Page 9 - Michael 2024 January

Now the banks are permitted to lend up to ten
times their actual cash reserve, and in so doing the
banker “creates” in the case of our loan, $1,000 (less
interest) in new money. But when the time comes to
repay this sum the credit he has extended to us is de-
stroyed. We can no longer write cheques against it. In-
deed, we must pay the banker promptly or forfeit what-
ever security has been placed with him as collateral. If
we cannot pay, our security then passes into his hands.
In other words, every bank loan creates a deposit
Two types of money: cash and bank cards and every repayment of a bank loan destroys a de-
posit. What has it cost the bank to lend us $1,000?
existence. We use cheques (and now bank cards) be- Nothing but the expense incurred in its bookkeeping.
cause they are safe and handy; they can be written for
paying an exact amount to specific in dividuals, and so Is it any wonder that we sink in a flood of debt
long as they are acceptable, we think no more about it. when every article of wealth we buy must be paid for
The cheque system is in itself a great advance with money which itself is debt?... The debt cannot be
upon the use of tokens in many ways. But its invention liquidated because it grows faster than business can
repay it. It can never be repaid, now or at any other
has resulted in the banks, not indeed coining money time.
as that is quite unnecessary, but creating money with-
out even the issue of printed notes. The time for the change has come
The method by which the banker makes money is The creation and circulation of money by the
ingenious and consists largely of bookkeeping. This banking system is a direct usurpation of the essen-
kind of money is born in a bank and dies in a bank. tial prerogative of government, giving to that system
And the bank is responsible both for its birth and its paramount influence over the national well-being. The
death. The banker creates the means of payment out Government, in allowing the banking system to enjoy
of nothing. a practical monopoly of this power, has forfeited a
The fact that banks create and destroy money by duty which now it must resume.
the bookkeeping process of issuing or cancelling cred- (Editor’s note: In the French version of Larkin’s
its is illustrated by any ordinary bank loan. Suppose book, Louis Even added: “It is futile to expect the
we go to the bank to borrow $1,000. The banker pass- masters of the system to correct it themselves; to
es judgment on our credit rating, accepts our note, do so they would have to relinquish the control they
and grants the loan, crediting our account exactly as have usurped, because a sound currency can never
though we had deposited this sum in cash. We are emerge from a private monopoly that seeks only prof-
now “in debt” to our friend the banker. We owe him its. Should we wait passively for governments to bring
the $1,000 we have borrowed, plus the interest he about change? Today they are subservient to the mas-
charges for its use. We can then write cheques against ters of finance, at whose door they slavishly ask per-
our new account, and these cheques are acceptable mission to use the nation’s real credit, indebting the
as money. entire nation to obtain this permission. If they show

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www.michaeljournal.org MICHAEL January/February 2024 9