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God or Mammon?

Written by Father Peter Coffey on Sunday, 30 June 1940. Posted in From Debt to Prosperity (book), The True Meaning of Social Credit

The True Meaning of Social Credit? - Chapter 3

Frustrated in front of plenty

Though the ills of society, economic and political, are obvious and menacing, their real causation must be discovered by accurate diagnosis before they can be remedied...

What is the purpose of the industrial and economic organization of society? Is it to provide employment — work — for all? Or is it to produce, and make available, material goods and services with the least possible amount of work (employment)?

The process of increasing the productive efficiency of human labour, and of gradually diminishing the amount of it required – and of supplementing it by labour-saving machinery during the past 150 years, has now reached the stage at which society, so organized, can make available an ample sufficiency of the material necessities of life for all with a steadily diminishing amount of human labour.

But this organization has been working so defectively — has so deplorably failed to deliver for use any more than a mere fraction of the wealth which it is equipped to produce — that

  1. the public does not yet realize the enormous productive capacity of the industrial system, and
  2. it still believes that a sufficiency of wealth can be produced only by the whole population labouring as long and as hard as people had to work ages ago, before modern labour-saving machinery was invented.

Hence, machinery is blamed as a curse instead of seeking to discover why machinery is being more and more held up idle, and what is preventing the distribution and enjoyment of its products.

...People generally are just beginning to realize that the world, under the capitalist industrial and economic regime, has reached the age of potential plenty. They hear of millions of tons of wheat and coffee being destroyed; crops being deliberately reduced; wealth in a variety of forms being destroyed instead of being distributed for consumption; men willing to work being kept idle; machines and factories running short time in all countries; while at the same time millions of the world's population are in destitution, and their natural right to marriage frustrated because the system is failing to distribute the ample and increasing wealth which it could produce if it were permitted.

But while they rightly cry out for a reform of the system, they are mostly ignorant and in error as to what is really wrong, and hence espouse futile and unlawful schemes of reform.

These schemes are Communism and Socialism — unlawful because they deny natural human rights; futile, because they wrongly diagnose, and would therefore fail to cure, the economic evils from which society is suffering. The Popes have condemned them, and that is enough for Catholics.

The purpose of an economic system

To find the right remedy, we must diagnose the disease aright. The obvious and natural purpose of all economic and industrial association is to provide material goods and services for use and consumption. To serve this end, there are two processes:

  1. production (including transport) and
  2. distribution of products among consumers by exchange (trade, commerce).

The former is becoming ever more and more efficient. Therefore, the defect lies in the latter; it is the distribution that has broken down.

Now the medium of distribution is money. The monetary system is not discharging its natural function: i.e. is not delivering the goods.

A defective monetary system

Money is essentially a system of exchange tickets, the value or validity of which is based on men's belief (credit) in the wealth-producing capacity of the community using them. Its sole right function is to ensure that all the wealth which the community is capable of producing be continuously produced and exchanged among consumers for use.

It is the duty of the State to so control the system of issuing money tickets for wealth-production, and cancelling them through wealth-consumption, that the system effectively discharge the above-mentioned function. But all modern governments have neglected that duty by committing the whole money system to the unfettered control of groups of private citizens, who have ignored that essential purpose of the system, and have made it subserve an opposite and anti-social purpose: which is nothing less than monopoly and consolidation of all economic and even political power, and domination of society in their hands.

Pope Pius XI, in his encyclical letter Quadragesimo Anno, has explicitly called attention to this international world-monopoly of finance, and indicated some of its disastrous consequences.

The controllers of this financing or banking system issue the community's money tickets (for wealth-production and distribution) to the community as a debt to themselves (at interest), and recall and cancel these tickets (through prices for a portion of the wealth produced) before the total wealth thus produced is exchanged for use by consumers: thus causing an ever-widening chasm between the community's purchasing power as consumers, and the total of accounted prices (which is the total money due to the banking system) for the wealth which the community has produced.

Hence forced export and competitive struggles of nations for foreign markets: hence the piling up of international debts: hence economic conflicts, leading to wars: hence the progressive mortgaging of the whole industrial plant and capital and wealth-sources of society to the world-monopoly of banking.

Golden calf


The State has become a slave

Another disastrous consequence, indicated by the Pope, is the effective enslavement of the State (i.e., of all modern governments of all political organizations and authority in the modern world) to a superstate plutocracy in which supreme political power is usurped and wielded by the monopolistic controllers of the very lifeblood of economics and industry, which is finance.

Now, this utter perversion of right order for the industrial and economic organization, and the authority of this latter ought to be (in the temporal domain) supreme. This authority derives rightly from God, and not from the superior might or craft of those who have usurped economic domination and who are swayed by greed for power.

But, as a consequence of this growing financial impoverishment of the masses, and of progressive mortgaging of the community's productive plant and capital and wealth-sources to the finance-controllers, the State had perforce to take over and administer many of the economic organs within the State.

Pope Pius XI, in Quadragesimo Anno, has indicated some of those cooperative organizations — guilds or corporations — of wealth-producers, the purpose of which would be to secure a better-planned and more efficient production of wealth.

But they can accomplish this purpose only if the State first makes the money system subserve industry by legally directing this money system to keep the products of the community's industry (as producers) distributed for use to the community (as consumers).

It is the duty of those commissioned to teach and to rule, whether in Church or in State, not only to formulate sound practical principles for the guidance of men in their social, political, and economic relations, but also to study the actual conditions prevailing in those relations, so as to be able rightly to apply the principles to the facts, for the elimination of abuses and the amelioration of conditions.

Society has been robbed of its credit

The banking system alone has and exercises de facto the power of creating and cancelling money.

The value, validity, purchasing power of this money rests ultimately not on gold, but on the National Credit, i.e., the community's potential rate of real wealth production compared with consumption.

Therefore, the community should not be forced to pay a perpetual money levy to private creators and issuers of money on its creation and issue. The community is forced to pay such a levy, and this in money which not the community, but only the bankers can create.

This payment of interest by the community to the banking system for money newly created (and costless) is on a wholly different footing from interest charged on already circulating money by individuals who have earned and saved this money, and invested it in (or lent it to) industry.


The consequences of this failure of money to discharge its essential function are disastrous and cumulative:

  1. Cut-throat competition to recover proportionately the greatest sum in prices in return for the least volume of goods sold;
  2. A steady stream of bankruptcies (of the weaker and less ruthless producers) as an inevitable result of the mathematical impossibility of recovering for the banks more money than exists in the community;
  3. The replacing of competition by monopolistic rings to raise prices;
  4. The growing accumulation of an unsaleable surplus in each capitalist country;
  5. The forced export of this surplus and consequent struggle for foreign markets, ending in international economic and military conflicts;
  6. The development of the banking policy of financing capital equipment to provide consumers with money to purchase some of the otherwise unsaleable surplus of consumers' goods;
  7. The gradual breakdown of this device, owing partly to substitution of machinery for human and wage-paid employment, and partly through the capital equipment becoming excessive and lying idle (through lack of consumer's incomes which would purchase its ultimate products).

The true remedy

The governments wanted to remedy these situations through various palliatives, through public works, or direct aid to the most destitute.

And the governments can get the money necessary for these remedies only by two ways:

  1. Through taxes, taken on the already insufficient incomes of the consumers;
  2. Through loans from the banks, new money created by the banks, but which must be repaid with the interest.

The failure of these remedies is obvious. They will leave the consumers with a bigger debt and less purchasing power...

To solve the problem, it is clear that the governments must:

  1. Take back their prerogative, and exercise themselves the control over the volume of money required for the population;
  2. Base the money on the productive capacity of the country;
  3. Issue new money, no longer as an interest-bearing debt to the bankers, but debt-free;
  4. Give a national dividend to each citizen.

At the same time, in order to prevent automatically any inflation or deflation of prices, and to maintain a perfect and constant balance between prices and purchasing power, prices must be subjected to a national discount, set in accordance with the statistics of production and consumption. This discount will be calculated so as to fill the gap between prices and collective purchasing power.

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