My previous posting included the last three pages (67-69) of Chapter 8
(The Remedy) of "The Struggle for Money" by "H.M.M." I am now posting
the rest of this chapter (pages 60-66)in the hope that this material may
be helpful to Jessop Sutton (and others) who has appealed for help in
understanding the admittedly "elusive" (because dynamic) Theorem:
THE STRUGGLE FOR MONEY BY “H.M.M.”
(Glasgow: William MacLellan, 1957)
CHAPTER EIGHT: The Remedy (pages 60 to 66 --of 60 to 69)
In general terms the remedy consists in restoring to the consuming
public the purchasing power it is robbed of daily with every new
credit--as distinct from replacement credits--created by the banks to
finance the needs of production and commerce, and the activities of the
Government and Local Government bodies; and this consists, among other
things, in transferring the National Debt--so far as it is internal
debt--to the other side of the nation's balance-sheet, as the National
Credit it really is--while recognising and acknowledging the rights of
all those who have been induced to invest their savings in Government
securities-- provided it really is their savings that are invested, and
not merely money got by way of bank overdrafts, a practice fathered by
the banks during the First World War, and still practised for all I
know. This would form the foundation of the National Credit Account.
Replacement credits are ones which cancel and replace earlier new and
replacement credits. They don't cause any fresh inflation, but they keep
earlier inflations and debts alive after the incomes they represent and
replace have been spent, and cease to exist as anybody's purchasing
power; and they carry these earlier debts forward in current costs and
prices and debts. They are never anybody's income.
So if justice is to he done, and "the strange discordance between the
consuming and producing power" Sir Winston [Churchill] complained of is
to be overcome, free issues of money or credit, from the National Credit
Account, must be distributed to the consuming public, to bring their
total purchasing power up to the level of total prices; and so enable
them to buy and pay for everything they care to produce, cancel the
bogus debts attached thereto, and so become solvent and free, probably
for the first time in history.
The whole present structure of costs, prices and debts is built up on
cumulative, inflationary, snowball lines; whereas the community's total
personal income, which is set the impossible task of liquidating this
cumulative snow-ball, is non-cumulative. It is earned, spent, and gone--
earned, spent, and gone--in endless succession. Hence the mountains of
bogus debts called into being to bridge the gap between the two, and the
mountains of useless labour and wasted material they involve, now
crushing the peoples of the world, and threatening their existence.
Their salvation depends on, and awaits, the squeezing out of all this
inflationary water from the price snowball.
To stop the bankers' depredations we must:
1. Set up a National Credit Account. At present we have only a National
Debt Account; the banks having usurped all our National Credit--to
create our National Debt!
2. Institute a National Dividend;
3. Finance New Production by drafts on the National Credit Account, and
not out of Savings; and
4. Allow a Just Price Discount on all personal purchases, out of income,
for final use or consumption--to adjust book prices to actual incomes.
The National Credit Account: This would be a compilation of the money
valuation of all the country's capital assets and resources, whether
publicly or privately owned--everything, in fact, that might appear in
prices as a cost, if requisitioned or used; and this necessarily
includes an actuarial estimate of the commercial capitalized value of
the population itself--an indispensable asset that gives value to all
other assets. (A number of years ago the value of a citizen of the
U.S.A. aged 25 was said to be about £10,000. That was before the Second
World War. The figure varies with the actuarial expectation of life and
the plant capacity of the country, so should be considerably higher
now.)
These capital assets are the country's Real Credit, and sum up and
measure its capacity to create and deliver goods and services; and on it
the National Dividend would be based, and financial credit be created
against it by the Treasury.
The National Dividend: Once the fact is grasped that all the financial
credits the banks create and lend us are really our own--being drafts on
the nation's real credit--its ability to produce a wealth of goods--it
becomes apparent that whatever the community has the ability to produce
or do, and cares to produce or do, it can not only finance without the
slightest difficulty, but also finance the consuming public to buy and
pay for it when produced or accomplished; and in so doing liquidate, for
good, all the formal debts incidental to its production or doing,
without having to incur and sustain fresh and larger debts in the
process, as now.
The National Dividend would be based on the National Credit, and would
be a debt-free issue of credit from the National Credit Account, and
added to the bank account of every member of the community, at regular
intervals, independently of any other income he--or she--may have or
earn--everybody's share being equal.
The National Dividend is a gift from the past--from the National
Heritage--and represents what I have slumped together roughly and called
the unpaid wages of the Machine; and its purpose is to keep the
community's income always abreast of its productive capacity.
This would usher in an honest self-liquidating economic system, and a
new and hopeful era for the whole world, free from bogus National Debts
and the cut-throat competition for money and markets they engender, at
home and abroad, which at present threatens to put an end to everything
and everybody.
Financing New Production: Just as people can't eat their cake and have
it, even so they can't invest their money in industry and at the same
time retain it for buying the final products of that industry--i.e.,
consumer goods--in the price of which the money invested re-appears as a
cost, although it no longer exists as anybody's purchasing power.
The money invested increases output, costs and prices; but reduces to
the same extent the community's purchasing power and ability, as
consumers, to pay these prices and buy the fruits of the investment in
the shape of goods produced. Hence the need for financing all production
by drafts on the National Credit Account, and not from Savings; and
counter-balancing the costs for the consuming public via the National
Dividend and the Just Price Discount.
The banks do actually finance industry at present by drafts on the
nation's real credit--its ability to produce goods and render services.
Their offence, or crime, is that they wrongfully--or sinfully--record
them as drafts on their own credit, a proceeding which drives us, and
the world, on to ruin and disaster.
The Just Price Discount: Every business without exception must fix its
prices to cover all its costs and yield a profit if it is to remain in
existence.
Its prices are made up of two groups of costs--Inside Payments and
Outside Payments. The Inside Payments are the wages and salaries paid to
the employees, plus the distributed profits or dividends allocated to
the owners or shareholders. The Outside Payments are all other payments,
made to outside firms and concerns for goods and services needed to run
the business--buildings, plant and machinery and tools, raw materials
and intermediate products--and final products in the case of retail
businesses--transport, repairs, and so on--also rates and taxes; and
these Outside Payments are obviously not income to anybody in the
business that makes the payments.
If we call the Inside Payments A, and the Outside Payments B, total
costs are A plus B; so it is equally obvious that the owners and
employees of the business cannot, between them, possibly buy--with their
joint incomes, represented by A--the total output of the business, the
price of which is A plus B--even if they wanted to, which, of course,
they don't.
That is true of every individual business, so it is true of all
businesses collectively, in any week, month, year, or period of years we
like to take; from which it follows that the country's total
income--every country's total income--all the world's total income--is
at all times insufficient to buy its total output; and to that fact all
the world's major troubles are due.
That is the late Major C. H. Douglas's famous A plus B theorem; and many
people, including not a few professional economists--but no bankers, so
far as I am aware--have rushed into print to prove it false, only to
reveal their utter incapacity to handle figures correctly. Disregarding
the elementary fact that comparisons between A and B payments, to have
any value or validity, must be taken for the same periods of time, they
analyze the B payments--the Outside Payments--and find, correctly, that
they were all, originally, at one time or another, Inside
Payments--i.e., A payments, payments of income in some business or
other--and conclude from that, quite wrongly, that B payments are
payments of income too; consequently, they contend, the community's
total income is always able to buy and pay for everything that is
produced. And if they are Socialists or Communists they may add that all
that is wrong is that most of the money is in the wrong hands, the hands
of the rich.
The reasoning is as false as to say that, as everybody now alive was
born, therefore everybody born is still alive!
(B payments are carried by "replacement" credits; and replacement
credits are debts due to the banks, but are never anybody's income.)
Critics of the theorem shut their eyes to the glaring evidence provided
by the whole labour world's eternal cry for higher wages, and their
resort to endless strikes to enforce their claims, merely to try and
keep themselves abreast of ever-rising prices--a feat impossible of
attainment, because every increase in wages is also a corresponding
increase in costs and prices.
They also shut their ears to the Government's eternal cry that we must
increase our exports--merely because the home population hasn't the
money to buy everything it produces.
Mr. R. A. Butler, when Chancellor of the Exchequer, was reported as
saying at a meeting in Edinburgh on 24/10/52, that if Britain could not
improve her export trade, she could not improve her balance of trade,
"Unless you sell more than you buy in food and raw materials," he said,
"you will go bust."
Sheer lunacy! Let him explain how the world can sell more than it can
buy, since every sale is a purchase-- except by piling up debts--bogus
debts--and cutting its own throat.
The same pathetic, and brainless, banker-inspired cliches are being
dinned into our ears every day in the week, in and out of
Parliament--and in the Press--without investigation as to their meaning
or truth, by those who utter them.
Hitler said earlier that Germany must export or die; and the whole world
can say the same and believe it to be true--and even go to war in
defence of that belief--without apparently realising the fact that as
every export is an import somewhere, and every import an export, they
are all bound to "bust" or die--and probably will, unless they learn to
talk sense.
For the contention to be true that the community's income is able to buy
everything that is produced, it would be necessary, either that all the
money now classified as a B cost should have been saved intact from the
day when it was an A cost and somebody's income, and not spent at all
until the work done, or the service rendered in return for these
payments, was embodied in the costs and prices of consumer goods and
sold to a final consumer, months or years ahead; or else that producers
of raw materials--possibly on the other side of the globe--and the
makers of intermediate or final products, should delay paying their
workers until the retailers of the final products had sold them to final
consumers, and passed back the money received to the various
contributors in the productive chain--only to find, in both cases, that
they had all starved to death because of the lengthy interval between
the work done and its just reward in consumable goods.
A little thought would have shown these hasty critics that although all
B payments were at one time A payments, that time is always in the
past--often a very distant past--and, needless to say, all money and
credit that was income in the past was spent in the past--probably
within a week or two of its receipt, for most people--and repaid to the
banks, and thereafter ceased to exist as anybody's income, although it
continued to exist in the costs and prices of today--via replacement
credits--as a B payment and a communal debt; and so is not available for
final personal purchases at all.
How much have you left--you who may read this--of your wage or salary at
the end of a week or month? And where has it gone after you spent it?
Back to the banks to cancel earlier bogus bank debts, and no longer
exists as anybody's purchasing power. Yet your employers will still be
in debt to the banks for the money you have spent--as well as for the
money you haven't yet spent--if any!
Great Britain's bogus Internal National Debt today (1954) of
£24,468,484,647 (Whitaker's Almanack 1956) is living testimony to the
truth of the theorem.
Nationalising industry, or the banks--or both--does nothing, and can do
nothing, by itself, to redress this discrepancy between incomes and
prices. Only a change to honest bookkeeping can do that; and if we get
honesty there, nationalising anything of a productive nature will be
easily seen by everybody--even Socialists and Communists--to be the most
inefficient and unsatisfactory way of doing it.
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