NZ Repercussions

The repercussions were felt in New Zealand as in other countries, but the contraction of credit on which the bankers had decided was not immediately operated in America, and an uneasy recovery was made up to 1928, despite the return of Britain to the gold standard in 1925; but in 1929 came restriction in America also with the Wall Street collapse of that year, and the beginning of the world slump.

R. G. Hawtrey held that the world's economic troubles were due to "mistakes of the banking system in the discharge of the vital function of the creation of credit."

Douglas on the other hand made it clear that there was in the price-cost system an inherent defect, persistently tending toward a failure of effective consumer demand, and that this was merely aggravated in its effects by bank contraction of credit, with the resultant check to that "economic growth" necessary to keep the crazy system afloat.

He declared: "The first step towards the solution of the problem is the recognition of the fact that what is called credit by the banker ... is definitely communal property."

Hence the basis of the Social Credit proposition that credit at its origin belongs to the nation and can be used by governments for the benefit of the nation as a whole.