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Social Credit - A DP Open Discussion

Please give me your feedback.

I have been thinking and researching ways to offset the collapse of the dollar in my home state. Of course I understand competeting currencies will have to be the number 1 priority, but what about Social Credit?

I got the idea from researching the effects of Lincoln's "Greenback" as a compete ting currency, to be the "Kindle" to start my States economy back up, and use the time for awareness to rebuild.

Engineered by C. H. Douglas,
Individual freedom, primary economic freedom, was the central goal of Douglas's reform.

From Wiki:
Social Credit[edit]

It was while he was reorganising the work of the RAE during World War I that Douglas noticed that the weekly total costs of goods produced was greater than the sums paid out to workers for wages, salaries and dividends. This seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power.

Troubled by the seeming disconnect between the way money flowed and the objectives of industry ("delivery of goods and services", in his view), Douglas set out to apply engineering methods to the economic system.

Douglas collected data from over a hundred large British businesses and found that in every case, except that of companies heading for bankruptcy, the sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: the workers were not paid enough to buy back what they had made. He published his observations and conclusions in an article in the English Review where he suggested: "That we are living under a system of accountancy which renders the delivery of the nation's goods and services to itself a technical impossibility." [4] The reason, Douglas concluded, was that the economic system was organized to maximize profits for those with economic power by creating unnecessary scarcity.[5] Between 1916 and 1920, he developed his economic ideas, publishing two books in 1920, Economic Democracy and Credit-Power and Democracy, followed in 1924 by Social Credit.

Freeing workers from this system by bringing purchasing power in line with production became the basis of Douglas's reform ideas that became known as Social Credit. There were two main elements to Douglas's reform program: a National Dividend to distribute money (debt free credit) equally to all citizens, over and above their earnings, to help bridge the gap between purchasing power and prices; also a price adjustment mechanism, called the Just Price, which would forestall any possibility of inflation. The Just Price would effectively reduce retail prices by a percentage that reflected the physical efficiency of the production system. Douglas observed that the cost of production is consumption; meaning the exact physical cost of production is the total resources consumed in the production process. As the physical efficiency of production increases the Just Price mechanism will reduce the price of products for the consumer. The consumers will be able to purchase as much of what the producers produce that they want and automatically control what continues to be produced by their consumption of it. Individual freedom, primary economic freedom, was the central goal of Douglas's reform.[6]

At the end of World War I, Douglas retired from engineering to promote his reform ideas full-time, which he would do for the rest of his life. His ideas inspired the Canadian social credit movement (which obtained control of Alberta's provincial government in 1935), the short-lived Douglas Credit Party in Australia and New Zealand's rather longer-lasting Social Credit Political League. Douglas also lectured on Social Credit in Canada, Japan, New Zealand and Norway.[7]

In 1923 he appeared as a witness before the Canadian Banking Inquiry, and in 1930 before the Macmillan Committee.[8] In 1929 he made a lecture tour of Japan, where his ideas were enthusiastically received by industry and government. His 1933 edition of Social Credit made a reference to the Protocols of the Elders of Zion, which, while noting its dubious authenticity, wrote that what "is interesting about it, is the fidelity with which the methods by which such enslavement might be brought about

can be seen reflected in the facts of everyday experience."[9]
Douglas died in his home in Fearnan, Scotland. Douglas and his theories are referred to several times (unsympathetically) in Lewis Grassic Gibbon's trilogy A Scots Quair. He is also mentioned, together with Karl Marx and Silvio Gesell, by John Maynard Keynes in The General Theory of Employment, Interest, and Money (1936, p. 32). Douglas's theories permeate the poetry and economic writings of Ezra Pound. Robert Heinlein's first novel For Us, The Living: A Comedy of Customs describes a near future United States operating according to the principles of Social Credit. While Heinlein's talent was still developing, and the story's rough edges reflect that, Heinlein saw Social Credit as the path to a utopia where poverty is eliminated and we live in a more balanced and less abusive economic and social settlement.

My question is can we issue this in an open competition, knowing the Market will make it obsolete in time.
I think this would give my State (over 50% unemployment) a chance to survive a monetary collapse.
Could this work in an open competition?
Would it be better for full commodity backed banking or fractional reserve?
How would you set the value of the currency?



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So

let them die.

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)

Only going to make a bad situation worse

"Douglas collected data from over a hundred large British businesses and found that in every case, except that of companies heading for bankruptcy, the sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: the workers were not paid enough to buy back what they had made."

Emphasis mine.

So the "problem" he saw was that companies that weren't going out of business weren't spending more than they made? I wish our government could have that problem! In order for a company to stay in business it needs to make more than it spends, yes? If it makes less, it can't pay its bills and dies. If it only breaks even, it doesn't provide enough to cover time costs for its owner(s), so it will be disinteresting to them. Let's say I have a business making bread that has one employee (Gill Baker), who can make one loaf of bread per hour. I'll pay him $1 per hour, and I'll need to charge more than $1 for each loaf; let's say $2. Mr. Baker now gets half a loaf of bread for the effort of making one whole loaf of bread. I think this is the gap Douglas is seeing, but how do we overcome this?

"There were two main elements to Douglas's reform program: a National Dividend to distribute money (debt free credit) equally to all citizens, over and above their earnings, to help bridge the gap between purchasing power and prices; also a price adjustment mechanism, called the Just Price, which would forestall any possibility of inflation."

Emphasis mine.

This is just communism/socialism with a bow. If one works for others, one's labor belongs to them. If you don't like that, the only just solution is to work for yourself. Their is the problem of a screwed-up system where it is nearly illegal to work for yourself, but economic policies from the 1930's to today have demonstrated that redistribution and price fixing will only make things worse.

Andrew Napolitano for President 2016!
http://andrewnapolitano.com/index

"Patriotism should come from loving thy neighbor, not from worshiping Graven images." - ironman77

Can you explain the Just

Can you explain the Just Price mechanism?

I am

not sure yet. Maybe peg it to a commodity, but not back it by that commodity. Not sure on that, but I am open to ideas :)

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)

footnote 6 is a reference but

footnote 6 is a reference but you don't include the links. the text you posted doesn't seem to come from the Wikipedia article about social credit. Please link to your sources.

yeah

I pulled that directly form WIKI, from the C.H.Douglas page.
http://en.wikipedia.org/wiki/C._H._Douglas

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)

Some thoughts

Obviously, the stated intentions here appear to be aimed in the right direction. Let's take a closer look and see if we can find any contradictions between the stated goals of the scheme and its proposed implementation to see if the implementation will forward the stated goals.

First, we have to be careful in the way that we define the word 'freedom' here. Specifically, if we are advancing individual liberty as freedom, a gain in liberty by one party must not be a loss of liberty to another party. Everybody must gain greater liberty.

Okay, so first up:

"Troubled by the seeming disconnect between the way money flowed and the objectives of industry ("delivery of goods and services", in his view), Douglas set out to apply engineering methods to the economic system."

Here we have to inquire as to whether Douglas was able to understand the entire system, not just the distribution aspect. Before becoming troubled by the pay of workers vs. the value of goods produced, did he ask the critical question: "Why does this disconnect exist?", or did he subjectively determine it was bad and set to fixing it without wondering from where the condition arose?

"The reason, Douglas concluded, was that the economic system was organized to maximize profits for those with economic power by creating unnecessary scarcity."

Basically, it looks like Douglas may have picked up a copy of "Das Kapital" and read it and agreed with its conclusions without asking any deep questions or thinking things through enough. He simply accepts Marx's view of "Surplus Labor" without criticism. For example, here is a wikipedia article with any overview of some of the criticisms of this theory that Douglas may not have considered:
Criticisms of the Labour Theory of Value

Here is but one excerpt:

"In his 1871 work Principles of Economics, Austrian Economist Carl Menger writes:

There is no necessary and direct connection between the value of a good and whether, or in what quantities, labour and other goods of higher order were applied to its production. A non-economic good (a quantity of timber in a virgin forest, for example) does not attain value for men since large quantities of labour or other economic goods were not applied to its production. Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of labour is completely irrelevant for its value. In general, no one in practical life asks for the history of the origin of a good in estimating its value, but considers solely the services that the good will render him and which he would have to forgo if he did not have it at his command...The quantities of labour or of other means of production applied to its production cannot, therefore, be the determining factor in the value of a good. Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic. But the quantities of goods employed in the production of a good have neither a necessary nor a directly determining influence on its value.

If you begin reasoning from a false premise (surplus labor theory), you end up with results that do not match the stated intentions of the proposed policies.

Thanks

And I have to agree.
The question still remains, and I should have stated it better.

Let's say my State starts a Treasury, but instead of issuing the currency into the market directly, they issue the currency directly to the people interest and debt free. It could give everyone in my State one years worth of Salary (after defining value), to keep the economy going. This of course would more than likely fail, but with an open competition in currency, it could give the state enough time to comprise a much better exit strategy, preserving as much of our wealth as possible. Would it work?
I would rather set the value of the currency (by pegging it to a commodity?), and let the market determine the value of goods. Could it work together?

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)

Voluntaryism works

A small group of children goes out on Halloween trick or treating.

They all come home with a mixed bunch of goodies.

Each child has their favorite set of goodies which is likely somewhat different from the other children.

This leads to trade between the children. They start swapping goodies they personally like for ones they don't care for.

There will be some goody that is a favorite of most, if not all, of the children. This is the goody that will become monetized. That is, the children will trade for this goody just to use it to trade for other goodies that they like. In this way, the 'money goody' facilitates trade. This is important because not every child will be able to make a fair bilateral trade for what they want. They may either lack something the other child wants or the other child does not have what they want or in the right quantity.

This is how the grass roots monetizes something. The example of the Halloween candy works because the children are not planning to save the 'money'. If they were, they would need to make sure it does not spoil.

Currency works best when it is divisible since that facilitates trade the best as the 'money' can be broken up into units appropriate to the value of the purchase.

Everything works in context where there is voluntary agreement and no force, fraud, or theft are employed. Values are mostly subjective.

Gold has no use to most animals and insects and yet humans have monetized it.

The labor hours of an individual artisan in Ithaca, NY, has a greater applicability as money within the local market of Ithaca.

Uncontacted tribes in the Amazon have zero understanding or use for USA federal reserve notes.

Labor is a value. Manufactured items are a value. A nice rock, plucked out of its natural state could be a value. Clean air is a value and so is clean water. Some values are extremely popular in that they are shared by most, while others are niche. The market places monetary values on goods and labor based on the supply and demand.

If everybody was working as a leather tanner, that occupation would not pay very well since there is too much competition.

If there are no oranges to be found and everybody loves orange juice, the price will skyrocket.

Market participants can not fix prices or induce artificial scarcity unless they employ force, fraud, or theft. This mostly takes the form of influencing the state, who has a force monopoly, to unnaturally rig the market in favor of certain participants. This can be done by banning certain good and services, taxing certain goods and services, subsidizing one set of goods and services other another set, creating expensive regulatory regimes that create barriers to entry for new market participants, etc. etc. etc.

So, the final answer is simple. If you want to see a bottom-up system, it must be voluntary and based on consent. Money will emerge naturally and requires no central plan.

If you want to see a top-down system, it can be unilaterally imposed by force. Since it is arbitrary and not based on consent, it could be anything including fossilized dog poo, since its 'value' is determined by fiat (law) rather than universal market desirability.

I completely agree with that

I would take that approach and legalize the competition.
Because of the taxes that are attached to the dollar, when it collapses, there will be more than 50% of my state helpless.
This will cause mass death and massive amounts of crime.
To prevent this, I want to introduce a currency directly to the population, knowing it will become obsolete vs the other currencies. That will not happen right away though, and will give a buffer for those who need it. Think about injecting interest free capital right into a business. That could keep my State going, while the ones around us are having apocalyptic type conditions. It would be a buffer to take us ALL into the monetary paradigm.

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)