by Charles Pearson
(Swans - June 30, 2008) A life-long fan of Laurel and Hardy, I used to watch a series of their shorts broadcast from the U.S. and available in Canada where I was then living. It did not bother me that the purpose of the transmissions was to entertain early rising children, or that in true evangelical fashion each programme was preceded by the Lord's Prayer, delivered imposingly by a Native American in full headdress. What did bother me, nearly floored me in fact, was the line: "Forgive us our debts."
I had never heard that before. Although I had been brought up in the mildly dissenting Methodist tradition, that line had always been "Forgive us our trespasses." Even the sound of the word "debt," blunt and uncompromising, seemed wrong in this context. More importantly, there was something decidedly unpleasant about using a word inextricably tied to money in a prayer. To want children to accept such an interpretation was deplorable.
Some readers may already be disgusted at my ignorance. I have to admit that I had been turned off the Christian religion, at least the organised sort, many years before. Too much mumbo-jumbo, even hocus-pocus, as well exemplified in the religious ritual involved in the coronation of the Queen in Westminster Abbey -- one archaic belief system propping up another, in my opinion. However, I was able to correct my ignorance about the Lord's Prayer by opening an old copy of the King James Version of the Bible. There, in Matthew 6.12, I read, "And forgive us our debts, as we forgive our debtors." In the 1977 revision of the King James Version, I believe "sins" was substituted for debts. I don't know whether they also altered Luke's version of the prayer, (Luke 11.2-4), but in my old Bible that Apostle, or his translator, seems to want it both ways, and incidentally gives us a clumsy sentence - "And forgive us our sins: for we also forgive every one that is indebted to us."
One has to wonder whether Matthew's job before his conversion, tax collector for the Romans, has something to do with all this. He is still the patron saint of bankers. Perhaps it is surprising that a proposal to locate bank boxes (ATMs) in churches never came to anything, as far as I know. If it had, I expect attention to sermons would have suffered as cash-strapped worshippers struggled to remember their personal identity numbers.
I think religions were on much sounder ground when they condemned usury and I understand that is still true in some Muslim countries. It was illegal in England until the thirteenth century. Even the change in the definition of the word is instructive. It used to mean lending money for any profit at all. Now it is used to refer to lending at unreasonable rates of interest. And who decides what is unreasonable? Not the borrower, that is for sure, however poor he or she may be.
The worldwide crisis triggered by the sub-prime mortgage shenanigans reminded me of all this. It also happened that I had recently come across books and articles that painted a very different picture from the conventional one of what banks actually do, and indeed about how money itself is created. I'd always believed governments created money, but again I realised my ignorance when I read in a book by Molly Scott Cato that "The process by which banks create money is so simple, the mind is repelled." (1) The author is economics spokesperson for the UK Green Party and she was quoting J.K.Galbraith, who also knew a bit about economics. Dave Patterson, I think, puts it as well as anybody:
... they accept an application (for a loan), type some numbers into their computer, and voila, new money. And of course on all that money they create as loans, they charge interest, as banks do. And not just once, but year after year. (2)
Add to that nice (and anything but little) regular source of profit, the matter of what happens if the loan is repaid. I think even some critics of the money system believe a repaid loan simply disappears, consistent with the way it was created out of thin air. But no, according to Michael Rowbotham (3) and Peter Tomlinson, an ex-banker, (4) this miraculously-created money, as well as all the accrued interest, is now treated as if it belongs to the bank. If true -- and I keep seeking more information on that one and I would welcome any input from Swans readers -- it is surely a monumental fraud.
Delving further into the question I came across some statistics that are truly horrifying: only 3% of UK money exists as "legal tender," (see note #3 above) about the same percentage as in the U.S. (5), and in Canada it is only 1-2% according to Patterson. It is then no surprise to learn that in the global economy as whole, virtually all the money has been created by debt. A very large part of this debt is, of course, in the form of mortgages, and the constant trumpeting of economists and politicians of the "ownership society" we are supposed to be enjoying is a very sick joke. Owership society would be much more appropriate. The title of Michael Rowbotham's book, The Grip of Death, is derived from the literal meaning of mortgage as a death pledge. Debt in general was defined by Ambrose Bierce in The Devil's Dictionary as "An ingenious substitute for the chain and whip of the slave-driver."
Rowbotham's book was published ten years ago and even then the figures he gave for outstanding mortgage debt in the U.K. were staggering, representing 60% of the total money stock. By January of this year it had ballooned to £1.2 trillion ($2.35 trillion) to which should be added £200 billion of other debts and the whole lot is increasing at £1 million every five minutes. (6) Recent US debt statistics were quoted by Gilles d'Aymery, Blips #69, Swans Commentary, April 21, 2008. The mind boggles at the mountain of interest being paid on these loans, to building societies as well as banks. Even though they have no shareholders, building societies is still part of the debt-based money creation process.
On the question of "legal tender" referred to above, I can't resist quoting a letter from the US Treasury to a Mr A.F. Davis, who had been pestering them about his concerns that money in his wallet might not actually be redeemable. (7) He had mailed them a ten-dollar note and asked if he could have some proper money in exchange (I exaggerate a bit). When they simply sent him two five-dollar bills from a different printing series he complained again and received the following reply:
... You are advised that the term "lawful money" has not been defined in federal legislation
... The term "lawful currency" no longer has such special significance.
Perhaps because they were fed up with ornery characters like Mr Davis, the phrases "... will pay the bearer on demand" and "... is redeemable in lawful money" were deleted from US currency in 1964, even though the dollar was still supposed to be backed by gold at that time. When I read that, I hastily looked at a ten-pound note I surprisingly still had in my wallet, in spite of just having paid an almost unbelievably high bill for heating oil. To my tremendous relief, there, printed just under Bank of England were the words, "I PROMISE TO PAY THE BEARER THE SUM OF TEN POUNDS." Of course I'd had no idea that was still on our currency. But promise to pay in what? We went off the gold standard decades before President Nixon took the dollar off. But I don't think I shall waste my time taking this up with the Bank of England.
I should mention that bringing back a system in which currency is backed by gold, or any other precious resource, is no answer to the huge problems of money creation and global debt. Some possible solutions are proposed by the authors I've referred to, but in a capitalist dominated world it is hard to see how they will come to anything. Innumerable proposals were put forward during the Great Depression, but banks, with government backing, avoided any significant change. According to Rowbotham, every attempt by the Social Credit government in Alberta, Canada, to implement a financial system based on Douglas's (heretical) ideas was overruled by the central government. All that has been tried is regulation, always inadequate and in any case dismantled as rapidly as possible, increasingly so since the days of P.M. Thatcher and President Reagan. Much of this happened under the Democrats, including repeal of the New Deal Glass-Steagall Act in 1999. The present crisis does not seem to have thrown up anything more enlightened than re-regulation, some of which could well be phoney, (8) even after the scandalous bailing out of banks and the astronomical financial rewards some of the most culpable top people have been allowed to walk away with. (9)
No one can predict how serious and far ranging the effects of the present credit squeeze will be. If the statistics about debt referred to above are considered frightening, those relating to the more general but related field of "derivatives" are even worse. In 2003 the total size of derivatives being traded was $85 trillion. (10) To try and bring out the immensity of this figure, John Lanchester printed out all the zeros instead of using the word trillions. But that figure already seems modest compared to those given by Ellen Hodgson Brown for December 2007 -- $681 trillion in derivatives, or 10 times the annual output of the entire world economy! (see note #5 above) Yet all this activity, in which the ugly word "leveraged" constantly crops up, can be mainly categorised as fantasy finance. It is essentially gambling, as Warren Buffet, now the world's richest man, has made clear. Gambling with all our futures I would say, certainly with our food as well as our energy security, the poorest suffering first, as always.
What Wall Street has called the "commodities super-cycle," with dealers taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials, has surely been expedited by the Fed handouts to these gamblers. The explosion in food and energy prices could well cause starvation on an epic scale. (11) I think we are justified in calling it economic terrorism.
7. G. Edward Griffin, The Creature from Jekyll Island: A second look at the Federal Reserve, American Media, California, 4th edition, 2002, p. 136. A word of caution about this book: Unless you believe America is already a socialist country you may consider Griffin to be an extreme right-wing crackpot. But that doesn't necessarily mean his history of the Fed isn't worth reading. (back)
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