 And so why don't we kind of just jump into it and for people listening out there or people watching out there, let's dive into social credits. Where do they come from? What are they and how can we start utilizing them to create better and more, let's say better design systems to help people? Okay. So social credit is something that was developed by a British engineer, Major C.H. Douglas. He was born in 1879 and died in 1952. And during the interwar period, so between the First World War and the Second World War, through a variety of books, speeches, articles, et cetera, he began what turned out to be a worldwide monetary reform movement. Now, social credit is actually broader than finance or economics. There's sort of a political side to it. There's a historical side to it. There's a philosophical dimension to it. But it's usually associated in the popular imagination or was when social credit was sort of a household phrase. It was associated with monetary reform in the main. So that's sort of what put Douglas on the map. And story, I should perhaps, before we get any further into it, perhaps should clarify that when we talk about social credit, of course, talking about something very, very different from the Chinese totalitarian surveillance reward and punishment system, which the Chinese government has introduced in the last few years, in which they have decided for some strange reason to call social credit. Well, they did it purposely. Well, one wonders. It's good marketing on their end. It's what wonders. This created a huge problem for us social creditors who are still about because the question arises, do we need to start calling this something else? Come up with a completely different term because the Chinese now have usurped appropriated our term. Or is there some way that we can judo it and say, well, this is not Chinese social credit. This is Scottish social credit because Major Douglas was a Scotsman. Call an investment creditor and say, yes, I want an investment. Well, some people have suggested we should refer to it as a monetary UBI as opposed to a fiscal UBI. We'll get into that a little later. So basically the story runs as follows. 1916, Douglas was sent down to the Royal Aircraft Factory in Farmboro, England. He was a major in the Army at the time. This is during the First World War. And he was tasked with the responsibility of investigating an accounting model that the factory had got itself caught up in. And he noticed as he was analyzing the books that the factory was generating costs and prices at a faster rate than it was distributing incomes to consumers in the form of wages, salaries, dividends, et cetera. He looked at 100 other British firms and found that the same pattern existed. They were all generating costs and prices at a faster rate than they were distributing incomes to consumers. So he thought this is rather curious. I mean, if all these companies are in the process of production generating costs and prices at a faster rate than they're giving people money with which those prices can then be offset. The economy is essentially inherently unstable and something has to be done in order to provide additional purchasing power. And the existing system does, in order to avoid recession, in order to avoid bankruptcies increasing unemployment, it does do something to fill this price income gap. What it does is it basically relies on us as consumers and as governments and businesses to go to the banking system and borrow additional money into existence to basically supplement the flow of consumer incomes. So I suppose I should point out also because it's something that a lot of people are not aware of even today, that the bulk of the money supply exists in the form of bank credit, so it's its digital numbers and this money is created by the banks every time they make a purchase. So every time they make a loan, every time they buy security or any time they make any other type of purchase, they're simply creating credits on their books. And that's like 95% of the money supply. So only 5% in your typical Western country exists in the form of bills and coins created by the state usually. So we have a debt money system, right? And so if there's not enough consumer purchasing power being distributed through the regular channels of production, the only way that the existing system can think of to balance out the flow of costs and prices with sufficient income is to get us to go and borrow more money into existence. So consumers go and get mortgages, car loans, student loans, lines of credits, you name it in order to obtain more money and because we borrow more money into existence at a faster rate than we pay any of it back, the total consumer debt tends to increase, the burden increases over time. And I think in Canada now there's, it's something like two trillion dollars that consumers owe. Now, in the same way that consumers are sort of required by the system to do that in order to keep the thing running, governments also borrow money, municipal governments, provincial governments, federal governments from the banking system in order to distribute additional consumer buying power maybe through make work projects, build an airport or a highway or whatever amongst other ways. And this is another way of putting more money in people's pockets so that the existing flow of goods and services coming from the private sector can actually be sold and full. And we also have built into the system the necessity for growth. So when it comes to election time, politicians always talk about jobs and growth, jobs and growth and there's a very good reason for that because again, one way of filling the recurring price income gap is to get businesses to initiate new production or to expand existing production and that again, will put more money into consumer pockets now with which past production can be purchased, costs can be met and we can keep the economy running. So this creates all sorts of problems. We talked about, well, could start with the fact that if you're relying on constant debt increases to stabilize the economy, what happens when you can't drive the debt up any further? So it's sort of built into the system that when consumers or governments or businesses for that matter become too indebted, they're not able that maybe they're not willing or they're not able to borrow additional money or the banks aren't willing or able to lend additional money and then we have a credit crunch and we have a recession, businesses go bankrupt, consumers go bankrupt, everyone's going bankrupt. Well, not everyone, but a lot of people and they then can wipe that debt off the books and we can start the system over again when a better economic climate returns and we can all start increasing our debt loads all over again until there's the next crisis. Also inflation is sort of tightly bound up with this as well, according to Douglas's analysis because if you are constantly relying on debt money, additional debt money to maintain economic homeostasis, you set up a situation where those debts eventually they've got to be serviced. So the debt servicing costs increase constantly over time and that means that in order to maintain a standard of living, consumers who are now paying maybe 20% of their income whereas they were paying 10% before, they will go to their employer and say, I can't live off of what you're paying me, we need to have minimum wage increases or just general wage increases, salary increases. And of course, wages and salaries are costs. So eventually those costs will filter through into the economic system has increased prices. You've got to wage price spiral and they say, I think that the American dollar has lost about 95% of its value in the last 100 years. And so on the Douglas analysis, debt and the necessity of having to service debt is a large part of why that's been occurring. There are, well, if you've got huge public debts and of course there's a reason for public taxation to cover the interest as well as payback some of the principal even though governments typically are borrowing more than they're paying back. So there's a connection there with increased taxation. And also, in spite of the fact, I mean, this is sort of gets the heart of the matter. If you look at our economy simply from a physical point of view and one analogy that I like to use is sort of a computer analogy. If you think of the physical economy as hardware, let's say it's computer like computer hardware. The raw materials, the machinery, the know-how, the labor, that's all raw material hardware. And if you look at what we possess, we have the physical capacity to meet everyone's needs. We could bury ourselves in goods if we wanted to. I'm not suggesting that we should, but we have the capacity to do that and as technology develops, that capacity increases all the time. And we have also physically, just looking at it from a physical standpoint, we also have the ability to do that with fewer and fewer people actually being employed in the formal economy. So I don't wanna put an exact figure on it, but it's quite possible that we could, let's say in Canada, provide everyone with everything that they could sensibly require in terms of survival needs and what they need to flourish without, let's say maybe only 25% of the available labor force actually working. So if the physical economy were arranged in such a way that it was actually efficient and we're getting the most for the least, then that would be the pattern, right? There'd be a tremendous amount of production with the minimum of labor input, but that's not what we have. Instead, we have a policy of full employment and beyond that, we have a system where although we have the capacity to provide all these goods and services that fulfill or would fulfill people's needs, we have what Douglas referred to in the 1930s and it's not much different now, we have this phenomenon of poverty amidst plenty where we have the goods, it's not that they're just scarcity, the goods exist or if we don't have them, they could easily be brought into existence and there's no good reason for poverty in a first world country and yet poverty in various forms continues to plague us. So on Douglas's analysis, the problem isn't with the physical economic system, it's not a problem with the hardware, it's a problem with the software and the software is composed principally of the financial system. So if you think of the financial system as a type of program that we're all running our economic lives on, he says that, yeah, the reason we have all these economic problems, whether they're sort of problems within the financial system like inflation or a periodic financial crisis like I was mentioning earlier or problems on the physical level where the goods aren't getting to the people that need them, it's because the financial system that we have in place is not properly designed and I've said a lot, I don't know if you want to ask any questions. No, I think we should, before we continue on, let's kind of touch base on the problems with the financial situation. When he speaks about that, what's he precisely referring to? Cause I know a lot of our audience, they're familiar with, for example, Austrian economics versus Keynesian economics where we're living in a Keynesian financial system and even now people talking about a new type of system like modern monetary theory, MMT theory and pretty much print as much money as I want, doesn't really matter cause I'm not really paying back anybody, debt is debt, whatever. In his eyes, so in Douglas's eyes, what was his concern with the system? Well, at the broadest level, most general level, I would say that according to Douglas's analysis, the current financial system that we have is not an honest system. So it's not designed to provide us with an accurate picture of our potential to create wealth, and it's not designed to provide us with an accurate picture of the real flow of wealth. So instead, money is treated by the system as a commodity that's kept in short supply. And that serves the interests of those who own and operate the monetary system, but it's not in the public interest. Not in the interest of the common good. So why do we have all this dysfunction? It's because the system is not designed to reflect the physical potential and also the physical reality of what we do produce. On Douglas's view, money should just be like a neutral tool. It should just be an indicator that shows us what we can do and what we are doing and what we have done. It's not something that, by being artificially limited and controlled and only being injected as debt has the capacity to basically control the economic system. So another sort of metaphor that I like to use to explain this better is that of a dog, all right? So if you have a dog and he has a long tail, according to Douglas, if the financial system were properly designed and had the right sort of relationship with the physical economic hardware, then the physical hardware, let's say, that would be represented by the body of the dog and the financial system would be the tail. And real people, real needs, and our real capacity to satisfy those needs would determine what we do with the financial system. So the dog would be wagging the tail as when and where required, and that's the proper relationship. And the only way to implement that relationship is to get the financial system just to be a mirror, just to be, not to have an agenda, but just to be an accurate sort of presentation of what we can do and what we have done. As it stands, because money is treated as a commodity that's kept artificially scarce, the relationship is inverted. So the real economy, our real capacity to satisfy needs and the real people, both of those are subordinated to artificial financial exigencies. And so we have a situation where the financial tail is artificially limiting what we can do with the physical economy and is conditioning it, and even determining a lot of the things that we do. So we've got the tail wagging the dog. And so what did Douglas design to counteract that? Okay, so we'll go back, I think first to that whole notion that there's not enough income being distributed to offset prices. So Douglas said that there's this gap, there's this price income gap. A lot of economists and politicians who are just common people assume that whenever we produce something, if it's gonna cost $100, we're putting $100 automatically in someone's pocket as income. And Douglas says this is not the case, right? So this is sort of the heart and guts of it. If we had an honest system, that is the way it would function, right? For every 100 units and costs coming onto the market, there would be $100 in someone's pocket as consumer income to balance that off. Douglas says, and this is just sort of an illustration, but he would say, for example, that for every 100 units of costs coming forward in prices, maybe we're only paid $50 in wages, salaries, and dividends automatically. And so his proposal was that what we need to do is to monetize the gap with debt free credit instead of relying on economic agents, consumers, governments, businesses, to go borrow more money, which they have to pay back from the private banks, just have an organ of the state, call it a national credit authority, monetize the gap in the form of debt free credit so that if there's only $50 being distributed in the normal flow of incomes, we'll add another $50 into the pot and distribute that to consumers are on their behalf. And that therefore would transform the existing system into an honest system because again, that would mean that for every 100 units coming forward in prices, we actually do now have $100 in real income, not debt money, but real income that we can use to cancel those costs and to sort of reestablish. Can we do like a modern day example analogy? Like if we were to implement this, like let's say here in Toronto. Well, I do have Australian colleagues who have done quite a bit of research with the Federal Reserve numbers in the United States and they, and this isn't sort of a full measure of the extent of the gap or what could be done, but according to a very conservative estimate based on Fred data, there's every year, well, I shouldn't say every year, in 2014, there was about a $2.4 trillion gap in the United States, meaning that if you tally up all, you tally up all the goods and services that are produced, capital goods as well as consumer goods and services. And then you look at how much was distributed in income according to the official numbers in wages, salaries, profits, rents, et cetera. There's a $2.4 trillion gap between what people were paid and not the total GDP, but just the consumer goods and services. So right there, there's some evidence for this gap that Douglas identified and sort of made the center of his diagnosis. And yeah, instead of relying people, let's say as consumers to go to the bank and borrow additional money through consumer loans, instead of those debts, we actually could just inject that money in the form of a debt-free credit, a credit that wouldn't have to be paid back. And in the United States, according to these numbers, again, this was a conservative estimate, it was something like 7,500 per person or $30,000 for a family of four. And that would make a big difference for many people if we were all receiving that. Now, so I don't wanna put an exact figure on it, but I guess the idea is that if the financial system were honest and if it were just and we were actually as a community, as a body of consumers, we were paid enough to buy back and full whatever we produce, we all would be receiving directly or indirectly because Douglas had two mechanisms for injecting this compensatory debt-free credit. We all would be enjoying a certain amount of free quote-unquote free money. From one point of view, you could consider it a free gift. At least it's a free gift to the people who receive it because they don't have to pay it back, but it's money that the economy actually needs in order to function in a stable way and if we're not gonna constantly rely on increased debt. From another point of view, it's not a free gift at all. All we're doing is simply recognizing the full value of what we've very produced that's there to be bought and that, you know, but we don't have the figures sort of corresponding or mirroring what's there. You know, and so yeah, that was Douglas's proposal, one of his proposals for balancing prices and incomes was what he called a national dividend. So this has some similarities with a UBI because it would be a payment that everyone would receive independently of employment status. And so maybe, you know, every month that say you might get a check for, I don't know, we'll say, we'll be conservative and say $500. And that, you know, rather you're employed or not, it wouldn't matter. That would be basically your share in the societal profit. So the idea is that we all should be regarded as shareholders in society and because society is profitable because we produce more in value than we are automatically given in income, we can monetize the difference, the profit and distribute it to the shareholders as a type of dividend. Yeah, so the difference of course between the national dividend and say that many conventional UBI proposals is that it's being financed through monetary reform. We're changing the rules of the financial game. We're not going to rely on taxes or an increase in public indebtedness to finance it. So, yeah, so. So who would be issuing that? The dividend would be issued, it would be one of the responsibilities of that national credit authority, which would be like a bureau of weights and measures. It would be independent of any political party, it would be like the post office, it would be. Yeah, but on the balance sheet who's actually issuing that money, are they taking a loan from like the IMF, the central banks? No, they would just be creating it on the basis of the fact that there's a profit to distribute. So if you create like a profit and loss account for the whole society and you say, okay, this is what we've produced and this is what we've paid people and look, there's a gap, then we can monetize the gap and create it on that basis. It's not just money that we're adding willy nilly into the system, it's because there's actually goods and services there that for which no money has been automatically distributed as income. Do you think this has caused any hyperinflation in the long run? According to Douglas's analysis, no, because the money that was going to be created and injected as a debt-free credit, it's calculated just to fill the gap, right? We're not talking about just creating any amount of money, whatever we feel like. It's got to be shown and demonstrated that the gap is on average so much and this is how much extra money the economy considers to- So to summarize, they look at national GDP so they take all consumer real estate to a whole nine yards, so let's say $2 trillion and they look at all accounted tax receipts of people within the country to see their income. Okay, right. That's what you're saying right now? Right, basically. And then they see the delta, the difference between the two, so let's say it's 2 trillion that we produced, but then it's only 1 trillion of claimed. So then you're saying it's a trillion dollar differences between the two, so we created a trillion dollars of a social credit that we give to people. Right, right. See, it's in another aspect of this too and it's important to understand that just as the banks create money, they also destroy money. So when we, if a business is operating on let's say a revolving line of credit, the money that it receives from consumers which then becomes business revenue, that's going to go and if they've got a revolving line of credit that will go to pay down that debt and both the debt and the money cancel each other out of existence. If they don't have a debt, then they might use it to replace working capital or things like that, but even the working capital will not be reissued without creating another set of costs, you see. So yeah, I mean the inflation concern is one of the objections that is often raised, but I think Douglas would say that these debt-free credits, if they're not created in an excessive amount, not only are not inflationary, they're anti-inflationary and it's the current system that's relying on ever-increasing debt which is the primary cause of inflation in the form of cost-push inflation. Yeah, like for me, my biggest fear with the modern day system is print on demand. Like you have quantitative easing happening. You have now even talks of negative interest rates where if I keep money in the bank, they take my money. Yeah. And it's happening in Europe, Japan had it. We can't raise interest rates, like literally money's freeing out tomorrow such a degree that you can't raise a subprime. You got to keep on printing. And where's that gonna head? And this is why people talk about the modern monetary theory. We're like, this system is so fractured, so broken. The only way that we can continue this Keynesian model is we literally have to keep on printing money. Or else this system will collapse. Printing at a stat. Yeah, oh yeah, it's all debt. Yeah, yeah, yeah. And the problem is like we're not the beneficiaries. So that's it. We have the Catalinian effect whereas like the beneficiaries are the bankers and Wall Street on the top. They get the first Virgin money and then they do their thing. Pretty much to get billions of dollars free. They do stock buybacks. Right, right. They put it their own pockets and then, you know, they say, we're the recipients. We get shit. What do we get? What do I get? I get nothing from QE. I get inflationary dollar that every year loses. Yeah, loses value. Yeah, loses value. Yeah.