When a community constructs an aqueduct, lays down a sewage system or paves its streets, it brings new wealth into being in the country; it develops a section of the country. Similarly, the building of schools, hospitals, churches, bridges, etc., constitutes additional wealth, new development. And such is the case when we open new lands to development or set up new factories for production, etc., etc.
The capacity of modern production is such that a country can proceed with such developments as we have mentioned above without in any way diminishing its production of consumer's goods — food, clothing, washing machines, fridges, etc. In fact, it is when we are embarked on that first type of developments, roads, bridges, aqueducts, etc., that the production of consumer goods is accelerated, because such work stimulates the flow of consumer goods.
However, a municipality which has need of, say, an aqueduct, often hesitates and puts off to some future date this project, simply because it has not got the money, even though it may have an abundance of the necessary materials and any number of skilled laborers. Current production can put money into circulation, but never more than is inscribed on the price tags of these goods. And with the money put into circulation by current production, we cannot pay for more than the cost of current production. Consequently, it is necessary to find other money whereby the production capacity available for these projects can be mobilized.
Taxing the population for these developments or asking the people to save their money and tend it might have been reasonable enough at the period when productive capacity, more limited, was not capable of maintaining the current flow of consumer goods and at the same time launch into new developments. But such is not the case today. We are able to carry on both types of production at the same time; in fact there is greater progress when we do maintain both at the same time. Consequently it should be possible to finance the two at the same time.
So, for developments there should be new money. This is the idea put forward by Douglas, the founder of Social Credit when he said:
"That the credits required to finance production shall be supplied, not from savings, but by new credits relating to new production."
Furthermore, when public corporations must absolutely go ahead with new developments which have become urgent, and when the people haven't the means with which to pay for these works, then such public bodies must have recourse to borrowing; and these loans do not always come out of savings. For economic expansion there must be monetary expansion. There must be an increase in the amount of money available. And this increase can only come with new money.
This new money doesn't drop out of the sky, nor grow in the ground; nor does it « come from mines or from the government. It comes solely from the banking system. We have seen in another article, (Modern money...) that bankers do not lend their depositors' money. They issue brand new credits which come into being with a stroke of the banker's pen.
Now, of course, the new money must come from somewhere. And since by far the greater part of modern money consists of book money or ledger money in the form of accounting, it is certainly most convenient that expert accountants, like the personnel of banks, should be charged with the operation of bringing new credits, new money, that is, into the world.
The great evil of the existing system is that this new money is treated by the banks as if it were their private property. They will put it into circulation only with interest rates grafted onto it. And such interest charges create debts which, collectively, can never be paid off.
Now, if you, personally, were charged by society with creating, by some method or other, new money which society might need, you would consider yourself as a simple agent of society and not the owner of the money put out by you at the demand of society. You would be justified in asking some reasonable fee for your work but not in assuming proprietorship of the money and issuing it on your terms at interest rates varying with the amount of money issued and the length of time it is in circulation. The printer hired by the Bank of Canada to print a certain amount of paper money (about one tenth of the total amount of money) doesn't consider himself the owner of these bank notes. He is paid for his work, but the new money is not his property and he has no say as to the conditions under which it shall be issued and put into circulation.
Why then does the banker, who is the authorized creator of the credit whịch serves as money, consider himself to be the owner of that credit? Why must he have back, after the money has been used, more than he has put into circulation, since he is the only one authorized to put new money into circulation?
The result of this monopoly and the conditions imposed is that all the money thus put into circulation as a debt must return to its source in a greater amount than when issued. Such a condition is patently absurd. Obviously, those borrowers who are able to return to the bank more money than they have taken out, do so only to the disadvantage of other borrowers. Collectively, as we have said, it is impossible to return all the money demanded. Hence we see perpetual debts burdening the shoulders of governments, public corporations and institutions, industries, business men and individuals. If tomorrow the makers of money were suddenly to recall all the money they had issued along with all the interest they demand, the sum total of money in the country would have to go back and the debt would still be far from paid off.
Social Credit denounces this enslavement of humanity by the money makers, an enslavement made only that much more unjustifiable by the fact that it is the people themselves why by their competence, their work, their acquired skills, their exploitation of the natural resources of their country give to this very money its value, regardless of the form it might take.
This system has been sanctioned by law but it is nevertheless completely fraudulent and out of harmony with economic realities. This robbery may be legalised by the privileges accorded to the banks, but it still remains the theft of wealth which essentially belongs to society.
That is why Crediters demand that the development of the country be financed by interest free money. The Bank of Canada, owned by the Canadian people, should be the institution charged with seeing that this is done. It might very well come to some arrangement with the banks, chartering them for this work and paying them for their services. Thus the Bank of Canada would not have to open branches of its own throughout the land. How this operation was effected would rest with the judgement of the experts as to which was the most efficient means. But regardless of what method might be adopted, those who work to develop the country should not be penalized for the services they render the nation.
New developments should not oblige the population to pay for them to those who have had no part in these developments. Such developments should be financed by new credits; these credits should be loans made without interest charges; the repayments should include nothing more than the exact amount of the loans and should be spread out over a number of years, the number to be decided at the time, the projects are planned. Thus we should have financing which is genuinely in accord with reality and instead of a dictatorship we should have service.
It is absolutely repugnant that we should have to pay $200,000 for a school which cost only $120,000. to build. The $120,000 paid out to the builders, for materials, for the management of the work, etc., is a perfectly justifiable cost. But why the $80,000 which, when it comes down to it, is nothing more than money paid to the financial system for permission to go ahead with the work?
Why should a church, which originally cost $400,000 to build, cost $800,000 after the thirtieth or fortieth annual payment?
Why should a town hall (the one in Arvida, Quebec, for example) which cost $570,000 to its builders, cost another $300,000 which must be paid only to the finance system?
Is it not time that such robbery was done away with?
A tremendous outcry is raised against inflation which sends prices rocketting — and with good reason are they protested. But from whence comes inflation if not from the interest rates imposed upon the people who produce?
When Crediters approach their councillors, mayors or other public men with the purpose of inviting them to ask for interest-free credit for the financing of public projects, they are often met with the objection: "Well, in that case I shall no longer be able to lend out my money profitably."
Well, we must make a distinction between money earned (as in the case of the objector) and new money (the creation of credit by the banks). In the first case the individual may certainly do with his money what he wishes; spend it, deposit it in the bank, hide it under the mattress, give it away or lend it out, under terms freely arrived at. But in the second case, that of the new money, such money has not been earned by him who creates it; it does not belong to him. Hence, by what right does he exact interest for issuing it?
Furthermore, money was not invented to make other money. The fecundity of money, something quite unnatural, has become a sacred dogma with financial capitalism. It has poisoned our economic life. It has made finance a false reflection of realities. It has made of economics the pursuit of money instead of the pursuit of goods needed to fill wants. It has made production the slave of finance instead of making finance serve production. It has caused the citizen to be taxed, to be plunged into debt, in many cases utterly despoiled; it has caused men to be uprooted from their homes, cast out without employment; it has set man against man in wars from which only the financiers emerge victorious.