Lesson from a Bank Note

When you receive a business document — an invoice, a promissory note, a receipt, a bill of registration you examine the paper before filling it out, don't you? You're not satisfied with a quick glance at the general substance or with merely reading a word here and there; you want to make sure that the paper is properly dated and signed, that the text states exactly the facts or the agreements arrived at. You consider such an examination important, and rightly so. But when it's a question of a bank note, paper money representing a dollar or two dollars or five or ten, how many people ever stop to scrutinize the text on it? The text? But it's the amount that's important and everybody looks at that to see how much they're spending or receiving! True enough, and later on we're going to discuss these figures on the paper money. But there's something else besides numbers on the Canadian bank note; something else besides the picture of Her Majesty, Queen Elizabeth II (with the engraver's irreverent sketching of a tiny devil carefully tucked away in the Queen's coiffure, just behind the left ear); and on the other side there's something more than the landscape. There is a text, a sentence signed with two names. Have you read it? No? Well, we're going to read it together and draw from it a very interesting lesson.

A Promise

Take a bill from your pocket. It doesn't matter of what denomination because, apart from the amount, all paper money bears the same phrasing. We'll say a dollar bill since that's the likeliest denomination most of us will have in our pocket.

The inscription is in two languages. Read it.

BANK OF CANADA                     —            BANQUE DU CANADA

will pay to the bearer                              paiera au porteur

     on demand                                           sur demande

Now beyond question, that's a promise: "The Bank of Canada will pay to the bearer...." This promise bears two signatures, that of the governor of the Bank of Canada and that of the deputy governor. The amount covered by the promise to pay is printed in large figures in the two upper corners, in capital letters in the two lower corners, across the side bearing the Queen's picture and again in large figures in the four corners of the reverse side. And in addition to all this it is repeated in figures and letters on the borders of the face and the back of the bill.

Any mistake is out of the question: "The Bank will pay to the bearer one dollar", — a pledge from the two highest executives of the Bank of Canada.

And to whom is this promise made? — To the bearer.

Who is the bearer? He who happens to have the bill in his hand. At this particular moment it is you.

Very good. Now let's go along to the Bank of Canada — or to any other bank for that matter since they all deal through the Central Bank. Present your bill to the banker.

— "What can I do for you?" he asks.

— "I want the Bank to honor the promise stated here and signed by its governor and deputy governor."

Our banker is briefly staggered; then he rallies:

— "Well just what is it you want? To have it changed into quarters, or maybe dimes?"

— "Oh, I don't have to come here to make change. My neighbor or my grocer can do that for me as well as you."

— "Then exactly what do you want?"

— "What do I want! Look! here's a promise made by the Bank to the bearer of this bill. I'm the bearer and I'm here to see that the Bank makes good its promise."

— "Oh, I see. Very well. I'll take your dollar and give you another one."

— "The same promise again?"

— "Listen! the Bank promises to pay you a dollar. Here's the dollar! Great Scott! what sort of a game is this?"

— "Exactly! What sort of a game is it? Let's face the facts. There's a peculiar resemblance between the Bank and electioneering politicians. From one election to the next the latter do nothing but repeat the same old promises. Likewise the Bank!"

Undoubtedly the banker will take you for a joker or for someone slightly unbalanced. On the other hand he may, after some thought, discover that it's the promise on the bank note which smacks of the irrational: "The Bank promises to pay a dollar to the bearer, which dollar in turn gives to the bearer the Bank's promise to pay a dollar....!!!"

Who does honor this promise?

Let's leave the banker to cudgel this about in his head and, if you don't mind, we'll pay a visit to the grocer.

Ah! here's a bag of potatoes priced at one dollar. You take out of your pocket the Bank of Canada's promise and you hand it to the grocer. He passes you the potatoes.

The sack of potatoes is no longer a promise. It's a reality.

Where do these potatoes, which the grocer has just sold you, come from?

They come from a Canadian farmer. It is the farmer by his labor and the merchant by his service who have made good the Bank's promise.

You could also go the haberdasher and buy a tie. In this case it's the producers of the raw material, it's the mill owner, the weaver, the tie maker with their labor and the storekeeper with his sales service who have carried out the Bank's promise.

I have a ten dollar bill — the promise of the Bank to pay me, the bearer, ten dollars. But let's not start the inane repetition we went through at the banker's office. Instead we'll visit a shoe store. I buy this pair of shoes marked at ten dollars. They're made of cowhide. It's the farmer and the tanner, the shoemaker, the transportation company and the storekeeper who have backed up the promise of the Bank.

I could just as easily avail myself of professional service — that of a doctor or a lawyer or a teacher — for the same price. It is the professional man in this case who has redeemed the Bank's promise.

In short, though I'm wasting my time asking the Bank to redeem its pledge, I can always present this promise anywhere else in demand for anything that is produced and the promise will be speedily honored, converted into something concrete — services or goods according to my wishes.

The Productive System

So it's the Productive System, as we shall call that part of society which turns out produce or renders service, which realizes the promises signed by the Bank.

Bank notes, or anything else serving as money, are only titles to the production of a country to the value indicated in the bill.

And from where does the produce of a country come from?

It proceeds from a multitude of factors: natural resources; the many sources of energy — the muscular energy of animals or men, the energy of the wind, of the water, electrical, steam and gasoline energy: produce comes from the toil of people on the farms, the seas and the rivers, in the forests, the quarries and the mines, within factories and offices and along the routes of transportation: it comes from machines and techniques developed to higher and higher degrees of perfection, from the application of science to production, from today's inventions and those of the past handed down from generation to generation: it comes from the very existence of society itself which makes it possible to divide work more with ever-increasing returns.

And since it is our Productive System and not the Banking System which truly honors the promises underwritten by the Bank, these bank notes should bear inscriptions more closely related to the true state of affairs. They could, for example, read:

"Canada will provide for the bearer produce or services to the value of so many dollars...."

And since these bills are simply titles to the production of a country they should bear some relation to the productive capacity of the country. There is no good reason for the lack of such credits in the face of a capacity for production which is not fully exploited. Nevertheless such a situation exists today, not only as regards the needs of the individual but equally so in what concerns the demands of the community.

For example: does it not often happen, almost daily we might say, that municipalities are hindered in carrying out urgent projects — water systems, sewage disposal, street paving for the sole reason that they haven't the means to pay for these undertaking?

These projets are certainly feasible because they are set on foot the minute funds are available. If so many affairs of this nature are set aside or delayed, the reason is, in short, that the community, the people, are incapable of paying for what they are perfectly capable of producing. So in this fashion the Bank practices a two-fold deception upon the people: first, by underwriting promises which it does not keep and which our Productive System must honor for it; secondly, by paralyzing at will this same productive capacity by rigid control of these unfulfilled promises in the shape of bank notes.

Conclusion

Since it is the people living together in a society who are truly the source of production, then it is this same society which should control the means of payment with which we draw on the fruits of our Productive System; likewise Society should regulate the distribution of these credits with due regard for the welfare of every member of the community.

Consequently:

1 — the amount of money should match the productive power of the country;

2 — there should be no public debt following upon the productive activities of the community in exploiting the resources of the country, or entailed in the importing of goods in exchange for produce exported.

3 — Society itself should control the quantity and distdibution of the medium — money — whereby produce is bought.

So there you are! We've learned some interesting facts from the study of an ordinary little bank note, haven't we?

In the next issue of this paper we'll have lesson number two. And this time the textbook will be a bank ACCOUNT.

After that we'll be in a position to develop the conclusions, quite similar in both cases, to which our two lessons have led us.