In other times when the word "credit" was mentioned, people ordinarily thought of the credit extended to a customer by a merchant; that is, the merchant sold a certain quantity of goods to a client and agreed to wait till the end of the month, or even later, for payment for the goods already delivered.
Today, thanks largely to twenty years of work by members of the Social Credit movement, the idea of that other form of credit, bank credit, has emerged from the shrouds of mystery which formerly covered it. Those who control money and credit can still make use of this power to restrict and hamper the growth of our economic life, but the people have come to know where to place the blame. And when the newspapers and the public men speak of "restriction of credit", the people do not turn accusing eyes upon the merchant but rather upon the banks.
Now, without having a detailed knowledge of all the intricacies of finance, everyone is well aware that the restriction of credit causes a diminution of the money available. People have learned of the relationship between "credit" and "money".
When there is less credit there is less money, and this for the very good reason, that today, credit serves as money.
In our modern world, four-fifths or even nine-tenths of all modern business transactions are carried out through the medium of cheques. Now a cheque is simply a piece of paper which makes it possible for a sum of money to pass from one account to another in a ledger book of the bank; the sum is moved from the credit of the payer to the credit of the payee. All that is involved is making entries in various columns. There is no movement of cash, always providing that the payee does not ask to have the cheque cashed. The total cashings of cheques, however, constitutes only about one-tenth of the total amount of money covered by cheques.
In other words, modern money is preeminently credit, bank credit. Consequently, if credit is increased, money is increased. If credit is diminished, money becomes scarcer.
So, restriction of credit means restriction of money. And restriction of money means that there is in circulation less means of paying for goods. With less purchasing power in circulation there is a decrease in the demand for goods and services. Consequently there is a diminution in the production of goods and services. And from this stems unemployment and privation and hardship for the unemployed.
Who, then practices this restriction of credit, this restriction of money? Those who have the power to create credit; those who control the floodgates of credit, who can, at will, open or close them or open them only half ways or a quarter of the way.
And where are these floodgates, these locks? In the banks.
A banker can accord or refuse credit to someone seeking a loan. He can open for him an account of $20,000 if the borrower asks for a loan of $20,000; or he can lend him only $10,000. Or he can refuse to lend him any money at all.
The banker can say to a merchant or an industrialist, "Very well, I'll grant you a line of credit of $30,000." In other words, the merchant or the industrialist can pay the costs of raw materials, salaries and other expenses even before he has put his product on the market or has sold it. He can pass cheques on the bank going over the amount of money that he actually has on deposit. He can go over this amount right up to the sum of $30,000. Naturally when he has sold his products he must bring money to the bank to cover the amount he passed over and above what he had on deposit. He must not go over the limit of $30,000.
However, the banker has the power to say to the industrialist or the merchant one fine morning:'"From now on until further notice, your credit has been restricted to $10,000". He can even say, "Your credit is finished; you may not pass any more cheques" unless you have the money in your account to cover them."
When the banker refuses a loan to an individual or when he decreases the credit of a merchant or an industrialist, the bank practices the restriction of credit with regard to this individual or this merchant or this industrialist. As a result, not only do these particular individuals suffer, but also those who are employed by them, for he must dismiss them from his service since he cannot pay them.
And when not only one banker here and there indulges in this practice, but all the bankers the length and breadth of the country do so, then you have what amounts to a "policy" of restricting credit, a deliberate, nation-wide agreement by all who control credit, to restrict credit, to cut down on the amount of money or purchasing power available to the citizens of the country.
This is what is causing loud complaints on the part of not only private business men, but also on the part of public bodies such as municipalities and school commissions. For they too have need of bank credit in order to keep operating until tax money starts coming in. And if the banks have been practicing a policy of restricting credit then the amount of money in circulation diminishes and as a consequence, the receipts from taxes are smaller than before.
Thus it was that not so long ago the municipality of Grand-Mère, in Quebec, was refused a loan of $225,000 by the bank — not a long term loan, but a temporary loan to tide the municipality over until it had sold the bonds which it was issuing to the public. As a result of this refusal municipal works came to a halt, people were thrown out of work, and the improvements which were physically possible of realization were not accomplished.
This case of Grand-Mère is not unique. There are thousands like it. And this grand ensemble of communities left without funds slows down the economic life of the country; families suffer, and this in spite of the fact that there is still the same amount of goods and natural wealth, in spite of the fact that we are still as capable of producing a superabundant supply of goods to meet the needs of the people, as before the restriction of credit.
That is why we say that such a restriction of credit is criminal. And those who ordain such a restriction of credit as well as those who permit it while they are occupying positions in which they are supposed to be guarding the common wealth are criminals. And they are accomplices in the crime who, having the voice with which to cry out and condemn such a crime, nevertheless are silent and hold their tongues.
Who is it that ordains such a restriction of credit. The chartered banks say it is the Bank of Canada. The Bank of Canada says it is the business of the chartered banks.
Almost naively, the Prime Minister, John Diefenbaker, says that he hopes the banks if they practice restriction of credit, will make exceptions in favor of the small and medium sized businesses. In fact, quite the contrary happens. It is just these businesses which are hardest hit by credit restriction. Furthermore, when the overall volume of credit is restricted everyone suffers.
As for the minister of Finance, Donald Fleming, he attacked the Bank of Canada, and its governor publicly during the electoral campaign which gave such a majority to his party. But, once in office he showed himself to be little different from his predecessors in placing himself completely at the command of the Bank. Elected to be Minister for the people he is showing himself to be the minister of the financiers. Not only does he practice complete submission to the Bank but he exhorts and urges others to practice this same total obedience. Speaking in Halifax recently, he exhorted provincial and municipal governments to support the federal government in its "fight against inflation". The "fight against inflation", of course, is the main argument for practicing restriction of credit.
No one is in favor of inflation — the high cost of living with prices inflated instead of the pocketbooks of the consumers being inflated.
Speaking of the provincial and municipal governments, Donald Fleming said:
"They (these governments - Ed.). can, within the field of their jurisdiction, adopt fiscal measures in order to reduce the demand where it is likely to exceed supply, and they can refrain from pressing the federal government to adopt those measures which would put more money into circulation."
Well, Mr. Minister, would you kindly inform us just where demand is exceeding supply? Are the mothers of families asking for more bread, more nourishment, more clothing, more shoes, more fuel, etc., etc., than this country can supply?
The only field in which the demand is exceeding the supply is in the fiscal field; here the taxers are demanding more than the taxed can supply. And yet the Minister of Finance (or rather, of financiers) is urging provinces and municipalities to adopt fiscal measures which will have no other result but to make their tax payers poorer still!
Let us repeat it again: the policy of restricting credit is a criminal policy. We can never raise our voices with this cry too loudly or too frequently as long as there are families suffering as a result of this practice and as long as those who are charged with protecting the interests of families remain mute and indifferent.
The criminals, who practice this policy, and their accomplices, are for the most part sufficiently protected against any suffering as a result of credit restriction. The distance in miles or fractions of a mile between their comfortable dwellings and the poor homes where families struggle to exist in the face of credit restrictions, is not very great. Presuming that they are ignorant of the conditions in which these poor people live, why do they not take the trouble to cross over this short distance and open those doors which have neither the grandeur nor the solidity of the portals of banks and parliaments? Were they to do so, they would certainly come out with a totally different view from that which had motivated them in undertaking the policy of curtailing and cutting back the supply of money and credit... always presupposing that they are not completely without heart and not completely devoted to the dollar with no interest whatsoever in what befalls their fellow men.
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