Regular readers of MICHAEL will have noted that the first expectation of the Pilgrims of St. Michael, or White Berets of the Louis Even Institute, is that the federal government restore its right to create the country's money supply Once this is done, it will be possible to apply the other two principles of Economic Democracy, or Social Credit (not the Chinese control system, but the financial solution conceived by Scottish engineer Clifford Hugh Douglas and spread by the Louis Even Institute). These are monthly dividends to every citizen, and periodic price discounting to control inflation.
But for new readers, this demand may raise a few questions. We will answer the most frequently asked questions here.
Question: You say the Canadian government has to create its own money. But doesn't it already do that, with Bank of Canada bills?
Answer: If the federal government created its own money, why is there a debt of over $1,000 billion? The reality is that bank bills and coins only come into circulation if they are loaned out by the banks, at interest. What's more, this kind of money (banknotes and coins, or "cash money") represents less than 10 percent of the country's money. The "other" kind of money, representing more than 90 percent, is the electronic money created by banks out of thin air, which we see on checks and in bank accounts.
Question: Why do you want the government to create money? Is the banks'current money no good?
Answer: Private banks issue money at interest, in the form of debt, which creates unpayable debts. For example, suppose the bank lends you $100 at 6 % interest. The bank creates $100, but asks you to repay $106. You can repay $100, but not $106: the $6 for interest doesn't exist, since only the bank has the right to create money, and it only created $100, not $106.
Understand that when the bank grants you a loan, it's asking you to repay money that doesn't exist. The only way to pay back $106 when only $100 exists is to borrow that $6 from the bank too, and your problem isn't solved, it's just gotten worse as you now owe the bank $106, at 6 % interest, or $112.36, and as the years go by the debts pile up and there's no way out.
Some borrowers, taken individually, may be able to repay the bank their loan in full, principal and interest, but not all borrowers, taken as a whole, can. If some borrowers manage to pay back $106 when they've only received $100, they've taken the missing $6 from the money put into circulation by others' loans, making it even harder for others to pay back their own loans. For some to be able to repay their loans, others must necessarily go bankrupt. And it's only a matter of time before all borrowers, without exception, find themselves unable to repay the banker, regardless of the interest rate charged.
Some will say that if you don't want to get into debt, just don't borrow. But the fact is, if nobody borrowed money from the bank, there wouldn't be a penny in circulation. And that money borrowed from the bank can't stay in circulation indefinitely: it has to go back to the bank when the loan matures... with interest, of course.
This means that if you simply want to keep the same amount of money in circulation in the country, year after year, you have to accumulate unpayable debts. For example, if we want to keep $100 in circulation in the country, year after year, by borrowing it at 6% interest, the debt will be $106 after one year, then $112.36 after two years ($106 plus 6% interest), and so on. At the end of 70 years, the debt will have reached $5907.59, and there will still be only $100 in circulation.
In the case of public debt, the bankers simply charge interest on the debt. Are they doing us a favor? No, they're just delaying the financial mess for a few years because after a while even the interest on the debt becomes unpayable. So, in the example of the $100 borrowed at 6%, after 50 years the interest on the debt is $104.26 — more than all the money in circulation.
So it's hardly surprising that the debts of civilized countries are reaching astronomical levels. Will we wait until debt servicing requires 100% of taxes to change the system?
Question: Does the government have the right to create its own money? Would this money be as good as the banks'?
Answer: Of course the government has the right, since it was the government itself that gave the banks this right. For the government to deny itself a privilege it has granted to the banks is the height of imbecility! In fact, it is the first duty of every sovereign country to issue its own currency, but all countries today have unjustly ceded this right to private companies, the chartered banks. The first country to cede its power to create money to private companies was Great Britain, in 1694. In the US this right was relinquished in 1913. In 1975, the Bank for International Settlements ordered the central banks of all countries to stop lending money to their governments, which were now obliged to go through commercial banks, borrowing the money at interest.
It's not the banker who gives money its value, it's the country's production. The banker produces absolutely nothing; he merely creates figures which enable the country to make use of its own production capacity, its own wealth. Without the production of all the country's citizens, the banker's figures are worth absolutely nothing. So, the government can very well create these figures itself, representing society's production, without going through the banks, and without going into debt. So why should the government pay interest to a private banking system for the use of its own money, which it could issue itself without going through the banks, without interest, without debt?
This question was clearly put to Graham Towers, Governor of the Bank of Canada from 1935 to 1954, when he appeared before the Parliamentary Committee on Banking, Trade and Commerce in April 1939:
"Why should a government with the power to create money cede that power to a private monopoly, and then borrow what the government could create itself, and pay interest up to the point of national bankruptcy?"
Towers' answer: "If the government wants to change the form of operation of the banking system, that is certainly within the power of parliament." Indeed, the Canadian Constitution clearly gives the federal government this power to create money.
Question: Isn't there a danger that the government could abuse this power and issue too much money, leading to inflation? Wouldn't it be better to leave this power to the bankers, so as to keep it safe from the whims of politicians?
Answer: Money issued by the government would be no more inflationary than money issued by the banks: it would be the same figures, based on the same production in the country. The only difference is that the government wouldn't have to go into debt or pay interest to obtain these figures.
On the contrary, the primary cause of inflation is the money created by banks in the form of debt: inflation means rising prices. And the obligation on borrowing companies and governments to return more money to the bank than they took out forces companies to inflate their prices, and governments to inflate their taxes.
How does the Governor of the Bank of Canada combat inflation? Precisely what actually increases it: raising interest rates! As some provincial premiers have said, "it's like trying to put out a fire by dousing it with gasoline."
But it's quite obvious that if the Canadian government was to start creating or printing money willy-nilly, without any limits, according to the whims of the men in power, and with no relation to existing production, we'd have inflation and money would lose its value. But this is not at all what Social Crediters propose.
What the Social Crediters of MICHAEL are proposing, when they speak of money made by the government — or more precisely, money created by a non-partisan body acting on behalf of society, is that money be brought back to its proper role, which is to be a number that represents products, which is in fact simple accounting. And since money is just an accounting system, all that's needed is accurate accounting.
The government would appoint a commission of accountants, an independent body, to be called a "National Credit Office" (in Canada, the Bank of Canada could very well perform this function, if the government so ordered). This National Credit Office would be in charge of establishing fair accounting, where money would simply be the reflection and exact financial expression of economic realities. Production would be expressed by an asset and destruction by a liability. And since we could never consume more than we produced, liabilities could never exceed assets, and indebtedness would be impossible.
In practice, this is how it would work. New money would be issued by the National Credit Office at the rate of new production, and withdrawn from circulation at the rate of consumption of this production (Louis Even's brochure, "A sound and effective financial system" explains the mechanics in detail.) There would be no danger of having more money than products as there would be a constant balance between money and products. Money would always retain its value and inflation would be impossible. Money would not be issued at the whim of the government since the accountants of the National Credit Office would only act according to the facts of what is produced and consumed.
Social Credit, or Economic Democracy, also proposes a mechanism for lowering prices, called "compensated discounting", which would enable consumers to purchase all production offered for sale with the purchasing power they have, by lowering the selling price of products (a discount) so that the total price of all products is equivalent to the total purchasing power available to consumers. This discount is then reimbursed to the merchant by the National Credit Office.
If the government created its own money according to society's needs, it would automatically be able to pay for everything it is capable of producing, and would no longer need to borrow from foreign or domestic financial institutions. The only taxes people would pay would be for the services they consumed. We would no longer have to pay three or four times the price of public projects because of interest.
So, when it comes to a new project, the government wouldn't ask: "Do we have the money?" but "Do we have the materials and the workers to make the project happen?" If so, the money would automatically be issued to finance this new production. The Canadian population could truly live within its physical means and production possibilities. In other words, everything physically possible would be made financially possible. The only limit would be the country's production capacity. The government could finance all the developments and social programs that the population demanded and that were physically feasible.
Education of the people by MICHAEL
Question: If everything you've just said is true, and a social money system created by a government agency on behalf of society is so beneficial, why doesn't the federal government implement it immediately?
Answer: Constitutionally, there's nothing to stop the government from doing so immediately. It is the sovereign government that must be responsible for the country's monetary policy, not private companies whose objective is not at all the common good but their sole profit. On July 27, 1961, Louis Rasminski, who was Governor of the Bank of Canada from 1961 to 1973, issued the following statement to the Canadian government.
"If the government disapproves of the monetary policy pursued by the Bank (of Canada), it has the right and responsibility to instruct the Bank what policy it should follow... and the Bank should have the duty to obey these instructions."
Governments, despite their often stupid declarations, are perfectly aware of the iniquity of money creation by private companies, but they dare not face up to this power for lack of popular support.
The only thing missing is the education of the people to demonstrate the falsity, absurdity and injustice of the current financial system, and the existence of a corrective such as Economic Democracy. MICHAEL denounces the current system and offers the ingenious solution of Economic Democracy, conceived by Scottish engineer Clifford Hugh Douglas. It's MICHAEL that people need to study. To do this, everyone needs to subscribe to MICHAEL. Alain Pilote