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A crash course in changing the world.
"The People's Credit"
First you need some credit, then you can create money...
"The People's Credit"
by Arthur Kitson
Being Chapter XI of Kitson's The Fraudulent Standard (1917)
* * *
THE real currency of Great Britain, the medium of exchange, the
instrument by which 99 per cent. of all business obligations are
settled, is the bank cheque, one of the most beneficial inventions of
the human mind. It constitutes the simplest, cheapest, most efficient
currency system ever devised. It offers the most perfect method for the
mobilization of wealth yet known. But it has been made unnecessarily
expensive to the borrower, and dangerous or fraudulent to the community
by reason of the narrow and insecure legal-tender redemption basis, upon
which it has been built. Under our legal-tender laws, bank cheques are
payable on the demand of the payees in legal tender. And as we have
already seen, in times of national crises the banks are utterly unable
to cash the cheques drawn on them for any large amounts. They are
therefore compelled to either close their doors or secure the
Government’s consent to use the national credit as they did in August,
1914. But the compulsory legal tender Act also limits the volume of
credit which a bank can safely issue. The limit of credit accommodation
which a bank can offer the public, is not the amount of wealth offered
as security, after allowing an ample margin for depreciation, but only
such cla**** of wealth as the bankers know will command at all times and
conditions a ready and immediate sale for cash. Here, then, is the
brake which our legal restrictions place upon the production and
exchange of wealth. Production is limited not by its prime factors, but
by our legaltender laws. And this is the reason that trade and
industry are subjected to periodical transitions of prosperity to
depression. If banks happen to be in possession of unusually large
supplies of gold and legal tender, they are able to extend to the
business community similarly abundant credit facilities. Then we may
have prosperous times and industrial progress.
If, on the other hand, our foreign trade rivals draw heavily on our free
gold market, thereby reducing our legal-tender basis, the banks are
forced to call in loans and reduce their credit issues, and with this
contraction of credit, all the trade and production dependent upon it is
suspended, and then we have industrial stagnation ! There is no other
reason for these periodical industrial troubles except the natural
operation of our own foolish money laws. Further, the same laws are
responsible not only for the frequent and often violent fluctuations in
the bank rate, but for the imposition of interest charges on credit
which in reality belongs not to the banks but to the public. This
subject has been most ably discussed by Mr. Oswald Stoll in his
wellknown book entitled The People’s Credit.
Amongst the vast mass of financial literature that has appeared during
the past thirty or forty years, most of which is a mere monotonous
repetition of fallacies, theories and false conclusions, Mr. Stoll’s
work is conspicuous for its honesty and fearless exposure of our banking
methods. The author is evidently desirous of contributing to the
development and industrial success of Great Britain and the Empire, and
he correctly points the direction in which the development may best be
secured. In criticizing our costly and inadequate financial methods, he
has placed his finger on one of the weakest and the sorest spots in the
wh*** of our economic system. His book should be read by every one who
is interested in trade and commerce. To most people, Mr. Stoll’s
conclusions will be a revelation. I know of no better endorsement of
this book than the fact that the majority of our orthodox and financial
writers and professors—many of whom are the paid hirelings of the
present banking monopoly—either ignore the book altogether or advise
their readers to treat it with caution.
Mr. Stoll shows that the credit which the banks grant to their
clients—usually under the guise of a favour—and for the use of which
they are permitted to charge anywhere from 5 per cent. to 10 per cent.,
belongs to the public. That this must be so will become apparent if we
investigate any of these transactions. Suppose, for example, the reader
to be the owner of £10,000 of 5 per cent. War Loan bonds, and desires
the use of £5,000. He applies to his banker, who offers him the
accommodation at 1 per cent. above the bank rate. The reader hands the
bonds to his banker, together with a legal transfer of the bonds to the
bank as security. Whereupon the banker places to the reader’s credit in
the bank books, the sum of £5,000, which he is at liberty to cheque out
as he desires. No doubt by this time the reader would feel the banker
had done him a great service. At any rate, the average banker
endeavours to impress this fact indelibly upon the mind of each of his
clients, viz., that the granting of bank loans is neither obligatory on
his part nor in the fulfilment of the right of any client. And the
banker is undoubtedly correct. Our laws, as well as the wh***
deferential attitude of our successive Governments to the banking
profession, confirm the belief that bankers belong to a select and
legally privileged class who are under no obligations to render the
public any services whatever, and if and when they choose to do so, the
public must regard such services as “ favours ” and act accordingly.
But now let us carefully examine the above transaction and see what the “
favour ” amounts to.
It is evident that—
(1) The possession or ownership of the £10,000 War bonds is what enables
the banker to give the reader his £5,000 of credit.
(2) This credit is not the property of the banker but of the reader, and
was his own property before he asked the banker to “ favour ” him.
(3) The issue of this credit has cost the bank nothing, since it has not
parted with a single halfpenny of its own assets. In fact, the bank
has loaned nothing.
(4) The transaction has cost the reader (a) the temporary loss of his
bonds until the “ loan ” is repaid, (b) and also the interest charges.
(5) The bank has increased its net assets by the difference between the
value of the bonds less the amount of the credit chequed out, and is
financially stronger than before it made the loan.
(6) The bank has gained on all points, (a) by obtaining the use of
securities belonging to their client as the basis for further “ loans,”
(b) by the use of any credit balance not chequed out by the client, (c)
by the interest charged for allowing the reader to use his own credit.
So much for the bank “ favours.”
Reader, do you wonder that bank shares are always at a premium ? Do you
wonder that the banking business, classified in economics as
unproductive, is one of the most lucrative businesses in the world ?
Surely never was there a better game of “ heads I win and tails you lose
”!
Mr. Stoll’s contention is, that since the basis of bank credit (wealth)
belongs to the people, the credit issued against it also belongs to
them, and it is the duty of Parliament to secure to the public the free
use of such credit. The contention is unanswerable. Unless the
Government is prepared to assert that the vested interests of bank
shareholders are of greater importance than the interests of all other
cla****—nay, of the national welfare itself—they will be bound
eventually to do away with the present monstrous monopoly and provide
the public with a national banking system. Where is the justification
for the bank charges upon loans since these so-called “ loans ” consist
merely of the credit possessed by the bank’s clients ? It is certainly
not an insurance charge against risk, because the character and amount
of the securities pledged amply provides for all emergencies. Nor can
it be said that the banks are lending cash for credit. It is true that a
borrower might draw cash, but the banker holds securities belonging to
the borrower sufficient to procure more cash than his client is at all
likely to draw out. The fiction with which the public mind is sometimes
“ doped,” that the banker is loaning some of his own hoards of gold
which is his capital and has therefore a right to charge interest, is,
of course, too absurd to require more than a passing mention.
Considering that the bankers are drawing interest upon far more credit
than all the gold and legal tender in the country, it is evident that
Mr. Stoll’s contention is correct.
The one valid reason for the bankers’ position is, that they have the
only credit organization which commands the public confidence, thanks to
the stupidity and indifference of British statesmen !
Our banks constitute a state-supported, private monopoly, which has
grown up under specially favoured laws and customs. Parliament has made
laws compelling the public to use certain legalized tokens of exchange
without bothering itself as to the supply of such tokens. This supply
has hitherto been allowed to fall under the control of privately owned
companies who have the right to tax the community to any extent it is
able and willing to bear. The result is that the public is permitted to
employ its own credit only by consent of the bankers, and only to such
limits as they choose to allow, on condition that it pays them a tax on
such credit—amounting to millions of pounds annually, and this amazing
monopoly exists merely because no British minister has yet had either
the courage or the statesmanship to provide the nation with its own
credit organizations ! But the present position of affairs cannot
continue. The force of circ**stances will compel Parliament to destroy
this monopoly and to release credit from its enslavement to gold, and
thus enable the people to vastly increase the amount of their annual
wealth production. Our monetary laws and banking methods will be seen
to have been the chief hindrance to our industrial progress and trade
advancement.
As to the limitations which our legal-tender laws have imposed upon the
bankers, in their endeavours to provide the public with a sufficiency of
credit, probably the clearest illustration is contained in an address
delivered by Sir Edward Holden (Managing Director of the London City and
Midland Banking Co.) before the Liverpool Bankers’ Institute, December
18, 1907, entitled The Depreciation of Securities in Relation to Gold.
Sir Edward illustrated the condition of the banks by a triangle, showing
that credit was restricted by gold, regardless of the enormous wealth
possessed by the nation in other forms. He first states—what is often
forgotten—that loans create bank credits (thereby endorsing Mr. Stoll’s
main contention), and if we regard all the banks in London as one, the
business of banking becomes little more than a matter of book-keeping—
the transfer of credit from one person to another. He then proceeds as
follows :—
“ The right side of the triangle (Fig. 3) represents the loans of the
wh*** of the banks, and the left side represents the credits created by
these loans, and the base the cash balance or reserve. If, then, you
draw a line from the left of the base, and equal to the base, you get
the cash credits in existence. If the loans and credits as represented
by the two sides of the triangle were the only two elements which
bankers had to take into consideration, then there would be no necessity
for them to restrict their loans at all, and traders could increase
their businesses and obtain loans ad libitum.
“ But there is another element, and a most important one, to be taken
into consideration, and it is the fact that all the credits as
represented by the left-hand side of the triangle and the line drawn
from the base, are practically payable on demand and in gold, assuming,
of course, that Bank of England notes represent gold. Every banker
must, therefore, make up his mind by what amount his credits are liable
to be diminished, both in ordinary and extraordinary times, and when he
has thus made up his mind, he ought to keep that amount of available
resources in gold, or in a means of obtaining gold.
“ Let us consider, then, that the base of the triangle consists of gold,
and it is the ratio of the base of the triangle to the total credits
(both created and cash credits) which restricts bankers from increasing
unduly their loans. If business increases unduly, and if bankers
continue to increase the loan side of the triangle, of course
concurrently increasing their credits, and not being able to increase
the gold base of the triangle, then evidently they are getting into
danger, and the only judicious course which they can pursue is to
curtail their loans, curtailing an undue increase of business, which
curtail these credits, and thus re-establish the ratio.
“ You see here the direct connection between trade on the one hand and
gold on the other, and that it is not so much the production of gold as
the amount of gold which can be obtained for the purpose of increasing
the bankers’ reserves. I venture to think that the above explanation
will enable you to come to the conclusion that, if the gold base of the
triangle cannot be increased, then the danger spot is the loan.
“ I want you to remember that the banking system of every country has
its triangle, and that the principles enunciated above exist in every
triangle of every system based on gold in the world ; that being so, it
is clear, generally speaking, that the business of the world is carried
on by means of loans, that loans create credits, that the stand-by for
the protection of credits is gold, and that therefore, gold controls
trade.
“ It may happen that the trade of one country grows by leaps and bounds,
the loans and credits, of course, following, while the trade of other
countries remains normal. What, then, takes place ? The gold base of
the triangle of the former becomes too small, and it is necessary to
enlarge it. How is the increase effected ? It is effected by the
representative bank of the more prosperous country attacking the gold
basis of the triangles of other countries, and the instrument by which
the attack is made is the rate of discount. By this means gold will be
attracted from the bases of the triangles of other countries, and unless
those bases are too great for the adequate protection of the credits,
the representative banks of those countries will meet the attack by also
putting up their rates. But it may happen that the trade of every
country has increased by leaps and bounds, and that all loans and
credits have also increased. Then the fight begins with each country
putting up its rate, first to prevent its base being diminished, and
secondly, to increase it if possible. Hence we have the English rate at
7 per cent., the German rate at 7½ per cent., the Austrian rate at 6
per cent., the French rate at 4 per cent., the Italian rate at 5½ per
cent., the Russian rate at 7½ per cent., but as the United States have
no Central Bank, there is no official rate for that country.”
Here is a frank avowal on the part of the world’s leading banker, that
trade and commerce are ever at the mercy of the manipulators of gold,
that long-continued industrial prosperity is impossible because of the
restrictions imposed upon exchange by our legal tender system, and that
the gold basis is a brake upon the wheels of industry, which is
continually checking the pace of production ! Here also is the
explanation of the phenomenon that periods of prosperity are inevitably
followed by periods of depression !
Increased trade demands increased banking facilities—increased loans—but
the moment credit is increased to meet this demand, the gold reserves
are strained, the bank rate is raised, loans are called in, the brake is
applied to the wheels of industry, production is checked, employees are
discharged, enterprise is discouraged, and the extra demand for money
and credit, which prosperous times require, is choked off. In short,
our financial system destroys prosperity, and reduces trade to the
amount of gold available. So that the mechanism of exchange, instead of
facilitating trade, actually checks it ! It first stimulates industry
and then destroys it. The gold basis has become both the life and death
of trade!
Summary
LET us now collect the various points we have already discussed and see
at what conclusions we are justified in arriving. Those who have had
the patience to read and to consider the previous chapters, will realize
that our present financial system is built chiefly upon a fallacy
arising out of a gross misconception of the true meaning of
exchange-values, and this misconception has been fostered by those who
have desired to reconcile economic theories with private and class
interests. And how persistent this desire has been may be seen in every
branch of the science. Take, for example, the numerous theories
regarding interest (better named usury, i.e., payment for use), upon
which innumerable treatises have been written, and to which reference
has already been made in a former chapter. Instead of recognizing the
simple truth that interest is the price of a legally created scarcity
which has resulted in a world-wide monopoly, economists have invented
all sorts of theories, such as the “ reward of abstinence,” the “
fructification theory,” the Austrian theory that “ present goods are
worth more than future goods,” and numerous others equally untenable.
Interest will cease as soon as nations abolish the laws which have
converted the factors of production and exchange—land, money and
credit—into private monopolies, and not before !
It has been well said that if it were to the pecuniary interests of any
class to deny the validity of the multiplication table, the denial would
be forthcoming. More than half a century ago Marx wrote as follows :—
“ In the domain of political economy, free scientific inquiry meets not
only the same enemies as in all other domains. The peculiar nature of
the material with which it deals, summons as foes into the field of
battle, the most violent, mean, and malignant passions of the human
breast—the furies of private interest.”
He added that even the Churches would more readily pardon an attack upon
their creeds than upon their incomes !
Orthodox economic science is founded upon the assumption that existing
property rights—no matter how acquired—that class privileges and vested
interests created by the selfishness, corruption, the ignorance and
caprice of both modern and ancient rulers, are permanent and essential
to the existence of society. And the main object of orthodox writers
has been to justify these interests. Were we about to found a new
colony in a far-off land uncontaminated and unhampered with tradition,
juridical rights, vested interests, precedents and privileges, it would
not be a difficult task to map out an economic system which would work
harmoniously in all its branches for the equal welfare of all cla****.
But our laws have raised so many impediments to any such system, these
private interests so often clash with the public interests, that any
attempt to establish a science built upon our present social and
economic inequalities can only end in failure. The present system
reminds one of a machine which has been constructed from various pieces
of machinery, built in different ages and for different purposes, no two
parts of which can be properly fitted or adjusted. The result is a
horribly noisy, wasteful, grinding machine which goes by fits and starts
and is continually breaking down in spite of the enormous amount of
lubricants employed !
Exchange-value has hitherto been regarded as the most abstruse—although
admittedly the most important—of all the numerous branches with which
political economy deals. And the cause of this abstruseness is due to
the attempt of its professors to reconcile theories which are either
naturally conflicting and irreconcilable or are wholly unrelated. We
have seen that exchange values are merely the arithmetic of trade and
are expressed by numbers. The “ measurement of values,” as it is
called, is practically a system of numbering or counting. It is
identical with the “measurement” of games like billiards and cards.
Chips and counters are the money of card games, i.e., they are used to
indicate the number of points won by each party, just as sovereigns and
one-pound notes are used to indicate in numbers of pounds, one’s
winnings or earnings in trade and industry. These pounds merely
represent certain fractional proportions of the wh*** of our national
wealth. That the function of money is to enumerate or count is shown by
the fact that in all financial and trade dealings where money is
concerned the only question that arises is, “ How much money ? ” One
never hears such a question as “ What degree of value is your commodity
worth ? ” or “ What quality of money do you require for such an article?
” Even where different kinds of money are in circulation, if there
exists any preference for one kind over another, such as gold or silver
over paper, or paper over gold coins, such choice is due to special
circ**stances, to convenience or the requirements of foreign trade where
paper has no legal-tender powers. If a difference in value exists, it
is indicated numerically, i.e., one kind will be quoted at a discount
compared with another. There is no such thing as degree or quality in
exchange-value. Chips and counters are no better indicators for being
made of gold and silver than if made of bone or ivory. Similarly
money—legal tender—performs the same functions whether made of gold,
silver, paper, or tin. By confining legal tender to gold, all we do is
to make our counters unnecessarily scarce and costly. And by so doing
we burden our trade, limit our output of wealth, and make ourselves
poorer than if we used something less costly and less scarce. We have
seen that the inevitable results of establishing a commodity standard
are : (1) Variability in the money unit, so that prices and debts are
made to fluctuate with the variations in the supply of and demand for
the money commodity. (2) The exchange-values of all other commodities
are falsified from time to time by the intrusion of the standard
commodity’s own value, which takes the name of prices, and the
industrial and trading cla**** are continually defrauded.
We have seen that, scientifically speaking, the “pound” is not as our
laws define it, although Sir Robert Peel’s fallacious definition
provides the basis of our present dangerous and irrational banking and
currency systems. This fallacy has cost the British nation untold
millions, not merely by the taxation which it has inflicted upon all our
industries, trade and commerce, as well as by increasing our national
obligations, but chiefly through its limiting the amount of our annual
production. It is estimated that every rise in the bank rate of 1 per
cent. costs the industrial and commercial cla**** from £60,000 to
£100,000 per week in increased interest charges on loans ! No form of
oppression can be more intolerable than for a Government to first
establish the legal necessity for an article and then fail or refuse to
provide an adequate supply of it. This, however, is a description of
most of the world’s legal-tender laws. Its results are shown in the
annual record of bankruptcies, suicides, lockouts, strikes, and
industrial disputes. Sir Robert Peel made it doubly oppressive by
making gold our sole legal tender for sums over £2, and refusing to
allow the issue of one-pound notes. The inevitable tendency of this
legislation was to thwart enterprise, to drive the small producer out of
business, to concentrate industry in the hands of the wealthy cla****,
in short to enrich the wealthy and to weaken the middle and poorer
cla****.
We have also seen that the gold standard imposes an elastic monetary
unit which functions as a fraudulent measure of wealth. Natural
conditions alone, such as fresh gold discoveries, the failure of
existing sources of supply and the variations in demand due to the
growth of population and trade, are sufficient to create serious
fluctuations in the value of the standard. But added to these natural
causes are the variations produced through the creation and cancellation
of vast sums of national and bank credit which function as currency
from time to time, and affect the purchasing power of money just as the
issue and distribution of so much legal tender would do. And when we
remember that a considerable proportion of all this currency is
controlled by a few international banking firms whose interest it is to
cause periodically these sudden fluctuations in the purchasing power of
money, we can get some faint idea of the unfortunate position of the
trading and industrial communities. Some years ago a well-known United
States Senator, speaking of the unlimited power in the hands of a few
New York bankers, made the following announcement. He said :—
“ There are fifty men in the City of New York who can in twenty-four
hours stop every wheel on every railway, close the doors of every
factory, lock every switch on every telegraph line and shut down every
coal and iron mine in the United States ! They can do this because they
control all the money of the country. The control of money gives its
possessors absolute power over a nation’s industries.”
A somewhat similar condition exists in this country to-day. The Bank of
England—which, bear in mind, is a privately owned and controlled Joint
Stock bank—with about twelve other joint Stock banks, practically
control the entire currency and credit of Great Britain. Walter Bagehot
once wrote (Lombard Street) :—
“ All our credit system depends upon the Bank of England for its
security. On the wisdom of the directors of that one Joint Stock
company it depends whether England shall be solvent or insolvent. This
may seem too strong, but it is not. All banks depend on the Bank of
England, and all merchants depend on some banker ! ”
It speaks volumes for the comparative honesty of British bankers as a
class (compared with those of other nations) that they have, generally
speaking, so moderately used the enormous powers which privileged
legislation has placed in their hands. But it must be remembered that
they are members of a larger circle of cosmopolitan financiers who
operate in all countries and are not troubled by the scruples of most of
our British bankers. And who is to ensure a continuance of this policy
of moderation ? And what is to prevent our bank shares from falling
entirely into the possession of a syndicate of unscrupulous cosmopolitan
financiers, amongst whom the Hun banker is notoriously conspicuous ?
Bank shares are purchasable with money. Imagine the results, if the
bulk of these shares fell under the control of some foreign syndicate,
whose policy might be to destroy British commerce !
Currency, whether legal tender or bank cheques, is a social instrument.
No man or group of men, outside the halls of legislature, can create a
nation’s currency. This requires the confidence and consent of the
trading public. It is the public, and not the bankers, who give
currency and therefore value, to paper and credit. The refusal on the
part of the industrial and commercial cla**** to accept any particular
instrument in exchange for their commodities, would render any
instrument useless for currency purposes.
We have also seen that nearly 99 per cent. of our trade and commerce is
transacted by means of bank credit, and most of this bank credit is
issued against the wealth belonging to the public. As Sir Edward Holden
says, “ Loans create bank credit.” Hence it follows that bank credit
is, properly speaking, the property of the public, although our
Governments have always permitted the banks to charge the public for its
use. On the other hand, it has been shown how an invariable unit can
be established without altering our present monetary denominations. The
one-pound unit can be made stable by a very simple alteration in our
banking and legal-tender laws. All that is required is to repeal the
Bank Charter Legal Tender Acts which have made gold the sole legal
debt-paying commodity, and establish the one-pound Treasury note as the
unit. Simultaneously with this, the banks should be compelled to issue
bank credit to all those demanding it who are willing to pledge
productive wealth to an amount which will allow for all possible
variations in the values of such wealth—say 50 per cent. of its
appraised value, to be repayable in definite yearly proportions as may
be agreed. There should be a definite Government issue of Treasury
notes based upon the national credit, equivalent at least to the annual
sum required by the Government for its support, for pension purposes,
and interest on the National Debt. Since the Government must collect
taxes in the form of legal tender, it must necessarily first provide a
sufficiency to enable taxpayers to meet the Government demands. The
most convenient price-level consistent with political and industrial
ante-war conditions would have to be pre-determined. This level would
be obtained by the issue of Treasury notes sufficient to reach that
level. Here it may be pointed out that this level will of necessity
have to be not lower than it is at present. The nation cannot go
through an era of industrial stagnation and starvation in order to reach
a lower level of prices merely for the benefit of bondholders and
moneylenders !
Much has been said of late about high prices due to inflation of the
currency, but, as pointed out in the chapter on this subject, it would
be difficult to carry on a great war in which a nation must devote its
wh*** energies to producing munitions of destruction without inflation.
If we were to employ slave labour as Germany is doing, inflation might
be avoided to a certain extent, but not otherwise. The Government is
compelled to buy its munitions. It cannot very well steal them. It
buys with its credit and the proceeds of taxation. To pay wholly out of
taxation the Government would have to impose an all-round tax of twenty
shillings in the pound. In other words, we should all have to work
without food and other necessaries which, as Euclid would say, is absurd
! Hence the Government must pay from loans and credit. Having
acquired the goods, our armies proceed promptly to destroy all this
wealth, but the debt naturally remains in the form of promises to pay,
which are divided into floating and funded credits or debts. Hence our
national labour merely creates a void which is represented by so much
credit (or debt). If we were all similarly engaged in producing wealth,
if we were building up towns and increasing and improving our
agriculture instead of destroying them, all this credit or money now
being spent would be represented by wealth and the inflation complained
of would not occur.
Having selected our monetary unit, we have demonstrated that the
maintenance of its stability and invariability is entirely dependent
upon a sufficiency of the money supply. What material the “ pound ”
should be expressed by is altogether of minor importance. The main
question is : How can the supply of pounds be kept always equal to the
demand ? And the selection of the material should be governed entirely
by this consideration.
In his history of Europe, Sir Archibald Alison tells us that the “
thousand-year night,” commencing with the break-up of the Roman Empire
about the sixth century, was largely due to the loss of the precious
metals which created a dearth of currency. And as no other currency was
possible at that period of European history, trade and industry
dwindled and decayed and mankind sank into universal poverty and misery.
With the discovery of America, and especially the great silver mines
of Potosi, trade, enterprise and production were quickened and the great
awakening known as the “ Renaissance ” began. Whether the Renaissance
was the cause or the result of these discoveries need not trouble us.
What is indisputable is the fact that the condition of trade does depend
very largely upon the supply of currency. A deficiency of money
invariably brings industrial crises, bankruptcies and depression, whilst
an abundance tends to encourage and stimulate both trade and
production. And this brings us to the crux of the wh*** question. The
value of the “pound” depends far more upon our banking mechanism and
administration than upon the weight of gold in a sovereign ! And to
establish an invariable monetary unit without some arrangement or
general control of our entire banking business, would be equivalent to
attempting to define the standard capacity of a railway truck or car
necessary for the transportation of so many thousands of tons monthly,
without considering the number of such cars or their speed. It appears
to me, therefore, that it will be difficult to satisfy the legitimate
currency needs of this country on any just basis unless we nationalize
the wh*** of our banks. Consideration of this subject from every
standpoint, patriotic, scientific, commercial, economic, points
conclusively to the necessity for nationalizing the banks, and as
speedily as possible.
Its accomplishment would be far simpler and cheaper than the
nationalization of either our land or our railways. Let the Government
purchase the shares of our banks by an exchange of War Loan certificates
at a just valuation. This would involve no injustice to bank
shareholders, whilst it would give the nation a vaster mine of wealth
than all the gold mines of Africa and America combined. By taking the
banks as running concerns with their present efficient staffs, the
transfer would occasion no difficulty or interference with trade. On
the contrary, it would enormously improve our industrial outlook.
Today, the average bank manager occupies a difficult and often an
unpleasant position. He must obey the instructions of his head London
officers, and these instructions are not always acceptable to his
clients. Instead of catering to the public welfare and interests, he
has to think only of the wishes of his directors and shareholders. His
promotion often depends upon his ability to secure deposits and transfer
to London as much money as possible. The policy of the great London
bankers is similar to that of the bankers of New York and Chicago—to
draw as much money to headquarters and leave the provinces with as
little as is consistent with the continuance of trade. This enables the
banks to make large loans to those who can pay the most. How
disastrous this policy has been in the past may be seen from the
financial plight in which we were placed prior to the war. Millions of
pounds belonging to British depositors were loaned to German bankers,
and the money remains in their possession at the present time. Many of
our enemy’s enterprises which have driven British industries out of the
running have been financed by loans of British credit by London bankers !
Percentage has hitherto ranked in the eyes of many of our money
merchants above patriotism. If the Germans wanted a railway to Baghdad
or elsewhere, no matter what their political motives might be, they
could always come to London and get the accommodation they needed (which
was often refused to British merchants and engineers) so long as they
paid the rate demanded ! As to what took place prior to the war we have
already seen in all earlier chapter.
How many of our manufacturers, farmers, merchants, and traders, how many
of our former industries have been sacrificed in the temple of usury
for the maintenance of our “ good, sound, honest ” banking system, i.e.,
to enable our banks to maintain their large dividends ! I do not
altogether blame the bankers. As a class they are, according to their
light, probably as honourable as any other class of the community. But
they are both conservative and selfish, and it is perhaps only fair to
add that they are often quite innocent of the injury their system
inflicts upon their fellow-countrymen. The banker is what the system
has made him. And probably no one would derive greater benefit from the
nationalization of the banks, so far as his own mental development is
concerned. To realize that his work henceforth is to be for the
exclusive benefit of his own country, that instead of scheming to make
profits for a comparatively small group of shareholders, instead of
having to take part in “ holding up ” production as he is sometimes
forced to do, he would be working hand in hand with the wealth creators
of the British Empire, building up its trade and industries, surely such
a prospect would be worth his striving for ! To-day, our monetary and
banking Acts block the path of our national progress, and must be swept
away with many other antiquated obstructions which, beyond a certain
archaeological interest, are of no national benefit whatever.
The greatest indictment against the gold standard is its alliance with
usury (i.e., payment for use)—the most destructive principle in the
economy of any society. It is one of the amazing paradoxes of economic
science that the instrument established for facilitating commerce should
prove its most fatal enemy. Under our legal-tender laws gold is said
to facilitate and encourage trade and industry. But the interest system
which it fosters tends to burden and destroy them. It was pointed out
by Aristotle more than two thousand years ago that money was
unproductive. For this reason the taking of interest was forbidden by
every religion and by every moral teacher from Moses to John Ruskin. It
was forbidden by the Roman Catholic Church down to the eighteenth
century. It is still forbidden by the Mohammedans. Its maintenance
here and elsewhere is due to State-granted monopolies and privileges.
And yet our entire economic and social systems are built upon this false
principle. The system of interest is impossible for any very large
amount and for any long period, for the reason that interest charges
tend to grow faster than surplus wealth. From the returns of industry,
sufficient wealth must first be given to the prime factors, to labour,
capital and land, to repair wastage and maintain their productive powers
so as to ensure future production. After allowing for all this and for
the maintenance of the State, for the care, nourishment and education
of each coming generation, it will be found that the balance left is not
sufficient to pay interest charges even at the rate of 5 per cent. on
more than a comparatively small proportion of the national capital. The
result is that the amount of capital that can be employed is
necessarily limited by the rate of interest prevailing. Some writers,
with a taste for sensational figures, have given us examples proving the
impossibility of satisfying the claims of interest by showing the
results of a five per cent. investment at compound interest. Proudhon
showed that if a man in the reign of St. Louis had left 1,000 francs on
interest at the rate of 5 per cent., with instructions that this
interest should be reinvested at the same rate at the end of each and
every year and the accrued amount should be divided among the French
people in the year 1840, the total sum would have far exceeded the wh***
wealth of Europe ! A recent American writer has also figured out that
if Mr. Rockefeller will leave his wealth in trust at a similar rate of
interest to acc**ulate for the benefit of American posterity five
hundred years hence, the amount accruing will suffice to pension off the
entire population of the United States, allowing for its natural
growth, with an income for each person of one million dollars per annum
for ever !
Our monetary laws have eclipsed even the laws of nature, for they have
conferred the life principle upon inert matter. Nay, more, they have
conferred the boon of immortality upon an unproductive metal. A chunk
of gold which an ordinary workman can carry on his shoulders, which
takes no part in production nor adds one iota to the general wealth,
comfort, or happiness of mankind, and which, for all the use it is,
might as well have remained in the bowels of the earth, will buy his
life’s labour six times over, even if he managed to outlive Methuselah !
It is more valuable to its owners (thanks to these laws) than the
labour of six men for all time—so long as the present system is
maintained ! The gold represents the equivalent of this amount of
economic power exerted so long as these infamous laws and the gold
superstition exist. The gold produces nothing, but it gives its owners
the legal right to purchase, to pay debts, and enables them to exact a
tribute from wealth producers year after year during their lives and of
their descendants for ever ! The principle of usury continues to
operate, however, only because it is confined strictly within limited
amounts and limited periods. But even with these limitations it entails
widespread poverty on the ma**** of the world’s producing cla****.
Single taxers and land reformers, who see in the monopoly of land the
cause of all social misery, should sit down quietly and make a simple
comparison of the total amount of our annual wealth production paid in
rent of land with that extorted in the shape of interest on loans and
capital. For the monopoly of credit not only determines the rate of
interest on all capital, but it is the chief cause of such interest !
And since the gold standard is at present the one factor limiting the
issue of credit below the needs of all industrial communities, and
preventing the free mobilization of wealth, it follows that it is also
the cause of interest.
The wh*** currency and interest problem is to-day merely a question of
insufficiency— of an inadequate supply. The supply should be regulated
by the demands of industry and commerce, not by the precarious and
accidental discoveries and production of gold. The industrial and
social needs of the world after the war, will necessitate the complete
abandonment of our present financial and banking ideas and methods.
Deposit banking will not suffice for the financial needs of industry.
The theory that trade and production can only be properly financed by
the surplus idle wealth of individuals, will also have to be scrapped.
Cheap money and credit facilities will be imperative in order to save
the world—and Europe especially—from a degree of misery and starvation,
such as has never been witnessed. Taxation alone will require such an
amount of money as we have never yet been accustomed to.
Again, it is probably not realized that the excess profit tax will wreck
hundreds of our industries unless ample credit facilities are furnished
by the banks or the Government. In the majority of cases, profits are
shown by an increase in machinery, tools, plant, stock, material, whilst
taxes are payable in legal tender. How are firms to pay these excess
profits unless the Government provides the necessary means for
mobilizing all this capital ? How is it possible for the nation to pay
£600,000,000 in taxes annually without crippling its industrial
resources, when the Government has only provided about one-third of this
amount for all purposes ?
No doubt, to the average reader, this somewhat tedious discussion
regarding values, standards, ratios, etc., will appear highly technical
and most uninteresting. A cursory glance over the preceding chapters
may raise the question, “ What does it all signify ? ” “ Who cares
whether exchange values are merely ‘ extrinsic relations ’ or ‘
intrinsic qualities,’ and how can it affect me ? ” The intelligent
business man, however, will realize as well as the financier, the
enormous importance of these seemingly unimportant questions. The
answers that the world’s moneylenders have been able to give to the
above questions in the form of banking and legal-tender laws, have
enabled them to gamble with the lives and fortunes of the industrial
cla**** in all countries, with the certainty of winning. These laws
made it possible for a man like the late W.H. Harriman, whose original
capital consisted merely of a seat on the New York Stock Exchange, to
secure control of thousands of miles of railway which were built and
paid for by other people ! They also gave to the late Pierrepont Morgan
greater economic power than was ever previously wielded by mortal man !
These same laws make it possible for a few men to acquire fortunes
overnight, to take wealth from those that have created it and give
nothing in return. It makes the producing and business cla**** the
pawns and playthings and their possessions the prizes of those who deal
in money and credit. Neither banking nor money-lending creates one
solitary grain of wealth, and yet the men in these professions
invariably grow rich, and often fabulously so. Where does it all come
from ? From the labour and sweat of the ma**** ! These laws have made
our economic system topsy-turvy. They have placed non-producers at the
top of our social scale and the producers at the bottom. They have made
the most useless and least important commodity the most valuable,
whilst the things that are indispensable have been treated as of the
least importance. The banker who has spent his wh*** life in the sole
pursuit of enriching himself at the public expense is ennobled by being
raised to the Peerage, whilst the farmer, the inventor, the
manufacturer, the distributor, whose labours have benefited and enriched
the wh*** nation generally, die neglected, unknown or forgotten. But
the war is exposing this system of false values in a manner hitherto
undreamt of. It is now the worker, not the idler, the wealth producer,
not the wealth grabber, the fighter, not the shirker, the patriot, not
the pacifist, who are in demand. These are the men whom the nation will
delight to honour.
Let us then get rid at once and for ever of all our false ideas,
principles, laws, systems and institutions under the sheltering care of
which the useless and costly drones of humanity have hitherto
flourished. We are endeavouring to destroy the greatest foreign
despotism that has ever existed. Are we to permit the continued growth
of a despotism in our midst far more insidious and equally dangerous ?
There is none more cruel, more intolerant, more soul-destroying or more
universal than the money despotism. It exists in all lands, and its
results are the same everywhere. Its policy is to enrich the wealthy
and enslave the poor, to divide society into two antagonistic cla****,
and to establish and perpetuate everywhere and in every department of
life the money standard. It is the most degrading, the most corrupt
ideal ever presented to mankind. It is destructive of everything noble
and praiseworthy in human life and character. And its power and
maintenance depend entirely upon two or three Parliamentary Acts. The
remedy is therefore to repeal them. The Bank Charter and Legal Tender
Gold Acts must be annulled. We must nationalize the wh*** of our banks,
and substitute Treasury- and bank-notes for our former gold currency by
issuing them against the national wealth. Finally, provision should be
made for the free mobilization of our exchangeable and productive
wealth by the issue of bank credit against such wealth as may be
required to meet the demands of trade and industry.
These measures would reduce gold to the level of other commodities, and
destroy the economic despotism which has grown up under the privileges
accorded it.
We have already discussed the question of the monetary unit or standard.
This would correspond to the purchasing power of the one-pound note at
the time the new system became established. And so long as the supply
of credit and legal tender were maintained equivalent to the demand, the
unit would remain invariable. Such results would completely change all
industrial and trade conditions. Accompanied by a land nationalization
policy, these measures would banish the speculative nature of
production almost entirely. They would enormously lighten the load of
the toiler. They would ensure larger returns to those who labour and
less for those who “neither toil nor spin.” They would vastly increase
the amount of our national wealth. They would destroy involuntary
idleness, and starvation would vanish from our towns and cities. They
would lead to harmony between capital and labour and put an end to
strikes and industrial unrest. They would enable the State to meet its
obligations and lighten the burden of taxation. The saving which they
would effect would be sufficient to pay all the interest charges on the
National Debt, and enable the nation ultimately to replace the National
Debt with a vast fund of National Wealth. Surely such a prospect is
worthy of the most serious consideration of all cla****.
As a final word, let me again warn the public to resist at all costs any
attempt on the part of the Government to re-establish a gold currency.
Such a measure will inevitably rivet the chains of industrial slavery
upon 95 per cent. of the population and their descendants for all time.
All that our armies are fighting for, viz., political and industrial
freedom, will be irretrievably lost, if the world’s financial despots,
among whom are the leaders of Germany, are permitted to gain control.
We shall have gained but little if, by destroying the Huns’ military
power, we fall beneath the sway of cosmopolitan finance.
============ =======
"Arthur Kitson's (1860 – 1937), the inventor of the vaporized oil burner
which had the effect of increasing, by power of six times, the
illumination fromlighthouses, shined a bright light on the dark
machinery of the money and banking system. He became quite wealthy from
his patented invention. Not one to rest he next wrote the books that
helped launch a national monetary debate in England. Kitson regarded the
Money Power as the chief cause of the world's economic evils and
misery. Noble Laureate Frederick Soddy (1877- 1956) dedicated his major
work Wealth, Virtual Wealth and Debt to Arthur Kitson, calling him the
doyenne (elder spokesperson) for monetary reform. Why was Kitson so
highly regarded in his day? What was the sound standard Kitson
recommended to replace the fraudulent (gold) standard? How different
would the world be today if only we had attended to the works of the
British monetary reform movement?"
Preface
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Introduction
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Great Crisis
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War Loan
http://yamaguchy.
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Exchange Value
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Determines Values
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Variability Gold
http://yamaguchy.
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Peel Fallacy
http://yamaguchy.
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Functions of Money
http://yamaguchy.
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Invariable Unit
http://yamaguchy.
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Money Supply
http://yamaguchy.
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People’s Credit -- see above
http://yamaguchy.
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War Financed
http://yamaguchy.
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Free Trade
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Summary
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No-Money Island
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"The People's Credit"
by Arthur Kitson
Being Chapter XI of Kitson's The Fraudulent Standard (1917)
* * *
THE real currency of Great Britain, the medium of exchange, the
instrument by which 99 per cent. of all business obligations are
settled, is the bank cheque, one of the most beneficial inventions of
the human mind. It constitutes the simplest, cheapest, most efficient
currency system ever devised. It offers the most perfect method for the
mobilization of wealth yet known. But it has been made unnecessarily
expensive to the borrower, and dangerous or fraudulent to the community
by reason of the narrow and insecure legal-tender redemption basis, upon
which it has been built. Under our legal-tender laws, bank cheques are
payable on the demand of the payees in legal tender. And as we have
already seen, in times of national crises the banks are utterly unable
to cash the cheques drawn on them for any large amounts. They are
therefore compelled to either close their doors or secure the
Government’s consent to use the national credit as they did in August,
1914. But the compulsory legal tender Act also limits the volume of
credit which a bank can safely issue. The limit of credit accommodation
which a bank can offer the public, is not the amount of wealth offered
as security, after allowing an ample margin for depreciation, but only
such cla**** of wealth as the bankers know will command at all times and
conditions a ready and immediate sale for cash. Here, then, is the
brake which our legal restrictions place upon the production and
exchange of wealth. Production is limited not by its prime factors, but
by our legaltender laws. And this is the reason that trade and
industry are subjected to periodical transitions of prosperity to
depression. If banks happen to be in possession of unusually large
supplies of gold and legal tender, they are able to extend to the
business community similarly abundant credit facilities. Then we may
have prosperous times and industrial progress.
If, on the other hand, our foreign trade rivals draw heavily on our free
gold market, thereby reducing our legal-tender basis, the banks are
forced to call in loans and reduce their credit issues, and with this
contraction of credit, all the trade and production dependent upon it is
suspended, and then we have industrial stagnation ! There is no other
reason for these periodical industrial troubles except the natural
operation of our own foolish money laws. Further, the same laws are
responsible not only for the frequent and often violent fluctuations in
the bank rate, but for the imposition of interest charges on credit
which in reality belongs not to the banks but to the public. This
subject has been most ably discussed by Mr. Oswald Stoll in his
wellknown book entitled The People’s Credit.
Amongst the vast mass of financial literature that has appeared during
the past thirty or forty years, most of which is a mere monotonous
repetition of fallacies, theories and false conclusions, Mr. Stoll’s
work is conspicuous for its honesty and fearless exposure of our banking
methods. The author is evidently desirous of contributing to the
development and industrial success of Great Britain and the Empire, and
he correctly points the direction in which the development may best be
secured. In criticizing our costly and inadequate financial methods, he
has placed his finger on one of the weakest and the sorest spots in the
wh*** of our economic system. His book should be read by every one who
is interested in trade and commerce. To most people, Mr. Stoll’s
conclusions will be a revelation. I know of no better endorsement of
this book than the fact that the majority of our orthodox and financial
writers and professors—many of whom are the paid hirelings of the
present banking monopoly—either ignore the book altogether or advise
their readers to treat it with caution.
Mr. Stoll shows that the credit which the banks grant to their
clients—usually under the guise of a favour—and for the use of which
they are permitted to charge anywhere from 5 per cent. to 10 per cent.,
belongs to the public. That this must be so will become apparent if we
investigate any of these transactions. Suppose, for example, the reader
to be the owner of £10,000 of 5 per cent. War Loan bonds, and desires
the use of £5,000. He applies to his banker, who offers him the
accommodation at 1 per cent. above the bank rate. The reader hands the
bonds to his banker, together with a legal transfer of the bonds to the
bank as security. Whereupon the banker places to the reader’s credit in
the bank books, the sum of £5,000, which he is at liberty to cheque out
as he desires. No doubt by this time the reader would feel the banker
had done him a great service. At any rate, the average banker
endeavours to impress this fact indelibly upon the mind of each of his
clients, viz., that the granting of bank loans is neither obligatory on
his part nor in the fulfilment of the right of any client. And the
banker is undoubtedly correct. Our laws, as well as the wh***
deferential attitude of our successive Governments to the banking
profession, confirm the belief that bankers belong to a select and
legally privileged class who are under no obligations to render the
public any services whatever, and if and when they choose to do so, the
public must regard such services as “ favours ” and act accordingly.
But now let us carefully examine the above transaction and see what the “
favour ” amounts to.
It is evident that—
(1) The possession or ownership of the £10,000 War bonds is what enables
the banker to give the reader his £5,000 of credit.
(2) This credit is not the property of the banker but of the reader, and
was his own property before he asked the banker to “ favour ” him.
(3) The issue of this credit has cost the bank nothing, since it has not
parted with a single halfpenny of its own assets. In fact, the bank
has loaned nothing.
(4) The transaction has cost the reader (a) the temporary loss of his
bonds until the “ loan ” is repaid, (b) and also the interest charges.
(5) The bank has increased its net assets by the difference between the
value of the bonds less the amount of the credit chequed out, and is
financially stronger than before it made the loan.
(6) The bank has gained on all points, (a) by obtaining the use of
securities belonging to their client as the basis for further “ loans,”
(b) by the use of any credit balance not chequed out by the client, (c)
by the interest charged for allowing the reader to use his own credit.
So much for the bank “ favours.”
Reader, do you wonder that bank shares are always at a premium ? Do you
wonder that the banking business, classified in economics as
unproductive, is one of the most lucrative businesses in the world ?
Surely never was there a better game of “ heads I win and tails you lose
”!
Mr. Stoll’s contention is, that since the basis of bank credit (wealth)
belongs to the people, the credit issued against it also belongs to
them, and it is the duty of Parliament to secure to the public the free
use of such credit. The contention is unanswerable. Unless the
Government is prepared to assert that the vested interests of bank
shareholders are of greater importance than the interests of all other
cla****—nay, of the national welfare itself—they will be bound
eventually to do away with the present monstrous monopoly and provide
the public with a national banking system. Where is the justification
for the bank charges upon loans since these so-called “ loans ” consist
merely of the credit possessed by the bank’s clients ? It is certainly
not an insurance charge against risk, because the character and amount
of the securities pledged amply provides for all emergencies. Nor can
it be said that the banks are lending cash for credit. It is true that a
borrower might draw cash, but the banker holds securities belonging to
the borrower sufficient to procure more cash than his client is at all
likely to draw out. The fiction with which the public mind is sometimes
“ doped,” that the banker is loaning some of his own hoards of gold
which is his capital and has therefore a right to charge interest, is,
of course, too absurd to require more than a passing mention.
Considering that the bankers are drawing interest upon far more credit
than all the gold and legal tender in the country, it is evident that
Mr. Stoll’s contention is correct.
The one valid reason for the bankers’ position is, that they have the
only credit organization which commands the public confidence, thanks to
the stupidity and indifference of British statesmen !
Our banks constitute a state-supported, private monopoly, which has
grown up under specially favoured laws and customs. Parliament has made
laws compelling the public to use certain legalized tokens of exchange
without bothering itself as to the supply of such tokens. This supply
has hitherto been allowed to fall under the control of privately owned
companies who have the right to tax the community to any extent it is
able and willing to bear. The result is that the public is permitted to
employ its own credit only by consent of the bankers, and only to such
limits as they choose to allow, on condition that it pays them a tax on
such credit—amounting to millions of pounds annually, and this amazing
monopoly exists merely because no British minister has yet had either
the courage or the statesmanship to provide the nation with its own
credit organizations ! But the present position of affairs cannot
continue. The force of circ**stances will compel Parliament to destroy
this monopoly and to release credit from its enslavement to gold, and
thus enable the people to vastly increase the amount of their annual
wealth production. Our monetary laws and banking methods will be seen
to have been the chief hindrance to our industrial progress and trade
advancement.
As to the limitations which our legal-tender laws have imposed upon the
bankers, in their endeavours to provide the public with a sufficiency of
credit, probably the clearest illustration is contained in an address
delivered by Sir Edward Holden (Managing Director of the London City and
Midland Banking Co.) before the Liverpool Bankers’ Institute, December
18, 1907, entitled The Depreciation of Securities in Relation to Gold.
Sir Edward illustrated the condition of the banks by a triangle, showing
that credit was restricted by gold, regardless of the enormous wealth
possessed by the nation in other forms. He first states—what is often
forgotten—that loans create bank credits (thereby endorsing Mr. Stoll’s
main contention), and if we regard all the banks in London as one, the
business of banking becomes little more than a matter of book-keeping—
the transfer of credit from one person to another. He then proceeds as
follows :—
“ The right side of the triangle (Fig. 3) represents the loans of the
wh*** of the banks, and the left side represents the credits created by
these loans, and the base the cash balance or reserve. If, then, you
draw a line from the left of the base, and equal to the base, you get
the cash credits in existence. If the loans and credits as represented
by the two sides of the triangle were the only two elements which
bankers had to take into consideration, then there would be no necessity
for them to restrict their loans at all, and traders could increase
their businesses and obtain loans ad libitum.
“ But there is another element, and a most important one, to be taken
into consideration, and it is the fact that all the credits as
represented by the left-hand side of the triangle and the line drawn
from the base, are practically payable on demand and in gold, assuming,
of course, that Bank of England notes represent gold. Every banker
must, therefore, make up his mind by what amount his credits are liable
to be diminished, both in ordinary and extraordinary times, and when he
has thus made up his mind, he ought to keep that amount of available
resources in gold, or in a means of obtaining gold.
“ Let us consider, then, that the base of the triangle consists of gold,
and it is the ratio of the base of the triangle to the total credits
(both created and cash credits) which restricts bankers from increasing
unduly their loans. If business increases unduly, and if bankers
continue to increase the loan side of the triangle, of course
concurrently increasing their credits, and not being able to increase
the gold base of the triangle, then evidently they are getting into
danger, and the only judicious course which they can pursue is to
curtail their loans, curtailing an undue increase of business, which
curtail these credits, and thus re-establish the ratio.
“ You see here the direct connection between trade on the one hand and
gold on the other, and that it is not so much the production of gold as
the amount of gold which can be obtained for the purpose of increasing
the bankers’ reserves. I venture to think that the above explanation
will enable you to come to the conclusion that, if the gold base of the
triangle cannot be increased, then the danger spot is the loan.
“ I want you to remember that the banking system of every country has
its triangle, and that the principles enunciated above exist in every
triangle of every system based on gold in the world ; that being so, it
is clear, generally speaking, that the business of the world is carried
on by means of loans, that loans create credits, that the stand-by for
the protection of credits is gold, and that therefore, gold controls
trade.
“ It may happen that the trade of one country grows by leaps and bounds,
the loans and credits, of course, following, while the trade of other
countries remains normal. What, then, takes place ? The gold base of
the triangle of the former becomes too small, and it is necessary to
enlarge it. How is the increase effected ? It is effected by the
representative bank of the more prosperous country attacking the gold
basis of the triangles of other countries, and the instrument by which
the attack is made is the rate of discount. By this means gold will be
attracted from the bases of the triangles of other countries, and unless
those bases are too great for the adequate protection of the credits,
the representative banks of those countries will meet the attack by also
putting up their rates. But it may happen that the trade of every
country has increased by leaps and bounds, and that all loans and
credits have also increased. Then the fight begins with each country
putting up its rate, first to prevent its base being diminished, and
secondly, to increase it if possible. Hence we have the English rate at
7 per cent., the German rate at 7½ per cent., the Austrian rate at 6
per cent., the French rate at 4 per cent., the Italian rate at 5½ per
cent., the Russian rate at 7½ per cent., but as the United States have
no Central Bank, there is no official rate for that country.”
Here is a frank avowal on the part of the world’s leading banker, that
trade and commerce are ever at the mercy of the manipulators of gold,
that long-continued industrial prosperity is impossible because of the
restrictions imposed upon exchange by our legal tender system, and that
the gold basis is a brake upon the wheels of industry, which is
continually checking the pace of production ! Here also is the
explanation of the phenomenon that periods of prosperity are inevitably
followed by periods of depression !
Increased trade demands increased banking facilities—increased loans—but
the moment credit is increased to meet this demand, the gold reserves
are strained, the bank rate is raised, loans are called in, the brake is
applied to the wheels of industry, production is checked, employees are
discharged, enterprise is discouraged, and the extra demand for money
and credit, which prosperous times require, is choked off. In short,
our financial system destroys prosperity, and reduces trade to the
amount of gold available. So that the mechanism of exchange, instead of
facilitating trade, actually checks it ! It first stimulates industry
and then destroys it. The gold basis has become both the life and death
of trade!
Summary
LET us now collect the various points we have already discussed and see
at what conclusions we are justified in arriving. Those who have had
the patience to read and to consider the previous chapters, will realize
that our present financial system is built chiefly upon a fallacy
arising out of a gross misconception of the true meaning of
exchange-values, and this misconception has been fostered by those who
have desired to reconcile economic theories with private and class
interests. And how persistent this desire has been may be seen in every
branch of the science. Take, for example, the numerous theories
regarding interest (better named usury, i.e., payment for use), upon
which innumerable treatises have been written, and to which reference
has already been made in a former chapter. Instead of recognizing the
simple truth that interest is the price of a legally created scarcity
which has resulted in a world-wide monopoly, economists have invented
all sorts of theories, such as the “ reward of abstinence,” the “
fructification theory,” the Austrian theory that “ present goods are
worth more than future goods,” and numerous others equally untenable.
Interest will cease as soon as nations abolish the laws which have
converted the factors of production and exchange—land, money and
credit—into private monopolies, and not before !
It has been well said that if it were to the pecuniary interests of any
class to deny the validity of the multiplication table, the denial would
be forthcoming. More than half a century ago Marx wrote as follows :—
“ In the domain of political economy, free scientific inquiry meets not
only the same enemies as in all other domains. The peculiar nature of
the material with which it deals, summons as foes into the field of
battle, the most violent, mean, and malignant passions of the human
breast—the furies of private interest.”
He added that even the Churches would more readily pardon an attack upon
their creeds than upon their incomes !
Orthodox economic science is founded upon the assumption that existing
property rights—no matter how acquired—that class privileges and vested
interests created by the selfishness, corruption, the ignorance and
caprice of both modern and ancient rulers, are permanent and essential
to the existence of society. And the main object of orthodox writers
has been to justify these interests. Were we about to found a new
colony in a far-off land uncontaminated and unhampered with tradition,
juridical rights, vested interests, precedents and privileges, it would
not be a difficult task to map out an economic system which would work
harmoniously in all its branches for the equal welfare of all cla****.
But our laws have raised so many impediments to any such system, these
private interests so often clash with the public interests, that any
attempt to establish a science built upon our present social and
economic inequalities can only end in failure. The present system
reminds one of a machine which has been constructed from various pieces
of machinery, built in different ages and for different purposes, no two
parts of which can be properly fitted or adjusted. The result is a
horribly noisy, wasteful, grinding machine which goes by fits and starts
and is continually breaking down in spite of the enormous amount of
lubricants employed !
Exchange-value has hitherto been regarded as the most abstruse—although
admittedly the most important—of all the numerous branches with which
political economy deals. And the cause of this abstruseness is due to
the attempt of its professors to reconcile theories which are either
naturally conflicting and irreconcilable or are wholly unrelated. We
have seen that exchange values are merely the arithmetic of trade and
are expressed by numbers. The “ measurement of values,” as it is
called, is practically a system of numbering or counting. It is
identical with the “measurement” of games like billiards and cards.
Chips and counters are the money of card games, i.e., they are used to
indicate the number of points won by each party, just as sovereigns and
one-pound notes are used to indicate in numbers of pounds, one’s
winnings or earnings in trade and industry. These pounds merely
represent certain fractional proportions of the wh*** of our national
wealth. That the function of money is to enumerate or count is shown by
the fact that in all financial and trade dealings where money is
concerned the only question that arises is, “ How much money ? ” One
never hears such a question as “ What degree of value is your commodity
worth ? ” or “ What quality of money do you require for such an article?
” Even where different kinds of money are in circulation, if there
exists any preference for one kind over another, such as gold or silver
over paper, or paper over gold coins, such choice is due to special
circ**stances, to convenience or the requirements of foreign trade where
paper has no legal-tender powers. If a difference in value exists, it
is indicated numerically, i.e., one kind will be quoted at a discount
compared with another. There is no such thing as degree or quality in
exchange-value. Chips and counters are no better indicators for being
made of gold and silver than if made of bone or ivory. Similarly
money—legal tender—performs the same functions whether made of gold,
silver, paper, or tin. By confining legal tender to gold, all we do is
to make our counters unnecessarily scarce and costly. And by so doing
we burden our trade, limit our output of wealth, and make ourselves
poorer than if we used something less costly and less scarce. We have
seen that the inevitable results of establishing a commodity standard
are : (1) Variability in the money unit, so that prices and debts are
made to fluctuate with the variations in the supply of and demand for
the money commodity. (2) The exchange-values of all other commodities
are falsified from time to time by the intrusion of the standard
commodity’s own value, which takes the name of prices, and the
industrial and trading cla**** are continually defrauded.
We have seen that, scientifically speaking, the “pound” is not as our
laws define it, although Sir Robert Peel’s fallacious definition
provides the basis of our present dangerous and irrational banking and
currency systems. This fallacy has cost the British nation untold
millions, not merely by the taxation which it has inflicted upon all our
industries, trade and commerce, as well as by increasing our national
obligations, but chiefly through its limiting the amount of our annual
production. It is estimated that every rise in the bank rate of 1 per
cent. costs the industrial and commercial cla**** from £60,000 to
£100,000 per week in increased interest charges on loans ! No form of
oppression can be more intolerable than for a Government to first
establish the legal necessity for an article and then fail or refuse to
provide an adequate supply of it. This, however, is a description of
most of the world’s legal-tender laws. Its results are shown in the
annual record of bankruptcies, suicides, lockouts, strikes, and
industrial disputes. Sir Robert Peel made it doubly oppressive by
making gold our sole legal tender for sums over £2, and refusing to
allow the issue of one-pound notes. The inevitable tendency of this
legislation was to thwart enterprise, to drive the small producer out of
business, to concentrate industry in the hands of the wealthy cla****,
in short to enrich the wealthy and to weaken the middle and poorer
cla****.
We have also seen that the gold standard imposes an elastic monetary
unit which functions as a fraudulent measure of wealth. Natural
conditions alone, such as fresh gold discoveries, the failure of
existing sources of supply and the variations in demand due to the
growth of population and trade, are sufficient to create serious
fluctuations in the value of the standard. But added to these natural
causes are the variations produced through the creation and cancellation
of vast sums of national and bank credit which function as currency
from time to time, and affect the purchasing power of money just as the
issue and distribution of so much legal tender would do. And when we
remember that a considerable proportion of all this currency is
controlled by a few international banking firms whose interest it is to
cause periodically these sudden fluctuations in the purchasing power of
money, we can get some faint idea of the unfortunate position of the
trading and industrial communities. Some years ago a well-known United
States Senator, speaking of the unlimited power in the hands of a few
New York bankers, made the following announcement. He said :—
“ There are fifty men in the City of New York who can in twenty-four
hours stop every wheel on every railway, close the doors of every
factory, lock every switch on every telegraph line and shut down every
coal and iron mine in the United States ! They can do this because they
control all the money of the country. The control of money gives its
possessors absolute power over a nation’s industries.”
A somewhat similar condition exists in this country to-day. The Bank of
England—which, bear in mind, is a privately owned and controlled Joint
Stock bank—with about twelve other joint Stock banks, practically
control the entire currency and credit of Great Britain. Walter Bagehot
once wrote (Lombard Street) :—
“ All our credit system depends upon the Bank of England for its
security. On the wisdom of the directors of that one Joint Stock
company it depends whether England shall be solvent or insolvent. This
may seem too strong, but it is not. All banks depend on the Bank of
England, and all merchants depend on some banker ! ”
It speaks volumes for the comparative honesty of British bankers as a
class (compared with those of other nations) that they have, generally
speaking, so moderately used the enormous powers which privileged
legislation has placed in their hands. But it must be remembered that
they are members of a larger circle of cosmopolitan financiers who
operate in all countries and are not troubled by the scruples of most of
our British bankers. And who is to ensure a continuance of this policy
of moderation ? And what is to prevent our bank shares from falling
entirely into the possession of a syndicate of unscrupulous cosmopolitan
financiers, amongst whom the Hun banker is notoriously conspicuous ?
Bank shares are purchasable with money. Imagine the results, if the
bulk of these shares fell under the control of some foreign syndicate,
whose policy might be to destroy British commerce !
Currency, whether legal tender or bank cheques, is a social instrument.
No man or group of men, outside the halls of legislature, can create a
nation’s currency. This requires the confidence and consent of the
trading public. It is the public, and not the bankers, who give
currency and therefore value, to paper and credit. The refusal on the
part of the industrial and commercial cla**** to accept any particular
instrument in exchange for their commodities, would render any
instrument useless for currency purposes.
We have also seen that nearly 99 per cent. of our trade and commerce is
transacted by means of bank credit, and most of this bank credit is
issued against the wealth belonging to the public. As Sir Edward Holden
says, “ Loans create bank credit.” Hence it follows that bank credit
is, properly speaking, the property of the public, although our
Governments have always permitted the banks to charge the public for its
use. On the other hand, it has been shown how an invariable unit can
be established without altering our present monetary denominations. The
one-pound unit can be made stable by a very simple alteration in our
banking and legal-tender laws. All that is required is to repeal the
Bank Charter Legal Tender Acts which have made gold the sole legal
debt-paying commodity, and establish the one-pound Treasury note as the
unit. Simultaneously with this, the banks should be compelled to issue
bank credit to all those demanding it who are willing to pledge
productive wealth to an amount which will allow for all possible
variations in the values of such wealth—say 50 per cent. of its
appraised value, to be repayable in definite yearly proportions as may
be agreed. There should be a definite Government issue of Treasury
notes based upon the national credit, equivalent at least to the annual
sum required by the Government for its support, for pension purposes,
and interest on the National Debt. Since the Government must collect
taxes in the form of legal tender, it must necessarily first provide a
sufficiency to enable taxpayers to meet the Government demands. The
most convenient price-level consistent with political and industrial
ante-war conditions would have to be pre-determined. This level would
be obtained by the issue of Treasury notes sufficient to reach that
level. Here it may be pointed out that this level will of necessity
have to be not lower than it is at present. The nation cannot go
through an era of industrial stagnation and starvation in order to reach
a lower level of prices merely for the benefit of bondholders and
moneylenders !
Much has been said of late about high prices due to inflation of the
currency, but, as pointed out in the chapter on this subject, it would
be difficult to carry on a great war in which a nation must devote its
wh*** energies to producing munitions of destruction without inflation.
If we were to employ slave labour as Germany is doing, inflation might
be avoided to a certain extent, but not otherwise. The Government is
compelled to buy its munitions. It cannot very well steal them. It
buys with its credit and the proceeds of taxation. To pay wholly out of
taxation the Government would have to impose an all-round tax of twenty
shillings in the pound. In other words, we should all have to work
without food and other necessaries which, as Euclid would say, is absurd
! Hence the Government must pay from loans and credit. Having
acquired the goods, our armies proceed promptly to destroy all this
wealth, but the debt naturally remains in the form of promises to pay,
which are divided into floating and funded credits or debts. Hence our
national labour merely creates a void which is represented by so much
credit (or debt). If we were all similarly engaged in producing wealth,
if we were building up towns and increasing and improving our
agriculture instead of destroying them, all this credit or money now
being spent would be represented by wealth and the inflation complained
of would not occur.
Having selected our monetary unit, we have demonstrated that the
maintenance of its stability and invariability is entirely dependent
upon a sufficiency of the money supply. What material the “ pound ”
should be expressed by is altogether of minor importance. The main
question is : How can the supply of pounds be kept always equal to the
demand ? And the selection of the material should be governed entirely
by this consideration.
In his history of Europe, Sir Archibald Alison tells us that the “
thousand-year night,” commencing with the break-up of the Roman Empire
about the sixth century, was largely due to the loss of the precious
metals which created a dearth of currency. And as no other currency was
possible at that period of European history, trade and industry
dwindled and decayed and mankind sank into universal poverty and misery.
With the discovery of America, and especially the great silver mines
of Potosi, trade, enterprise and production were quickened and the great
awakening known as the “ Renaissance ” began. Whether the Renaissance
was the cause or the result of these discoveries need not trouble us.
What is indisputable is the fact that the condition of trade does depend
very largely upon the supply of currency. A deficiency of money
invariably brings industrial crises, bankruptcies and depression, whilst
an abundance tends to encourage and stimulate both trade and
production. And this brings us to the crux of the wh*** question. The
value of the “pound” depends far more upon our banking mechanism and
administration than upon the weight of gold in a sovereign ! And to
establish an invariable monetary unit without some arrangement or
general control of our entire banking business, would be equivalent to
attempting to define the standard capacity of a railway truck or car
necessary for the transportation of so many thousands of tons monthly,
without considering the number of such cars or their speed. It appears
to me, therefore, that it will be difficult to satisfy the legitimate
currency needs of this country on any just basis unless we nationalize
the wh*** of our banks. Consideration of this subject from every
standpoint, patriotic, scientific, commercial, economic, points
conclusively to the necessity for nationalizing the banks, and as
speedily as possible.
Its accomplishment would be far simpler and cheaper than the
nationalization of either our land or our railways. Let the Government
purchase the shares of our banks by an exchange of War Loan certificates
at a just valuation. This would involve no injustice to bank
shareholders, whilst it would give the nation a vaster mine of wealth
than all the gold mines of Africa and America combined. By taking the
banks as running concerns with their present efficient staffs, the
transfer would occasion no difficulty or interference with trade. On
the contrary, it would enormously improve our industrial outlook.
Today, the average bank manager occupies a difficult and often an
unpleasant position. He must obey the instructions of his head London
officers, and these instructions are not always acceptable to his
clients. Instead of catering to the public welfare and interests, he
has to think only of the wishes of his directors and shareholders. His
promotion often depends upon his ability to secure deposits and transfer
to London as much money as possible. The policy of the great London
bankers is similar to that of the bankers of New York and Chicago—to
draw as much money to headquarters and leave the provinces with as
little as is consistent with the continuance of trade. This enables the
banks to make large loans to those who can pay the most. How
disastrous this policy has been in the past may be seen from the
financial plight in which we were placed prior to the war. Millions of
pounds belonging to British depositors were loaned to German bankers,
and the money remains in their possession at the present time. Many of
our enemy’s enterprises which have driven British industries out of the
running have been financed by loans of British credit by London bankers !
Percentage has hitherto ranked in the eyes of many of our money
merchants above patriotism. If the Germans wanted a railway to Baghdad
or elsewhere, no matter what their political motives might be, they
could always come to London and get the accommodation they needed (which
was often refused to British merchants and engineers) so long as they
paid the rate demanded ! As to what took place prior to the war we have
already seen in all earlier chapter.
How many of our manufacturers, farmers, merchants, and traders, how many
of our former industries have been sacrificed in the temple of usury
for the maintenance of our “ good, sound, honest ” banking system, i.e.,
to enable our banks to maintain their large dividends ! I do not
altogether blame the bankers. As a class they are, according to their
light, probably as honourable as any other class of the community. But
they are both conservative and selfish, and it is perhaps only fair to
add that they are often quite innocent of the injury their system
inflicts upon their fellow-countrymen. The banker is what the system
has made him. And probably no one would derive greater benefit from the
nationalization of the banks, so far as his own mental development is
concerned. To realize that his work henceforth is to be for the
exclusive benefit of his own country, that instead of scheming to make
profits for a comparatively small group of shareholders, instead of
having to take part in “ holding up ” production as he is sometimes
forced to do, he would be working hand in hand with the wealth creators
of the British Empire, building up its trade and industries, surely such
a prospect would be worth his striving for ! To-day, our monetary and
banking Acts block the path of our national progress, and must be swept
away with many other antiquated obstructions which, beyond a certain
archaeological interest, are of no national benefit whatever.
The greatest indictment against the gold standard is its alliance with
usury (i.e., payment for use)—the most destructive principle in the
economy of any society. It is one of the amazing paradoxes of economic
science that the instrument established for facilitating commerce should
prove its most fatal enemy. Under our legal-tender laws gold is said
to facilitate and encourage trade and industry. But the interest system
which it fosters tends to burden and destroy them. It was pointed out
by Aristotle more than two thousand years ago that money was
unproductive. For this reason the taking of interest was forbidden by
every religion and by every moral teacher from Moses to John Ruskin. It
was forbidden by the Roman Catholic Church down to the eighteenth
century. It is still forbidden by the Mohammedans. Its maintenance
here and elsewhere is due to State-granted monopolies and privileges.
And yet our entire economic and social systems are built upon this false
principle. The system of interest is impossible for any very large
amount and for any long period, for the reason that interest charges
tend to grow faster than surplus wealth. From the returns of industry,
sufficient wealth must first be given to the prime factors, to labour,
capital and land, to repair wastage and maintain their productive powers
so as to ensure future production. After allowing for all this and for
the maintenance of the State, for the care, nourishment and education
of each coming generation, it will be found that the balance left is not
sufficient to pay interest charges even at the rate of 5 per cent. on
more than a comparatively small proportion of the national capital. The
result is that the amount of capital that can be employed is
necessarily limited by the rate of interest prevailing. Some writers,
with a taste for sensational figures, have given us examples proving the
impossibility of satisfying the claims of interest by showing the
results of a five per cent. investment at compound interest. Proudhon
showed that if a man in the reign of St. Louis had left 1,000 francs on
interest at the rate of 5 per cent., with instructions that this
interest should be reinvested at the same rate at the end of each and
every year and the accrued amount should be divided among the French
people in the year 1840, the total sum would have far exceeded the wh***
wealth of Europe ! A recent American writer has also figured out that
if Mr. Rockefeller will leave his wealth in trust at a similar rate of
interest to acc**ulate for the benefit of American posterity five
hundred years hence, the amount accruing will suffice to pension off the
entire population of the United States, allowing for its natural
growth, with an income for each person of one million dollars per annum
for ever !
Our monetary laws have eclipsed even the laws of nature, for they have
conferred the life principle upon inert matter. Nay, more, they have
conferred the boon of immortality upon an unproductive metal. A chunk
of gold which an ordinary workman can carry on his shoulders, which
takes no part in production nor adds one iota to the general wealth,
comfort, or happiness of mankind, and which, for all the use it is,
might as well have remained in the bowels of the earth, will buy his
life’s labour six times over, even if he managed to outlive Methuselah !
It is more valuable to its owners (thanks to these laws) than the
labour of six men for all time—so long as the present system is
maintained ! The gold represents the equivalent of this amount of
economic power exerted so long as these infamous laws and the gold
superstition exist. The gold produces nothing, but it gives its owners
the legal right to purchase, to pay debts, and enables them to exact a
tribute from wealth producers year after year during their lives and of
their descendants for ever ! The principle of usury continues to
operate, however, only because it is confined strictly within limited
amounts and limited periods. But even with these limitations it entails
widespread poverty on the ma**** of the world’s producing cla****.
Single taxers and land reformers, who see in the monopoly of land the
cause of all social misery, should sit down quietly and make a simple
comparison of the total amount of our annual wealth production paid in
rent of land with that extorted in the shape of interest on loans and
capital. For the monopoly of credit not only determines the rate of
interest on all capital, but it is the chief cause of such interest !
And since the gold standard is at present the one factor limiting the
issue of credit below the needs of all industrial communities, and
preventing the free mobilization of wealth, it follows that it is also
the cause of interest.
The wh*** currency and interest problem is to-day merely a question of
insufficiency— of an inadequate supply. The supply should be regulated
by the demands of industry and commerce, not by the precarious and
accidental discoveries and production of gold. The industrial and
social needs of the world after the war, will necessitate the complete
abandonment of our present financial and banking ideas and methods.
Deposit banking will not suffice for the financial needs of industry.
The theory that trade and production can only be properly financed by
the surplus idle wealth of individuals, will also have to be scrapped.
Cheap money and credit facilities will be imperative in order to save
the world—and Europe especially—from a degree of misery and starvation,
such as has never been witnessed. Taxation alone will require such an
amount of money as we have never yet been accustomed to.
Again, it is probably not realized that the excess profit tax will wreck
hundreds of our industries unless ample credit facilities are furnished
by the banks or the Government. In the majority of cases, profits are
shown by an increase in machinery, tools, plant, stock, material, whilst
taxes are payable in legal tender. How are firms to pay these excess
profits unless the Government provides the necessary means for
mobilizing all this capital ? How is it possible for the nation to pay
£600,000,000 in taxes annually without crippling its industrial
resources, when the Government has only provided about one-third of this
amount for all purposes ?
No doubt, to the average reader, this somewhat tedious discussion
regarding values, standards, ratios, etc., will appear highly technical
and most uninteresting. A cursory glance over the preceding chapters
may raise the question, “ What does it all signify ? ” “ Who cares
whether exchange values are merely ‘ extrinsic relations ’ or ‘
intrinsic qualities,’ and how can it affect me ? ” The intelligent
business man, however, will realize as well as the financier, the
enormous importance of these seemingly unimportant questions. The
answers that the world’s moneylenders have been able to give to the
above questions in the form of banking and legal-tender laws, have
enabled them to gamble with the lives and fortunes of the industrial
cla**** in all countries, with the certainty of winning. These laws
made it possible for a man like the late W.H. Harriman, whose original
capital consisted merely of a seat on the New York Stock Exchange, to
secure control of thousands of miles of railway which were built and
paid for by other people ! They also gave to the late Pierrepont Morgan
greater economic power than was ever previously wielded by mortal man !
These same laws make it possible for a few men to acquire fortunes
overnight, to take wealth from those that have created it and give
nothing in return. It makes the producing and business cla**** the
pawns and playthings and their possessions the prizes of those who deal
in money and credit. Neither banking nor money-lending creates one
solitary grain of wealth, and yet the men in these professions
invariably grow rich, and often fabulously so. Where does it all come
from ? From the labour and sweat of the ma**** ! These laws have made
our economic system topsy-turvy. They have placed non-producers at the
top of our social scale and the producers at the bottom. They have made
the most useless and least important commodity the most valuable,
whilst the things that are indispensable have been treated as of the
least importance. The banker who has spent his wh*** life in the sole
pursuit of enriching himself at the public expense is ennobled by being
raised to the Peerage, whilst the farmer, the inventor, the
manufacturer, the distributor, whose labours have benefited and enriched
the wh*** nation generally, die neglected, unknown or forgotten. But
the war is exposing this system of false values in a manner hitherto
undreamt of. It is now the worker, not the idler, the wealth producer,
not the wealth grabber, the fighter, not the shirker, the patriot, not
the pacifist, who are in demand. These are the men whom the nation will
delight to honour.
Let us then get rid at once and for ever of all our false ideas,
principles, laws, systems and institutions under the sheltering care of
which the useless and costly drones of humanity have hitherto
flourished. We are endeavouring to destroy the greatest foreign
despotism that has ever existed. Are we to permit the continued growth
of a despotism in our midst far more insidious and equally dangerous ?
There is none more cruel, more intolerant, more soul-destroying or more
universal than the money despotism. It exists in all lands, and its
results are the same everywhere. Its policy is to enrich the wealthy
and enslave the poor, to divide society into two antagonistic cla****,
and to establish and perpetuate everywhere and in every department of
life the money standard. It is the most degrading, the most corrupt
ideal ever presented to mankind. It is destructive of everything noble
and praiseworthy in human life and character. And its power and
maintenance depend entirely upon two or three Parliamentary Acts. The
remedy is therefore to repeal them. The Bank Charter and Legal Tender
Gold Acts must be annulled. We must nationalize the wh*** of our banks,
and substitute Treasury- and bank-notes for our former gold currency by
issuing them against the national wealth. Finally, provision should be
made for the free mobilization of our exchangeable and productive
wealth by the issue of bank credit against such wealth as may be
required to meet the demands of trade and industry.
These measures would reduce gold to the level of other commodities, and
destroy the economic despotism which has grown up under the privileges
accorded it.
We have already discussed the question of the monetary unit or standard.
This would correspond to the purchasing power of the one-pound note at
the time the new system became established. And so long as the supply
of credit and legal tender were maintained equivalent to the demand, the
unit would remain invariable. Such results would completely change all
industrial and trade conditions. Accompanied by a land nationalization
policy, these measures would banish the speculative nature of
production almost entirely. They would enormously lighten the load of
the toiler. They would ensure larger returns to those who labour and
less for those who “neither toil nor spin.” They would vastly increase
the amount of our national wealth. They would destroy involuntary
idleness, and starvation would vanish from our towns and cities. They
would lead to harmony between capital and labour and put an end to
strikes and industrial unrest. They would enable the State to meet its
obligations and lighten the burden of taxation. The saving which they
would effect would be sufficient to pay all the interest charges on the
National Debt, and enable the nation ultimately to replace the National
Debt with a vast fund of National Wealth. Surely such a prospect is
worthy of the most serious consideration of all cla****.
As a final word, let me again warn the public to resist at all costs any
attempt on the part of the Government to re-establish a gold currency.
Such a measure will inevitably rivet the chains of industrial slavery
upon 95 per cent. of the population and their descendants for all time.
All that our armies are fighting for, viz., political and industrial
freedom, will be irretrievably lost, if the world’s financial despots,
among whom are the leaders of Germany, are permitted to gain control.
We shall have gained but little if, by destroying the Huns’ military
power, we fall beneath the sway of cosmopolitan finance.
============ =======
"Arthur Kitson's (1860 – 1937), the inventor of the vaporized oil burner
which had the effect of increasing, by power of six times, the
illumination fromlighthouses, shined a bright light on the dark
machinery of the money and banking system. He became quite wealthy from
his patented invention. Not one to rest he next wrote the books that
helped launch a national monetary debate in England. Kitson regarded the
Money Power as the chief cause of the world's economic evils and
misery. Noble Laureate Frederick Soddy (1877- 1956) dedicated his major
work Wealth, Virtual Wealth and Debt to Arthur Kitson, calling him the
doyenne (elder spokesperson) for monetary reform. Why was Kitson so
highly regarded in his day? What was the sound standard Kitson
recommended to replace the fraudulent (gold) standard? How different
would the world be today if only we had attended to the works of the
British monetary reform movement?"
Preface
http://yamaguchy.
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Introduction
http://yamaguchy.
netfirms. com/7897401/ kitson/fraud_ 01.html
Great Crisis
http://yamaguchy.
netfirms. com/7897401/ kitson/fraud_ 02.html
War Loan
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Exchange Value
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Determines Values
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Variability Gold
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Peel Fallacy
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Functions of Money
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Invariable Unit
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Money Supply
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People’s Credit -- see above
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War Financed
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Free Trade
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Summary
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No-Money Island
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public servants
The exchange works directly for state and public workers and servants. It gives them credit in exchange for the amount of public work they contribute to the community. The more constructive they are based off a base rate the more credit they recieve.
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