1

ANALYSIS OF USURY I
I
With Proposals for
the Abolition
of Debt

by
JEFFREY MARK

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LONDON
J. M. DENT AND SONS LTD
 Printed by the Guernsey Star and Ga:utte
Company Ltd., in Guern.;~y, C.!., British Isles
for
f. M. Dent & Sons Ltd.
A/dine· House, Bedford St., London
All ri.~;hts reserved

First Published I935

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 CONTENTS

CHAPTER PAGE

PREFACE : CHRISTIANITY, SociALISM

AND MoNETARY REFORM 7

PART ONE

BONDAGE

I CoNTRoL BY ExPLOITATION • • 23
II THE MAJOR AND MINOR PRINCIPLES
oF UsuRY • 26
III BoNDS AND BoNDAGE
IV EARNED AND uNEARNED INCOME •
v DEBT AND DEPRESSIONS • •
VI WAR AND DEBT
VII THE PATHOLOGY OF DEBT •

PART TWO

FREEDOM

VIII THE ABOLITION OF CAPITAL DEBT • 8J

IX THE ABoLITION oF RENT • 97
X ABsoLuTE EcoNOMIC SECURITY • 107

APPENDIX: THE BANKS AND THE PuBLIC I 2 I

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 PREFACE
CHRISTIANITY, SOCIALISM AND MONETARY
REFORM

THIS book is at once a summary and an extension of

the argument and analysis put forward in the author's
The Modern Idolatry!. The writer makes no apology
for the fact that a few incidental phrases and passages
from this book are included in the present text with
little or no alteration.
It has been written under the force of an acute
conviction that the present crisis offers to the world
two e"'Ctremes of possibility, one leading to inter-
natior al disaster and the other to the realization of a
new ~nd unsuspected fulfilment of man's destinies
on .nis planet. The writer believes that there is no
tJ.. .rd alternative. Compromise may postpone, but
it cannot avert catastrophe.
The present policy of makeshift, together with
~~
the official attitude of sycophantic optimism which
! brings it about, is becoming, even to the casual
observer, more and more irrelevant to the funda-
il'i ;.'
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mentals of the situation. It is only by considering
!,
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the most desperate instances of man's material and
psychological frustration under present conditions
with the utmost seriousness that any real remedy is
likely to be found.
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( ~ London; Chatto and Windus, 1934•
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8 PREFACE

If the official attitude in all departments seeks to

avoid and condone and to concentrate on pallia-
tives and the treatment of symptoms rather than
causes, the forces which seek some basic reconstruc-
tion of society can be roughly divided into three
classes; those advocating some form of communism
or socialism, those concerned with monetary re
form and those which are convinced that the evil
of modern civilizations can only be overcome by th
practical application of humanitarian or purel
religious principles.
The aim of this book is to make some connectio
between these points of view and to show that th
essential conditions in all three of them will b
satisfied if men are enabled freely to exchange an
freely to consume the products of their thought an
labour.
This book, therefore, gives a somewhat compre
hensive account of modern financial processes, an1
examines the problem of exchange in relation to th
. circulation of money and credit .
'
In spite of this, it should not be considere
primarily as an attack on the present monetar
system, but as an attack on the accepted bases <
civilization itself. Psychological as well as materi
values are exchanged through the mediumship c
money. If money breaks down, civilization breal
down with it.
When, therefore, the author suggests that tl
monetary system forms the framework on whi1
civilization is built, it is not because he is unawa
QJ." unwilling to admit that the whole subject is r
 CHRISTIANITY, SOCIALISM, MONETARY REFORM 9
lated to sociological and psychological factors of l
prime importance. Modern psychology is a· pro-
duct of modern financial processes, just as modern
financial processes are the product of modern
psychology.
I •.
Monetary reformers have been quick to realize
that the issue and ownership of credit is a prime
function of sovereignty and, as such, ought to be
controlled by governments in the interests of the
communities they are supposed to represent. This
control has been abrogated in favour of the banking
systems of the world, and it is true to say that mone-
tary reformers realize more vividly than any others
the extraordinary nature of the power which comes
from this most patent usurpation of authority by
bankers and financiers. For, by means of this
usurpation, the community is forced to pay to its
banks enormous yearly sums as interest for the hire
of what is, in the last analysis, its own credit, while the
banks are given absolute control over all expansions
and contractions of credit, on which the fate of
individual businesses and nations depends. By the
same token, banks are given a blanket mortgage
against all present and future production. This
right of mortgage they can and do exercise to any
extent they may consider profitable or politic.
At the same time, monetary reformers, speaking
,.
. generally, have failed to make any specific attack on
the disruptive effect of mutual rent- or interest-
bearing debt-claims (misleadingly called capital)
between individuals, businesses, governments and
nations. In this respect, they are much farther
away from the crude realities of the present situation
 IO PREFACE

than are socialists and communists, whose attack is

primarily directed against the abuses consequent
upon private land and capital ownership. For if the
system of credit administered by banks controls
industry absolutely, it is administered as much or
more in the interests of private capital ownership as
in the interests of the banks themselves. In saying
this, the writer is fully aware that the banks hold
enormous exercised or unexercised capital debts
against the community, and that their functions as
issuers and owners of credit and as owners of pro-
perty or capital claims are inextricably joined.
I But while socialists are aware of the existence of
,I
this monopoly of credit and are more fully alive to
the disastrous effects of private land and capital
ownership under present conditions, they are most
lamentably ignorant, speaking generally, of the
:financial processes which instrument this monopoly
and this ownership and through whose agency the
community is so extravagantly exploited. The rank
and :file have experienced this exploitation at :first
hand and are quite rightly persuaded that no im-
provement will be forthcoming until this monopoly
and ownership is overthrown. But even their
leaders have very little idea as to how exploitation is
.i• effected. At best they do little more than give it a
name and dismiss the whole thing impatiently as
capitalist exploitation or a 'bankers' ramp'.
The fall of the last Socialist Government in this
country in I 9 3 I is a case in point. Although this
was undoubtedly brought about by a :financiers'
ramp on an international scale, it was a ramp to pre-
serve all capital claims, great and small, including
e,- --

CHRISTIANITY, SOCIALISM, MONETARY REFORM I I·

those of the small working-class investor; so that the

most able of the socialist leaders were forced not only
to capitulate, but to remain in office to ·praise
and support the opponents who had outwitted
them.
While saying this, the writer is iri full sympathy
with the socialist point of view. Like many another,
he can only deplore the fact that the historical ideo-
logy of socialism has been corrupted by the gross
political and material ambitions of present-day
socialist leaders.
Since Das Kapital was written, however, a new
situation has developed. Capitalistic exploitation has
given way to purely financial negation, and if the
new era of prosperity and justice is to be set up,
capital and labour must unite against a common
enemy-the financial system-which still keeps the
latter in subjection and which is now driving the
former precipitantly into bankruptcy. Karl Marx
made an exact examination of the productive pro-
cesses of his time. From this examination he was
able to make certain prophecies. Those prophecies
have now become facts. What is needed is a new
examination and a new prophecy.
But if the slipshod critical attitude of modern
socialists has prevented them from getting to real
grips with their enemy, humanitarian and religious
reformers are still farther away from any realization
of practical causes and practical results. Not only
have they not, for the most part, any first-hand
experience of the brutal incidence of the productive
mechanism on the lives of men, but they are
12 PREFACE

completely ignorant of the :financial processes which

make such an incidence inevitable.
On the other hand, their very ignorance in these
matters has prevented them from being led away
from fundamental issues. No ingenious schemes
for monetary reform, nor the abolition of private
property, but only a change of heart, will set man
free. 'The money power,' as William Jennings
Bryan said, 'can only oe overthrown by the awakened
conscience of the nation.'
But men whose conscience has been awakened
must not only champion the cause of the oppressed.
They must oppose the authority of the oppressors
with a higher authority and must be in a position
to confound their argument with a surer judgement.
Many of the scribes and pharisees of modern
:financial theory are fanatically sincere according to
their own lights, and if reformers are to dispute with
these modern elders of the Temple of the Gold
Standard they must be intimately familiar with the
workings of the new Mosaic law of debt, rent and
interest.

II

If it is a fact that all forms of public activity are

set up and maintained through the agency of money,
it is also a facr that money cannot be issued or
borrowed except through the payment of interest to
those who issue or own it. Yet, as far as the writer
is aware, no government has seriously questioned
the validity of the principle that money interest
must be paid on money lent.
 CHRISTIANITY, SOCIALISM, MONETARY REFORM I 3
Yet the 'root of the trouble is in this principle
itself,-and usury has been the curse of the world since
the days of Adam. The system of money-lending
operated hy the bankers and financiers of the world
is nothing more or less than a book-keeping elabora-
tion of a principle which all great philosophical and
i
religious thinkers, and the Catholic Church itself,
have condemned throughout history.
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Within this major principle is contained the minor

principle of usury, the private lending at interest
between individuals, businesses and nations, effected
through stocks and shares, mortgages and other
instruments of debt. Rents due on the capitaliza- .
)
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tion of land and property values are, as will be
shown, special cases of the operation of the principle
of usury.
The connection between bonds and bondage is no
mere accident of languag'E"" ·Unci"er-·--me"'pie'sent
system, the driving force behind industry is not the
free exchange of commodities to the individual and
common benefit, but a competitive attempt to get ..;
opposing individuals, businesses or nations into
debt by capital accumulation so that rent or interest
will be forthcoming as tribute. Th1s "is -·:nar·ex-
cliarige, but commercial warfare in which subjuga-
tion is effected by the mutual exploitation of home
and foreign markets.
The fact that these debts are not necessarily owned
by those who create them does not alter the situation
in the slightest. Investments can be bought and
sold on the Stock Exchange and stand as 'assets' to
the last purchaser. They are nevertheless debt-
 PREFACE

claims against the community as a whole. Capital,

in fact, is debt, and debt is capital. Under such a
system it is clear that capital can only be realized by
regarding the interests of the holders of these debts
as directly opposed to those of the community which
supports them.!
I
This opposition applies equally to the inter-
national situation. Foreign investments, which take
I.,.
up the balance of indebtedness in international
trading, and which similarly are not necessarily
held by nationals of the countries which create !'
them, can only be realized or supported by regarding
the interests of the holders as directly opposed to
those of the community of nations which make up
the world market.
,_; Under these circumstances, the equilibrium of
civilization is continually threatened by disruptive
forces from without and within. Inasmuch as the
process of becoming 'wealthy' is essentially a process
of holding debt-claims against the community (as
I
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internal investments), or' against the world market
(as foreign investments) and as becoming wealthy,
\under these conditions, has come to be regarded as
r1,the chief, if not the only aim of existence, it is not too
:much to say that industry operates not to harmonize
t~uman rel.atio_nships, but to set ~hem at varian~e;
jnpt to matntatn the peace of natwns, but to dnve
:tl\em to war.
For, since capital ownership begets power, society
is forced to take an active part in all processes of
debt-creation and to submit to the dictates of the

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CHRISTIANITY, SOCIALISM, MONETARY REFORM I 5

minority of individuals and groups who benefit
most extensively from them. There is an all-
powerful impulse, that is to say, to increase, abso-
lutely and relatively, that portion of national (or
international) income which can be appropriated as
rent, interest and other charges due on debt-claims.
The inevitable result of this is that the wages of
workers are forced and held down to the lowest
level that will be tolerated, while the disabled and an
increasing number of unemployed have no option
but to accept doles and benefits which are the lowest
consistent with human subsistence on this planet.

At the same time, this condition is constantly

aggravated by the very existence of foreign invest-
ments. Foreign debts are created by some coun-
tries exporting more than they import-i.e., by
maintaining what is euphemistically called a 'favour-
able balance of trade'. Apart from the fact that
this process involves the continuous sending away
of more Real Wealth, in the shape of goods and
services, than are received, it is manifest that not all
nations can succeed in such a mad and ignoble in-
version of policy. So that whether a nation is
getting other nations into debt or whether it is
attempting to pay interest and other charges due on
external debts which other nations have created
against it, it can only do so by competing with every
other nation, debtor and creditor alike, in the world
market. The inevitable result of this is an ever-
increasing competition to reduce costs and to throw
increasing 'surpluses' on to the world market by
mass production methods, long working hours and
wage slavery. The 'success' of any one nation,
 16 PREFACE

under these conditions, automatically creates a

necessity for all other countries to reduce its costs
still further, thereby actively promoting the cause of
wage slavery in all countries.
Even these instances do not fully indicate the
precarious nature of civilization under usury. The
grossest forms of injustice and absurdity are brought
about by the very existence of capital debts rather
than by efforts to transfer the rent, interest and other
charges due on them.
It is not convenient, at this point, to give any de-
tailed examination of the subject of debt. It will be
sufficient here to say flatly that the existence of
capital debt is in itself responsible for the existence
of bankruptcy. It is necessary to make this obvious
remark because the majority of otherwise well-
informed people somehow seem to imagine that
bankruptcies are necessarily caused by extravagance ·
or incompetence of some sort. While it is a fact
that bankruptcies may be brought about by these
causes, it is nevertheless true that bankruptcies
would still exist if all producers and traders showed
that model punctiliousness in business relationships
so unctuously applauded by bankers, judges, bishops,
politicians, educators and other pillars of society.
Unfortunately the fact of the matter is that all pro-
ducers and traders cannot so conduct business and
remain 'honourably ' out of debt as a reward for their
virtue, for the simple reason that so long as capital
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I debt is in existence one man's solvency is the cause
· ·of another man's bankruptcy.
Inasmuch as enforced poverty and the fear or
 CHRISTIANITY, SOCIALISM, MONETARY REFORM I 7
actual fact of bankruptcy are at the root of nearly all
the social evils of our time, and inasmuch as these
conditions are allowed to continue side by side with
the existence of enormous unpurchasablc 'surpluses'
of goods which are either withheld or destroyed, it is
sheer hyprocrisy to condemn crime and vagabondage,
to attempt the 'reform' of criminals and prostitutes,
to develop elaborate theories about the 'compensatory
escape mechanisms' of mental and nervous sufferers,
to dogmatize about capital punishment and suicide,
or to look askance at (ol.", on the other hand, 'broad-
mindedly' tolerate), the many and various forms of
psychological perversion, until capital debt itself has
been utterly abolished from society.
The reconstructive proposals in Part I I of this
book are therefore concerned with the details of a
mechanism to liquidate all public and private capital
debt, to abolis\{;w...and interest and all the absurd
paraphernalia o e present debt-structure and to
effect the complete distribution of all the products
of industry to consumers.
They are referred to socialists as a means to bring
about all the declared objects of their policy. Present
socialist schemes to effect these reforms are usually
vague or violent, because they proceed from an
examination of the brutal conditions brought about
by modern productive processes rather than from an
examination of the monetary mechanism which
makes those processes and conditions inevitable.
It is true that the exploitation of the poorer classes
is effected through the agency of profits, rent and
interest. But unearned profits are received as interest
B
 18 PREFACE

due on capital invested, while rents on land, plant and

property are, as has already been suggested, parti-
cular cases of the operation of the principle of usury.
The fact that profits may be received by a rich
sleeping partner or shareholder and that the widow of
a working man may depend on a little interest deriv-
ing from the investment of his hard-won savings
does not interfere with the fact that both are re-
ceived as charges due on debt-claims, and that
industry must support them both.
Similarly, there is no fixed landowning class, as
active socialists seem so anxious to suggest. It is in
general possible for any capital owner, including the
poor widow, to realize his or her investments and
buy land with the proceeds; thereby exchanging an
interest privilege for a rent privilege. In the con-
trolling financial aspects of the matter, there is not a
ha'p 'orth of qilferei1c:;e J:?~tweeQ .rent a1,1~}~~~,r,~~t.
The Industrial Revolution brought about the
ousting of large sections of the former landed classes
by industrial magnates. Speaking generally, the
industrialists were and still are able to exchange their
interest or profit privileges for rent privileges to any
sox_tent they considered it or now consider it profitable
e!;''"'llt:!esirable to do so. Capital, whether invested in
or L..fon·nment, municipal or industrial shares, or 'sunk'
9ovetd a plant or property, is accumulated largely
b lan >'h · '1terest is paid on it, and private property or
ec~u,se . Jz ts, as at present understood, are a by-product
11

captta rzg ·~:1..

of usury. 'l.A
If th del '1-:lt-claims and the rent or interest privi-
' de~, on r·hem are abolished, an entirely new
1eges u · ·
 CHRISTIANITY, SOCIALISM, MONETARY REFORM I 9
situation is created. It is simply not true to say that,
in order to abolish these privileges, the State must
assume the ownership and control of the productive
processes. To abolish debt, rent and interest, all that is
necessary is to abolish them.
When this is done, men will be enabled freely to
exchange the products of their thought and labour,
and no one will be able to lay the community under a
rent or interest tribute because of the ownership of land,
bonds or anything else. Active socialists are reminded
that the following passage occurs in the Communist
Manifesto of Marx and Engels :

'Communism deprives no man of the power to

appropriate the products of society; all that it does
is to deprive him of the power to subjugate the
labour of others by means of such appropriation.'

The author's proposals are referred to monetary

reformers, whose schemes, with a few notable excep-
tions, are· concerned with the righting of numerous
glaring absurdities under the present system, rather
than with an attack on its fundamental principles ..
When capital debt has been abolished and steps have
been taken to prevent its further accumulation, these.
absurdities will automatically disappear.
They are submitted to the consideration of all
people who wish to see Christian principles made
effective within the mechanism of society. Under
present conditions, exhortations to lead the Christian
life and, at the same time, to observe the legal and
social conventions of civilization, are impertinent.
No reconciliation between 'real life' and the Christian
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life is possible so long as usury obtains. The prac-

tice of even the most elementary principles of Chris-
tianity is impossible in business and commerce
generally because the working classes are forced to
submit to the grossest forms of indignity and exploita- i
tion so that some proportion of producers and traders '\
may achieve competency or maintain a precarious
solvency at the expense of the bankruptcy of the
remainder. . 'i
!

Religious leaders have not only tolerated this, but,

inasmuch as the sources of their temporal power derive
from interest on investments and rents on land and
property, they have accepted the system of bonds
and bondage as necessary to the continuation both of
themselves and of society. If the Catholic Church
wishes to establish itself in the confidence of the
people, it m~st ~estate and r~-enf~rce its traditional
ban on the pnne1ple of usury m alltts forms. : .
Lastly, they are addressed to all men who honour
the name of democracy; to all who have heard the
voice of Blake, Burns and Beethoven; of Tom Paine,
Cobbett and Whitman; of Jefferson, Jackson and
Lincoln: to all who hold that men have an inalien-
able claim to consume and enjoy the full product
of their thought and labour; to all who believe in the
essential goodness of human beings and who are
quick to resent any affropt offered directly or in-
directly to their dignity; and to all who hold liberty
of thought and action to be one of the natural and
imprescriptible rights of man.
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! PART I
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{
t BONDAGE
Debt is a fantastic abstraction whose ultimate effect is to
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- confound debtor and creditor alike.

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 CHAPTER I
CONTROL BY EXPLOITATION

MAN, as part of a social mechanism, lives by ex-

change. His labour in the provision of goods and
services entitles him, or is supposed to entitle him, to
a fair claim on the products of the labour and thought
of his fellows.
The evil in men, singly and collectively, is active
in the promotion and legalization of methods and
processes which will secure a disproportionate return
of the products of the land and industry to certain
individuals or collections of individuals within the
mechanism of societies. The ultimate control of
sociological processes thereby tends to gravitate to
individuals and groups who benefit most extensively
by these processes.
Now while the existence of processes of exploita-
tion as a determining factor in the conduct of busi- "
ness is admitted by nearly everybody, it is not so
commonly realized (this book will set out to prove)
that the political and legal machinery of civilizations
is designed, consciously or unconsciously, it matters
not which, to sanction and indeed enforce such
methods ensuring unfair appropriation of productive
return on a national and even international scale.
It is still less frequently realized that the fundamental
objection to such methods of licensed expropriation is
not so much in the inequitable relationship that is
23
 ANALYSIS OF USURY

thereby established between exploiters and exploited,

as in the fact that within these processes themselves is
contained the root cause for nearly all the social dis-
turbances-from riots and revolutions . to inter-
national wars-that have occurred in the history of
civilizations.
During crises such as we are passing through at the
present time, the truth of this becomes increasingly
. apparent. What is more rarely realized is that these
crises, which succeed each other on an ever-increasing
scale, are continuously being prepared during periods
of so-called prosperity. When the real significance
of present financial processes is more perfectly under-
stood, it will come to be seen that the normal course
of the commercial struggle, which we call peace, is
but a preparation for that breaking down of the
commercial struggle which we call war.
'What,' says Tom Paine, 'is the history of all
(Governments) but a disgustful picture of human
wretchedness, and the accidental respite of a few years'
repose? Wearied with war, and tired with human
butchery, they sat down to rest and called it peace. ' 1
The ethical, as opposed to the factual cause for this
is not far to seek. Human nature is such that the
'benefits' obtained through the exploitation of others
fundamentally pervert the recipients; and the history
of nations is but the history of the struggle of these
recipients and their heirs and subsidiaries for the
maintenance and extension of these 'benefits' by the
organized exploitation of the world market. It may
be difficult to recognize and proclaim the existence of
1
Rights of Man, (1791), Introduction to Part II.
 " '

CONTROL BY EXPLOITATION

this perversion, especially in otherwise upright

individuals whose controlling position is ratified by
common consent and full legal authority, but the
sins of these exploiting fathers are visited, with
increase, on their children of the third and fourth
generations during wars and 'depression' periods.
It is difficult to admit this, just as it would be
untrue to say that the rich oppress the poor. All but
a small minority of wealthy people are merely the
indirect instruments of an organized exploitation
which is implicit in the debt-system itself. But
I while many wealthy people may be unwitting, few
I' are unwilling instruments of this oppression.

:II The sufferings of the poor, during prosperous and

·11
depression periods alike, need no special mention
here, but it takes the passage of years and a full
r:'' historical perspective to realize that all aristocracies,
ii
I whether of wealth, title, culture, leisure or estate-so
I
long as they are based on the automatic exploitation
of inferior components in societies-are transitory
and instinct with the essence of decay. Under these
circumstances, civilizations, alike in growth and
decline, are obstructed as much by the perversion of
authority, as by the frustration of the exploited.
If then, men live by the exchange of the products
of their labours, and governments, as will be shown,
. ' can be defined as mechanisms to enforce these
processes of licensed appropriation of production in
favour of controlling minorities, it should appear as a
first possibility, and it is, in practice, a fact, that this
exploitation is effected through the control of the
medium of exchange, i.e. money.
 CHAPTER II
THE MAJOR AND MINOR PRINCIPLES OF USURY

THE medium of exchange, which thereby becomes

the instrument of exploitation, is not controlled by
governments, as is vaguely supposed by the large
majority of people, but by a highly-organized syndi-
cate of national and international moneylenders
which operates through the banking systems of the
world, the Bank for International Settlements at
Basle and the League of Nations machinery at
Geneva. This control is supplemented by direct or
indirect co-operation with independent financiers
and powerful financial agencies throughout Western
civilization.
This control of the medium of exchange is, in
effect, so absolute that the processes of modern
civilizations become merely subservient components
in an international financial mechanism, which-like
the international armaments racket it has sr.awned-
knows no frontiers, geographical, politica, cultural,
or ethical, and which seeks to perpetuate the evil
and disruptive principle of usury against the teaching
of all the highest philosophical and religious
auth,wity.
Tht-re are two forms of usury. The major form
is that represented by bank loans and the discounting
of bills, and the minor form by the creation of
26
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r MAJOR AND MINOR PRINCIPLES OF USURY 27-

I interest-bearing savings, investments, or inheri-
I
tances, which, as Government or municipal ·stock,
industrial shares, bonds, debentures, mortgages, or
capital claims on land, plant and property, make up
the debt-structure in every country. The common
and essential feature in all these processes, here com-
prehended as the major and minor principles of
usury, is the payment of money interest on money
lent.
The act of lending itself creates an equivalent
debt; and debt-quite apart from the interest or rent
that is due on it-has come to be regarded as capital
or 'wealth', whereas the Real Wealth of a nation is
determined by the nature and extent of its natural
resources, the capacity of its productive equipment
and the ability and willingness of its people to
deliver goods and services as, where and when
required. The source of all Real Wealth is the four
elements and man's labours therein.
Financial debt, as will be shown, is largely a
measure of Real Wealth not consumed. It should
therefore be represented by a positive and not a
negative symbol. Under present circumstances,
capital 'wealth' stands as an asset to the firm or
individual which owns it, but it is clearly a debt-
'""· claim against the community as a whole. Capital is

·---
(' debt, and debt is capital.
A fact which is not, but which should be, common
knowledge, is that all money, in and out of circulation,
now comes into existence as an interest-bearing
loan in favour of the banking systems of the world.
Bank deposits, which are drawn upon by cheque,
 ANALYSIS OF USURY

and which form the large bulk of the medium of

exchange, derive from the progressive creation and
extinction of bank loans.l Bankers do not lend, as
is popularly supposed, other people's money. The
money which they lend is money which, in effect,
they themselves have created for this purpose. 2 If,
during any year, more loans are granted than are
recalled, the money in existence is increased, and vice
versa. 2
So that, in the literal sense of the word, the public
do not 'own' any money at all. No one really has
any money 'on deposit', because all money 'owned'
by depositors derives, through the circulation of
deposits by cheque, from a created loan made by the
banks to someone else. The bankers' much adver- !! .
tised care for public deposits is therefore the expres-
sion of an anxiety for what is, in the last analysis,
their own property.
I
(In making this statement, the writer does not wish !

to suggest that bankers do not respect, as far as it is

possible for them to do so, the wishes and welfare of
individuals and the progress of agriculture and
industry in their administration of 'public deposits'.
Banks, as administrative entities, are second to no
other public or private concern in efficiency and
departmental integrity.)
1 The phrase 'bank loans' should here be taken to include all bills
discounted and all securities bought by and held in the banking
systems. Loans, bills, and securities come into existence through
processes which establish all three as the property of the banks which
issue or buy them. The sum of all loans granted, all bills discounted,
all cash held and all securities bought by the banking systems is
approximately equal to the totality of bank deposits. (See The
Modern Idolatry, Appendix B.)
• See Appendix to this book.

j
l
'
I
I MAJOR AND MINOR PRINCIPLES OF USURY 29 ·
I' The fact that the banks are technically liable to pay
I out public deposits in gold, or in currency..:notes
I 'backed' by gold, need not be gone into in any detail
here. The processes of credit creation and the utter
speciousness of this liability are fully discussed in the
i
' author's The Modern Idolatry and in the Appendix to
this book, to which the reader is referred.
In Great Britain, for instance, there is in existence
at the present time something less than £2oo millions
of monetary gold, while bank deposits of about
£2,500 millions are outstanding. There is a
'fiduciary' issue of Bank of England notes backed by
Government securities, which, together, with the less
than£ 200 millions of notes 'backed' by gold, makes a
total note-issue of less than £450 millions. In ad-
dition, there are some £ro millions of bronze and
some £4o millions of silver coin.
)
l
I It is therefore a mathematical impossibility for
more than about one-fifth of the totality of bank
deposits to be paid out in currency, even if we allow
the unwarrantable assumption that £450 millions of
notes can be 'redeemed' by £2oo millions of mone-
tary gold.
Since the suspension of the r 92 5 Gold Standard
Act in I 93 r, however, the Bank of England has been
exempted from its liability to redeem its notes in
gold, so that the actual status of Bank of England
notes is now, to say the least about it, extremely
dubious.
If they arc promises to pay on demand, but not
gold, they are promises to pay what?
30 ANALYSIS OF USURY··

When it is remembered that bronze and silver

coins need only be accepted as 'legal tender' if pre-
sented in very small amounts, it will be admitted that
circumstances and the law have enabled banks to
reduce their coin and notes for the paying out of
public deposits to a woefully inadequate mixture of
very doubtful quality.
In actual practice, it can fairly be said that the
legalized restriction of bank note-issue to the amount
of gold held by the banks plus the amount of the
fiduciary issue, as well as the restriction of the legal '
tender status of the bronze and silver coins, is part of \
an elaborate legal mechanism to excuse the banks
their discharging their obligations by making it literally
impossible for them to do so.
'
Under the present dispensation, coins and notes
are simply tokens which, irrespective of their status as
'legal tender', effect a relatively unimportant propor-
I
I
tion of transactions between individuals and busi- I
nesses. The ratio which cash transactions bear to
cheque transactions in any industrialized country is I
I
i
small. In any case, the means to cash purchase
derive preponderantly from cheque payments be-
tween employers and the banks themselves.
On the other hand, some £2,500 millions of bank
deposits in Great Britain and some $ so,ooo millions
in the United States, are the measure of an e'uer-
increasing and irredeemable interest-bearing debt in
favour of the banks and against society. The charges
on these debts (which vary with the rise and fall of
bank rates which are fixed, not by governments, but
by financial authority) are of the order of £100

I
t
!
i
 MAJOR AND MINOR PRINCIPLES OF USURY 3I
millions per annum in England and $2,500 millions
in the United States. This relationship between
the banks and the public expresses the principle of
usury in its major form.
The creation and extinction of bank loans, which
determine the dimensions of bank deposits, control
industry absolutely. Inasmuch as man lives by
exchange, this ownership and control of the medium
of exchange as an irredeemable interest-bearing debt
against industry and society, places bankers and
financiers in a position of absolute authority through-
out Western civilization.
The fact that certain individuals and businesses
can and do pay back their bank loans, does not
interfere with the fact that society, as a whole, can
never repay its obligations to the banks. Inasmuch
as the totality of bank deposits increases from year to
year (during the World War, for instance, bank
deposits in Great Britain rose from some £7 50
millions to about £I, 760 millions), society's obliga-
tions to the banks, far from being reduced, are
continually being extended.
In practice, this position is obscured, because the
industrial circulation of bank deposits-effected by

I
f
cheque transactions between individuals and busi-
nesses-brings into existence subsidiary debt-claims,
called investments, which subsequently develop to an
amount greatly in excess of the totality of bank
I deposits.
!
The costs of industry, whether represented by
! payments for raw materials or intermediate commodi-
ties, for wages, salaries and dividends, or for over-
I,,
''
32 ANALYSIS OF USURY

head charges of any description, are preponderantly

negotiated by cheque (i.e., by the circulation of bank
deposits), and are the source of all incomes, whether
spent, saved, or invested. At the same time, they
are costs which must be recovered, in tlteir entirety,
if producers, as a whole, are to remain solvent.
These costs are recovered, or are supposed to be
recovered, through the agency of prices charged for
commodities produced. Into the price of all inter-
mediate and ultimate commodities is written all the
individual costs entailed in their production-includ-
ing the profits which the producer receives, or expects
to receive. Inasmuch, however, as the totality of all
incomes generated directly or indirectly in the pro-
duction process is included in these costs, and as
these costs can only be recovered through the sale of
goods, it is axiomatic that these costs will not be
recovered, in their entirety, unless ali incomes gener-
ated in the industrial process are spent in the purchase of
commodities produced.
In point of fact, these incomes are not all so spent.
Every year, a proportion of the gross income created
is withheld and carried over as savings or invest-
ments. This creation of interest-bearing savings
and investments is the minor principle of usury.
It is here called the minor form, because although
savings and investments (including the gross capita-
lization of land, plant and property) exist in quan-
tities much greater than the totality of bank deposits,
the former are entirely controlled by the major
principle of bank loans. Investments and debt-
claims in general derive from the private or industrial
circulation of bank deposits, whose dimensions are
 r

MAJOR AND MINOR 'PRINCIPLES OF USURY 33

determined, as has been said, by the issue of bank
loans, by the discounting of bills and by the buying
and selling of investments by the banks. (See foot-
note top. 28.)
The economists and other professional apologists of
the present system have evolved a variety of highly in-
genious but entirely specious arguments to justify the
principle of usury in both its major and minor forms.
With regard to the major form. In spite of the
fact that the original intention in both the British and
American constitutions (to mention no others) was
that their respective governments should own, issue
and control all the money in circulation, this right to
lend, as opposed to their present necessity of eternally
borrowing from the banks and the public, has been
abrogated by governments in favour of the banks,
because it is maintained that governmental control of
credit would be 'dangerous', as it might be used by
politici'ans to 'further party ends'.
There is a 'danger' attached to every enterprise in
this life, including that of crossing the street, and the
• selection of the least dangerous from a group of
alternatives is a function of common sense. The
alternative ofleaving the issue, control and ownership
of the whole of the money circulating through
Western civilization in the hands of a highly organ-
ized syndicate of international banker-moneylenders
is surely not one which common sense in any country
would choose. The true answer to the arguments of
bankers in this matter was nobly given by William
Jennings Bryan in his famous 'Cross of Gold' speech,
delivered at Chicago in I 896.
c
-------------------------
1
I
'
34

l
ANALYSIS OF USURY

'We say on this platform that the right to coin and issue money
is a function of government. . . . We believe that it is a part of
sovereignty, and can no more with safety be delegated to private
individuals than we could afford to private individuals the power to
make penal statutes or levy taxes ... .'

It is further suggested that money and credit,

which are administered remarkably efficiently by
bankers and financiers at present, would be placed in
the hands of 'muddling politicians' whose efforts in
other forms of control in the past have not been con-
spicuously successful. The writer holds no brief
for politicians in general, but it is important and only
fair to realize that, far from being rulers, statesmen
are themselves governed by an inflexible financial
power whose policy they know little about and under.:.
stand less.
This control, which recognizes no authority above
it on this planet, radiates from the centre largely
through the meetings of central bankers and power-
ful financiers at the monthly meetings of the Bank
for International Settlements at Basle. This author-
ity is international, and its orders or general policy
are carried out in the political sphere in individual
countries, through the mediumship of the various
Treasuries concerned. In agriculture and industry,
this control is exercised through the administration
of credit by joint-stock banks.
In England, for instance, the control of the Bank
of England over all forms of credit, on which the
fate of individual businesses depends, is absolute.
The Bank of England is a private corporation, the list
of whose shareholders is not made public and whose
actions and policy cannot be questioned by the
r . .,.
·····--·~--

MAJOR AND MINOR PRINCIPLES OF USURY 35

representatives of the British people in Parliament
assembled. Under these circumstances, the Gover-
nor of the Bank of England is in a position to
engineer and enforce any expansion or restriction of
credit advocated by the international control in the
face of any objections that may be made by political
authority. In point of fact, such objections are very
rarely raised because politicians, as has been said,
have little or no knowledge of these financial pro-
cesses which ultimately control all major aspects of
their policy.
In the political, as opposed to the industrial sphere
of financial control, the situation works down roughly
to this. What the Cabinet decides, the Parliament
generally speaking, enacts. What the Cabinet
decides, depends on what the Treasury says it can
afford to do. What the Treasury says it can afford
to do is what the Bank of England policy permits it
to do. What the Bank of England policy is, de-
pends on what the councils of central bankers decide
it should be. What the councils of central bankers
decide, depends on the maintenance of superstitions
with regard to so-called gold 'backing' to currencies.
Under these circumstances, it is idle to discredit
the name of democracy, or to blame politicians for its
failure.
The world in fact is governed by a gold-mining
and financial autocracy which battens on these super-
stitions, and whose authority is so absolute and far-
flung that the historical dictatorships of Alexander,
Caesar and Napoleon become feeble by comparison.
Whatever may be the results of policies which
..........___________________
ANALYSIS OF USURY

proceed from an authority outside the control of the l

1,'
governments of individual nations, governments are
held responsible. Their chief function in fact is the
provision of palliatives which will be acceptable to
the people when such policies have been determined
and carried out. If these policies result in such a
general financial stringency that tolerable palliatives
cannot be provided (as for instance during severe
deflations of credit) governments will fall. States-
men serve both as marionettes and scapegoats for
the policies of bankers and financiers.
With regard to the minor principle of usury, it is
claimed that investments represent voluntary absti-
nence from consumption, and therefore ought to be
rewarded by annual interest payments, in proportion
to the amount of this abstinence, for ever and ever,
amen. A more hypocritical and, as it will appear, a
more brainless argument was never put forward in
the cause of self-righteousness. How it has come
about that a man who already has more money than
he can or wishes to spend should thereby be entitled
to retain his money and to receive a yearly payment
from industry for not spending it, is past finding out.
Secondary motives for saving and investing-con-
cerned with the necessity for providing for old age,
sickness, bad times, or a problematical future will
be dealt with later.
Technically, investments are justified, it is said,
because they represent capital put back into industry
and therefore generate incomes (as they undoubtedly
do), for the future purchase of commodities. Un-
Jortundtely the industrial employment of investments also
generates a new set of costs equal in amount to the new
 MAJOR AND MINOR PRINCIPLES OF USURY 37
incomes generated. So that, in the new cycles created

l by the industrial employment of investments,

equally for the cycle or cycles in which the invest-
ments th~mselves were created out of income-these
! new costs can only be recovered, in their entirety, if
all the new incomes generated are spent in the pur-
chase of commodities produced. Here again, in the
new cycles, the new incomes are not all spent, but
are partly withheld as savings, or participate, as in-
vestments, in some future cycle or cycles of produc-
tion-in which the same process will be repeated.
It is untrue and altogether dangerous to suggest
or let it be implied that the principle of investment is
sound merely because incomes are thereby returned
into circulation. It is not sufficient that incomes
return into circulation through investment. They
must go direct into consumption.
The writer is, of course, aware that, under the
present system, savings and investments are used
for the promotion of new productive or distributive
enterprises, and that, apparently, the productive
equipment of a nation can only be extended by a cor-
responding abstention from the purchase of con-
sumable goods by the community as a whole. This,
however, is not a necessary condition and in Part II
of this book will be found the details of a mechanism
by means of which the extension of productive equip-
ment can be brought about by the issue of new money
for this purpose. Here we are simply concerned
with the disruptive effect of savings and investments
under present conditions.
It is unprofitable to follow out any further this
 ANALYSIS OF USURY

maze of incomes generating investments and invest-

ments generating incomes. The professional apolo-
gists of the present system are paid to lose themselves
!
in it. The unavoidable fact is that over any period
only a proportion of incomes generated (whether
by the industrial use of bank credit or investments)
I
is spent in the purchase of commodities produced.
As the whole of these incomes must be so spent if
production costs are to be recovered in their entirety,
it is mathematically certain that the balance of
savings and investments, which accumulate by the
snowball process described above, must be set off
by a running balance of unpurchased goods, whose
total financial value will increase as the running total
of savings and investments increases.
It follows that, as a direct result of the accumula-
tion of savings and investments, not only will con-
sumers not be able to purchase all that they produce, but
a certain proportion of producers will inevitably be
forced into a state of actual or potential bankruptcy.
This situation is fundamental to all forms of socio-
logy under usury, and it is on such a fantastic basis
as this that all modern civilizations are precariously
maintained.
It is no mere coincidence that all the major co-
ercive and moral forces of civilization seek to en-
courage savings and 'judicious' investments as
opposed to reprehensible and 'short-sighted' habits
of 'extravagant' spending. In this, the Church,
both as a social organization and a moral influence
has been a prime offender. On the other hand, it
is significant that those sections of the community
which spend all or most of the money they receive
 MAJOR AND MINOR PRINCIPLES OF USURY 39
derive from such despised or neglected categories
as poor people who spend all because they must,
reprobate sons of wealthy fathers, ne'er-do-wells,
drunkards, and prostitutes.

/
/
 CHAPTER III

BONDS AND BONDAGE

THE fact that a certain proportion of what is produced

in every country is not purchased internally because
total production costs are always greater than gross
community spendings, is obscured in practice;
firstly, because a certain proportion of businesses can
and do make profits or maintain a precarious sol-
vency at the expense of the bankruptcy of the re-
mainder; secondly, because bank deposits and the
volume of investments with them normally increase
from year to year; and thirdly, because these un-
purchasable 'surpluses', as they are politely called,
are thrown on the world market, and their
profitable disposal attempted by means of a process
which is euphemistically referred to as foreign
' tra d e ' .

The fact that the profit-making or running

solvency of a proportion of producers can only be
maintained at the expense of the bankruptcy of the
remainder brings into existence an entirely unethical
perversion of the Victorian doctrine of the survival
of the fittest, in the commercial struggle for exist-
ence. This automatically encourages the develop-
ment, through material reward, of all the undesirable
and retrogressive elements in human character. At
the same time, producers and traders are necessarily
40
 BONDS AND BONDAGE
so occupied in 'making money' that they have little
or no time to consider where in fact it does come
from or where it goes to. Questions of monetary
policy on large-scale issues which fundamentally
affect the fortunes of each and every one of them, are
consequently left to financial 'experts' who are pro-
fessionally inhibited from considering the disruptive
as opposed to the so-called 'creative' function of
investments.
With regard to the second obscuring cause, a
continual increase in the volume of bank 'credit'
disguises the existence of the invariable disparity
between costs and spendings by constantly increasing
the dimensions of the debt-structure through re-
funding and new capitalization. The serpent of
debt is swallowed up by a larger serpent, and the
larger by a still larger. The living nightmare for
every nation, whether it realizes it or not, is that if
this larger serpent of debt is not allowed to swallow
its smaller predecessor, the smaller one will begin
to swallow the nation.
The fundamental situation with regard to foreign
'trade', the third factor under consideration, is con-
sistently ignored by all the professional apologists
of the present system. Inasmuch as the principle
i of usury, in both its major and minor forms, is uni-
I
1']·
.
versally accepted and enforced, production costs are
\;
I
always greater than internal spendings in every
i. country in Western civilization to-day. Under
these circumstances, it is obvious that the insolvency
1.
of any one of these countries can only be improved
(through foreign 'trade') by the intensification of
this condition of chronic insolvency in another
 ANALYSIS OF USURY

country or countries. This situation, which is at

the root of all difficulties in international politics
to-day, will defeat all efforts to promote goodwill
amongst nations and can only end in war.
I
The accumulation of interest-bearing savings and
investments creates an unpurchasable 'surplus'
which every country must sell profitably in the
world market if its producers, as a whole, are to
remain solvent. It is obvious, therefore, that the
mutual exchange of commodities of equal financial
value-which is what foreign 'trade' ought to be
and is, indeed, represented as being-will not help. \
the financial position of producers in any country.
Every country must therefore sell more than it buys
(i.e., export more than it imports) if its industrialists
are to recover their margin of costs. There is a
driving necessity imposed on every country, that is
to say, to maintain what is called a 'favourable'
1balance of trade. The fact that commercial 'success'
1involves the continuous sending away of more Real
i Wealth, in the shape of goods and services, than are
'\·received, does not appear to have worried economists
,and Free Traders unduly.
In any case, of course, this 'success' cannot be
achieved by more than a proportion of nations at one
and the same time; and those countries which do, in
fact, suffer an 'unfavourable' balance of trade be-
come indebted to those countries whose balance is
'favourable'. This balance of international debt is
largely taken up in what are called foreign 'invest-
ments'.
The world market, like the internal markets
I
f
BONDS AND BONDAGE
which make it up, may expand enormously under
stimulus, but it is also a self.:contained entity which
likewise cannot, under usury, achieve any condition
of static solvency. But, whereas all national
productive mechanisms have a suicidal oppor-
tunity to achieve a running solvency in the
world market, there can be no financial resolu-
tion for the world market itself until planetary
communication is established and the populations
of Mars and Venus have been. impressed for
commercial exploitation under the rules of the
money game.

The running balance of costs which have not been

or which are not being recovered by the producers
of the world therefore appear either as internal or
external debt-claims-i.e., as domestic or foreign
investments-the only important difference being
that the rates of interest associated with the latter
are usually much higher than those chargeable on
the former. Inasmuch. as international financiers
have at their disposal enormous reserves of capital
which can be transferred wherever interest rates are
high or secure, it should appear that their advocacy
of international lending in this and that country at
\
'
ultimate rates of 5, 6, 7, 8, and even 9 and ro per
! cent, has a much more obvious basis than their de-
clared desire for financial 'reconstruction' in those
countries. Tlze vital trouble witlz tlze League of
Nations is tlzat, on the advice of its financial experts, it
lzas supported tlzis 'reconstructive' work tlzrouglz debt-
creation, in Europe in particular, and lzas been coerced
into using its international mandate to press for
exorbitant interest payments on, or deliberate increases
 44 ANALYSIS OF USURY

in, this vast nexus of international debt which bankers

and financiers control.!
To sum up the position for the producers in every
country, it will be seen that, not only are they faced
with the desperate competition of their fellow pro-
ducers at home for a share of inadequate internal
spendings, but that they are also faced with a still
more suicidal competition with the 'surpluses' of
l
every other country, 'creditor' and 'debtor' alike, in
the world market. And just as it is impossible for
more than a proportion of home producers to recover
their costs from internal spendings, so it is impossible
for all nations to maintain their solvency in the
world market. The temporary 'success' of one
nation, through the creation and profitable disposal
of vast 'surpluses' in the world market, automatically
creates a still more pressing necessity for every other
country to produce and throw out 'surpluses' at even ;_
lower prices to compete with that nation. l
'
The inevitable result of this world-wide competi-
tion to secure costs which, so long as internal and
international debt-claims are in existence, literally
cannot be recovered internally or extemally, is an ever-
~ 1If this is doubted, it should only be necessary to refer to the loan
, of £z6,soo,ooo floated as 6 per cept bonds for the 'financial recon-
' struction' of Austria in 1922"U'tlder the auspices of the League and
· issued at So. This rate of interest, taking into account the premium
, of redemption, works out at about 8~ per cent, and is secured as a first
' charge on the gross receipts fron:'l"'tlle 1\:lis'r;ian customs and tobacco
, monopoly. An international loan of £1o,soo,ooo was similarly l

>,
i granted to Hungary under the auspices of the League with interest at
\Jk per cent and issuing _at 88. Thi~ rate of interest works out at
'
•

\ ;~rly 9! per cent and 1s very heav1ly safeguarded by charges on

'
"
j: l'customs and monopoly revenues. Owing to the extreme fall in world
(.prices since the time of issue} the interest due on these loans is now
~considerably more than Io per cent in actual purchasing-power for
:Commodities. (See The Modern Idolatry, Chap. XXVII.)

f
i

i
 BONDS AND BONDAGE 45
increasing intensity of effort to reduce costs by mass-
production methods, long working hours and wage
slavery. There is no escaping this vicious see-saw
which all the educational and so-called moral forces
of society persist in representing as 'inevitable' and
as 'good' for the development of individual and
national character in the 'battle' of life. But in this
situation is the root cause for all conditions of slavery
(serf or wage slavery) which have developed in past
and present civilizations. The connection between
bonds and bondage is no mere accident of language.

I
Man has no desire to enslave his fellows, but, under
usury, he must.
• • •

If these processes have been understood, it will be

realized that the function of money-which should
be; ,the facilitation of the exchange of all the products
of industry-is fundamentally restricted and per-
verted by the creation of rent- or interest-bearing
debt-claims. The flow of the medium of exchange,
in both its national and international aspects, be-
comes the circulation of the evidences of debt, not of
wealth; the accumulation of which simply means
that an increasing proportion of gross income in
each country is appropriated by those who are in a
specially favoured position to create these evidences
against the interests of the community as a whole.
As individual members of society, we are never-
theless brought up from the cradle to believe that it
is possible (and desirable, of course) for each and
every one of us, by hard work and unfailing economy,
to stay out of debt. Yet the fact remains that, even
 ANALYSIS OF USURY

in the case of those individuals and businesses who

manage to maintain an absolute solvency, they are
part and parcel of an industrial mechanism and a
national or imperial entity which is hopelessly and
irrecoverably in debt. 1
If education, ecclesiasticism and culture served
the truth instead of the ends of the present system,
they would make it clear to every schoolboy and
schoolgir 1 that he or she is born into a debt-bound
society, and that-irrespective of their position with
regard to their personal solvency or insolvency-
their efforts on behalf of themselves, their children,
and their children's children can and will result in
nothing more than an increase in this debt.
At the outset, it should be pointed out that any
attempt to repay this debt-and indeed any attempt
to prevent its continuous increase-would immedi-
ately bring about national and international disaster. l
The repayment of all bank loans would automatically
wipe out all the money in circulation. The gradual
repayment of loan capital would reduce what is
t
t
called the 'working capital' of industry and bring on
the progressive bankruptcy of the nation. The !
redemption of the external debt-claims known as
foreign 'investments' would destroy the medium of
international exchange and bring foreign trade to a
standstill.
lI
It shoul~ then be shown that every member of !
society who, directly or indirectly, owns a debt- i~
i.
claim of any sort-a deposit in a savings bank, a
government or municipal security, a claim on land, '
l
1 See footnote to p. 57. l
;·

1
f,

I
J
 BONDS AND BONDAGE 47
plant or property, or a share in some industrial con-
cern-has an entry in his books which he calls wealth,
and on which he proposes to draw eternal rent or
interest; and that, inasmuch as such claims 'repre-
sent loss, not gain, debt, not credit to the community,
they are only realizable by regarding the interests
of the holders as directly opposite to those of the
community'.! Further, that the maintenance of
these debt-claims creates a running 'surplus' of un-
purchasable commodities, which, at one and the
same time, prevents the community from buying
and consuming what it produces and forces a certain
proportion of producers, at all times, into a state of
,.
actual or potential bankruptcy.

It would then, no doubt, be difficult to explain

why wealthy men-i.e., those who hold an excep-
tionally large number of debt-claims against the
community-should be held in such universal regard,
should be placed in special positions of power and
authority, and should receive such a disproportion-
ate share of some or all of the rewards of material
wealth, title, culture, leisure or estate which this
civilization has to offer.
1 Major C. H. Douglas, Economic Democracy, London, Cecil
• Palmer.
j
I

I
 CHAPTER IV

EARNED AND UNEARNED INCOME

IT is, of course, a fact that society offers every

possible inducement to individuals, businesses and
nations to accumulate interest-bearing debt-claims
against industry-the banking systems, in particular,
being given a free hand to create loans against the
community to any extent they may consider it pro-
fitable or politic to do so.
The inevitable result is that debt-claims (capital)
increase at a much faster rate than production. As
Mr. Bassett Jones, one of the original founders of
the group of American scientists and engineers who
assembled their findings and theories under the
name of Technocracy, has tersely put it:

'Population (in the United States) has been in-

creasing as the square of time, production as the
third power and debt as the fourth power of time.'

Although these extreme ratios of disparity do not

hold good for other countries, it can safely be said
that, in all industrially developed communities, pro-
duction increases at a much faster rate than popula-
tion, and capital debt at a faster rate than either.
Inasmuch as debts can only be supported by the
sale of commodities, it follows that goods go into pawn
48
 EARNED AND UNEARNED INCOME 49
Jaster than they are produced. That this is actually
the case does not become apparent until the debt-
structure, relative to the dimensions of production,
has accumulated beyond the point at which the
latter can pay the more or less fixed rent, interest,
and amortization charges due on the accumulated
debt.
The industrial process, in the controlling financial
aspects of the matter is one of the continuous circula-
tion of bank deposits by cheque. In Great Britain,
for instance, bank deposits of some £2,ooo millions
(in round figures), circulating about thirty times a
year, give total cheque payments of about £6o,ooo
millions. By an examination of these payments
it is possible to discq;ver the principles which control
the whole economic activity of the community.
These payments can be divided into four main
categories. Firstly, as external payments made by
one firm to another for goods or professional ser-
vices; secondly, as internal payments for wages,
salaries, dividends, rents, royalties, and taxation;
thirdly, as payments for the purchase of final com-
modities for personal use or consumption; and
fourthly, as payments for what the writer refers
to as capital transfers. This latter phrase should be
taken to include all buying and selling of land,
plant, property, mortgages, stocks, shares, and in-
vestments of every description, whether of a private,
public, speculative or non-speculative nature .
. Of the £6o,ooo millions cheque payments made
annually in Great Britain, probably more than
£4 s,ooo millions can be included in this latter eate-
n
so ANALYSIS OF USURY

gory.. These payments nevertheless represent trans-

fers of capital values which have accumulated as
interest- or rent-bearing debt claims by appropriation
from incomes developed during the industrial pro-
cess in previous years. During so-called prosperous
periods in particular, the net result of these transfers
from one account to another is simply, as far as the
balance sheet of industry as a whole is concerned, to
add to this debt accumulation.
Of the remaining1 £r s,ooo millions, some
£s,ooo millions represent cheques made for the
purchase of ultimate commodities by private con-
sumers, together with payments made on account
of municipal or governmental taxation, as well as
payments made by municipal and governmental
authorities from these receipts.
Of the remaining£ r o,ooo millions, some £6,ooo
millions are per contra entries inasmuch as they are
payments for goods and professional services made
by one firm to another. They are simple transfers
of bank deposits. which clearly do not affect the
balance sheet of industry, as a whole, one way or the
other.
The remaining £+,ooo millions are the net costs of
industry, and represent the aggregate of all incomes
paid out as wages, salaries, dividends, rents and
royalties by the productive an_d distributive com-
ponents of industry during the course of the year.
Taxation payments to municipal or governmental
authorities will be included in these net costs to the
1 The figures given here, before and immediately following, are
given as illustrations only. Their absolute or relative accuracy does
not affect the main argument.

'
.)
 . - .. ' "'

EARNED AND UNEARNED INCOME

extent that they are made direct from producers or

distributors in their public capacity as industrial
concerns. To the extent that taxes are made as
payments by individuals from incomes already dis-
tributed by industry, they represent simple transfers
of income from private to governmental or municipal
account.
The extent to which these wages, salaries, divi-
dends, rents and royalties are not spent is the extent
to which industry (apart from foreign 'trade'), will
not recover its costs on the year's accounting, and
also the extent to which capital (i.e., debt-claims of
every variety) will be increased through the saving or
investing of these incomes. The criss-crossing of
the group of cheque payments already described as
capital transfers will result in the aggregate of debt- •
claims being increased by this amount. In general,
therefore, all increases in gross capitalization-
whether as an increase in the volume of savings or
investments or in the total valuation of land, plant or
·property-are effected as an increased demand upon
(rise of rent or interest rates) or by a draft on current
income (through new fundings and capitalizations).
If we assume that, in a given country during a
period of rising 'prosperity', total production output
increases by one-half at the end of ten years and
doubles itself at the end of twenty years, we may also
assume, speaking generally, that gross income (i.e.,
the total yearly payments made as wages, salaries,
profits, dividends, rents, and royalties) rises in some
sort of conformity from a figure represented by, say,
40, through 6o (at the end of the first ten years) to 8 o
(at the end of twenty years). If the total amount of
 ANALYSIS OF USURY

debt-claims in existence at the beginning of this

period is represented by roo (all interest-bearing
bank loans, savings, investments, mortgages and
capital claims deriving from the money appraisal of
land, plant and property), and if, say, one-fifth of the
gross income generated every year is saved, invested
or 'sunk' in plant or property, we may estimate that
debt increases from roo, through 200 to 350 during _{
these two ten-year periods.!
If then we take r o% as representing a flat rate for
all the interest and other charges due on all forms of
capital (i.e., as the average annual charge accruing
as interest and amortization payments on all bank
loans, discounted bills, industrial shares and munici-
pal or Government stock, and as rent, interest,
depreciation or obsolescence on the gross capitaliza-
tion of all land, plant and property) it will be seen

~
that these yearly rent, interest, amortization, de-
preciation and obsolescence charges increase from
I o ( ro% of IOo) through 2 o to 3 5; i.e., from one- i
.I
quarter (Ioj4o) through one-third (2oj6o) to
nearly one-half (35 / 8o) of the total national income
distributed as wages, salaries, profits, dividends,
!
rents, and royalties throughout this period.
i
1
The relative accuracy of these figures with respect )
to statistics which might be procured is immaterial.
Some such development as that outlined above must l
take place in the very nature of the case. If income
1
iI
During the first ten years, the total yearly income increases from
40 to 6o. If we take the mean figure of so as representing the average '
~
income for this period, and assume, as postulated, that one-fifth of
this is saved or invested, the debt-structure will be increased by
10 x 50 f 5 = 100, i.e., from 100 to zoo. In the second ten years 1
the income rising from 6o to So, and the average income being 70,
debt will increase by 10 x 70/5 = 150 (approx.),-i.e., from :o:oo to 350.
i
j

.I
 EARNED AND UNEARNED INCOME 53•
increases, debt-claims will increase proportionately.
I If income remains stationary, the accumulation of
i
' debt-claims from year to year will automatically
demand an increasing share of that income. If
j income decreases, the proportion due to capital and
I

l property claims will increase at a still faster rate.

If then we regard the total national income as

I being divided into two components-as wages and

salaries on the one hand, and as profits, dividends,
rents and royalties on the other-it will be seen that
1 during 'prosperous' periods the industrial process is
I
'I essentially one of transferring an increasing propor-
1
tion of a rising national income from the earned to the
U!learned category. In the progression traced
I above, this proportion increased, as has already been
pointed out, from one-quarter, through one-third, to

l nearly one-half.
It is irrelevant to protest that the incomes dis-
tributed as profits, dividends, rents and royalties,
equally with those distributed as wages and salaries,
are available for the purchase of commodities. The
important point, to say it again, is that these incomes
however distributed, are not all so spent, and that
society, far from encouraging the spending of them,
offers every possible inducement for them to be

I I
J saved and invested; thereby urging that the earned
\proportion of national income be continually decreased and
) the unearned proportion correspondingly increased.

I In the case of the wealthy rentier or big industrial-

ist, his inducement to increase the debt-structure by
individual or joint-stock capital aggrandizement is
dictated by motives concerned with avarice or

j
I
I
 54 ANALYSIS OF USURY

material ambition, or both. In either case, his

acquisition of the means to power or possession is
applauded by a society which, under usury, can be
little else but sycophantic with regard to all processes
of money making (i.e., the accumulation of debt-
claims). The warnings given (usually after disaster
has overtaken the community) against 'excessive'
stock market speculation, 'over-borrowing', the
rapid increase or inflation of capital values and other
'reprehensible' practices are essentially appeals for a
moderation of rapacity sufficient to enable financiers
and economists to maintain the system with a decent
interval between the 'depression' periods which
periodically interrupt its progress. If the serious i <

slumps which climax all periods of debt-accumulation

occur more than once or twice during an adult life-
time, the public will begin, as it is undoubtedly
doing to-day, to question the fundamentals of the
system which brings them about.
At bottom, pronouncements with regard to the
rate at which debt (capital) may 'safely' be accumu-
lated are both misleading and irrelevant. There is
no 'safe' rate at which debt can be accumulated, and a
debt-structure (or credit-structure as it is euphemistic-
ally called) is never 'sound'. It is always heading
for, or actually achieving disaster. Savings and debt-
claims in any shape or form; i.e., whether kept in a
stocking, left on deposit, invested, or 'sunk' in land,
plant or property, are fundamentally inconsistent with
a pricesystem.
\.

The unctious approval now being bestowed on the

increased small savings of the working classes-
whose precarious position under usury makes thrift
 EARNED AND UNEARNED INCOME 55
an urgent necessity-is itself calculated (in no small
measure, as it now appears),! to intensify the very
fallacy c:in which the price system is based. Its '1
sinister effect is to identify the interests of the J
workers (in so far as they are represented by the ·
amount of these hard-won savings) with the interests
of the £nancial, rentier, landed and capitalistic
classes who are the very instruments of their op-
pressiOn.
1
Sir George Paish, speaking at Nottingham on 15th September,
1933, quoted an estimate that the small savings in Great Britain were
about £z,4oo,ooo,ooo, although he himself was of the opinion that the
aggregate was 'greatly in excess of this sum'. Similarly the giant
financial corporations of the United States, discussed in detail in
The Modern Corporation and Private Property, by A. A. Berle and
G. C. Means (N.Y., Macmillan, 1933), derive a considerable propor-
tion of their enormous capitalization from the small investments of the
lower and middle classes.

I
~!
 CHAPTER V

DEBT AND DEPRESSIONS

IF the industrial process during 'prosperous' periods

is one in which an ever-increasing income is being
claimed as rent, interest, amortization or deprecia-
tion charges in favour of those who hold debt-
claims against the community, and if the creation
of these debt-claims at the same time prevents the
community from buying and consuming all that it
produces, the precarious and disruptive basis of
society under usury should at once appear. I
i
. ~ 1'
As being wealthy, under present conditions, is not · li

a matter of spending and consuming, but of saving

and creating debt-claims against industry, and as all
classes, from the financiers to the wage earners, have
now come to regard their becoming wealthy, under
these conditions, as the chief, if not the only, aim of
existence, the logical end of the matter would seem to
be attained at the point when the national income has
been !:tppropriated in its entirety as rent, interest and
other charges due on debt-claims.
~
I.,J
However absurd this may seem to be, there can be 'I

no doubt that the financial mechanism works con-

sistently in the direction of this end. The unavoid- f,.
'
able fact that workers have to be paid wages so as to
enable them to feed, house and clothe themselves
sufficiently well to preserve their health and efficiency
as operators or administrators of the industrial
. 56

. . !\1
 .,

DEBT AND DEPRESSIONS 57

J
mechanism is about the only guarantee, under the I,
present system, that debt-charges are not allowed to I
I
swallow up the whole of the income. 1
f '
Even at this, the mechanism works so relentlessly
in this direction that the health and general welfare of
the workers are consistently neglected to an extent
far beyond that which would be contemplated by
the most unscrupulous of producers, if the responsi-
-bility for such neglect were to rest on his shoulders
alone. In the blind competitive scramble for lower
costs which producers must engage in if even a
proportion of them are to remain solvent in home or
foreign markets, it is obvious that, as gross capitaliza-
tion and the efficiency of the productive mechanism
increases and as the total income paid out as wages
and salaries decreases proportionately, more and
more workers will be thrown out of employment.
Once serious unemployment is a fact, as it is to-
day, its very existence tends to lessen the proportion
of national income that is paid out as wages and
salaries. Firstly, because the excess of the supply
over demand for labour can be and is used as a lever
to force down.· wages still further, and secondly,
I
I'
! •·
because an increasing number of unemployed, who j ·.;

presumably still have a right to live, can be paid

'wages', as doles and unemployment benefits, which

'\
1
According to statistics given by Professor Irving Fisher before .,_.,. _,. I
! .•
he U.S. Senate Finance Committee in May, 1933, the national income
windled from $89 billions in 1929 to about $40 billions in 1932,
' ,.
' ~·-~
I ' ·_·.•

hile deflationary forces drew it down still further in 1933. j, ·,

On the other hand, the total industrial debt of the U.S.A., amounts •' ''
o more than $zoo billions, demanding fixed charges (interest, amorti-
ation, taxes, and obsolescence included), of about $34 billions a year •., i .
I
i.e., about three-quarters of the total national income.
And America is still the greatest 'creditor' nation in the world!

~ 'i
 ANALYSIS OF USURY

are the lowest compatible with human subsistence on

this planet.
As, however, the process of debt-accumulation is
continuous and c1mulative, and as total national
income, far from increasing, may remain stationary
or even contract (as it did in England a few years
after the World \Var, and as it did with cataclysmic
rapidity in the United States in 1933) 1 what is to
happen when the point is reached at which employed
and unemployed alike are receiving the absolute
minimum as wages and doles that is consistent with i
internal peace and stability? ~
i

The answer to this is that rent and interest rates

begin to decline and internal and external debt- '
~·
structures are forced to contract so as to accommodate
themselves to the dimensions of production and its
capacity to pay rent, interest, depreciation and I

'
j_·. amortization charges due thereon. ...~
i
/- 'Depressions', whether appearing on a national or
1 international scale, can therefore be defined as
factual indications that the national or international
debt-structure has accumulated, relative to the
' dimensions of national or international income, •
:1
.)

beyond the point at which the latter can pay the

'! more or less fixed rent, interest, amortization and
depreciation charges due on this accumulated debt,
. !, and, at the same time, pay wages and salaries to
·t workers and doles or maintenance benefits to un-
~ employed and incapables on a basis which will be
~ tolerated by the various communities concerned.

When wages and benefits have been reduced to

•.. 1 See footnote to previous page.

"' .

_,.
..
·rr
!
1
DEBT AND DEPRESSIONS 59
this point, it is inevitable that interest rates decline
and internaland external debt-structures be forced to
contract. The purely financial characteristics of the
present 'depression' are concerned with this decline
and contraction on an entirely unprecedented scale.
In almost every country of the world to-day
interest rates on loan and share capital have steadily
fallen. Rates which in 'boom' periods were con-
sidered to be safe, are now classed as speculative,
while the speculators themselves are becoming more
and more like careful rentiers seeking safe outlets for
their capital. At the same time, conversion schemes
for the refunding of Government securities on lower
interest bases have been carried out or are being con-
l templated in most countries. In spite oflow interest
I' returns, the general tendency is for Government and
j
'
other 'gilt-edged' securities to rise.
Similarly, the most significant feature in inter-
national politics to-day is the wholesale default on or
repudiation of external debt-claims. The fantastic
aggregate of inte 'lational debt which came into
existence during 01 1fter the War as war debts and
reparations have d. 1ppeared or are steadily dis-
appearing. Of the , 'Uth American countries, only
one or two have been ble to maintain payments on
their external obligat )ns. The interest due on
foreign 'obligations' in Cuba was transferred under
the military dictatorship of President Machado and
brought about revolution and the complete ruin of
the island, politically, industrially, financially and
morally. Russia and Japan, to mention no other
countries, are trying to get foreign currency for the
interest payments due on their external debts by

•
 6o ANALYSIS OF USURY

dumping goods wholesale throughout the world-to

the intense resentment of the producers in 'creditor'
nations who 'own' these debts. The economic diffi-
culties of Australia, New Zealand, and Canada are
concerned principally with their external debt
relationship with Great Britain and the United
States. In Europe, part payments and defaults on ,...
j foreign debts are the rule rather than the exception. · ",,l'
!

Internal debt-claims are being continuously

i'
reduced by a variety of methods. Firstly, by the
use of capital resources to eke out falling incomes;
secondly, by an increase in the number of bank-
ruptcies, and, thirdly, by the accountancy prc>cess
known as the writing down of assets. Large num-
bers of firms which have undergone or are under-
going financial 'reorganization', have been forced to
agree to the 'loss' of the whole or part of their share
capital.
This capital has not been 'lost'. If it has been
lost, who has gained it? The simple fact is that
these capital values-like the bank 'loans' from
whose industrial circulation they derive,-are entirely
fictitious and have been imagined to exist for the
purpose of charging interest on them. The amount
of debt which can exist in any country is determined
by the capacity of industry and the willingness of
workers in that country to pay interest and other
charges due thereon. When income cannot or will
not yield the charges due on accumulated debt, the
debt itself is forced to contract and so capital is 'lost' .1
1 It has been estimated, for instance, that between 1925 and 1931,
in Great Britain, agricultural capital (land value plus tenants' capital)
depreciated by £zzs,ooo,ooo, a decrease of more than zo per cent.
(Cer1tral Landownei"S' Association Joumal, September, 1934.)

''
!

I
 DEBT AND DEPRESSIONS
'

The practical result of a universal decline in

interest rates and in the contraction of internal and
external debt is that stock and share values begin to
fall. These defaults and falls react directly on
industry and the spiral of depression is initiated.
Attempts are made, in the face of rising public
opposition, to still further reduce wages so as to
maintain the precarious solvency of producers,
purchasing power declines, prices fall, unpurchas-
able 'surpluses' of still more unmanageable dimen-
sions are thrown on internal and external markets,
interest payments and mortgage claims begin to be
settled by the transfer of actual property to the
creditors, bankruptcies multiply and banks acquire
fixed assets and other collateral security in the pro-
cess; while economists begin to look for 'causes' in
'lack of confidence', 'over-production' (or, as Pro-
fessor J evons did, in sun spots), and ·to advocate
drastic economy, balancing of budgets, increase of
taxation and restriction or destruction of output.
,,
i

' The inevitability of this progression is disputed or

t' obscured by professional economists by confusing
references to 'modifying factors' introduced by
stock-market speculation, variable bank-rates in
I different countries, contractions and expansions of
~
( credit, increase or decrease in the velocity of circula-
tion of money, fluctuating exchange ratios, by foreign
'trade' and foreign lending and by the international
movements of gold and capital. Involved argu-
ments as to the 'repercussions' of these 'modifying
factors' on internal and external trade have so dis-
I
l
mayed and confused the general public that they
'
!• have come more and more to the conclusion that
,.I.
I
 ANALYSIS OF USURY

these are matters which are best left to the 'experts'.

This, of course, is exactly what the 'experts' wish [
them to think. '
I'
If the chapters on foreign 'trade' and foreign
'investment' have been understood it will be realized \
that all the 'modifying factors' introduced or effected
by the international movements of gold, trade and
capital tend to intensify rather than alleviate the
position for producers at home and abroad. All the
factors referred to, as well as others not mentioned,
may and do affect the speed at which debt accumu-
lates with respect to production at different periods in
the same country, or in different countries relative to
each other; but they do not interfere with the under-
lying fact that the rewards accruing to the wealthy
(i.e., those who have accumulated large debt-claims
against the community) automatically encourage the
creation of capital debt at a faster rate than produc-
tion and the gross incomes generated with respect to
that production in all countries; and that the rate of
t
i

debt-accumulation is only seriously interfered with

r
by the arrival of the 'depression' which this process
clearly makes inevitable.
t
t
'
In this simple but sinister progression caused by
the accumulation of capital debt at a much faster rate
than production is contained the whole explanation
for 'booms' and 'slumps' and for the so-called trade
I
f

l
cycles which the sponsors and apologists of the l
present system have persuaded themselves, and would
have us believe, are implicit in the nature of things rI
and apparently as outside the control of mere mortals t
~
as are the flow of the tides and the change of the ;_

seasons. If mathematicians, scientists and engineers I

!
;
 DEBT AND DEPRESSIONS

had given a minute fraction of the time which they

have spent on pure or applied science to a study of the
monetary system which controls and frustrates their
every activity, the entirely specious nature of the
explanations given by financiers and economists for
both prosperous and depression periods would have
become immediately apparent. But to the pure
scientist-as well as to the priest and artist, who con-
ceivably might have something to say in this matter
-the study and control of money is a sordid and
uninteresting matter which can have no conceivable
l relation to his research, devotion or creation and
) which is consequently best left to monetary 'experts';
while applied science and mathematics, as well as
the pot-boiling activities of the vast majority of
writers, painters, sculptors and musicians are funda-
mentally concerned with the provision of social
palliatives for a preposterous debt-system in the
immediate interests of usurers and bondholders.

t
I

\
l
 CHAPTER VI
WAR AND DEBT

IF this is the basis on which modern so-called civiliza-

tions rest, it may well be asked how they have man-
aged to function-even precariously-for so long.
The answer to this is that they have been maintained
by a continuous expansion of national and inter-
national debt-structures (in conformity with a
continuous rise in the dimensions of production
output), by the complementary degradation of the
working classes and by the indefinite expansion of the
areas for exploitation throughout the world. Wage-
earners have received an increasingly smaller pro-
portion of an increasingly larger national income;
while consumers, as a whole, have received in-
creasingly smaller proportions of increasingly larger
outputs so that increasingly larger 'surpluses' could
be made available for debt-creation at home and
abroad. The standard of living, especially in the
highly industrialized countries, has risen continu-
ously, but not in any sort of conformity with the
rise in productive output.

For example, if home production in any country

has increased from 100 to 200 over a period, but
home consumption has declined from 7 5 per cent to
50 per cent of these totals, home consumers·, irrespec-
tive of a rise or fall in population, would nevertheless
64
 WAR AND DEBT

receive 100 as against their original 7 5, while the

'surplus' for profit-making (through debt-creation)
would increase from 2 5 to 1 oo. The proportion of
total national income received by workers would
decline in direct proportion to this, while although
production has been doubled, internal consumption
and the standard of living has been raised by only
one-third.
World history, since the renaissance, has been
determined, in its major aspects, by the 'success' of
highly industrialized nations in the world market
under these conditions. Military success has fol-
lowed or rather has developed side by side with com-
mercial success, particularly in the matter of external
debt-creation. The easy access to credit based on
gold acquired by military or commercial aggression
and the capital (debt) agglomerations deriving there-
from as domestic and foreign investments, have put
the highly industrialized nations in a position to
command military and other services for subjugation
or consolidation on a scale not possible to less success-
ful nations. These services have been commanded,
firstly by virtue of the fact that they have been in a
position to pay for them, and secondly, because they
have been able to mobilize, directly or indirectly,
the assistance of those nations which had been
conquered by or which had become heavily indebted
to them.
The writer has no desire whatever to belittle the
individual heroism and achievements of the pioneers
of European imperialistic expansion, but it is a fact
that the jingoistic paraphernalia of Western military
power, Church, State and Law derive from and are
E
66 ANALYSIS OF USURY

entirely controlled by the financial and commercial

processes which have been described in the previous
chapters. And if the Bible has followed the sword in
the military campaigns which have extended the
areas for Western exploitation, both priest and sol-
dier have followed the usurer. If for, say, two
hundred years the countries of the East have been
exploited by European (and latterly and extensively
by American) debt-creation, and have been forced to
live and work like dogs to pay interest on or disgorge
gold to meet these debts, soldiers, priests and ad-
ministrators have worked and fought for the most
part, not in their own interests, nor, in the last
analysis, those of their own country, but in 'the
interests of an international moneylending oligarchy
and a miscellany ofbondholders throughout the world.

During the last eighty years or so, the rapid rise of

communism and socialism (in creditor and debtor
nations alike, be it observed) has made it plain that
internal exploitation-through the increasing ap-
propriation of national income as rent, interest and
other charges due on debt-claims-is now receiving
organized opposition on a world scale; while, in this
century, those nations, particularly of the East, which
have been exploited by Western external debt-
creation and foreign 'investments', have come to an
awareness of the financial and commercial processes
which brought about their degradation. They are
now being forced to accept the continuance of severe
working conditions, at the dictates of financiers, so as
to further a new and aggressive policy in the world
market, with respect to both industrial and agri-
cultural products.
'I
 WAR AND DEBT

The chief portents in this development are the

present serious unrest in China and India and the
spectacular rise of Russia and Japan as aggressive
commercial and military powers of the first order of
importance.
The most powerful weapon of a now fully aroused
Japan and Russia and a rapidly awakening China and
India in the coming suicidal struggle for economic
supremacy is the low standard of living to which
Eastern workers have become inured during cen-
turies of Western oppression. They are therefore
able to produce and sell at prices with which the
West cannot compete. The chief 'advantage' of the
East, that is to say, derives from the miserable con-
ditions which have been created there by centuries of
Western domination.
As a result of this, those countries (e.g., of the
East), which were formerly exploited to pay interest
on Western foreign 'investments' are now not only
showing less and less disposition to do so, but are
in a position to establish external debt-claims~~ their own.
That portion of the world market which formerly
existed as a passive absorber of Western 'surpluses'
• has now become active and is beginning to throw out

l
Il
:~

l1
'surpluses' itself.
Under present methods of internal and external
accounting, there is literally no way out of this
deadlock, except by an accelerating race in competi-

l
I
tive currency depreciation, mass production and
wage slavery in all countries. And there can be no
doubt that in such a Gadarene rush to destruction,
r'
the East, led by a militant Japan, would be left with
68 ANALYSIS OF USURY

the sordid fruits of 'victory'. If usury is still to

obtain, the East will eventually establish 'favourable'
balances of trade with respect to the West, and,
through the inexorable processes of external debt-
creation, will sooner or later bring the West in to
subjection.
In this situation is the explanation for the desper-
ate position in which civilization finds itself to-day
and for the evidences of internal and external dis-
integration which are presenting themselves on
every hand.
These evidences of decline have been accompanied
by a tightening up of the political and military
forces which secure to nations the 'right' to exploit
each other in the world market. In nearly every
country there have been commercial developments
and increases in legislation designed to 'save' industry
by amalgamation, rationalization and subsidizing, by
quotas and import restrictions, by planned produc-
tt?n and by organized marketing. These develop-
m~ts, which have their political symbols in the rise ·~
of (ictatorships and Fascisms, are not attempts to 'i
l
'save industry (although they profess and consider l

thems:lves to be), but attempts to preserve the debt- l

l'
system vhich has ruined it. !

The ratid trend towards increased capital amalga-

mation whsh is brought about by these processes
and which ecures to large scale financial combines
and the indiviuals who compose them the certainty
of power and te promise of profit, is caused by the
fact that the COlpetition for the disposal of 'sur-
pluses' -now bei<s thrown out by both Eastern and
l
I WAR AND DEBT

Western industry-demands an ever-increasing ac-

celeration in mass production methods. The
increased capitalization which this demands can only
be obtained by a draft on current income.! In this
way, immediate purchasing power is ploughed back
into production through investment, while, at the
same time, the working classes suffer a proportionate
decrease in their income distributed as wages.
The paradox of poverty amidst plenty has now
become a permanent feature of all internal economies,
but nowhere is this stupid and sinister product of
\
usury and debt so extravagantly demonstrated as in
l the mad maelstrom of foreign 'trade'. Consumption
l -relative to the dimensions of a rising production-
is progressively inhibited and capital debt propor-
I tionately increased so that reckless capitalists, specu-
I lators and elephantine commercial and financial
l
i
combines may use the increasing 'surpluses' gener-
ated as clubs with which to bludgeon each other
in the world market.
1 Seep. 51.
 CHAPTER VII

THE PATHOLOGY OF DEBT

Tms mad warring of financiers and industrialists

in foreign 'trade' has been a consistent feature of
national and international policy since the time of the
Venetian, Dutch and Hanseatic traders of the six-
teenth and seventeenth centuries. Individual civi-
lizations have waxed according to the ability of their
industrialists to create and extend debt-claims
abroad; they have waned when subject nations have
used foreign loaned capital and the low standard of
living they have been forced to adopt first to compete
with and then to overcome their conquerors in the \
marketing of products. 1

To-day, the immediate effect of the commercial

retaliation of the East under these conditions has
been to throw up the desperate anomalies of the
present debt-system into staggering relief.
Whilst it should appear that the universal paradox
of poverty amidst plenty is the most important issue
before the peoples of the world to-day, politicians,
industrialists and financiers have shown determina-
tion and adroitness only in their manner of evading it.
It is estimated that there are some thirty million
unemployed in Europe. This means that possibly
one hundred million human beings in this continent
70

j
 THE PATHOLOGY OF DEBT

are living on or near the bare subsistence level.. The

unemployed in Great Britain alone, if stood side by
side, would form an unbroken line round the two
thousand miles of her coast-line; and although con-
ditions are better here than anywhere else, it seems
likely that one person in every five is living a desper-
ate, hand-to-mouth existence.
In spite of this and the further fact that low wages
obtain in large sections of industry; in spite of the
fact that machinery is being dismantled or falling
into disrepair all over the country; and in spite of
the fact that the remaining machinery is able to turn
out goods which are destroyed to keep up prices, on
an enormous and increasing scale, in nearly every
country in the world to-day, politicians, economists,
and financiers still have the effrontery to look on this
side by side jostling of desperate need and desperate
waste as a problem of 'over-production'.
It is obvious that if these goods could be purchased
by the needy, the problem of 'over-production'
would be solved, as it should be, by increased con-
sumption and increased leisure.
Not only, however, is this simple and humane
solution disregarded, but the official diagnosis is
contradicted by frantic efforts to increase employ-
ment. We are suffering from 'over-production',
so the unemployed must be set to work to produce
more!
At the same time, seeing that there is so much of
everything available, the remedy is rigid economy
and a patriotic self-denying ordinance for the whole
nation. We got into extravagant habits during
72 ANALYSIS OF USURY
i
the World War. It is time we returned to the i
·r
Spartan virtues of our ancestors. In a world of I',,
.
abundance, dietetic theologians of the British
Medical Association and the Ministry of Health
seriously dispute whether a man can exist on four
and ten pence halfpenny or five and fourpence half-
penny a week.
Although there is admittedly a great scarcity of
purchasing power, 'inexorable economic laws' indi-
cate that budgets must be balanced, that taxation
must be increased or maintained, and that higher
wages and shorter working hours must be resisted I.
if we are to compete with other nations in 'foreign :[
/:
markets'. ,I
I
I
Although there is no money in the pockets of the
people, there is a glut of money in the banks, a mass I
of frozen credits everywhere, a heavy supply of I.
capital seeking investment, and a general availability
of 'cheap' money. (Why, at certain times in parti-
cular, there should be no money about, but plenty
of debts and goods for sale, has not been deliberately
considered, to the writer's knowledge, by any gov-
ernment in Europe throughout the whole course of
the present depression.)
\
In spite of the admitted fact that there is a general \
I
lack of purchasing power, it is maintained in some !I

countries that prices must be raised. The artificial- ~II

raising of milk prices in England, for instance, by .I

co-operation between the Government and the dairy i
industry automatically forced down the consumption
of milk. It is proclaimed, therefore, that there must
be a nation-wide advertising campaign to drink
!

·'·
"''J!li'" ·~------~ -----------
'

THE PATHOLOGY OF DEBT

more milk. When the public have been persuaded

to drink more milk at higher prices, they will be able
to buy less meat. So plans to raise the price of meat
are already under consideration.
The unemployed must be set to work to increase
'over-production', yet the plant which they could
operate is being scrapped wholesale throughout the
world in efforts to 'rationalize' industry. Efficiency
is a holy word to the business man, yet it is essen-
tially a process of increasing output with respect to
costs-including labour costs in particular. Effici-
) ency, then, would seem to add both to the problems
,I of 'over-production' and unemployment.
!I
·[-, The shipping industry, to mention no other, is in
I a desperate condition in all countries and is being
I
supported by Government subsidies so as to intensify
I competition with other countries forced to adopt the
same suicidal policy. The taxpayers in the various
countries concerned must therefore support these
subsidies so that the frantic bidding for a decreasing
volume of international freightage may be whipped
up still further. They must pay a special fee for
the privilege of extending their already unlimited
opportunities for cutting each other's throats.
There are at least a million new houses needed
in England, the materials for the making of bricks,
iI concrete, and plaster exist in abundance, yet these
houses 'cannot' be built by some 2oo,ooo unem-
.I' ployed operatives in the building trades without
further Government subsidies from taxpayers already
j
penalized far beyond their normal capacity.
The health and welfare of people unemployed or
 '

\'
74 ANALYSIS OF USURY

destitute through no fault of their own should be a

matter of prime concern to the governments of all
Christian countries. Yet penniless tenants are ex-
pelled fzom apartments which remain permanently
empty. In a world of abundance, mothers starve to
feed their babies; and while a man who steals a loaf
of bread to feed his wife and children will be con-
victed, national and even international sanction is
given to the restriction or destruction of output, on
an enormous and increasing scale, in wheat, coffee,
tea, sugar, and almost every other variety of con-
sumable commodity.
While literally millions of people lack the element-
ary necessities of life, wine is poured to waste, coffee
is burnt and oranges are thrown into the sea, land
is thrown out of cultivation by Government edict,
and wheat is mixed with pitch and used as fuel.
Further along the chain of absurdity, coal and
oil producers throughout the world clamour for
orders. i
;,
The pos1t1on to-day in international commercial !
relationships could be summed up by saying that li'
every country, without exception, is feverishly de-·
vising methods to decrease imports and increase
exports. On the one side, exports can only be
increased by an intensification of mass production
methods and by lower costings, or, on the other, by
wheedling or coercion in the matter of securing
'most-favoured-nation clauses' in trade agreements.
So that while every country is trying to secure favour- ''
-[

able conditions for export into every other country,

it is also seeking to restrict imports by high tariffs,
\
quotas, and other restrictive devices. Foreign I
 '
I.
THE PATHOLOGY OF DEBT 75
politics have become almost exclusively concerned
with these sordid bargainings.
Apart from the fact that it is manifestly impossible
for all countries to succeed in these mad and ignoble
l inversions of policy, why, in the name of elementary
common sense should any country, let alone all
countries, be so frantically anxious to send away
more Real Wealth, in the shape of machinery or
goods, than it receives? 1
~ The answer to this is, that under the present
I.
i system, it is just as impossible for a nation as for a
I
business to concern itself primarily with the produc-
I
tion, exchange, and consumption of Real Wealth.
I''
'r Commodities are, of course, exchanged in both in-
li ternal and international transactions, but the real
aim of trade under usury is the creation of debt. If
more goods are sold than are bought, or if exports
~··.
exceed imports, debt will be created against a rival,
' and tribute will be forthcoming as interest. So that,
just as the income and bargaining power of a business
f
i is largely determined by the extent to which it can
't accumulate debt-claims as capital against the com-
'I
i munity, so the success of a nation in the world
i. market is measured by the extent to which it can
)

·~ accumulate debt-claims, as foreign 'investments',

r against other nations. Creditor nations, therefore,
i
seek to export more than they import so as to give
'idle' capital (not necessarily the property of their
own nationals) opportunities for foreign 'invest-
ment'; while debtor nations seek the profitable
1 Between 1919 and 192.9 the United States and Great Britain
together created external debts, as a result of their 'favourable' bal-
ances of trade or the extension of credits abroad, to an estimated total
of about $zo,ooo,ooo,ooo!
 I
'
ANALYSIS OF USURY '
f.
disposal of their 'surpluses' so that they may acquire f'
foreign currency to meet the annual 'services' due
on these investments. It thus transpires that debtor
countries can only transfer the interest and other
charges due on their foreign obligations to creditor
nations by undercutting resentful producers of those
creditor nations in the world market. This mad
situation, as has been already explained, is at the root
of all difficulties in international relationships to-day,
and can only end in war.
These monstrous anomalies, and others too numer-
ous to mention, have called forth a parallel confusion
of contradictory explanations and remedies from the '
l
professional apologists of the present system. ''
It is said that we must return to the gold standard,
that we cannot return to the gold standard; that we
can return to it but that it would be disastrous if we
did; that we are not able to return to the gold stan-
dard at present but that we must return as soon as
'international confidence' is restored. It is proposed
that gold should be abolished as the basis for internal
currencies, that it should be used for the settlement
of international debts and that 'managed currencies'
combined with this so-called gold-bullion standard
should determine central banking policy in the
future. On the other hand, it is held that the effects
of managed currencies are unpredictable and perhaps
uncontrollable. They are expedients which might
result in 'dangerous inflation'. To others, inflation
is not dangerous, but deflation is deadly. The gold
'bloc' is convinced that credit must be carefully con-
trolled, that budgets must be balanced, that the gold
content of currencies must be maintained and

I
 THE PATHOLOGY OF DEBT 77.
'sound money' restored. The sterling area advo-
cates cautious credit expansion on managed currency
I
principles, while the dollar area actively promotes
! currency depreciation and a vigorous expansion of
I
credit. The first says that wages and Government
expenditure must be reduced, the second considers
it sufficient if wages are maintained, while the third
says that wages must rise considerably. It is further
claimed that prices must rise. It is counter-claimed
that a rise in prices would restrict consumption and
jeopardize foreign trade. It is held that public
works are efficacious; that they are a waste of
money; that working hours must be reduced; that
it would be dangerous to reduce them; that inter-
national lending must be resumed; that international
lending is too precarious as there are no credit-
worthy nations left; that currencies must be stabil-
ized; that currencies should be left to find their own
level; that currencies will not find their own level un-
less they are stabilized and that currencies ought not
to be stabilized until they have found their own level.

In the middle of this riot of contradiction in

attitude and policy, exchange ratios are left at the
mercy of short-term speculators who 'bull' this
currency and 'bear' that currency to such an extent
that the difficulties of foreign traders, already
exaggerated by subsidies, quotas, and exchange
restrictions, are complicated by the addition of a
powerful unknown factor. At the same time, gold
and gold currencies are bid up and down by pur-
chases or sales from elephantine Exchange Equaliza-
tion Funds which seem quite unable to decide
whether to buy with or against the speculators. So
 ANALYSIS OF US,URY

-the gold-point is here, the gold-point is there.

The price of gold rises, the price of gold falls. It is
exported there, it is imported here; it is exported
here, it is imported there.
It should be fairly obvious that these remedies are
all in the nature of the disease suggesting its own
cure, and that the variety and developing intensity of
the symptoms are due to the fact that the financial
physicians of the international industrial organism
are unable or unwilling, or both, to make any funda-
mental diagnosis and therefore to treat psychological
or organic causes directly.
In general, all proposals for the reform or modifica-
tion of monetary policy can be divided into two main
categories. Those which assume that usury and
debt-creation arc and must be taken as basic to the
mechanism of civilizations and those which do not.
All but some fraction of one per cent of these pro-
posals belong to the first category; and while some of
the originators of these proposals are prevented,
because of professional reasons, from considering the
possibility of a monetary system without its present
apparatus of debt, rent, and interest, it is certain that
this possibility does not even suggest itself to the
remainder.
In view of the following facts, which are a sum-
mation of the main conclusions arrived at in this
book, that under the present system:

(a) debt automatically increases at a faster rate

than production;
 - - -----~~~.,---.,------,-~--------,...--

THE PATHOLOGY OF DEBT 79

(b) this accumulation of debt creates a running
'surplus' of commodities in all countries which
cannot be purchased internally-thereby en-
suring, at one and the same time, that con-
sumers will not receive all they produce and
that a certain proportion of producers, irre-
spective of their individual abilities as busi-
ness men, will inevitably be forced into a
state of actual or potential bankruptcy;
(c) the chronic insolvency thereby brought about
in every country brings into existence ex-
ternal debt-claims as foreign 'investments'
whose accumulation by commercial aggres-
sion in the world market is the chief, if not
the only cause of international wars;
(d) these debt-claims, domestic or foreign, are
only realizable by regarding the interests of
the holders as directly opposed to those of
the community;
(e) the accumulation of these debt-claims,
whether as domestic or foreign 'investments',
ensures that an increasing proportion of
international income will be transferred from
the earned to the unearned category;
the writer considers that all such proposals, whether
put forward in good or bad faith, must be regarded
as sycophantic, anti-social, and subversive in the
highest degree. Conversely, he is of the opinion
that the principle of usury must be abolished in all
its forms if peace, progress, and sanity are to be con-
sidered the true objectives of civilizations.

i
[·
~: '
.............---------------------
 PART II

FREEDOM
'For a nation to love Liberty, it is sufficient that she knozos
it; and to be fru, it is sufficient that she zoills it.'-
MARQUIS DE LAFAYETTE.

F
 CHAPTER VIII

THE ABOLITION OF CAPITAL DEBT

I

IF the foregoing analysis is agreed with, it will be

admitted that no intermediate compromise is pos-
sible. In order, therefore, to set about the problem
of debt, and its complete abolition, debt-claims are
divided into the following four main categories:

(I) Private, industrial, municipal and govern-

mental debts to banks (all bank loans, bills
discounted, securities held by banks, short
term and day-to-day loans to brokers, etc.,
and Treasury Bills).
(2) Government debt to private, industrial and
municipal holders of Government stock (all
National Debt securities not held by banks
as defined in [I J above).
J
(3) Mutual interest-bearing debts between in-
:~
dividuals, businesses and municipalities (priv-
ate loans, industrial and municipal stocks and
shares of every description, mortgages, and
afMapi~a'H.zations of land, plant, and pro-
1
l perty).
i
,,
l
(4) Debts owed to foreign investors.
'I

l Neglecting category (4), which is the connecting

link by means of whicli national debt-structures are
8J
 ANALYSIS OF USURY

dovetailed into each other, it will be seen that cate-

gory (1) expresses the major, and categories (2) and
(3) the minor, principles of usury. (Seep. 26.)
Seeing that all the components of the debt-
structure derive from and are controlled by the major
principle of usury, it is essential that governments
should first reassume control and ownership of all
forms of money and credit. Inasmuch as new
money (newly created bank credit) is issued in
advance of production, it is criminally stupid and
unethical that this issue should appear as an interest-
bearing debt in favour of any group of individuals.
The inevitable outcome of this procedure is that the
community pays privately controlled banking in-
stitutions for the hire of its own credit, while pro-
duction is eternally mortgaged in advance to these
institutions. The truth of this may be obscured
during so-called 'boom' periods when new issues of
credit swallow up an old burden of debt, but it be- :1
comes a matter of everyday observation during
'depressions' when credit is restricted.
I GOfernments of to-day, as well as munidpalities 1
\

and· industries throughout .the world, are conse-

quently under the necessity of eternally borrowing
from the banks and the public. It is essential,
therefore, that Governments, as an act of elementary
political sanity, should immediately reassume their
constitutional right to create and lend money, and that
the public, as far as all issues of currency and credit
are concerned, should become indebted to them for
such issue.
It is therefore suggested that Treasury Notes

!
Jl:.l
 . . .
"~ '
',

THE ABOLITION OF CAPITAL DEBT 85 .

should be issued not only to supplement Bank of
England notes (as was done during the World War),
but that they should be issued and controlled so as to
entirely replace them. Also, that direct action
should be taken to substitute Government credits for
all bank deposits now outstanding.
Further, inasmuch as existing debts owed by
Governments have been contracted because of their
abrogation of a right to lend which they now propose
to reassume, and that private, industrial and muni-
cipal debts to banks h~e been contracted because of
a similar usurpation of authority, it is suggested that
the Government take immediate steps to resolve their
'obligations' to the banks and the public, whether
as National Debt or Treasury Bills-and at the same
time implement the transfer of private, industrial,
and municipal debts owing to banks to their own
control-by an issue of newly-created Government
i) credits, up to the amount (and to any extent beyond
that may subsequently be discovered to be neces-
sary) of all bank deposits now outstanding. In
Great Britain, this will call for an issue of some
£z,soo millions. This will not result in inflation, as
it is designed, in this first instance, not to extend
but. to replace existing money and credit of all cate-
gones.
All holders of Government securities of every de-
scription and all financial institutions holding
Treasury Bills should therefore be notified that their
bonds and bills, over an indefinite period, will be
subject to redemption in coin, Treasury Notes or
newly-created Government credits in any proportion
between coin, notes, and credit as may be required.
86 ANALYSIS OF USURY

These bonds might be redeemed at a premium,

the increment to be disbursed as yearly interest
payments for any period that might or might not be
considered as equitable during this change over.
The amount of the credits resulting from such re-
demption should be the bondholder's full authority
to draw on them by cheque in the settlement of his
debts and in the furtherance of his business. Large
holdings of Government stock should be redeemed
first, holdings of intermediate size next, and so on
down the scale, so that the incidence of any temporary
inconvenience may fall on the shoulders of those best
able to bear it.
At the same time it should be announced:

(r) that the banks will be left in charge, with due

recompense, of all administration within the
limits of the new dispensation.
that all coins and Treasury Notes will have
the same status as currency up to the full
amount of their denomination, and must be
accepted as legal tender for all transactions,
irrespective of the amounts in which they may
be separately or conjointly presented. .
(3) that the gold standard, in both its internal and
international aspects-i.e., as a 'basis' for
currency and as a 'basis' for the creation and
resolution of internal and external debts, will
be abolished absolutely and in all its forms.

It should further be made clear that, inasmuch as

the gold standard is to be abolished, the Govern-
ment will be prepared, through the agency of its
 THE ABOLITION OF CAPITAL DEBT

banks, to issue coins and notes to whatever extent

they may be demanded by depositors. By authoriz-
ing this issue of legal tender currency, theoretically
up to the full aggregate of deposits extant, and at the
same time cutting away all the disastrous effects of
international interference consequent upon the ex-
port or import of gold in conformity with specious
gold standards, bank runs will become of non-effect,
and moratoriums and monetary crises a thing of the past.
Coincidentally, it should be announced :

( 1) "fhat the Government, through the agency of

I the banks, will make loans to reputable indi-
i viduals and businesses, against the deposition
·~ of evidence of tangible assets, and that these
i loans, which must·be repaid, will be free and
' subject to no interest charge whatever.
(2) fthat all deposits and credit balances will be i

taxed. This to take the form of a combined ,.

\,yearly charge for service, safe custody and
lpunitive taxation.
\

Under the new dispensation brought about by

these two clauses, the principle of usury, in both its
major and minor forms, will be abolished at a stroke.
Communal indebtedness to banks will be replaced
by an indebtedness to the Government, which will
hold its monopoly over the issue and ownership
of all forms of money and credit in trust for the
community it represents. If these free loans cannot
be or are not repaid by any individual or business,
the property of the borrower held as collateral
security will be distrained on as at present. /ill such
88 ANALYSIS OF USURY

distrained effects will thereby revert to and become the

property of the State. They will then be sold in the
open market for what they will fetch. Any deprecia-
tion in value, whether due to obsolescence or any
other cause, will thus be borne, as it should be,
by the State on behalf of the community as a
whole.
At the same time, industrial securities and all
other instruments of debt will quickly disappear,
and the minor principle of usury become inoperative.
Individuals and businesses will not borrow privately
at interest when they can obtain Government-issued r
loans free. I'
'

The progressive liquidation of mutual indebted-

ness will be effected by an ever-increasing pressure I

from the incidence of three distinct new processes;

\
by the redemption of National Debt securities, by I
1
the issue of free Government loans, and by the i
taxation of all deposits and credit balances.
Part of the proceeds of National Debt redemption
will automatically be applied to the repayment of
loan capital and debt-claims in general because of a
double pressure. Firstly, because there will be
increasingly less necessity for anybody to borrow
from and pay interest to anybody, and secondly,
because the holding of redemption-yields on deposit
will itself be penalized through taxation. The issue
of free Government loans will similarly accelerate
I
I
the liquidation of the existing debt-structure as soon f
r
as these loans are drawn on by cheque and put into \
'
industrial circulation. \
j
I
It remains to give some special consideration to
 TilE ABOLITION OF CAPITAL DEBT 89
the effects of the taxation of deposits and credit
balances.
It will be seen that under this new form of taxa-
tion, savings will be reduced to a minimum and that
one of the chief conventional virtues of modern
citizenship will seem to be unfairly penalized. This,
as will shortly be explained, will not, in effect, take
place. But, in any case, under the terms of the
analysis in this book, it is legitimate that savings
should suffer some form of penalization, as the un-
consumed commodities they represent deteriorate in
quality or usefulness through delays consequent
upon competitive marketing in a world suffering, as
at present, from a chronic restriction of purchasing
power. If this is not considered to be sufficient
justification for so unconventional a procedure, the
disastrous international effects of the piling up of
unpurchasable 'surpluses' by all nations, as described
in earlier chapters, should be recalled.
It should, however, be understood that the fund
set up by this taxation of deposits will be held in
trust by the Government for the individuals and
businesses who are forced to make contributions
to it through taxation, and that all firms and indi-
viduals will be allowed to draw out their contribu-
tions at any time, to the full amount, if so required.
It will be immaterial whether these drawings are
used for the purchase of goods and services, or for
the initiation or maintenance of constructive or dis-
tributive enterprises. There will equally be no
objection to their simultaneous withdrawal by com-
panies or miscellaneous collections of individuals so
~ ' i•
l;,r
,,,
,
1·'.:
I >~
'::
 :
i
ANALYSIS OF USURY

that large-scale productive or sales organizations

may be promoted by joint-stock amalgamations as
, at present.. The only binding condition is that
1
t 1these drawmgs must be spent. If, for any reason
/I whatever they are left in deposit, they will again be
l/ penalize~ through the mechanism of the taxation
( of depos1ts.
If, in spite of the fact that savings are not im-
pounded but only held in trust by the Government,
individuals or firms attempt to save by hoarding coin
or notes to any serious extent, this can be prevented
by instituting some system of seignorage or de- I
i

murrage. The first would involve the compulsory

reminting or reissue of coin and notes at convenient
intervals upon payment of a tax. The second would
cause all notes to depreciate at a uniform rate
throughout the whole period of their circulation
until their value was zero: they would then be re-
issued at par value to begin a new cycle of continuous ·~'
deprecia!ion. 1 I
I
In either case it would be in the direct interest of
the holders to part with currency as soon as possible I
by exchanging it for goods and services.
The Government, on the other hand, will regard
all contributions from the taxation of deposits as a
huge revolving fund which will pay out as fast as it
receives. At the same time, it will always be full,
like a reservoir, with a capacity estimated to suit the
needs of the community which it serves.

~
1 Those interested in the detailed workings of a demurrage system
of currency are recommended to read Silvio Gesell's The Natural
Hconomic Order. English translation from the sixth German edition, ,
Bt:rlin-Frohnau, 1929.
'
I
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 '! .

r THE ABOLITION OF CAPITAL DEBT

If there is a lack of individual or joint-stock enter-

I prise and the reservoir tends to rise above normal
I capacity, the Government will take this condition as
its full authority to spend the overflow on public
.I works and services of all kinds. Alternatively, it
may reduce this tendency to overflow by lowering
{"the rate of taxation of deposits. The only condition

I
here again is that all surplus or overflow funds must
be spent, without any attempt being made by the
, Government to recover any part of its expenditure
f on public works and services by taxation or any
! other means.
If, on the other hand, withdrawals are heavy and
the fund shows a tendency to shrink below normal
capacity, the Government will again take this as its
authority to increase the funds at its disposal by an
increase in the taxation-rate on deposits, or by direct
taxation of income. Alternatively, and if the
,~,
.
dynamic condition of industry appears to justify it
(with reference to certain factors to be discussed in the
! next chapter) the Government will maintain its
funds by the direct issue of new credits for public
works and services.
In this way savings will be reduced to the work-
able minimum, and public and private income will
b¢ maintained in an uninterrupted flow between
production and consumption, with the certainty of
constant equilibrium between both, for the simple
reason that all incomes, however reallocated by industry
and the Government, will be spent on goods produced and

l
~
services rendered. At the same time, the Govern-
ment, now in a position to mobilize funds from three
distinct ·sources-the 'overflow' from the taxation
r
 I
l
I

92 ANALYSIS OF USURY

of deposits fund, the funds proceeding from the

direct taxation of income, and the possible alterna-
tive of the creation of new credits-will be in a posi-
tion to organize and maintain public works and
services on any scale which it, as representing the
wishes and as guardians of the welfare of the people,
may consider advisable. ·
In this way the Government will not only be in a
position to maintain a constant equilibrium between
production and consumption, but will be able to
finance, without the creation of any public debt what-
ever, not only all forms of insurance and poor relief
as at present administered, whether privately or
publicly, but also advanced schemes:

(a) for the building and entire maintenance of all

ho.spitals, 'workhouses', lunatic asylums, and
pnsons;
(b) for all public works, whether of a commercial ' '

social, artistic or ethical nature;

(c) for the voluntary retirement from active par-
ticipation in industry and the maintenance
of all adults above a certain age.
(d) for the education and maintenance of all
juveniles until such time as they may be
thought fit-under the continuous evolution
of social standards-to participate in industry.
· It should be understood that no particular em-
phasis is here intended for governmental, as opposed I
to private or municipal enterprise in the matter of
public works and services. In the controlling finan-
cial aspects of the matter, it is immaterial under the t
-
~·
'·

THE ABOLITION OF CAPITAL DEBT 93

new dispensation whether they are :financed by de-
posits privately held or by municipal or govern-
mental taxation of those deposits. The extent to
which these works and services will be supported
publicly rather than privately will depend on the
extent to which savings are persisted in. If the
community does not spend, it is an indication that it
wishes its savings to be spent in the public interest.
(The fact that these savings are automatically spent
by the Government will not, of course, prevent the
public from withdrawing and spending their savings
at some later period.)
· While this active promotion of the flow of money
and the production and consumption of commodities
is in progress, the progressive liquidation of mutual
indebtedness will be rapidly promoted. In spite
of the enormous proportions of the debt-structure,
it is very closely criss-crossed between individuals,
municipalities, and businesses, and a large part of it
will automatically cancel out as soon as free Govern-
ment loans are put into circulation. The debt-
structure, in fact, is nothing more or less than a huge
bubble which will collapse as soon as it is pricked
by the introduction of free loans.
At the same time, this collapse will be hastened
by the further redemption of National Debt securi-
ties through the process described in the earlier part
of this chapter. Some£ 2, 500 millions, corresponding
to the dimensions of the totality of bank deposits,
have already been redeemed, and the remaining
£s,ooo millions odd can continue to be redeemed
by the issue of new Government credits against
them. If production is tending to get ahead of con-
94 ANALYSIS OF USURY
I
sumption-i.e., if the fund from the taxation of
deposits is being heavily drawn on for new produc-
tive enterprises-part of the proceeds from this
redemption will go either to repay debts or to pur-
chase commodities and so restore the equilibrium.
If they are perforce left on deposit they will raise
the level of the fund through taxation. If there is
a lack of industrial initiative, the proceeds from re-
demption will throw additional purchasing power
on the market and so stimulate demand. In any
case incidental irregularities caused by an increase
of production with respect to consumption or 'vice
versa' (thereby causing a fall or rise in tfie dimensions
of the revolving fund), can be rectified by a rise or
fall in the taxation-rate on deposits.
(The fact that part of this influx of new money
will be used to repay debt or go direct into consump-
tion-thereby short-circuiting the productive pro-
cess and bringing about some inflation of prices-
will be discussed in the next chapter.)
When all National Debt securities have been
redeemed in this manner, the Government may then
proceed to the liquidation of municipal debt by
individual arrangements with local authorities. If
any category of private debt, for whatever unfore-
seen reason, still persists in spite of increasing
pressure against it, it may be attacked by a specific
tax under a people's mandate in Parliament.
The position is now that all public and private

~
debt has been resolved. The only debts being
created are those owed by producers and others to
the Government. These will be quickly repaid and
'
l
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li
!:

I
 THE ABOLITION OF CAPITAL DEBT 95
renewed for the simple reason that all incomes
generated in the industrial process will be spent in
the purchase of commodities produced. Even in
the case of these running debts, however, a funda-
mental modification of present accountancy practice
is advocated.
Inasmuch as these loans represent the ultimate
creation of plant and commodities-i.e., of Real
Wealth, they should be written up to the Credit of
the State. (In spite of the fact that they exist in-
dependently as debts to individuals and businesses.)
All repayments, by individual borrowers, effected
as they are by the sale of these commodities, and
representing therefore the communal consumption
of this Wealth, will be debited to the community by
being written off against this Credit. (This will also
hold true in spite of the complementary fact that
these repayments will be written up to the credit of
individuals and businesses who severally contract
the loans.) The net balance, at any time, repre-
senting commodities held in the system and not
consumed, will therefore stand, as it should, to the
Credit of the State, and not, as at present, as an irre-
deemable debt to banks and bondholders.
With regard to foreign trade, the Government,
through the agency of the banks, will finance the
importation of goods by the extension of free loans
to home traders (and not through the discounting
and selling of bills of exchange as at present).
These loans, representing the ultimate importation
of Real Wealth into the country, will, as in the case
of all internal loans from the Government, be written
up to the Credit of the State. Proceeds from the sale
 ANALYSIS OF USURY

of exports, representing foreign consumption of

internal production, will be automatically written
off against this Credit. (This in spite of the fact
that these Credits will exist as debts to the individual
trader, and that the proceeds of his foreign sales
will be credited to his account by being written off
against his debts. In foreign trading, as in internal
accounting, what is debt to the individual is credit
to the community and 'vice versa'.)
<,:.,
~,. In this way, imports will stand, as they should, as a
credit and exports as a debit to the community.
There would then be no suicidal onus on the
country to acquire a 'favourable' balance of trade
or suffer an 'unfavourable' balance, as at present
understood. Foreign trade would become a simple
exchange of goods against goods, and the effort
would be, as in internal accounting under the new
dispensation, to keep the national trading account
more or less in equilibrium so that the Real Wealth
of the country would be altered as to diversity and
quality, but not as to financial value. The prob-
lem of distributing this mixture of domestic and
foreign produce, collectively of equal financial value
with that of the national income, would thus remain
absolutely the same.
 CHAPTER IX
THE ABOLITION OF RENT

THE question of rents and mortgages on land, plant

and property still remains to be considered. In the
financial aspect of the matter there is no difference
between these and industrial, municipal, or Govern-
ment investments. They are all debt-claims in
that they demand yearly charges from the total
incomes developed by industry. But, in some
cases, the nature of their origin is different, and
some special legislation-if not some reform of the
Constitution-may be called for if they are to be
abolished.
The essential difference is that investments arise
naturally out of the industrial process under the
present system, whereas many rent-bearing claims
represent appropriations from national income by
legal processes of tenure and entail which derive
from feudal times. In their origin, they were not
so much acquired as granted, however much they
may have been bought and sold subsequently.
Inasmuch, however, as there is no real distinction
nowadays between a capital sum and the income it
yields, all rent claims, whatever the nature of their
origin, can be considered as yearly charges due on
capital-i.e., as particular cases of the operation of
the principle of usury. There may appear to be no
97 G
 •
ANALYSIS OF USURY
,.
sucl1 operation, because no money is apparently
lent, but the fact that all land and property claims
must be capitalized before they can be transferred
and that rent is thereby due to the new owner is
proof to the contrary.
With regard to land, in particular, under this or
any other system, the writer is of the opinion that
it ought to be in the absolute possession of the
State.
As such, it should be rented out to manufacturers,
distributors, agriculturalists and residents alike.
If it is let out for productive purposes, i.e., to an 1
agriculturalist for cultivation or pasture, or to an
industrialist as a site for plant, the benefit to the
State is direct in two distinct respects-in the re-
ceipt of rent, and in the creation and distribution of
commodities. If it is let for unproductive purposes
-i.e., for residence in town or country, on whatever
scale-the community receives a yearly rent which the
rent-payer can only pay by abstaining from the con-
sumption of use-commodities (in favour of the rest
of the community) to an equivalent amount each
year.
This transfer may, of course, be effected by direct
'
I
expropriation, but it is unfair that individuals should !
· be victimized because of injustices which are in-
herent in the system itself. It is, therefore, sug-
gested that the land should gradually be bought
back by the Government for the community, either
out of the taxation of deposits fund, by the taxation
of income, or by the direct issue of new Government
credits to landowners in full settlement of their
 '
THE ABOLITION OF RENT 99
claims. The moneys received from such settlements
will automatically be circulated through the purchase
of commodities or through their utilization in
new enterprises. Otherwise they will gradually
revert to the Government through the taxation of
deposits.
In any case it should be proclaimed that there will
be no land-rents due to any other party but the
Government while this transfer is in progress, so
that landowners who need money will have no option
but to sell to the Government, to others who can
pay rent by using it productively or to others who
can afford to support their holdings unproductively
and still pay rent to the Government.
All other rent-claims on plant and property should
be abolished utterly. A fair valuation, at current
' market-rates, should be placed on all holdings so
' that, in the same way, owners will either have to
~ maintain them as properties or sell them to those who
can and will use them productively.
It is absurd that the mere fact of ownership should
create the right to demand a yearly charge as rent
from industry.! Ownership is in itself a privilege.
i If an owner cannot or does not wish to use the plant
I;
or dwelling-houses he owns but needs more money
and is not prepared to work for it, he should have
no recourse but to sell them to others who can and
will. Ownership of plant in particular should
simply constitute authority to apply for free Gov-
ernment loans so that the owner will be in a position
1
i Although rents are paid by individuals or firms this does not
01 interfere with the fact that the income from which these rents are paid
! themselves derive from industry.
roo ANALYSIS OF USURY

to make a living by administering it. The plant

is then in his trust, not his ownership. If he ad-
ministrates it successfully he receives a reward in
proportion to his success. If he is unsuccessful it
will revert to the State through distraint and the
responsibility will be assumed by another by pur-
chase in the open market, as already described.
(See p. 8 7.)
It is just as absurd that rent for dwelling-houses,
office buildings, factory and business sites, etc.,
should be paid to owners who cannot or will not use
or operate them themselves. All property, whether
for business or residence, should be in the absolute
possession of the occupiers or should be in process of
being purchased by them. If the occupier cannot
buy the property outright, a yearly instalment charge
should be fixed, all such instalments constituting
part-payments on the purchase price, without any
deductions being made for interest or any other charge
whatsoever. These part-payments should, of course,
constitute part-ownership to this extent, so that if an
occupier moves to other premises or place of resid-
ence he, as part-owner, will receive his share of the
purchase price or of the instalments due from the new
occupier. If any man is unable to buy house or
property in his own lifetime, his part-ownership to
the full extent of his payments should be trans-
ferred to his heirs or assigns.
It is particularly desirable that dwelling-houses
should be in the absolute possession of the occupier
or should be in process of being purchased by him,
without his having to pay rent to owners or interest to
money-lenders while doing so. Under the present
'f I

i .
r.'
•
THE ABOLITION OF RENT IOI ·

system, the working classes and unemployed especi-

ally are at the mercy of a mad system of rents and
mortgages which makes slums and their eternal
subjugation inevitable.
' The effect of the absolute ownership of dwelling-
houses on the psychology of the nation would be in-
calculable. All reasonable people will sympathize
with the following sentiments expressed by Mr. Ezra
Pound in his A.B.C. of Economics.
Personally I favour a home (owned by) each individual ... into
which he or she can retire and be exempt from any outside interfer-
ence what so damn ever .
•
We have now arrived at a pos1t10n in which all
interest and rent-charges and all debts (with the
exception of current non-interest-bearing debts
between traders and between traders and the
I
Government) have been abolished.
In order to bring this about, the continuous crea-
tion of new money by the Government (i.e., the
issue of more loans than are repaid) has been postu-
lated. Firstly, as a possible means to keep up the
level of the taxation of deposits fund for the main-
tenance of public works and services; secondly, as a
means for the redemption of national and municipal
debt; and thirdly, as a means of buying back the
land and certain categories of plant and property
for and on behalf of the community.
Under present methods such issues would result
in inflation and in unmanageable fluctuation of the
price level; or, conversely, in variations in the pur-
chasing power of money in terms of commodities.
102 ANALYSIS OF USURY

It is in this respect that the present monetary

system has most signally failed and all schemes for
monetary reform which accept the present apparatus
of debt, rent and interest, and which do not
consider the maintenance of a stable price level as
a first objective may safely be set aside as unworthy
of notice. It is both absurd and unjust that debts
contracted in money units of low purchasing power
may have to be repaid, with regard to both principal
and interest, in money units say of twice the pur-
chasing power with respect to commodities. Under
the terms of the present system, in fact, inflation
and deflation, which alternatively rob the creditor
and debtor at the expense of the other, may very
properly be regarded as criminal instruments of
financial policy.l
In the present case, however, we are considering
a community ultimately freed from all debt, and the
problem of maintaining a uniform purchasing-power
for money does not present itself with the same
urgency.
If new money is introduced over any period (i.e.,
if more free loans are granted than are repaid) an
inflation of prices will result and the purchasing
power of money suffer some tern porary decrease.
But there will be no creditors to be defrauded or debtors
1 Taking the dollar before the American Civil War to be a normal
one of roo cents purchasing-power, Professor Irving Fisher of Yale
University has produced statistics to show that the inflated dollar at
the end of the Civil War (r 865) declined in purchasing-power to about
40 cents. The dollar then increased in purchasing-power throughout
a prolonged period of deflation until it reached a ma.ximum of 152
cents at the time of the Bryan McKinley election in 1896.
Here, in the short space of thirty years, is a variation in the purchas-
ing-power of money of nearly 400 per cent!
 THE ABOLITION OF RENT 103

to be robbed over short or long term periods, and the

'cost' of the inflation caused by this temporary dilution
of the purchasing-power of mone~v will be spread, as it
should be, over the community as a whole. Such
inflations, moreover, will be temporary affairs which
will soon be rectified by the appearance of more
goods on the market, so that these passing inflations
and deflations will be in the nature of pulsations
which merge into a general flow.
To appreciate the truth of this, a complete dis-
association from existing conditions and processes is
necessary. The rise in prices which follows in-
flations under present methods is largely due to the
fact that the expansion of credit itself creates an
absolute increase but a relative decrease in the size of
the debt-structure. As debt itself is created by a
draft on current income, this means that there is a
relative increase in the amount that is spent on the
purchase of commodities. This automatically raises
the price of that proportion of productive output
which is purchased.
At the same time, large issues of new money
should not be made without full consideration by the
Government. The liquidation of industrial in-
debtedness will largely be a matter of per-contra
cancellation, as already explained, but the redemp-
tion of National Debt and the issue of new money
for the repurchase of land will bring about large
increases of productive output, and corresponding
(temporary) falls in the purchasing-power of money.
The rate at which this process should proceed will
depen.d on the dynamic psychology of the industrial
orgamsm,
104 ANALYSIS OF USURY

The ownership and control of credit (new money),

under any system, is an essential, if not the only
essential condition of effective government. In the
case of a monetary system designed to function
without the creation of any public or private debt
whatever, this control should be placed in the hands
of a body of men representing every interest in the
State.
While, therefore, it is advisable that bankers
should be in charge of all administrative detail, it is
suggested that the Board of the Central Bank, under
l
the new dispensation, should include representatives •
from the farming, industrial, engineering, scientific,
medical, artistic and religious elements in the com-
munity. This bringing together in council of such
a diversity of elements may sound a little artificial
and cumbersome; but this division into 'expert'
types is largely, if not altogether, a product of present
conditions. Under any reasonable monetary system
the interests of these various groups would tend
to merge rather than oppose each other, as at
present.
Speaking generally, therefore, it will appear that
whereas the actual functioning of the money machine
should be left to bankers, decisions affecting an in-
crease or decrease in the taxation-rate on deposits-
or the extent to which Government funds should be •
I
mobilized by this means rather than by direct
taxation of income, or the extent and the circum-
stances under which the 'purchasing-power of the ii''
community might be temporarily diluted by issues
of new money-are sociological functions of the first
order of importam:e, They are not matters which
 THE ABOLITION OF RENT 105

can with safety be left to the judgement of account-

ancy experts.
This central council would, in fact, be the real
Cabinet, and would constitute the real Government
of the country. All governmental functions, as at
present understood, are largely concerned with the
promotion and administration of public works and
services, the scope and usefulness of which are
determined, in the last analysis, by the amount of
money that can or will be spent on them. They are
therefore subsidiary to the issue and control of the
National Credit and should be regarded as such.
This control is, in fact, of so much importance
that local councils of a similar composition should
iI be set up to advise on credit-issue in municipal and
I rural areas-all administration being left to branch
bankers as at present. The actual administrators
of municipal and rural affairs would become sub-
sidiary to these local councils, just as the adminis-
tration of Government works and services would be
controlled by the decisions of the Board of the
Central Bank. At the same time there should be
close co-operation between administrators and coun-
cils. Those in charge of public or municipal
works and services would propose the allocation of
moneys for this and that purpose, while the central
and local councils would decide on these allocations,
individually and collectively, in the public interest.
The issue of new money should be controlled by
the central council in relation to the size and be-
I haviour of the taxation of deposits fund as well as
to other factors already referred to. The regional
 'I
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I06 ANALYSIS OF USURY

allocation of this new issue should roughly be

determined by co-operation between the central
council and the local councils (as is effected by the
present relationship between the head offices of
joint-stock banks and their branch banks). In this
way, the issue of credit will be highly decentralized
and at the same time controlled by a flexible central
authority.
This is put forward not only as a matter of general
principle, but also to make possible the granting of
loans which will only partially be repaid or which
will not be repaid at all. Here the author has in
mind not only direct credits to producers, inventors,
and scientists whose activities will bring in only a
partial return in their own lifetime, but also to cer-
tain categories of research scientists, doctors, writers
and others, the value of whose services to the com-
munity is not ordinarily returned to them in goods
or money.,
Loans in this latter category in particular will go
direct into consumption and so short-circuit the I
productive process. They will thus create minor

l
inflations which will be paid for, as already ex-
plained, by the dilution of the purchasing-power of ·
the nation as a whole.
It is right that all such contributions to the psy-
chological as opposed to the material needs of the
community should be laid to the public charge.
,.,'
'~ CHAPTER X

I ABSOLUTE ECONOMIC SECURITY

IN this chapter will be given some account of the

possibilities opened up to man in a debt-free com-
munity. This will be done only briefly here, as it
has been gone into in some detail in the author's
The Modern Idolatry. 1
If incomes represent net costs and all incomes are
spent, costs will automatically be recovered and loans
from the Government quickly be repaid. The com-
munity will therefore be able to buy all that it pro-
duces. If it is able to buy all that it produces, it will
produce all that it wants. And it will sell and buy
all it produces at prices for individual commodities
which will vary only with the instinctive estimate
placed on them by the community with regard to
their desirability and usefulness.
There will therefore be no 'surpluses' destroyed to
keep up prices, or sold at ruinous prices in home or
foreign markets. The inventions of scientists and
engineers will not be bought up and shelved to pro-
tect fictitious capital values invested in obsolete
plant and processes. Science will become the friend
and not the lurking enemy of the working classes.
The machinery and technological equipment of a
new Power Age will be able to supply goods and
1
Chap. XXV: Sociological Possibilities under Free Money.
107

ij.
''
 i

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108 ANALYSIS OF USURY

services on a scale never before seen or contemplated

by mankind. The artificial problems of 'over-produc-
tion' and 'unemployment' will appear as the natural
blessings of an ever-increasing abundance and leisure.
At the same time it should be realized that mass-
production methods are largely a product of com-
petition in the world market under present conditions
and it is possible that if industry were freed from
debt, man might prefer to refine and improve on
work-to some extent possibly by hand-rather than
be satisfied with standardized makeshifts. At any
rate, his choice between longer hours and craftsman-
ship, on the one hand, and increased leisure and mass-
production methods on the other, would be free and
unfettered, and a never-ending argument between
the supporters of medievalism and modernism on this
point would be settled once and for all.
No persons or families would be living on unearned
income from rent or interest as at present, either wholly or
in part. With certain exceptions referred to below,
work (under a much wider definition than is given to
that word now) would constitute the sole right to
income, and the extent work would be demanded
would depend on the extent to which the community
preferred craftsmanship to mass-produced articles. J)
If the tendency, as at present, was towards mass- '
production, it seems likely that some three or four
hours work per day for all adults between the
ages of say twenty and fifty-five would enable every
industrialized community to enjoy a higher standard
of living than has so far been vouchsafed to it.
The exceptions referred to above have already
 ABSOLUTE ECONOMIC SECURITY 109

been mentioned (see page 92). They include grants

for the education and maintenance of all juveniles
until such time as they might be thought fit to begin
work, grants for the voluntary retirement from
work of all adults above the age of say fifty-five and
grants to all men prevented by temporary Of per-
manent disability from active participation in
industry. These grants would be given uncon-
ditionally to the individual to spend as he or she
thought fit and would be estimated to provide ade-
quately for all necessities and reasonable amenities.
At the same time, as suggested above, the word
'work' would be given a much wider definition than it
at present enjoys, and should be taken to mean any
form of physical or mental activity which the com-
munity shows itself willing to support by paying the
individual who practises it. This widening of the
definition of 'work' to the extreme limit is necessary,
because, with an industry freed from debt and
purged of all the barbarous cut-throat competition of
to-day, the continuous evolution of social standards
and the ease with which goods and services could be
supplied would tend to place increasingly higher
estimates on cultural and psychological values. In
fact, if the situation is looked forward to imagina-
,I
J\ tively, it is conceivable that nothing short of complete
I
physical or mental paralysis would permanently
prevent people (regarded as 'incapable' under
present industrial standards) from contributing
something which the community would be prepared
to pay for in cash.
It should also be realized that the taxation of de-
posits would provide a complete system of insurance
 I

I
I IO ANALYSIS OF USURY
f
for workers of every category. All savings at f
present in savings banks, building societies, insur-
ance companies, etc., would be administered by the t
Government through the taxation of deposits fund
and although no interest would be forthcoming, all t,
contributors would be able to draw out their savings
at any time. As has already been shown, the extent
to which savings are persisted in will automatically
become the measure of the extent to which the
Government promotes and maintains public works
and services, so that individuals and firms will
benefit from their savings both directly and indirectly.
In a community in which there is no debt. and in
which i.~1e productive machinery is working at full
capacity (instead of at some fraction below one-half,
as at present), no citizen, for whatever cause, should
or need be without food, clothing, shelter and the
elementary amenities of this life. In cases where the
money claim to these essentials is granted rather
than earned (and for whatever reason such a grant is
made), there should and would be no stigma at-
tached to it whatsoever. Ev~ry individual has a
rig:}lt to life an.d free~om: and the basis of freedom is
absolute econormc secunty.
In such a community, private property and
capital rights-.as upheld by capitalistic economists
and as disputed by socialists-would be more closely
defined. The main objections of the latter are
against capital as distinct from property, and Marx-
ians as a whole have failed to make what is an essential
distinction between them. The following example
is given from Ezra Pound's A.B.C. of Economics
(Faber and Faber, I 933):
1 ABSOLUTE ECONOMIC SECURITY I I I.

.J'My bust by Gaudier is my property. Nobody is expected to do

+ything about it.
· 'My bond of the X and Y railroad is capital. Somebody is
s pposed to earn at least 6o dollars a year and pay it to me because
own such a bond.
• 'Therefore: it would be possible to attack the rights or privileges of
' apital without attacking the rights or privileges of property.'

It is not only possible but essential that such a

distinction should be made. In a debt-free com-
munity no capital (debt-claims) would be in exist-
ence and no rent or interest would be due to individuals
I' because of the ownership of land, bonds or anything else.
f
I!;
Physical prosperity would then divide itself into
two classes-productive and unproductive. U n-
productive assets, from personal belongings to
dwelling-houses, would be private property, but
productive equipment (plant, etc.) would be held and
administered in trust by individuals or firms, as
~ I
already explained on page 8 7. All depreciation of
plant, whether due to obsolescence. or any other cause,
would be borne by the whole community when sold
in the open market as already explained, but all
depreciation of unproductive private belongings and
'I properties (whether owned wholly or in part) would
!'
'
be borne, as it should be, by the individual or in-
'
t,.,. dividuals who own them.
J
7

'~
Certain other developments will be briefly referred
' to.
In the case of such a closely co-ordinated economic
whole as the British Empire, it is absurd that some
forty or fifty millions of people should be packed into
the British Isles, while only a quarter of this number
112 ANALYSIS OF USURY

are living in Canada (to mention no other Colony or

Dominion) with an area some forty times as great,
and with immeasurably greater productive resources.
The present population of Canada is relatively and
absolutely small, not because she cannot or does not
wish to support a larger one, but because she is
financially prevented from doing so. The abolition
of debt and usury would thus bring about a more sane
~I 'li
distribution of population throughout the Empire
and so make possible an entirely new policy of "'
reciprocal development. •
With regard more especially to internal conditions, •
the abolition of capital debt and bankruptcy would
go far to solve the major sociological problems of our
time. Enforced poverty is at the root of nearly all
disease and crime. So long as poverty and bank-
ruptcies are tolerated, all forms of public and private
relief can be regarded as equivocal and sycophantic.
They are essentially concerned with the provision of
palliatives, and, as such, their effect is not to call
attention to or rectify fundamental evils, but to
condone them and make possible their indefinite
continuation.
Indeed, all the processes of modern civilizations
are consciously or unconsciously designed to justify
the Victorian doctrine of the survival of the fittest in
the commercial struggle for existence, and to sug-
gest, in their various spheres, that the continuance of
present conditions is inevitable and 'good' for charac-
ter, and that human beings and human psychology
must be eternally subject to 'inexorable economic
laws'. The activities of the vast majority of priests,'
artists, judges, lawyers, scientists, medical men,
 ABSOLUTE ECONOMIC SECURITY I I 3
business leaders and educationalists are subconsci-
ously calculated to enforce 'inexorable laws' which·
are the practical extension of insane financial policy.
The development of mental and nervous illness
can be traced with more or less certainty to the opera-
tion of these same 'inexorable economic laws'. Over
• any period, the number of suicides is very closely
related to the number of bankruptcies. Other
material or psychological causes may bring about
minor variations in this relationship, but the main
causes for suicide, directly or indirectly, are poverty,
debt and the fear or actual fact of bankruptcy. If
this is considered in relation to the principle of
heredity, it will at le·ast be admitted that severe
economic pressure in one generation may result in
neuroses or even insanity in succeeding ones. On
the other side of the picture, it is a matter of common
observation that the parasitical existence of certain
types within the upper classes of society may and
often does result in mental and physical degeneration
or psychological perversion in later generations.
The close relationship that is in process of being
established by psychologists between neuroses,
insanity, disease and crime will never be shown in its
true light until all are related to the central problem of
capital debt.
But by far the most important result would be the
abolition of the chief if not the only provoking cause
for imperialistic and international wars. These are
brought about, as has already been explained, by
desperate attempts to dispose of mounting 'surpluses'
in a world market made up of nations who are all
suffering, although not to the same degree, from a
H
 ANALYSIS OF USURY

chronic restriction of purchasing-power. Under

such circumstances, the international co-operation
advocated by Governments and uninformed idealists
can and does only bring about the opposition of
larger and larger political, commercial or purely
financial combines which result, as has been well said
by an American economist, in .'bigger and holier
wars' .1 It is not claimed, at this stage, thaffree
money would remove the causes for war entirely, but
;
it would at least bring about conditions favourable to 'i
smaller and more honest fights.
One other development must at least be referred l
to. This is that woman would be given a free op-
portunity, in industry and elsewhere, to earn an l
income which would give her complete economic I
independence. (The following paragraphs are l

l
quoted verbatim from the author's The Modern
Idolatry.)
'Given economic independence, woman, in her present temper,
would quickly put an end to all the masculine complacence and
vanity which have brought about and which seek to perpetuate
, present conditions. Free to follow her instinct and inclination,
, she would inspire man to be worthy of her love. At present, driven
·by economic necessity, she is compelled to put up with all the
l I
l
pompous vacuities of the successful men of her "choice", and has
to seek the illusion oflove and romance in a miscellany of flirtations
; and illicit relationships.
. 'For just as man under usury cannot freely exchange the products
\of his labours, so woman cannot freely extend her love to man.
;If producers are forced to withhold or destroy in the cut-throat '
l
, game of commerce, woman is forced to advance and retreat, in an I
endless series of feminine inflations and deflations, so that man ~~
:will bid the higher for her love. Under free money, man and
1

1932.)
Lawrence Dennis: Is Capitalism Doomed? (New York, Harper.
l\

I'
I
Ii
 ABSOLUTE ECONOMIC SECURITY I I 5.
rwoman would obtain complete economic independet1Ce for the first
ltime in recorded history, and togeth~r. Both would be enabled
\freely to give and freely to receive in love. Masculine arrogance
land feminine coquetry would disappear.'
\

It will at once be objected that the foregoing

promises something too good to be true. This
instinctive reaction comes because the present situa-
tion is altogether too hard to be borne.
' This summing up is not lightly to be passed over.
The intensity of his present need is the indication of
man's possibility, and the depth of his misery is the
measure of his true felicity. And it is only by an
examination of his past and present folly that man
will find the wisdom which will guide him to his
future achievement.
Translated into economic terms this means that
man must discard all the legal and political machinery
which insists that the rights and privileges of capital
ownership are inviolable and that capital property or
industrial and governmental debts can only and must
be supported by paying annual rent or interest to
those who 'own' them. He must see Debt as the
measure of Real Wealth not consumed and realize
that Debt is liquidated by and in the very act of consump-
tion. He must insist on his inalienable right to
consume all that he produces not only as a matter of
common justice but as an expression of elementary
economic sanity. With Ruskin, he must see that
·~;msumption a?solute is the end, crown and perfec-
twn of productwn '. · He must regard pteseht Debt
as present Wealth and in future regard only Real
Wealth as Wealth. .
JI6 ANALYSIS OF USURY

He must come to see capital debt as a fantastic

abstraction which has no parallel in the world of
nature, where positive values alone are created. 1
There is no such thing in existence, for instance, as
minus three cows, yet man has allowed himself to be
utterly controlled and perverted by banking and
accountancy processes which seek to regulate the
I
;

creation and distribution of positive values by an

absurd elaboration of negative symbols.
Before this can be admitted, man must undergo a
complete mental inversion with regard to the attri-
butes and functions of money. If it is to be regarded
as a medium of exchange, which is its true and which
should be its only function, money must become a thing
of no value in itself. At present, it is a highly-
I
~
i
'
priced, interest-bearing commodity which can be
bought and sold on the stock exchange, in the gold
i
market or by short-term speculation in international I
I
exchange. The double evil which results from this
is that men are encouraged to accumulate capital
debt-claims for speculative purposes, while specula-
l
I

tion itself can and does alter the value of money in

terms of commodities.
Money therefore must not be thought of in bulk or
quantity but as a flow. The existing debt-system
places an automatic and powerful emphasis on the
possession of money; and spending, speaking gener-
ally, is looked upon with some misgiving because the
'stock' of money owned by firms or individuals (cash
or capital) is lessened. In this way-quite apart
from the fact that interest on money-accumulation is
offered as an extra inducement-money is saved and
debt created against the community. All the pro-

.,L
r
j
ABSOLUTE ECONOMIC SECURITY I I 7.
cesses of modern civilizations are designed to encour-
age and reward the creation of debt. In this way
· capital 'rights' are developed through the mechanism
of rent and interest, and legal machinery is set up,
not only to enforce these 'rights', but, as a crowning
absurdity, to protect them by charging all capital
depreciation into the price of commodities produced.
If money is looked upon, as it should be, as a flow,
not only will all such legislation be discarded as
absurd and unethical, but new legislation to bring
about a contrary set of affairs will be set up. All
interruptions in the natural flow of money, caused by
the creation of debt or by any other circumstance, far
from being rewarded, as at present, will be penalized
I
by some such mechanism as the taxation of deposits
already described. Money and credit is the blood-
stream of industry and society and any interference
I with its free and natural flow should be regarded as
a social offence of the first magnitude.
In short, money cannot be regarded as private property.
It is a privilege and claim given in trust by the nation
to the individual worker through the agency of free
Government loans to producers and traders. Indivi-
duals and businesses must be coerced, if necessary,
into exercising this claim by exchanging it for what
they really want; namely, goods and services.
For, under present conditions, money can only be
accumulated and a man become 'wealthy' by his
refusing to exercise a money-claim to buy and con-
sume. The debt thereby created and the interest
or rent due thereon is the motivating force of a
financial mechanism which enables man to satisfy
 II8 ANALYSIS OF USURY

all his ignoble instincts connected with greed and

oppression. Power and favours are thereby given
to individuals or combinations who can create these
evidences of debt against the interests of the com-
munity as a whole. The practice of even the most
elementary principles of Christianity is impossible
in business and commerce for the simple reason
that so long as capital debt is in existence, one man's
solvency is the cause of another man's bankruptcy.
Contrary to popular opinion, it has never been
proved that the principles expounded in the Sermon
on the Mount are impracticable in 'real' life. All
that can be said is that they are incompatible with a
debt-system that has been built up in complete
defiance of them. 'Real' life, in fact, is diametrically
opposed to the Christian life and until this is ad-
mitted, Christians can only expiate the busy follies of
·the community as a whole by personal sacrifice
against the full force of temporal authority.
The practical basis of the Christian ethic is the
enrichment of human psychology by free exchange
between individuals, under the certain knowledge
that if the medi urn of exchange is good will, the more
: that is given, the more will be received. Free
\ money would make possible a similar exchange, with
\ similar increases in mutual benefit, in the creation and
, distribution of material things. Commerce would
~be found to be not only compatible with Christian
principles, but to be a practical extension of them.
If it is more blessed to give than to receive, it is
· better to spend than to save. If money is not spent,
· the natural flow of the medium of exchange is inter-
 ABSOLUTE ECONOMIC SECURITY I I 9.
' rupted, debt is created and the community put
·under the bondage of rent and interest. If money
is spent, goods or services are received and the claim
'passed on to another. The more a community
saves, the less it will have; the more it spends, the
more it will have. Until politicians, business men
i and financiers become aware of this simple paradox,
society will be corrupted and the individual frus-
trated.
JJ

APPENDIX

THE BANKS AND THE PUBLIC

h is still seriously maintained by large numbers of

bankers and economists that banks do not create
credit. It is held that banks lend only their deposi-
tors' money; the inference being that they cannot
create ci·edit if they lend only that which is already in
the possession of some firm or individual.
,,,.I' The true statement of the case nevertheless is, that
'
,,I, although banks lend their depositors' money, this
process itself brings about a creation of credit. The
following example paraphrased from C. P. G.
Jacob's Economic Salvation, (London: Thornton
Butterworth, 1 9 3 3) will prove this.
A person saves £100 and places it on deposit in a
bank. The practice of the banks being to keep only
about IO% cash reserve against their liabilities (for
1 reasons which will subsequently be discovered), £Io
'
is held in the bank and the remaining £90 lent out to
a borrowing customer, or invested in securities. In
either case, the £90 returns into circulation. In the
course of trade this £90 ultimately finds its way back
into the banking system as the deposit or deposits of
some other person or persons.
Although this £90 is really part of the original
I2I
!22 APPENDIX

deposit, it can be lent again (less IO%) to another

customer or customers. The new £8 I loan similarly
returns as the deposit of some other person or persons
and (less IO%) can be re-lent to other borrowers.
It should therefore be clear that while the banks
are 'only lending the money of their depositors' they
are really in process of creating credit by re-lending
the same deposit or deposits over and over again.
The following table compiled by Mr. Jacob shows
how this process is extended.
Money Reserve Money loaned or
held by batik invested by bank
£ £ £
Original deposit IOO IO go
. go g 8!
Second "
Third . 8! 8 73
" 73 7 66
Fourth "
0

. 66 6 6o
Fifth "
Sixth 0 6o 6 54
" . 54 5 4g
Seventh
"
Total 524 SI 473

It will be seen that the series is finally completed

when the following position is arrived at:
Aggregate bank deposits Money reserve held Money loaned or '~
by banks invested by banks. "'
£!,ooo £Ioo £goo
If we imagine the original £IOo deposit of our
example as having originated in some other cycle
similar to that which it itself generated in the manner
shown above, it will be seen that the whole process is
fl. flow of ;~. continually increasing volume, the only
 THE BANKS AND THE PUBLIC 123

limiting factor being the ro% legal tender which the

\.
banks hold as reserve against their aggregate deposit
liability.
t II
it

Before we can come to any conclusions as to the

real implications in the preceding process therefore,
we must know what constitutes legal tender and
what exactly is the nature of the hanks' deposit
liability.
Bank chequing-accounts are a comparatively
f. recent 'invention'. In the early part of the nine-
I teenth century private and commercial banks granted
I
II
what we now think of and refer to as bank credit
by the private issue of their own bank-notes. In
' spite of the fact that the gold sovereign was the
legal tender and in spite of the fact that these notes
were promises to pay gold on demand by the bank
which issued them, notes were issued far in excess of
the amount of gold held in reserve by the banks, i.e.,
that amount of monetary gold which was not nor-
mally in circulation.
It was found in practice that a I o% gold reserve
against note-issue was normally sufficient to meet
j
't current demands for gold; this proportional reserve
I
II
varying according to the condition of public con-
fidence in its banking system. But the fact that this
I reserve was, in general, found to be sufficient, does
~
I
not interfere with the fundamental fact that the banks
!" as a whole were quite unable to redeem their notes in
gold and therefore assumed a public liability which it
was impossible for them to fulfil. This impossibility
 APPENDIX

was frequently demonstrated to the public by gold

'runs' on individual banks and, on certain occasions,
by 'runs' on all the banks simultaneously.
It became obvious that some sort of amalgamation
or co-operation was necessary if the banking system
was not to be discredited by a too frequent demon-
stration of the fact that the gold 'backing' to their '

l
note-issue was a purely illusory one, and in I 844 the
Bank Charter Act, one of the main objects of which
was the centralization of the obligation to pay gold on ,,
demand, became law. The right of private note-
issue was gradually taken away from individual
banks and the sole right vested in the Bank of Eng-
land. The credit policy of what we now call the
joint-stock banks then came to be controlled and is
still controlled by the note-issue and international
gold policy of the Bank of England.
With the 'invention' of bank-chequing accounts h
•I
and bank credit as we now know it, a new situation '
was brought into existence. The Bank of England ~;

issued its notes against gold only, but credit was

extended by the joint-stock banks far in excess of the \
total amount of notes and gold coin in existence. At ,,f ,,
the same time, this credit was similarly granted 'i
under the supposition that clients should be entitled I
j
to demand coin or notes to the full amount of their ..
deposits, so that here again the banks were under-
taking a liability which they were quite unable to
fulfil.
During the World War, however, Treasury Notes
were issued which were not 'backed' by gold but by ,, !'

Government securities. In I 928, under the Bank

 THE BANKS AND THE PUBLIC I2 5
Notes and Currency Act, these Treasury Notes were
taken out of circulation and some £2 so
millions of
£r and ros. Bank of England notes issued in their
'\ .
':
stead. Government securities were transferred from
the Treasury to and held by the Bank of England as
i
'backing' to these new notes.
During the period of the development of this
'fiduciary' issue, as it is called, the gold sovereign
passed out of circulation, and Bank of England notes,
whether 'backed' by gold or Government securities
became legal tender. (Silver and copper coins exist
in comparatively small quantities and, in any case, are
only legal tender if presented in small amounts.)
So that whereas in r 8 3 5 metal currency was the
legal tender with interest-bearing paper in circulation
to an amount determined by the policy of the indivi-
dual banks which issued it, in I 9 35, Bank of England
notes are legal tender with a superstructure of
interest-bearing bank credit whose total amount is
similarly determined by joint-stock bank policy-
this policy in its turn being entirely controlled by the
international gold policy of the Bank of England.
Speaking generally, therefore, in 1 8 3 5 there was a
metal currency with a much larger superstructure of
i interest-bearing paper supposed to be redeemable in
that currency, and in 1935 there is a paper currency
with a much larger superstructure of interest-bearing
bank credit supposed to be redeemable in that paper.
One more circumstance must be mentioned if this
matter is to be fully presented. During the War the
gold standard was suspended and banks were exoner-
ated from their liability to redeem their notes in gold.
126 APPENDIX

The I 92 5 Gold Standard Act restored this liability,

but only to the extent of requiring the banks to
redeem their obligations in bars containing 400
ounces of gold. Redemption of notes in gold was
therefore only possible for individuals or businesses
who could present notes in multiples of about
£I,soo. On 21st September, I9JI, however, the
I 92 5 Act was suspended and this curious privilege
extended to depositors taken away; so that now the
.·,,.,,
;., '
banks are under no liability whatsoever to redeem
their notes in gold or any other commodity, in how- ..•f'·.
'·•
ever great or small quantities they may be presented.

III

It is now possible to present the actual relationship

that exists between the British banks and the public
to-day.
It has been estimated that the total deposit liability
of the British banks is now somewhere in the neigh-.
bourhood of £2,500 millions. Each depositor is
entitled to demand legal tender to the full amount of • 0

his or her deposit, and for this purpose there exists

only some £I o millions of bronze and some £40
millions of silver coin (which is only legal tender if
presented in limited quantities) and about £450 ';~.·.·
w:
millions of Bank of England notes, of which £2 so
millions are 'backed' by Government securities and
the remainder by gold, mostly held in the vaults of
the Bank of England.
So that for every five units of deposit liability the
banks hold less than one unit of legal tender, while
li ,,
they are now legally entitled to disregard the fictitious

! .

,,
1 i

I
 THE BANKS AND THE PUBLIC 127

gold 'basis' on which this gross insufficiency of legal

tender was originally issued.
If the Bank of England is now under no obligation
to redeem its notes in gold, in what is it obliged to
redeem them? (In any case, more than half of them
are backed by Government securities, for which the
British people guarantee both principle and interest.)
And if the notes are not redeemable in anything,
what exactly is the nature of the obligation of the
Bank to the public in return for the sole privilege of a
note-issue which has most patently been usurped
from the Government itself?
The 'promise to pay' which is printed on every
Bank of England note is now no more than a promise
''
to pay-a promise to pay. And whereas it is under
an obligation (indirectly through the mediumship of
the joint-stock banks) to pay out some £2,500
millions of deposits in legal tender, it has only £4 50
millions of-promises to pay promises to pay-with
which to discharge it.
The writer makes no suggestions against the
individual honesty of any bank or banker. Indeed,
in the body of this book, he has paid some tribute to
the efficiency and departmental integrity of the
British banks. But it should be clear that the system
they operate is based on an entirely fraudulent
relationship between themselves and the public.

.. Even assuming that it is right that private banks

1 should continue to exercise their power of credit-
issue, they should clearly hold, or be fully em powered
to demand the coining or printing of legal tender
coin and notes in whatever amounts they may be
 APPENDIX
l
asked for by the public. Theoretically the limit of Ij
this can only be the full extent of their deposit
liability. It is obvious that if this injunction were
made effective, bank 'runs' and bank moratoriums
would become of non-effect and a thing of the past.
And it is most important to realize that the con-
dition which prevents this becoming effective is the
insistence that notes (and credit with it) should only
be issued in conformity with the acquisition of gold
by the Bank of England in the international market. \
In practice, this issuing of notes under an obligation
to redeem them in gold on a basis which was always
specious and which has now been suspended, puts
the British banks in a position to extend or restrict
credit on their own authority; and to charge, for the
exercise of a delegated privilege to issue credit, any
interest rate which may seem to them to be profitable
or politic.
So that the control over the issue of credit, which
is the very life-blood of industry and society, is not
in the hands of the people and their elected repre-
sentatives, but in the hands of an international
money-lending authority functioning through the
banking systems of the world; an authority which, I
:!
through long practice and self-interest, is profession- r
ally obliged to maintain a system governed by a gold- !'
mining and financial autocracy which battens on the
gold superstition and which controls, chokes and
defrauds the community of nations it is supposed to
serve.
I
~~
CfL
' (D~
\:.1
r-