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The Social Credit Scam

June 16, 1998

The interest being paid on the national debt is about a billion dollars per working day. It is being paid, ultimately, to the bankers, because the bankers are the source of our money. And that is only on the government's portion of the national debt!

Many have wondered why the government should continue to borrow money, and pay interest on it, when it prints the stuff. Thomas Edison was among those who pointed out that any government which can print bonds can print money directly. Of course, it was doing so when Mr. Edison made that remark. Why doesn't it simply spend what it prints, or deposit it in the Treasury and write checks on it?

President Franklin Roosevelt remarked that "financial institutions" have owned the U.S. government since the days of Andrew Jackson. Others have voiced similar remarks about the political clout of banks. Possibly, then, the "real" owners of the government are quite happy with the situation which pays them a billion dollars daily in interest, which would evaporate if Uncle Sam spent the bills which he printed. From this point of view, the government is a highly profitable enterprise operated by the financial system, with the profits being both monetary and political.
"Who pays the piper calls the tune."

Whatever the reason, however, the fact remains that the government prints what people accept as "money," but does not spend it to pay its bills. According to some, that should stop!

Abraham Lincoln evidently agreed: he declined to pay the bankers' interest on funds he could create on his own, and printed his famous Greenbacks.He was shot in the head. So, for that matter, was President Kennedy, whose assassination apparently brought to a halt the program, then underway, to reissue United States notes. Bloodshed notwithstanding, wouldn't it be fiscally sound for the U.S. to finance itself directly from the printing press, instead of indirectly, by borrowing? It's called the "social credit" scheme.

It surely sounds like a good idea, but many nice-sounding ideas turn into nightmares when implemented. For one thing, there is the proliferation of money we call inflation. To some extent, that is held in check by the necessity to repay, with interest. Were Uncle free to create and spend as much as he wanted, with no such restraint, where would it end? If it is reasonable to spend billions on AIDS research, why not additional billions to conquer the common cold, which probably has as great or greater an impact on our national production as AIDS? If saving the spotted owl is a worthwhile expenditure, why not save the reticulated salamander, as well? Does spending on schools improve education? The evidence seems to suggest it doesn't, but let's give it a real test, and boost the spending tenfold. After all, it costs us nothing to run those presses! And what Congressman could resist the pleas of his constituents for a few million bucks to widen this road, erect that statue, or create a park? The social credit scheme would flood the economy with money, and the only prevention of runaway inflation would be confiscatory tax rates. Of course, not all Americans would benefit from the free-wheeling spending of the social credit scheme, and for them the combination of rising prices and equally rising taxes would mean disaster. And how could you justify taxation by a government which pays its bills, for nothing, by running its printing press?

There is another aspect to the social credit scheme: the moral aspect. Modern money certainly has a moral component, as it involves exchanging something for nothing, even if done with the acquiescence of the provider of the something. A rube may be delighted to accept a gilded brick in exchange for his horse, but that doesn't make it any less wrong. Thou Shalt Not Steal applies, even if the stealing is done indirectly and without the knowledge of the victim.

Would you be better off trading your goods or services to someone for a bill that entered circulation debt free, printed and spent by the government, or for one that was borrowed into existence? If you prefer the debt-free bill, consider counterfeit. The counterfeiter does not loan his bills into circulation; in fact, he will sell them at a sizable discount. Those who favor the social credit scheme would be wise to seek out a really good counterfeiter; maybe they already have, which is why the government is attempting to make duplication of the "good" paper so difficult. Is counterfeiting any less offensive if done by the government, which excuses itself from the legal consequences of its actions? Neither the good bill nor the "bad" one entitle the holder of anything of the issuer. Both owe their usefulness to the credulity of the victim.

Ah, but if we exchanged goods and services for money which the government simply printed and issued, rather than borrowed, there would be no government debt, and no interest burden! True, absolutely. But there would be the inflation tax, or price hike due to the proliferation of money. You might end up paying the same price, or even more. What difference does it make if high prices are the result of interest costs being passed to the consumer, or simply the depreciation of the money (or both!)?

What would happen to banking under the social credit scheme? Under our present system, the banks are the source of our money, and thus an important part, to say the least, of our society. Under the social credit system, they would not have that significance. Uncle would be the source of money, although he might provide it cheaply to the banks who could then loan it to their customers, and give Uncle a kickback. Eventually, however, someone in Washington would surely realize that this was foolish: why not have people borrow directly from Uncle, and eliminate the middle-man? Banks would end up with no purpose other than maintaining checking accounts, and safe-deposit boxes. Having Uncle, who gives the orders, holding everyone's IOUs doesn't seem like a good idea.

Debating the merits of the social credit scheme vs. our present debt-money system is like debating which is better: to die of cancer, or of tuberculosis. Obviously, a grim dilemma on which to be impaled, and an unnecessary one. The Constitution spells out the system to be used in this country, and every official of government swears to adhere to that contract--although few do. States are to pay their bills with precious metal coins. They are not to coin money; only Congress is authorized to do that. Any government official found guilty of debasing the currency is to suffer death, according to the Coinage Act of 1792. The value of our money was to be its purity and weight. Thus, the dollar of silver was legal to tender for a dollar only until its weight, which was 416 grams when it left the mint, dropped to 409 grams. After that, it was valued in proportion to its weight.

What a simple, logical, and honest method! Those who recognize the problems inherent in our present system might do well to consider the Constitutional method. It is head and shoulders above either our present system, or the social credit scheme.

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