Top Ten Lies and Mistakes of Austrian Economics
In the face of Austrian Economics’ ongoing onslaught through Ron Paul, the Mises Institute and Gold Dealers parading as the ‘Alternative Media’, we present the next installment in our series of articles exposing it for what it really is: just another Banker Mind Control Operation.
1. Bankers hate Gold
Nowadays everybody knows that the 19th century was called ‘the Age of Rothschild’. They controlled the Gold Market and became incredibly rich by lending the stuff to Governments.
The Money Power came to power through Gold.
They love it because it is deflationary, they can tax it with interest, they can create the boom/bust cycle with it and they control it completely.
Clearly Bankers don’t hate gold. Europe was on a Gold Standard for the entire 19th century and left it only in the thirties, due to the horrible deflation that was the Great Depression. Populists at the time finally managed to force their Governments to get rid of it. They had been warning about its deflationary tendencies for ever.
Gold is de facto World Currency.
Ron Paul: “Commodity money if voluntarily and universally accepted could give us a single world currency requiring no money managers, no manipulators orchestrating a man-made business cycle with rampant price inflation.” — Ron Paul, Congressional Record, March 13, 2001
In older days Austrian Economists would say Governments hate the Gold Standard. Alan Greenspan, one of the more famous Austrian Gold loving Bankers, wrote in 1966: “An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions.“
Government, of course, is Austrian Economics’s classic enemy, but the adversary du jour in the ‘Truth Movement’ are the Bankers. So to sell something we say Bankers hate it.
They did face the little problem that the American Populists would be very hard to convince of this. Not in the least because of the book ‘Secrets of the Federal Reserve’ by Eustace Mullins, who famously described who owns the FED and how it came about. Mullins of course was quite explicit in his analysis of Gold as the Banker’s favorite currency.
But Ed Griffin solved this for them. He wrote an even more famous book: ‘the Creature from Jekyll Island’. This is basically a rip off of Mullins’s book, with one difference: it proposes a Gold Standard to get rid of the FED.
In this way Griffin obscured the truth for millions of people, who assumed he was basically saying the same thing as Mullins.
2. Government is the main problem
This is the red herring that Austrian Economics is famous for. Just like the mainstream it completely ignores the Money Power.
Austrian Economics is also incredibly ‘naive’ when it comes to private interests controlling markets. Austrian Economics will always explain Governments shouldn’t mess with the economy, while ignoring the monopolistic inclination of Capital.
As a result Austrian Economics is the wet dream of the Trillionaires, as they will resist any Government action against them and their Transnationals.
Austrian Economics will actually blame Government for the fact that markets now are controlled by Transnational Cartels. Why they don’t seem to consider the shareholders and controllers responsible remains an open question.
To be fair, the analysis of Austrian Economics about the negative implications of many regulations is spot on and very enlightening.
However, to ignore the power struggle that is inevitable both in the market in and politics, is so naive and pleasant to the powerful that it is almost impossible to fathom how somebody else could have thought it up than these powerful interests themselves.
The fact is, that Governments all over the world have been subverted by private interests. And these private interests are quite homogenous. This international centralization of power, concentrated around extremely rich banking families, the Money Power, is the problem.
Government is a neutral institution, associated with a Nation. Public Opinion can always force its hand.
But when both Government itself AND Public Opinion are captive to the Money Power, Government will become quite unpleasant.
Soon, it will be obsolete, as it surrenders its sovereignty to World Government and World Currency. Governments and certainly Nations will never voluntarily surrender sovereignty.
These projects clearly belong to the Money Power.
3. Manipulation of the Volume of the Money Supply is the main problem with our money
Another red herring: manipulation of Volume is certainly quite a scourge. But it ignores an even bigger problem: Interest.
The Government currently pays 700 billion per year in debt service for the National Debt.
It matters not whether she pays this for Gold or for paper.
We currently pay $150.000 dollars in interest over thirty years for a $100.000 mortgage. Most of this mortgage was created by simple bookkeeping the moment we borrowed it.
45% of prices we pay for our daily needs are compensation for capital costs incurred by the producer.
We are Interest Slaves.
But if we can have credit by bookkeeping, clearly we should get the money interest free, because it is our credit, not the bank’s.
4. Gold guarantees a steady volume
This another very strange supposition. After all, the Gold Standards of the past saw horrible asset bubbles.
The boom/bust cycle has nothing to do with the currency, but whether the money supply is being manipulated.
The idea that Gold cannot be printed and that that give security about the volume is nonsense. Bankers routinely have withheld vast quantities of specie from circulation, only to inflate at a later stage again.
5. Inflation is bad
It is certainly true that inflation knows problems.
Inflation hurts savers, creditors and people on pinned incomes. But it is pleasant for debtors, of which there are far more than creditors. And, very important, inflation is associated with economic growth. People stop hoarding cash and rather invest and spend.
The one sided focus of Austrianism on inflation, while actually promoting the horror of deflation (see next) makes it look like they’re demonizing inflation in order to make deflation more palatable.
6. Deflation is good
This statement is so incredibly favorable for the ultra rich, who are basically the only ones who benefit from deflation, that it puts Austrian Economics in a very bad light.
Austrians clearly promote the Deflation vs. Inflation dialectic, with all its nefarious implications.
Deflation hurts debtors. It makes their debts and the interest they pay over it worth more.
Deflation is a wealth transfer from those holding assets to those holding cash.
Deflation destroys economic growth because people rather hold cash than invest or spend it.
As a result, Deflation on all fronts makes the rich richer and the poor poorer.
7. We don’t want a Gold Standard, we want a Free Market for Currencies
This is such nonsense.There are two major reasons why it is.
1. In fact, the idea of a Currency Free Market is quite attractive. In the case that all different systems would receive the same funding and propaganda, such a market would undoubtedly see Mutual Credit Facilities providing interest-free credit prevail, see below.
However, only Gold and perhaps Silver, but not if they can avoid it, will receive all the attention and funding. In fact, Mutual Credit will be resisted actively by the Money Power.
This will not be hindered Government, who just by decree created this new ‘Free Market’, because that would be ‘statist interference’
Thus, only Gold will circulate.
2. Would there be a ‘free market’, there is Gresham’s Law. Bad money drives out good money.
It means that the units appreciating in value will be hoarded, while those depreciating will be used to pay.
Everybody will accept the depreciating unit (as long as it is not hyper inflating), because most will want to pay with it and firms will have to accept them to accommodate their customers. They won’t have a problem with that anyway. Firms don’t care what the money will be worth in a year. They want to know where they can spend it tomorrow.
This means nothing will happen if Ron Paul’s proposal to make Gold and Silver also legal tender is accepted. People will continue to pay with the Fed’s notes and hoard Gold.
Also, if you can get a Gold based mortgage costing 5% per year, or a 0% mortgage in Mutual Credit, which would you chose?
Case closed.
8. Austrian Economics is hated by the Main Stream Media
While it is true that Austrian Economics is a fringe, also in terms of Media Attention, it always has maintained a steady niche. It is not for nothing that Peter Schiff and Gerald Celente were predicting the crash in the MSM.
Lately, Ed Griffin was plugged by Glenn Beck on prime time T.V.
Judge Napolitano gets all the airtime he wants on Fox News, spouting his Austrianism. Amazingly, the fact that even Fox News will plug Austrianism does not ring a bell with people.
9. Fiat Currencies are always bad
Another typical device: a dialectic. Trying to frame it as Paper vs. Gold. Both ignoring interest.
But interest-free paper is of course something else entirely. At least it won’t suffer from the forced inflation on interest-bearing money supplies. Because the interest is not spent back into circulation, but lent back, there is never enough to pay off all the debt + interest. During a Gold Standard this is deflationary, because the money supply can’t grow. With paper, this is ‘solved’ by ever more debt. With ever more interest.
Modern Mutual Credit is inflation free. Or better: the market is in control of the money supply. It grows when it must, shrinks when it must.
Social Credit is probably inflationary, but everybody will be fully compensated for it because of the fact that they spend the inflationary cash into circulation themselves. Meanwhile, the inflation will stimulate production.
They are trying to promote the idea that Fiat Currencies are automatically bad ‘because the volume will be manipulated’.
This is the eternal clincher, killing all rational debate about how to manage all the different parameters in the different proposals.
10. The problem is the FED
The FED is a symptom, not the problem. The problem is that the Money Supply is controlled by the Money Power, which uses this control to enslave us with interest, scarce money and the boom/bust cycle.
The FED is their vehicle. We want to get rid of it, because we want to end the control of the Money Supply by the Money Power. It’s not a goal in itself.
Austrians use this to ‘fight the FED’ and gain sympathy and support, meanwhile maintaining the control of the Money Supply with the Plutocracy.
Related:
Recovering Austrians
Who is Ed Griffin?
The Ron Paul Challenge: Ten Reasons why the Alternative Media is Failing this Test
Alex Jones joins Alan Greenspan in Calling for Gold Standard
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This may just be the dumbest shit I’ve ever seen in my life. You clearly know nothing about economics.
Yea, and everyone that comes here is retarded ‘cuz communist bankers should run the planet. They earned it right?
“You clearly know nothing about economics”.
Economics as it’s taught in every major school of thought knows nothing about reality. It’s not a dismal science, it’s a bullsh*t science constructed on models that fail in real-life, over and over again.
You, sir, are a genius. You might be interested in my YouTube channel. I teach not what is taught in universities.
I came to this article attracted by the pretentious title to argue with the only sound and scientific theory about the free-market economy. So far haven’t found any valid and substantial criticism to the fundamentals of what this author calls Austrian School. For example as Keynes’ General Theory was annihilated first by Hazlitt and more lately by Hunter Lewis.
No surprise here. The arguments of the author are plain vanilla propaganda revealing that he doesn’t really know what he it trying to criticize or is conveniently avoiding it assuming the readers have also no idea. Maybe he thinks that most people form their opinions from mass media and Internet blogs? I cannot argue that this has been true for awhile but Ron Paul’s recent results indicate a turning tide. Maybe more and more find the courage to go over the volumes of “Human Action” by Ludwig von Mises and then follow through with “The Capitalism:..” by his student George Reisman both available free at mises.org and capitalism.net.
Once a person goes though this purgatory of mainstream “economics” lies no one, including this author with his bombastic and pretentious title can obscure the plain truth about the real mechanisms driving the economics of any society based on labor division and free exchange. Yes, including the governments messing with the free market (see why in “Meltdown” by Thomas E. Woods Jr.) Then one can see the arguments about the above fabricated “lies” for what they truly are – inept attempt to construct false arguments that then are “criticized” with counter- arguments and complete with the pretentious conclusion that somehow the author has refuted the Austrian school of economics.
Only a true science can reliably predict future events, right? Ludwig von Mises in his treatise “The Socialism” written shortly after the bloody Bolsheviks coup in Russia HAS PREDICTED in detail how this system will evolve and why ultimately it will fail. At contrary, mainstream “economists” cannot predict economy turns and market busts even one year ahead so they need to fabricate mystical creatures as black swans etc.
Now, feel free to call me names, to twist my words or make fun with my English. But you cannot really argue with the sound science of economics, cannot refute in substance any fundamental position thoroughly explained in the above books by von Mises and Reisman. Nor the author of this pretentious article can either.
Unless interest or usury are done away with, there’s really no point in having lengthy discussions about the alternatives unless they do not involve interest. There is no alternative than to get rid of interest or the whole economic system will collapse under the weight of its own corruption. My guess is that almost anything will work that does not include usury.
Common sense and natural law tell us that the interest-based systems are complete losers and makes slaves of everyone involved. Interest and usury is evil, and nothing good can come from evil. That’s where you make your stand.
I wonder how many bankers would be bankers under the current system if they knew there was a special place in hell for those who charged usury. This is in an early Christian writing called the
Apocalypse of Peter http://www.graceofrepentance.com/ApocalypseofPeter.pdf which was used in the early Christian church. (See Verse 30) It makes sense because usury is considered stealing and there’s really no way to get around it.
http://verydumbgovernment.blogspot.com/2010/02/scourge-of-usury.html I find it interesting that this work was removed by the so-called “early Church” because it seemed to offend a few people. I’m speculating that those people were the bankers and usurers of that time period.
But even without any kind of writing or scripture, it should make good common sense that interest is stealing from the producers in any economy. The bankers think it is good for them, but they don’t realize that in violating God’s laws, they are securing for themselves a very miserable life on earth, and may be securing an extremely bad one in the next life.
I cannot over-emphasis this enough. Nothing good comes from evil. The monetary system we have today is completely evil and it is because of interest or usury. We cannot get something good out of the bad.
Al
Hopefully we can resolve the issue of monetary policy soon so we can move on to issues like how not-Biblical the idea of a literal place called hell is, and the idea of immortality of anyone not in Jesus Christ is.
There is always a spiritual fall out whether we like it or not. There is a reason why usury or stealing is bad; it doesn’t work and it goes against the natural order. That is the most important thing to know. Usury is wrong and it is stupid. You can’t fix stupid.
This is a case where the solution is extremely easy; at least in principle. Stop the usury and the problems go away. How hard is that?
A gold standard is arguably better than “fiat” money, but if interest is still present, that too will fail.
It’s called natural law. If air were sucked off of the planet, we would all be dead in seconds. That’s natural law, and it is what it is.
Wow, you come here and your still a gold bug?
Great stuff! I love your blog. I wish you’d consider going on Mike Montagne’s(MPE) radio show… It would be a great listen to hear you guys debate your approach’s to currency.
Mike has issues with debate. He has left comments here, but there so damn long it’s kind of hard to address any single thing he says. For me it boils down to this: should currency be issued in large lumps to a select few by way of a foundry, or should it be issued in small lumps as equally as possible to many? In other words – $100,000 to 1, or, $1000 to 100.
That’s indeed a very fundamental question.
My answer would be that it should equitably shared. There are a number of parameters, like assets, income and how much credit already has been enjoyed.
The role of the government should only be to ask if a person is intending to be an active producer within the region when considering issuing currency. Currently, we have people with no income because of our reliance on a currency driven economy. The only reason banks collateralize currency issuance is to create the illusion they are risking something.
“The only reason banks collateralize currency issuance is to create the illusion they are risking something.”
Don’t forget their chance to grab the asset!
That is only an inconvenient stipulation for the bank. The credits acquired by the auction or sale of the asset simply balance out a portion of the debt the borrower has with the community. The rest of the debt that is defaulted on is collectivized loss among the community in the form of inflation.
I agree he can be a little long winded…lol… also his constant charge of plagiarization can be a little off putting, but you can’t really blame the guy. I’d be pissed too if I felt like people were stealing my life’s work and not doing it justice. All that aside though I think a platform like radio is easier to engage in debate than print. I’d love to hear it. As far as your other point Philo; I definitely think it should be issued based on potential production alone and as equally as possible..
Hopefully Mike just adopts my approach soon. I won’t be pissed. Unfortunately, anyone with as much exposure as he has isn’t really positioned well for self preservation. In other words, he’s well within the enemies territory and quite visible. He’s just been firing blanks. Does he want to go out in a blaze of glory, or back off and start nuking the enemy from behind the lines under various pseudonyms?
I don’t have any solid opinions as to the actual structure after interest or usury is gone. Since we don’t see too many modern examples, this would have to be done by a lot of people smarter than me. I haven’t studied “social credit” so I can’t speak intelligently about it. I first heard about it through this blog. If you have a type of fiat currency, then how would the supply of money be controlled? Who would do it?
All I know is that usury violates God’s commandments and His natural law because it is stealing. No economic system can survive that indefinitely. I’m guessing that you could leave the same system in place, but get rid of usury. Banks could manage the monetary system, but no contracts or transactions could include usury. But I don’t study things like this so I really can’t give a thorough opinion.
Al
Just as an experiment, would you consider finding a nice secluded spot out in nature, drink two or three beers if you want, then cry out to God for revelation? Dance around, roll on the ground and sing praise. That’s how my journey began anyway. You’ve got to really sincerely convey your preparedness for reality. “I want the truth and I can handle it!” Let me know what happens.
thanks Libertydenied,
Yes, it would be nice to discuss these things on radio. It’s indeed easier than texts, even for the readers, but especially if you have to write them.
I appreciate Mike tremendously so perhaps we will one day!
Bankers love gold because they can use it to extract wealth without producing anything. Austrianism obscures the fact that the public currency is supposed to be issued by a public bookkeeper as opposed to a private bookkeeper. Every penny of a mortgage is created the second a borrower signs a promissory note for the mortgage. His balance is debited(negative signed numbers added) and a seller/lender balance is credited. The idea of mortgages being the vehicle for introducing/issuing currency is absurd. It just won’t happen. But, I suppose it makes sense if the idea of a high school graduate or an immigrant receiving a check from the government for a small amount seems absurd. “Interest”(embezzlement) is created the second the borrowers balance is debited and the bankers balance is credited, and the bankers do spend it, that’s why they have so much stuff.
Social Credit is NOT inflationary, because a large portion of any money distributed directly to consumers from a National Credit Authority would be in the form of a price rebate.
Further, Douglas did not want to eliminate interest on loans. Nor did he focus solely on interest as a cause for the gap between income and prices.
Douglas said:
“The rapturous iconoclasm of certain groups of monetary reformers’, to whom Usury”, the sparring-partner of the bankers “inflation” is the Scarlet Woman of Babylon, has had the inevitable effect of encouraging the financial authorities to abolish, for practical purposes, the interest paid on undrawn current balances, and deposit accounts. We do not say they would not have done it anyway – the one thoroughly sound feature of the banking system was its dividends to shareholders and its interest payments to depositors which I jointly with the insignificant mint issues, provided almost the only fresh unattached purchasing-power. It is obviously lost time to beg of our amateur currency experts to consider whether they really mean what they ask, which is, the replacement of unattached purchasing-power by loans. But they must not complain if we, and others with us, regard them as propagandists for totalitarianism. ”
The Social Creditor, Oct. 27, 1945.
Clearly, Douglas was not in favour of the elimination of interest on loans, and when on to state that the analysis by which certain monetary reformers believe that interest on loans is incapable of being repaid because they only create the principal of the loan in false. Banks create money when they spend, or pay interest on deposits. This money is not factored into any analysis of the monetary reformers who want to eliminate interest on loans.
The reason that Douglas proposed a price rebate and dividend is based upon his A+B theorem, and the deduction that a form of purchasing power must replace the wage as capital replaces labour in production. Keynes reached the same conclusion as Douglas in his book “The General Theory of Employment, Interest and Money” when he stated:
“Thus the problem of providing that new capital-investment shall always outrun capital-disinvestment sufficiently to fill the gap between net income and consumption, presents a problem which is increasingly difficult as capital increases. New capital-investment can only take place in excess of current capital-disinvestment if future expenditure on consumption is expected to increase. Each time we secure to-day’s equilibrium by increased investment we are aggravating the difficulty of securing equilibrium to-morrow.”
Unfortunately for us, Keynes failed to recognize Douglas’ solution to this problem, which is the only practical solution – a price rebate and divident given directly to consumers.
I’m not too sure about SC not being inflationary. Many Social Crediters actually expect inflation also. The question is how problematic this inflation would be.
I do realize full well Douglas didn’t want to end interest on loans.
I do. The reason I support Social Credit is because it dampens the drain through interest to the Plutocracy:
http://realcurrencies.wordpress.com/2009/11/26/on-interest/
Or better: it ends the control of the Money Power of the money supply.
Although I understand Douglas analysis and agree with it, it is not comprehensive: the poorest 80% of the Globe’s population pay 5 to 10 Trillion in interest per year to the richest 10% and most of it ends up with the richest 0,00001 percent.
So while Social Credit is a very powerful system, it is far from perfect and it is a mistake to try to keep it ‘pure’ in the sense that it is the ‘only’ solution. It is not. It teaches us a lot and provides a good system, but I like to integrate it in a more General Theory of Money.
A Gap credit balancing effect would not be inflationary, but it would radically change the value system of prices and economic activity back to real world utility – in some cases this would seem inflationary, others deflationary.
Earnt real world Purchasing Power would control future supply, the value system of artificial scarcity would be reversed as would that of superfluous abundance, thus attaining environmental stability while increasing the returns of economic industry to a societies wants & needs.
A Free market for currencies is the only way to get there- talking about funding and propaganda issues is not talking about the role of a currency at all, that’s all well and good but every system will have it’s own real world consequences and propaganda/funding won’t change those a scrap. And that is what will matter with a free market for currencies.
A much needed different & higher frequency of affairs then.
There already is a free market for money. Most money is not currency. In Canada, cash and coin only comprise approximately 3% of the money supply. Most money is created by banks through loans. This bank credit comprises the vast majority of the money supply, and is created by all sorts of different banks. If someone doesn’t like the money bank A creates, they can refuse to accept it. Only currency is “legal tender” in the settlement of debts, yet very few debts are repaid in currency.
Hi Michael:
I’m in full agreement with you that a return to the “gold standard” is a serious mistake. I also believe that anyone who promotes a gold standard has a poor understanding of fractional reserve banking, and how banks create money. Most money is credit created by banks through loans. Even in a “gold standard”, the gold is not actually part of the money supply (or a very small percentage of it is if gold coins are actually used). The gold becomes the “monetary base” upon which credit is created. It is the banks “reserves”, just as cash and coin are now.
No serious student of Douglas believes that Social Credit would be inflationary. There is a gentleman in the US who promotes “populist Social Credit” (I’m not really sure what that is besides a hodge-podge of contradictory ideas) who claims that Social Credit would be inflationary.
One of the key components of Social Credit is the price rebate mechanism which lowers prices to consumers at the point of retail. In a Social Credit society, aggregate prices are falling – which is exactly what they should do as increased efficiencies are realized in production.
Interest on loans would not be a problem if debt were not increasing exponentially. This increase in debt is the result of an accounting flaw Douglas discovered in his A+B theorem. In a Social Credit society income and prices would be in equilibrium (unlike now), so there would be no necessity for increasing debt. This would mean that people would be less likely to take on personal debt, and their interest burden would be greatly reduced.
If you factor for inflation, interest rates are nearly zero right now. But people cannot afford to take on more debt. Exponentially increasing debt is one of the demonstrations that Douglas was accurate in his predictions based upon his A+B theorem. Douglas predicted this phenomenon (and many others) close to a century ago. I believe that Douglas was one of the greatest, if not the greatest, “economist” who ever lived, and he is to economics what Einstein was to physics.
Yes, I agree that theoretically there is no reason why SC would be inflationary.
But on the other hand Government has been known to tamper with the money supply and also to allow the Money Power to work through it.
That’s the main concern. That’s why I’m happy people are directly compensated for inflation through the handout itself.
The concern that Government might not be the optimal guard of currency is legitimate. It is foolish to blame only Government, of course, like Austrianism, but we should not be all to enthusiastic about total Government control.
Hi Michael:
I agree that we should not be enthusiastic about total government control of the money supply. In fact, I would argue that would be tyranny. It would replace one monopoly with an even more powerful one.
Social Credit does not advocate total control of the money supply by the government. Most money would come into existence as it does now. What Douglas proposed is that consumers be given money directly by the government to account for an accounting flaw he discovered in his A+B theorem. Without this compensation mechanism, debt will continue to grow exponentially, because consumers are never given enough income to buy back all of production.
Keynes recognized this flaw, but his policy proposals to correct for this flaw were elementary compared to Douglas. He recognized the absurdity of his recommendations when he stated in his book, “The General Theory of Employment, Interest and Money”:
“Thus the problem of providing that new capital-investment shall always outrun capital-disinvestment sufficiently to fill the gap between net income and consumption, presents a problem which is increasingly difficult as capital increases. New capital-investment can only take place in excess of current capital-disinvestment if future expenditure on consumption is expected to increase. Each time we secure to-day’s equilibrium by increased investment we are aggravating the difficulty of securing equilibrium to-morrow.”
A.W. Joseph, a Social Credit advocate, stated essentially the same thing in his address to the Birmingham actuarial society when he said:
“Thus in order that the economic system should keep working it is essential that capital goods should be produced in ever increasing quantity relatively to consumable goods. As soon as the ratio of capital goods to consumable goods slackens, costs exceed money distributed, i.e. the consumer is unable to purchase the consumable goods coming on the market.”
Only Douglas’ proposal to give consumers money directly, such that said money does not pass through the productive system and have a corresponding cost associated with it is the correct solution to solve this dilemma. The root cause of this problem is that labour is continuously being replaced by capital and technology in production.
Yes, but isn’t this problem a result of the fact that Capital is in the hands of the few? And that it ‘needs’ returns?
“The root cause of this problem is that labour is continuously being replaced by capital and technology in production.”
Shouldn’t we rephrase this to: The root cause of this problem is that Labour is not the owner of Capital and technology’?
If Labor owned Capital all the added value of production would always return to the consumer, which is Labor.
I would venture to say that Social Credit aims at compensating Labor for the problem, it does not solve the problem itself: that capital is concentrated in far too few hands.
Hi Michael:
Social Credit gives consumers CONTROL over capital.
Giving people “ownership” of capital will not eliminate the gap between prices and income. Wages, salaries and dividends (income) is always less than prices. Giving more people dividends will not lessen the gap between income and prices. Douglas demonstrated this fact in his A+B theorem.
Further, I do not believe people want “ownership” of capital. They want the goods and services that capital creates. The owners of capital do not ultimately control its use, because if consumers do not demand its use, the owners go bankrupt, and the capital sits idle. By giving people adequate purchasing power to liquidate all of the costs of production, Social Credit would us all to access the fruits of capital.
I think what you are talking about is Marxism. Marxists claim that the root of the problem is that “capital is concentrated in too hands of the few”. The problem isn’t that capital is concentrated in too hands of the few, but that consumers lack adequate purchasing power to liquidate the costs of capital.
Ultimately, the consumer pays for capital, because all costs go into prices. Yet the consumer is forced to pay for capital twice, and this creates a gap between income and prices.
I wrote an essay about this phenomenon on my blog:
http://social-credit.blogspot.com/2010/08/costs-and-time.html
Thanks Socred,
First this: as a Social Crediter you are undoubtedly often accused of Marxism. We give what we receive, so I’m not annoyed you would spring this silly label on me.
But let’s cut a deal: shall we save this label for Austrian Economics’ welfare for the rich and Obamanomics and its multi trillion hand out to banks, socializing losses while privatizing profits?
Marxism and Capitalism are two faces of the same coin: monopoly. That’s why Capitalism financed Communism.
http://realcurrencies.wordpress.com/2011/12/20/what-is-capitalism/
“Marxists claim that the root of the problem is that “capital is concentrated in too hands of the few”.
They try to solve this by making everything the property of the State? That’s just one hand in my mind. I’m not too happy with the notion that ‘l’état, c’est moi’.
So I reiterate: is not the problem that capital is in too few hands, as a result of which all added value, either through interest or through profit ends up in these few hands?
If there were no profits and no interest, there would be no gap.
If the workers owned the plants and the banks, there would be no gap.
The Gap is created by a small group of financiers who mop up all the worlds wealth through usury and ownership of all the cartels that own all the major markets: Big Oil, Big Pharma, Big Food, Telecom, Automotive Industry. The profits of these cartels are siphoned off to treasuries that are used for black budget operations, not the normal economy.
Mind you, I support Social Credit, as it does address a large part of the problem and does restrict the wealth transfer, through compensation, not by addressing the root cause.
And this is not meant critically: Douglas was way ahead of his time in many respects, but his work IS 90 years old.
We should be on the lookout for every decent system and every decent analysis bringing us closer to ridding us of debt slavery. Social Credit surely fits that.
But it’s not the ‘final solution’ yet.
Hi Michael:
I agree with you that “finance capitalism” and communism are two sides of the same coin.
I totally disagree with you that if there were no profits and income there’d be no gap.
The following is taken from Douglas’ “A+B and the Bankers”
“Note particularly that the question of profit has not entered into any of these transactions at all. In every case the factory representatives have merely endeavoured to re-coup themselves in money for charges which at some time or another have been incurred. But the vital fact is that this money does not exist. Only the price value exists; the money has been re-cancelled by the repayment of bank loans.
The matter may be stated thus: When a factory adds, as it always does add, certain “costs” to its “prices” for the use of its buildings, tools, and intangible assets, it creates a price value but does not create any purchasing power. The only new purchasing power which is distributed is that which did not exist before, i.e., the bank loan. Therefore we can say “The rate of flow of purchasing power is the rate of flow of money or credit being distributed through wages or salaries (A), but the rate of flow of prices is money distributed in direct costs, plus charges created in respect of money which does not exist. Consequently, A will not purchase A plus B (vide Credit-Power and Democracy, page 22). ”
Interest is just bank profit, so the attack on interest and profits is really an attack on all profits. I wasn’t claiming that you were a Marxist. I was claiming that this line of reasoning is the same as Marx’s. It’s the 10 will not pay for 11 argument. However, the argument that banks create the principal of the loan, but not the interest, does not take into account reciprocal spending by banks which also increases the money supply. In other words, when banks pay interest on deposits, or spend money for ordinary business expenses, this also increases the money supply.
While I concede that profits do create a gap between income and prices, this is not the only cause of the gap.
Douglas demonstrated that there were at least the five following causes of a gap between purchasing power and prices:
“Categorically, there are at least the following five causes of a deficiency of
purchasing power as compared with collective prices of goods for sale:—
1. Money profits collected from the public (interest is profit on an intangible).
2. Savings, i.e., mere abstention from buying.
3. Investment of savings in new works, which create a new cost without fresh
purchasing power.
4. Difference of circuit velocity between cost liquidation and price creation
which results in charges being carried over into prices from a previous cost
accountancy cycle. Practically all plant charges are of this nature, and all
payments for material brought in from a previous wage cycle are of the same
nature.
5. Deflation, i.e., sale of securities by banks and recall of loans.”
http://douglassocialcredit.com/resources/resources/New%20and%20Old%20Economics–C%20H%20Douglas.pdf
Therefore, if all the workers owned the “means of production”, there would still be a gap between income and prices.
While you may not consider yourself to be a Marxist, your analysis is “Marxist” in nature.
Douglas did not seek to change the “ownership” of capital, because administration of capital is not the problem, nor would its change be the solution. People don’t want to “own”, and therefore “administer” the capital (even if “common owership” was actually possible in effect). Ownership is best left in private hands, because it’s more efficient. What people desire is the “fruits” of capital (i.e. consumer goods), because people do not actually consume capital; its consumption occurs through depriciation in the production of consumer goods. People will have access to the “fruits” of consumption via a Social Credit price rebate and dividend. No change in “ownership” of capital need take place, because the owners of capital will produce exactly what the consumers (now armed with adequate purchasing power) desire, because if they don’t, they will go out of business.
Actually, bankers understand physics better than anyone but they’re not going to teach it to you unless you’re their progeny or inducted into their cabal.
If anyone should be collecting interest on cash debt, it would be the guy with a bag of cash under his mattress. I know it doesn’t make sense when I say he’s actually the lender, but it’s true. That guy should be getting a check in the mail every month if anyone should.
The idea of “hard currency” ie gold and silver as the circulating currency is too preposterous for serious thought. Let us read and learn that money is credit in circulation. The basis for that credit comes from Nationality. Globalism without nationality is heading toward a period of NO universally recognized credit consequently no universally accepted money. YIKES! Think about that!? Thanks Rduanewilling.