The ad hoc nature of the economists' approach betrays their lack of any consistent and coherent philosophy from which to derive policy. They have no locus standi. They are approaching the situation in media res (into the middle of things) as being merely a matter of technical manouevering because they do not recognize the Cultural Heritage and the nature of inheritance as being innately due to all citizens by right of birth and existence. Nor do the economists in general seem to recognize the role of orthodox industrial cost-accountancy in the situation. Historically they have ignored or denied its relevance.
*locus standi: a right to appear in a court or before any body on a given question: a right to be heard
Financial incomes have been assumed to be equal to financial costs. Indeed, economists have tended to abjure subjective questions of philosophy as being an impediment to a scientific and objective pursuit of their subject. It is, therefore, not surprising that they can go on with endless debates and theoretical speculation—because they do not really know where they are going. Moreover, their position is both philosophically and technically unsound because they almost universally assume that the primary function of an economy is to ensure that all able-bodied individuals are working. This assumption inevitably encourages inefficiency and recognizes humans essentially as mere economic functionaries—and debases the nature and purpose of human life.
Douglas revealed that the existing price-system is fundamentally non- self-liquidating, i.e., incapable of liquidating its costs with the incomes distributed—the rate of flow of prices exceeds the rate of flow of consumer incomes. The latter can never equal the former except by increasing drafts upon the future. The equality is forever elusive because every attempt to achieve it drives it even further into the future.
The flaw is not due to the creation of money by bank loans, which act by the instrument of “IOUs” to activate productive resources and without which the modern economy could not function. The function of the banks in creating, rather than on-lending, money through the issue of credit was known in the late 1800’s and was, indeed, the subject of Westinghouse Comptroller Branson’s boring monologue lectures to C. H. Douglas prior to the First World War. It was described by monetary experts at Government hearings during the early decades of the last century.
What is relevant and problematic is that the banking system recovers all financial costs through prices in respect of both consumer and capital goods although the latter may remain physically in existence for many decades. Money should be issued at the rate of physical production and cancelled at the rate of physical consumption. Douglas described this as a “…difference of circuit velocity between cost-liquidation and price creation which results in charges being carried over into prices from a previous cost-accountancy cycle.
Practically all plant charges are of this nature, and all payments for material brought in from a previous wage cycle are of the same nature.” The fact that ultimately incomes may theoretically equate with prices in some nether world of timeless beings is of no help to humans who must live now. The subject seems admittedly elusive but the survival of civilization most likely depends upon an understanding of the dynamic as opposed to static nature of it.
The oppressive situation has gone on for centuries, un-mitigated by a continuous accumulation of un-liquidated financial costs represented as debt. This debt represents past purchasing-power wrongly appropriated from the consumer over time. We face the problem of this vast overhead of debt which can never be paid by conventional means but only converted into new debt. The only way it can be dealt with is to repudiate it and place it to the credit side of the ledger on behalf of the citizens or where appropriate honour holders of State securities who have actually acquired such securities with earned income.
Meanwhile we have to contend with the continuing flaw in the non- self-liquidating price-system, which defect is continuous and dynamic. This requires not any one-time solution but a continuous injection of non-cost-creating consumer credit to ensure that all final products can be purchased without incurring any residual financial debt. We need a program of continuous debt redemption in order that the price-system may reflect physical realities. From a theological or philosophical standpoint this does reflect, as Steve so often emphasizes, a “gifting” in keeping with the concept of redeeming “Grace.” At this point science and sound “religion” do appear to merge.
To what extent Steve Keen has actually grasped the above concept one can only speculate. It is difficult to imagine that at this point in time, as a professional economist, he has not enquired into Social Credit to some extent, if only clandestinely. We can be sure that he is sufficiently aware to know that any overt or visible support of Social Credit, per se, would almost certainly mark the end of his academic career.
We understand that very shortly prior to his departure to the United Kingdom from New York to conclude his world tour of 1934-5 Douglas received an urgent request for an audience with a very prominent and powerful U.S. jurist who said that he understood that Douglas was attempting to promote a new financial system with the objective of decentralizing power—and assured him point-blank that he would not be allowed to succeed in his venture.