C.H. Douglas Out of Print ...... Mondo Politico
Social Credit, by
Major Clifford Hugh Douglas

Part II: The Mechanism of the Classical Ideal



TAKING into consideration the fact that all business is at present carried on with the express purpose of "making money," it might be imagined that even if the details of the money system were not matters of general knowledge, at any rate there would be little room left for discussion in regard to its main principles. But there is not even elementary consistency and agreement on the subject. One of the more obvious examples of this is the confusion which is in evidence in regard to matters of foreign exchange, and War Reparations.

It will be remembered that we are constantly being told that Great Britain, in particular, lives on exports of goods and services. In orthodox circles there is never any discussion in regard to this statement. It is regarded as axiomatic. It is how we become "rich." On the other hand, as a result of the determination to inflict punishment of all descriptions upon Germany for her crime of losing the War, and to reward other countries for their virtue in winning it, severe economic penalties were imposed by the Treaty of Versailles. These penalties were assessed principally in terms of currency. It is common knowledge that these penalties, generally referred to as reparations, have not so far been successfully inflicted. Germany has herself expressed her willingness to pay; France in particular amongst her opponents has expressed her determination to make Germany pay. Germany has printed large quantities of paper money and has also incidentally greatly expanded her economic ability to produce, and thus, it might be imagined, to pay, but the payment has not taken place. The reason for this is quite simple, and has been explained in many orthodox quarters. Such payment can only take place by the export of German goods and services in return for a pledging of German credit based on the ability to deliver these goods and services. Notice the grim humour of the situation. At one and the same time and from one and the same source, it is being stated that Great Britain can only become rich by exporting goods and services. Germany, however, can only be penalised and presumably become poorer by exporting goods and services. A science of finance and economics which will permit absurdities of this description to pass almost unnoticed, can hardly fail to produce chaos in the world. The country on which the "penalty" of reparations was inflicted is straining every nerve and sinew, not merely to export an amount equivalent to the money figure attached to the reparations, but to add to this amount by every means in her power. Great Britain, which was one of the nations very vocal in asserting that Germany must pay, is feverishly searching for methods either by tariffs or otherwise, which will prevent German goods, which are by common consent the only method by which Germany can pay, from entering this country, and is providing Germany with credits - in order that she may import British coal.

There must be in every country, a sufficient, if small, minority of persons who see these absurdities and understand that they proceed, and can only proceed, from a radically defective or obsolete financial system. It can only be assumed that the silence of such persons is either dictated by fear of the results of a general exposure, or by complicity in the policy which is furthered by the existing situation.

Considered merely from the point of view of financial operations, and without trespassing on the domain of world policy, it is not difficult to see that every advantage to finance, as a business, lies in rendering the Reparations Clauses of the Treaty of Versailles ineffective. To a financier, a country is simply something on which to base a mortgage. Just as a private estate which is not mortgaged is, to a money-lender, an excrescence on the landscape, so a country whose National Debt is not as large as is consistent with security is an object of solicitude to International Finance. If Germany's productive capacity for the next twenty years or so were effectively hypothecated to the service of the allies who were engaged against her in the late war, it is fairly obvious that she would not be good security for loans.

For this reason, if for no other, the efforts of the financial interests are likely to be directed to obstructing the payment of reparations, and finally to the cancellation of the obligation to pay them - a state of affairs which in the existing financial arrangements would no doubt be signalised by the grant of an "international" loan to Germany for a reconstruction of which, by all accounts, she is in no need.*

* This paragraph was written in 1923. It has been justified in detail by events. - Note to ....Revised Edition.

If this line of argument be accepted, it will no doubt occur to the reader that the insistence by the United States on the payment of the British Debt to America would seem to furnish a contradiction. It must be remembered, however, that it was necessary for someone to pay war debts, or the repayment of Financial Debt would be gravely discredited, and that the U.S. Government has so hedged round the repayment of the sums borrowed, as to make the British Debt merely a political weapon for the control of British policy. Further, it is to be remembered that the financial system is a centralising system; it can only have one logical end, and that is a world dictatorship. There seems to be little doubt that the temporary headquarters of this potential world dictatorship have been moved from country to country several times during the past five or six centuries. At one time it was in Italy and specifically in Genoa, then in the Low Countries and Lombardy, from whence came the Jewish Lombards who gave their name to Lombard Street. During the eighteenth and nineteenth centuries it has unquestionably been in London, but there is every indication that a change of headquarters to New York is contemplated. The financial and economic crippling of Great Britain, which under existing methods of finance would be the result of the payment of a sum of 1,300,000,000, carried out by the process of purchasing American dollars or State Securities and cancelling them, would be a logical and necessary step to what is hoped will be the establishment of a final and indisputable Regency of the world.

We may therefore expect to see a greater diplomacy in operation, having as its objective the psychological, political, and military isolation of Great Britain contemporaneously with the economic and industrial emasculation which is at present proceeding. By forcing a policy of deflation on Great Britain, while at the same time pursuing a policy of inflation, the powers operating through the United States Political and Financial Government have, during the years 1918-1930, succeeded in destroying, to a considerable extent, the immense increase in productive and fighting power which existed at the time of the Armistice. A continual drain of the most skilled mechanics from this country to America has been the result of the immense disparity between the wages paid in the two countries during the same period of time. No pressure has been applied from Washington or Wall Street to secure a repayment of the indebtedness of any country other than Great Britain; and, as a result, the onus of unpopularity has shifted to London in view of the impossibility of meeting American indebtedness without collecting the sums due from continental countries.

In short, it is impossible to doubt that the bid for world control, which emerged into the open in 1914, and was temporarily foiled in 1918, has merely shifted from Berlin to Washington and New York, and that the apparently better relations which exist between this country and America can only be attributed to a decision that effective resistance to the fresh attempt is for the moment impossible. The promptness with which any suggestion of departure from the imposed financial and fiscal policy has been followed by a severe fall in the sterling exchange on New York is, I think, sufficient evidence that the somewhat contemptuous friendliness which subsists in regard to Anglo-American relations at the present time can, and will be, replaced by unrelenting severity at any moment that British policy appears to run contrary to that of her creditors.

Just as, in the main, the mass of Germans were merely passive tools in the policy which resulted in the first Great European War, so it is no doubt true that the American people, as individuals, would repudiate personal complicity in any similar plans. If it is true, as seems probable, that effective resistance to an imposed group policy is nearly impossible so long as the group has control of the credit of the individuals composing it, it is beside the point to pay serious attention to such a factor. The only line of action which can be effective in the emergency with which the world is confronted must be one which can paralyse or break up the group control of credit to which the majority of individuals in every country have become helpless slaves; and it is not without interest that the antagonism between the American people and the United States Government is crystallizing into an attack on the mutual support given to each other by the interests symbolised by Wall Street and Washington.