Why no mention of Alfred N. Lawson's Direct Credits Society? Even within the entry on Alfred Lawson, there's a ghost link inviting an article to be written on direct credits. Lawson was a nut, but one to be reckoned with just like many other devotees of populist money schemes. Maybe someone should also add to the Robert Anton Wilson material his jocular embodiment of theory in flaxscrip and hempscrip.
People must borrow money
One of the tenets of the Douglas thesis is that there is a perennial shortage of purchasing power in the economy. In other words, the aggregate price of goods on the market at any one time is greater than the total amount of money at the disposal of the buying public. The result is that people must borrow from the banking system to make up for this deficiency. It is the banks who issue new (credi)money (not cash/legal tender) all the time by lending more and more. Only about three per cent (tree out of one hundred) of the total money supply is in the form of notes and coins, i.e legal tendeder.
Subsidizing foreign producers
Your "logical fallacy" argument may affect the original form of the A+B theorem, but it ignores Heinlein's version with his focus on savings. Note that Federal Reserve Board Chairman Bernanke recently spoke of a world-wide savings glut. As to your second paragraph, I just don't follow you at all. Why would "subsidizing foreign producers" create a problem in a Heinlein-style Social Credit society?
His book explicitly advocates exchanging paper money for foreign-made products (a.k.a. real wealth), in those situations where foreign producers can supply us with the product more efficiently. At what point would this cause individuals to suffer, and how? Recall that the largest single number of business loans in Heinlein's future U.S. would come from the publicly-owned Bank of the United States, which may not actually have to make a profit. If an American company goes out of business because of Bank/government policy, the Bank could presumably change the repayment schedule to prevent any gross hardship. Nothing would limit their ability to forgive loans except the ability of the economy to deal with extra money.
(If the Bank decides to forgive a loan to a U.S. company because a "trade deficit" has put them out of business, this may imply that the Bank has put more money into the national economy than it planned. But meanwhile, consumers have sent a presumably unexpected amount of money out of the national economy by buying foreign products. It may even out. We would ask Bernanke's future equivalents to take all this into account in making later policy decisions.)
Printing more Money
Just to clarify: Douglas did not advocate "printing more money" but instead suggested that amount of money available to purchase goods should match the price of the goods available for purchase. In other words, production should match consumption. He further suggested that when production exceeds consumption, the difference should be distributed to all consumers so that goods already manufactured could always actually be purchased.
Social Credit
So, what exposed these alleged flaws in "many of Douglas' ideas"? I don't know that much about Social Credit, but I get the impression that no country has ever put it into practice. And so far I haven't found any clear refutation of the theory (as I understand it). What proof did J.J. refer to? And what, specifically, did it prove?
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