(By Louis Even, published in the June 15, 1961 issue of the Vers Demain Journal.)
I am, let us say, a farmer. I need to hire someone to help me with my work. Lacking money with which to pay him, I might possibly arrive at a settlement whereby I can pay him with something else besides money.
I can, for example, agree to give him ten pounds of potatoes, three pounds of meat, one pound of butter, and one gallon of milk for every day of work that he gives me, the products coming from my own farm.
I can also estimate the value of his work in dollars, without actually giving him any, since I don't have any. I could once a week, sign a voucher allowing him to choose, from among the products of my farm, those things which he wants for a value of ten dollars for each hour of work he does. Here again, he is given by me the right to choose from among the products of my farm.
However, I certainly cannot sign vouchers that would give him the right to choose from among the products made by other farmers or by craftsmen in nearby towns. I can only give him claim upon what I own.
If I paid him with cash, well, he could then choose goods or services from anywhere in the country. But in order to pay him in cash, I must first have some money.
The difference between a voucher issued by me and money is that my voucher gives a right only over those things that belong to me, whereas money gives a right over the products of others, as well as over my products.
I can issue my own vouchers because I own my products. I cannot issue (create) money because I am not the owner of everyone else's products.
Both — my voucher and money — can be pieces of paper of identical size. Both can bear the same numbers. The voucher based on my products can just as easily be labeled for ten dollars of value as is a ten-dollar note issued by the Bank of Canada. But my voucher can only buy my products, whereas the ten dollars of paper money can buy any goods or services for that value.
A social instrument
This is just another way of saying that money is a social instrument. And since it gives the right to draw upon the goods and services made and offered by others, its issuance by one or even by a group of individuals, cannot be justified. For this would give one the right to dispose of other people's products.
And yet new money must have a beginning somewhere. The money that is already in circulation certainly did not fall from the sky; it did not create itself. Similarly, when production increases, or when the population of a country increases, the volume of money in circulation must necessarily increase. Canada's present-day industry and commerce would be paralyzed if there was no more money now than there was in Champlain's days.
So, there was new money added. And more will be added as industrial activity increases. But where is this new money to come from since no individual may issue claims on other people's production?
New money, i.e. increases in the money supply, must come from no other source than from society itself, through the agency of an organism established to accomplish this function on behalf of society.
But who fills this function today, a function which is social in essence? Certainly not the Government, since the only money it has, it gets through taxes or through loans which mean still higher taxes at a later date.
Money is created by the banks
A small part of modern money is made up of coins and bank notes. The greater part is made up of credits found in bank ledgers.
Anyone who has a bank account can pay a bill without taking cash out of his pocket. All one has to do is write a cheque for the required amount. The merchant who gets the cheque can either deposit it to his bank's account or cash it at the teller's.
Everybody knows this. But not everyone knows that there are two kinds of credit accounts to be had at the bank: a savings account into which we deposit our savings and a loan's account into which the bank deposits the money it lends us.
There is a big difference between these two kinds of accounts.
When you take your money to the bank, the banker places this money in his drawer, and later in his vault, and then enters the amount in your account, to your credit. You may use this credit as you wish. You can make payments by drawing cheques on this credit. It is no longer hard cash like the money you carried to the bank, but it is money just the same.
But what about the loan's account? The borrower does not bring money to the bank. He goes there to ask the banker for money. Often this is a large sum — let us say $50,000. The banker will not take $50,000 out of his drawer and hand it to the borrower. And the borrower would hesitate to leave the bank with this amount of money in his possession. What the borrower wants is to have $50,000 entered to his credit in his account, upon which he will be able to make cheques according to his needs.
And the banker does this for the borrower. But, mind you, without the borrower having brought a penny to the bank, and without the banker having taken a penny out of his drawer, and also without any of the other clients' accounts having been decreased.
With the saving's account, hard cash that was placed in the banker's drawer was transformed into financial credit and entered in the saving's account. This does not put one additional penny into circulation.
In the case of the borrower, there was no such transformation since the borrower did not bring any money with him. And since nothing was taken from either the vault, the drawer, or from any other account, there now is, in the bank's ledger, to the credit of the borrower, a new amount of money that did not exist before.
This is called the creation of money by the banker. It is a creation of credit, of bookkeeping money. This money is just as good as the other type of money since the borrower can write cheques against it.
With this new money, the borrower can pay for work, for materials, for goods. That is: for the work of others, for the materials of others, for the goods of others.
In creating this $50,000 for the borrower, the banker has given to the latter the right to draw upon the production of others; not upon the banker's production, but upon all the production offered throughout the country. The banker who owns none of the country's production, nevertheless, gave the borrower a claim upon the country's production.
This can no doubt be called the usurpation of a social function. Only society, as a whole, may justifiably accomplish this function, a function that it may choose to entrust to a competent organism, under its own control. But it is inadmissible that so important a social function be delegated to a private institution that traffics in money creation for its own profit.
Sovereign power over economic life
On a date agreed upon, the borrower must repay to the bank, the money it created for him. When the money returns to the bank, it is no longer in circulation. It is extinct. To place another amount of money into circulation, another loan is needed, another creation of bookkeeping money.
Loans therefore put money into circulation. Repayment of loans withdraws money from circulation.
In a given period — let us say, a year — if the sum of bank loans granted is greater than the sum of repayments made, then the volume of money in circulation is increased. If, on the contrary, the banks have been reluctant to grant loans, while still demanding repayment of outstanding loans, then the volume of money in circulation is decreased. This is known as a restriction of credit.
Since the banker charges interest on his loans, every repayment entails the return of more money than was originally loaned. Thus, in order to maintain the volume of money in circulation, more loans have to be granted than repayments accepted.
The fact that it is necessary to repay to the bank more money than was issued results in private individuals and public bodies having to return to the bank for more loans, from whence the ever-increasing debt. Otherwise the amount of money in circulation would dry up completely. This function of the banker therefore confers upon him supreme power over the economic life of the country. He is more powerful than the Government, for he has the power to grant, to deny, and to regulate credit, "modern money", the very lifeblood of any country's economy.
What hope is there?
Statesmen in Europe, the United States, and Canada have denounced, even strongly, this supremacy of the banking system. In 1935, Canada's Prime Minister, Mackenzie King, said that as long as this power remained unbroken, it was futile to speak of democracy and the sovereignty of Parliament. There are those who, like him, have promised to restore to the nation the control of its money and credit. Others, like former Canadian Finance Minister Donald Fleming, have publicly attacked the arbitrary and harmful acts of the top bankers.
And yet none of these men were able to effect any change. And those politicians who are most vocal in their attacks against this dictatorship, and this includes those politicians who fraudulently used the label “Social Credit”, will never bring about any change, as long as the people themselves have not united to constitute a power greater than that of Finance, a power that will force the Government to take action.
This is not a matter to be settled by elections. It is a question of forming a large enough group of citizens who are enlightened, who join forces, who assert themselves and who decide to make themselves heard by their governments, regardless of what party is in office.
It is also a matter for Divine assistance, since the enemy has a diabolical nature, and the money dictatorship is only one of its many faces. This is what the Social Crediters of the“Michael” Journal have understood, and understand more so now than ever.