Message #1129

[Geolibertarian]

In his excellent book, We Hold These Truths: The Hope of Monetary Reform, Richard C. Cook advocates as a solution to “poverty in the midst of plenty” what he calls the “National Dividend.”

If a grassroots push for the National Dividend -- whether the all-out version proposed by Richard C. Cook, or the more modest version proposed by me -- ever attracts serious media attention, it will be met by all sorts of objections (including the usual hysterical reactions by monetary flat-earthers from the Austrian School). Below are responses by Cook himself to what I predict will be the two most common.

Wouldn’t even a modest version of the National Dividend cause runaway hyperinflation?

From pages 33-34 of We Hold These Truths:

"Bankers and their apologists have always argued that any program that publicly-generated credit would cause inflation. This is nothing but propaganda.

"Because a National Dividend would replace bank-credit of the same amount, it would bring the total monetary supply of the nation only up to the level of the GDP. It would not result in 'more dollars chasing the same amount of goods,' but would simply bridge the gap. Not only would the National Dividend be non-inflationary, it could even be counter-inflationary. It would allow businesses to liquidate previous financial costs incurred when they borrow from banks without creating new ones to the same extent.

"Besides, what is truly inflationary is the Federal Reserve's policy of creating, then deflating, asset bubbles, the latest being the housing bubble. With such bubbles, prices inflate on the way up but stay well above their original level on the way down. This can do irreversible structural damage to the economy and is in fact a wealth transfer mechanism from ordinary consumers to wealthier people who own more assets.

"Inflation due to the housing bubble has affected not only home prices--it has also escalated rents and business leases, made it harder for people to start small businesses, and increased the difficulty for young people even to find a rented room. Meanwhile, home and property ownership is becoming a high-priced commodity available only to the rich.

"This type of inflation has an immense ripple effect. What it means is that the dollars people earn purchase less throughout the economy, because every business must operate in a building and on a parcel of land which now costs much more....

"Also, bank interest by itself is inflationary, because it adds to the cost of doing business at many points in the production-consumption stream. The Federal Reserve claims it is fighting inflation when it raises interest rates, but what it actually does is slow down economic activity by suppressing wages and salaries or throwing people out of work. The higher interest itself pulls in the other direction by adding to costs. Thus inflation has continued even during periods of monetary contraction, as in the 1979-83 recession when the Consumer Price Index rose almost 20 percent."

Isn't the National Dividend just “socialism” or “communism” in disguise?

From pages 31-32 of We Hold These Truths:

"A National Dividend would represent the truth wealth of the community, the bounty of our incredible GDP and our amazing efficiency, of which all citizens should be the beneficiaries once the business owners receive a reasonable profit. Again, it's important to realize that Social Credit is not a socialist system. Rather it is 'democratic capitalism,' in contrast to the 'finance capitalism' that has become so destructive that it threatens to destroy the world rather than submit to reform."

And from pages 84-85:

"The idea current today of the individual and community in conflict is a sign of an unbalanced, even sociopathic, frame of mind. Thus we have in our own time two extreme views. One is that individuals should be able to do just about anything they want and that society is a hindrance—the mind-set that has fostered free-market capitalist economics. The other is that the individual should be totally subservient to the group as in state communism.

"Curiously, though, neither ideology upholds the same ideals for all members of the culture. Free-market capitalists see nothing wrong if a handful of oligarchs holds everyone else in thrall to debt. The commissars of communism find it perfectly natural if their position in the party grants them privileges the rank-and-file will never attain. So both systems are rife with oppression, brutality, and hypocrisy."