Chapter 25 Money, or Credit,
Is a Social Instrument. Only Society
Should Have the Right to Issue It



(An article of Louis Even, first published in the June 15, 1961 issue of the Vers Demain Journal.)

I am, let us say, a farmer. I need a hired man to help me in my work. Lacking money with which to pay him, I might possibly arrive at a settlement whereby I can pay him with something else besides money.

I can, for example, agree to give him ten pounds of potatoes, three pounds of meat, one pound of butter, and one gallon of milk for every day of work that he gives me, the products coming from my own farm.

I can also estimate the value of his work in dollars, without actually giving him any, since I don't have them. In this case then, for example, each day I can sign a ticket permitting him to choose, from among the products on my farm, those things which he wants to the value of five dollars for each hour of work he does. Here again, he is given by me the right to choose from among the products of my farm.

However, I certainly cannot sign for him tickets that give him the right to choose from among the products made by other farmers nor by craftsmen in towns. I can only give him claims to those things which strictly belong to me.

If I pay him in dollars — well, that's different! He can then choose goods or services from any source anywhere in the country. But in order to pay him in money, I must first of all have the money.

The difference between a ticket issued by me and money is that my ticket gives a right over only those things which belong to me, whereas money gives a right over the products of others, as well as over my products.

I can use tickets on my own products because I make these products; I am their owner. I cannot issue (create) money because I am not the owner of everyone else's products.

Both — my tickets and money — can very easily be two pieces of paper of the same size. Both can bear the same numbers. My ticket can just as easily be labeled for ten dollars of value, just as is a ten-dollar note issued by the Bank of Canada. But my ticket can only buy my products, whereas the ten dollars of paper money can buy any goods or services for the amount of this value.

A social instrument

argentAll of this is just another way of saying that money is a social instrument. And since it gives the right to draw on the goods and services of everyone without exception, its issuance by one individual, or even by a group of individuals, cannot be justified. For this would be to give these private individuals the right to use the goods of others.

And yet new money must begin, be created, somewhere. The money that is already in circulation certainly did not fall from heaven like manna; it did not come into being by spontaneous generation. Similarly, when production increases, the volume of money in circulation must necessarily increase. Canada's present-day industry and commerce would be paralyzed if there was no more money in the country than there was at Champlain's time, in the early 1600s.

So, the money supply did increase. There was new money added. And as industrial activity increases, so must the money supply. But, then, from whence is to come this additional money, since no private individual or group of private individuals has the power to issue claims on the property of others?

New money, increases in the money supply, can come from no other source than society itself, through the agency of an organism established to accomplish this function on behalf of society.

Now, today, who fulfills this function, which is social in its very essence? Certainly not the Government, since it has no money to spend except for what it gets through taxes or through loans which it repays through new tax levies at a later date.

Money is created by the banks

A small part of modern money is made up of coins and bank notes. By far, the larger part is made up of credits existing in the ledgers of banks.

Everybody knows that anyone who has a bank account can pay his grocery bill without taking cash out of his pocket. He has only to make a cheque for the required amount. The merchant who gets the cheque has only to go to the bank and deposit it to his account or, if he wishes, get bank notes or coins in exchange.

Everybody knows that. But what everybody does not know is that there are two types of accounts which one can have at the bank: first, the case of the saver, who comes to the bank to deposit money in his account — a savings account; and secondly, the case of the borrower, who asks the bank to deposit money in it for him.

There is a big difference between these two kinds of accounts.

When you take your money to the bank, the banker places this money in his vault and inscribes in your account this amount of money to your credit. You may use this credit as you wish. You can make payments when you want by drawing on this account through cheques. It is not hard cash (notes and coins), like the money you carried to the bank, but it is money just the same.

But what about the borrowing account? The borrower does not bring any money to the bank. He goes there to ask money from the banker. Often this is a large sum — let us say something like $50,000. The banker is not going to reach into the drawer and take out $50,000 in hard cash and give it to the borrower. And the borrower would hesitate to leave the bank with this amount of money in his possession. What the borrower wants is to have $50,000 inscribed to his credit in his account, upon which he will be able to make cheques according to his needs. And the banker will do this for the borrower; he inscribes this amount to the credit of the borrower.

But, mark you, the banker does this without taking a penny out of his drawer, without the borrower having to bring a penny to the bank, and without anyone else's account having been in any way touched.

In the case of the saver, there was a transformation of hard cash, locked up in the banker's drawer, into financial credit, which appeared as figures in the credit account of the saver. This transaction did not put one additional penny into circulation.

In the case of the borrower, there was no such transformation since the borrower did not bring any money with him. And since nothing was taken from the vault, from the drawer, from the account of any of the other depositors, it happens now that there is, in the bank's ledger, to the credit of the borrower, a new sum of money which did not exist before.

This is what is called the creation of money by the banker. It is a creation of credit, of checkbook money. This money is just as good as any other, since the borrower can make out cheques on it in the same fashion as the saver can draw on the money he deposited.

With this new money, the borrower can pay for work, materials, goods — the work of others, the materials of others, the goods of others.

In creating this $50,000 for the borrower, the banker has given to the latter the right to draw upon the production of others; not upon the production of the banker, but upon all the production in the country. The banker who does not, as a banker, own one bit of the country's production, nevertheless can give the borrower a claim to a share of the country's production.

This is what might be called, in all justice, the usurpation of a social function. Only society, in its whole, may with justice accomplish this function, a function that society may very well entrust to a competent organism, under its own control. But it is inadmissible that so important a social function be delegated to a private institution that traffics in it for its own profits.

Sovereign power over economic life

The borrower must, by a certain agreed date, repay to the bank the money which it created for him. When the money returns to the bank, it is no longer in circulation. It is dead money. To get another amount of money into circulation, another loan is needed, another creation of book money.

Loans therefore put money into circulation. Repayment of loans withdraws money from circulation.

In a given period — let us say, a year — if the sum of bank loans granted is greater than the sum of repayments made, then the volume of money in circulation has been increased. If, on the contrary, the banks have been more difficult about making loans, while still demanding repayments at the same rate as previously, then the volume of money in circulation decreases. This is what is known as a restriction of credit.

Since the banker charges interest on his loans, every repayment entails the return of more money to the banker than was originally issued in the loan. The result is that, in order to keep up the volume of money in circulation, it is necessary to have, over all, a greater activity in loans than in repayments.

The fact that it is necessary to repay to the bank more money than was issued results in private individuals and public bodies being obliged to have recourse continually to new loans, whence comes the ever-increasing debt. Without such a practice, it would not be long before the amount of money in circulation dried up completely. This function of the banker therefore confers upon him supreme power over the economic life of the country. He is more powerful than the Government, for he has the power to grant, refuse, and regulate credit, which is the very lifeblood of any country's economy.

Hope for an end?

Statesmen in Europe, the United States, and Canada have denounced, even openly, this supremacy of the banking system. Canada's Prime Minister Mackenzie King said in 1935 that as long as this power remained unbroken, it was futile to speak of democracy and the sovereignty of Parliament. There have been those who, like him, promised to restore to the nation the control of its money and credit. Others, like former Canadian Finance Minister Donald Fleming, have publicly attacked the arbitrary and harmful acts of the top bankers.

And yet none of these men were able to effect any change. And those politicians who are most vocal in their attacks on this money power — and this includes those politicians who fraudulently used the label “Social Credit” (real Social Credit, as advocated by the “Michael” Journal, has nothing to do with so-called “Social Credit” parties; moreover, it does not need either a “Social Credit” party to be implemented into the laws of a country) — will never change anything as long as the people themselves are not united to form a power even greater than that of Finance, a power that will force the Government to take action.

This is not a matter to be settled by elections. It is a question of forming a large enough group of citizens who are enlightened and determined to the point that they will make themselves heard by their governments, regardless of what party is in office.

It is also a matter for Divine assistance, since the enemy has a diabolical nature, and the money dictatorship is only one of his multiple faces. This is what the Social Crediters of the “Michael” Journal have understood, and understand more and more.

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