So long as the present gap separates buying power and prices what good can be expected from international Peace Conferences? And what relief can be accomplished by new and greater government bond issues to finance a “relief program” based on more and bigger debts?
With increasing speed we are being driven to make a choice. Will we deliberately choose to continue in debt and poverty while we follow the lead of Russia to a revolution of senseless violence in this country? Or will we choose instead prosperity and plenty following a necessary, orderly, and peaceful evolution in the bookkeeping of our money system?
This is the choice America must make. This choice is inevitable because all our productive machinery is worse than useless unless we can use its products. Its sole purpose is to produce and deliver wanted goods and services for consumption. These wanted goods and services together with our ability to produce them, constitute our real national wealth. Furthermore this wealth is the only real basis of our National Credit. But we cannot use that Real Credit today because the perverted bookkeeping of our broken-down money system shows it as unpayable debt, not as a credit. The burden of that debt will continue to paralyze business until we realize that the credit of the United States is a national asset. It is only common sense and good business to show in our bookkeeping the ability to produce as a credit, not as a debt to the bookkeeper. We have still the opportunity to choose. Why should we wait for another bookkeeping failure to force us into national collapse?
We have seen that a sound money system must provide circulating money, free of debt as the condition of its issuance, in sufficient quantity to express the effective demand for available goods. With the supply of money in the hands of men who must be interested primarily in their own profits, how can we expect money to be reasonably related to the supply of goods? A financial monopoly from which money is born as debt can only result in a money system that ignores the needs of consumption. It is simply common sense that such a system should result in a chronic shortage of purchasing power.
The dangerous illusion of scarcity, with the power it gives over human life, exists because, in the past, it has worked to the advantage of those who control Finance. Few people realize how subtly they have been involved in this deception. The world’s money-masters and their paid economists have practiced their craft for so long that the illusion appears to most of us as a fact, instead of a transparent sleight-of-hand trick, or as Prof. Soddy terms it “le(d)gerdemain.”
The evidence is clear that so long as we tolerate the artificial illusion of scarcity, with which the popular idea of money has been surrounded, Financial Credit can never be a true reflection of Real Credit. Yet by its very nature no money can be sound unless it adequately expresses the demand of the shopping-nation for existing goods and goods that can be produced. “But so long as private people can get money created for them and destroyed again when they have done with it, money must be capricious in its value and business a game of chance.”1
We need hardly wonder that the monopoly over money has broken down. We might better wonder how the monopolists have been able to operate it so long. So schooled have they been in sustaining the strategy of their illusion that they have become the victims of their own creation. It is a curious paradox that to the international banker the Wealth of a nation appears as something on which he may place a mortgage to issue money as an evidence of debt; while to the shoppers of the nation, its consumers of goods, that same Wealth represents the satisfaction of vital needs and desires. Yet freedom from poverty is frustrated by the shortage of money-tickets.
The obvious necessity for clean-cut changes is everywhere evident in the banking system. “The whole financial system of this country is so rotten that it cannot face a genuine inquiry.”2 Many broadminded bankers are aware of this fact, but Finance cannot save itself. Too many of its own executives have fallen under the hypnotic spell of the power they must have wielded. The necessary changes in the banking system must come from outside the system itself.
Strange as it may seem the monopoly over money exists simply because we have allowed it to continue. In terms of human suffering we know the miserable consequences of its power. Who chooses blindly to tolerate poverty? The public can close any bank it wishes to close at any time, by refusing to do business with it. An actual demonstration of this occurred in 1933, when public fear and distrust closed every bank in the country. The money-monopoly can dominate our lives only so long as we continue to allow it to do so.
But there is still a stranger fact about the private control of the supply of bank-money in circulation. While the total amount of money issued by the banks varies only in accordance with their own action in increasing or diminishing deposits, yet the Constitution of the United States explicitly provides that Congress shall have exclusive power to issue money and regulate its value:
“The creation and circulation of money by the banking system is a direct usurpation of the essential prerogative of government, giving to that system paramount influence over the national well-being.”3 The Government, in allowing the banking system to enjoy a practical monopoly of this power, has forfeited a duty which now it must resume. In the present abundance of goods the artificial illusion of the scarcity of money is a prime cause of human misery. And we ourselves as citizens and taxpayers are responsible for this situation.
The time has come for the Government to assert its constitutional right to control the issue of money for the benefit of every citizen. If we want business recovery we can get it only by closing the gap between buying power and prices. We can do this either by reducing prices or by raising buying power until the two are equivalent. But the most effective method to close that gap is to raise buying power and to lower prices at the same time.
To accomplish the raising of buying power and the lowering of prices clearly necessitates a change in our broken-down money system. What we require os a supply of credit at all times correlated with our supply of goods. The monopoly of credit can no longer continue to issue money only as debt.
The first immediate necessity is to restore to the nation the right to control its own money system. The Constitution grants this power to Congress, as the elected representatives of the people. The assertion of this power is the first step in the direction of permanent business recovery and freedom from our slavery to the money-monopoly.
The time for the change has come. It is here and now. The overwhelming forces of economic necessity require that we face this fact, and give our earnest attention to the design and operation of a money system that is sound, that will equate our buying power with the supply of goods we can produce. To refuse this challenge is nothing less than national suicide.