Social Credit Theory: Money grows in trees!
There are several topics that I contemplated writing about this time, but the sudden pervasiveness of this repackaged “Free Lunch” economics insists that I do whatever I can to save the minds of those searching for answers as the current economic system implodes around them.
The most important point has already been made twice, first in the “Money grows in trees” reference and secondly in referencing the theory as a “Free Lunch” theory. The Theory of Social Credit posits that the immutable economic law of scarcity is somehow suspended if people just “believe”. If something seems too good to be true, it probably is; and it definitely is in this case.
For those who may be unfamiliar with what the Social Credit Theory/ Argument is, I will go over the basics very quickly. Social Credit advocates rightly attack the destructive nature of debt based fiat currencies, noting that paying an entity for fiat money creation (in the case of the US, bond holders and/through the Federal Reserve System) , seems like paying for nothing. Why not just print the money, instead of making interest payments on it as well (from taxes or through printing with no debt backing the new money)? Social Credit arguments centered on the US quote excerpts from the US Constitution (Article I, Section 8 “The Congress shall have Power….. to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”) to point out how the US Government has needlessly abrogated this right to a public-private partnership to the detriment of the taxpayer and national fiscal health. Again, why not just print the money? We could have all the money we want for free! Sounds pretty sweet right? On the contrary, this theory is possibly the only thing worse than the current system.
The first problem with this theory is it focuses on only one aspect of the entire economy (money, or the exchange medium), and then focuses only on one aspect of the exchange medium (debt base). It does not take into account the problems of fiat (“by decree”, or “legal tender laws”, a government supported monopoly of money), central banking (the cartelization and monopoly of the banking sector), fractional reserve banking (the freedom of the banks to keep less reserves than the amount needed to cash out deposits, etc.), or the inflationary aspect of cheaply produced currency (particularly fiat). Social Credit advocates go so far as to say that inflation is good for the economy, while it is deflation that is bad, speaking only in terms of how deflation makes things bad for borrowers. I thought the point was to avoid debt? That is only one example of the cognitive dissonance required to make this Theory fly.
So in this potential land of unicorns and marshmallows, Social Credit Theorists claim that a country may just print all the money it wants, and thereby fund all the social programs, infrastructure projects, etc. that the people of the nation need, while also providing enough money for everyone to live comfortably, while legal tender laws ensure cooperation from everyone. They usually reference prior usage of “free money” in the US in glowing terms, such as “Colonial Scrip” and Lincoln’s “Greenbacks” as examples of success. They even go so far as to suggest that Lincoln was assassinated by the banking establishment for bringing this wonderful economic freedom to the citizens of the country. However, they never spend any time on expounding the full history of those currencies, and for good reason. They must leave out important facts about these currencies, that they were used to fund wars (how noble and helpful), the notes were supposed to be backed by specie (precious metals) but either never were or only partially (lies) , and that after some time they often could only be spent at gunpoint (particularly in the case of the Colonial Scrip, the Continental Army was not above stealing supplies when wagonloads of paper scrip was refused). Why give up real goods and services for paper and ink? This leads into the next argument.
Austrian economists have always held that precious metals will win the currency competition in a free market economy (I will not explain this whole argument here, as there are plenty of free resources online about this position). Social Credit Theorists disagree, positing that in a free market economy, “Social Credit banks” will offer interest free loans of the money-printed-on-demand, and that since any loans in commodities will require interest with repayment, the cheaper loans from the Social Credit institutions will quickly run commodity currencies out of the market. They overlook a key problem with this assertion: Just because you can get a loan, doesn’t mean the seller has to accept the payment. Without legal tender laws, Gresham’s law (bad money will drive out good money) does not work. I have yet to see a social credit theorist explain why someone would sell hard earned real goods or sell their labor for something they could easily print up themselves at home, or notice that when they appeal to Gresham’s law in defense, they are admitting to supporting bad money. This leads us back into the initial contention with “Free money”: If printing as much money as desired is the path to prosperity, why don’t we all just start printing our own money? Why not just start paying for things in literal monopoly money? What makes this different from counterfeiting?
The Social Credit Theory is merely another attempt at a free lunch. Stealing. Getting something for nothing. If one entity can make money as it pleases, why bother with loans from them? Why can’t you do it? Why can’t we all do it? Of course if we all do it, it would be worthless, which is why Social Credit Theorists don’t like this question, or really any questions that don’t involve their anti-bond arguments. When someone counterfeits (creates) money, they get the goods the purchase for free. This is no different than anyone else printing money, whether it’s the US Treasury and Federal Reserve, or a Social Credit institution. There (Still) Ain’t No Such Thing As A Free Lunch (TANSTAAFL).