The ABC of Finance and Social Credit

Compiled by
R. L.


1. What is Money?
" Money is any medium which has reached such a
degree of acceptability that, no matter what it is made
of, and no matter why people want it, no one will refuse
it in exchange for his product." (Professor WALlmR.)

2. Should Money have any Value in itself?
None whatever.

3. What, then, gives Money its Value?
The quantity (or quality) of goods one can receive
in exchange for it.

4;. Is Money a commodity?
It should not be, but under the so-called gold standard
all kinds of money are supposed to be convertible into
gold, and gold is a commodity.

5. How, then, should Money be regarded?
As a ticket entitling one to goods or services.

6. Should there be any limit to the number of tickets
(i.e., the amount of money)?
The limit should be determined by the quantity of
the goods produced-the more goods the more money.

7. What advantage would accrue from this?
There could not be, as there is to-day, an abundance
of goods and a scarcity of money.

1. What is Economy?
The wise use of one's resources.
2. Is that the generally accepted meaning of the word
3. What is meant by the word " Economy " to-day?
Doing without things.
41. You mean even supposing the things are in existence,
or can be produced?
Yes, to-day the word means ABSTENTIONfrom the use
of commodit"ies; or, where abstention is physically impossible,
using as few as possible.
5. What are the effects of this policy?
Chiefly two. :FIRST: Almost everyone is forced to
endure a lower standard of living than is necessary.
SECOND: The reduced consumption is, ipso facto,
reducing production.
6. Does that mean that the more economy is practised
the greater is the amount of unemployment?
7. Does that explain why the Prime Minister advocated
" wise spending "?
It is not safe to-day to infer why a Prime Minister
says anything.
1. What is the function of an economic system?
" To achieve the highest rate of consumption by the
least expenditure of personal energy." t
2. Is the economic system fulfilling its function?
3. Why is that?
Because it is prevented from doing so by the operations
of the financial system. In a word, the financial
system controls the economic system.
4. How does the financial system maintain such a
Chiefly in three ways. FIRST: By basing the amount
of credit available on the ability of the Bank of England
to secure an adequate gold reserve and not on the productive
capacity of the community. SECOND:;By
claiming all issues of credits as debts to the bankmg
system. THIRD: By its system of recovering all costs
in the prices of consumable goods.
5. Would the D.S.C.P. free the economic system from
this control?
6. How?
The answer lies in a study of the D.S.C.P. (See
The Social Credit Proposals, 15.)
1. What is the function of a financial system?
" The business of a modern and effective financial
system is to issue credit to the consumer, up to the
limit of the productive capacity of the producer, so that
either the consumers' real demand is satiated, or the
producers' capacity is exhausted, whichever happens
first.' '*
2. Is the finanical system fulfilling this function to-day?
Obviously not, or there would not be financial poverty
in the midst of real wealth.
3. What reasons are given for this failure?
The following have, from time to time, been held
responsible: -War debts, reparations, free trade,
tariffs, nationalism, the stupidity of politicians, cussedness
on the part of trade unions, over-production, underproduction,
lack of initiative among industrialists, sunspots,
original sin.
4. What does Major Douglas say is the real Feason?
That the financial system is now functioning for purposes
outwith its proper sphere 5. What are these purposes?
They are two in number. FIRST: To give employment.
SECOND:To secure world control for those in
financial authority.
6. What enables these financiers to exercise this
Chiefly their monopoly of credit creation and credit
7. What change would the D.S.C.P. make in this
They would transfer the control of credit from the
present controllers of the financial system to the individuals
composing the nation.
1. How many kinds of credit are there?
There are two kinds. FIRST: There is REALcredit
which may be defined as " the belief as to the capacity
of a community to deliver goods and services as, when,
and where required."* SECOND:There is FINANCIAL
credit which " is the instrument for setting real credit
in motion and converting it into actual goods and services
and for distributing them where they are
desired .• ,*
2. What should be the relation between real and
financial credit?
The latter should always reflect the former.
3. Is this the case under the present financial system?
No; else how could the world be rich in goods and
poor in money at one and the same time?
4. How would this financial credit be estimated?
" By counting up the cost value of all our existing
plant, machinery, railways, canals, mines, ships, factories,
etc., and then regarding the sum involved
as financial credit due to the community."t
5. What would be the result?
The communitv would then control its real credit,
i.e., its wealth. "
1. What is meant by credit?
(a) Credit is derived from the Latin word credere,
which means to believe.
(b) Credit is thus the belief anyone has in another.
(c) Used in a banking sense the word means the belief
on the part of the banker that his customer will repay
a loan, at or within, a stated time.
(d) As nine-tenths of the money in circulation is in
the form of credit, credit and money are for all practical
purposes synonymous.
2. Where does the banker get the money with which
to grant credit to a customer?
(a) He creates it. "A bank is a manufactory of
credit. " (Macleod. )
(b) " £1000 in cash deposits enables the banker to
lend up to £10,000 of credit." (See Macmillan Report,
Chapter IV.)
3. Who claims the credit thus created?
The banker.
4;. Is it really his?
5. Then by what right does he claim it?
By no right; merely by convention.
6. Does the banker accept the answer to Question ~
No. At first the banker denied that he created
money; now he admits the fact, but still maintains that
the new money is his.
7. To whom, then, does the credit belong?
To the community. "All credit values are derived
from the community."*
8. What does the banker do with the money he creates?
He lends it to a customer of the bank (usually a producer)
in return for security. "The new money, or
credit, is claimed by the financial institution as its
property, and therefore when it is lent creates a debt
against the public. ' '*
9. What does the bank's customer do with this money?
In the process of producing he creates prices which
must necessarily be greater than the loan and from these
prices repays the loan plus interest thereon.
10. Does that mean that the community is always in
process of repaying a bank loan?
Yes; and as the greater part of anyone loan is spent
<onexisting goods a further loan is necessary to liquidate
the previous loan.
11. Does that mean that the community is continuously
in debt to the banking system?
12. Can the community free itself from the control of
the banks?
13. Will it be easy doing so?
H. Why?
Because "money is a licence to live," and the
banker, by his control of money, can thwart every effort
to escape.
15. Will the community win its escape?
Yes; and for two reasons. FIRFlT: The present banking
system relies on the continued financial ignorance of
the community; it encourages people to believe that
there is something mysterious about finance; and that
the slightest inquiry will bring disaster (a disaster which
by his control of money the banker can quite easily
engineer). But, like murder, knowledge will out, and
the community is now more enlightened on financial
matters than ever before. SECOND:The present financial
system is mathematically unsound, and is increasingly
failing to function.
16. What are the D.S.C.P. re credit?
They are two in number. FIRFlT:" The credits required
to finance production shall be supplied, not from
savings, but shall be new credits relating to new production.'
'* SECOND:The communitv shall be credited
with the capital values created by sU:chcredits.
17. In what ways would these proposals assist the
Chiefly in two ways. FIRST: The issue of free credits
would reduce excessive bank charges, and would also
make large sums of money, at present invested, available
as purchasing power. SECOND:The community
would be entirely free from bank debts.
18. How would these changes affect the present banking
The banking system would relinquish its present
monopoly of creating credit; otherwise banks would
continue to discharge their proper function of facilitating
and recording the exchange of goods.
19. What effect would these proposals have on the
productive system?
Freed from the artificial and throttling restrictions of
the present financial system the productive system
would be able to expand (or contract), pari-passu, with
the desires of the community.
1. What are capital goods?
Capital goods are those-factories, plant, roads, etc.
-by means of which ultimate products reach the consumers 2. How large a supply of capital goods does a country
Such a supply as will provide the maximum amount
of consumable goods desired by the consumers.
3. Is there just that necessary supply to-day?
No; the supply is excessive in relation to the amount
of consumable goods produced.
4. Why is that?
:For two reasons. FIRST: Because bank loans are
credited to producers, and capital goods are suitable
as security against such loans. SECOND:The purchasinry
power obtained in the production of capital goods
helps to make good the deficiency of purchasing power
-distributed in the making of consumable goods.
5. What effect would the D.S.C.P. have in this respect?
They would tend strongly to preserve a balance between
the production of capital goods and consumable
goods; e.g. new factories would be built only if and
when factories at present in existence failed to meet
the dema.nds of consumers.
1. What is a private loan?
A transfer of wealth (or a claim to wealth) from one
person to another.
2. What is a bank loan?
A bank loan is a loan granted by a bank to a customer
upon security.
3. Whose money does the banker lend?
No person's. "No depositor has his deposit reduced
by the amount of the loan. The banker has as much
created new money as if he had printed bank-notes."*
4. Wha,t is meant by war debts?
They can, for convenience, be considered as belonging
to two categories. INTERNAL:Subscribed by citizens
and various institutions. The money subscribed
by citizens represented savings; that subscribed by
banks was in the form of bank loans and was really new
money which the banks, in virtue of their control of
credit, were in a position to create.
5. Does that mean that the banks really lent nothing
and have been drawinginterest on this credit money
ever since?
Well, what they really lent to the Government was
the credit of the community to produce wealth to that
amount (and a bit more). INTERNATIONALT:hese loans
were created by the respective national banks as described
above and their respective communities pledged
to hon.our them by producing goods. An example will
make It clear. The Bank of England by its power to
{j~e8:tecredit. bought American dollars (representing a
SImIlar creatlOn of credit by American bankers), and
these dollars ~e~e paid tc: ~he American people to produce
commodItIes (mumtlOns, etc.) for the British
people. 'What the Americans got out of the transaction
was hard work and wages. British repayment of the debt
sho~l~ therefore ?e by British people working hard and
receIvmg wages m order to return the kindness of the
American people. The failure to realise this due to an
artificial financial system out of touch with' reality, is
largely the cause of the " American debt crisis" and
of all international debts.
1. What is inflation?: deflation?
Inflation is. the na~e given to a condition brought
about. by an ll~crea~e m th~ a~ount of money leading
to an mcrease m prIces; ann VICe-versa, deflation is the
result of a restriction of the supply of money leading to
a fall in prices.
2. Is inflation, or deflation, good or bad in an economic
Neither. They are the two normal features of banking. When bankers create credit, they are
mflatlOmsts; when they withdraw loans they are
3. Do both inflation and deflation affect all classes of
the populace alike?
No. Inflation is more favourable for the working
class, while being detrimental to the rentier; on the
other hand, deflation by producing a scarcity of money
increases the value of whatever money there is, thus
favouring the rentier, but, by having an adverse effect
on trade and industry, causes unemployment. In the
words of J. M. Keynes, " It is easier to agree that both
arfl evils to be shunned."
1Ji. Are the D.S.C.P. inflationary or deflationary?
Neither. Since they increase the amount of money in
circulation they cannot be deflationary; and, since they
lower prices by means of the Just Price, they cannot
be inflationary.
5. Does that mean that the D.S.C.P. introduce a new
mechanism into the financial system?
Yes. They make possible what has hitherto been
considered impossible; they increase the supply of
money, and at the same time, and, pari-passu, they
lower prices. (See" Just Price," 17.)
1. What are exports?
Exports are goods produced in one country and sold
to a customer in some other country.
2. Why should goods be exported at all?
For one reason only: " To diversify consumption. "t
3. Is that the reason to-day?
No. Goods to-day are exported because the home
market cann0t buy these goods. And for a further
reason: because the purchasing power received in
exchange helps to buy the consumable goods in the
home market. Giving evidence before the Macmillan
Commission, Sir W. H. N. Goschen said: "To my
mind what industry wants is not more facilities, but
more buyers from abroad."
1Ji. And why cannot the home market buy the goods
Because there is not sumcient purchasing power todo
5. Does this apply to all countries?
6. Then are all industrial countries trying to find
" foreign" markets?
7. Is this impossible?
8. Does a country gain or lose by exporting goods?
It loses by virture of the fact that wealth is sent out
of the country.
9. Does that mean that all countries are pursuing a
policy of impoverishing themselves by their export
'What else can they be doing? Does anyone become
materially richer by giving away wealth?
10. Very good; but what about a country's imports?
Do not they at least neutralise the loss of the
For the answer to this question see" Imports" (11).
11. What are some of the results of the present policy?'
Tariffs, Trade Agreements, Quotas, &c.
12. In the end what will the result be?
Prophecy is dangerous, but the possibilities are'
revolution, or war, or both.
13. Is there no other possible result?
Well, perhaps a world financial dictatorship of some
kind will emerge.
Imports are goods produced abroad and sold in the
home market.
2. Should imports make a country richer 01' poorer?
That seems a silly question to ask. Obviously they
must make it richer.
3. Then why are all countries so desperately anxious
to prevent the importation of goods?
Because of a farcical financial system.
4. What exactly is meant by that answer?
Look at " Exports" (10, 3). It therefore follows
that, if the " home" market cannot buy the goods
that had to find a " foreign" market, it cannot buy
any additional goods imported.
5. Am I not right in thinking then that the exports
pay for the imports?
No; although that is what many people imagine.
6. Doe!s that mean that every country is striving to
export and not to import?
That is correct; and is, you will agree, an impossible
7. What steps would required to be taken to remedy
the situation?
The people in any and every country would require
to have sufficient purchasing power to cover the cost
of all goods p.l'Oducedso that .if some goods are exported
the people WIll have a quantIty of money equivalent in
value to the goods exported; and that money will be
available to buy the goods imported.
8. Would the D.S.C.P. lead to the abolition of tariffs
and all similar restrictions on imports?
YeB; and why not, since imports and exports ought
to be an interchange of goods to enable a people to
diversify consumption if necessary.
1. What is a favourable balance of trade?
A favourable balance of trade is the advantage (?)
that a country derives from giving away (i.e. exporting)
more than it gets (i.e. imports).
2. Should that not be called an unfavourable balance
of trade?
Yes, of course it should; but a stupid financial system
makes good evil, and evil good.
S. Can all countries have a favourable balance of trade
at one and the same time?
No; for that would mean they were all exporting more
than they were importing.
4. How can this obviously absurd arrangement be
By correcting the flaw in the price system.
ii. And how is that done?
The answer is to be found by studying The "National
Dividend" (19) and" The Just Price" (17).
13. THE AIM OF THE D. S. C. P.
1. What is the aim of the D.S.C;P.?
The aim is to enable the members of the community
to buy all the goods they produce up to the limit of
their desires.
2. What is required to realise that aim?
Such a financial system (i.e. a distributive system)
8S would enable the goods produced to be delivered
where, when and as required.
3. What would be the result of the introduction of such
a financial system?
The reBUltwould be to inaugurate a state of economic
freedom for each individual such as no country in the
world has ever enjoyed.
1. Clifford Hugh Douglas is a major in the R.A.F.
2. He was born in the year 1879.
3. He was educated at Cambridge University.
4. He is by profession a consulting engineer, holding
the following degrees :-M.I.MECH.E., M.I.E.E.
5. He has held many important appointments,
among which may be mentioned;-
(a) Chief Construction Engineer, British Westinghouse,
(b) Chief Engineer and Manager for India of
Westinghouse & Co.
ec) Deputy Chief Engineer on Electrification
Schemes, Buenos Aires and Pacific Railway
(d) Assistant Superintendent, Royal Aircraft Factory,
6. He is the author of the following books;-
Economic Democracy.
Credit Power and Democracy.
The Control and Distribution of Credit.
Social Credit.
The Monopoly of Credit.
Warning Democracy.
The New and the Old Economics.
1. What are the Social Credit Proposals of Major
Douglas? .
They are three in number.
FIRST: "The cash credits of the population of any
country shall, at any moment, be collectively equal to
t.he collective cash prices for consumable goods for sale
in that country, and such cash credits shall be cancelled
on the purchase of goods for consumption.' '*
2. By what financial mechanism is the above secured?
By means of the" Just Price Formula" (17, 4).
SECOND:" The credit required to finance production
'Shall be supplied, not from savings, but shall be new
credits relating to new production."*
3. What is the reason for this second proposal?
Because all savings are, in the first instance, a curtailment
of purchasing power.
THIRD: "~'he distribution of cash credits to individuals
shall be progressively less dependent upon employment.
That is to say, that the dividend shall progressively
displace the wage and salary."*
4. What is the justification for this?
Simply this: as machines are increasingly displacing
human labour, employment is decreasingly capable of
distributing purchasing power to all members of the
1. What is the A+B Theorem?
The theorem states that where A represents all payments
made to individuals (wages, salaries, and dividends),
and where B represents all payments made
to other organisations (raw materials, bank charges,
and other external costs), "the rate of flow of purchasing
power is represented by A; but since all payments
go into prices the rate of flow of prices cannot
be less than A+B. Since A will not purchase A+B,
a proportion of the product at least equivalent to B
must be distributed by a form of purchasing power
which is not comprised in the description grouped under
2. Does that mean that there is always a shortage of
purchasing power under the present system?
3. How many reasons are there for this state of affairs?

4.What are they?
FIRST: Money which should be used as purchasing
power is used for investment purposes (i.e. saved).
SECOND:The fact that under the present system all
costs are charged into prices and the community never
has the money to meet "allthese costs. "If the public
gets £2000 for producing £2000 worth of factories,
plant, and consumable goods, and pays the whole £200(}
for the consumable goods alone, it cannot afford to pay
a penny piece in the future on account of the factories
and plants. "t
5. How do the D.S.C.P. remedy this?
In two ways.
FIRST: As outlined in " Credit" (6, 16).
SECOND: "By fixing the prices of ultimate commodities
according to the proportion that consumption
bears, not only to these products, but to capital production
as well. "*
1. What is meant by the Just Price?
The Just Price is the REALcost of any article as distinguished
from its FINANCIALcost.
2. Why is it necessary to make this distinction?
Because the consumer has not the necessary purchasing
power to meet the financial cost (i.e. the selling
price) of all the goods produced.
3. Why is that?
Because the selling price includes items of cost which
the consumer has not enough money to defray.
4i. How is the Just Price arrived at?
It is a ratio based on the statement that " the cost
of production is consumption," and therefore the Just
Price is:-
Total National consumptiOn}
TotIaN at'IOnaI Product'Ion x financial cost.

1. What is purchasing power?
Purchasing power is the amount of cash in the possession
of the people (and at call) which is available
for spending on consumable goods.

2. In what way is purchasing power lessened under the
present financial system?
ln three ways. Firstly investments (i.e.
savings). SECOND:By deflation (I.e. recall of loans).
'third: By the operation of the financial law that all
costs must be recovered in prices.

3. If that is true, why has the financial system been
able to continue so long without breaking down?
. There are two reasons: FIRST: Purchasing power in the
home market has been increased by money received
from the production of goods for export. SECOND:
Purchasing power has also been increased by the production
of capital goods.

4. Is there anything to prevent the two reasons in 3
from continuing?

Yes. FIRST: All industrial countries have reachedt
he state of requiring an export trade (see 10) and are
increasingly finding difficulty in meeting that need.
SECOND: All capital production creates a debt under
the present system, and the community has not the
money wherewith to liquidate the debt.

5. How do the D.S.C.P. remedy this deficiency in
purchasing power?
FIRST: By financing new undertakings by new
credits. (See" Social Credit Proposals," 15.) SECOND:
By means of the Just Price" (see 17).


1. What is the national dividend?
The national dividend is a sum of money divided
equally among the citizens of the country and is additIOn
to wages

3. But why a national dividend at all?
On account of the increasing displacement of human
labour by machinery, only in some such way can all
citizens share the communal heritage.

3. How would the amount of the national dividend be
arrived at?
It would be obtained by (a) " placing a money value
,on the country's capital assets, and (b) assessing the
present commercial capitalized value of the population.
"* The national dividend would be based on the
total figure thus obtained, and would thereafter depend
on the ratio of appreciation to depreciation.

4. What would be some effects of the distribution of a
national dividend?
(a) Taken in conjunction with the Just Price every
one could live in material comfort.
(b) Poverty on the part of anyone would be the
direct result of wastefulness.
{c) There would be no need for charity as practised
(d) There would be a marked increase in the spirit
of self-respect and the spirit of independence.

1. What is usually meant by the term" work "?
The performance of any service of value to another
in return for a remuneration.

2. How is such service usually remunerated?
By the receipt of wages, salaries, dividends, or

3. Are machines not increasingly displacing human
They are.

4. What result does this produce?

5. What is unemployment?
Unpaid leisure.

6. Does the increased use of mechanical power lead to
a greater or a lesser productivity?
Greater, very much greater.

7. Why then are the unemployed not allowed to consume
as much as formerly?
Because under the present financial system money
is loaned only for certain approved forms of work.

8. What would be the logical solution of the problem
under the present regime?
That all " surplus" labour (i.e. unemployed men
and women, boys and girls) should conveniently depart
this life at the earliest possible moment.

9. Is it suggested that such a solution should be
Decidedly not; but the recorded increase in the number
of suicides indicates that a growing number of our
fellow-beings are having recourse to this way of escape.

10. But the Government does do something for the
Yes, and for the aged. These payments are, in themselves,
an acknowledgment that" work" in itself is
not an adequate method by which to distribute purchasing

11. Is there. any solution to the unemployment problem?

12. What is it?
 the distribution of purrchasing ,Power other than by
wages and salaries (I.e. The Natronal Dividend" (19).

13. Is there any other possible solution?

n. Are there any objections to this solution?
Well, perhaps not objections, certainly prejudices.

16. What are some of them?
(a) Fear that men and women would not voluntarily
associate to maintain the present standard of living
or to secure a higher one.
(b) Fear that many of our fellows could not be trusted
to " pull their weight" for a common cause the fruits
of which all would share.
(c) A belief that man was sent into the world to do
what is called" work."
(d) An idea that continuous and unremitting toil is
necessary throughout the best years of man's existence
in order to secure the present standard of living.
(e) An erroneous and primitive idea of " work."
(f) '1'he belief that if men and women were not kept
" working" they would get into misehief.
(g) A disinclination for any radical change in our habits of life.


1. What is leisure?
Unemployment accompanied by a high standard of

2. Should the aim be to increase 01' decrease the amount
of leisure available for each and all?
The ideal aimed at would be a "teadily rising
standard of hvmg accompanied by a gradually iIJ('reasing
amount of leisure.

3. Then the aim should not be to provide work?
That is so. The aim should rather b·"b transfer the
burden of human labour more and more to the machine
and thus make man the master of thu machine instead
of being at the moment its competitor, if not its

4. What would you say was one test of a progressive
In an economic sense one test would be the extent to
which an increasing measure of leisure could be the
possession of each and all.

6. But would men and women be capable of utilising
their leisure in a profitable manner?
That. question belongs to the sphere of ethics, not

6. Is it expected to realise this aim in the lifetime of
the present generation?
Of course not; the aim presents us with an ideal
worthy of the active support of every intelligent man
and woman in the eountry.

7. What would you say then was the ultimate goal?
In an economic sense such a goal would be the leisure

1. What is a reasonable attitude to adopt towards the
question of disarmament?
It is first of all necessary to understand that, given
the present financial system, armaments are a national
economic necessity.

2. How does that come about?
By the fact that each country is in competition with
every other one for the rights of " foreign" markets,
and this necessity is ultimately enforced by military

3. And how does that affect the question of disarmament?
If the cause of economic war is removed the need
for armaments will, ipso facto, be removed.

4. What then is the first step towards disarmament?
The introduction of a financial system which abolishes
national competition for markets.

5. Would this be one of the effects of the D.S.C.P,?
It would.

6. Will there be no disarmament until the financIal
system Is changed?
Disarmament will probably be forced upon the world.

7. By whom?
By the financial hierarchy.

8. Why?
Because military power is probably the only power
superior to financial power. "Disarmament in a military
sense is a pressing requisite to a continuation of
the present ascendence of the banking system."*

9. Should one therefore be opposed to disarmament?
Under the present financial system, yes.

10. But under the system envisaged by the D.S.C.P.?
Under the conditions which would succeed the introduction
of the D.S.C.P. one could hardly imagine the
people of any country wasting their abilities on the construction
of means of destruction and death.

23. WAR.

1. What are the popular notions as to the causes of war?
The ambition of national rulers; the hatred felt by
the nationals .of one country for those of another; the
need for expansion by rapidly-growing populations.

2. Where is the chief cause of war to be sought to-da.y?
The chief cause of war is to be found in the operation
of the financial system.
3. Why is that?
Because under the present financial system no one
country can buy all the goods it produces.

4 How is that brought about?
By the fact that the total prices of commodities
always exceed the total purchasing power of the community.

5. What is the result?
Each country attempts to dispose of its surplus (i.e.,
what cannot be bought) by exporting it. (See 10, 3.)

6. What does that lead' to?
It leads to a state of economic warfare. The Prime
Minister (Mr Hamsay MacDonald) said, "Markets
must be got back."

7. And the final act is-.?
The final act is war.

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