There are a lot of good things in our country, but many individuals and families who need these goods lack the right to have them, the permission to get them. Is there anything lacking but money? What is lacking, apart from the purchasing power to make the products go from stores to homes?
But then where does money begin, the money that we lack in order to buy the goods that are not lacking?
The first idea that we keep alive in our minds, without really realizing it, is that there is one fixed quantity of money, and that it cannot be changed; as if it was the sun, or the rain, or the weather. This idea is utterly wrong; if there is money, it is because it was made somewhere. If there is not more, it is because those who made it did not make more.
Another prevalent belief about the origin of money is that the Government makes it. This is also incorrect. The Government today does not create money, and complains continuously about not having any. If the Government were the source of money, it would not have sat around idly for ten years in front of the lack of money. (And there would not be a $500-billion national debt.) The Government takes and borrows, but it does not create money.
Our standard of living, in a country where money is lacking, is not regulated by the volume of goods produced, but by the amount of money at our disposal to buy these goods. So those who control the volume of money, control our standard of living. “Those who control money and credit have become the masters of our lives... No one dare breathe against their will.” (Pius XI, Encyclical Letter Quadragesimo Anno).
Money is whatever serves to pay, to buy; whatever is accepted in exchange for goods or services.
There are at present two kinds of money in Canada: one we call pocket money, made of metal or paper; and the other we shall call book money, made of figures in a ledger. Pocket money is the least important; book money is the most important.
Book money is the bank account. Business operates through bank accounts. Whether pocket money circulates or not depends on the state of business. But business does not depend upon pocket money; it is kept going by the bank accounts of businessmen.
With a bank account, one makes payments or purchases without using metal nor paper money. One buys with figures.
Let us suppose I have a bank account of $40,000. I buy a car worth $10,000. I make my payment by a cheque. The car dealer endorses the cheque, and deposits it at his bank.
The banker then makes changes in two accounts: first, that of the car dealer, which he increases by $10,000; then mine, which he decreases by $10,000. The car dealer had $500,000 — he now has $510,000 written in his bank account. I had $40,000 in mine — my bank account now shows $30,000.
Paper money did not move in the country because of this deal. I simply gave some figures to the car dealer. I paid with figures. More than nine-tenths of all business is done this way. It is book money, the money made of figures, which is modern money; it is the most abundant money; its volume is ten times that of paper or metal money. It is a superior type of money, since it gives wings to the other. It is the safest kind of money, the one that no one can steal.
Book money, like the other type of money, has a beginning. Since book money is a bank account, it comes into existence when a bank account is opened without money decreasing anywhere, neither in another bank account nor in anyone's pocket.
The amount in a bank account can be increased in two ways: by saving and by borrowing. There are other ways, but they can be classified under borrowing.
The savings account is a transformation of money. I bring along some pocket money to the banker; he increases my account by this amount. I no longer have that pocket money; I have book money at my disposal. I can get back pocket money by decreasing the amount of book money in my account. It is a simple transformation of money.
But since we are trying to find out how money comes into existence, the savings account, being a simple transformation of money, is of no interest to us here.
The borrowing (or loan) account is the account lent by the banker to a borrower. Let us suppose I am a businessman. I want to set up a new factory. All I need is money. I go to a bank and borrow $100,000 under security. The banker makes me sign a promise to pay back the amount with interest. Then he lends me the $100,000.
Is he going to hand me the $100,000 in paper money? I do not want it. First, it is too risky. Furthermore, I am a businessman who buys things at different and widely separated places, through the medium of cheques. What I want is a bank account of $100,000 which will make it easier for me to carry on business.
The banker will therefore lend me an account of $100,000. He will credit my account with $100,000, just as if I had brought that amount to the bank. But I did not bring it; I came to get it.
Is it a savings account, set up by me? No, it is a borrowing account made by the banker himself, for me.
This account of $100,000 was made, not by me, but by the banker. How did he make it? Did the amount of money in the bank decrease when the banker lent me $100,000? Well, let us ask the banker:
— Mr. Banker, have you any less money in your vault after having lent me $100,000?
— I haven't gone into my vault.
— Have other people's accounts been reduced?
— They remain exactly as they were.
— Then what was decreased in the bank?
— Nothing was decreased.
— Yet my account has been increased. From where did the money you lent me come?
— It didn't come from anywhere.
— Where was it when I came into the bank?
— It didn't exist.
— And now that it is in my account, it exists. So we can say that it was created.
— Who created it, and how?
— I did, with my pen and a drop of ink when I inscribed $100,000 to your credit, at your request.
— Then you create money?
— The banks create book money, the money of figures. That's the modern money that puts into circulation the other type of money by keeping business on the move.
The banker manufactures money, ledger money, when he lends accounts to borrowers, individuals, or governments. When I leave the bank, there will exist in this country a new source of cheques, one that did not exist before. The total amount of all accounts in the country was increased by $100,000. With this new money, I will pay the workers, buy materials and machinery — in short, build my new factory. Who, then, creates money? — The bankers!
The bankers, and the bankers alone, make this kind of money: script or bank money, the money that keeps business moving. But they do not give away the money they create. They lend it. They lend it for a certain period of time, after which it must be returned to them. The bankers must be repaid.
The bankers claim interest on this money that they have created. In my case, the banker will probably demand $10,000 from me in interest, at once. He will withhold it from the loan, and I will leave the bank with $90,000 in my account, having signed a promise to repay $100,000 in one year's time.
In building my factory, I will pay my men, buy things, and thus spread my bank account of $90,000 throughout the country.
But within a year, I must, through the profits I make selling my goods for more than they cost me, build my account up to not less than $100,000.
At the end of the year, I will pay back the loan by making out a cheque for $100,000 on my account. The banker will then debit my account by $100,000, therefore taking from me this $100,000 I have drawn from the country by selling my goods. He will not put this money into the account of anyone. No one will be able to draw cheques on this $100,000. It is dead money.
Borrowing gives birth to money. Repayment brings about its extinction. The bankers bring money into existence when they make a loan. The bankers send money to the grave when they are repaid. The bankers are therefore also destroyers of money.
And the system so operates that the repayment must be greater than the original loan; the death figures must exceed the birth figures; the destruction must exceed the creation.
This seems impossible, and collectively, it is impossible. If I succeed, someone else must go bankrupt, because, all together, we are not able to repay more money than has been made. The bankers create nothing but the capital sum. No one creates what is necessary to make up the interest, because no one else creates money. And yet, the bankers demand both capital and interest. Such a system cannot hold out except for a continuous and ever-increasing flow of loans. Hence the system of debts, and the strengthening of the dominating power of the banks.
The Government does not create money. When the Government can no longer tax nor borrow from individuals, due to the scarcity of money, it borrows from the banks. The operation takes place exactly like mine. As a guarantee, it pledges the whole country. The promise to pay back is the debenture. The loan of the money is an account made by a pen and some ink.
And the country's population finds itself collectively indebted for a production that, collectively, it made itself! It is the case for war production. It is the case also for peacetime production: roads, bridges, waterworks, schools, churches, etc.
The situation comes down to this inconceivable thing: all the money in circulation comes only from the banks. Even metal and paper money comes into circulation only if it has been released by the banks.
Now the banks put money into circulation only by lending it out at interest. This means that all the money in circulation comes from the banks, and must someday be returned to the banks, increased with the interest.
The banks remain the owners of the money. We are only the borrowers. If some manage to hang on to their money for a long period of time, or even permanently, others are necessarily incapable of fulfilling their financial commitments.
A multiplicity of bankruptcies, both for individuals and companies, mortgage upon mortgage, and an ever-increasing public debt, are the natural fruits of such a system.
This way of making the country's money, by forcing governments and individuals into debt, establishes a real dictatorship over governments and individuals alike.
The sovereign Government has become a signatory of debts to a small group of profiteers. A minister, who represents millions of men, women and children, signs unpayable debts. The bankers, who represent a clique interested only in profit and power, manufacture the country's money.
This is one striking aspect of the degeneration of power of which Pope Pius XI spoke: governments have surrendered their noble functions, and have become the servants of private interests.
As for individuals, the scarcity of money develops a mentality of wolves. In front of plenty, only those who have money — the too scarce symbol of goods — have the right to draw on that plenty. Hence the competition, the tyranny of the “boss”, domestic strife, etc. A small number preys on all the others. The great mass of the people groans, many in the most degrading poverty.
It is Saint Louis, King of France, who said: “The first duty of a king is to coin money when it is necessary for the sound economic life of his subjects.”
Book money is a good modern invention that should be retained. But instead of it proceeding from a private pen, in the form of a debt, those figures, which serve as money, should come from the pen of a national organism, in the form of money destined to serve the people.
One must stop suffering from privations when there is everything needed in the country to bring comfort into every home. The amount of money should be measured according to the demand of the consumers for possible and useful goods.
It is therefore the producers and consumers as a whole, the whole of society, which, in producing goods in front of needs, should determine the amount of new money that an organism, acting in the name of society, should put into circulation from time to time, in accordance with the country's developments.
Thus the people would recover their right to live full lives, in accordance with the country's resources and the great possibilities of modern production.
Money should therefore be put into circulation according to the rate of production and as the needs of distribution dictate.
But to whom does this new money belong when it comes into circulation in the country? — This money belongs to the citizens themselves. It does not belong to the Government, which is not the owner of the country, but only the protector of the common good; nor does it belong to the accountants of the national monetary organ- ism: like judges, they carry out a social function and are paid, according to law, by society for their services.
To which citizens? — To all. This money is not a salary. It is new money injected into the public, so that the people, as consumers, may obtain goods already made or easily realizable, which are awaiting only sufficient purchasing power for them to be produced.
There is no other way, in all fairness, of putting this new money into circulation than by distributing it equally among all citizens without exception. Such a sharing also makes it possible to derive the maximum benefit from the money, since it reaches into every corner of the land.
Whenever it might become necessary to increase the amount of money in a country, each man, woman and child, regardless of age, would thus get his or her share of the new stage of progress that makes the new money necessary.
This is not payment for a job done, but a dividend to each one for his share in a common capital. If there is private property, there is also community property that all possess in the same way.
What, according to us, would be the effect of this financial reform? First of all, in a general way, order would be restored in the money sector, consequently in economics, with echoes in the political and social spheres.
Goods would be made to serve needs. The accumulation of money would stop being the commanding aim of industry. (And one would therefore not need to create artificial needs to sell useless products, thus reducing waste and pollution.)
The way to obtain the implementation of an honest money system is to form a public opinion sufficiently enlightened and motivated to make a successful demand for it. So there is no question of an election campaign, but rather of an education campaign.
This propagation of study among the masses requires the devoted efforts of numerous apostles who are not afraid of self-abnegation and sacrifice. And it is still in order. The present disorder is the result of all kinds of selfishness. All this must be expiated and corrected. As Pope John Paul II put it in his encyclical letter Sollicitudo Rei Socialis: “These attitudes and `structures of sin' (love of money and power) are only conquered – presupposing the help of divine grace – by a diametrically opposed attitude: a commitment to the good of one's neighbour.” (n. 38)
So, the surest and only way of advancing the cause of honest money is that method which develops study and devotion. This is the method advocated by the Pilgrims of St. Michael, with the “Michael” Journal. Come to our meetings, order leaflets like this one to distribute around you, solicit subscriptions to the “Michael” Journal!