The Flaw Again

Earlier I have referred to a flow in our present financial system upon which the case for Social Credit stands or falls. The flaw is that the total prices for goods produced during a given cycle of production exceeds the total incomes distributed during that cycle. In other words if £100 is distributed in incomes during the production of one hundred pairs of shoes then the total prices of those shoes must be more than £100. The shoes can be sold only if purchasing power is obtained from another source and as that source can only be a lending source it follows that New Zealanders can only buy the goods they themselves produce (or get in exchange) by going further and further into debt. There are some apologists for the present system who see nothing wrong in mounting millions, of debt. Let us see just exactly what happens.

A shoe manufacturer distributes £100 in purchasing power during a cycle of production. As practically all money comes into existence as a debt it obviously means that this £100 must meet an interest levy of approximately £5 per annum. Let us suppose that the shoe manufacturer takes a year to complete his cycle of production and that his borrowing therefore costs him £5. It is quite plain that he must obtain at he very least £105 back from shoe buyers in order to meet his costs including the interest. The first point is that his prices must be raised by the £5 if he wants to escape bankruptcy. Secondly where do the shoe buyers get the money from to meet the £5 imposition? They have received only £100 in the form of purchasing power during the cycle of production.

It is true that the £5 eventually paid to the banks in the form of interest will re-emerge In the form of wages and salaries etc. to the bank employees. But before the shoe buyers can buy the shoes, so that the shoe manufacturer can pay the interest, so that the bank can pay its employees, somewhere, somehow that extra £5 has to come into existence and the only way under the present system for it to come into existence, is for it to be borrowed. So that in addition to the interest bill on the original £100, a bill for the interest on the Interest has to be met. This interest business is one cause of the disparity between purchasing power and prices. There are other causes but this one should suffice to show that there is a considerable case for the fundamental Social Credit theory of the flaw.