It is a classical example of trying to expose one lie with another lie in an attempt to exploit human ignorance with the use of popular mythology and false morality—all for the purpose of maintaining an evil dispensation for the advantage of an self-appointed power elite.
The essay contains some truths. People as a mob have neither intellect nor rational function but are moved primarily by blind passions and misconceptions. When conditions become totally intolerable the more intelligent tend to wake up as individuals rather than the masses awakening collectively. Some individuals or groups of individuals always assume a leading role. Truly intelligent initiative is alway at a premium and does not emerge suddenly both spontaneously and pervasively. It takes time for ideas to spread and generate understanding.
The deploring of the rapid expansion of financial debt is entirely justifiable—but the discussion merely describes this phenomena without analyzing the problem in any scientific manner—and blames it on an assumed flaw in human nature which manifests as a desire of individuals to have what allegedly they are not entitled to possess. Von Mises is correct about the manner in which our present financial system leads to alternating economic expansion and collapse but he offers no valid explanation as to the cause or nature of the problem. He presents essentially as a moralist who blames the "frailty of man"—and any suggestion that gold offers a solution to the vicissitudes of the modern economy is pure nonsense. People who are infatuated with gold should be placed within a secured enclosure in the middle of the Sahara Desert. They should be given all the world’s gold. The gates should be secured and they should be told to have a merry time. This might bring home to their deluded minds what is the real wealth of society, i.e., food, clothing, transportation, medical services, housing, communication, education and a host of other material possessions, cultural relationships and spiritual attributes. Basing life upon a relatively useless rare metal is a form of mindless and immoral idolatry which defies description.
The claim that we are trying to live beyond our means is a form of deception and delusion. You cannot live beyond your physical means. One cannot eat next year’s crop or drive next year’s model of an automobile not yet produced. I defy any of these Puritans or blind moralists to perform such an act. This sort of belief is a classic example of how abstractions can defeat our natural intelligence. When people make such ridiculous claims they are not looking at reality. They are looking a the world through a distorted financial lens which purports to represent reality but increasingly produces a diminishing image of our real potential for both creating and distributing real wealth. The erroneous assumption is that our purely man-made system of financial accountancy reflects accurately our real wealth and our potential for creating more. This is the fatal error upon which modern society attempts to function.
The fact is that a financial “bubble" is built upon credit advanced as bank debt in respect of real and actual production, notably but by no means exclusively for housing. These houses, e.g., were actually built and were not a figment of the imagination. We had demonstrated our creative capacity to produce real things. They were created and awaited consumer acquisition and use. To suggest that anything which is already produced and desired should be beyond the reach of the consuming public is merely perverse and reveals the mind of the tyrant who seeks power through the agency of alleged but false scarcity. Anyone who will release their minds for an instant from the mesmerization of “money” as an abstraction will appreciate that the real, i.e., physical, cost of production is fully met when any item is completed and ready for final consumer purchase and use. There is no physical debt, nor can there be. Economics is simply the application of energy to conversion of materials to form articles which are required or desired as useful to humans. The problem is that our defective human-designed system of finance and financial cost-accountancy fails increasingly to reflect this irrefutable fact. Industry generates financial costs which derive from two primary sources: (1) wages, salaries and dividends. These are both components of ultimate price and disbursements of unattached and effective purchasing-power. (2) costs in respect of goods which are brought in from a previous costing cycle and are not income in the same cycle of production, although they increase costs and prices. The only option given to us currently is to compensate this chasm between prices and incomes, which grows proportionately with the replacement of labour by technology, by increased borrowing of additional repayable credit, i.e., debt, from the banking system. This does not finally liquidate the financial costs of production because it merely transfers them as an inflationary charge against future cycles of production.
The banking system possesses a monopoly, conferred by State charter, on the creation of financial credit (which functions as money in the modern world) which falsely claims ownership of the credit which it creates against the real wealth of the community—which wealth it did not create. When foreclosing on this wealth they exercise this false claim—which in fact is a claim to ownership of the earth. They have in effect appropriated the communal capital in a breathtaking act of grand larceny. Many bankers themselves do not fully realize the nature and evil of the system in which they operate. The general public is woefully uninformed on the matter—although more people are awakening to an understanding. However, we now have the encouraging phenomenon of some bankers recognizing the evil of their practice and abandoning the profession as incompatible with both reality and Christian and moral principles in general. https://vimeo.com/136794177
In brief, the current financial system charges the consumer, quite appropriately, with capital depreciation—but quite inappropriately and unjustly fails to credit the consumer with capital appreciation which greatly exceeds capital depreciation. We should have increasing real supplementary financial incomes augmented by rapidly falling retail prices. This condition must be met by an expansion of consumer credit issued without being registered as debt in order to not only fill the increasing “gap” between consumer incomes and retail prices but to give consumers full access to the physical outpouring of product and to provide the consumer the means of allowing producers to recover and cancel their costs through sales. The present financial system defrauds the community by accounting our physical capital as a liability instead of an asset.
Von Mises is confused or misled by his preoccupation with price-theory which erroneously assumes universal price elasticity while neglecting the crucial area of industrial financial cost-accountancy. He is dead wrong in stating that economic “bubbles”, i.e., prosperity, can only be sustained by credit (meaning debt) expansion. They can be sustained by consumer credit issued without debt to supplement incomes and to effect falling retail prices. The modern money system is simply accountancy and the time is long past due when we should have altered our financial accountancy to reflect reality. The real lie is not that we are in general irresponsible by going further and further into debt. The real lie is that we are being falsely forced into debt in order to achieve and enjoy the actual and potential results of our association as humans. As things currently stand, if the consuming public did not contract debt to finance purchases the producers would not be able to recover their financial costs through sales and the entire economy would collapse in universal bankruptcy. That people can be conned by these malevolent pseudo-moral falsehoods is not exactly a favourable testimony to the general level of human intelligence. Of course when unsuspecting people of general good will are lied to day in and day out and fed false ideas about morality and financial and economic principles they can, understandably, be misled by all of the false data which is constantly presented to them.
www.socred.org Here you will find Dr. Heydorn’s recent 550-page book “Social Credit Economics” which is available in various countries on the Web at Amazon.
Dr. Oliver Heydorn’s recent lectures in Australia
Here is Dr. Heydorn’s presentation in New Zealand (Aukland):
Major C H Douglas on 'The Causes of War' PART 1 and the …
Major CH Douglas on "The Causes of War" - part 2 - YouTube