Why the demand for interest-free loans ?

The need for new money for new production

New money the property of the people

Why make the people pay interest for the use of that which belongs to them?

Why must municipalities have recourse to borrowing when they wish to build a new police station, dig new sewers, construct new water supply systems, etc.; school commissions when they want to build new schools; private enterprise when it wishes to erect new plants or enlarge old?

Simply because all of these forms of production constitute new wealth. The money already in the hands of the public was channeled there by production already realized, which listed this money on its price tags. The money which has thus been distributed, if it is to be used to pay for this new production, cannot be similarly used to pay for production which has previously been realized and offered to the consumer. It is quite obvious to anyone who has eyes to see, that the amount of money in existence in the hands of the consumer is quite insufficient to purchase the goods which are offered and of which the consumer has need.

Therefore, we must logically look for a new flow of money in order to mobilize material and labour so that new production may be realized.

* *  *

Where are we to go for this new money (or financial credit, which substitutes for money)? The logical place - namely, the banking system from which all new money has its origin.

There are still many people who do not know that money has its source in the banking system. They are under the misapprehension that the banks lend and do business only with that money which is already in circulation. They do not even stop to reflect on the point that money must have its origin somewhere. The know that there must be producers of wheat, potatoes, clothing, furniture. They never question that. But that there should be producers of money is something which sounds very novel and curious to them.

One thing is certain, however; money does not give birth to itself. Nor does it take its rise under the plow of the farmer or from the machine of the factory worker. No more does it have its origin from any form of government, since all governments are obliged to obtain money by digging it out of citizens' pockets through taxes or begging it from the financiers as loans.

The simple fact is, all money sees the light of day in the banking system - either the central bank (the Bank of Canada for us) or in the chartered banks.

*  *  *

Now money can take several forms. We see it as metal disc bearing certain engravings on one side, and on the other, a number or figure which indicates the value of goods which can be purchased with a particular type of disc. Or it can take the shape of rectangles of paper bearing certain inscriptions and the picture of the monarch or some other person, and, besides, a figure which indicates its purchasing power. Or again, it can be nothing more than figures set down in a bank ledger crediting so much purchasing power to this individual or that group - simple figures (book money) which is used in making cheques.

Metal money, paper money, ledger money - it makes no difference; one can be changed into the other with the greatest of ease, as happens thousands of times a day at every bank wicket. The one is added to the other, and they are accepted, the one or the other, as is witnessed at the counter of any merchant of goods. The particular form of the money is of no consequence. What counts is that which it can pay for - its purchasing value.

But is not money based on gold? - This is a very hoary myth which was created to make us believe that money does not lie within the control of men, and to make us accept with resignation all the hardships consequent upon a lack of money, even though the stores and warehouses may be packed to the cracking point with goods of all description.

- But then, on what is money based? Money is based on that which gives it its value.

- And what is it that gives this value to money?

- It is the possibility of finding goods or services which can be bought by this money. And likewise the confidence of the people in these "legalised "figures", a confidence which leads them to accept this money without hesitation in exchange for products or services.

And from whence comes the possibility of furnishing the goods and services to meet the demand expressed by money? This possibility, the productive capacity of a country, arises from a country's natural resources, from a competent people which works, from machines, from applied science, from the progress made in means and techniques, from the use of non-muscular, motor power, from the fact of an organized society which preserves and hands on the advances made, and which permits the division of work and collective enrichment through the other advantages which arise from life in association.

Then it is not the banker who gives value to this money which takes its origin in the banking system? Not at all. It is society itself which bequeaths this value through all the production which it realizes; and the new money belongs by right to society. The banker's function, in reality, is that of an accountant; he expresses in figures the right to draw on the productive capacity of the country. New money is the real credit of society (a social credit) a credit expressed in figures by the banker, which function he holds by virtue of a charter which he receives from the government, the government acting in the name of society. But the banker is no more the owner of this money than is the printer the owner of the bright green, new notes which he prints.

Still, the banker acts very much as if he were the true and sole owner of this new money. Not that he uses it himself to buy goods and services; rather he lends it, on his conditions, drawing from it, for himself, an interest rate, an interest upon something which in reality belongs to society.

If a borrower must pay interest for the use of something which belongs to society, then this interest should go to society and not to the banker. Since the loan was made to create new, real wealth, why should those who thus enrich the country be punished by being forced to pay an interest rate?

This penalty, this tribute (for that is what it is), this interest is exacted by the banker on a good which does not belong to him.

There is no question about the banker's right to demand recompense for his work as an accountant. But not through this method of exacting a percentage of the money which is being processed. Accounting work on a sum of $100,000 cannot involve expenses a thousand times greater than the accounting work involved in a loan of $100.

And it must be quite obvious that there is a distinct notion of oppression, of tyranny, in a system which permits that the sole source of money can demand that the amount of credit demanded in repayment be greater than the original amount issued as a loan. For example: if $100,000 is issued, the repayment exacted is not $100,000 but $150,000 or $200,000. And yet the source of the original amount has the complete and absolute monopoly on the issuance of money or credit.

*  *  *

Let us suppose for a moment, good reader, that you have control of this absolute monopoly over money, making loans to governments, public bodies and industry. Here you are, hard at work. You lend $100,000 to municipality A, under the conditions that it repays you this loan at 6% a year over a certain number of years, so that the total amount to be repaid is $175,000 ($75,000 more than the credit which was issued). You then lend to School Commission B, a sum of new money to the amount of $200,000, under terms similar to those in the first case, so that the total amount payed back will now be $350,000. Now a contractor C gets a loan of $80,000 from you under the obligation of repaying capital and interest which will come to a total of $100,000.

So the total amount of new money issued for this day's work is $380,000. But the total of amounts which must be repaid is $625,000. And don't forget that you are the monopolist in money. Nobody else but you can turn out new money. Now, what do you think of this arrangement? What do you think of an arrangement whereby $625,000 must be returned when, in fact, only $380,000 was issued. What will your three borrowers think?

You may reply that other borrowers will come after these three; that the first three, by taxes, if they are public bodies, or through their prices if they are private producers, are going to find the means of extracting the necessary amounts from the money put into circulation by these new loans. Likewise, those following will do the same with regard to following new issues of money through loans and thus the continued flow of loans will maintain an uninterrupted flow of money in circulation. Undoubtedly, certain ones will succeed in repaying the total amount of their loans, but this will only create difficulties for others in repaying theirs. But, collectively, the sum total of debt can only grow greater and greater. And if in your idea of wisdom, it seems good to restrict the outward flow of credit, you will still demand that the inward flow of repayments continue in its unbroken rythm! Your monopoly gives to you a tremendous power; but it can only result in evergrowing debts, violence between those using your money, bankruptcy for many, instability, unemployment, a lack of purchasing power, and all the other evils to which our present economic system is heir.

For that is exactly what is resulting from the money system under which we live.

*  *  *

Loans without interest through the intermediary of the Bank of Canada or of the chartered banks will not eliminate all the vices inherent in the system under which we live. But it will certainly be an improvement. The people will no longer be expected to pay two or three times over, the price of that which they have produced, And in making the terms of repayment correspond to reality, that is, to the rythm of the depreciation of the goods produced, the amount to be repaid each year will be considerably less and as a consequence, taxes will be much lower.

The people elect the government. But the government has its hands tied by the controllers of money and credit. We pride ourselves in living under a democracy. In fact, we might be said to be living under a bank-ocracy.