This article was first published in the August, 1939 edition of "Les Cahiers du Crédit Social".
Why does MICHAEL insist on discussing matters related to money? It is because all economic and most political problems are related to money.
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 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.
Our lifestyle does not depend on Canada's productive capacity but rather on our having (or not having) money. Money is scarce, and because of this, wealth must be destroyed. This goes against order, but this state of affair agrees wholly with those who control money.
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 this false system alive. We were told for so long to be patient that we have become accustomed to doing without.
Money is made neither by God, nor by the angels, nor is it a natural phenomenon. It is made by man.
Money today is created by men who are not socially inspired. The simple fact that money was printed by the billions for war in all countries of the world, and that it should disappear without justification when production was at its peak, is proof enough that the motivation behind the creation of money is neither social nor even human.
There may be a few people left who still believe that the amount of money does not depend on man's will but on the amount of gold available.
This does not hold water. During the last World War, men were not concerned with digging gold mines. Money was being freely created to kill millions, and in addition, during the ten years of the Great Depression, even though gold was stored in the vaults at Fort Knox, there were 13 million Americans who were unemployed because of a 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.
Money is lacking 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 out.
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 metal coins in my payment. 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 of that gives it its 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 bank account, I can also pay the chair using a check drawn upon my account. The checks allows the banker to transfer money from my account to the retailer's account. I can draw checks from my account as long as there is money in this account.
Money can be found in bank accounts. 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 script money 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 enters $20,000 into an account, to the credit of the borrower. The bank account of the borrower has now increased by $20,000. The loan is guaranteed by the borrower's possessions.
Where did the banker get the $20,000? He did not take it from his drawer, nor did he take it from anyone else's account, nor did he take it from his own pocket. Nevertheless, a bank account has increased by $20,000. 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:
First, by the savings of depositors: currency is transformed into bank credit.
Second, through loans: credit is created that did not exist prior.
So, money was created? Yes, without a doubt, since the $20,000 dollars is money. It is money by the mere fact that the borrower is able to write checks on this account to purchase or pay for whatever goods or services, in the same way that he uses paper currency or coins.
Public loans are carried out in the same way. Let us accompany the Finance Minister to the bank for a loan of one billion.
The Minister of Finances must first give the bank a "bond" or "debenture" that is a promise to reimburse: "I promise to reimburse the bank, over the next twenty years, the sum of one billion dollars plus 5% interest."
What does the banker do? Does he give the Finance Minister one billion dollar in currency? No, not at all! The banker does the same thing he did earlier: he enters the amount of one billion in the Finance Department's account as credit to the government. The Finance Minister can now sign checks for goods and services that add up to one billion dollars.
Where did the banker get the one billion dollars? Not from his vault, nor from his own pockets, nor did he take it from anyone else's bank account.
A bank account was increased without diminishing another. Who else can do this except the banker? Who else can lend money without decreasing their own bank account?
To lend money without taking it from anywhere else, one would have to manufacture or create it. This is what the banker does.
But, is this the proper way of doing things?
The capacity to create money by the mere stroke of a pen is a great invention. Considering that the production of useful goods is made easy by today's modern technology, it is desirable that the production of money be made easy. Proper accounting would allow as much money to be made as there are goods and services available.
Yet, money is not based on production. Money can be lacking while goods are available. At other times, there is plenty of money while the stores are empty. Why? Because of the decisions made by he who holds the pen and to the conditions he sets on the creation of money.
Every time money is created, a debt is created, whether private or public. In order to pay back these debts, money must be removed from society through prices or taxation.
Money is bound to be scarce since it is created under condition that a greater quantity be destroyed than was created. If some money remains, it is because more debts have been entered into.
When the national debt increases, the total amount of interest increases. When annual interest rates increase, taxes increase. When taxes increase, money in circulation decreases, even as prices go up. When money decreases, we tighten our belts. When this happens, unemployment sets in, and so on and so forth.
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 against a common enemy, we end up waging political battles against each other.
It is a complete distortion that money, which was created by man, should now become master of man. Money was instituted in order to serve man; today, money is created for the purpose of controling man. Money now comes into being in the profiteers' ledgers with debts being created that cannot mathematically be paid back. Robbing society's credit is foremost in driving society further into debt.
How can money that is born this way ever be of benefit to society? From birth, it commands, and goes on commanding. It comes into being for the sole purpose of profiting a few exploiters, and goes on benefiting these few exploiters. Money comes into being while controlling governments at their own request; and it goes on controlling governments.
Meanwhile, children are born into debt. At their birth, they take up their share of their country's debt, a burden they will carry throughout their entire life. And the system will see to it that this debt will keep on growing. Money becomes the master; man becomes the slave. The more the children in a family, the more the slaves. This is truly a distortion of reality!
Distortions: money is scarce in a world overflowing with products; money disappears when production is at its peak; money is regulated for the sole profit of bankers instead of being regulated according to the urgent needs of society; money comes into being owned by only a privileged few who convert into money all of society's assets! As long as nothing is done to correct this problem, little can be done to establish order in social relations.
Indeed, money matters. This is why the MICHAEL Magazine persists in making the problem known to its readers in order to bring about the cure: applying the monetary proposals of Social Credit, also known as Economic Democracy. Initiated by Scottish engineer Clifford Hugh Douglas, these proposals would put money in its proper place. Money would become a servant and an an instrument for the distribution of the wealth that is destined to all men. Whether a gift from God, or the result of man's work and applied science, each man, all men, each and every human being must receive their share.
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