The "why” of the mounting debt problem

The Gazette, November 15, of Montreal, expresses in an editorial its worry over the manner in which Canada's total national debt is increasing (the gross national debt stood at $21,601,000,000 for the year 1960-61)...

"These debts (federal, provincial and municipal) are swelling month by month", laments The Gazette. "... there are few indications that the production of the country is rising sufficiently to take care of the mounting obligations".

How can it increase when some 300,000 of Canada's working force has been idle for almost a year? What is the purpose of increasing production when surpluses are mounting and the means of consuming the fruits of production have been so drastically cut through the disappearance of purchasing power represented by the lost wages of these unemployed.

Yes, production has not been keeping pace with the rising tide of debt. It is a fact that the expenditure by business of money for plant and equipment has been in decline since 1957.

669 businesses failed in Canada during the second quarter of 1961 (49 more than during the same period last year). These businesses were set up to provide goods or services for the people of Canada. They were an attempt to increase production. Yet they failed with an average liability of about $35,000 each...

Is it because, there was no call or need for the goods and services which existing businesses (which are not expanding) supply, or which bankrupted businesses wanted to supply?

Canada's needs are vast. For roads, schools, hospitals; for food, clothing, houses and all sorts of consumer goods. The poor in New Brunswick and elsewhere will testify to this: The lack of teachers and schools, the need for new roads and improved roads in every part of the country, the need for increased hospital facilities — each of these is a witness, to the country's needs which business - existing and bankrupt, - might have supplied.

To say that the lack of production is in some way responsible for mounting debts is like whipping a race horse for not running when the poor animal is tied to the starting post. Canada can produce ail it needs for itself and its neighbors from its productive potential. But it must be untied.

The "why" of the mounting debt of this country – and most other countries, for that matter — lies in the crippling financial system under which society labours.

All money comes into existence not from the government or the government's central bank, but from the private chartered banks. And it comes into existence as a debt to be borne by society. Here is what Maurice Colbourne has to say in his book, The Meaning of Social Credit under the sub-title, The Mountain of Debt:

No picture of the present financial system, however short, would be complete without its background of Debt. To omit this would be like describing Hamlet without his stepfather. We are not thinking of War Debts; or of International Debts, or of any relatives of these which may be in the limelight at any given moment- but of the system itself by which all money is debt. It is a debt to the banking system: All of it. The reader, at is true, may actually own some of the one billion eight hundred million pounds (roughly the amount of the deposits of Financial Credit in the Joint Stock Banks in England), and it may stand in his or her bank credit as a true credit, but in someone else's bank account it stands as a debit, or debt because it was as a debt and not a credit that it, and the rest of the 1,800,000,000 pounds, together with the rest of the money in the world, came into being. And as debt it must remain until it is repaid and destroyed.

Even our vocabulary is perverted. When a bank is said to extend you credit it is doing nothing of the kind; it is extending you debt. So-called Financial Credit should properly be called Financial Debt. And the point about the Financial Debt of the world as a whole, a point which cannot be stressed too strongly or repeated too often, is that it cannot be repaid. It is unrepayable. It cannot be repaid now nor at any other time. It can never be repaid. Why can it never be repaid? In a word, because of Interest. How can the world repay more money than has been loaned it, and more than has been created? The world is not a conjurer. It is perfectly true that in so far as a bank itself spends and consumes it is distributing money which is purchasing power unadulterated with debt... But what a drop in the ocean the total of such money is!

It is also true to say, therefore, that until the banking system creates and spends, as a consumer, at least as much money, as the amount it demands as interest on the money it creates and lends, the impossible feat has to be undertaken of trying to repay more money than is in existence.

How then is the trick performed? The answer is simple. It isn't performed; it is postponed. All that happens is that the world is lent further credits (i.e. debts) and pays, for the moment, out of them. Today's debt cannot be repaid except by incurring a still bigger debt for tomorrow. The process never ends. The debt piles up; that is all; until at last there comes a time when the Debt's sheer size prizes open the eyes of the people to the tragic farce of the whole principle of debt on which the system works, or else the debts themselves become unbearable.

Mr. Colbourne then goes on to pose the question: has the world always been in debt? Did the banking system start as a lender of money or as the guardian of the first deposits of a customer's money tokens? There is no very clear evidence to support a claim for either hypothesis.

However, the Bank of England, the prototype of all modern banks, came into existence because William III wanted to borrow money. Secondly, England's financial system (again, the model of all financial systems existing today) has been based on the principle of debt for more than two hundred years. In other words, the debt-breeding money system seems to have been with us from the inception of the modern monetary system.

To repeat: money comes into existence as a debt which must be repaid to the banking system. It cannot be repaid because such lending exacts a return of more money (interest) than was originally created and issued. In its attempt to repay such  unrepayable loans by new borrowings, the world only increases this debt.

The world must awaken to the fact that as long as we try to finance new production, public and private, with debt-bearing issues of credit from the banks, so long shall we have mounting debt, increasing unemployment, falling production. It is useless to clamor for greater production when the people of the world, for fack of purchasing power, cannot consume what they are already producing (and really need).

Unfortunately, the greater part of the world's media of communications and this includes The Gazette of Montreal - is controlled directly or indirectly by the powers of Finance. They cannot be excepted to lay the issue clearly before the people.

Thus it is up to the voice of Social Credit, throughout the world, to bare the true nature of the financial system and the havoc it is creating in our society.