article of Alain Pilote, published in the November-December, 1994 issue
of the Michael Journal.)
regular readers of the “Michael” Journal will have noticed it: the
first request of the Social Crediters, the “White Berets” of the
“Michael” Journal, is that the Federal Government should take back
its power to issue, create the money for our country. Once this is done,
it will then be possible to implement the two other principles of Social
Credit: a monthly dividend to every citizen, and a periodical discount
on retail prices, to prevent any inflation.
for the new readers, this request may give rise to a few questions. We
will mention here the most frequent ones, and give them short answers.
You say that the Government should create the money. Does it not already
do it, with the Bank of Canada notes?
Answer: If the Federal Government does create its own money, why is it over $500
billion in debt? The truth is that bank notes and coins come into
circulation only when they are lent by private banks, at interest.
Moreover, this kind of money (cash) represents less than 10 per cent of
the money supply in our country. The other kind of money, which
represents over 90 per cent of the money supply, is bookkeeping or
checkbook money, that is to say, figures written on checks or bank
Why do you want the Government to create the money? Is not the present
bank money good?
Answer: Chartered banks lend out money and put it into circulation at interest,
in the form of a debt, which creates unpayable debts. For example, let
us suppose that the bank lends you $100, at 6 per cent interest. The
bank creates $100, but wants you to pay back $106. You can pay back
$100, but not $106; the $6 for the interest does not exist, since only
the bank has the right to create money, and it created $100, not $106.
other words, when a chartered bank lends you money, it actually demands
you to pay back money that does not exist. The only way to pay back $106
when there is only $100 in existence is to also borrow this $6 from the
bank. Your problem is not solved yet; it has only gotten worse: you now
owe the bank $106, plus an interest payment of 6 per cent, which makes a
total of $112.36. As years pass, your debt gets bigger; there is no way
to get out of it.
borrowers, taken individually, can manage to pay back their loans in
full — the principal plus the interest —, but all the borrowers as a
whole cannot. If some borrowers manage to pay back $106 when they
received only $100, it is because they take the missing $6 in the money
put into circulation through the money loaned to other borrowers. For
some borrowers to be able to pay back their loans, others must go
bankrupt. And it is only a matter of time until all the borrowers,
without exception, find it impossible to pay the bankers back, whatever
the rate of interest on their loans.
may say that if one does not want to get into debt, one has only not to
borrow. Well, if no one borrowed money from the banks, there would
simply be not a penny at all in circulation. And this money borrowed
from the bank cannot remain in circulation indefinitely: it must be
returned to the bank when the loan is due... and returned with interest,
means that just to maintain the same amount of money in circulation in
our country, year after year, unpayable debts must pile up. For example,
if one wants to maintain only $100 in circulation, year after year, by
borrowing at 6% interest, the debt will be $106 after one year, then
$112.36 after two years ($106 plus the 6% interest), and so on. After 70
years, the debt will have reached the sum of $5,907.59, and there will
still be only $100 in circulation.
the case of public debts, the bankers are satisfied as long as the
interest on the debt is paid. Is it a favour they do to us? No, it only
delays the financial impasse for a few years since, after a while, even
the interest on the debt becomes unpayable. Thus, in the example of the
$100 borrowed at 6%, the interest due on the debt will have reached
$104.26 after 50 years, which is more than all the money in circulation.
wonder then that the national debts of all the civilized countries in
the world are reaching astronomical proportions. For example, Canada's
national debt, which was $24 billion in 1975, is now over $500 billion,
and the interest on this debt costs over $49 billion per year, or about
one-third of all the taxes collected by the Federal Government; this
percentage keeps increasing year after year. So, to satisfy the bankers,
the Government must slash all its other expenditures. Will the
Government wait until servicing the debt takes 100% of the taxes, to
change the system, or will it prefer to let people starve? Moreover, the
national debt is only the peak of the iceberg: there are also the debts
of the provinces, the municipalities, the corporations, and the
Does the Government have the power to create money? Would this money be
as good as that of the banks?
Answer: The Government has indeed the power to create, issue the money of our
country, since it is itself, the Federal Government, that has given this
power to the chartered banks. For the Government to refuse to itself a
privilege it has granted to the banks, is the height of imbecility!
Moreover, it is actually the first duty of any sovereign government to
issue its own currency, but all the countries today have unjustly given
up this power to private corporations, the chartered banks. The first
nation that thus surrendered to private corporations its power to create
money was Great Britain, back in 1694. In both Canada and the U.S.A.,
this right was surrendered in 1913.
is not the bankers who give money its value; it is the production of the
country. Bankers produce absolutely nothing; they only create the
figures that allow the nation to make use of its own producing capacity,
its own wealth. Without the production of all the citizens in the
country, the figures of the bankers are worthless. So, the Government
can just as well create these figures itself, without going through the
banks, and without getting into debt. Then why should the Government pay
interest to a private banking system for the use of its money, when it
could issue it itself, without going through the banks, without interest
very question was actually asked to Graham Towers, Governor of the Bank
of Canada from 1935 to 1954, before the House of Commons Standing
Committee on Banking and Commerce, in the spring of 1939 (page 394 of
the Minutes of Proceedings and Evidence Respecting the Bank of Canada,
Committee on Banking and Commerce, 1939):
“Will you tell me why a government with power to create money should give that power away to a private monopoly and then borrow that which parliament can create itself back at interest to the point of national bankruptcy?”
“Now, if parliament wants to change the form of operating the banking system, then certainly that is within the power of parliament.”
a matter of fact, the power of the Federal Government to create the
money of our country is clearly stated in the Constitution (Section 91
of the British North America Act, paragraphs 14, 15, 16, 18, 19, and
No danger of inflation
Is there not any danger that the Government might misuse this power and
issue too much money, which would result in runaway inflation? Is it not
preferable for the Government to leave this power to the bankers, in
order to keep it away from the whims of the politicians?
Answer: The money issued by the Government would be no more inflationary than
the money created by the banks: it would be the same figures, based on
the same production of the country. The only difference is that the
Government would not have to get into debt, or to pay interest, in order
to obtain these figures.
the contrary, the first cause of inflation is precisely the money
created as a debt by the banks: inflation means increasing prices. The
obligation for the corporations and governments that are borrowing to
bring back to the banks more money than the banks created, forces the
corporations to increase the prices of their products, and the
governments to increase their taxes.
is the means used by the present Governor of the Bank of Canada to fight
inflation? Precisely what actually increases it, that is to say, to
increase the interest rates! As many Premiers put it, “It is like
trying to extinguish a fire by pouring gasoline over it.”
is obvious that if the Canadian Government decided to create or print
money anyhow, without any limits, according to the whims of the men in
office, without any relation with the existing production, there would
definitely be runaway inflation. This is not at all what is proposed
here by the Social Crediters.
the Social Crediters advocate, when they speak of money created by the
Government, is that money must be brought back to its proper function,
which is to be a figure, a ticket, that represents products, which in
fact is nothing but simple bookkeeping. And since money is nothing but a
bookkeeping system, the only necessary thing to do would be to establish
Government would appoint a commission of accountants, an independent
organism called the “National Credit Office” (in Canada, the Bank of
Canada could well carry out this job if ordered to do so by the
Government). This National Credit Office would be charged with setting
up accurate accounting, where money would be nothing but the reflection,
the exact financial expression, of economic realities: production would
be expressed in assets, and consumption in liabilities. Since one cannot
consume more than what has been produced, the liabilities could never
exceed the assets, and deficits and debts would be impossible.
practice, here is how it would work: the new money would be issued by
the National Credit Office as new products are made, and would be
withdrawn from circulation as these products are consumed (purchased).
(Louis Even's booklet, A Sound and Effective Financial System,
explains this mechanism in detail.) Thus there would be no danger of
having more money than products: there would be a constant balance
between money and products, money would always keep the same value, and
any inflation would be impossible. Money would not be issued according
to the whims of the Government nor of the accountants, since the
commission of accountants, appointed by the Government, would act only
according to the facts, according to what the Canadians produce and
best way to prevent any price increase is to lower prices. And Social
Credit does also propose a mechanism to lower retail prices, called the
“compensated discount”, which would allow the consumers to purchase
all of the available production for sale with the purchasing power they
have at their disposal, by lowering retail prices (a discount) by a
certain percentage, so that the total retail prices of all the goods for
sale would equal the available total purchasing power of the consumer.
This discount would then be refunded to the retailers by the National
No more financial problems
the Government issued its own money for the needs of society, it would
be automatically able to pay for all that can be produced in the
country, and would no longer be obliged to borrow from foreign or
domestic financial institutions. The only taxes people would pay would
be for the services they consume. One would no longer have to pay three
or four times the actual price of public developments because of the
when the Government would discuss a new project, it would not ask: “Do
we have the money?”, but: “Do we have the materials and the workers
to realize it?”. If it is so, new money would be automatically issued
to finance this new production. Then the Canadians could really live in
accordance with their real means, the physical means, the possibilities
of production. In other words, all that is physically possible would be
made financially possible. There would be no more financial problems.
The only limit would be that of the producing capacity of the nation.
The Government would be able to finance all the developments and social
programs demanded by the population that are physically feasible.
Does what you advocate require nationalizing private banks?
Answer: Not at all. The private banks could freely continue to exercise the
functions that are rightfully theirs: receiving deposits and investing
them. They could continue to loan money, but the creation of new money
would be the sole prerogative of the sovereign government of the nation.
education of the people by the “Michael” Journal
If all that you have said above is true, and that a social money system,
money created by a public organism on behalf of society, is so
beneficial, why is it that the Government does not implement it right
Answer: Constitutionally speaking, there is nothing that prevents the Government
from doing it immediately, since it has already the right to issue its
own currency. It is the sovereign government of the nation that must be
responsible for the monetary policy of our country, and not private
corporations, for whom the objective is not at all the common good, but
their own profit. On July 21, 1961, Louis Rasminski, who was Governor of
the Bank of Canada from 1961 to 1973, sent the Government the following
“If the Government disapproves of the monetary policy being carried out by the Bank (of Canada), it has the right and the responsibility to direct the Bank as to the policy which the Bank is to carry out... and the Bank should have the duty to comply with these instructions.”
governments, despite statements that are often stupid, are perfectly
aware of the iniquity of the creation of money by private companies, but
they dare not to challenge the money power, for want of support among
the population. (See
Chapter 24, on Mackenzie King's statements in
only thing that is lacking is the education of the people, to show the
falseness, the absurdity, and the injustice of the present financial
system, and the existence of a corrective system like Social Credit.
Only the “Michael” Journal denounces the present system and brings
the Social Credit solution. The population must therefore study the
“Michael” Journal. To that end, everyone must be subscribed to the