American Social Credit - identifying the real problem and really fixing it

[oldickeastman]

Dick Eastman claims strong creditor-class
collusion in hoarding money savings to obtain
collective deflation premium gains.  He further
claims that the result of this collusion is that
interest being paid outside the household-
business-government loop to the financial
sector creditors does not find its way back
into circulation either as consumption spending
or investment.  The deflation that results (since
inflow of loans is less than outflow of payment
of principal and compound interest) causes
diminishing of household disposable income,
the increase of real debt, the less of buying
power, of business revenue, of incomes to
all non-financial factors of production.  This
also means that loans that were sound when
contracted (except for the future deflation
that is not anticipated) will tend to default
because of diminished purchasing power
in the system to enable borrowers to meet
their payment obligations.  This means
there will be defaults, foreclosures and the
selling off of assets to pay creditors.  The
creditors, holding the interest income they
have been collecting and not lending, will
no be able to buy up the foreclosed and
distress-sale assets at deflated prices 
-- the borrowers will be plundered of their
assets by the deflation which the creditor
class engineered for their own advantage.
 The "fiscal cliff" is simply Christmas for
Creditors  -- it creates deflation that will
put all of the household sector, the public
land and utilities sector, and the private
business sector on the auction block.  But
even this auction of the assets of those
bankrupted by deflation will not in any
way reflate the economy  -- because the
assets are not actually bought until the
bank takes possession of them  -- the
buying is all conducted between the
financial sector and the "upper loop class."

While you were all getting rid of your
dollars and buying gold from Rothschild
in this DEFLATION  and listening to Ron
Paul, Glenn Beck, Lew Rockwell, Peter
Schiff and Gary North who told you
hyper-inflation was coming  (a big fat
lie to trick you into buying gold in a
deflation) 

Meanwhile I had spelled out the solution
to the crisis of Western economies. 
Repudiate the debt and shut down all
government borrowing and all government
payments on national debts.  The worst
war criminals, murderers and traitors to
every country are responsible for the
fraudulent rigged system that borrowers
in aggregate can never win and always lose.

Instead of the banking system given the
power to create money (checking deposits)
by letting them lend money for which they
have only a fraction of the amount in their
possession (called lending under the 
fractional reserve banking system) 
-- instead of that, we shut down fractional
reserve lending and have the government
take over all of the creation of new money
and its introduction into circulation in the
economy.

Government will simply create money
(as banks create deposits when they make
get an amount of dollars deposited and
then lend out a big fraction of that to a
borrower who then spends it to buy from
someone who deposits the amount a bank
(the same bank or a different one) where
the bank then loans a fraction of that new
deposit to someone who spends the money
(transfers the deposit)  which to another bank
as a new deposit of which a fraction is spend 
etc.  So that there is the original amount being
transferred around  but it gives birth to a
smaller amount which also is transferred
around which gives birth to a smaller amount
that is transferred around  -- all of these new
but successively smaller creations of deposits
eventually totaling a multiple of perhaps
10 times what the original deposit was.  This
is called the money multiplier effect 
-- mathematically it is the inverse of the
required reserve ratio.  This is how money
is really created out of "thin-air"  -- because
a fresh deposit creates excess reserves 
(i.e. money in the vault that the law allows
a fraction of to be converted into a loan 
-- that is, for the bank, created into an
earning asset  since new demand deposit
money is always created with an equal
amount of debt that must be repaid
principal equal to the debt plus additional
interest.

But the multiplier works in reverse too.  As
new deposits and debt are created with
loans  -- the money supply growing by a
multiplier amount   -- at the same time 
the payment of principal and interest
causes a contraction of loans -- a
destruction of deposits  -- a shrinkage
of the M1 money supply (which includes
checking deposits as money) also buy a
multiplier amount.  But because the
absolute sum of principal and interest
payment flow is greater than the amount
of loans  the deflationary effect is greater
than the inflationary effect.  This follows
from the obvious fact that the retirement
of principal and the multiplier contraction
it causes just cancels the loan creation
of the new checking deposit  -- but
nothing cancels the contraction caused
by the retirement of interest and the
deflationary multiplier effect associated
with it.

This is why deflation is built in.  Why recession
must follow every boom in an economy where
all money is debt-created money within a
fractional reserve deposit system.  That is
also why the assets of the country must
flow from the bankrupted borrowers to the
creditors  -- since there is no money to pay
the interest since new money loan inflow is
exactly cancelled by vanishing money principal
outflow.  Where doe the money to pay interest
come from?  Nowhere.  It doesn't get paid. 
The creditors get the collateral.  Yes, some
people take out a loan and can pay it back 
-- but we are looking at the aggregate.  There
can only be an inflow of purchasing power
equal to the total of loans as multiplied by the
multiplier (the reciprocal of the required reserve
ration)   that is equal to the   outflow of principal
repaid times the multiplier.  So since there is
no amount of interest created to be paid to the
usurers  - the lender ends up taking the collateral
that was offered.

Most people fail to grasp this because they
miss the following point.  Above I am talking
about total flows of money from the financial
 to the other sectors of the economy.  We
look at total flows.  The total flow of new loans
entering the economy is a flow cannot for
long equal  the payments of interest and
principal that is going out of the economy. 
(It is possible in the short run when there is
a big jump in lending after a drought in
which the flow of interest and principal had
slowed to a trickle because of a period of
little lending (a downturn, a recession). 
But over time the flow of what can be paid
to the financial sector as principal and interest
cannot be bigger than what has flowed in
as loans.  A number of those seeking to pay
both principal and interest are going to come
up short  -- and it has nothing to do with how
thrifty or creditworthy they were  -- the money
is simply not there.  All of the borrowers
could be donald trumps and warren buffetts
and steve jobs, Edison or Henry Ford or
Walt Disney  types  -- the result will still be
the same -- there just isn't enough money
in the system for all of them to make good
on their loan contracts.  The banks therefore
will have to attach collateral.  The banks end
up with asset transfers equal to the shortfall
of interest.

I am sure that all I have given you is a headache.
 But if you go over it and draw a diagram of
the plumbing  -- you will see that I am right
-- that it can be no other way under the
present system of fractional reserve banking.

The lesson is a hard one to teach  -- that is
why only a few dozen people are aboard
on the need for a new national credit and
money system.

I say banks should not be allowed to lend
on deposits  -- but they should be forced
to lend only the deposits themselves  -- in
a deal with savers who have come to their
bank with their money  -- the bank will lend
their money  -- the savers are lending the
money to the banker  -- and the banker is
pooling all of the money it has borrowed
from "savers" and is in turn lending it to
entrepreneurs for a slightly higher interest
rate  -- and the bank lives on the spread
between what banker pays saver and what
entrepreneur pays banker for the loan. 
THAT IS HONEST BANKING  and no new
money is created that way.  The banker
becomes very interested in the success of
the entrepreneur in the local business
community as he should be. The banker
is not reaping big interest takings from the
fractional reserve system and investing it in
new factories in China that compete using
slave labor paid 10 yuan a month  -- to put
the local US manufacuters out of business
as has happened.  Instead we will have a
populist banking system.

A populist banking system is great, but
first we need populist money.  To satisfy
that need we have the the new American
money which a national money that
originates exclusively as a dividend
deposit to each American citizen in
every household.  That is, all new
money comes as a dividend distributed
in equal amounts to every citizen on a
regular basis, monthly or perhaps quarterly.
This money is not debt.  The householder
receiving it obtains it free and clear  -- no
interest to pay, no principal to repay.  It is
pure purchasing power that adds to
aggregate demand, but does not expand
by the money multiplier, since there is no
more fractional reserve banking.

That is the American National Dividend Plan,
the American Social Credit system.  (The
name social credit also applies to the
system of C H Douglas, and the two
systems each have a household dividend
-- but the American system completely
does away with the old system of money
creation and money expansion and contraction
-- the Douglas system rather uses the
dividend to fill in "gaps"  between what
retailers must pay to produce and market
a product and what consumers receive to
spend on those products.  (Douglas would
not admit to the problem with interest I have
outlined above.)

Its a great plan.  It should be taken up by
everyone.  The reason it isn't is because
it serves the common good, it promotes the
general welfare, it benefits everyone with
justice and all that.  But today no one with
money or a newspaper or a broadcasting
empire is going to want to promote such
a system.  They call the shots because they
profit from the crooked system we have
now.  So I am left calling on the hair dressers,
the Wal Mart greeters, the unemployed,
those holding down two jobs, those in prison,
those living off their parents or grandparents
-- all of us basket cases -- those working
McDonalds at 63  -- and guess what -- they
can't seem to put their hearts into paying
attention -- much less organizing and imposing
their political will on those feeding at the
trough in Washington.  And even if they could
have me explain it to them  -- the mass media
will drown me out in an endless drumroll of
falsehoods and bogus "Austrian economics"
and "Tea Party" politics  or bogus  Steve Keen,
Lyndon LaRouche, Michale Hudson "New
Dealism"   -- because "thin air money" that
is "spent into existence" by the government
-- is pure communism  -- pure hell  -- the
apex of corruption -- the total enslavement
of man to the corrupt politicians  - the pefect
unity of the totalitarian state and organized
crime.

Still there may yet be intelligent people of
good will who will see the advantages of
American Social Credit and will find a way
to convince the masses.



Dick Eastman