Gerry McGeer was a Canadian lawyer, politician and monetary reform advocate who served as the mayor of Vancouver, British Columbia, during the tough times of the Great Depression, and later as a provincial MLA, a Federal MP and, finally, as a Senator in Ottawa.

A keen student of economics, he became convinced early in his career that only monetary reform could solve the problems of the Great Depression but he was constantly thwarted in his lifelong mission to attain a powerful enough political position to implement his banking and monetary reform ideas.

Immensely popular for his stand against Big Money, his fiery oration skills and passionate tirades against bankers and the banking system made him especially popular during the Great Depression.  He regularly lectured to packed houses across the country and became one of the most forceful voices in the country advocating government intervention in the monetary system. He was greatly influential in the nationalising of the Bank of Canada. He saw this as a means of providing free- or low-interest loans to governments  for the building of public assets, but learned to his chagrin that public ownership of the Bank’s shares meant little unless the elected Parliament, via the Finance Minister, could exercise their Constitutional rights. 

Instead, private bankers hijacked the centralised money system via a series of Bank Acts that transferred to them the right to create and control the nation’s money and credit. What followed - the ‘legal’ creation of leveraged fiat money, the gradual removal of all reserve requirements, the sale of Canada’s gold reserves and the rescinding of the Usury Act  -set the stage, over time, for the disastrous state of Canada’s economy today.

Gerry McGeer’s monetary reform ideas are most fully elaborated in his 1935 book, Conquest of Poverty.  Fortunately this work is not lost to us  It’s as fresh and as relevant now as when he penned the words in 1934 and the first chapter appears below. There is much that we can learn from his writings as we head pell-mell toward an economic melt-down of global proportions.


The Conquest of Poverty by G.G. McGeer


Democracy or Money Power
Financing War

Just twenty years ago the governments of the leading nations of the world were confronted with the problem of financing a war, the cost of which mounted in four short years to the fabulous sum of roughly $400,000,000,000 in direct governmental expenditures and an additional $400,000,000,000 of loss due to the destruction of property and the curtailment of productive activity.**  When the World War commenced, many laboured under the delusion that it would be of short duration and that it would not continue indefinitely simply because of the fact that its cost would by far exceed all the money in existence.  No one ever dreamed that all the money that might be required could be created, no matter how long the war lasted.  Now, as it turned out, the longer the war continued and the greater the expense grew, the easier the problem of financing the cost became.

During the war period some 65,000,000 men were mobilized as combatants, and all were carried on governmental pay-rolls.  Another army even greater in numbers was engaged in producing army supplies and war materials;  yet there never was any shortage of money to meet the current cost that the maintenance of the World War involved.  For a period after the war was over prosperous times continued.  Eleven years after the Armistice was signed and just four years after the gold standard was re-established in Great Britain the world’s most tragic economic depression commenced.  From one end of Christendom to the other, governments acknowledged bankruptcy.  Debt repudiation became the general order of the day.  Huge armies of unemployed and destitute workers appeared everywhere and Democratic governments fell into a condition of pitiable impotency.  Strange, is it not, that while there was a plentiful supply of money for war, that with peace established a shortage of money should everywhere appear.

These somewhat unique monetary and economic characteristics of the 20th century cease to present the features of a paradox once we appreciate that the moment war was declared the British Government immediately suspended the gold standard limitation upon the issue of money, and all governments immediately followed suit.  However, when peace was re-established, under the advice of international bankers, the gold standard limitations on the issue of money were restored by Great Britain, and other governments, believing in the infallible monetary wisdom of the British Government, adopted similar action.


Thus we see that the comparative shortage of money which we now suffer in peace time, as contrasted with the abundance of money which existed in war time, is due to a definite and specific change in monetary policy.  Obviously, since governments were able to increase the supply of money required to serve war needs they were, of course, able to reverse the policy in peace time so that the supply of money could be reduced.  These extraordinary financial results have been accomplished by the simple process of suspending and restoring the gold standard limitation on the power of government to create an issue money.  Surely, then, it is reasonable to conclude that if an abundance of money can be provided to finance war when the primary purpose of government is the destruction of life and the employment of large numbers of people in the destruction of wealth, there can be no good reason why there should be any shortage of the medium of exchange which is required to finance the production and distribution of wealth, the sustenance of life and the governmental employment of all who are available for work in the advancement of a cultural civilization.

The fact that an abundance of money was made available by a change in the monetary policy to promote the public enterprise of war proves that, under a sound monetary policy developed out of the knowledge gained from the experience of war-time financial policy, an equal abundance of money may be made available to promote the public enterprise of peaceful progress.  War-time and post-war financial policies prove that the control of currency and credit is a practical administrative function and that it is the most important and far-reaching of all the powers that come within the jurisdiction of modern government.

The monetary system should be recognized as the most important of all public utilities, because it is through the control and regulation of the issue and circulation of the medium of exchange that the economic blood-stream of the social system can be sustained.  Without money in circulation the law of supply and demand, as we know it, cannot function.  The administration of the monetary system, therefore, should be recognized as the most conspicuous and sacred responsibility of government.

The Law of Supply and Demand

The law of supply and demand is a fundamental law of nature.  It is commonly referred to, but, like money, its real meaning and true purpose are little understood and less appreciated.  Of course, everyone is subconsciously aware that no one can survive who does not eat, drink, shelter the body and throw off the waste or residue of the materials required to sustain life.  Life, therefore, is dependent upon the unceasing repetition of a three-point cycle of activity based on consumption, destruction by use and replacement.  The inherent and instinctive power which the desire to live creates, establishes the assumption that the demand for life’s requirements will always be satisfied by human intelligence from whatever available supply there is of life’s necessities.

So long as materials essential to the sustenance of life are available, the demand to live will be certain to secure from such supply the needs of life.  It is from these facts that the law of supply and demand is developed and from them emanates the assumption that it is inexorable.

Now the operation of the law of supply and demand, in serving the three-point cycle of existence, viz., the cycle which involves the creation of the supply of life’s necessities, the destruction of them by consumption and use, and the replacement of wastage thrown off, is somewhat different to the operation of the law of supply and demand which comes into play when the three-point cycle of existence is expanded into the three-point cycle of progress.

Human progress, in a social sense, is obviously dependent upon man’s ability to increase the supply of necessities of life into abundance and to extend that supply so that it will include, along with necessities, the comforts and conveniences that make up the amenities of life.  In addition to that, all these things must find effective distribution in human service.  Progress, therefore, is dependent upon the ability of mankind to increase the supply of real wealth, to destroy it by consumption and use, and to replace in increasing quantities all that serves effectively the needs of the human race.

Now, in considering the effect of the law of supply and demand in relation to human progress, it should be recognized that the demand for general progress is not possessed of the same power that supports the desire of all to live;  consequently, in the realm of progress, the law of supply and demand loses something of the inexorable power it possesses when functioning to sustain life.

As we shall see, while progress is dependent upon the demands of the human family for necessities, comforts and conveniences being satisfied out of whatever supply may be available or realizable, it is possible to interfere with this law so that progress may be delayed, notwithstanding that both supply and demand exist.  An improper or defective administration of the monetary system does, as we shall prove, produce this evil result, but let us first examine the part that money should play in helping the law of supply and demand to function.

During the course of civilization’s progress, mankind has moved from a condition of natural existence, when life’s necessities were supplied by nature and the business of living was purely an individual enterprise, until to-day, when individualism has ceased to exist and life itself is now dependent upon collective effort.  When advancing intelligence made life more secure and a more comfortable and convenient living possible, a demand was created for a medium of exchange.

Money was invented to satisfy this demand.  It is, therefore, a simple tool of trade, man-made and man-controlled.  It was invented to assist the law of supply and demand to function in the realm of progress.  Primarily it should serve the purpose of assisting unlimited numbers of people in creating and distributing wealth in human service through an effective division of labour and intelligence.

If money is to serve the purpose for which it was invented, viz., that of a tool of trade assisting in the creation and distribution of wealth, it must be created, issued, circulated, cancelled and re-issued so that it may serve the purpose of creating, using and replacing the wealth that is essential to the sustenance of life and the maintenance of progress.

Like water in an irrigation system, money must be circulated in the social system as the means of sustaining the production and development of life’s needs.  Going concern activity and going concern values are, therefore, dependent upon the effective circulation of the medium o£ exchange in common use.  Money used in this way is a God-given invention that constitutes mankind’s greatest creative opportunity.

Unfortunately, money is not controlled and managed to serve as a tool of trade aiding in the creation and distribution of wealth, the purpose for which it was invented.  To-day it is primarily controlled and used for the purpose of acquiring wealth.  Under the private money system, the medium of exchange has been perverted into a dangerous instrument of appropriation.  The private money system has changed it from a simple tool of trade into a power that negatives the law of supply and demand, and appropriates to the service of the few the entire wealth-creating power of modern civilization.

The power to create, issue and circulate the medium of exchange, which should be recognized as the supreme prerogative power of government, now forms the stock-in-trade of the business of our super-banking system, which functions as the servant of usury in the realm of high finance.

Under the powers enjoyed by our super-banking structure, the medium of exchange is employed by a powerful and well-organized minority to place humanity in slavery to the financial community.  In employing money in this misguided purpose, the medium of exchange, which should function as the economic power carrying the supply of available and realizable wealth to the service of the demands of progress, does the very opposite.  Employed as an instrument of appropriation in the service of the few, its operation under the private money system prevents the law of supply and demand from serving in the realm of progress.  Instead of there being an abundant supply of the medium of exchange circulating to sustain progress, a shortage of the medium of exchange is deliberately maintained with the result that progress is denied.

No factor has played so great a part in this unfortunate development as that of the gold standard.  The gold standard, considered by many to have been a security for social, economic and international progress, was, in fact, an effective deception.  It was designed to prevent governments exercising their power to issue currency as a medium of exchange serving human needs.  By its operation, the power of government to issue a medium of exchange in adequate quantities to sustain progress, was eliminated.  The production of gold, and not human needs, fixed the volume of national currency in issue.  The supply of gold, as this depression has compelled us to realize, bears no relation whatever to the capacity of the people to create and distribute wealth in the service of mankind;  consequently the monetary laws, which establish the gold standard money system, negatived and made inoperative the law of supply and demand.

Thus we see that in the realm of progress the law of supply and demand is not inexorable.  The depression which the private money system has produced is, therefore, neither novel nor unique.  It is the normal and natural result that has always followed when government has delegated a power, which it alone should exercise for the benefit of all to a monopoly -which is authorized to use that power as a means of exploiting the multitude in the service of a privileged few.  Fortunately for humanity, such monopolies are always blind.  Dominated by greed, they invariably sow the seeds that produce their own destruction.

The private money system having secured the power to limit the supply of money so that all—government, corporation and individual—would have to borrow at interest, proceeded to pyramid interest-bearing obligations into a mountain of unpayable and inextinguishable debt claims.  The private money system having thus made progress impossible, it must now give way to a governmental administration of the monetary system.  All are now agreed that the indisputable causes of want in the midst of plenty are due solely to the fact that government, at the behest and on the advice of the private money system, has set up and maintained monetary laws which have made the wages of money superior to the wages of men.  The operation of the gold standard, combined with the unbridled power to exact usury, has been established as a sacred privilege of the lovers of money, while the right of mankind to progress has been sacrificed to the maintenance of the pagan rite of usury.

It is the purpose of this treatise to show that the existing monetary system is a managed one and further that the management of the monetary system can be easily changed from an institution which threatens the destruction of civilization into one of enduring service to human progress.

Money, A Tool of Trade

I appreciate that the greatest difficulty that the ordinary individual has in understanding money lies in the fact that many pre-conceptions must be repudiated.  The idea commonly accepted that money is a strange and mysterious institution must be abandoned.  In truth, money is one of the simplest and most easily produced and managed of all the innumerable tools of trade used in modern trade and commerce.  And this is true notwithstanding all the superficial wisdom that pours forth from our so-called academic economists, who constitute a group who know more that isn’t so, than any other group of “snootocrats” that our modern educational system has produced.  As metaphysicians they are marvellous.  Their outstanding achievement is to glorify the absurd and the impossible and to “snoot” hilariously at realities and the simple things that constitute the real foundations of economic progress.  The academic economist, of course, is cheered on by the oligarchy of Money Power when he assumes that the understanding of money involves great achievement in the most complex and perplexing of all the realms of science.

This is so because the bankers and financiers are fully aware that they could not co-operate without the sheltering and concealing power of the facade of mysticism that the academic economist throws over the entire monetary system.  Were it not for the fact that most of the important monetary transactions are concealed from public gaze, the private money system would have been abolished long before now.

In the very nature of things, money must forever remain a simple institution.  In the operation of a banking system, bookkeepers can be employed, but there is no employment available for mathematicians or scientists.  Of course I differentiate as between scientists and tricksters, for it cannot be denied that bankers and financiers have perfected and employed, as the very basis of their success, the doubtful art of legerdemain.  As a group of men who have developed the capacity to trick and fool humanity, they have acquired marvellous efficiency, but that does not entitle them to be accepted as men of science.

Their efficiency as magicians may be inferred from the fact that they have been able to develop in the mind of the public the absurd conclusion that money is a difficult thing to understand.

A Penny

This conclusion is amply justified once we realize that when a child uses a penny or a copper cent to buy a stick of candy, every law, principle and rule of procedure and practice involved in the creation, issue, circulation and use of money is involved.  No variation of principle comes into play with an increase in the value of a monetary transaction.  When a child uses a copper cent to purchase a stick of candy the child does everything in the way of using money that is involved when a corporation purchases a million dollars worth of assets.  The only difference in the two transactions is in the number of pennies used.  When a copper cent performs the function of transferring property in the form of candy to a child from the storekeeper, everything that is involved in the creation and use of money is included.

Base Coins

Now I have already mentioned that money is a simple tool of trade, and I wish to add that its creation is equally simple.  All money, whether it consists of metal coins, paper currency or bank deposits transferred by cheque, is created by the acts of men who are authorized by law to perform certain simple physical operations.  There is, therefore, nothing strange or mysterious about the creation of money.  When, for example, a government passes a law which says that 50 grains of copper, tin and zinc minted in a certain way constitute 1/100ths of a dollar or 1 cent, the government creates money out of nothing but its power to pass laws, the money value of 50 grains of copper, tin and zinc being infinitesimal.  The market value of the metal in the 1 cent coin has nothing whatever to do with the money value that the coinage law gives to the metal when it is developed and issued as a 1 cent coin.

Silver Coins

Similarly is this so when the government creates a silver dollar.  When the government declares by law that 371 grains of silver in the United States or 360 grains of silver, 8/lOths fine, in Canada, minted in a certain way, shall have a money value of 100 cents or $1.00, the government creates silver money by passing a law.

Everyone knows that there are 480 grains of silver in an ounce, and that the price of silver per ounce has fallen to as low as 26 cents.  Even at its present governmentally-fixed price of 50 cents an ounce, the silver content in a silver dollar is worth roughly 38 cents.

If 371 grains of silver were worth on the market 100 cents, silver would have a value just under $1.30 an ounce.  Therefore, the government, by declaring the weight of the metal in a silver dollar to be roughly ¾/ths of an ounce, and by fixing the price of silver at 50 cents, creates with every silver dollar minted 62 cents of money value out of nothing but its power to pass laws.

Paper Money

The general use of paper currency in the form of silver certificates issued by the United States Government as full legal tender money, constituting printed promises to pay to the bearer of the silver certificates on demand silver dollars up to the face value of the silver certificates, prove that the Government of the United States does create and issue metal and paper currency having money values based on nothing but the power to pass laws.  The privilege of redeeming on demand paper silver certificates in silver dollars worth only 38 cents is a pure fiction because no one will ever exercise that privilege.  It has, in fact, nothing to do with the currency value of the silver certificate as money.  The silver dollar and the silver certificate would be just as effective as money if silver were reduced to 1 cent an ounce or to nothing.  What is true of American silver coins and American paper money is equally true of the metal and paper money of every other nation.

The fiction that the value of paper currency issued under governmental authority as legal tender money depended upon its convertibility on demand into gold, was completely wiped out by the British Parliament in 1925, when a law was enacted under which the paper pound sterling ceased to be convertible into gold but remained the only full legal tender currency of the British nation.  The fact that the pound sterling not convertible into gold became more valuable than it was when England was on the gold standard and the pound sterling was convertible into gold, relegates gold as the basic security for national paper currency to the mythological relics of the age of the ox-cart and hand labour.

Now, as a further demonstration of the ease with which the government may create and issue money by passing laws, our paper currency offers an excel lent illustration.  When we examine a $1.00 and a $10.00 paper currency note, we find that the only difference is in the printing on the bills.  The paper itself is valueless.  However, when the government declares by law that one piece of paper printed in a certain way shall have a money value of $1.00 and a similar piece of paper printed in another way shall have a value of $10.00, the government creates by law a difference in the money value of such pieces of paper equal to $9.00.  If we make the contrast between a $1.00 and a $50,000.00 bill, we again find that while the difference in the two pieces of paper is merely a matter of printing, the differentiation in the buying power of the pieces of paper is 49,999 real dollars.  This is so merely because the governments pass currency laws which declare that pieces of paper printed in a certain way shall have the money value designated in the terms of the printing.  It is in this way that governments can create money at little real cost to the government.

Cheques and Bank Deposits

The consummation of monetary transactions in 1929 in the United States by cheque totalling $983,000,000,000 and proportionately similar amounts in Canada and Great Britain by the use of cheques transferring bank deposits, which are in actual practice convertible into neither gold nor money, proves that private banks authorized by law to operate can and do create credit entries in their own books which the bankers call bank deposits of money, and which, when transferred by cheque serve as an effective substitute for money.  Bank deposits transferable by cheque, however, are no less creatures of law than are the coins and paper currency which are issued by the government under the coinage and currency laws.  This is so because the banker can only create a bank credit substitute for money when he is authorized by the banking laws of the land so to do.  Obviously, what the government can authorize private bankers to do, the government can do itself in a national banking system.

The Creation of Bank Deposits

Prior to the war and even during the war period the public generally laboured under the delusion that all investment was limited to the accumulated savings of the people.  It was assumed that when government proceeded to borrow and invest capital in public enterprise so that the capital secured by government reduced the amount of capital available for investment in private enterprise.

War-time financing has proven this conclusion to be incorrect.  Such is the finding of the Macmillan Committee.  This committee was appointed by the British government to investigate the British monetary system in 1929.  It consisted of bankers, economists and industrialists and was presided over by a distinguished member of the English Bar.  Its report was filed on the 23rd of June, 1931.

Of this report Sir Josiah Stamp, a director of the Bank of England, has said :

“It is the best up-to-date text-book on economy yet published, and contains much that is not to be found elsewhere.”

The report states :

“For the theory that there is in any sense a fixed loan fund available to finance investment which is in all circumstances fully employed, or that the amount of the savings of the public always exactly correspond to the volume of new investment, is, we think, mistaken.  At one time some such view as this appears to have influenced British policy.  To a questionnaire from the International Labour Office in 1927 the British Government replied :

‘The decision taken by the Government at the end of 1925 to restrict grants for relief schemes was based mainly on the view that, the supply of capital in this country being limited, it was undesirable to divert any appreciable proportion of this supply from normal trade channels.’

“The Treasury White Paper was also capable of interpretation in this sense.  We gathered, however, from the evidence of Sir R. Hopkins that it would be a mistake to attribute this view to the Treasury at the present time.”

Since the war bank deposits have been much more carefully considered and analyzed than ever before with the result that the fact that bankers were able to finance loans and to create bank deposits by the simple process of making credit entries in their own books has been definitely established.  The following table discloses the increase in bank deposits during the war period in the countries named :

                         BANK DEPOSITS
                      (In millions of dollars)
             Great Britain              Canada        United States
1914 .......... 5,000                  1,000              18,000
1920 .........11,500                   2,400              37,000
Increase .....6,500                   1,400              19,000
                   130%                   140%              105%

Thus we see that during the war period the banks more than doubled the total amount of moneys alleged to be on deposit.

As we shall see a little later on, these alleged bank deposits are not supported by gold or cash.  The war-time increase in bank deposits was the result of the conversion of war contracts and war bonds into bank deposits through the operation of the bankers’ accounting system.  How then are these bank deposits built up? There is no mystery about it;  it is a simple problem in bookkeeping.  When governments, bond brokers and other individuals apply to bankers for loans, the banker fixes the securities to be hypothecated, the rate of interest to be paid and the date for repayment of the loan.  The banker does not, as is generally assumed, go into his vault and secure capital of his own or on deposit with him.  He has a much simpler way of financing a bank loan than that;  he merely makes a credit entry in favour of the borrower and he calls that credit entry a bank deposit of money.  Always representing to the borrower that he is lending money previously on deposit, the banker actually lends to the borrower the deposit which the banker’s loan creates.  Bank deposits are thus increased during the currency of every loan advanced and to the extent of that increase the liquid capital in the nation is increased.  Obviously, when war was declared in 1914 there was not enough money to finance its cost;  therefore, under the private money system credits were created in the bankers’ bookkeeping system to take the place of money.  The enormous war debts that have brought us to bankruptcy were financed by the operation of a bookkeeping system that produced profits for bankers and impossible debts for posterity.

The manner in which bank deposits are created by bankers was definitely and authoritatively described in the report of the Macmillan Committee.

Dealing with the creation of bank deposits the report says :

“Since the merchant banks as a whole maintain a cash proportion to deposits of from 10% to 11%, they are in fact able to increase their deposits by some ten times the cash created by the Bank of England.”

In a word, for every $10.00 of legal tender cash that the bank holds it is, under banking practice in England, able to create $100.00 in bank loans.  Thus we see that bank deposits are created and maintained without any regard to the ability of bankers to redeem them in legal tender cash and with no regard whatever to their ability to redeem them in gold.  The bankers assume that depositors do not want money and do not want gold;  therefore, they exploit the principle of trading short to the ultimate limit that public deception makes possible.

Dealing more specifically with the creation of bank deposits, the report states :

“It is not unnatural to think of the deposits of a bank as being created by the public through the deposit of cash representing either savings or amounts which are not for the time being required to meet expenditures, but the bulk of the deposits arise out of the action of the banks themselves, for by granting loans, allowing money to be drawn on an overdraft or purchasing securities, a bank creates a credit in its books which is the equivalent of a deposit.  A simple illustration in which it will be convenient to assume that all banking is concentrated in one bank will make this clear.  Let us suppose that a customer has paid into the bank £1,000 in cash, and that it is judged from experience that only the equivalent of 10 per cent of the bank deposits need be held actually in cash to meet the demands of the customers :  then, the £1,000 cash received will obviously support deposits amounting to £10,000.  Suppose that the bank then grants a loan of £900: it will open a credit of £900 for its customer and when the customer draws a cheque for £900 upon the credit so opened that cheque will, on our hypothesis, be paid into the account of another of the bank’s customers.  The bank now holds both the original deposit of £1,000 and the £900 paid in by the second customer.  Deposits are thus increased to £1,900 and the bank holds against its liability to pay out this sum (a) the original £1,000 of cash deposited and (b) the obligation of a customer to repay the loan of £900.  The same result follows if the bank instead of lending £900 to a customer purchases an investment of that amount.  The cheque which it draws upon itself in payment for the investment is paid into the seller’s bank account and creates a deposit of that amount in his name.  The bank, in this latter case, holds against its total liability for £1,900 (a) the original £1,000 of cash and (b) the investment which it has purchased.  The bank can carry on the process of lending, or purchasing investments, until such time as the credits created or investments purchased represent nine times the amount of the original deposit of £1,000 in cash.

The process is much the same when we remove the assumption that there is only one bank.  The credit granted by one bank may reach the accounts of customers in another bank.  There is thus established a claim by the second bank upon the first for cash, and the ability of the second bank to grant loans is improved insofar as that of the first bank is reduced.  Over the banking system as a whole, therefore, loans and investments made by the banks increase their deposits.  There is, however, a limitation on this process.  A hank which is actively creating deposits in this way will naturally find that a considerable part of the cheques drawn against them will be m favour of other banks.  It will thus lose part of its cash reserve to those banks and must proceed to limit its loan operations if its normal cash ratio is to be maintained.  In practice, therefore, no bank can afford to pursue a policy of creating deposits by making loans or investments which is much out of line with the policies of other banks.” (Sections 74 and 75 of Macmillan report.)

In 1930 Mr. A.S. Baxendale in his book, “Sane Currency”, described the bank deposit situation in England in these words :

“The forty-one banks (which can only meet cash liabilities up to about £300,000,000 in the improbable event of the Bank of England paying every penny of its reserve to them, and also provided they can pass off as legal tender the £22,000,000 of subsidiary coinage that we know they usually hold) have liabilities to their depositors amounting to £2,435,000,000.”

Here we see that trading short did not originate in the stock market nor is it confined to stock gambling.

The practice developed in England has been fully adopted in the United States.  This was placed beyond question by Mr. Carl Snyder, statistician of the Federal Reserve Bank of New York, in a public address he delivered to the Academy of Political Science on November 22nd, 1929, in which he said :

“That bank credit is created whenever a bank increases its loans or investments;  and this is added to a credit fund that turns over on the average possibly about twenty times a year ... and it is of no great consequence whether the deposits are labelled ‘demand’ deposits or ‘time’ deposits, or ‘government’ deposits.”

This opinion of Mr. Snyder was fully confirmed by ex-President Hoover during his campaign against hoarding.  Early in 1932 Mr. Hoover said :

“I am convinced that citizens hoarding currency or money do not realize its serious effect on our country.

“It diminishes the credit facilities by many billions.

“Every dollar hoarded means a destruction of from five to ten dollars of credit.

“Credit is the blood-stream of our economic life.  Restriction or destruction of credit cripples the revival and expansion of agriculture, industry and employment.

“Every dollar returned from hoarding to circulation means putting men to work.

“It means help to agriculture and to business.

“Every one hoarding currency injures not only his own prospects, and those of his family , but is acting contrary to the common good.  It is to their own interests that they should return it to circulation, as well as a patriotic service to the country as a whole.”

Now what Mr. Hoover was actually saying to depositors who had withdrawn their legal tender cash from the banks was that on every $200.00 of legal tender cash deposited with the banker, the banker could lend at interest from $500.00 to $1,000.00 of bank credit.  On the face of it this proposition is obviously a racket and an extremely vicious and dangerous one.  Hoarding was stopped and money was re-deposited with the bankers, but unfortunately there were no borrowers available who could pay the bankers interest for their fiction of money;  consequently the campaign against hoarding proved futile and valueless.  The depression continued and banks collapsed, notwithstanding the fact that the boarders re-deposited their money and in some instances lost it.

Thus we see by examining the records of monetary and credit statistics, on the authority of the Macmillan Committee report, Carl Snyder and ex-President Hoover, that bank deposits consist of a pure fiction of money manufactured in bankers’ books by the mere stroke of a pen.

It is in the light of these facts that the statement made by Sir Josiah Stamp, Director of the Bank of England, that :

“The main function of the gold standard is to set an outside limit upon the creation of money and credit to put it beyond the caprice of human frailty and political desires,”

is of the greatest significance.  What Sir Josiah says about the limitation of the issue of money does not apply to bank deposits.  He conveniently overlooks the fact that the banker creates a substitute for money, the issue of which is not limited by the gold standard and which is not placed beyond the frailty and unbridled desire of usury.

This latter proposition is now of the utmost importance because under modern credit practice gold and money have receded into the background of the monetary system.  Mr. George E. Roberts, Vice-President of the National City Bank of New York, and a recognized authority on the operation of the gold standard money system in the United States, clearly pointed out that fact by this statement :

“I have already said that gold has passed out of use as a circulating medium and venture to say that this inaugurates a fundamental change in the use of gold in monetary systems.  Gold is no longer required for any monetary use except as the standard of value, and for the settlement of balances, and the last statement may be limited to international balances.  Take notice of what a change this signifies from our old conception of gold as a reserve against all currencies and bank deposits in the minds of some persons;  even the basis of all private contracts and business;  in fact, business is not based upon gold in any such sense as that.”

These are the facts that justify and confirm the truth that John Maynard Keynes, the eminent English economist, declared in 1923 when he said :

“In truth the gold standard is already a barbarous relic.  All of us, from the Governor of the Bank of England downward, are now primarily interested in preserving the stability of business, prices and employment.

“If we restore the gold standard we will return to the pre-war conceptions of bank rate and allow the tides of gold to play what tricks they like with the internal price level, and we will abandon the attempt to moderate the disastrous influence of the credit cycle on the stability of prices and employment.”

Bank deposits unsecured by money or gold are therefore manufactured as a simple practice in accounting by bankers who are authorized by law to use cheques transferring fictitious bank deposits created in their own books to take the place of money which the gold standard denies the government the right to issue.

In a summarization of the facts we find that under existing monetary law, banking and credit practice, the medium of exchange, whether consisting of money or intrinsic value (no longer in use), token currency in the form of minted coins, printed pieces of paper or cheques transferring alleged bank deposits, is a simple man-made tool of trade that can be created by law and banking practice in unlimited amounts.  There is, therefore, in this enlightened age, no good reason why government with power to pass monetary laws should ever be short of money.  Whatever volume of the medium of exchange is required to finance war and the demands of rational progress in peace times can be created and issued by government for the supply of the medium of exchange is now inexhaustible.  The problem of managing circulation is one that is quite apart from the creation and issue of money, and, as we shall see, it does not involve any great difficulty.

Governmental bankruptcy and general depression due to money shortage should, under these circumstances, be properly charged to bad government, because there is no good reason why government cannot create and issue the medium of exchange necessary to finance progress.  The fact is that the creation of money is one of the simplest problems in elementary political economy.

Now having examined and shown the ease with which the creation of the medium of exchange can be accomplished, let us proceed to deal with the problem of circulation.


We have already seen that the creation and issue of money is a simple process, but simple and all as the creation of money is, it is no simpler than the problem of maintaining effective circulation.  When the government issues national currency and monetizes credit through a national banking system as a means of financing public enterprise, it can prevent depression resulting from the shortage of the medium of exchange in circulation.  To maintain progress, however, it must assume the responsibility of controlling and regulating circulation.  In this task it has three simple problems to solve and they are :

(1) To prevent an unrighteous amount of the medium of exchange accumulating in the possession of individuals or groups.
(2) To prevent the total volume of the medium of exchange in issue from becoming redundant.
3) To prevent an undue and unwarranted exportation and importation of gold, silver, cash and credit.

By doing these things, depression due to defective circulation can be eliminated. Fear that unbridled inflation must follow is unwarranted.  By correlating with the government’s power to issue money its power to withdraw money from circulation by taxation, the evils of inflation can be easily avoided.  Income and excess profits taxes, probate and succession duties, license and excise fees can be levied and collected so that no individual, group or class in the community may acquire and withhold from circulation an unrighteous amount of the circulating medium.  A general turn-over tax provides all that is necessary to withdraw from public circulation any volume of the medium of exchange that may, be considered detrimental to ordered progress.

In the face of the existing records, no one can dispute that the technique of creating and issuing token currency and credit as a substitute for money has been perfected, and certainly no one will suggest that the technique of levying and collecting taxes requires anything further to bring it to perfection.  The steps that have been taken with reference to the price, export and import of gold and the control that is now exercised by government over international credit and debts proves that international finance can be regulated.  It is obvious, therefore, that the government can create, issue and circulate with ease whatever volume of the medium of exchange is required to support production, destruction by use, consumption and replacement of all that is necessary to maintain the going concern activity of the social order.

When we ask ourselves the following questions: Why does government with power to create an effective medium of exchange borrow at interest the medium of exchange required to sustain governmental activity and governmental stability ?

Why does government borrow at interest that which it can create at profit to itself and the community at large ?

Why does the government not issue through its own banking system the currency and credit needed to maintain the operation of the cycle of production, consumption and replacement ?

—we are told that if the government finances by the direct issue of currency and credit through a national banking system, such a bank controlled by government would issue and leave in circulation too much money and therefore disruption from inflation would be inevitable.

As the only alternative to this disaster, we have been assured that the issue of national currency must be tied to gold and that the issue and control of credit must be left to the unlimited control of bankers.  We have been led to believe that by this course stability in the economic structure and rationality in the rate of progress and commerce, trade and the general standard of living would be guaranteed.

Now that international and domestic trade has collapsed, the standard of living has been wrecked, credit control has ended in chaos, and progress in all things has been changed to retrogression, these answers are no longer satisfactory.  They never were sound because they were deliberately designed to sustain a system based upon foundations which were absurd, thoroughly unwise and wholly impracticable.

Let me make that perfectly clear by asking—What sane individual with power to create money would impose upon himself starvation and misery by refusing to create his own buying power ?  What normal individual with a single atom of business sense, possessed of power to create money, would give that power away and then impose bankruptcy upon himself by borrowing the money back again and paying interest for it? Certainly, no one would be so foolish.  That being so, there is no sound reason why members elected to represent the people in Congress or in Parliament should give the nation’s power to issue money away to private bankers and then suffer the collapse of civilization under bankruptcy by borrowing back at interest that which the government has power to issue as an inherent privilege that no other institution can exercise without the sanction of government.

What individual with power to create money would deny himself the privilege of enjoying a higher standard of living for want of the buying power that he is able to create with ease? Certainly none but one whose insane love of money places the ownership of money and ‘Money Power above human values.  Unfortunately, this is the attitude of our modern bankers and it is because this attitude dominates in the realm of finance that we now suffer want in the midst of plenty.

Why We Are Short of Money

If we ask ourselves why consumers are not buying the abundance which is available and readily realizable, the answer is that they have no money with which to buy.  If we ask the question—Why have they no money ?—the answer comes at once that they have no work and cannot earn wages.  If we ask ourselves why national, state, provincial, county and municipal governments are not providing work and wages by proceeding with the vast programmes of public works and social services which the great majority are anxious should be advanced, the answer is that governments have no money.  If we ask ourselves why governments have no money, the plain answer is because governments have delegated their powers to create and issue money to a private monopoly of bankers.  By this course, the governments have established the sovereignty of Money Power over Democracy and have placed usurers in charge of the destiny of humanity;  consequently we have strife and destitution where peace in abundance should rule.

There is nothing abnormal about this result, for the banker is interested in using money and credit to earn interest.  The power of money to accumulate wealth is his primary consideration.  Money, when the banker controls the monetary system, is therefore more important than real wealth.  As a result, we have been led to believe that we should sacrifice the value of homes, farms, commercial and industrial organizations, trade, and in fact all our political and social institutions that constitute the material fabric of our civilization to maintain the value of money.

The present depression is forcing all to see .and to recognize the utter absurdity and futility of the banker’s point of view.  This point of view unfortunately places the value of money above the value of the needs and comforts of human existence.  It foolishly sacrifices the going concern value of the assets and institutions which are essential to maintain going concern activity, which, after all, is the thing that gives to money its only value.

We know that governments have the power to create money and that the creation of money is a simple problem in practical political administration.  The fact that consumers are without buying power and that governments with power to create money have been induced to borrow themselves into a state of hopeless bankruptcy, and that they are unable to finance progress by supplying people with the medium of exchange necessary to the production, consumption and replacement of wealth justifies the conclusion that “there is a nigger in the economic woodpile” and that the “nigger” is of the type of financial racketeer who throws “monkey wrenches” into the machinery of Democratic government.

Money and the Credit Medium of Exchange

Now a proper understanding of the monetary system involves, along with a knowledge of how the medium of exchange is created, some appreciation of how it is issued and used.  By referring to the monetary statistics of leading nations we can see at a glance what we now use for money and how it is put into circulation.  The available records now disclose indisputable facts from which the truth may be secured.  The following table is compiled from the records of the nations named :

        1934                                Great Britain       Canada          United States
                                                        (in 000,000 of dollars)
 Gold reserves.                            1,000                100                   4,500
 (Gold at $20  an oz.   
 Full legal tender currency*           2,000               170                   1,264
 Private bank note currency              Nil                160                  4,500
 Bank deposits transferable
 by cheque ..............                  11,500             2,200                43,000
 Monetary transactions 1929,
 consummated by cheque          230,000           50,000              983,000

Since 1929, cheque transactions have fallen by roughly 50%.  The figures in this table are averages for the year.

Now these figures disclose that while the bulk of our alleged money consists of bank deposits, strangely enough our bank deposits do not consist of money.  They also show that while the issue of money has been tied down by the gold standard, no such limitation has been put upon the bankers’ right to create and issue bank deposits as an effective substitute for money.  In practice, the banker repudiates his own arguments against inflation, for in the development of bank deposits he ignores the gold standard and the volume of money in circulation.

Bank Inflation

The following table shows the excess of bank deposits over gold and full legal tender cash in issue in the respective nations referred to :

                    Deposits in 000,000 of Dollars
                    In excess      In excess of
                       of gold        legal tender cash
Great Britain ...... 10,300           9,500
Canada ..............  2,100           2,030
United States ......38,500         41,736

Here we see that governments on the advice of bankers maintain a shortage of money and allow the bankers to issue billions of dollars in bank credit which serves as an effective substitute for the medium of exchange that the government can and should issue.  Now, as part of the very clever scheme by which the banker has concealed this racket, the banker has consolidated two distinct types of banking activity that should always be kept separate and apart.  Private bankers have taken over the power to issue credit as a substitute for money, which makes the private banker an issuer of money, a function that belongs to the State.  He also combines with that function the business of taking deposits from the public.

Now whatever may be the justification for a private banking system empowered to use the money owned by bankers and depositors as the capital of the bank, there can be no justification for the government turning over to a private monopoly the government’s power to issue money or a credit substitute for money.  Such a policy, in fact, is tantamount to legalizing counterfeiting for a privileged group which is, of course, preposterous.  But that is exactly what takes place under the existing monetary and banking laws.

Having dealt with the methods employed in the creation and issue of money and the credit medium of exchange now in use, let us review briefly some interesting facts that are pertinent to an understanding of the change from the use of money of intrinsic value to the use of token currency and credit that has taken place in monetary and banking practice.  And I hope the reader will have observed that while we commonly talk money based on gold we really use credit based on accounting.

Banker Control

Now that gold coin has been withdrawn from circulation, the only money governments issue is the small change, consisting of copper and silver coins.  Thus we see that the issue of the medium of exchange has been transferred from government to a private monopoly of bankers.  To-day, as these statistics show, the banker issues a credit substitute for more than 95 per cent. of the total media of exchange in common use.  Therefore, the banker now controls the issue of the spending power of government and the buying power of the consumer.  The banker, under the circumstances, is the real ruler of the land.  Governments have therefore farmed out to bankers the supreme prerogative of the State, namely, the right to issue the media of exchange.

Money of intrinsic value has been withdrawn from circulation and gold has ceased to be a security for the payment of debt or the basis for the issue of the medium of exchange.  The creation of bank deposits transferable by cheque is not restricted by gold reserves, nor are bank deposits in actual practice convertible into gold or money.  These facts are now established upon an indisputable basis.  The gold standard is obviously a piece of financial trickery designed to destroy the government’s power to issue money.

According to these statistics, the public has been weaned away from the idea of money of intrinsic value and has unconsciously adopted a credit system based on accounting.  National currency has given way almost completely to bank credits transferable by cheque as the medium of exchange in common use.  A credit system operated by private bankers has taken the place of a money system operated by the government.

The banker, while talking money based on gold, has actually appropriated the wealth of modern nations to the service of usury through the operation of a credit system based on pure inflation, together with an unparalleled exploitation of the evil of mass usury.  In working out the technique of substituting a credit medium of exchange for a money medium of exchange, the banker has merely taken advantage of the opportunity that elementary education has created.  There is nothing difficult or scientific about his methods or practices.

The Evolution of Credit

Since illiteracy no longer dominates the world, money consisting of coins having by law a fixed intrinsic value is no longer necessary.

The plain fact is that elementary education, by teaching people how to read and write and by giving them an understanding of elementary arithmetic, has made it possible for all to use token currency and cheques transferring credits in an accounting system as a substitute for money based upon gold or silver.  Where formerly the volume of money depended upon the production of gold and silver, to-day no such ]imitation exists.  Education, by making it possible to substitute a credit system based on accounting for a money system based on gold, has emancipated our civilization from an involuntary shortage of money.  Elementary education, therefore, has accomplished what the alchemists of old sought to achieve when in their vain attempt to transmute base metals into gold they tried to create abundant money.

Supply of Credit Inexhaustible

Here then we find that the greatest of all accomplishments in the realm of technological achievement, namely the creation of an abundance of effective buying power, is a simple product of elementary education.  This is by no means a theoretical conclusion.  It is based upon the indisputable monetary facts that the monetary system in operation has established.  Gold and silver no longer are required as the security for the value of paper currency or bank deposits.  Today we use copper, nickel and silver coins of little or no intrinsic value as legal tender money for small change transactions.  Paper currency notes not convertible into gold are used for out-of-pocket current expenses, while more than 90 per cent. of the total volume of modern monetary transactions is consummated by cheques transferring bookkeeping entries m an accounting system, commonly called bank deposits, which are not in actual practice convertible into gold coin or legal tender currency.  The creation of money, therefore, is one of practical administration which is within the administrative power of modern government.  We know from the statistics which disclose that which we now use as an effective medium of exchange that there need be no shortage of buying power.

Now let us examine, in the light of actual facts, the true purpose of the gold standard limitation on the issue of national currency and credit.

The Gold Standard Racket

A most casual examination of the statistics cited discloses the fallacies and purposes that the bankers’ theories were designed to serve and upon which the private money system is based.  We have been told that by restricting the issue of national currency to a gold reserve basis, investment of money would he secured, trade would be advanced and economic progress would be established.  The facts now disclose that the gold standard limitation upon the issues of national currency was designed to maintain a shortage of money and to permit the bankers to issue a credit substitute for money which the national government should have created.

Let us deal first with the shortage of national money which the records disclose to be the result of the gold standard limitation.  By analyzing the following extracts from the foregoing statistics :

      1934                  Great Britain  Canada  United Skates
(in 000,000 of dollars)
Gold reserves .......        1,000         100          5,000
Legal tender money in circulation
                          ...........2,000         160          1,264

we see that the governments of the nations referred to have issued for the use of the people full legal tender national currency to the value of $16.00 per capita in Canada, $43.00 per capita in Great Britain and $10.60 per capita in the United States.  In the case of Great Britain, however, the government does not issue the legal tender paper currency.  It is issued by the Bank of England and that will be the case as soon as the Bank of Canada is in operation in that Dominion.  Obviously legal tender cash issued is totally inadequate to maintain the production and consumption of wealth required to sustain bare existence.  The shortage of money is perfectly obvious.

The long accepted representation that the gold standard is the anchor of economic security, the basis of the value of money, the automatic regulator of the rate of progress of domestic trade, an effective means of regulating international commerce and the sole means of settling international monetary balances are now proven to be false.  It should be recognized also that while many have been led to believe that the gold standard has been abandoned, that is not entirely true.  Some features of the gold standard have been abandoned, but the gold standard limitation on the power of government to issue money is clearly still in force.  That is now, as it always has been, the only real purpose and the only effective part that gold has ever played in the monetary system for more than half a century.  In the conflict between the people who need money in abundance to maintain progressive trade and the banker who profits from a shortage of the medium of exchange in circulation, the gold standard has been used to give victory to money and credit dealers.  The gold standard, therefore, is a “barbarous relic” of the dark and illiterate past.  It is, in truth, a vicious instrument used by usurers, under the protection of government, to plunder the people of their wealth.  It forces all to borrow the bankers’ credit substitute for money at interest.

Bank Money

Now let us examine how and in what manner the demand for money occasioned by this shortage has been supplied.  In Great Britain no private bank other than the Bank of England has the privilege of issuing paper money, but in Canada and the United States private bankers are privileged to print paper currency notes, not legal tender, as a substitute for money.  In Canada and the United States the shortage of money created by the gold standard has been partly supplied by the issue of private bank note currency.  In Canada private bankers partially satisfied this shortage by the issue of some $160,000,000 of private bank notes unsecured by gold or anything else, while in the United States the amount of private bank note currency issued by the Federal Reserve Bank and other private banks totals $4,500,000,000, only a part of which was secured by a 33 1/3 percentage of gold reserves.  This amount of bank note currency was not sufficient to supply the needs of either nation and the practice developed in Great Britain of substituting bank deposits existing merely in the form of statements of account in private bankers’ books constituting promises to pay on demand money which does not exist, for national currency has been followed.

Now in the substitution of private bank currency and bank deposits for money, the banker has conveniently ignored the gold standard limitations which he insists must at all times be observed in the issue of national currency.  Let us examine the relation of bank money, that is, private bank note currency and bank deposits, to the monetary gold reserves available.

1934           Great Britain Canada United States
(in 000,000 of dollars)
Gold reserves  1,000         150        4.500
Bank money   13,500      2,350      47,500

These figures show the extent to which the banker has substituted inflated bank note currency and bank deposits for national currency.

These bank deposits are looked upon by the public as money.  Transferred by cheque from one individual to another in the bankers’ books, they are used as a medium of exchange transferring property and services in every department of the life of the community.  How, then, is it possible for bankers to owe their depositors billions of dollars of money that does not exist? The perfectly obvious enquiry that these statistics arouse is how the banker can get along without money.  This is how it is done.  “A” has a deposit in the bank.  He writes a cheque to “B”.  “B” has the right to go to the bank and demand legal tender cash in payment of the amount named in the cheque.  The banker, however, knows from actual experience that he will not be called upon to meet this money liability.  He knows that in the vast majority of cases the receiver of the cheque w211 deposit the cheque in his own account and that a transfer of the credit of the drawer of the cheque to the account of the payee of the cheque will be accepted by all parties as a cancellation of the banker’s money liability.  It is in this way that bank deposits in the form of statements of account transferred by cheque circulate from one individual to another and from one generation to another.  When a man dies, if he has a deposit in the bank, a transfer of his credit in the bank to the credit of his heirs or beneficiaries is all that is necessary.  Bank deposits transferable by cheque therefore circulate indefinitely, the banker never being called upon to redeem but a very small percentage of them in money.

The circulation of bank deposits transferred by cheque is analogous to the circulation of money.  For instance, when the government mints a silver dollar and puts it in circulation it circulates from one individual to another and from one age to another through the bankers and possibly back to the government in payment of taxes, but it keeps on circulating until it is either lost or returned to the Mint on account of mutilation for re-issue.

Bank deposits set up in a national banking system would circulate in the same way and government could finance public enterprise by the circulation of bank deposits in exactly the same way that the private banker now finances loans with statements of account issued in his own bookkeeping system.  There is obviously no need for government to pay interest for a credit medium of exchange that is produced by the operation of an accounting system.  In addition to that, there is no need for government to arbitrarily withdraw its investments from circulation on a given date.

The banker has taken advantage of this fact and he eliminates the cost of carrying money or accumulating money with which to redeem his liabilities to depositors.  The banker, of course, is the only one who enjoys a privilege that exists, merely because he has taken full advantage of the opportunities that a credit system offers.  All other debtors are compelled to redeem their debts with money on specific dates.

All bank loans and all government borrowings are made upon the basis of repayment at a specific time.  Obviously, if bankers can create debts to depositors which in actual practice are not redeemable simply because bank deposits circulate indefinitely as a credit medium of exchange, then the government, through a national bank of issue and deposit, can finance public enterprise by creating credits in a national banking system which are transferable by cheque.  In this way the government can increase and augment the volume of private capital required to sustain the commerce and industry of the nation.

The necessity for debt redemption, as far as government is concerned, is therefore a pure fiction, invented by usurers as a means of securing for themselves the wealth of the taxpayers by the simple process of purchasing interest-bearing bonds issued by the government with a bankers’ fiction of money.

Bank Mints Credit

Under the banker-created and self-imposed fear of inflation, governments, while refusing to issue media of exchange, have allowed the banker to enjoy that privilege by issuing bank credit without restriction.  Here, then, is the ludicrous position in the United States.  The government has issued $1.204,000,000, while the bankers have issued $4,500,000,000 of bank notes and $43,000,000,000 of bank deposits or a total of $47,500,000,000.  Therefore, of the medium of exchange in use the gold standard limits the issue of national currency to 2.6 per cent., while the banker issues 97.4 per cent. of the total medium of exchange in circulation with which the bulk of modern monetary transactions are consummated. In Canada and Great Britain the bankers are even more firmly entrenched as the creators and minters of the nation’s money, for in these allegedly enlightened nations the bankers have successfully induced thoroughly gullible statesmen to create the Bank of England’ and the Bank of Canada as private banking corporations and to hand over to these private profit-seeking monopolies the exclusive right to create and issue full legal tender currency of the nation as the stock-in-trade of a private business.


The truth is that while bankers have been unceasing in their efforts to frighten governments and people with a fear of inflation of national currency, they have at the same time proceeded to plunder both government and people with inflated bank credit.  These statistics disclose that the so-called gold standard, banker managed, private sound money system is a pure racket.  It is based upon the substitution of bank credit for money and the ruthless exploitation of the criminal and egregious principle of trading short.  Our so-called “sound money system” is based upon chicanery and barefaced fraud.  The banker obtains money by false pretences, in that he represents that he is lending money when the truth is that he is merely lending bookkeeping entries.  He also gains by representing that he has money on deposit which he does not possess and has no means of securing.  Any other group of business men who operated on this basis would land in the penitentiary as criminals of the most reprehensible type.

If we ask the banker the plain question—How can there be on deposit ten times the value of the total legal tender in issue, the banker is forced to confess that his representation to bank depositors that he has their money on deposit is false.  He must acknowledge that his bank deposits exist merely in the form of statements of account which constitute promises on the part of the banker to pay to depositors on demand money which does not exist.  In the development of the private money system, the power of government to issue money has been destroyed.  The banker has become the minter and issuer of the credit substitute for money that now constitutes the medium of exchange in common use.  It is in these facts that we find the “root cause of our troubles”.

The Central Bank

Now the operation of a credit system on the principle of trading short is not without risk.  If depositors lose confidence in a bank and demand their deposits, the bankruptcy of the bank is inevitable.

In the hope of minimizing this danger, the central bank policy was established and perfected.  Under this system the private merchant banks are permitted to borrow legal tender cash from the depositors’ central bank in such amounts as may be required to satisfy the public’s demand from time to time.  In addition, the central bank issues to private banks the legal tender cash required to settle interbank balances arising from the failure of cheques taken in for deposit to offset the cheques drawn against bank deposits.  For example, let us use Bank “A” and Bank “B”.  At the end of a day the cheques drawn upon Bank “A” and deposited in Bank “B” total $50,000, while the cheques drawn upon Bank “B” and deposited in Bank “A” total only $40.000.  Therefore, Bank “A” will owe Bank “B” $10,000 and Bank “A” must pay to Bank “B” $10,000 in cash.  The banks settle these balances with legal tender cash.  If a bank cannot settle, bankruptcy or merger follows.  Naturally, the fewer the banks the less the danger, for if there were only one bank all cheques drawn against the bank would be deposited in the same bank and there never would be any inter-bank balances.  The aim of the private money system quite naturally has been to reduce the number of banks to a minimum.

In Great Britain and Canada great success towards this end has been accomplished.  The several hundred banks that existed in England in 1844 have been reduced to the point where only forty-one banks are in operation and the “Big Five” do the bulk of the banking business.  In Canada, of the nine banking houses the “Big Three” do most of the Canadian banking business.  The Federal Reserve central banking system having been established only since 1914, the number of banks in the United States is still very large, but with time, at the rate they have been wiped out during the last five years, the number of banks in the United States will be brought in line with the private money system’s ideas.  Yes, the reader might well say that this is hard on some of the bankers and not in their interest as a whole, but the reader should remember that the business of usury is always blinded by selfishness, and in the end always ruins the usurer as well as his victim.  The private money system is created and designed to serve a financial oligarchy based upon a monopoly which means that with time the whole power of money will centre in one organization consisting of the very few who are able to survive in a business that is based upon insatiable and rapacious greed.

Easy Money

Now let us consider how the banker uses bank credit and bank currency to accumulate assets and to finance the pyramiding of deposits and interest bearing debts.

We have already noted how the banker creates deposits by making loans and allowing overdrafts.  The banker is also privileged in Great Britain to borrow cash from the Bank of England.  In Canada and the United States, in addition to borrowing cash from the government and the Federal Reserve Bank, the bankers are privileged to print their own money in the form of bank note currency.  They are also privileged to take money on deposit.  In a word, the banker may create his own buying power by making credit entries in his own books, by printing money and using for his own purposes money left on deposit in the bank.  Within certain broad limits the banker is entitled to use whatever buying power he controls in the purchase of profit producing assets for the bank.  He can and does purchase interest-bearing securities and other assets with his own capital and credit and with borrowed and depositors’ cash for his own account.  Quite naturally, this system operates wholly in favour of the banker.  When government is forced to expend new capital it issues bonds.  These bonds are handed over to brokers who underwrite them with credit advanced by bankers, and while it is true that private individuals as well as credit dealers and bankers purchase government bonds with bank deposits, nevertheless the fact remains that it is the banker who issues all the credit medium of exchange with which government bonds are purchased.  The banker is therefore in a position to exchange mere bookkeeping entries for government interest-bearing bonds payable on a specific date as to both principal and interest in money, the bonds in question constituting a charge upon’ the entire wealth of the nation.

When we come to an examination of war-time finance, the outrageous nature of this policy will become more pertinently apparent, for the truth is that the enormous war debts were very largely incurred, not by the borrowing of money but by the borrowing of credit entries in bankers’ books through which the medium of exchange necessary to carry on the war was provided.  All the bankers did was to monetize and make available as spending power the credit value that the war bonds and contracts contained.  Of course, no one ever heard of a banker borrowing money to build a bank or to purchase assets.  The banker, having taken over the power to create bank capital does not need to borrow.  Obviously, if the government maintained and operated a national bank, it could create and issue the capital of government without incurring the impossible cost that the private banking system now imposes upon all public finance.  Thus we see that the banker, having the power to create and issue a credit substitute for money, can finance the purchase of assets and loans to public and private enterprise by the operation of a bookkeeping system.

In addition to that, the banker is empowered to use all cash in his possession over and over again for the purchase of assets, and he does use cash in that way.

Velocity of Circulation

Let us examine a possible transaction in governmental interest bearing bonds.  A citizen has a bond for $1,000.  He cannot spend it because it exists in the form of frozen wealth.  To convert it into spending power, he must convert it into cash or a bank deposit against which he can issue cheques.  To do this, he takes the bond to a banker.  The banker exchanges for the interest-bearing bond $1,000 in bank note currency and the citizen puts his $1,000 on deposit with the banker.  Immediately after that is done, another citizen with a $1,000 bond appears and asks that his bond be purchased.  The banker takes the bond and hands over the $1,000 that has been left on deposit by the first citizen who came in, with the result that the second individual who gets $1,000 invariably places it on deposit.  At the end of the transaction, the banker has $2,000 in interest-bearing bonds and as much cash on deposit as he had before the bonds were purchased.  From these transactions we may secure a fairly good idea of the most important feature of what the banker calls “velocity of circulation”.

This so-called “velocity of circulation” has literally whirled our civilization into a condition of disaster under a withering blight of universal bankruptcy.  Our monetary guardians have in truth turned out to be ravening wolves.

In offering these illustrations, I am fully aware that every time the bank creates a deposit by using depositors’ money to purchase assets and receiving that money back on deposit, or by making a credit entry in his books, that he is creating a debt to a depositor that gives the depositor the right to call for his money on demand by writing a cheque on the bank.

Yes, let me repeat, it is quite true that when bank deposits are created by using other people’s money to purchase assets or by the mere stroke of a pen as the means of collecting usury, that the deposits so created give the depositors the right to demand legal tender money from the banker.  The banker, however, knowing that depositors do not use money, assumes that never but a small percentage of depositors will ask for cash at one and the same time.  On this assumption, the banker does not hesitate to incur liabilities to depositors amounting to billions of dollars in excess of all his available cash.  If the banker happens to be wrong and depositors lose their confidence in his short-trading racket and are foolish enough to ask for their money, well, it is just too bad for the depositors, because the bank closes and the banker very rarely goes to goal.  Yes, I am aware that the depositors have a right in law to ask for their money, but I am aware of something else that is even more important, and that is that the banker incurs debts to depositors with a criminal indifference to his actual ability to pay his obligations to depositors.  This has been proven over and over again.  When any appreciable number of depositors ask the bankers for their money, bank bankruptcy is the result.  This situation exists simply because the bankers’ entire credit racket is based upon the assumption that the banker is entitled to the protection of the government while he uses all the devices of the counterfeiter and all the privileges of obtaining profit by legalized fraud and misrepresentation.

Now I quite appreciate that to the average individual these examples of banking transactions I have offered are so foreign to plain reason and honest business that they are almost unbelievable.  They offer, however, the only available explanation for the excess of bank deposits over cash and the appalling excess of debts over both bank deposits and cash in existence.

Unpayable Debt

Let us, for the purpose of checking my conclusions, correlate the legal tender money in which all debts, including bank deposits, are payable with the bank deposits and the public and private interest-bearing debts that are now outstanding.  They speak for themselves and here they are :

       1934                    Great Britain   Canada   United States
(in 000,000 of dollars)
Full legal tender cash ..   2,000               170         1.264
Alleged bank deposits ..11,500             2,200         4,300
Public and private interest
bearing debts ..........     80,000             9,500     275,000

No one but the bankers knows the exact total of the value of bank assets representing bank loans and investments.  They are always reported as representing a substantial surplus over the total bank deposits.  The amount held in secret reserves and which is in the possession of those who, enjoying the opportunity to let their friends in on preferred lists, i.e., the enormously wealthy credit barons, is, of course, considered information which the government and the public have no right to possess.  Suffice it to say that in Canada, with $160,000,000 of paid-up capital and less than $200,000,000 of cash in the nation, bank loans and investments have risen to more than $3,000,000,000.  In the United States with $3,000,000,000 of bank capital, and $4,500,000,000 of cash, the bankers’ loans and investments have risen to more than $50,000,000,000.

Once we fully realize that the enormous load of debt established is payable in legal tender cash, we see at once that the banker has not overlooked anything.  He has made his position as master of the nation’s wealth secure by making all debts payable in species of legal tender which, under the system, does not exist in anything like the amount required to settle the debts extant.  The figures quoted indicate the hopeless position of government and public as bankrupt borrowers.

Specie Payment

American debtors are called upon to pay $275,000,000,000 out of $1,264,000,000 of legal tender money, or for every $275.00 they owe they have $1.26 to pay with.  In Great Britain for every $80.00 of debts owing $2.00 is available for settlement.  In Canada for every $95.00 owing $1.70 exists as the means of legal payment.  These statistics disclose the extent to which the private gold standard money system places the borrower at the mercy of the lender.  Of course, when times are good and bank credit is circulating freely, the danger that arises when bank loans and other interest-bearing debts repayable in money are financed by the issue of a fiction of money, is not apparent.  Borrowers are then able to secure and liquidate their money debts with credit.  When, however, hard times set in and bank credit is being withdrawn from circulation, the shortage of money always present makes its open appearance.  Hypothecated assets must then be sold for money values in a market where the volume of credit for debt settlement purposes is controlled by the bankers who have the power to issue and withdraw it at will from circulation.  The result is that real assets lose their money value.  Homes, farms, business institutions and all manner of investment values in going concern activities decline.  If the decline in the value of real wealth goes far enough, the investments in municipal, state and national bonds also lose their value.  Bankruptcy and debt repudiation are thus inevitable.  Once the decline in values has definitely set in, hankers under their system are unable to restore prosperity.  They have everything they can do to maintain their own solvency, and this they can do only by reducing their obligations to depositors.  This is so because the banker has no power to issue the legal tender money which his depositors have the right to demand.  The banker, having obligated himself to pay depositors far more cash than exists is compelled, therefore, in periods of depression, to reduce deposits with the fall in value of the assets he holds as security for the loans he has financed with statements of account.  When people complain about the bankers not putting credit in circulation in bad times, they overlook the fact that under the existing system the banker is powerless to resort to re-issues of further credit without running the risk of bankrupting his banking institution.  In a word, the existing system makes it possible to finance interest-bearing debts, but it is devoid of the power of creating the means of liquidating all the interest obligations that such debts establish.  The banker, it should be remembered, never puts anything in circulation with which to pay the total interest he demands.  Once interest-bearing debts reach a certain point the collapse is inevitable.  Debts have now reached that point.


Appreciating the difficulty that the average person finds in keeping figures in mind and in the hope that the figures quoted may be properly appreciated as the factors whose correlation is necessary to justify and support the conclusions I have submitted, I have summarized in chart form the fundamental monetary statistics already dealt with.

In these charts I have shown the position of gold reserves, notes in circulation, cash in the banks, bank deposits and the national public debt for the years 1914, 1920, 1929 and 1933, for the three countries named.  The charts visualize the effect of war-time finance and show the extent to which bank deposits and national debts are inflated above the actual supply of gold and cash.  In a word, bank deposits, which constitute debts of bankers to depositors and national debts, are unpayable in money.  The increase in these two items discloses that inflation has been resorted to by bankers on the one hand whose money liabilities to depositors far exceed the total of money in existence, and on the other by national governments whose total obligations far exceed the reasonable limits of the debt load that should be carried.

For the year 1933 I have included a column which shows the total figure of public and private interest-bearing debts, i.e., the national debt, the debts of provinces (States in the United States), municipalities, corporations and private individuals combined.  These charts clearly disclose that the debt position which has been developed under the banker-managed gold standard-usury-private money system is impossible.

They disclose the utter impossibility of meeting, under that system, the debts it has developed.  Unless the system of issuing and putting the medium of ex change into circulation is changed so that a greater volume of medium of exchange can be maintained in continuous circulation, there is no way by which existing debts can be serviced.  Repudiation, is inevitable.  They also show that it is utterly impossible to finance progress by adding further debt burdens to the impossible load that is now being carried.

It is also to be noted that the statistics and charts disclose that practically the same relative results have been developed in Great Britain, United States and Canada.  In Chart 4 I have pictured the same figures in another form, showing the mountain of debt now carried by the Canadian people.  A similar chart picturing the same results would disclose that the debt load of the people of Great Britain and the United States is proportionately heavy.

Unfortunately the debt load is now so great that if deflation were depended upon to reduce it by bankruptcy and repudiation to the level where it could be carried so that a new start could be made, so sweeping would be the destitution and bankruptcy that would follow that starvation and revolution would be inevitable.  The only remedy available is an increase in the total volume of wages and consumers’ buying power in circulation.  This can only be accomplished under an effective scheme of currency and credit management maintained through a national banking system administered by men who are servants of the State.

In a later chapter I will outline a plan which I think Lincoln had in mind when he inaugurated his national currency programme in the United States in 1861 and which he developed during his Presidential term and which, I firmly believe, he would have further developed and put into practice had he not been assassinated shortly after his inauguration in 1865.


* N.B.  In England the full legal tender currency now consists of Bank of England notes which are issued by a private banking corporation, the Bank of England.  Therefore, the government of Great Britain issues no full legal tender for the use of the British people.  In Canada, legal tender paper currency consists of Dominion notes, Which, under the Bank of Canada Act of 1934, will be issued as Bank of Canada notes by a private corporation.  In the United States, the Federal Reserve Bank notes are not legal tender.  There, legal tender is still confined to United States notes (gold coin and gold certificates), now withdrawn from circulation, and silver certificates.


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The Conquest of Poverty