The following article was first published in the Cahiers du Crédit Social in August 1939, just before the first issue of Vers Demain (the French-language version of MICHAEL) was published.
Why does MICHAEL focus on the issue of money? Because all economic problems, and almost all political problems, are primarily about money.
We never claim that the monetary question is the only one to be settled nor the only one that should preoccupy us. But it is the most pressing, because everything else is a money problem. The disorder in the monetary system is such that it spoils everything else.
Money is important in our world today, not because money is wealth, but because wealth is not distributed without money. Useful goods are the real wealth that mocks us when we don't have money (even when granaries are full).
We survive when the household has money. Money is scarce, and because money is scarce, wealth will be suppressed. This is a mess, of course, but one that pleases those who control money.
If the amount of money on earth depended on the weather or some other factor beyond human control, we would have to accept the consequences. Perhaps this is the mindset that has maintained the permanence of false beliefs about money.
Money is not made by God, nor by angels, nor by natural phenomena, but by men.
And not by socially inspired men. The mere fact that money is born in the billions for war in every country in the world and disappears without justification when production is in full swing, proves there are motives at play which are neither social nor human.
Some ignorant people will repeat that the quantity of money does not depend on men, because money must be limited according to the gold supply.
This fable no longer holds true today. Men were certainly not being directed to the gold mines during the two great wars, when money was being created to finance the slaughter. On the other hand, during the decade of the Depression, gold was piling up in Fort Knox, even when the United States had 13 million unemployed because of a lack of money. Similarly, never has Canada produced so much gold as during the crisis, and never has it been so short of money.
Money is lacking when those who make and destroy it destroy more than they make. Money abounds, when these same men issue more money than they recall.
Money is any instrument accepted in exchange for goods. The nature of the instrument does not matter, as long as it is universally accepted in the country.
For instance, if I buy a chair which costs $100, I can pay for it with ten $10 notes or a $100 note, or I can include coins in my payment. The metal coin and the paper rectangle are both money. It is not the material that makes bills and coins valuable. There is exactly the same paper in a $10 note as in a $100 note.
If I have an account at the bank, I can also pay for the chair with a cheque. The cheque moves the money from my account to the merchant's account.
So, everything in bank accounts is also money. But are bank accounts made of metal or paper money savings? Far from it.
There are at least ten times as many chequing accounts on the books of banks in Canada as the total amount of metal or paper money in the country.
Bank accounts are not built on savings alone. Most bank accounts are built by the banker himself, not by the saver.
I am a saver. I have saved $100 and take it to the bank for deposit. The banker puts it in his drawer, takes his book, looks up my account and adds $100 to my credit. My account has grown by $100 by moving money around that I took to the bank.
But here is a borrower. He comes to the bank for a loan of $20,000. He doesn't bring money to the bank; he comes to get it. What does the banker do? Does he give the borrower $20,000 in paper or metal? Not usually. The banker takes his book and adds $20,000 to the borrower's credit. The borrower's account grew by $20,000.
Who has increased the borrower's account by $20,000? Surely not the borrower himself, since he came to collect money instead of borrowing it. Who did? The banker himself.
Where does the banker get the $20,000? He doesn't take anything out of his drawer; he doesn't diminish anyone's account; he doesn't take anything out of his pocket; yet he still adds $20,000 to an account. There is $20,000 more in the total accounts of the country than there was before the transaction. The chequing base is increased by $20,000. Where did this money come from? From the banker's pen.
Bank accounts grow in two ways: the small way, by the saver's contribution — simply moving money around. The big way is by borrowing — introducing new money that did not exist before. This is money creation; no doubt about it. With this credit I can purchase or pay for anything, just as I can with metal or paper money.
The saver works and deprives himself to increase his account; he is rewarded with 1% of his savings as long as it remains in the hands of the banker.
The banker holds a pen and with one stroke makes you $20,000. He rewards himself by charging you 5% of the total amount.
Public borrowing is done in the same way. Let's take the Minister of Finance to the bank to borrow $1 billion. The Minister gives the banker a 'bond', a 'debenture', a promise to repay: I promise to repay the bank the sum of $1 billion in 20 years, plus interest at 5% for 20 years.
What does the banker do? Does he pull out $1 billion in paper? Not at all.
The banker does what he did earlier. He opens his book to the account of the Minister of Finance and puts $1 billion to the credit of the government. The Minister of Finance can then sign cheques for $1 billion to pay or buy anything.
Where did the banker get this $1 billion? Not in his drawer, not in his pocket, and not from the account of another.
To lend money without taking any from anywhere, you have to make money, and that's exactly what the banker does.
But is this a good thing, or is it a bad thing?
Making money with a pen is a wonderful modern invention. Since the modern production of useful goods is very easy, it is fortunate that the production of modern money is easy. This would make it possible, through bookkeeping, to have as much money as is needed to dispose of all that is produced.
Yet the money does not follow at all according to production. It can be limited even with abundant production, or it can be abundant when store shelves are empty of products. Why is this? Because of the will of the person who holds the pen and because of the terms he sets to create money.
Money is necessarily condemned to scarcity since it is born on the condition that it dies in greater quantities than it is born. If there is any money left, it is simply due to the increase of debts elsewhere.
When public debt increases, total interest increases. When annual interest increases, taxes increase. When taxes rise, money falls, even if prices rise. When money decreases, we deprive ourselves. When we deprive ourselves, unemployment sets in. We know the rest.
All this seems very simple and easy to understand, when you strip it of all the pretence that complicates and camouflages what is going on.
But when the public is kept in the dark, it attributes the problem to the government of the day, and rather than targeting the common enemy, we go into political battles against each other.
This birth of money as the master of men is a disorder. Money was instituted to serve but it is born by enslaving. Money comes into the world by creating mathematically unpayable debts. And the theft of society's credit is the basis of the operation that puts society into debt.
How can money that starts out this way be expected to perform a beneficial role? It is born for the benefit of some exploiters, and continues to benefit these exploiters. It is born by placing governments at its feet, and continues to be the master of governments.
Meanwhile, a child is born a slave to debt. By coming into the world, he assumes his share of the public debt of his country. He is born in debt and will remain so for the rest of his life. The system is responsible for increasing the debt. The master is money; the slave is the human being. Disorder!
Large families may well suffer more from such a system because to multiply children is to multiply slaves.
Disorder is the result of scarce money in a world of abundant production. Disorder! Money that disappears when production is maintained. Disorder! Money regulated by the profit motive of the banker, instead of the social necessity motive. Disorder! Money that is born the property of a few individuals, when this is the monetisation of a public property.
As long as this disorder is not corrected, there is little point in trying to establish some order in social relations. It is because they understand this great disorder that the Social Crediters of MICHAEL insist on remedying it.
The application of the monetary proposals of Social Credit or Economic Democracy, developed by Clifford Hugh Douglas, would restore money to its role as a servant, an instrument for distributing to men the abundance made for them, whether it comes directly from Providence, or is the product of labour and applied science. Men, all men, each and every one, must have their share.
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