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Social Credit to the Corona Rescue By James Reed

     You would think that the banks would be in fear and trembling, with the fall of the cliff that the Australian economy has undertaken, businesses shut down, economic activity in the toilet, or not even there, a looming property price crash, jobless levels set to rival, maybe surpass the Great Depression. So, why are the banks so happy? Sure, they are all cashed up, holding more cash than usual, but cash is but a small part of the modern financial sector. Not to worry, the Reserve Bank has plenty of dough to splash around, like a corporate Santa:

“If the cash gets low, the Reserve Bank stands ready to assist. Since 2015, in the wake of the global financial crisis, the RBA has offered Australian banks what's known as the 'Committed Liquidity Facility'. In the RBA's own words, it "entails the central bank committing to stand ready to provide a bank with liquidity against high-quality collateral that would otherwise be illiquid in the market". In other words, in times of distress, banks can bundle up loans into securities and park them with the central bank for a very modest fee, in return for cash. This emergency line of credit is set at more than $220 billion this year — and if that's not enough, the RBA would likely scale it up or set up something else if necessary. The central bank is also offering term funding of "at least $90 billion" to the banking system to allow lenders to support small and medium-sized business, but it will also allow lenders to shore up cheap reserves. Some 130 banks, building societies and credit unions can borrow from the RBA dirt cheap, at a fixed rate of 0.25 per cent, for funds equivalent to up to 3 per cent of their total outstanding credit to households and businesses, in the first instance. "It's not free money but it's close to it," Mr Johnson said.”

     Well, that is good if you can get it, and should give unemployed Australians a warm and fuzzy feeling while they freeze and/or starve to death his winter, when the Great Depression 2.0 sweeps in like an Antarctic wind.

     This is all good for the banks, but as usual, the ordinary people are not placed at the centre of any social recovery program, and they should be, at least from a social credit perspective. Here Oliver Heydorn  sees merit in the US Automatic Boost to Communities Bill  which involves “direct[ing] the Secretary of the Treasury to establish the Boost Communities Program to provide monthly payments to America’s consumers during the COVID–19 emergency to recover from the emergency, and for other purposes.”

     This Bill Heydorn believes, represents social credit in embryo, even though probably none of the sponsors know anything about social credit, but the principles of social credit are universal, like the laws of physics, so a particular crisis can produce the desired solution. Thus, each citizen, regardless of wealth would be provided with $ 2,000 a month during the Covid-19 crisis period, then $1,000 for one year after that. This is somewhat similar to the national dividend, although it is not a measure based on an audit of the productive capacity of the society, which would undoubtably have led to more money.

     What is interesting is the proposal of how this will be paid for:

“When it comes to the typical question, “but where will the money come from?” the UBI-like payments proposed by the ABC Act would be funded through the money-creation powers of the government via the issuance of debt-free money. More specifically, the Treasury would mint two 1-trillion platinum coins (which the U.S. Constitution allows the government to do) in accordance with title 31 of the U.S. Code:  Additional coins could be minted as required. These coins would then be bought by the Federal Reserve central bank in exchange for digital dollars that could be spent by the Treasury.

Such a proposal for what would, in essence, be a monetary UBI (funded by newly created money), as opposed to a fiscal UBI (paid for by dipping into the tax till, consisting of existing money, and/or by increasing the National Debt) is, once again, fully in line with how Social Credit’s National Dividend would be financed. There is no need for borrowing or for taxation when the public authority can create new money that is free of debt and inject it into the economy in the form of a basic income or dividend payment. In close connection with the idea of “digital dollars,” the bill proposes a digital dollar system that would include Digital Dollar Account Wallets by 2021. The idea is that these “FedAccounts” could become a permanent feature of the financial system in the United States as a way of distributing UBI-like payments directly to the citizens and even to businesses. Such accounts would have things like debit cards, online account access, automatic bill-pay, mobile banking and ATMs associated with them.”

     Of course, this is where the parallel with social credit end, as there are many differences. The social credit dividend would be permanent rather than a stop gap measure to paper over the cracks of a crisis, and would be indexed to the productive capacity of the economy, which as I said, would likely give greater benefits to the ordinary people. As well, the corona money does not have a rigorous philosophical basis, merely to deal with a social problem on an ad hoc basis whereas social credit attempts to address the perennial problem of the deficiency of purchasing power that all consumers have to buy in full all that is produced in the economy, as  the flow of total costs and prices always exceeds the flow of total consumer incomes, leading to the structural problem of a lack of purchasing power. One can list many other differences, but no point, as the scheme is not social credit, but only uses parts. But, it is a good start, and we have to start somewhere, showing that parts of the Douglas scheme can be easily put in place without economic chaos, and indeed, saving society from the economic chaos that is surely heading our way.

     So, let’s try and get something like this up in Australia, to kick the can along the road.



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Sunday, 05 July 2020
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