“Sing a song of plenty, a planet full of fools,
Everybody starving by sound financial rules;
The shops were full of good things, the factories likewise –
The Banker shut his books and said ‘We must economize.’”
That little ditty from the days of the Great Depression seems to sum up the grim prognostications that fill the Business world today. It’s all so unnecessary!
One of the remarkable things about hypnosis is the way in which, as a result of suggestion, people individually, and whole masses of people on occasion, can completely misperceive the world around them, so as to act in ways that are self-defeating and absurd.
Listening to economists, financiers, business executives and politicians—let alone taxpayers, debtors, and those in danger of losing their homes or their jobs—wailing about the state of the world’s economies, makes me think that we need a dose of realism to dispel the myths that make today’s situation so discouraging and incomprehensible. So here goes:
(1) That the economy is collapsing. WRONG. We are just as able to grow food, build houses and automobiles, as we were twelve months ago. What is collapsing is not our ability to produce, but the system of payments by which that production is made available to people who want to enjoy it.
(2) That there is something mysterious and incomprehensible about the way our money system behaves. WRONG. Money obeys all the normal rules of arithmetic. The amount of our Gross National Product is directly connected to the quantity of dollars in circulation at any time. If the quantity is reduced, say by a shortage of credit, then the amount of production will also shrink, and bankruptcies and unnecessary poverty result.
(3) That Government deficits are a Bad Thing. WRONG. If they are needed to give citizens the dollars they need to receive a standard of living that is physically possible and desirable, they are essential. The important question concerns the way in which they should be financed.
(4) That deficits can only be covered by borrowing money created by the banking system. WRONG. The federal government controls both the Mint and the Bank of Canada, both sources of dollars which are legal tender. It does not have to go into debt to the banking system to do this. Of course, it will have to control the private creation of credit by the banking system if it does so, but perhaps that’s not a bad thing.
(5) That Canada’s banks are stable and sound. WRONG. The reserves of legal money held by banks to cover their obligations to customers are a minute fraction of the amounts they owe. Banking is a confidence game that can break down at any time—remember the Canadian Commercial Bank, the Northland Bank, and near banks such as the Principal Group, and the Credit Unions that had to be bailed out by the Province of Alberta only twenty five years ago—let alone some of the enormous failures taking place in the U.S.A. and elsewhere at the present time. Banking operates by making the same dollar appear to be in several places at once. It only takes a few bad debts for the whole card house to start tumbling down. That’s what is going on at the moment.
(6) That we have to give everybody jobs before they can get incomes. WRONG. The really rich in the world get most of their incomes not from the jobs they do, but from the property and investments they own. Society’s unearned income, who gets it and why, is quite as important to a sound and prosperous economy as what comes in a pay packet. Ordinary folks should get on that gravy train too.
(7) That creating money involves creating debt. WRONG. It does if the money is created by a bank, because a bank needs to hold a promise to pay to balance its own promise to repay its depositors on demand. But our coinage simply comes into existence by stamping an image on pieces of metal. No debt at all. When you think how much of your taxes are going to pay interest on borrowed money that the Government could have created for itself, one wonders why there isn’t a taxpayer’s revolution.
(8) That governments printing money is a sure guarantee of inflation. WRONG. Money is like the transmission fluid in a car—it doesn’t create any energy itself, but it transmits the energy of the motor to the wheels that do the driving in a way that makes movement possible. Too little fluid, and the vehicle will go in stops and starts, just like our present economy. Too much, and its power is diluted. Dollars are dollars no matter where they come from, and as long as there is proper control of the overall amount in circulation, inflation and deflation need not be problems.
(9) That the present situation will work itself out in a short period of time. WRONG. History shows that the one effective way of getting out of a depression is by the incredibly unpleasant, dangerous and wasteful route of rearmament and war, when normal rules of ‘prudent finance’ are suspended. Do we really want that? When we find ourselves in a hole, as we are today, the first thing to do is to stop digging. The next, is to find a way out.
(10) That the ‘iron laws of economics’ have nothing to do with morality. WRONG. Economic systems have been created by man, and they should serve public welfare rather than private greed. Today’s ‘competitive free enterprise system’, so favoured by organizations such as Stephen Harper’s National Citizens’ Coalition, is nothing but a blueprint to establish the Kingdom of Hell on earth. We can do better.
So let’s take the blinkers from off our eyes, and see the situation as it really is—not nearly as bad as the financial experts and bankers would have you believe. As William Aberhart used to say in the days of the depression of the Thirties—“If you haven’t suffered enough, it’s your God given right to suffer some more!”