to feed 1000 people for a year, that is technology leverage. When a dozen workers can bottle 20,000 bottles of Coca-Cola per shift, that is technology leverage. When robots can spit out dozens of cars per hour with little human intervention, that is technology leverage. We are fast approaching the point in our evolution where very few people will be able to work. There will simply be no jobs. The GAP will be so huge that there will be piles of consumer goods with very little EFFECTIVE DEMAND PURCHASING POWER with which to buy them. Then what? Have you thought that one through? Douglas did and his solution is the only one that will work - with the possible exception of Professor Frederick Soddy's National Economy proposals.

You said something else that is patently UNTRUE. I challenge you to find a single quote from any of Douglas's many writings where he says he proposes to "take away the fruits of ownership" from anyone. How do you arrive at such a flawed conclusion when the only thing he ever proposed was to fill the gap between the cost of the goods and services we produce and the wages we are paid to produce them? Check out www.economiccures.com and get some understanding before you make yourself look any more foolish than you already have.

Dean E Malone said...

And another thing you wrote that is completely untrue is "Taking away the fruits of ownership, as Douglas proposed through the national dividend, is theft, as it takes away what makes property, property. Social credit is, not to put too fine a point on it, a form of socialism, albeit through indirect abolition of private property by taking away enjoyment of the fruits and control, rather than attacking title directly. This was the same thing that George, Ryan, and Keynes did, following the principles that Knapp outlined in his chartalism, the basis of "Modern Monetary Theory," which has nearly destroyed the global economy." Douglas himself referred to his vision of a successful economy as "An aristocracy of producers serving a democracy of consumers." There is plenty of room for bright entrepreneurs to get rich in a social credit economy. Indeed they are more likely to succeed with good products because consumer will have enough "voting power" with their sufficient purchasing power for the producers wares to actually be bought - rather than stalling on the shelves for want of "effective demand." Let's look at the truth of this assertion from a macro and micro-economic perspective. First the micro; can you tell me a single good or service produced anywhere on the planet that is comprised ENTIRELY of wages, earnings or dividends? No? I can't either. How do you pay $2 for goods for which only $1 in purchasing power has been placed into the economy? Even the crops the subsistence farmer grows have costs to bring to market. Now let's look at the macro perspective. Consider USA GDP of $14 Trillion dollars but BLS reports only $8T in IRS reported earnings. How do you buy %14T with only $8T in purchasing power? In our foolish economy, you borrow and kick the can down the road. I challenge you to show me a SINGLE YEAR that any country paid out more in wages than its GDP in the last century. That is why every government, business and person is buried in a mountain of debt. This is the GAP that Keynes spoke of in his seminal book but failed to solve. It is the same gap that Douglas spoke of and did solve. When you get THAT (it's called the A + B Theorem) you will know that I am right. By the way, just how much money does this gap break down to for every man, woman and child? It approaches $17,000 PER YEAR. The simple truth is that the Congress could issue a check for this amount to everyone (as is their right under Article 1, section 8 of the Constitution) and this single action would not generate a shred of inflation. On the contrary, it would absolutely rescue the economy in one majestic swoop.

Dean E Malone said...

And another thing you wrote that is completely untrue is "Taking away the fruits of ownership, as Douglas proposed through the national dividend, is theft, as it takes away what makes property, property. Social credit is, not to put too fine a point on it, a form of socialism, albeit through indirect abolition of private property by taking away enjoyment of the fruits and control, rather than attacking title directly. This was the same thing that George, Ryan, and Keynes did, following the principles that Knapp outlined in his chartalism, the basis of "Modern Monetary Theory," which has nearly destroyed the global economy." Douglas himself referred to his vision of a successful economy as "An aristocracy of producers serving a democracy of consumers." There is plenty of room for bright entrepreneurs to get rich in a social credit economy. Indeed they are more likely to succeed with good products because consumer will have enough "voting power" with their sufficient purchasing power for the producers wares to actually be bought - rather than stalling on the shelves for want of "effective demand." Let's look at the truth of this assertion from a macro and micro-economic perspective. First the micro; can you tell me a single good or service produced anywhere on the planet that is comprised ENTIRELY of wages, earnings or dividends? No? I can't either. How do you pay $2 for goods for which only $1 in purchasing power has been placed into the economy? Even the crops the subsistence farmer grows have costs to bring to market. Now let's look at the macro perspective. Consider USA GDP of $14 Trillion dollars but BLS reports only $8T in IRS reported earnings. How do you buy %14T with only $8T in purchasing power? In our foolish economy, you borrow and kick the can down the road. I challenge you to show me a SINGLE YEAR that any country paid out more in wages than its GDP in the last century. That is why every government, business and person is buried in a mountain of debt. This is the GAP that Keynes spoke of in his seminal book but failed to solve. It is the same gap that Douglas spoke of and did solve. When you get THAT (it's called the A + B Theorem) you will know that I am right. By the way, just how much money does this gap break down to for every man, woman and child? It approaches $17,000 PER YEAR. The simple truth is that the Congress could issue a check for this amount to everyone (as is their right under Article 1, section 8 of the Constitution) and this single action would not generate a shred of inflation. On the contrary, it would absolutely rescue the economy in one majestic swoop.

Wallace Klinck said...

I have recently received Dr. Heydorn' 548-page book on Social Credit and can attest to its faithfulness and reliability in representing the Social Credit case as originally expounded by the late Major Clifford Hugh Douglas.

Michael Greaney seems confused regarding a number of issues. More or less equating Douglas's and Keynes's financial policies is an inversion of fact. There appears to be sound reason for believing that Keynes plagiarized Douglas because Keynes actually does admit that we will have an increasingly difficult task in distributing current output without drawing upon future incomes. Unfortunately, Keynes offered no solution to the problem other than effecting distribution by increasing financial debt, i.e., increasing bogus purchasing-power by credit-money expansion via bank loans. Purchasing-power is only effective if it cancels a financial cost upon being expended. As conditions are today, the banks actually and increasingly appropriate the communal capital through their claim of ownership of the financial credit which the create against the community's wealth--a claim that they put into effect through property foreclosure facilitated by credit contraction which slows the expansion of money making it impossible for debtors to service or liquidate their debts. Apparently, Greeney is not troubled about this appropriation of the community's real capital by the banks, which have not created that capital.

Social Credit does not attack ownership, pe se, nor profits earned by entrepreneurs. Nor does it encroach upon the administration of industry. However, as allocated capital charges in price become progressively larger relative to the costs of wages, salaries and dividends and this changing ratio is reflected in final prices, Social Credit would ensure that consumers would always have sufficient effective demand to claim the physical output of industry as it flows from the production line. Thus, Social Credit expands and universalizes the concept of inheritance through the financing of consumption increasingly independent of direct participation in production--the latter of which would have no reason for existence without consumption.

All costs must be recovered from consumers. Only if consumers have sufficient financial income to meet said costs can the producer recover his or her costs and remain financially solvent and in business. The sole purpose of production is consumption--not to create "work" or serve any other ulterior purpose. The Social Credit consumer credits to be issued via the Consumer Dividend and to lower consumer prices (the Compensated Price) would be issued without creating new financial debt but there is already a claim against them in final consumer prices and when received from sales they will be cancelled as purchasing-power by when businesses repay their bank loan or replenish their capital reserves.

The natural, rational, inevitable and only sane trend is for technology to replace human effort and energy in production processes. Attitudes such as those expounded by Greaney raise a nightmare scenario where should we totally automate our economies so as to produce a towering mountain of consumer goods without the help of human intervention we would have to erect a gigantic fence around such a surfeit of material wealth and deny access to it because consumers had no earned income--because there was no longer any need for paid employment! We have not reached this theoretical level of technological development by we are progressively moving in this direction--with astonishing rapidity as a recent article in the Chicago revealed in claiming that within about twenty years hence we have the potential to eliminate approximately fifty per cent of industrial and commercial "jobs".

Wallace Klinck said...

I have recently received Dr. Heydorn' 548-page book on Social Credit and can attest to its faithfulness and reliability in representing the Social Credit case as originally expounded by the late Major Clifford Hugh Douglas.

Michael Greaney seems confused regarding a number of issues. More or less equating Douglas's and Keynes's financial policies is an inversion of fact. There appears to be sound reason for believing that Keynes plagiarized Douglas because Keynes actually does admit that we will have an increasingly difficult task in distributing current output without drawing upon future incomes. Unfortunately, Keynes offered no solution to the problem other than effecting distribution by increasing financial debt, i.e., increasing bogus purchasing-power by credit-money expansion via bank loans. Purchasing-power is only effective if it cancels a financial cost upon being expended. As conditions are today, the banks actually and increasingly appropriate the communal capital through their claim of ownership of the financial credit which the create against the community's wealth--a claim that they put into effect through property foreclosure facilitated by credit contraction which slows the expansion of money making it impossible for debtors to service or liquidate their debts. Apparently, Greeney is not troubled about this appropriation of the community's real capital by the banks, which have not created that capital.

Social Credit does not attack ownership, pe se, nor profits earned by entrepreneurs. Nor does it encroach upon the administration of industry. However, as allocated capital charges in price become progressively larger relative to the costs of wages, salaries and dividends and this changing ratio is reflected in final prices, Social Credit would ensure that consumers would always have sufficient effective demand to claim the physical output of industry as it flows from the production line. Thus, Social Credit expands and universalizes the concept of inheritance through the financing of consumption increasingly independent of direct participation in production--the latter of which would have no reason for existence without consumption.

All costs must be recovered from consumers. Only if consumers have sufficient financial income to meet said costs can the producer recover his or her costs and remain financially solvent and in business. The sole purpose of production is consumption--not to create "work" or serve any other ulterior purpose. The Social Credit consumer credits to be issued via the Consumer Dividend and to lower consumer prices (the Compensated Price) would be issued without creating new financial debt but there is already a claim against them in final consumer prices and when received from sales they will be cancelled as purchasing-power by when businesses repay their bank loan or replenish their capital reserves.

The natural, rational, inevitable and only sane trend is for technology to replace human effort and energy in production processes. Attitudes such as those expounded by Greaney raise a nightmare scenario where should we totally automate our economies so as to produce a towering mountain of consumer goods without the help of human intervention we would have to erect a gigantic fence around such a surfeit of material wealth and deny access to it because consumers had no earned income--because there was no longer any need for paid employment! We have not reached this theoretical level of technological development by we are progressively moving in this direction--with astonishing rapidity as a recent article in the Chicago revealed in claiming that within about twenty years hence we have the potential to eliminate approximately fifty per cent of industrial and commercial "jobs".

Michael D. Greaney said...

I cannot respond in any meaningful way to the above comments, because they all take as a starting point a redefinition of the natural law and of the natural right of private property that flatly contradicts the Aristotelian-Thomist philosophy and assumptions on which the Just Third Way is grounded. The comments embody fundamental errors that seem small (such as changing what "property" means), and confusing, e.g., Keynesian principles with Keynesian policy.

Dean E Malone said...

Michael, there is just no truth in this assertion "they all take as a starting point a redefinition of the natural law and of the natural right of private property that flatly contradicts the Aristotelian-Thomist philosophy and assumptions" Please articulate these laws and assumptions and we will deal with them. I suspect this is a straw-man assertion because you lack the will to dig more deeply into what Wally, Oliver and I have told you. Rather than make you dig deeper, just tell us the assertions you think we are contradicting and we can start there. I suspect that we are both on the same page but you just don't see it yet.

Michael D. Greaney said...

Oh, very much the contrary. Social credit, along with georgism, Keynesian economics, and all forms of socialism, embodies a violation of the principle of identity, which is the "positive" way of expressing the first principle of reason: "That which is true is as true, and is true in the same way as everything else that is true."

That means that you cannot change the definition of a natural right as Keynes asserted on the opening page of the fist volume of his Treatise on Money when he claimed that the State has the power to "re-edit the dictionary." This is because the natural law is not a gift from God (except in the larger sense that existence itself is a gift from God), but an unchanging and unchangeable part of human nature, which is a reflection of God's Nature; the natural law, the code of human conduct, which includes the rights to life, liberty, and property, cannot be abolished or redefined in any way that changes what it means for it to be a right, or that defines the exercise thereof in such a way as to change its substantial nature. Natural rights are "inalienable" (or "unalienable," if you prefer), which means they cannot be alienated or "taken away," which is what "alienated" means.

Social credit re-defines property to mean that enjoyment of the fruits of ownership is not part of private property, but belongs to the community at large. This changes the essential definition of property, effectively abolishing it. Given that Karl Marx and Pope Leo XIII (among others) defined socialism as the abolition of private property, social credit is a form of socialism. It is Fabian rather than Marxist, but it is still socialism.

You cannot go around changing definitions of natural rights based on your personal interpretation of anything, or that harms others in any way (and violating someone's natural rights is "harm"), only the exercise thereof (and then only in ways that do not harm or abolish the underlying natural right itself) because the natural law, being based on human nature, is based in turn on God's Nature, self-realized in His Intellect, NOT His Will, and therefore discernible by use of human reason alone. Changing the definition of a natural right, whether life, liberty, or property, disparages all other natural rights and calls them all into question.

Further, to claim that a natural right can be taken away or substantially changed in its essential definition is, ultimately, to deny that God is God. God is a perfect Being. Any change is necessarily a movement toward or away from perfection. Thus, to change a natural right based on God's Nature necessarily implies that God is imperfect at some point, either before the change or after, and therefore not God. This is a contradiction, another violation of the first principle of reason, this time expressed "negatively": "Nothing can both 'be' and 'not-be' at the same time under the same conditions."

Oliver Heydorn said...

"Social credit re-defines property to mean that enjoyment of the fruits of ownership is not part of private property, but belongs to the community at large."

No, Social Credit does NOT re-define property in such a way that the fruits of ownership do not belong to the private owners. What it does is this: it extends some of the fruits of ownership to each and every individual via the dividend without abolishing salaries, wages, private profit, and without confiscating anything whatsoever from any legitimate existing owner. It does not rob Peter to pay Paul. The dividend is financed by the creation of new, debt-free money, which is necessary to bring the economic cycles of production and consumption into financial equilibrium. It is not financed via redistributive taxation or public debts.

Right now, the private banking monopoly appropriates (via the issuance of new loans in order to fill the price-income gap) that proportion of production which is due to the unearned increment of association, natural resources, and the cultural heritage for its own oligarchic uses at the illegitimate expense of the real owners of these factors of production: the common individual citizen.

Many Catholics have been Social Crediters including Priests, Bishops, and Cardinals. They find no contradiction between Social Credit and Aristotelian-Thomistic Philosophy - nor do I. I hold, btw, a Ph.D. in philosophy and have studied at Catholic schools. I do not take issue so much with the principles you exposit (though I find your expression somewhat unclear), but rather with the claim that SC is guilty of re-defining property; it does not. Furthermore, a commission of 9 theologians in Quebec (before Vatican II N.B.) had examined SC and declared that it was not at all socialistic and could be supported in good conscience by Catholics.

Michael D. Greaney said...

I'm afraid your description of social credit constitutes a redefinition of private property by taking away the fruits of ownership from owners, and bestowing them on non-owners by means of the national dividend.

Please stop redefining terms and attempting to judge what I say by your principles. If you wish to disprove what I say, you must do it using the principles on which I base my argument, not on yours.

Oliver Heydorn said...

Since you are apparently an expert on Social Credit, would you please explain exactly, in concrete terms, how Social Credit takes away the fruits of ownership from private owners?

Michael D. Greaney said...

When the State emits bills of credit ("creates money") it dilutes the value of currency already in circulation, and decreases the value of all assets denominated in that currency. This makes inroads on private property in two ways.

1) By making the currency unstable, the State shifts wealth from one class of persons to another. If the State inflates the currency, the shift is in favor of debtors. If the State deflates the currency, the shift is in favor of creditors.

2) By emitting bills of credit, the State is imposing a "hidden tax" in the form of inflation. Taxation is not, however, an exercise of property on the part of the State as Thomas Hobbes asserted, but a grant from the citizens as John Locke pointed out, and is unjust without their explicit consent.

The bottom line in social credit is the fixed belief that the end (adequate income) justifies the means (overthrow of the natural law).

Oliver Heydorn said...

Thank you for your reply.

You said:

"When the State emits bills of credit ("creates money") it dilutes the value of currency already in circulation, and decreases the value of all assets denominated in that currency. This makes inroads on private property in two ways."

The tendency to demand-pull inflation that is induced by the creation of money (which can be offset if the new money is associated with increased production in the same period of time) occurs whenever money is created under the present financial system. It does not matter whether it is the government or private banks. Are you aware that well over 95% of the money supply in the typical industrialized country is created by private banks out of nothing through the fractional reserve system in the form of bank credit (i.e., digital numbers)? Their creation of digital numbers can and often does dilute the value of the currency, which, technically speaking, is only 5% of the money supply. Yes, government-created money, notes and coins, is a very small proportion of the money supply.

Oliver Heydorn said...

You said:

"1) By making the currency unstable, the State shifts wealth from one class of persons to another. If the State inflates the currency, the shift is in favor of debtors. If the State deflates the currency, the shift is in favor of creditors."

Yes, the inflation and deflation of the money supply can have this effect, but once again, it is the inflation and deflation of the money supply through the activity of private banks which play the greatest role. Even when governments inflate through public debt they are typically borrowing most of it as bank credit from private banks.

None of this would apply under Social Credit, because under SC consumer incomes are to be EQUATED to the rate at which final prices are being generated; i.e., there will be neither demand-pull inflation, more money chasing the same volume of goods, nor deflation resulting in not enough income to meet prices. BTW, prices are not infinitely flexible, businesses must charge at least enough to cover their costs.

You said:

"2) By emitting bills of credit, the State is imposing a "hidden tax" in the form of inflation. Taxation is not, however, an exercise of property on the part of the State as Thomas Hobbes asserted, but a grant from the citizens as John Locke pointed out, and is unjust without their explicit consent."

Yes, SC agrees that demand-pull inflation filches purchasing power from consumers and that this is unacceptable, but please note again that it is the private banks who are chiefly responsible for inducing this kind of inflation directly or indirectly at present. Furthermore, the SC measures are anti-inflationary. Only as much money as is required to balance prices with incomes is introduced and the price adjustment mechanism is designed to prevent retailers from increasing their prices whenever there is more money about because of the dividend. What is wanted is a real increase in purchasing power, not a mere increase in the money supply followed by price inflation. That would serve no one. Also the money created to balance prices and incomes is debt-free money, rather than, as at present, debt-money from private banks. This will liquidate costs and thus prevent these costs from being factored into future economic activities, thereby contributing to push-cost inflation.

You said:

"The bottom line in social credit is the fixed belief that the end (adequate income) justifies the means (overthrow of the natural law)."

This is completely false. Douglas is on record as rejecting the principle that a good end can ever justify an intrinsically evil means. Furthermore, the SC mechanism is explicitly designed to provide adequate income or liquidity to the financial system without inducing either demand-pull or cost-push inflation. No inflation and the various points you make regarding the loss of property do not apply. Finally, SC also agrees with Locke's position that any taxation must be okayed by the explicit consent of the citizen and adequate mechanisms must be devised to make that possible.

You cannot properly understand SC from within the context of economic orthodoxy. I really encourage you to get a copy of my book. There is too much a stake for the brilliant light of SC to be obscured by elementary misunderstandings.

Michael D. Greaney said...

Again, you are using a definition of money that changes what it means for something to be owned; you have removed enjoyment of the fruits from the rights of property, which nullifies the right to property. This overthrows the natural law by making an inalienable right alienable, and inserts a basic contradiction into your analysis. You cannot judge the Just Third Way except by the principles of the Just Third Way. You have also broken the essential link between money and property, which also abolishes private property.

Oliver Heydorn said...

I'm afraid that what you are saying is simply not true.

SC is quite easy to correctly grasp once you have a realistic understanding of what is actually going on in the physical and financial spheres of economic life.

Beyond labour, land, and capital (including entrepreneurship), there are other factors of production such as various natural resources, the unearned increment of association, and the cultural heritage which make a real contribution to the productive process. Labour deserves to be recompensed in exchange for its services to production and it is. The owners of land and capital also deserve to be recompensed and they are. Guess what? Those who own the natural resources, the unearned increment of association, and the cultural heritage must also receive their share in justice, which they don't at all at present. SC would finally allow the real owners of these factors to have their share recognized, while not taking anything at all from labour or the owners of land and capital.

So who owns these latter factors? They are common property, not in the socialistic sense (i.e., the property of a collectivity, the nation or state), but common in the distributistic sense, i.e., every individual is a part owner of these factors and is entitled to an individual share in the benefits derived from them. In keeping with the Church's teaching on the universal destination of goods, natural resources, air, water, etc., were created and given by God for everyone's use and benefit. The unearned increment of association, i.e., the benefits that come from co-operation and that enable things to be done more quickly and easily, cannot be privatized, they belong to every member of that association as individuals since each contributes to it. Finally, the cultural heritage is simply a recognition that when patents run out or inventors, scientists die, their contributions are the patrimony of mankind generally to which each individual should be able to lay his claim.

The commons was a very important form of property in the medieval period, i.e., in the Catholic World Order, and it is through its destruction via enclosure that the vast majority of the world's population have been turned into wage-slaves. SC restores the commons in an age of high technology.

Oliver Heydorn said...

One other thing, who receives the dividend once it is spent? The person who has something to sell. In other words, the dividend benefits the producer as well as the consumer and, by assuring stable business conditions, guarantees that the producer will fully enjoy the fruits of ownership - he'll be in a position to make greater profits. SC does not destroy private property, it secures it and will make it more widely available than classical distributism or what you are calling 'the Third Way' ever could.

Michael D. Greaney said...

You assert that what I say is simply not true, but you base your claims on a paradigm in which what it means for something to be "true" has, frankly, lost all meaning.

Social credit is based on a redefinition of private property, a natural right. A natural right, a manifestation of the unchanging and unchangeable natural law based on God's Nature self-realized in His Intellect and therefore discernible by the natural force of human reason, cannot, by definition, be changed. The exercise of a natural right can and must be changed, but never its essence or substantial nature. Social credit, however, relies on such an impossible change.

By changing the definition of a natural right, social credit changes what it means for something to be true, removing all concept of an absolute standard. The basis of the natural law is shifted from the Intellect, discernible by reason, to the Will, accepted on faith.

Your analyses take for granted that the definition of private property used in social credit is correct, when, in fact, you have not demonstrated that it is, in fact, any such thing. You are basing arguments on opinion, which may or may not be true, and dismissing knowledge, which is certainly true.

Even if you were correct, and private property is exactly what social credit claims (which has not been proved), you are attempting to critique one system in terms of another.

This is fatal to the consistency of your argument, and is illogical. You cannot, for example, insist that I am playing baseball incorrectly or am lying because I refuse to employ the rules of football on the grounds that both are games involving balls, and both are sports. It does not make sense.

You can construct all the castles in the air that you like, you can accuse me of lying, you can do many things, but until you present evidence and rational argument to support your claims, you have done nothing. By accepting Douglas's change in the definition of private property, you have made the seemingly small error that leads to great errors in the end.

Oliver Heydorn said...

Let's make this very simple:

1. Give me in a sentence your definition of property. "Property is ...."

2. Give me in a sentence what you think Douglas' 're-definition of property' happens to be. "According to Douglas, property is ...."

Michael D. Greaney said...

1) Property is a) the natural right to be an owner inherent in each and every human being, and b) the socially determined bundle of rights that, in a specific set of circumstances, define how an owner may exercise the inherent right to be an owner.

2) By taking away the fruits of ownership by having the State issue a "national dividend," Douglas abolishes private property. The State does not own the marketable goods and services against which it issues claims in the form of bills of credit, and therefore has no right to (re)distribute it, except as explicitly granted by the citizens in the form of taxation.

Oliver Heydorn said...

You have either not answered my questions or have not answered them well.

Property is not a right. One may have a natural right to property, but that is a different matter.

Property is that which a person owns and can therefore control.

You have not answered at all how Douglas supposedly re-defines property. I am waiting for the completion of the sentence, "According to Douglas, property is ..."


Try again.

Michael D. Greaney said...

"Property not a right"? Incredible. I suggest you consult any legal dictionary or text on property. As Black's Law Dictionary defines "property":

"[I]n the strict legal sense, an aggregate of rights which are guaranteed and protected by the government."

By claiming that property is not a right, you are admitting that you have changed the definition of property. This violates the first principle of reason as expressed in the principle of identity.

As your "arguments" and demands demonstrate, violating the first principle of reason leads inevitably to what Archbishop Fulton J. Sheen translated as "mental suicide" from Aquinas's "intellectual self-annihilation," a process Chesterton described as "the assassination of Thomism." As Sheen explained,

"No thesis in the philosophy of St. Thomas is clearer than that which asserts that all knowledge rests upon a single first principle. To it all other principles of thought may be reduced. Upon it all depend for their validity. Without it there can be no certitude, but only opinion. Whether we choose to express this absolute, first principle in the form of an affirmation — the principle of identity — or in the form of a negation — the principle of contradiction — it matters not. The point is, that unless our knowledge hangs upon this basic principle, it is devoid of certainty. Wherefore, causality — efficient, formal, material or final — must attach itself in some manner to the principle of identity. In the Thomistic view, the connection is immediate. Its very immediateness gives to the notion of causality the absolute necessity and complete universality of the ultimate principle.

"He who denies causality must ultimately deny the principle of identity and the principle of contradiction — and this is mental suicide. It is to assert that that which has not in itself and by itself its reason of being, is its own reason of being; or, in other words, is and is not, under the same formal consideration."

By insisting on imposing your redefinition of property on others operating in a different framework than yourself, you violate one of the first principles of rational discussion as well as the first principle of reason. As Chesterton explained when commenting on Aquinas's reaction to a similar attempt by Siger of Brabant in the 13th century (your errors are by no means original), one of two occasions on which Aquinas is known to have expressed anger,

"At the top of his fury, Thomas Aquinas understands, what so many defenders of orthodoxy will not understand. It is no good to tell an atheist that he is an atheist; or to charge a denier of immortality with the infamy of denying it; or to imagine that one can force an opponent to admit he is wrong, by proving that he is wrong on somebody else’s principles, but not on his own. After the great example of St. Thomas, the principle stands, or ought always to have stood established; that we must either not argue with a man at all, or we must argue on his grounds and not ours. We may do other things instead of arguing, according to our views of what actions are morally permissible; but if we argue we must argue 'on the reasons and statements of the philosophers themselves.'”

By insisting that property is not a right, when the clear understanding of property for millennia is that property is in strict fact nothing other than the right to be an owner, and the socially determined bundle of rights that accompany ownership and define the exercise of the underlying right to be an owner, you are merely spewing out nonsense.

Oliver Heydorn said...

Absolutely incredible!

I notice that you still have not answered the second question. "According to Douglas, property is ..."

My definition of property is backed up by no less an authority than the Oxford dictionary.

The Oxford dictionary defines property this way:

noun (plural properties)

1 [mass noun] A thing or things belonging to someone; possessions collectively:

Notice, it says nothing about a right or rights. I am not denying that people should have a right (natural or legal) to certain types of property.

Furthermore, it is possible and, in certain situations, it is the case that a person may hold property that he or she has no right to on the basis of natural law. For example, women are, for all intents and purposes, regarded in N. America has owning the foetus and are therefore 'within their rights' to have it killed. Since one can hold property, i.e., have something at their exclusive disposal for their use, and yet not have a right to that property .... PROPERTY AND RIGHTS TO PROPERTY ARE CLEARLY DIFFERENT THINGS.

If you cannot see this or admit it, I'll just have to conclude that, as shown by your marked tendency to ignore many of the important points I have raised in my various posts, you are not intellectually honest.

Michael D. Greaney said...

It is impossible to reply to your questions because your statements and demands are based on a rejection of the first principles of reason. They assume as a given that which is proven false.

You have been given the precise and correct definition of property. You reject it, and attempt to evade the issue by making other demands that you decide have not been answered.

Redefining property violates the first principle of reason. Since this has already been pointed out to you a number of times, I conclude that you are "playing dumb" and assuming the role of what Hilaire Belloc called "the stupid skeptic."

It is patently useless to try and discuss anything with you, as you have taken up automatic gainsaying as an end in itself, regardless of the objective truth or falsity of your claims. As Bertrand Russell pointed out, you can verbally deny everything forever, even in the face of incontrovertible evidence — but you cannot thereby change reality, however much you want to. You might even be able to bully others into going along with what you say out of fear or intimidation, or merely to get you to shut up, but that doesn't make you right, either.

You inserted yourself uninvited into this blog in a transparent effort at self-promotion, i.e., to plug your books. I let it go in the interests of fair debate. I have no idea why you continue to drone on and on with demonstrably false statements. You clearly have no understanding of the banking principle on which binary economics is based, or the natural law on which the social doctrine of Pius XI is based. You are now making shrill demands regarding something that any reasonable person would conclude has already been answered in full not once, but several times. You are, in short, a "troll," and are here only to make trouble and engage in insulting and, frankly, ridiculous behavior.

Please do not come back. I will delete any future comments by you.

Anonymous said...

Wow. This Greaney guy is a monomaniac.

Social Credit doesn't at all redefine property. What it DOES say is that Credit (and only Credit, really) is a social rather than a private good. People DO own everything else (the labor, the capital, the land, etc) and get the fruits of that private property under social credit!

What social credit forbids is exactly what Thomism always forbade: usury. The idea that private financiers can monetize credit, even though that is unnatural.

And it is unnatural because Credit is not a private good that private people can sell like that. Because credit, by nature, is the product of an entire socio-economic system which guarantees it. Money in itself is just a means of exchange. Being able to make money just by having money is unnatural, and Aquinas knew this and said this! The ability for money to gain interest (ie credit) is a social good, because it is a symbolic relation that only makes sense in a social context.

Social credit, when the government issues money, actually prevents ANY inflation, and therefore any argument against the compensated price and social dividend which is based on some idea that "inflation is theft from current money-holders" is entirely backwards.

It is the *current* financial system of private debt-money which produces inflation and robs us all! Social Credit, by design, increases the money supply in such away that there is no significant inflation or deflation because the money supply "matches" total prices generated.

Social Credit isn't redistributing any justly held property. The only thing that you can even possibly argue that the new money distributed by the government is "redistributing" is the former fruits of Usury, instead distributing those fruits away from private usurers and to their true owner: every person individually and equally.

But nothing else is redistributed or changed. Only what would have been, in the current system, the fruits of usury unjustly captured by the monopoly on monetizing credit accorded to the usurious banks.

Anonymous said...

Wow. This Greaney guy is a monomaniac.

Social Credit doesn't at all redefine property. What it DOES say is that Credit (and only Credit, really) is a social rather than a private good. People DO own everything else (the labor, the capital, the land, etc) and get the fruits of that private property under social credit!

What social credit forbids is exactly what Thomism always forbade: usury. The idea that private financiers can monetize credit, even though that is unnatural.

And it is unnatural because Credit is not a private good that private people can sell like that. Because credit, by nature, is the product of an entire socio-economic system which guarantees it. Money in itself is just a means of exchange. Being able to make money just by having money is unnatural, and Aquinas knew this and said this! The ability for money to gain interest (ie credit) is a social good, because it is a symbolic relation that only makes sense in a social context.

Social credit, when the government issues money, actually prevents ANY inflation, and therefore any argument against the compensated price and social dividend which is based on some idea that "inflation is theft from current money-holders" is entirely backwards.

It is the *current* financial system of private debt-money which produces inflation and robs us all! Social Credit, by design, increases the money supply in such away that there is no significant inflation or deflation because the money supply "matches" total prices generated.

Social Credit isn't redistributing any justly held property. The only thing that you can even possibly argue that the new money distributed by the government is "redistributing" is the former fruits of Usury, instead distributing those fruits away from private usurers and to their true owner: every person individually and equally.

But nothing else is redistributed or changed. Only what would have been, in the current system, the fruits of usury unjustly captured by the monopoly on monetizing credit accorded to the usurious banks.

Michael D. Greaney said...

"Property" includes the right to the enjoyment of the fruits. You take that away, whether by direct confiscation or by issuing claims (money) against it without producing anything yourself, and you have destroyed private property. When the government issues money, it is making promises that other people are required to keep. It is, as Irving Fisher noted and Paul Samuelson repeated, engaged in "legal counterfeiting."

What the people calling me names don't appear to understand is that "social credit" was derived from guild socialism (a type of syndicalism or localized socialism), which itself derived from Fabian socialism based on an expanded georgist socialism. In essence, social credit is a type of chartalism, Georg Friedrich Knapp's theory that is the basis of Modern Monetary Theory. The underlying belief of all these schemes is that the State or the collective is the ultimate owner of everything (an impossibility, by the way, as man creates the abstraction of the collective, while God creates man and endows each human being with rights; God doesn't create the collective), and has the right to issue money as a claim on any or all of it. Private "ownership" may be permitted, but is always subject to the ultimate ownership of the State, cf. Thomas Hobbes's totalitarian manual Leviathan (1651), which claims that taxation is the exercise of the State's ultimate property right, not a fee citizens pay for the service of government.