Government authority is generally divided into three branches: the legislative, the executive, and the judicial. Together, these branches of government allow a nation to maintain order, stability and peace, and protect citizens' lives, property and other rights.
The authority to enact laws is a function of the legislative branch of government. The executive branch governs according to that nation's laws, and the judicial branch of government has authority to enforce legislation and settle litigation.
A nation's Constitution determines the nature, attributes, and jurisdiction of each of these three branches of government. Their authority is derived from the Constitution. Yet, there exists another power, neither cited in textbooks nor in our educational institutions. It is a power that was not enshrined by the Constitution, yet its powers surpass all legitimate constitutional authority. This power dominates the lives of individuals, families, institutions, and even governments. This superpower is the monetary power; its domain is the control of money and credit.
It is this superpower that was denounced in Quadragesimo Anno, Pope Pius XI's encyclical letter, written in 1931:
"This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will."
Generally, people understand that legislative power resides in parliaments, executive power is embodied in various governmental ministries, and judicial power resides in the courts. But where does the non-constitutionally based power to control money reside? It resides in the banking system. Financial credit — modern money — is created by the banks and dies in the banks. New financial credit is created when a bank grants a loan to an individual, a businessman, or a government.
When a bank grants a loan to a contractor, a retailer, or to a government, new financial credit is created. The banker credits the borrower's account with the approved loan amount, just as if the borrower had deposited that amount of money into his bank account. But the borrower did not bring money to the bank nor make a deposit. Rather, he came to the bank to obtain money he previously did not possess. When the borrower exits the bank, he will be able to issue cheques on this account, something he could not do when he earlier entered the bank.
None of the bank's other customers' accounts were decreased. This approved loan amount represents a new account, added to the accounts that already existed. The total credits in all the accounts of the bank are therefore now increased by the amount of this new account. An increase in financial credit has resulted, and "new money" will go into circulation via the cheques the borrower will write based on this new credit.
In contrast, when a borrower repays his loan, that is, the credit he had borrowed previously, the volume of credit in circulation will be decreased accordingly, and a quantity of "blood" will have been removed from the economic body.
A simple bookkeeping operation, made with one stroke of a pen, created financial credit. When a loan is repaid, another simple bookkeeping operation will cancel the credit and send this money to the grave.
When, during a given period of time, the total of issued loans exceeds the total of loan repayments, there are more credits in circulation than there are credits cancelled. Inversely, when the total of repaid loans exceeds the total of issued loans, a reduction of circulating credit results.
If the period of constricted credit persists, the entire economic body will be affected, and we will have a crisis — a crisis caused only by the reduction of available credit.
These periods of increased and constricted credit are not haphazard. They are strictly a result of the actions of the banks. They result from either an increase in issued loans or in loans having been repaid. Whatever the conditions of economic life in past centuries might have been, it is undeniable that if a society's private and public needs are to be satisfied, money (or credit) is essential for the multiple-source production of the modern economy.
Products can only be obtained by handing money to producers. Money has become a de facto permit to live. Those who control these permits, by granting them or not, and deciding the terms, such as how much will be loaned and when it must be repaid, control our lives in such a way that "...no one dare breathe against their will," as Pope Pius XI said.
Money would have no value if there were no products. However, the existence of financial credit, also known as money, is the condition which sets in motion the production capacity, not of the controllers of credit, but of the country's population. The controllers of money and credit do not cause a single stalk of wheat to grow, do not produce one pair of shoes, manufacture even one brick, nor dig a single mine shaft. They do not pave one square inch of road. It is the country's population who does all this. But to do these things, the population has to obtain permission from the controllers of credit!
Money is a permit that only costs the controllers a decision and a drop of ink. Yet, to obtain this permit, the population must indebt itself for its own work. Can you think of a greater economic tyranny?
The banker's pen controls individuals, companies and governments' ability to mobilize the knowledge and know-how, goodwill and natural resources of a nation. The pen rules by allowing credit, or not, and by establishing conditions on the permits it grants. The pen has the power of a sceptre in the hands of the superpower we call the monetary power.
The Great Depression consisted of ten years of economic paralysis. No government believed it could intervene to end it. Yet, when war was declared, sufficient permits were created overnight to produce goods, draft men, destroy and kill.
This simple fact should have opened everyone's eyes and taught us that the crisis of the previous ten year period was manipulated by those who control money and credit. Issuing credit was all that was necessary to end the Depression. Indeed, at the war's outset, these permits were issued and printed by billions of dollars to finance the most expensive war of all time.
You may still hear fallacious scholars deny that the volume of credit in circulation depends on the actions of the banks. These cunning and ignorant scholars, who deny the obvious, are an invaluable support to the superpower. We must ask whether it is truly ignorance, or whether there are other factors at play, such as vested interest, or even a collusion for personal gain, such as career advancement.
High ranking bankers, on the other hand, clearly understand that financial credit, which makes up the bulk of modern money, is created and cancelled in bank ledgers.
A distinguished British banker, the Right Honourable Reginald McKenna, one-time British Chancellor of the Exchequer and Chairman of the Midland Bank, one of the five largest banks of England, addressed an Annual General Meeting of bank shareholders on January 25, 1924. The following is excerpted from his book, Post-War Banking:
"I am afraid the ordinary citizen will not like to be told that the banks can, and do, create and destroy money. The amount of finance in existence varies only with the action of the banks in increasing or decreasing deposits and bank purchases. We know how this is effected. Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft, or bank sale destroys a deposit."
As Minister of Finance, McKenna knew full well which of the two powers was greater — the power of the banks, or that of sovereign governments. With a virtue seldom exercised by bankers at his level, he frankly stated:
"They [the banks] control the credit of the nation, direct the policies of governments, and keep in the palm of their hands the destinies of the peoples."
This statement is in complete accord with Pope Pius XI's statements in Quadragesimo Anno that "Those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will."
What society needs, rather than a monetary superpower, is an authority, established by the Constitution or by law that will make the monetary system into one that serves the community. This monetary power would be like the judicial system, staffed by qualified accountants, rather than judges. Accountants would undertake their duties independently of politicians in power, just as do judges and courts. They would base their operations on statistics over which they have no control or influence. The production and consumption patterns of free individuals would guide their actions.
The same monetary authority would supply producers with the financial credits required to mobilize a nation's production capacity, in response to the demands of consumers. This is what engineer, Clifford Hugh Douglas, expounded in Social Credit. Social Credit was never designed to mobilize as a political party.
Economists, politicians, sociologists and moralists have expressed disdain for Social Credit. It would appear they would rather endorse Socialism and Communism in the false hope of finding relief from financial tyranny. These so-called solutions would only add political tyranny to the existing financial tyranny.