The following article was first published in French in the August 1939 issue of the "Cahiers du Crédit Social" (Social Credit booklets).
Why does our magazine persist in the question of money? It is because money is the cause of all economic problems, and almost all political problems in society today.
We do not say that correcting the financial problem is the only issue that we need to be concerned with, or even that it is the most important. But we do say that, it is the most pressing. All other problems stem from this problem of money. The chaos that reigns in today's monetary system is what affects all the rest.
Money is essential in our modern world. Though money is not the true wealth of a nation, it is the means by which the wealth of each nation is distributed. Without money, you will die of hunger in front of stores filled with useful goods.
In today's social economy, instead of it being the nation's capacity to provide, that dictates how we are going to live, it is the amount of money that we each have in our pockets. Because money is so rare today, we choose instead to do away with the goods. This, obviously, is not how things should be, but this is what is most profitable to those who have control of the money supply system.
If the amount of money in circulation depended upon the weather, or on some other cause outside of man's control, then we would just have to learn to accept it. But perhaps it is actually this very state of mind that maintains the permanence of such a false system. We have become so accustomed to hearing idioms such as, "Times are hard, we need to tighten our belts", that we think nothing of giving ourselves over to being skinned alive economically.
God did not create money. Money was not made by the angels, nor is it a natural phenomenon. Money is an invention of man, pure and simple.
Money today is not created by people inspired by the common good. The fact that billions of dollars are created in order to finance wars in all countries of the world, and that this money disappears without any explanation just when production is at its peak, is proof enough that the motivation behind this creation of money is neither social nor even human.
There are some who argue that the quantity of money in circulation is decided according to the amount of gold available.
This does not hold water. During the last World War, men were most certainly not concerned with the development of gold mines. Money was being freely created for slaughter, and in addition, during the ten years of the Great Depression, even though gold was stored in the vaults at Fort Knox, the United States counted 13 million unemployed because of lack of money. In Canada, never had there been so much gold produced as during the time of the Great Depression, yet, at the same time, never was there such a shortage of money.
The money supply is deficient when those who create it, as well as cancel it, destroy more than they create.
Money abounds when, these same men create more money than they cancel.
Money is any instrument which is generally accepted as an exchange for products. The nature of this instrument does not matter, as long as it is universally accepted throughout the country, as money.
Let us say that I buy a chair for one hundred dollars. I can either pay for it with ten 10-dollar bills, or I can pay for it with one 100-dollar bill, or include in my payment metal coins. The metal coins, as well as the rectangular pieces of paper, are both currency (money). It is not the material with which the currency is made that gives it some value. The exact same amount of material is used in making both a ten-dollar bill and a hundred-dollar bill.
If I have a checking account, I can draw checks from my account for the full amount of money in that account. So, I can also pay for the chair by means of a check. One hundred dollars from my account would then be placed in the account of the merchant.
But aren't all bank accounts made up of our savings of paper or metal currency? No, far from it!
There is actually ten times more scriptural money (the money recorded in bank accounts) than there is metal or paper money in the entire country.
A bank account is not built on savings alone. The largest portion of the money in a bank account is created by the banker, and does not come from the savings of the depositor.
Let's say that you have saved up twenty-dollars and you bring it to the bank. The banker puts your twenty-dollars in his drawer, he then looks up your account and enters $20.00 to your credit. Your bank account has now increased by twenty-dollars.
Now, a borrower comes into the bank. He needs a loan of $20,000. He has not brought any money with him to the bank. Instead, he needs to borrow money. What does the banker do? After having him sign an agreement, the banker then enters $20,000 into an account, to the credit of the borrower. The bank account of the borrower has now increased by $20,000. This is the same procedure used for the commercial borrowers.
Where did the banker get the $20,000? He did not take it from his drawer, he did not take it from anyone else's bank account, and he did not take it from his own pocket, but a bank account has increased by $20,000 nevertheless. And what is more, there is now a $20,000 increase in the total of all the bank accounts in the entire country. The amount in the borrower's checking account has increased by $20,000. Where did this money come from? It comes from the banker's pen.
Bank accounts increase in two ways:
So, this is a new creation of money then? Yes, without a doubt, since the $20,000 dollars is money. It is money by the mere fact that the borrower is able to make checks from this account to purchase or pay for anything, in the same way that he uses paper currency or coins.
Public loans are made in the same way. Let us now accompany the Finance Minister to the bank for a loan of one million dollars.
The Finance Minister, or Secretary of the Treasury, as he is called in the United States, must first give the bank a "bond", or a "debenture", which is a promise to reimburse: "I promise to reimburse to the bank the sum of one million dollars, plus interest, in the next twenty years."
What, then, does the banker do? Does he give the Finance Minister one million dollars in currency? No, not at all! The banker does the same thing that we saw earlier; he enters the amount of one million dollars into the Finance Minister's account as credit to the government. In addition, the Finance Minister can now sign checks for up to one million dollars to pay for, or buy anything.
From where did the banker take the one million dollars? He did not take it from his drawer, and even less, from his own pocket, and he did not take it from anyone else's bank account.
One bank account increased, without diminishing anything from any other account. Who else, besides the banker, can do this? Who else, besides him, can lend money without decreasing his own bank account?
For it to be possible to lend money without taking it from anywhere else, it would be necessary to manufacture or create some, and this is exactly what the banker does.
But, is this a good thing, or is this a bad thing?
The capacity to create money by the mere stroke of a pen (or by entering digits into a computer), is a great modern invention. Considering that the production of useful goods is made easy by today's modern technology, it is a wonderful thing that the production of money is also made easy. This modern accountancy should make it possible to have as much money as necessary in circulation in order to buy and sell all the production.
And yet, this is not the case. The money in circulation does not reflect the production. Either there is not enough money to buy the products that exist in abundance, or, money abounds while the store shelves remain empty. Why? It is because of the whimsical power of him who holds the pen, and because of the conditions he imposes along with the creation of this money. Any creation of money creates, at the same time, a debt either a private debt or a public debt. In order to reimburse these debts, money must be removed from society.
Money is essentially, doomed to scarcity, since it is created with a condition that a greater quantity of it be destroyed (taken out of circulation) than be created. If there still remains some money left in society, it is simply because there has been an increase of debt.
When the national debt increases, the total amount of interest increases. When the annual interest increases, taxes increase. When the taxes increase, the money in circulation decreases, even as prices go up. When the money in circulation decreases, we "tighten our belts"… When this happens, and then unemployment sets in…we know the rest…
This seems easy enough to understand once we've stripped away all the confusing apparatus surrounding and disguising it. But when people are kept in ignorance of the facts, the blame is oftentimes attributed to the government of the day. Instead of uniting ourselves against the common enemy, we end up waging political battles against each other.
It is a complete distortion that money, which has been created by man, has now become the Master of man. Money was instituted in order to serve man; today, it is made to control man. Money now comes into being in the profiteer's ledger books by the creation of debts mathematically impossible to repay. Robbing society of its credit is at the very core of this operation which thus indebts society: individuals, corporations, governments.
For money to begin in such a way, how are we ever to expect it to play a beneficial role in society? From the moment of its creation it begins to take command, and continues to command…it comes into being for the sole purpose of profiting a few exploiters; and goes on benefiting these exploiters. Money comes into being controlling the governments; placing the governments at its feet.
And the human being, the child, comes into the world a slave to the debt. At his birth he takes on the burden of his share in his country's debt, a burden that he will carry throughout his entire life. Large families especially suffer from such a regime: the more children born, the more slaves to the system. And the system assumes the responsibility of ensuring that this debt will keep on growing. Money then becomes the master; and man becomes the slave. This is truly a distortion of reality!
A distortion – money is scarce in a world abundant with production! A distortion – money disappears just when production is at its peak! A distortion – money is regulated for the mere profit of the banker, instead of being regulated according to the urgent needs of society! A distortion – money comes into being owned by only a privileged few, but it is done by converting into money all of society's assets! As long as nothing is being done to correct this problem, it is useless to even begin trying to establish order in social relations.
For this reason the MICHAEL Magazine persists in making known this problem, in order to bring about the cure. The application of the Social Credit monetary proposals, or Economic Democracy, from the Scottish engineer, Clifford Hugh Douglas, would put money in its proper place, as a servant, and an instrument to distribute to man, the abundance that was made for man. Whether this abundance comes directly from God or was the result of man's work or applied science, each man, all men, each and every human being, must have their share of it.
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