CREATION OF CREDIT

Ellesmere Guardian, Volume LIII, Issue 56, 15 July 1932, Page 3

CREATION OF CREDIT

THE CRAZE FOR GOLD.

ENERGY MISDIRECTED.

(Written for the Guardian by W. B.

Bray)

We have seen how money is really created in the bank ledgers, but the average man will not be quite satisfled with this explanation of the origin of money. He says "But gold is money and it does not come out of the banks' ledgers." The idea that gold is hard cash haj become so firmly rooted in the mind of civilised man ttiat it is difficult to eradicate it. It is just the fact of that idea having become a conviction that gives gold its value. It is an old saying that a British sovereign will be accepted anywhere. We know the Chinese are extremely anxious to secure them. But not so long ago I had the experience of tendering a sovereign to a merchant (native) in Colombo. It was not accepted until the .acid test had been applied. In other words it was not acceptable money till the acid test enabled him to believe that it really was what it appeared to be. It was credit. Credit is money, gold is money, therefore gold is credit.

Let us now examine the value of the credit. Its value depends on our belief in our ability to exchange it again for the goods we require and in equal value to the goods we gave. To illustrate this point I can tell you what happened some^thirty or moie years ago to a prospector in Australia. He was one of the first white men to cross the great desert of Central Australia and a contemporary of Professor Baldwin, whose books on the Australian aboriginal are classical. After losing his camels and coming to the end of his water supply he found gold literally in handfuls waiting to be scooped up. He filled his belt with as much as he dared to risk carrying, and with only a marble in his mouth to satisfy his thirst he had pver a week's journey ahead of him to reach the nearest water. On the way he met a camel rider with water and provisions, but to his dismay he could not buy either water or provisions even after offering all the gold he carried—some two thousand pounds* worth. The owner of the water, which was vital to life, did not believe that he could again exchange the gold for the precious fluid. Therefore the gold had no value—its credit was valueless.

Before the gold had any value the prospector had to go through the tortures of hell to transport it to a place where water had lesfi value by comparison. Vrhe lesson left its mark on him, for he never attempted to return to the place where gold could be picked up in handfuls. Instead, he turned to the quest of other minerals, in New Zealand where water could be had for the trouble of lifting it. This week I read in the cable news that an expedition of twenty men, well equipped, are setting out to search for gold which is known to exist in the great Australian desert.

How futile is this quest for gold when we come to realise how easy it is to carry on without it! To quote from Powell's "Deadlock in Finance" "Why should we, at considerable pains, dig this yellow metal out of the bowels of the earth in one part of the world, only to bury it again in a bank vault in the bowels of another part of the earth ? And if two people, each having goods to exhange, want to trade with each other, what possible purpose can it serve either of them to know that pieces of yellow metal are locked up in a bank safe?"

Gold is won from the earth at the .cost of much labour and even of life itself. Expensive machinery, useless for anything else, is required. Good land which can produce food every year is washed away to secure the gold underneath. The gold fetish makes us do this. Gold as the basis for credit is a fetish and no more. The real source of wealth is not the gold tinder the earth or in a bank vault but it lies in the top layer of soil all over the earth whence it is extracted by the combination of rain, sunshine and labour. Two men go out to search for gold. One man finds it and he is considered lucky. He "sells" it to a bank and establishes a "credit." He never sees jthe gold again. The other man con-

sumes all his food, wears out his clothes and tools, finds nothing, and returns penniless. The only credit he gets is the credit of having hard luck. Surely it is a crude way to issue credit. It would be more logical to assume that the gold is somewhere (and so save the trouble of locking it up), allow the men to stay at home and beautify their surroundings and issue credit to them in equal portions. The real basis of credit should be the amount of consumable goods they can produce and consume.

Suppose that instead of sending men out today, as we are < doing, to search for gold, we send them to delve for coal and lime, iron and copper; others to change these minerals into cement, dynamos and wire; still others to transport these goods to a river, there to be arranged in such 'relation to one another /that in due time we have a hydro-electric plant capable of bringing to our homes and factories the energy of the sun. We will eventually have something which we can use and save the men of the future the dangers and toil of digging coal to warm our houses and turn the wheels of industry. The issue of credit in the form of tickets to these men could not be called inflation, for they are building an asset to back up the tickets. But the bankers who issue four notes to one sovereign in their vaults would hold up their hands in horror at the ticket system and call it inflation!

The workers who receive the tickets would use them to buy their daily needs and the tickets, instead of bank notes, would become a medium j of exchange. Eventually, when electricity is ready to be sold, the consumers would -/pay for* it with their tickets which could then be burnt. Finally, when all the tickets were thus redeemed the community would have an income producing asset instead of a liability as under our present financial system.

One hundred years ago the island community of Guernsey, having been refused a loan in London and Paris to build a market, but having all the labour and material necessary in the island, went ahead on the ticket system and built the market. Three and a half years after it was opened the stall rents redeemed the last ticket, which was burnt at a public ceremony in honour of the occasion.

Leeston cannot even consider the luxury, the cleanliness, the safety from fire and disease, in having a high pressure water and sewerage system because we cannot get thfe MONEY.