Page 28 - Michael October 2021

It’s time people knew the money trick

Banks hold the power of life and death over the economy

Colin Barclay-Smith is an Aus- ible”, or “absurd” but if you will read on, each one
tralian journalist and writer who will be proved beyond all shadow of doubt.
started studying Douglas’ Social Most of us have grown up with only the vaguest
Credit — or Economic Democracy notions of money. We are fairly certain that it is the
— during the first years of the De- government’s right to print notes and mint coins.
pression. He was convinced of
the value of the teachings, and in For the rest, our knowledge is distinctly foggy.
1932 founded a journal, The New Most people, for example, labor under the im-
Era, to publicize the doctrine. He pression that the only money in the community is
had over 30,000 subscribers at notes, silver, and copper. But this is a very, very
one time. In 1934, Barclay-Smith accompanied Doug- small part of the community’s money.
las on a tour In fact,
of Australia notes, silver,
and New Zea- By creating money and cop-
land. He died per — legal
in 1957 in Syd- out of NOTHING tender — is
ney, at the age used for less
of 64. Barclay- banks become the
Smith wrote than 5% of
several book- owners of EVERYTHING the total pur-
lets on various chases made.
aspects of Eco- Over 95 per
nomic Democ- cent of all
racy. The last one, “It’s time they knew”, was published business is done by checks.
a few months before his death. This booklet was repub- This check currency is really bank-created
lished and updated several times under the title, The money — bank credit — but it functions exactly the
Money Trick. Here are excerpts from the booklet. same as legal tender money. Banking authorities of
by Colin Barclay-Smith world-wide repute state that banks can and do cre-
ate credit up to nine or ten times their cash resour-
It’s time the people of our nation knew the ces.
alarming facts. Test your own knowledge of these
Banks go to great pains to perpetuate the fiction
facts by the following questions: that they are merely “the custodians of their cus-
F Do you know that no bank lends money tomers’ deposits” — that they lend these deposits,
deposited with it? and that their profit consists of the difference in the
F Do you know that when a bank lends rate of interest which they pay to depositors and the
money it CREATES it out of nothing? interest they receive from borrowers. Such an idea

F Do you know that bank loans are merely is quite wrong and it is the popular acceptance of
this major monetary fallacy which gives rise to most
pen and ink entries in the credit columns of a
bank’s ledger? They have no other existence. of the false notions upon the subject of money.
The facts about money are as follows:
F Do you know that practically all the money
in the community comes into circulation as a (1) Banks do not lend money deposited with
debt to the banks? them.
F Do you know that every repayment of a (2) Every bank loan or overdraft is a cre-
bank loan cancels the amount of the loan out ation of entirely new money (credit), and is a
of existence? clear addition to the amount of money in the
community.
F Do you know that banks purchase bank
sites, build premises, and acquire assets at no (3) No depositor’s money is used when a
real cost whatsoever to themselves — by the bank lends money.
simple process of honoring their own checks? (4) Practically all the money in the commun-
You may dismiss these affirmations as “incred- ity begins its life as an interest-bearing debt to
the banks.

28 MICHAEL October/November/December 2021 www.michaeljournal.org