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morselessly. As taxation increases, so individual se-    Instead  of being  more free,  man  is enfettered.
        curity decreases.                                    Instead of enjoying better health with shorter hours,
            It is the most tragic irony of our civilization today   labor-saving devices and social services, many dis-
        that  although  man has solved the  age-old  problem   eases, and especially diseases of the nervous system,
        of dire poverty and  scarcity, although  his inventive   are more widespread than ever before.
        genius has given the world an age of plenty, we have     The money-creation and debt story is the same
        become individually more and more enmeshed in the    all over. Nations are now wallowing in crisis, through
        heavy chains of debt. Progress has been purchased by   a sea of debt and usury. v
        tax bondage — and quite needlessly.                                                             Colin Barclay-Smith



                      A bank’s premises cost it nothing!

            Did you ever wonder why the most  beautiful      its properties and securities out of profits or reserves.
        buildings of a large city are always its banks? The an-  But  this  idea  is as  illusory as  the  fiction  that  a  bank
        swer is that it actually costs banks nothing to build   lends its deposits. Neither profits nor reserves are af-
        their marvelous edifices.  They  are  simply honoring   fected by any purchase by a bank, because it hasn’t
        their own cheques! Here is how Colin Barclay-Smith   actually parted with anything.
        explains it in his book, “It’s time they knew,” published   The position is very different when an individual
        in 1957.                                             buys a premises. The cost of the purchase is debited
            We have stated that most money comes into circu-  to his bank account. The individual, though he has
        lation as a debt to the banks. We say “most” of it does,   acquired an asset, is down in his balance at his bank
        the only money that does not originate as a debt to the   to the extent of the transaction. But in the case of
        banks is the money banks use in their own purchas-   the bank’s purchase of a premises or securities, or
        es. All money that a bank spends on its own behalf,   indeed anything else, the cost is no more than a book
        whether  it  is  the  payment                                               entry in its own books.
        of its employees’ salaries,                                                    As  Ralph  Hawtrey,  one-
        the purchase of a building                                                  time under-Secretary to the
        site,  a  building,  stocks and                                             British Treasury, observed in
        shares,  printing,  advertis-                                               The Art of Central Banking
        ing, stationery, etc., all such                                             [published in 1970]:  “Other
        purchases  put  money  into                                                 lenders have not this mystic
        circulation debt-free.                                                      power of creating the means
            Let  us  deal  with  the                                                of payment out of nothing.”
        statement  that banks pur-                                                     You may object that  if
        chase  properties or secur-                                                 bank “A” bought a premises
        ities by the simple process                                                 and its cheque in payment
        of  honouring  their  own                                                   was deposited with bank “B”,
        cheques. Take the case of                                                   the latter might not cooper-
        a property or bank prem-                                                    ate.  That  is a  possibility, of
        ises.  First,  the  bank  draws                                             course. But this is met by an
        a  cheque  upon  itself.  This                                              exchange  of  balances  with
        cheque  is paid  into  some-                                                other banks. If the banks
        one else’s account — prob-                                                  work  in  harmony  with  each
        ably at another  bank. Thus                                                 other  (as  they  do),  they  can
        bank deposits are increased.                                                meet their own requirements
            To offset this purchase                                                 and acquire assets, at no real
        in  the  bank’s  balance  sheet,   Toronto’s bank district: the richest buildings  cost to themselves.
        there would be an increase in the bank’s assets, i.e.,   The foregoing may explain to the reader why the
        premises.  The  accounting  technique  is  to  debit  the   banks have been enabled to acquire the most valu-
        Premises  Account  with  the  amount  of  the  purchase   able building sites in cities and towns and erect such
        and credit the same amount with the value of the asset.  remarkably attractive premises. Most of the main
            In a similar manner, a bank can purchase shares   city banks are beautified with marble from floor to
        or government securities. These would be paid for by   ceiling, and the humble depositor feels like doffing
        a cheque drawn on the bank and in due course the     his  hat,  and  standing  in  silent  awe  and  admiration
        amount of the cheque and purchase are placed to the   in  such  an  atmosphere  of  hallowed  opulence  and
        debit and credit of the Securities Account.          power. Now we know the secret of it. v
            It may be argued, of course, that a bank pays for                          Colin Barclay-Smith


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