What is Social Credit ?

What is Social Credit ?

Today the banks lend our money into existence. Our checking accounts are created
by bank loans. Banks lend to households and they lend to
single-proprietorships, partnerships and corporations. They are able
to create loans -- new money, new purchasing power -- if they have
reserves to cover their loans. When we write checks to each other that
does not increase total deposits, since one checking account is debited
the amount as another is credited the amount. But when the Fed buys
treasury securities from the banks that event injects fresh deposits --
which increase reserves, allowing expansion of purchasing power by an
amount that depends on the fraction of reserves that must by law remain
in the vault to secure each new loan. Under this
system of today, it is the banks, who inject investment money, usually
to corporations, and most often, following the de-industrialization and
the long-term neglect of our infrastructure, most often housing.
But
the bankers -- the big bankers -- have the power to increase or
decrease purchasing power in the system by expanding or contracting
credit -- by making or not making loans or by calling in loans. When
they call in loans or reduce the rate of writing new loans to below rate
at which loans are being paid off, there is a contraction of checkable
demand deposits (less money in circulation). This contraction of
spendable deposits ("money supply" as economists say) is first felt as a
reduction of purchasing power at the old prices. Now if all prices
drop to accommodate the reduction in spendable deposits -- that is if
fall in price compensates for fall in money supply -- then prices in
terms of dollars you must pay for an item will be lower, but purchasing
power will not be affected. However, -- and this is the important part
that few people understand -- if prices do not adjust to reduced money
supply, that is if prices do not fall to match smaller wages and
profits -- then purchasing power will be lost by people receiving fewer
dollars (reduced wages, reduced revenues and profits). Either
businesses will be forced to sell at prices lower than their original
cost of production or else they will have unsold inventories. In this
case they must either lay off workers or reduce wages or -- go out of
business with everyone losing their jobs, and a new buyer of the
bankrupt business buying up that business and rehiring the old workers
at lower wages with less benefits. (The recent Health Reform is an
aspect of this phenomenon, obviously.) Now here comes
the heart of the problem -- a problem which social credit perfectly
solves. Banks contract the spendable deposits by calling loans or
lending less. This means people will have less cash to spend, either
because of wage reductions, pension reductions, unemployment or cuts in
working hours. Now I said above that if all prices and payment
obligations shrink with the reduction of wages -- fall in price keeps
pace with fall in wage and fall in wage keeps pace with fall in price
-- then all will be well and purchasing power will not be effected.
Economists call that the "neutrality" of money in affecting purchasing
power. Wouldn't it be great if when prices went up wages went up too
so that you did not fall behind. And wouldn't it be great if when
wages went down, prices would fall too so, again, you stay even. But
money neutrality -- and the similar concept of Say's Law (which is not a
law at all -- but a lie that covers what really happens) are both
concepts that you never find in economies of recent times. Let us now
see why "neutrality" and Says Law do not obtain and why the economy is
not correcting, why we are caught in a Kleptastrophe. First
contracted credit (fewer outstanding loans, less spendable checking
deposits and less spending of those deposits) means firms receive less
money with which to pay workers, managers, owners. There may be wage
contracts, but unless the union is controlled by communists actually
out to destroy the manufacturer rather than maximize employee
purchasing power -- or the union is too stupid to see when the employer
is really up against the wall and not just bargaining hard -- contacts
can be renegotiated. Wages can be reduced to match the fall in prices
--otherwise the firm will fold and reopen when investors
rematerialize industrial capital overseas. But there is another
expense besides wages, that does not adjust downward -- and that is
the schedule of debt payments. Most home owners have fixed
interest-rate mortgages and so do most firms. Debt burdens do not
shrink when the money supply contracts -- which means that there will
not be enough money in circulating (getting paychecks and writing
grocery checks) for people to continue eating and warming their homes
and paying taxes and at the same time keeping up the payments on loans
that do not shrink as paychecks and retail prices shrink. Paychecks
are smaller and revenue from sales by firms are smaller but the bank
still demands the same debt payment as when spendable checkbook
deposits were more plentiful and were people spending less cautiously.
But what does it mean that the debt burden of households and
firms does not shrink with purchasing power, that payments to the bank
must continue the same even though people have cuts in pay, cuts in
profit, cuts in pensions, cuts in benefits etc. It means that the bank
ends up with a larger share of the national economic pie and the
workers, pensioners, entrepreneurs, farm owners etc. end up with fewer
and smaller slices of the pie. Businesses are foreclosed and only
people connected with the financial industry have the purchasing power
to buy up the foreclosed properties -- they end up owning every house
and business that goes down. But not only do debt payments not
go down when the banks shrink the loan-created checking deposits (i.e.,
when they contract the money supply), neither do property taxes and
many other taxes. Income tax is graduated (with higher and lower income
brackets), but if employers choose to fire some rather than cut
everyone's wages -- then those who remain employed will continue with
the same high income tax bracket as before. Like debt burdens, income
tax burden will not fall for those still employed. But the government
will still have the loss of income tax from those now unemployed. They
will seek to raise taxes to keep up the same level of bureaucrat
comfort as before. But there are so many different ways that taxing
and government spending can adapt to the crunch that it is too complex
for this summary -- so let's just stick the part of the analysis that
involves the fact that when wages and prices fall after a credit
contraction (shrinking of spendable checking deposits) debt burdens do
not fall to compensate. In social credit we may call this
the A + B theorem -- with "A "being wages and profits paid out by
firms from their revenues and B being payments on the debt from the
loans that create our purchasing power. "A + B" represents total cost
(note: actually depreciation and taxes figure in here too, but I am
keeping it simple) -- which must be covered by selling price for a
firm to break even or have "normal profits" if we include pay and
"bonus" to entrepreneurs. Let me say that simpler. In order to pay
everyone involved in production and the bank as well (A + B) the good
or service sold must be priced at at least at A + B. When the
checking deposits shrink A (wages and profits) may be reduced, but debt
burden (B) will not be reduced -- due to the power of bankers in
making the rules -- and so wage earners and profit-based firms are hit
even harder by the contraction as the bankers, receiving "B" are
actually better off -- because like the people who did not lose their
jobs and whose wages were not cut - they are actually better off in a
deflationary world. Firms have had to cut prices -- how cheap laptops
and i-pods were this Christmas! -- in order to get inventory off the
shelves, but at prices far under "A + B" (with, remember, B not
shrinking) -- and so businesses will work to whittle down "A" as much
as possible, whittle down the wage component of "A" to save as much of
the profit component of A as they can -- while making their "B" debt
payments as usual. IF they fail in this they go under. Remember, the
financial sector, including all of the bondholders, like deflation,
because that means that their income from bonds and securitized fixed
mortgages etc. will stay the same as prices go down in deflation --
increasing their wealth, increasing the value of their bond portfolios.
The debtors will be crushed by the same amount that the bondholders
receive their deflation windfall. If I take out a loan while making
$100,000 a year and my income, due to credit contraction, is reduced to
$20,000 per year -- it will be very difficult for me to keep my house
and feed and clothe and provide comforts and relishes to my family
while meeting my unchanged debt obligations. I go under. Now this all
of this disaster for the earners of "A" has been brought about by the
credit contraction (the calling in of loans -- margin calls, calling
loans too long delinquent etc. ) of the bankers who receive
unadjusting "B" -- and when the debtor fails, receives ownership of the
collateral (house , the assets of the company etc., repossessed car
etc.) For the banker bent on wealth maximization (think about it
-- the bond holder seeks to maximize the indebtedness of Americans)
his goal is to lend at a high interest rate during periods of "easy
money" -- when lots of loans outstanding keep spendable checking
deposits large and inviting -- so that Joe Citizen will take on as much
debt as he thinks he can handle in these good times (which he imagines
will last forever) -- and of course the banks, during their
"seedtime" will hire a million people to phone every American to get
them to borrow money on every bit of equity they may have in their
homes -- and the people, with big eyes for new cars, big plasma
screens and bigger houses, and vacations, and Christmas shopping, but
also for gasoline and heating fuel etc. that monopolists have priced
far into the stratosphere stratosphere -- so that even the people who
have been managing their budget closely will be compelled to take out a
loan to make ends meet given their debt obligations -- so that in
the end everyone places themselves into debt up to the maximum -- even
as the Presidents (Carter and Bush) tell them that the new high-tech
economy, after all of the leveraged buy-outs etc. is going to be lean
and mean and better than ever -- when actually they were turned into
concentration camp ghosts before they expired and were torn down to be
replaced by China based production under international ownership.
What I am saying is that, the during the "seed" phase of the bankers
exploitation cycle everyone got in debt because they thought easy
money would continue or that somehow the emergency caused by high fuel
prices would go away and everything would "somehow" be worked out
later. But later never came. Instead the bankers, as in
1929, deliberately contracted credit, calling in bad loans -- all
planned at the higher levels of banking -- the local managers often
quite pained by the suffering and disruption and ruin the contraction
was causing those to whom they had so happily extended loans a few
years or a few months before. When the spendable deposits are shrunk
and the and people can't meet expenses -- the banks reap a great
harvest. They get the homes and businesses which were the collateral
for the loans they made. Workers now have a tiny wage (or unemployment
or underemployment or fewer hours) and business owners negative
profit. Small business or their domestic (small) corporations go out
of business -- but the real assets (land, machines, buildings) do not
vanish, they simply change hands -- they are owned by the bankers and
the international allies of the bankers. When a company is
foreclosed -- usually it reopens as a cheaper, shabbier and lower
paying place, but often too it is allowed to go under so as to increase
monopoly concentration of competing firms -- the banks float the
international corporations which compete with the domestic local
entrepreneur businesses -- so the banks use the credit-expansion/
credit-contraction business cycle to destroy the competition -- and it
works perfectly. Where are all the high-tech firms that once thrived
in the US? Where are all the banks that used to compete with Chase
Manhattan? (Remember, it is the bigger banks connected with wall
street that play this game, not the little savings and loan run by
"George Baily"-like characters (from the Frank Capra film).
Now
we are ready to spell out what Social Credit is and who it can solve
national economic problems and the problems that have come upon most of
the world's households in this kleptastrophe. Under the
Social Credit system we get rid reliance on the bankers loans based on
fractional reserves and with spendable deposits increased or decreased
by the Fed's buying and selling of securities to the big investment
banks, which work their way to the little banks slowly and imperfectly
-- the money often going to invest in construction in China or other
low-wage land ow-environment- user-cost countries -- THAT SYSTEM IS
ELIMINATED. Instead, new money arrives each month at each household
(not to firms) -- this money takes the place of loan money. It is debt
free and it does not have to be paid back. (No, it is not impossible.
It is no less impossible that the fact that we can finance two wars
when were are already busted and sunk to the center of the earth in a
debt h*** that neither householder nor government can climb out of. --
Now let me tell you the secret: We are killing Iraqis in payment to
our Jewish creditors and we are killing Afghanistanis and soon
Pakistanis in payment to our Chinese creditors. And we will soon be
killing each other for both of them. -- ) As I was saying, the
social credit dividend goes to each household and the housewife etc.
then takes the money to the stores and buys what she thinks best for her
family. Father still goes to work, and mother too if she prefers that
to domestic production of home culture and her own children's social
and cultural development etc -- the householder still has a job --
but more leisure because he does not have to pay the Rothschilds --
all debt incurred under the old criminal system has been repudiated --
and so people need only work a fraction of what they worked before.

This Social Credit System -- let's call it the American version of
Social Credit -- to distinguish it from the more purist C.H.Douglas
versions that are widely promoted by populists in Australia, Canada,
New Zealand, and, in dark basements of Britain. American Social Credit
is a lazy combination of Douglas, Kitson and Soddy -- taken with a
great deal of artistic license. As I was saying, this Social Credit
System gives money to the householder, who then takes it to become the
effective demand for new goods and services offered by firms. The
people not being entirely wage dependent for their consumption (for
their buying) are able to pay a higher price firm enabling the firm earn
some profit that does not have to be eaten into by payments of "B"
the usurer. The firm can make an honest profit and the amount of
purchasing power in play will not be tampered with by devious criminals
in top floor offices of the Rockefeller Center or the small group of
investment bankers who on the Second Floor of the New York Federal
Reserve Bank tell the FOMC chief (Geitner's old job) what the open
market sales and purchases of securities will be. (Remember, these
purchases and sales of treasury securities between Fed and bankers is
what under the present system expands and contract the supply of
loanable funds that finance business investment and mortgages (i.e.
increasing and decreasing spendable deposits, those debt-based deposits
that provide our purchasing power, such as it is). All that will be
shut down under social credit. There would be no Fed. Money would be
created by the Treasury, and credit would be created by the National
Credit Office with every penny of credit going to household and not to
any agency of Government. The householder will be the first spender,
not the government and not the elite international corporation. The
housewife will again (or for the first time) direct production and
become the center of the attention of profit seeking entrepreneurs as
they once again (as not since the 1920's and early 1950's) do everything
they can to satisfy her wants for herself and her family -- which is
called Consumer Sovereignty, something that only Social Credit really
provides without tricks -- without debt and the grand larceny of
intentional manipulations of credit to set up and then knock down
households with inflation and deflation, boom and bust, easy credit and
tight credit, investment and bankruptcy and transfer of assets from
workers, entrepreneurs and engineers to bankers and their crony monopoly
corporations. It is very important that the households receive
the social credit checks and not the government. The big spending
Democrat is the partner of the banker (the Republican IS the banker!)
-- I'm speaking of the decision makers, the policy setters of the
party, not the rank-and-file fool who is led by the nose by deceit and
bribes and scares and seduction and envy and whatever politically
useful emotion paid agitators can stir up. But under Social Credit,
the household gets the money, they spend it on what they think
households need most -- what is best for their children and for their
own personal development and health and future and public contributions
they wish to make -- the American citizen will once again have money
to give to charity, even as charity will not be as necessary --
although there will always be spendthrifts -- there are other problems
which are addressed by populist remedies other than social credit --
but we are not talking about those here. The government
will continue to get its money by taxation. It will not spend the
social credit money itself. It will only get that money when it is
paid to them as taxes. There will be no withholding on social credit.
(Very important.) Social Credit will not replace earned
wages. People will still go to work. But they will not have to work
to pay big debt and they (Oh wow! I just realized I didn't push the
save button all this time -- this time I am lucky!! ) as I was saying
they will not have to work to pay their household debt -- except a
reasonable mortgage debt on a bank with 100 percent backing -- people
can deposit their debt-free treasury note money at 3 percent interest
and people wanting to buy a home will borrow at say 6 percent --
which will be fixed for all time -- inflation being impossible without
the dishonest banker expanding and contracting credit at will. The
householder will not have to work until May or some other late month
just to pay the national debt, the tax to pay interest on the national
debt. That debt, to the Rothschild interests will be repudiated -- as
gained by fraud and malfeasance and the igniting of wars and boom-bust
cycles and bubbles and other forms of financial and government
boondoggle scandals. The Rothschids and other banking dynasties will
have most of their money taken from them in reparations -- let them go
into the wine business or sell fine art -- under Social Credit the
Rothschilds have no function -- even as they are a dead weight loss on
society today -- remember, a banker is not an entrepreneur -- he
only controls entrepreneurs and engineers and workers because of his
monopoly of credit -- the Rothschild's control too much to be good
entrepreneurs -- Investment Bankers of the City of London and Wall
Street care nothing about pleasing the American housewife, or any other
American family member -- the banker profits not from building better
a better mousetrap or computer mouse, and neither does the big
corporation -- rather, they profit by creating monopoly for
themselves, monopoly created by destroying the competition through the
shock of damaging expansions and contractions of credit as already
explained. Governments will tax and they will provide public
services. But the money will originate in the hands of the
householders -- not the government owned by the corporation getting
into a war, or building up a giant Homeland Security boondoggle -- or
fake crises that each have to be met with expenditure of trillions and
the regulation and shut down of everyone not related to a big financier
etc. Businesses will need to apply less for loans because they
will be profitable enough to expand without loans, that is provided
they still can satisfy the housewife, if they can still attract her
dollars (social credit plus wages and profits from business ownership).
Social credit is real free enterprise, the only really workable
market system that can hold up a complex modern society without the
scam, boom and bust and all out corruption of the debt-money private
credit monopoly system we now languish and perish under. Because the
housewife directs production with the purchasing power that social
credit and a husbands pay-check that does not have to go to pay
creditors and the tax man who turns it over to Rothschild as interest on
the National Debt. Motive for war will be gone. Wars, as Hobson
showed over a hundred years ago, is caused by the people not having
enough money to buy what they themselves produce -- so that firms had
to sell abroad (in exchange for raw materials etc.) to sell that they
produced -- giving credit to foreign countries to develop their
resources on condition that they buy from the Imperialist country's
firms -- because, as Douglas put it, the domestic population only
earned "A" while the products for sale had to cover both "A" (wages,
profits) and "B" usury -- so that a constant stream of loans by
usurers were necessary to keep firms going -- a responsibility abused
by rigging the game with expansions and contractions until the banker
and his pet monopoly corporations owned everything. The heck with that
noise! All of that will be out of our lives forever -- if and when
we -- all nations -- rise up and overthrow the money power and replace
it with treasury money, social credit, debt repudiation against
international crime banking syndicates. Did I explain
it? Probably not. And I am not going to polish this. It is 4:25
a.m. Thanks for asking me how it works. I hope my thumbnail
explanation of my version of social credit is clear. Present
system -- the A + B problem The Financial sector manipulates us into
booms and busts by either expanding loans (and
B) or contracting loans while obligations of firms and houses to
pay on their loans the amount stipulated in the loan contract
remains the same -- forcing bankruptcies and foreclosures. Interest
payment obligations, "B," grow in expansion but they do not shrink
loans are cut back and fewer dollars are in circulation to meet
household needs and debt obligations. Social credit.
The National Credit office is like an Anti-matter IRS -- not a penny
it issues goes to government. The prime thing is the dividend going
to household and the wages plus dividends going to businesses (to the
retailer who with it pays his suppliers and his employees). The
government sector is not shown here and neither is the banking sector
-- the banks being 100 percent fractional banking with regulated
interest rates -- as in the 1950's when savings accounts earned 3
percent and borrowing firms and home-buyers paid 6 percent on loans.
In short we have no usury, except the tightly regulated "George Baily"
savings and loans. Banks will all be state run and state regulated --
no Federal Involvement. The banking system will not control the money
supply, -- that will be the job of the Treasury Department and the
Social Credit Institution (called the National Credit Office in the
Diagram above) On the question of how much money should each
household get and how often -- and how to keep the flow even -- and how
to conduct an Irving Fisher type monetary policy with a pure treasury
system of public treasury notes -- Lincoln money -- "debt free
Greenbacks" which funded the Civil War and lasted up to the time of the
Federal Reserve -- but not in abundance thanks to the Robber Barons
forcing the gold standard -- not allowing any new issue of greenbacks
to expand with the economy ... etc. All that is trivial -- the
costs of trial and error could not possible come near one 100th of what
the Kleptastrophe and the Imperialist wars of just the new century
have cost us -- and working out the system will end business cycles
forever -- provided we can keep the old tribes that have gotten so
good at the usury system from sneaking it back in on us. Social Credit
in combination with a few other populist measures is a genie that
could end debt slavery almost in the blink of an eye. But we would all
have to commit to "using a wish." So that is the
system we could and should have. What I predict however is that you
will get newly disguised and more deceptive and malevolently flexible
version -- like Windows Vista to replace Windows XP -- of current
Rothschild usury -- which Dr. Stiglitz has already prepared for us.
It has been waiting in the wings for a long time -- its outline
decided upon even before 9-11 -- although Stiglitz is giving it its
public face -- pretending that it is the solution to the Kleptastrophe
when if fact it is the capstone of the Kleptastrophe, the final
destination of the Kleptastrophe envisioned by the chosen agents of the
Money Power who brought it forth.

D*** Eastman
Yakima, Washington