A WORLD IN DEBT BONDAGE
In dealing with the question of debt, it is necessary that we make a clear distinction between private and public debt. Under the heading of private debt, we would include all those debts which are incurred by individuals in their capacity as private citizens, or as business men or women. The tenn public debt, on the other hand, we would use to cover those debts which are contracted on behalf of the citizen by public bodies-i.e., govermnent, semi government and local govermnent.
Even before World War II, the spectacular growth of public debt attracted wide attention. Britain's public debt, for instance, had reached the huge figure of £8,301 million, while the private debts, of which there are no accurate records, were at least ten times this amount. If these public and private debts be added, the prewar debt owed by the people of Great Britain alone, must have been in the region of £91,300 million. The usury charge on this debt, calculated at the then moderate rate of 4 per cent., would have exceeded £3,650 million a year. Although this usury payment exceeds, by more than £500 million, the greatest tax collections in any year during World War 1 1, the total burden of usury exactions on the British public was in no way abated during the war years. On the contrary, the burden of usury has shown a vast increase in spite of reduced rates. For instance, the total usury charge on the public debt has increased by more than 2 per cent. in the last six years.
Sir Ernest Benn, in the introduction to his work, Debt, outlines the principles which should operate in the case of both private and public debt. In 1938, he wrote :
" Among the sound political and moral notions on which we have relied, are the two with which this little book is concerned. First, that family finance and national finance are both subject to the same principles and governed by the same forces. And second, that a debt is a thing to be incurred with great caution and, above all, that it has to be paid. These platitudinous propositions have been forgotten in connection with a great deal of the public and political work of the last twenty years. Sir Ernest Benn, Debt, p. v.
Although this statement, by an extremely orthodox writer, is a statement of principle with which we must all agree it is, however, not a statement of fact. Unfortunately, private and public finance are not "subject to the same principles and governed by the same forces."
Because of our false financial accounting methods, industrial prosperity is governed by the state of the public debt. When public debts are not being increased, and there is no abnormal industrial expansion, industry as a whole cannot make a profit. Under these conditions, a few concerns, for one reason or another, will make profits while the greater number will be forced into debt and bankruptcy. It is a regrettable fact too that high moral character will, in these circumstances, tend to hasten disaster for the individual.
When borrowing money, the average person does exercise considerable caution. He is aware of his responsibility, both moral and legal, to repay the loan. Indeed, it may be said that, except for the improvident or dishonest person, the increasing insecurity is forcing private borrowers to exercise greater caution than ever. But even this increasing caution does not save large numbers of people, including many estimable citizens, from bankruptcy, and what is worse, from a debtor's prison. It will come as a shock to most people to learn that imprisonment for debt is common. For example, "in 1925, 10,858 persons were imprisoned for debt in Great Britain. By 1929, the number rose to 12,925. BY 1933, the figure had risen to 20,416. In 1934, the total number of people in the prisons of the British Empire for debt was in the region of 130,000. " The New Era, Sydney, 8/May/36
No stronger argument need be advanced to support our claim that private debts are normally incurred with great caution. Not only must the individual, or individuals concerned pledge existing assets, but they must accept personal responsibility to repay the debt. Failure to repay involves, at the very least, a loss of assets. If assets have been lost before the default occurs, bankruptcy and imprisomnent may result. In the case of public debt, no such responsibility is accepted by individuals. It is true, that the collective assets of the community back the loan, and the public are liable to repay the debt.
But, because no individual as such has accepted the liability, a most deplorable laxity has developed in our attitude to public debt. While nothing over 25 may be considered a safe loan to a worker in regular employment, we still talk of public debt as being a "gilt-edged" security, even though the debt be in the region of 500 per head. And the reason for this is not hard to find. The individual may default ; the State, seldom if ever. Furthermore, the power of taxation, coupled with the ability to raise new loans to pay off old debts, has so far enabled most States to avoid default.
Now while most informed writers on this subject deplore the general slackness in regard to public debt, those of the orthodox school attribute the increase to three main causes: war, moral laxity and a desire, in certain quarters, to wreck the system by piling up debt. Although wars appear to have been the principal contributing factor in the growth of public debt we hope to demonstrate, as we proceed with our argument, that even this increase is due to a fault in our accounting methods, rather than to the wars themselves. That there has developed, in recent years, a certain cynicism toward the increase in public debt, cannot be denied. In part, this is due to moral laxity, but in the main, we believe it is due to a growing consciousness that the system would prove unworkable without constant additions to the public debt. Significantly enough, big business, while denying the existence of a flaw in the system, will not hesitate to demand the expenditure of loan credits immediately trade falls off. And the average politician, with a cynical disregard of future consequences, will hasten to obey
Generally speaking, the orthodox economists attribute the peace-time rise in public debt to moral laxity. They even go so far as to suggest that a disciplined public could, not only call a halt in this drift to greater indebtedness, but that the debts could be repaid. In his concluding chapter entitled, Something Must be Done, Benn, writing with great earnestness, declared :
" A period of rest means no more borrowing... Taxation should, during this period of rest and reflection, be maintained up to the limit of endurance, and all surpluses should be ruthlessly applied to the reduction of debt. " Sir Ernest Benn, Debt, p. 149.
If this reasoning be sound, then, we suggest, public debts should be paid off as soon as possible. No man, worthy of the name, is prepared to pass on to his children a burden that is rightly his own. In order to achieve maximum possible repayments, every able-bodied person should be fully employed. All earnings over and above that which will provide a tolerable existence, " should be ruthlessly applied to the reduction of debt." But, unfortunately, the reasoning is not sound. Our earlier analysis of false financial accounting methods, has demonstrated that industry as we know it today, is quite incapable of providing full employment, unless debts are being increased, or markets found overseas for a large part of our industrial production.
During the 19th century, and to a lesser extent during the early part of the 20th century, Britain, as a case in point, did find markets abroad for a large part of her industrial production. As a result she was able to reduce her public debt, in the hundred years prior to World War 1, by 153 million. And this despite two minor wars-the Crimean and Boer War. With the end of World War 1, Britain was faced with rapidly worsening trade conditions. Foreign markets, now sought by many newly industrialized nations, could absorb but a small part of her actual or potential production.
The balance of exports over imports, when it existed at all, was small even compared with that of the immediate pre-war years. These economic conditions, made worse by deflation, caused widespread unemployment and poverty. In an attempt to maintain tolerable conditions at home, Britain was forced to increase her public debt, in the twenty years between the two world wars, by £820 million-a figure £1 12 million greater than the total at which the National Debt had arrived, in all the two hundred and twenty years of its existence, prior to World War 1.
In considering this question of debt it must always be borne in mind that the production of real wealth-i.e., goods and services does not of itself bring money into existence. A farmer may produce a crop of wheat, but he does not, at the same time, produce the money to buy it. If the public purchase the wheat, or in fact any other product of industry, then the money used must nonnally have been distributed as incomes by the farmer and other employers. But every penny distributed in this way is regarded as a debt to be recovered in the price of the product. Industry, therefore, while producing goods, does not produce money. Any money made "by industry must be the product of some unpaid debt. "
Even the notes and coins, manufactured on behalf of the Government, do not come into the hands of the public except as a debt to the banks. And this comes about in the following manner: Prior to World War II, it was the usual practice for banks, in this and other countries, to acquire notes and coins by lodging Treasury Bills in exchange for them. As the banks originally acquired the Treasury Bills (Governinent I.O.U.'s) by the simple expedient of honouring their own cheques, they really got the notes and coins for nothing. In other words, the banks created the money which they lent to the Government in the first place. During the last war, however, certain restrictive legislation was introduced.
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In Australia, for instance, the banks have been obliged, since November, 1941, to deposit their " surplus investable funds " with the Central Bank-in this case the Commonwealth Bank-and when a bank draws extra notes or coins this special account is debited with their value. Now, these " so called surplus investable funds " are really increased private deposits made possible by the war-time expansion of central-bank credit. As no depositors account was reduced by this transfer of funds, the special deposits with the Commonwealth Bank are nothing more than new money brought into being when the banks drew cheques on themselves. Notwithstanding war-time legislation, the banks, in effect, still buy notes and coins with their own cheques.
From the foregoing it should now be quite clear that all money has its origin in debt. Every deposit of money is represented by a corresponding debt somewhere in the banking system. In theory of course this is as it should be. Money, distributed through production, must be cancelled in consumption, otherwise it would accumulate and tend to lose its value through inflation. The fundamental error in the present financial system is that we permit private individuals to create money out of nothing, and then to lend this privately-created money at usury. Now the banker, as we have pointed out in previous chapters, is as much entitled to payment for services rendered as any other member of the community. It is the method of payment that is wrong, and not the principle behind the payment.
What is true of the banker is also true of all other business men. They are justly entitled to payment for services rendered, but not for the use of money invested in the business. A salary, no matter how large, can liquidate its own cost in price. Interest, rent and profit, on the other hand, cannot be collected from the consumer unless some other business fails to recover its costs ; unusual industrial expansion is taking place ; new bank loans are being made available for public works, or there is a surplus of exports over imports. If these charges are collected at the expense of some other industry, it matters not whether the collections are used to supplement an inadequate salary or not, the practice causes a shortage of purchasing power. Moreover, should any of this money so collected be converted to capital, debts of an equal value must remain unpaid to the banking system. If, however, this new capital be invested in a public loan, the proceeds may be used to repay some portion of the public debt owed to the banks. In this case, a public liability has been transferred from the banks to the private citizen, but the public debt has not in any way been diminished.
Despite the views expressed by Benn and other orthodox economists, a reduction of the public debt, even under the most favourable conditions of peace, is physically and financially impossible while we retain our present insane economic system. Indeed, even to maintain the present standard of living, which is low compared with the potential standard that could be provided under a sane financial system, we must constantly increase the public debt. As the community is forced to borrow the money from the banks to meet the usury charge on the money already borrowed, public debt must, at the very least, increase at the rate the usury is being compounded. And, while industry as we know it to-day, cannot function unless it recovers its usury charges, the public debt must be constantly increased to provide this money through public works and the like. Public debts, therefore, cannot now be paid in peace time, much less in time of war.
While the exigencies of war-time finance have been blamed for the major increases in our public debt, an examination will show that it is our false financial accounting methods which cause the increase, rather than the wars as such. In war-time, all restraints are thrown off, and the whole process of debt finance is speeded up. In time of war, money is no object, and demand from the outset overtakes supply. Output is enormously increased, and the volume of wage payments increases with production. Large sums of new money find their way into the bank accounts ; the tills, and the pockets of the people. Australia, for example, increased her note issue during World War II, from £47 million to £200 million-a rise of £153 million in six years. During the same period, deposits in trading banks and savings banks moved from £566 million to £1,226 million-a rise of £660 million. If we add to this figure the special deposits of £233 million with the Commonwealth Bank, the total deposits reached the record figure of £1,459 million-a wartime increase of £893 million. These figures, on a population basis, are comparable with those of most belligerent countries.
Now if we had a sane financial system, even the pressing needs of war would leave no burden of debt or inflated values. If any new money were required to finance increased production, this would be provided by the Central Bank as at present. Because the money distributed for purposes of war would be additional to that paid out in respect of civilian goods, its complete recovery by taxation would still leave sufficient in the hands of the people to buy all the available goods. This process of paying out and recovering by taxation, could be repeated indefinitely with the same sum of money, and without piling up debts or changing values. Under the present system, however, such a scheme, although practicable, would not prevent some increase in public debt, because the prices generated are always in excess of the incomes distributed.
Desirable though such a scheme may be, our present methods achieve exactly the opposite. Not only do we build up huge debts, but money becomes an increasingly dishonest measure. In an effort to meet the insatiable demands of war many Govermnents, more especially during World War II, early began to raise the extra money by increasing the short-term debt with their respective Central Banks. This new money (central-bank credit) was provided against Treasury Bills. As the short-term debt increased, due to war-time expenditure, the price level tended to rise because of inflation.
Now it is true that heavier taxation was imposed, but this was ineffective owing to our false accounting methods, and to unscientific taxation. To remove this troublesome surplus, the short-tenn debt was funded with the public several times each year. In other words, the public was asked to subscribe to war loans. And the proceeds of these loans were used to pay off this debt to the Central Bank. By such means, the short-tenn debt was kept within reasonable limits and inflation retarded, but the public debt increased by an amount at least equal to the funded short-term debt. Only when voluntary public subscriptions fell short of the desired amount, did the Treasury permit the trading banks to subscribe to war loans.
Of all the belligerent countries, America perhaps showed the least departure from longestablished financial practice. Some restrictive legislation was introduced, but the banks appear to have circumvented the Govermnent's intention in this regard. In The New International Year Book, for 1945, Jules I. Bogen, a noted financial authority, after giving details of the contributions to war loans, wrote :
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" It must not be assumed from the figures tabulated that commercial banks did not participate heavily in financing the war. While they could not subscribe directly to the year's War Loans, they purchased huge amounts of outstanding Treasury securities from corporate and other investors, thus permitting the latter to subscribe on so large 'a scale during the War Loan drives. " Jules I. Bogen, The Yew International Year Book, 1945, P. 509.
When commenting on the magnitude and effect of these bank purchases, Bogen wrote :
" The banking system contributed to a large extent to the financing of the war during 1944. Commercial banks and the Federal Reserve banks increased their holdings of Governent securities by $22,676,000,000 during the year, accounting for approximately 37 percent. of the increase in the interest bearing debt of the United States. Without these purchases of Government securities by the banks, the Treasury's task in financing the war would have been infinitely more difficult. " Jules 1. Bogen, The Yew International Year Book, 1945, P. 59.
This statement is important in that it gives some idea of the value of government securities which found their way into the hands of the American private banker during World War II. As the banker created the money to buy these securities he got, in one year alone, a free gift valued at 22,676 million dollars. For him it was a perfectly safe procedure, so long as his cash holdings increased, as they did, to support the augmented deposits of new money. That this method of finance did not make the Treasury's task less difficult is proved by the case with which other Govermnents raised the bulk of their war-time finance through the Central Banks.
During World War I there was little or no restrictive legislation, and the trading banks were free to create and lend money against Treasury Bills. They also subscribed freely to war loans, and even went so far as to finance their customers to buy bonds. With every increase in the note issue the banks' cash holdings rose, and because of their powers of credit creation, they were able to make further subscriptions as each new loan was launched. Not only this they accepted their customer's old bonds as security for further loans to buy new bonds. In this way the money was provided, but when the war ended the public was under an obligation to repay, in real wealth at greatly enhanced values, money which had been created and lent by the private banker.
Although this survey is necessarily brief, it will be readily seen that, with the exception of America, there was a great difference between the methods used to finance the two world wars. Notwithstanding the difference in the methods, the result was the same huge increase in the public debt. At the end of World War 1, a large part of the debt was owed to the private banker, while after World War 11, the greater part of the debt was owed to the people. Now this last was an improvement, but it would have been a much bigger advantage if the debt claims had been spread evenly over all the people, as is the debt burden.
In other words, if a debt burden of 500 per head meant that the public owed each person £500, then we would really owe the money to ourselves, and the absurdity of the whole usury system of finance would be exposed. We would, in fact, merely take the usury payment out of one pocket and place it in the other. Unhappily, however, this is not quite the position, for while large numbers have small holdings, a small minority of wealthy persons and bodies have large holdings, and these exact a perpetual toll of usury. This is possible, because usury payments between individuals merely involves a transference of existing purchasing power, even if that transfer be compelled by taxation.
Having examined the orthodox mechanism of money raising during the two world wars, it should not be difficult, in view of this and earlier studies, to see that the resultant debts cannot be paid in peace time. Especially is this true if we remember that a sum of money, at least equal to the incomes distributed during any period, will be required to purchase the goods and services produced and rendered during that period. Any collections, by way of taxation to pay off war debts, will increase the shortage of purchasing power for the following reasons. Firstly, if the collections are used to repay the banker, the money will be cancelled in the usual way. Secondly, if they are used to repay the private bond holder he will, in most cases immediately seek a new investment for his capital. In either case, new govermnent loans, for public works and the like, will be required to stave off post-war depression.
Another factor, frequently overlooked, is that even if every penny to which the people may lay claim could be collected and paid over in a lump sum it would, in most cases, pay less than half the public debt. And this leaves out of account the great mass of private and local govermnent debt. The fact is, that a sum - of money cannot normally be used more than once to cancel debt, whereas in creating debt, it may be used many times. For instance, if the public subscribe £100 million to a war loan, the money may be used to reduce the shortterm debt with the Central Bank. Actually, what happens is this : a credit entry is written up in the books of the Central Bank, and the Government again proceeds to increase its short-term debt by spending £100 million. To all intents and purposes it spends the same £100 million, and when this sum is exhausted the whole process of borrowing, repaying and spending is repeated. If this happens ten times, the public debt has been increased by £1,000 million, but the public never had more than £100 million at any one time. How then can £100 million pay off a public debt of £1,000 million ?
If debts cannot be paid, then the oft-expressed opinion that "all debts must sooner or later be cancelled," is more significant than most people realize. And this includes the great majority of those who so lightly express this view. If this opinion were based on a real understanding of the fact, rather than on a desire to throw off burdens at the expense of others, we should be greatly encouraged. Nevertheless, whether we like it or not, periodical cancellation of debt will be found to be the only solution. In the meantime, however, we must face the fact that where individuals have sacrificed their hard-earned cash to buy bonds (portion of the public debt), Goverinnents, representing the community, are in honour bound to repay. Where the debt is owed to bankers, who made the purchase by honouring their own cheques, Governments should repay by using central-bank credit. This credit need not be repaid to the Central Bank as it will be cancelled by the private banker when the Govermnent securities are redeemed.
The redemption of that portion of the debt owed to corporate and other investors, as distinct from bankers, does present some real difficulties. The actual repayment, despite the huge sum involved, does not constitute any problem provided central-bank credit is used. It is, however, one thing to repay money, and quite another to keep faith in repayment. If the thousands of millions now owed to persons other than bankers, were repaid at one and the same time, inflation would result, and the ex-bond holders as well as all other members of the community would be defrauded. To honour its obligation, a Govermnent should repay in money which has the same purchasing-power value as the money originally lent. Just this and no more.
A Government, therefore, is not only under an obligation to repay, but it must take steps to see that such repayment does not cause inflation. For this reason, repayment must take the form of central-bank credits which may be drawn upon at a specified rate, or where the need exists, at an adequate rate during the lifetime of the owner. No transfers should be permitted, and death duties could cancel any balance remaining without breaking faith or inflicting hardship. Remember, the only alternative to this is cancellation, which, under existing circumstances, would involve a serious breach of contract. In any case, the money was surplus income when first invested, and will not be required, either by the owner or his family, if proposals outlined in a subsequent chapter are introduced concurrently with the above reform.
To pay off the public debt in this manner would take a little time and involve some detailed administration. Nevertheless, it would have the merit of keeping faith. Furthermore, if the ex-bond holders should discover that they have all the security they desire they would, in most cases, ask that the credit be cancelled. Once a sane economic system has been established, there would be no longer any need for a State to go into debt. Even debts between nations present no difficulty, for they could be adjusted with goods. Under these circumstances, public debt would be a thing of the past. And where individuals incur debt, this should be subject to the Law of Release, which reads as follows :
At the end of every seven years thou shalt make a release. And this is the manner of the release : Every creditor that lendeth aulht unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother ; because it is called the Lord's release." (Deut. 15 : 1:1,2.)
With this Law of Release goes the following stern warning and a promise. They read :
" Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand ; and thine eye be evil against thy poor brother, and thou givest him nought ; and he cry unto the Lord against thee, and it be sin unto thee. Thou shalt surely give him and thine heart shall not be grieved when thou givest unto him: because that for this thing the Lord thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto." (Dent. 15: 9, 10)
Surprising as it may be, to those not versed in legal matters, the Law of Release has been in partial operation for centuries. Under Conimon Law, a creditor who fails to collect any sum over a period of six years, forfeits all legal right to enforce payment. This is a departure from the Law of Release in that the debt is cancelled one year earlier, but only if no payment is made, while under the Divine Law, debts are cancelled every seven years, irrespective of what payments have been made in the interim. Moreover, the Law of Release, even in this modified form, has never applied to public debts. With the slate wiped clean every seven years, and a money system freed from usury, man's future would be bright indeed. But this will remain a vain hope until we learn to pray with sincerity Forgive us our debts, as we forgive our debtors. "
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Editor's comment: This article was taken from Only One Road, by The Hon. L. H. Hollins, Ex Minister for Public Instruction and Ex Minister for Labour Victoria, Australia, Published by Cornish Brothers Limited 1949.
For those who wish to pursue further reading. The Secrets of the Federal Reserve by Eustace Mullins 1991, from Bloomfield Books 26 Meadow Land Sudbury Suffolk England C010 6TD, is quite educational.
As is also; The Last Days of The Red Throne by Des Thomas from British Israel Word Federation. 8 Blades Court Deodar Road Putney Bridge London SW15 2NU. UK. 6.95 plus postage and package.Tel 44 181 877 9010
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A final word about the two books. The Kingdom of the Cults by Walter Martin and The "Lost" Ten Tribes of Israel... Found! by Steven M.Collins.
We will start with Collins. Both books "debunk" British Israel Theory without giving any actual documented evidence-- which questions their Scholarship. First, there has never been a British Israel Word Federation doctrine that the British Empire would ever develop into the kingdom of God. Over 100 years ago a few could be forgiven into thinking that would happen as they experienced Gods power in action. So Quoting Collins page 388--'This doctrine was discredited when it became clear that the British Empire would never become the millennial "kingdom of God"'
Editor's comment: The doctrine has not been discredited because there was NO such doctrine.
One of the Basic doctrines of British Israel Word Federation and Church Of God is that Ephraim of Genesis is now Modern Day Britain. This is covered by the Scholars Yair Davidy and J.H. Allen The Kingdom of the Cults by Walter Martin. On page 306 the author states that " to sum up the theories of the Anglo-lsrael cult in a concise manner is not difficult...... then go on to say that "... in fact, it is quite complex and deserves the careful consideration... "
As Martin does not fully understand Anglo-Israelism, he uses one "Brilliant" Dr. Baron who's thorough "refutation" cannot be improved upon page 314. Which states in effect page 311 that NOW the Jews and Ten Tribes are united under David page 312 as their King. It appears to have escaped the "Brilliant" Dr. Baron that David has not yet been resurrected.
Finally by their own admission The Jewish Chronicle states that the True Mount Sinai Racially pure Jew, is few in number--in other words they can be counted.
Ephraim -Britain by contrast are as innumerable as the stars in the sky--they are everywhere Gen 32:12 as the sand of the sea.
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