Errata page ix line 6 from top: when talk should read when they talk x line 4 from bottom: gooda should read good xii line 40 from top: “ministry” one shouId read “ministry Y> of one xxiii line 11 from bottom: my problem should read of any problem xxxi line 3 from top: critics should read critics’ 15 2nd paragraph under Conclusion, 1st line: claims should read denies 33 footnote 6: Cornell, Trial, p. 119. 63 line 16 from top: heads should read head 98 line 18 from top: real credit should read Real Credit 99 line 9 from top: bring should read being 138 line 7 from top: and more should read any more 158 line 9 from botton: cannot not should read cannot 170 line 5 from top: argument should read arguments 174 line 6 from top: dividends to should read dividends on 182 line 2 from bottom: cross out most of the time 203 line 5 from bottom: and ought to be standardised is repeated 229 line 7 from top: set on should read set only 232 line 10 from top: money the should read money in the 235 line 2 under subhead: capitalize social credh 268 line 5 under subhead: capitalize credit 257 replace chart with this one 275 line 11 from bottom: three my should read three of my 285 line 8 from top: passtime should read pastime home m Lo.d end Labor 83 ounces ‘:g:tttttt ~7 nw SALVATION THROUGH INFLATION Other Books by Gary North Manx’s Religion of Revolution (1968, 1989) An Introduction to Christian Economics (1 973) Puritan Economic Expm”ments (1974, 1988) Unconditional Surrender (1981, 1988) Sucessful Investing in an Age of Envy (1981) The Dominion Covenant: Genesis (1982, 1987) Government by Emergency (1983) Backward, ChnMan Soldiers? (1984) 75 Bible Questions XMr Instructors Pray ItNJ Won’t Ask (1984) Coined Freedom (1984) Moses and Phuraoh (1985) The Sinai Stmte~ (1986) Conspiracy: A Biblical View (1986) Honest Money (1986) Fighting Chance (1986), with Arthur Robinson UnhoZy Spirits (1986) Dominion and Common Grace (1987) hdwrit the Earth (1987) Liberating Planet Earth (1987) Healer of the Nations (1987) The Pirate Econom~ (1987) Is the World Running Down? (1988) When jwstice 1s Aborted (1989) Political Polytheism (1989) The Hoax of Higher Critici.$m (1990) The Judeo-Chtitian Tradition (1990) lbols of Dominion: The Case Laws of Exodus (1990) Victim’s Rights (1990) Westminster’s Confession (1991) Christian Reconstmction (1991), with Gary DeMar The Cease Theorem (1992) Political~ Incorrect (1993) Rapture Faer: Why D@ensationali.sm Is Paraijwd (1993) SALVATION THROUGH INFLATION The Economics of Social Credit Gary North Institute for Christian Economics copyright, Gary North, 1993 Library of Congress Cataloging-in-Publication Data North Gary. Salvation through inflation : the economics of social credit/ Gary North p. cm. Includes bibliographical references and index. ISBN 0-930464-64-8 (pbk): $12.95 (alk) ISBN 0-930464-66-4 (hdbk) $25.00 (alk) 1. Social Credit. 2. Inflation (Economics) 3. Douglas, C. H. (Clifford Hugh), 1879-1952.4. Economics - Religious aspects - Christianity L Title HG355.N67 93-18285 332.4’ l-dc20 CIP Institute for Christian Economics I? O. BOX 8000 Tyler, TX 76711 This book is dedicated to Don Bell whose journalistic integrity is matched only by his dogged persistence - a model for all of us professional scribblers. TABLE OF CONTENTS Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 l. Testing the Prophets . . . . . . . . . . . . . . . . . . . . . . . . . 17 2. The Origins ofSocialCredit. . . . . . . . . . . . . . . . . 31 3. Scarcity and Wealth . . . . . . . . . . . . . . . . . . . . . . . 41 4. Social Credit’s Blueprint . . . . . . . . . . . . . . . . . . . . 55 5. Who Represents the Consumers? , . . . . . . . . . . . . 81 6. Who Should Control Distribution? . . . . . . . . . . . . . . 106 7. Falling Prices and Capitalist Profits . . . . . . . . . . . . . . 119 8. AFaIse Prescription . . . . . . . . . . . . . . . . . . . . . . 141 9. Dividends Under Capitalism. . . . . . . . . . . . . . . . . . . 165 10. Social Credit Means State Monopoly Credit . . . . . . . 185 11. Sanctions: From Economics to Politics . . . . . . . . . . . . 209 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 AppendixA MajorDouglas’A+ BTheorem . . . . . 241 Appendix B: My Challenge to Social Credit Leaders . 264 Appendm C: A Bibliography ofFiat Money Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . 27’7 Appendix D: A Bibliography ofFree Market MonetaryTheory . . . . . . . . . . . . . . . . . . 285 Scripture Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . 301 There are men who are commonly stigmatized as moneta~ cranks. The monetary crank suggests a method for making everybody prosperous by monetary measures. His plans are. illusory. However, they are the consistent application of a mon- etary ideology entirely approved by contemporary public opin- ion and espoused by the policies of almost all governments. The objections raised against these ideological errors by the economists are not taken into account by the governments, political parties, and the press. It is generally believed by those unfamiliar with economic theory that credit expansion and an increase in the quantity of money in circulation are efficacious means for lowering the rate of interest permanently below the height it would attain on a nonmanipulated capital and loan market. This theory is utterly illusory. But it guides the monetary and credit policy of almost every contemporary government. Now, on the basis of this vicious ideology, no valid objection can be raised against the plans advanced by Pierre Joseph Proudhon, Ernest Solvay, Clifford Hugh Douglas and a host of other would-be reformers. They are only more consistent than other people are. They want to reduce the rate of interest to zero and thus to abolish altogether the scarcity of “capital.” He who wants to refute them must attack the theories underlying the monetary and credit policies of the great nations. Ludwig von Mises* * Mises, Human Action: A Treatise on Economics (New Haven, Connec- ticut: Yale University Press, 1949), p. 186. FOREWORD And Jesus answering them began to say, Take heed lest any man deceive you (Mark 13:5). This book is an antidote for economic deception. It is de- signed to help you understand economics. Read it, pay atten- tion to it, and follow its arguments. When you have finished it, you will have learned to “think economically.” You will never again be easily deceived by politicians and other professional deceivers when talk about taxes, prices, and money. Especially money. I am trying to help you keep more of your money. If you hold a Ph.D. in economics, you are not likely to have been deceived by the version of inflationism that I do my best to refute in this book. Major Douglas’ version of inflationism is long forgotten within the economics profession. Even in its heyday in the 1930’s, it was considered terribly unfashionable by economists. Far be it from me to suggest that you are un- fashionable. While you probably hold some version of inflation- ism, unless you are an Austrian School economist, you will probably find this book a curiosity. You need to read my book on the Cease theorem more than you need to read this one.l My targeted reader for this book is a sincere Christian, prob- ably a layman, who has stumbled into some branch of the Social 1. Gary North, The Cease Theorem: A Study in Ejiftemology (Tyler, Texax Institmte for Christian Economics, 1992). x SALVATION THROUGH INFIATION Credit-movement and has been persuaded (though not by reading the complete works of Major Douglas) that Social Cred- it economics is Christian. He has been woefully deceived about, this. I see my task as that of instructor in biblical economic truth. What the Bible teaches about economics in general and monetary policy specifically is utterly opposed to Social Credit economics. I intend to prove this to him. This maybe you. I receive no money from the sale of this book. I wrote it fi-ee of charge as a service. Why? As we ask in the United States: “What’s the catch?” There is no catch. I was trained to be a teacher. Teachers teach. Once they begin a career teaching, it is difficult for them to stop. But unlike most teachers, I teach in fi-ont of a computer screen, not in front of a classroom. I have devoted my adult life to studying the Bible. I have also devoted much of my career to studying economics. Having learned some things, I feel compelled to teach them to others. The things I have learned are simple, such as the old rule, “You rarely get something for nothing,”2 and its corollary, “you sometimes get nothing for something.” As a businessman, I have learned that the solutions to personal poverty are hard work, long hours, personal thrift, honesty, and a commitment to serve others by selling them what they want at a price they can tiord. Prayer is also a gooda idea. These are also the solu- tions to world poverty I have learned, above all, that there are no shortcuts to lasting wealth. This principle applies to societies as well as to individuals. 2. The exception is salvation, a fkee gift of God. “For by grace are ye saved through fkhh; and that not of yourselves it is the gifi of God: Not of works, lest any man should boast” (Ephesians 2:8-9). But salvation ceases to be free once it is freely received. “For we are his workmanship, created in Christ Jesus unto good works, which God bath before ordained that we should walk in them” (Ephesians 2:10). Grace is a form of debt. We receive more from God than we can ever pay for, but we are nevertheless required by God to pay what we can in order to verifj the reatity of our Eah.h. “But wilt thou know, O vain man, that faith without works is dead?” (James 2:20). “Ye see then how that by works a man is justified, and not by filth only” (James 2:24). [...]... innovation The economic ideas of John Maynard Keynes, another apostle of fiat money and government fine-tuning of the economy, triumphed because he offered them in the middle of the worst depression in modern’ history The popularity of Social Credit in the 19 30’s was also the product of the Great Depression 8 Igor Shafarevich, The Socialist Phenunurwn, translated by William Tjalsma (New York Harper & Row, [19 75]... fundamentalist may embrace these ideas as the wave of the future, to the extent that he believes that this dispensation has a future A good example of this sort of long-forgotten discard is Social Credit Social Credit and “Real Bills” The Social Credit movement began in 19 17 The fundamental idea of Social Credit is that capitalism suffers from a major flaw: it does not create sufficient bank credit to allow consumers... a profound ignorance of the history of the erroneous idea which they so enthusiastically proclaim: fiat credit money, i.e., legalized counte@eiting Following the logic of the real-bills doctrine, they proclaim the need for continual new injections of fiat money by the State in order to avoid economic slumps They also call for the replacement of the fi-actional reserve banking system by the State They... money The result is the boom-bust business cycle.4 Sociul Credit Defenders of Social Credit today, not one of whom is a trained economist, have never heard of the real-bills doctrine Neither had Social Credit s founder, Major Douglas For that matter, only specialists in the history of banking theory have heard of it So, those enthusiasts who announce Social Credit as both a breakthrough economic theory... [19 75] 19 80), p 12 9 SALVATION THROUGH INFLATION xx I expect the next economic crisis to be inflationary, not deflationary Social Credit is a system designed for a deflationary era, not an inflationary one, For a time, people will get their fill of inflationary nostrums during the next major crisis But on the far side of mass inflation there could be a deflation In fact, there will surely be a post -inflation. .. Typical of the leadership of the Social Credit movement is the statement by Maurice Colbourne, author of The Meaning of Sociul Credit, published in Canada by the Social Credit Board of Edmonton In the book’s Preface, he offered this opinion of himselfi The second advantage I have is that I am not an economic expert Thank goodness for that too No, I am a much more important person than a professional... profess faith in the divinity of Jesus Christ, the divine-human incarnation in history of the Second Person of the Trinity find themselves on the fi-inges of Western society Protestant fundamentalists, who seem to make up the bulk of Social Credit s Christian supporters, have been consigned to the cultural outer darkness of poorly typeset newsletters, AM radio broadcasts, and tiny Bible colleges They... VII (Summer 19 80), pp 53-63 xxii SALVATION THROUGH INFLATION In other respects, Douglas’ system resembles the mixed economy of Keynesianism’s “New Economics. ” John Maynard Keynes was Douglas’ contemporary and in 19 36 he praised with faint damns the economics of Social Credit, as we shall see It is worth noting that in that same year, in the Preface to the German edition of his General Theory, Keynes... camp of the faithful who dare to criticize their beliefs, whether the critics are Christians or humanists Their very isolation from Establishment culture comforts them It also makes them vulnerable to charlatans and deviants who proclaim some bizarre “new thing” in the name of Christ xiv SALVATION THROUGH INFL4TION The Lure of the Bizarre This is why Christians often revel in ideas that members of the. .. unity to the fragmented Social Credit organizations!) 5 Maurice Colbourne, The Meaning of Social Credit (4th revised edition; Edmonton, Alberta: Social Credit Board, 19 35), pp 9, 10 Preface xxvii What is an outsider to do? More to the point, what are you to do? You are the reader Presumably, you want to know whether Social Credit is true or false How can you find out? The best way is to read all of hk . (19 68, 19 89) An Introduction to Christian Economics (1 973) Puritan Economic Expm”ments (19 74, 19 88) Unconditional Surrender (19 81, 19 88) Sucessful Investing in an Age of Envy (19 81) The. (19 87) hdwrit the Earth (19 87) Liberating Planet Earth (19 87) Healer of the Nations (19 87) The Pirate Econom~ (19 87) Is the World Running Down? (19 88) When jwstice 1s Aborted (19 89) Political. (19 89) Political Polytheism (19 89) The Hoax of Higher Critici.$m (19 90) The Judeo-Chtitian Tradition (19 90) lbols of Dominion: The Case Laws of Exodus (19 90) Victim’s Rights (19 90) Westminster’s