Quantitative Balancing (QB) and the Douglas Theory of Social Credit

 Quantitative Balancing (QB) and the Douglas Theory of Social Credit, while developed in different contexts and with distinct focuses, share some fundamental critiques of the existing financial system and propose solutions that aim to enhance public welfare and stability.

Here are the key points of convergence:

• Critique of Private Money Creation and Seigniorage: Both theories fundamentally criticize the private banking system's ability to create money "ex nihilo" (out of nothing) and appropriate the seigniorage (the profit from issuing money).

  • Quantitative Balancing explicitly highlights the "Original Sin - Private Seigniorage," arguing that banks privately capture this profit, leading to instability, inequality, and moral hazard. It proposes to explicitly recognize seigniorage as a debt to the treasury, making it public income.

  • Douglas Social Credit also points out that banks create credit "by the stroke of the banker's pen" and that this credit-creating power has provided banks with immense wealth and power, suggesting a "concealed lien on nearly all property." Douglas viewed credit as "communal property" that should not be managed as if it were the private property of financial institutions.

• Addressing Deficiency in Purchasing Power / Financial Instability: Both theories aim to resolve systemic issues related to the flow of money and its impact on the economy.

  • Douglas Social Credit's core "A+B theorem" posits a chronic deficiency of purchasing power in the economy, where wages and salaries (A payments) are insufficient to buy back all goods whose prices include overhead costs (B payments). His proposed solution involves filling this gap through a "national dividend" distributed to citizens or subsidies to producers to reduce prices.

  • Quantitative Balancing addresses financial instability by proposing a more transparent and controlled money creation process. By reclassifying deposits as liabilities to the state and segregating accounts, QB aims to eliminate bank run risks and curb speculative bubbles fueled by opaque bank lending. The idea is to prevent the boom-bust cycles that result from unregulated credit expansion.

• Increased Transparency and Accountability in the Monetary System: Both frameworks advocate for greater clarity and public control over financial mechanisms.

  • Quantitative Balancing emphasizes making bank balance sheets transparent, revealing the true nature of money creation and the bank's role as a manager rather than owner of deposited funds. It seeks to bring about "more democracy and accountability in the monetary system."

  • Douglas Social Credit also aimed for a more transparent and just financial system by exposing the "secret" of money creation by banks and advocating for a system where credit serves the public good and matches productive capacity.

• Money as a Public Good/Service: Implicitly, both theories treat money and credit as essential public utilities that should serve the general welfare, rather than being solely instruments for private profit.

  • Quantitative Balancing explicitly frames "Money as a Public Good" in its preface, underscoring the need for the state to reclaim sovereignty over its creation for the benefit of society.

  • Douglas Social Credit's proposal for a national dividend and a "just price" system implies that the purpose of the financial system is to ensure the distribution of goods and services to meet the needs of the population, rather than being a source of private rent extraction.

While Douglas focused on bridging the purchasing power gap through direct distribution and price adjustments, and Quantitative Balancing focuses on reforming the banking architecture to make money creation transparent and public, their shared foundation lies in challenging the unchecked power of private banks in creating money and advocating for a financial system that prioritizes public stability and welfare.