"Social Credit is the policy of a philosophy. It is something based on what you profoundly believe – what at any rate, I profoundly believe, and hope you will – to be a portion of reality. It is probably a very small portion, but we have glimpsed a portion of reality, and that conception of reality is a philosophy, and the action that we take based upon that conception is a policy, and that policy is Social Credit."
- C.H. Douglas, The Policy of a Philosophy
I.) Introduction: Arthur Kitson and the Cross of Gold
'These bankers conceived a policy unrivaled in brilliancy, which made them masters of all commerce, industry, and trade. They engrossed the gold of the world, and then, by legislation, made it the sole measure of values. What Samuel Loyd and his followers did to England, in 1847, became possible for his successors to do to all the gold standard nations, after 1873. When the mints had been closed to silver, the currency being inelastic, the value of money could be manipulated like that of any article limited in quantity, and thus the human race became the subjects of the new aristocracy, which represented the stored energy of mankind.'
- Brooks Adams, The Law of Civilization and Decay, chapter eleven.
'Any money that is tied to a commodity is, therefore, bad money, in the sense of not being reliable in performing the money functions when it is needed.'Centuries of minting coins from precious metals gave rise to an extremely harmful superstition: the notion that the volume of money should be determined by the quantity of the mineral used for coinage. As with many other grave errors, there were those with a vested interest in maintaining the notion among the general public and elevating it to the status of a dogma. Perhaps the ultimate expression of this dogma was the gold standard.
- Arthur Kitson, The Money Problem, chapter nine.
The gold standard system was well described by two Australian academics as follows:
'For a country to be wholly committed to a full gold standard five basic requirements had to be met. First, the unit of account had to be tied to a certain weight of gold; second, gold coins had to circulate domestically and any bank notes in circulation had to be convertible into gold on demand; third, other coins in use had to be subordinate to gold; fourth, no legal restrictions were to be imposed on the melting down of gold coin into bullion; and finally, there had to be no impediment to the export of gold coin and bullion.'The main rival to the gold standard (prior to the twentieth century) was bimetallism - which involved the use of both silver and gold as the basis for money. The question of which system to adopt was not simply an arcane financial matter, but one with great bearing on the economy, and therefore, of serious public importance. Since gold is much rarer than silver, a gold standard tended to give an economy a deflationary bias - and thus favoured those who had an interest in money being expensive relative to goods, notably financiers. It was also easier to hoard gold and thereby to manipulate economies by taking and releasing it into circulation. Silver, in contrast, tended to generate an abundance of money and hence, it was opposed by banking interests as Gorham Munson noted:
(A. G. Kenwood & A. L. Lougheed, The Growth of the International Economy, 1820-1990, page 104).
'But why were the banking interests against silver? Primarily because silver worked against their deflationary policy. Silver was being discovered in several of the Western states and would very soon be mined on a much greater scale, thus "threatening" a considerable enlargement of the metallic base for the issuance of money. Silver menaced the monopoly which the owners of gold were starting to establish. Therefore, silver must go.'Thus, the contest between bimetallism and the gold standard was ultimately a manifestation of the struggle between the people and the banks. This struggle had an international dimension as well: Britain - which hosted the influential City of London - was the pioneer of the gold standard, (proceeding towards it for over a century before adoption of a full gold standard in 1821), whilst France managed bimetallism by ensuring (thanks to its abundance of both silver and gold reserves) that the ratio of silver to gold required by the system was maintained. Most of the rest of the world also followed bimetallism or a silver standard in the first several decades of the 19th century:
- G. Munson, Aladdin's Lamp, page 128
'By 1870, therefore, the gold standard was far from being internationally adopted. Britain alone operated on a legal gold standard. Bimetallism existed legally in the United States and the Latin Monetary Union, and Germany, Holland, Scandinavia, Latin America and the Orient adhered to the silver standard.'The defeat of France in the Franco-Prussian War, and the gold indemnity Paris paid to Berlin, facilitated the shift of Germany to the gold standard, (Russian scholar Andrey Fursov has argued that this was one of the main reasons for the war), which in turn, paved the way for the widespread adoption of the gold standard in Europe, with surprisingly little commotion, given the significance of the change.
- A. G. Kenwood & A. L. Lougheed, op cit, page 106.
It was a very different matter in the United States. Here, the drawbacks of the gold standard were well appreciated by the populace of the Western States - so well that the demonetization of silver had to be carried out with great subtlety (by omitting mention of coinage of silver dollars in the 1873 Coinage Act). The Western States continued to agitate for silver nonetheless, forcing concessions from Washington in 1878 (Bland-Allison Act) and in 1890, with the Sherman Silver Purchase Act. It was the repeal of the latter in 1893 that incited the ultimate battle between gold and silver, banks and people, at the end of the 19 th century, with the elevation of William Jennings Bryan to the position of Democratic nominee for the Presidency of the United States in 1896. As Bryan famously declared:
'You come to us and tell us that the great cities are in favour of the gold standard. We reply that the great cities rest upon our broad and fertile prairies.... If they dare to come out into the open field and defend the gold standard as a good thing, we will fight them to the uttermost. Having behind us the producing masses of this nation and the world, the labouring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labour this crown of thorns. You shall not crucify mankind upon a cross of gold!'Opposition to the 'Cross of Gold' drove Bryan to the threshold of the presidency, but no further, as he lost by 600,000 votes to William McKinley, who rewarded his patrons by signing the Gold Standard Act of 1900. This defeat, as well as the inflow of new supplies of gold from South Africa and Alaska (which mitigated the deflationary tendencies of the gold standard), marked the end of popular monetary reform agitation in the United States. Bryan's movement faded into the history books and public discontent would subsequently flow into channels that would not bring the masses into direct confrontation with the banking interests.
- W. J. Bryan quoted in G. Munson, op cit., page 129
One man stood among the ruins with undiminished resolve to free mankind from the Cross of Gold. Arthur Kitson, an English engineer working in the United States at the time, had taken a position more radical than Bryan's: he opposed metallic money standards altogether. He had nonetheless backed Bryan, judging bimetallism as the less harmful of two superstitions then returned to his homeland to challenge, criticize and condemn the gold standard system in its very centre, going as far as to declare:
'The question of the supply of money may, therefore, be thus summed up. There should be an abundance, in order to meet all the requirements of business, and the supply should be governed by these demands instead of allowing business to adjust itself to a fixed supply. Money, when issued on a scientific basis, obeys but one law. In order to do this, it must be, per se, neutral. The substance chosen should be most plentiful, so that it could not possibly be monopolized. Value arises only where scarcity exists—where the supply is limited ; hence gold is the worst possible material of all for monetary purposes.'His views gained traction, as did his insight into the fact that the artificial scarcity of specie due to the gold standard led to bank credit increasingly becoming the most important form of money in the economy - and the serious economic and political consequences that entailed. Perhaps more than any other man, he thus ensured that the flame of monetary reform was not snuffed out at the start of the twentieth century.
- Arthur Kitson, op cit, chapter thirteen
Arthur Kitson did not simply attack metallic money: he offered an alternative - unhindered producer credit. It was this idea that one of the men inspired by his works - Major Douglas - would critique - and it was a corrected version of it that would power the East Asian economies to extraordinary success in the latter half of the twentieth century.
II.) The Douglas Critique
One of the main charges against the gold standard was that it enriched financiers and speculators at the expense of the productive members of society - i.e. those who provided goods and non-financial services. Thus, it is not too surprising that the alternative championed by Kitson and some other critics of the gold standard was unhindered provision of financial credit to any supplier who could demonstrate a market for his wares. Major Douglas denoted them as the producer credit control school, and a shortened phrase - the producer credit school, will be employed here.
At first glance, this proposal of the producer credit school seems plausible enough. If demand for a product exists, as well as the capacity to produce it, with buyer and seller in contact with each other, then clearly the real credit exists and all that is left is the provision of the financial credit to the producer so he can set about supplying society's requests. Were time not a factor, this argument would hold.
However, as Major Douglas noted, time is a factor. There is a gap - of months, possibly even years - between the provision of funds to the producer and the release of new output onto the market. In the meantime, such funds find their way into the pockets of consumers (as a payment for work for example) and thus increase demand. This rise in demand precedes the increase in the supply of goods - and thus risks generating an increase in prices, imports or indeed, both. As Douglas put it:
'This new purchasing-power would be effective in the market before the goods, even if these were for ultimate consumption. If the goods were intermediate products they would never become effective as such in the individual consumer's market. Prices under such conditions would be equal to:Indeed, the increase in demand is particularly difficult to cater to, because the consumer goods firms seeking to address it will find the labour, raw materials and other goods they require to increase output already being purchased by those firms that received producer credit, (unless the two sets of firms completely coincide which is most unlikely.) Hence, as Douglas noted:
Purchasing-power ex-(capital production + ultimate production) ÷ Consumable Goods
and we should enter into the manufacturers' paradise and the consumers' purgatory - an era of constantly soaring prices and continuous depreciation of currency.'
- Major C. H. Douglas, Credit Power and Democracy, chapter thirteen.
'The financier says: "Yes, you shall have money for housing as the result of building gunboats for Chile," thereby implying that there is a chain of causation between gunboats for Chile and houses for Camberwell. Not only is there no such real chain of causation, but the building of gunboats for Chile, or elsewhere, decreases the energy available to build those houses...'This was not an esoteric issue: many States which sought to stimulate their economies especially developing countries after World War Two, ran precisely into the difficulties Douglas predicted, with investment-driven economic booms brought to a halt by rising inflation and/or surging imports, resulting in a financial crisis and subsequent recession.
- Major C. H. Douglas, The Control and Distribution of Production, chapter four.
Two groups managed to escape this predicament: the oil exporters of the Persian Gulf, and the industrializing East Asian nations. The former, thanks to their large petroleum and natural gas reserves and low populations, were able to avoid both inflationary and balance-of-payments crises by easily being able to purchase sufficient imports to accommodate increases in consumer demand. Their case is special, and has little, if any, scope for wider application: they were simply fortunate enough to escape the dilemma.
The East Asians, on the other hand, solved it.
III.) The East Asian Solution: Forced Saving.
An implicit assumption of the Douglas critique was that consumer spending could not be sufficiently curtailed by government measures to prevent the destabilising inflationary outcome. This assumption reflected the liberal British environment in which both Kitson and Douglas lived and worked - an environment which held the government's role to be regulatory rather than directive, and which frowned upon State interference in the everyday activities of the public. In other words, it strongly preferred a 'nomocratic' (rules-governed) state to a 'telocratic' (purpose-governed) state i. This laissez faire animus was very much a legacy of the nineteenth century that would be challenged, and ultimately overthrown, in the twentieth.
Please go to the C.H. Douglas Institute website to read more.
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More:
Related:
Important discussion on how America is being financially harvested and what to do to recover the energy being stolen from you:
CATHERINE AUSTIN FITTS ~ A SEA OF LIES. W/ DEL BIGTREE OF THEHIGHWIRE.COM
CATHERINE AUSTIN FITTS ~ A SEA OF LIES. W/ DEL BIGTREE OF THEHIGHWIRE.COM
Steps you can take to "come clean" (stop building your own prison):
We don't need central banks and their "fairy dust" magic money. Go here and start transacting to ween yourself off the central banks:
Cash is going to be king in the short term so remove your cash from the big banks. This is war. Stop financing your enemy. Why would you have money in a bank that was behind engineering the mortgage fraud in 2008?
Monetary solutions that need enacting now:
Please take the time to go through our archives on monetary reform then take action on the local level. The best way to wipe out democracy is to decimate small businesses. For example, when these Covid lockdowns started restaurants were deliberately targeted. Once the restaurants are wiped out it follows that the food chain leading back to local farmers will be wiped out. Take back your energy...
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