To monetize something is to coin it into money, or establish it as legal tender. For example, monetizing gold or silver is to take gold or silver and strike out of them pieces of money, accepted by the countries who recognize pieces of gold and silver as legal tender.
In modern business, the money which moves the most goods is not the gold or silver money, but the bank's simple bookkeeping money, the monetized credit, which moves from one account to another and is of use in transactions without moving the metal or paper money.
The fact of recording these credits for the first time into an account, from where they will pass into circulation, therefore has all the effect of real monetization. And when this credit disappears, by cancelling it totally, when a repayment is made to its issuer, it is a real destruction of the medium of exchange.
If one calls money all that serves to pay, buy, clear from debt or taxes, one must certainly recognize that the more a country's production increases, the more the money in circulation is a must; otherwise, production accumulates and the producers stop working.
A country's production increase denotes progress for that country. This progress can perhaps be due to an increase in the population capable of producing. Usually it is due much more to new and more effective means of working the soil, the subsoil, the motorized forces, and all of the country's other resources.
How can money in circulation increase when progress increases production? Only one way: by new issues of money or what serves as money.
Today, all these new issues enter into circulation only in the form of loans, by the banks, to the governments or entrepreneurs.
We do not talk here about simple loans of money already in existence: this would not increase the total circulation at all; it would be a simple transfer of money from one person to another, from one institution to another.
When we talk about a money increase to match a production increase, it can only be about new money added to the old, putting into circulation money which was not previously in circulation. This money can perhaps be of metal or paper, or the simple crediting of accounts at the disposal of industrialists or governments — it is of no great importance, so long as it is willingly accepted in payment for goods or services.
Where and how is the increase made? The borrowing industrialist pledges his acquired properties, but this is not enough. He must envisage a profitable development from money that he borrows. He must show, to the banker's satisfaction, a production increase, the sale of which will allow him to repay the lending bank. The guaranties are in the banker's hands, it is true: but the bank does not wish at all to seize the pledged properties. This does not interest the bank; it only happens as a last resort when the borrower's project goes wrong and he can not pay back his loan. What the bank wants is money, because its business is a money business.
Therefore it is really progress, envisaged as very realizable, which is the real determinant of the loan.
To make this loan, the bank records the amount to the credit of the borrowing industrialist. The cheques written on this credit will pay for the manpower and the industrialist's other disbursements to establish new means of production in the country.
The increase in the means of payment, made through this recording of credit in the borrower's account, is therefore purely and simply a monetization of progress. Without progress in production, this monetary expansion would not be possible; or it would really be nothing but inflation, and inflation, instead of increasing the real purchasing power, decreases the purchasing power of everybody.
Before going any further, let us see to whom is attributable this progress that the banker monetizes to lend to the entrepreneur.
Progress is the outcome of many things: not only does it stem from the industrialist's personal initiative or his collaborator's work, but also, and perhaps above all, from the application of inventions, from the scientific processes, which constitute a real common cultural heritage. No one can proclaim himself the sole owner of the new improvements: they are a new link in the chain of progress, but a new link which would be impossible without the previous ones.
The entrepreneur's initiative and the activities that he will recruit certainly bring a share to progress: this share is private and must give a reward to its authors, in the form of profits or wages and salaries. But the share that society itself brings into progress is more and more considerable.
And what share does the banker bring into it? The banker only ratifies the evaluation of progress. He agrees or refuses to monetize the progress that the borrower plans to put into concrete form.
Now what is the result of monetization for the various parties involved — the borrower, the public, the banker — under the present system?
Let us begin with the banker. It is really he who is the first beneficiary of a progress to which he personally does not contribute, and on which he has no more claim than the other members of the community.
Let us point out that the banker actually fulfills a double function in the described operation. He monetizes progress; then he lends the fruit of this monetization.
When he monetizes progress, he carries out a sovereign act. He does it by virtue of a charter that the Federal Government has granted to him. He acts as the sovereign, through a simple delegation of power — a power that rightly resides in the Sovereign Government. Therefore the fruit of this act must be a social fruit, a common good.
But nothing of the sort actually occurs. Hardly has Mr. Jones, the sovereign, monetized progress, when he makes this money the property of Mr. Jones, the banker. And our artist, who becomes again a simple banker, actually lends, to the profit of the bank, the money that he has just monetized when he fulfilled the role of sovereign through a delegated power existing for the common good.
This same person, sovereign to monetize and banker to lend, therefore takes advantage of the first role — the role of sovereign — to pass to the lending banker what must legitimately belong to the people.
This is a despoilment, stemming from corrupt practices. And not only is the banker the first and principal beneficiary of the monetization of progress, but he is also the best-protected beneficiary. He can not lose, even if the borrower fails in his undertaking, since he has guaranties in his hands on the borrower's past acquisitions, and these acquisitions exceed always in value what the banker has lent.
What is the borrower's share? He will also be able to benefit from the monetization of progress, provided, in the first place, he manages to establish the means of production planned; secondly, provided he is clever or violent enough to extract from the public more money than he puts into circulation.
The borrower's profit is less ensured than the banker's. If he fails in his undertaking, he comes out of it poorer, since the banker grabs the goods that the borrower has pledged.
And the public? The members of society, whose common cultural heritage perhaps forms the most considerable share in progress, have as such no share from the monetization of this progress. They have none, because the sovereign, who has monetized progress, has forgotten the people and thought only of the banker.
Those who work are paid wages or salaries, thanks to monetization; but collectively, they must, as consumers, pay more for the product of their work than they draw in wages and salaries, since the entrepreneur must take out all the money that he lets go, plus his strongly legitimate personal profit, plus the repayment to the banker who appropriated the fruit of monetization from the very beginning.
As this repayment, to be complete, must be greater than the loan, and as it is collectively impossible to bring in more money than goes out, there will necessarily be bankruptcies somewhere, or ruination, or accumulation of private or public debts.
All these things oppress the community. The ruin of a few is a burden for the whole. The private debts are paid only by placing surcharges on the prices for the buyer. The public debts, or the interest on the growing public debts, are paid only by overtaxing the taxpayers.
Instead of a public that benefits from progress, one has therefore a public crushed under a growing load as progress is expressed by debt-money. In such a case, if putting into circulation the monetization of progress causes a temporary well-being, this temporary well-being is short-lived; the very conditions of this issue of money impose unpleasant and exhausting bleedings.
Let us add that bankers have around them a clientele of borrowers who are more and more welcome, because these borrowers have proved themselves effective at fleecing the public. These are the unscrupulous ones of whom the Pope (Pius XI) spoke. Though not very pleasant to God and His angels, to the bankers these unscrupulous borrowers are the cream of humanity. And this is the way that, around the sovereign and lending banker, are grafted the powerful monopolies which strangle all competition and poison the economic atmosphere.
The monetization of progress, such as we have, is therefore an injustice, a theft, an illogicality, a concentration of wealth, and a manufacture of chains.
It is the Government which, in the name of society, ought to monetize progress. As the country's production increases, it is the Government itself which ought to increase the money, or the credit-money, and do it for the good of all members of the community.
The Government ought to act in this way for the good of each and every one, by distributing freely to each and every one, in the form of a social dividend, the claims on the country's progress.
The entrepreneurs and workers would have their rewards, through the sale of their products or their work, thus made easier. Finance would come, debt free, through the consumers, whom the monetization would have benefited directly, instead of coming in the form of a debt through the banker, who grabs the fruit of monetization.
And if the Federal Government does not want to free the people in this way from the yoke of the sovereign banker, the Provincial Governments can do it more gradually, but just as effectively, through a Provincial Financial Mechanism which the citizens would use freely, instead of clinging to the banks' spoliating system.