Money Must be Created by the Island’s Inhabitants

The following article, written by Mrs. Gilberte Côté-Mercier, is a summary of Louis Even’s tale, “The Money Myth Exploded”, which helps us understand how money today is created as debt by private banks, whereas social money can be created debt-free by society.

by Gilberte Côté-Mercier

Let us imagine that 10 men lived on an isolated island inaccessible to the rest of the world.

The men were good workers and they successfully exploited the island’s riches.

Everyone plied a trade. Peter tilled the land, Louis bred animals, etc.

One day, Peter, who was tired of eating only his crops, asked Louis to trade a calf for some potatoes.

Peter: “Louis, can you sell me a calf?”

Louis: “What will you give me in return?”

Peter: “Twenty bags of potatoes.”

Louis: “I am not interested in potatoes; I don’t eat them.”

Peter resigned himself to eating potatoes. Louis, however, had too many calves and would have liked to have traded his livestock for products that he actually wanted.

It was the same situation each time one of the men wanted to trade with the others. Either it was difficult to match tastes, or it was not the right time or it was impossible to make the calculations. Often, it would have been necessary to cut a calf in two to complete an exchange.

Seeing the difficulties they had in trying to make mutually agreeable arrangements, the 10 men gathered to discuss the problem.

They noted that the island provided them with everything they wanted; it was not wealth that was lacking, nor work, but something else.

Everyone agreed that money was lacking on the island.

* * *

The men were practical and had common sense. They had determined the problem was that they lacked money to facilitate exchanges, and so they decided to create money.

They did not act like our governments who conclude that an increase in taxes or a war are the solution when there is a lack of money.

Rather, they reasoned logically: “Money is lacking. Therefore, let us create some money for ourselves.”

They did not think about going elsewhere to create money. They did not ask spirits from another world nor men from other countries to create money for them. Rather, they decided to create it themselves, for themselves.

Peter said: “James was formerly a bank manager. He knows very well how to count. James, please create money for us.”

James: “Fine! I will create money for you. How much money do you need on the island so that business can be facilitated?”

Peter: “If we had $1,000 on the island, then exchanges could be completed easily. Please create $1,000; $100 for each of us.”

James got down to work. He took a book, wrote Peter’s name and beside it he wrote that $100 in credit was available to him. Then, he handed Peter the credit book, and said:

“Here is $100 for you, Peter. It is money made up of figures, of numbers; the most modern money. This money cannot be lost or stolen. I am lending you $100. You will pay it back to me at the end of the year, plus an additional $7 in interest.”

Peter was incredulous: “Why are YOU lending ME $100? You want me to pay back $100, and on top of that, interest! You must be joking, James! It is as if the money that you create would belong to you since you want me to pay it back to you. You are mistaken, James. We asked you to create money for us, not create money for you. You will receive your share of $100 like the others, but the total $1,000 does not belong to you. If you lend $100 to each of us with the obligation to pay it back to you, it is as if the $1,000 was yours!”

James: “But, that is the way money is created in modern nations!”

Peter sarcastically replied: “Oh! It is undoubtedly for this reason that living is so nice in civilized countries, where one can die of hunger when there is such abundance, and where war ultimately settles matters. Well, that type of society does not interest us, James. You will create money for all; for everyone. It means that you will create $100 for each one of us which you will simply give us.”

James understood. He gave each man a credit book with $100 noted in the credit column.

On the island, they called the $100 a dividend. It was based on the island’s production, and it was brand new money that came from James’ pen. The money was necessary for the island’s inhabitants in order to exchange their products.

The following year was a great success. There were no longer arguments when trading goods.

Business prospered so much that the $1,000 in circulation was not enough to purchase all that was produced on the island as production had greatly increased.

* * *

At the end of the year, the men met again. They considered that the money which had been created at the beginning of the year had done them much good but, because of the island’s growth and prosperity, they needed more money.

They asked James to create more new money for them.

Peter said: “If we had an additional $25 each, it would be sufficient for now.”

James created $25 for everyone by adding this amount in the credit column of each man’s book.

Peter had worked more than Louis during the past year and already had $150 noted in his credit book. He received $25 and so had a total credit available for his use of $175.

Louis, who had been sick during the year, had $50 in his credit book at the end of the year. He received $25 and so had a total of $75.

The $25 which was added to everyone’s credit column could be called the dividend for that year. It represented the amount of the island’s additional development or progress in the year.

The 10 men had created money for themselves. They did not ask a monopolist to create their money. They had more confidence in themselves, the very folk who had built the island’s wealth, than in strangers who would simply exploit the island’s real producers.

They created dividends to circulate, not debts to pay.

The credit which circulated on the island was a social credit, based on the production of the island and based on the confidence that the island’s inhabitants had in their small society. The credit was created by the island’s inhabitants for the island’s inhabitants.

* * *

If Canada was this island, and it was inhabited by 37 million members, should this method to create credit not be the same? Why not?