Clearly the satisfaction of citizens’ material needs is not the objective of the present economic order. Australians will be painfully aware that the purpose of economics is ‘jobs and growth’ or, in other words, compounding economic activity.
Whatever differences there may be between the various political camps there is no spectrum when it comes to this. I assure you the political machinery will be in perfect synchronicity when it comes to getting you, and everyone else to work. Douglas wrote the purpose of the economy then and now is to
…make the man-hours necessary for a given programme of production equal to the man-hours of the whole population of the world, so that everyone capable of any sort of work should, by some powerful organisation, be set working for eight, or any other suitable number of hours a day.
And it isn’t just the elected government working to this end either. According to the Reserve Bank Act 1959, the Reserve Bank of Australia is responsible for ‘the maintenance of full employment in Australia.’
So despite the fact, obvious hundreds of years ago, that machinery replaces labour and increases production, and despite the glut of goods pouring unstoppable from the farms and factories, all the ‘powerful organisation’ of government and finance will collude to keep us at the grindstone as a matter of principle. No money, under any circumstances, will be made available to the public unless work is involved.
Now we need to hone in on a common misconception that keeps this lunacy in play. Whether you work for a wage or you run a business that makes or sells things you need money to live. So whatever is it you do to get money you call that activity ‘work’. But you should know that money is not made by working it is made by banks lending. The problem everyone is complaining about, is we don’t have enough money to enable the smooth running of the economy. It follows then that there is no point in trying to solve it by doing more work or by selling more things because money is not made by working or selling.
Forgive me if I point out the obvious but we should be careful about the words we use. If you do some work and are paid for it, you don’t ‘make’ money you simply get it from somebody else. So, as a matter of fact, there is no functional link between work and the quantity of money at all. Making money is the exclusive domain of banks. When banks lend money it is literally made and, ironically it is about the least labour intensive occupation imaginable.
To illustrate the process pretend I work in a bank and this computer I am using is in the bank where I work. I have a customer sitting before me named Sue that the bank I work for has approved for a $100,000 loan. I bring up her account, put the cursor in the correct field, smile over the top of my screen and type $100,000.00 (enter after the last zero)
That this is the method by which modern money comes into existence is self-evident. The $100,000 is deposited into Sue’s account and no one will refuse it as payment for goods and services. It is new money. There is no gold backing and no one’s account has been reduced so Sue can have her $100,000. The same principle applies on the national level. Virtually every nation in the world operates from a position of insolvency because the tool they require to conduct their economic affairs is created in this way. The more productive the economy, the more money is required, so the greater the national debt, take the U.S. and Japan for instance. The essential problem the financial system now confronts is that governments, business and private people are so indebted they aren’t borrowing enough to provide economies with sufficient debt money to lubricate economic activity.
All sorts of devices have sprung into existence for the purpose of increasing the quantity of borrowed money cycling in the economy. Quantitative easing, negative interest rates, credit cards, microloans, unfunded superannuation, finance desks at used car lots, TVs that can be bought on 5-year interest free plans etc. NAB wants to finance my wedding, a holiday in London and a new house and I frequently receive mail from them telling me how much I deserve their latest low interest credit card. Apply within. Douglas warned us that trying to solve our shortage of money problem by loan credit would increasingly mortgage property to the banks. Check the loan books of the financial industry in the country from where you are reading this (if you can) to see if he was right.
Governments often ask ‘Where is the money going to come from?’ This question is taken to mean ‘whose money are we going to take so we can pay for this or that.’ But it is answerable in a general sense. The answer is that the banks loan it into existence. Instead our attention is diverted into all sorts of blind alleys that will have no bearing on increasing the money supply. One has to wonder whether the diversion is, on some level, deliberate.
All, and I mean ALL, of the mainstream discussion about our economic problems fails to factor in this vital truth. It is like a magician’s sleight of hand. Everyone, from the blue collars right down to the politician, complains of there not being enough money, yet no one thinks it important enough to examine its source.
We are lead up all sorts of barren garden paths. For instance, consider the push for innovation. To innovate means to ‘make changes in something established, especially by introducing new methods, ideas, or products.’ Innovation is fine if the new methods, ideas or products are good and useful ones but, unless it innovates in the method of money making, it’s not going to bridge a money shortage because you don’t make money by innovating.
Neither will we solve our dilemma by developing industry for export markets. A favourable balance of trade refers to a situation where a country sells more than it buys in financial terms. It is obviously a foreign policy intended to address a national money shortage. The conundrum is that every industrialised nation simultaneously pursues this course which only serves to increase friction on the international stage. Any observer can see that the formation of trading cliques designed to secure markets for the sale of export orientated production has worrying parallels with alliances preceding past wars. Trade is fine, but it’s not going to make up a global money shortage because you don’t make money by making and selling things.
Foreign investment is another tool in the political kit used to address the chronic money shortage. On the rare occasion the supernationals are told they are not allowed to buy some critical piece of Australia’s real wealth the international set warn us in sombre tones of the danger of discouraging foreign investment. It’s amazing what we will do for a fleeting bit of foreign cash. Australia is not just content to sell the cow and the coal they seem committed to getting rid of the farm and the mine as well. House prices in capital cities are out of reach of most Australian buyers due to foreigners having open slather in housing markets. If Australia had a reliable money supply of its own the reasons to sell the sources of our real wealth would simply vanish. Instead governments continue to allow money creation to be the exclusive preserve of banks, foreign or domestic, and take fright whenever some international rating agency whispers the possibility of downgrading our credit rating. You have to ask who is running this show. So foreign investment is another non-solution because, and I can’t stress this enough, you don’t make money by selling the farm.
What about other proposed measures. Does building submarines make money? Does laying road make money? Does subsidising the pay packets of old people, young people, mothers, day care workers, disabled people, make money? Does taxing the rich make money? Does taxing generally make money? Does polishing Bill Shortens ample forehead make money? None of these activities makes money. None of these supposed remedies will do anything but relieve for a nanosecond our economic migraine because none of them make money.
I could go on but you probably get the picture. Money is merely an instrument that we use to organise activity and distribute goods. The instrument is not the goods and services themselves. The method of money creation controlled by banking sets up money as the limiting factor governing economic activity. It is completely inappropriate. It is like choosing what you will wear each day by referring to a thermometer 30° out. As you would expect it leads to all sorts of bad decisions.
On the back of one of my copies of Social Credit is printed a photo of a smiling Douglas beside the statement; ‘The scientific money system for the automation age of abundance and leisure.’ When we open our eyes to the truth of the immediate possibility of abundance and leisure by the correction of the instrument we might put together a ‘powerful organisation’ of our own and demand a scientific money system.