Without giving technical solutions to present-day economic problems it leaves this task to the lay faithful the Catholic Church has nevertheless issued principles of justice on which any sound economic system should be based, for the Church cannot lose interest in all that goes against the dignity of the human person or that could prevent his eternal salvation.
Money should be an instrument of service, but the bankers, in appropriating the control over its creation, have made it an instrument of domination. It is Pope Pius XI who wrote, in 1931, in his encyclical letter Quadragesimo Anno:
"This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will."
The creation of money as a debt by the bankers is the means of imposing their will upon individuals and of controlling the world:
"Among the actions and attitudes opposed to the will of God, the good of neighbour and the 'structures' created by them, two are very typical: on the one hand, the all-consuming desire for profit, and on the other, the thirst for power, with the intention of imposing one's will upon others." (John Paul II, Encyclical Sollicitudo Rei Socialis, Dec. 30, 1987, n. 37.)
Since money is an instrument that is basically social, the Social Credit doctrine proposes that money be issued by society, and not by private bankers for their own profit. It is still Pope Pius XI who wrote, in the same encyclical quoted above:
"There are certain categories of goods for which one can maintain with reason that they must be reserved to the collectivity when they come to confer such an economic power that it cannot, without danger to the common good, be left to the care of private individuals."
Pope John Paul II has denounced several times the tight-money dictatorship, and has called for a reform of the financial and economic systems, for the establishment of an economic system at the service of man:
"Again, I want to tackle a very delicate and painful issue. I mean the anguish of the authorities of several countries, who do not know how to cope with the fearful problem of indebtedness... A structural reform of the world financial system is, without doubt, one of the most urgent and necessary initiatives." (Message to the 6th United Nations Conference on Trade and Development, Geneva, September 26, 1985.)
"One must denounce the existence of economic, financial and social mechanisms which, although they are manipulated by people, often function almost automatically, thus accentuating the situation of wealth for some and poverty for the rest." (Encyclical Sollicitudo Rei Socialis, n. 16.)
There is no way any country can get out of debt in the present system, since all money is created as a debt. This point has been explained several times in past issues of "Michael", but understanding it is of the highest importance: all the money that exists comes into circulation only when it is lent by the banks, at interest. And when the loan is paid back to the bank (this money being withdrawn from circulation), it ceases to exist. In other words, new money is created every time banks make a loan, and this same money is destroyed every time loans are paid back.
The fundamental flaw in this system is that when banks create new money in the form of loans, they ask the borrowers to pay back more money than what was created. (The banks create the principal, but not the interest.) Since it is impossible to pay back money that does not exist, debts must pile up, or you must borrow also the amount to pay the interest, which does not solve your problem, but only worsens it, since you end up even deeper in debt. 5 3hz
Even if there was only $1 dollar in circulation in our country, this dollar has to be lent by a bank in order to exist. Let us suppose the bank lent it at an interest rate of 6%. So, at the end of the year, $1 must be paid back to the bank plus a 6% interest, or 6 cents. The fact is that there exists only $1 in the country, not $1.06. It is impossible to pay back the interest, even if it is only 6 cents, since the 6 cents is simply not there! Even if the production of the country doubled or tripled during the year, this did not create one more cent, since only banks can create money in the present system.
So, for the same amount of money to remain in circulation, year after year, debts must necessarily pile up, and there is no way they can ever be paid off. (In Canada, the debt of the Federal Government is only the peak of the iceberg, since there are also the debts of the provinces, municipalities, corporations, and individuals. All in all, the total debt is fifteen times bigger than the total amount of money in circulation!) In the present system, the only way there can be no debt, is to have no money at all in circulation! If you think this is a silly system, you are completely right! The way money is created as a debt to supply the money for our country is the most absurd thing that can exist.
Institutions like the International Monetary Fund and the World Bank pretend to help countries in financial difficulties with their loans, but because of the interest charges they have to pay back, these countries end up even poorer than they were before the loans were made. Here are some striking examples:
Back in 1995, at a conference in Rome, 75 Latin American Bishops denounced the fact that during the period 1980-1990, Latin American countries paid $418 billion in interest on original loans of $80 billion... and they still owed the capital, even though they paid it back more than five times!
And now, what about Canada's public debt! (See text with pie chart below.) Over 90% of the debt is made up of interest charges; the original capital borrowed represents less than 10% of the debt. In other words, Canada's debt has already been paid off ten times... but because of the absurdity of the present financial system, we must continue to pay interest charges on it. Just the interest payments in one year ($45 billion in 1997) are more than enough to cover all of the original debt! For all those who keep shouting that Canada's debt must be paid off, don't you think that paying it off ten times is more than enough? (In all fairness, paying it off only once would have been the only proper thing to do.)
The most absurd thing in all of this is that governments persist stubbornly in borrowing, at interest from private banks, money that they could create themselves, interest- free, thus forcing Canadians to pay interest charges on a $600-billion debt, when there should be no debt at all! The first duty of any sovereign government is to issue, create its own money for the needs of its citizens. For governments to have given up this sovereign function to private corporations (the chartered banks) is the greatest betrayal of history.
As it is explained in Louis Even's article on pages 4 and 5, it is not the bankers who give money its value, but the production of the country. Bankers produce absolutely nothing; they only create the figures that allow the nation to make use of its own productive capacity, its own wealth. The Government, through its central bank, can just as well create these figures itself, without going through the banks, and without getting into debt. As Mr. Even wrote, it is just ridiculous to pay a stranger for permission to use something that we built ourselves.
Now we see how right are those who call for a reform of the financial system, and the cancellation of all debts. On December 27, 1986, the Pontifical Justice and Peace Commission issued a document entitled An Ethical Approach to the International Debt Question, which said, among other things:
"Debtor countries, in fact, find themselves caught in a vicious circle. In order to pay back their debts, they are obliged to transfer ever greater amounts of money outside the country. These are resources which should have been available for internal purposes and investment, and therefore for their own development.
"Debt servicing cannot be met at the price of the asphyxiation of a country's economy, and no government can morally demand of its people privations incompatible with human dignity... With the Gospel as the source of inspiration, other types of action could also be contemplated, such as granting extensions, partial or even total remission of debts... In certain cases, the creditor States could convert the loans into grants.
"The Church restates the priority to be granted to people and their needs, above and beyond the constraints and financial mechanisms often advanced as the only imperatives."
Pope John Paul II also wrote, in his Encyclical Centesimus Annus (May 1, 1991, n. 35): "It is not right to demand or expect payment when the effect would be the imposition of political choices leading to hunger and despair for entire peoples. It cannot be expected that the debts which have been contracted should be paid at the price of unbearable sacrifices. In such cases it is necessary to find as in fact is partly happening ways to lighten, defer or even cancel the debt, compatible with the fundamental right of peoples to subsistence and progress."
And more recently, in November, 1994, in his Apostolic Letter Tertio Millennio Adveniente, for the celebration of the Jubilee of the year 2000, the Holy Father proposed, in the spirit of the jubilees of the Old Testament, the outright cancellation of the international debt:
"Thus, in the spirit of the Book of Leviticus (25:8-12), Christians will have to raise their voice on behalf of all the poor of the world, proposing the Jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not cancelling outright, the international debt which seriously threatens the future of many nations."
From November 16 to December 12, 1997, a Special Assembly for America of the Synod of Bishops was held in Rome, gathering Bishops of North, Central, and South America. Many Bishops, especially those from Central and South America, made sure to mention how this debt problem crushes their peoples and compromises the future of their nations. At the end of this Synod, the Bishops issued a final message, which had this to say about the burden of the debt:
"The burden of external and internal debt, which for many countries has been something from which there seems to be no prospect of relief, has been a considerable concern during the Synod... We join the Holy Father in his appeal for the reduction or forgiveness of debts in an effort to give relief to the people of some of the world's poorest nations. Relief from debt will only begin to lift the burdens of the poor."
One of the best interventions during this Synod was made by Archbishop Henri Goudreault, O.M.I., of Grouard-McLennan, Alberta, Canada, who spoke about the globalization of the economy:
"The race for profit means that a person is put at the service of the economy rather than the economy at the service of the person. Financial giants set governments in competition in order to obtain increasingly generous guarantees and advantages.
"...The proposed actions are numerous: Educate people through teaching the social doctrine of the Church; governments must stop being puppets in the hands of the financial giants; in the spirit of the Jubilee, consider the question of the partial or total erasing of the debts of poor countries."
Governments are indeed puppets in the hands of the financial giants when they borrow at interest from private banks what they can create themselves, interest-free. Politicians no longer act for the common good, but for the good of a handful of financiers. In this case, we can really speak about corruption. Pope Pius XI did not hesitate to talk about the majesty of the State that has been degraded, the State having become the slave and docile instrument of financial interests.
In his latest message for the World Day of Peace, on January 1, 1988, entitled "From the justice of each comes peace for all", Pope John Paul II courageously spoke out against "the evil of corruption":
"We cannot pass over in silence the evil of corruption which is undermining the social and political development of so many peoples. It is a growing phenomenon insidiously infiltrating many sectors of society, mocking the law and ignoring the rules of justice and of truth. Corruption is hard to combat, because it takes many different forms: when it has been suppressed in one area, it springs up in another. Courage is needed just to denounce it. To eliminate it, together with the resolute determination of the authorities, the generous support of all citizens is needed, sustained by a firm moral conscience."
Interestingly enough, the Holy Father also mentioned, in this message, the injustice of a lack of "fair access to credit":
"There are other forms of injustice which put peace at risk. Here, I wish to mention two. First, not having the possibility of fair access to credit. The poor are often obliged to remain outside the normal financial system or to place themselves in the hands of unscrupulous money-lenders who charge exorbitant rates of interest. The end result is the aggravation of an already precarious situation. For this reason it is everyone's duty to work to ensure that the poor have access to credit on equitable terms and at affordable interest rates. Actually, financial agencies offering mini-credit on terms favouring the poor already exist in various parts of the world. These are initiatives to be encouraged, for this is the path which can lead to the radical elimination of the shameful scourge of usury, by giving everyone access to the economic means needed for the dignified development of families and communities."
With a Social Credit system, interest-free loans would be available to all. (This is explained in further detail in Louis Even's brochure, A Sound and Effective Financial System.)
The defenders of the present banking system will obviously say that asking for the cancellation of debts is unrealistic and utopic, that the borrowing nations must respect their financial agreements and that "rules of the game" cannot be changed, since it would penalize the savers who hold bonds. They say that that debts must be paid off until the last penny... even though the capital has actually been paid off more than ten times! But when one understands that the money lent by the banks is literally created out of nothing, with a simple stroke of the pen (and more and more, they don't even use a pen, but simply enter digits in computers), then it is easy to understand that debts can be cancelled, written off, forgiven, without anyone being penalized.
Here is a realistic solution, that can be applied tomorrow morning, by any country in the world. Paying off one's debt is simple justice if this debt is just. But if this is not the case, paying this debt would be an act of weakness. As regards the public debt, justice is to make no debts at all, while developing the country. First of all, in a just system, the sovereign government of the nation would stop building new debts, by creating its own debt-free money, instead of borrowing it at interest from private corporations. As for the existing debt, the only bonds to be acknowledged would be those of the individual savers, who do not have the power to create money. The debt would thus be reduced year after year, as bonds come to maturity.
The Government would honour in full only the debts which, at their origins, represented a real expense on the part of the creditor the bonds purchased by individuals and not the bonds purchased with the money created out of thin air by the bankers, which are fictitious debts, created with a stroke of the pen. Banks would lose nothing, since the money they created for these loans just did not exist before the loans were made. So it is quite realistic to call for the cancellation of all debts, as the Pope, the Bishops... and the Social Crediters of the "Michael" Journal do.
As regards the $600-billion debt of the Canadian Government, it is right to say that we don't owe it, since it is a fictitious debt that unjustly represents, as a liability, all the developments (assets) of our country. Moreover, as it was just explained, the capital has already been paid back more than ten times!
To quote the Lord's Prayer, may our debts be forgiven, and the daily bread be given to all, before the year 2000, through the implementation of a honest debt-free money system, as is advocated by the Social Credit philosophy of the "Michael" Journal!
Alain Pilote
Canadian Debt 1867-1992 - $423 billion
$386 billion 91.25%
In his November 1993 report, Canada's Auditor General calculated that of the $423 billion in net debt accumulated from Confederation to 1992, only $37 billion went to make up the shortfall in program spending. The remaining $386 billion (10.43 times the useful expenditure) covered what it has cost to borrow that $37 billion. In other words, 91% of the debt consisted of interest charges, the Government having spent only $37 billion (8.75% of the debt) for real spending on goods and services.
Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.
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