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Wednesday, 3 June 1942

Senator DARCEY (Tasmania) (11:32 AM) . - The honorable senator who has just resumed his seat has dealt with Australian affairs in retrospect, and he has given us some wonderful information, particularly in regard to military affairs. In the first year and also in the second year of the war people were asking themselves, " What is the matter with the Empire's war effort? Why have these disastrous things happened which we were told could not happen? Why were we caught so terribly unprepared? Why has the Empire lost battle after battle - Norway, Libya, Greece, Crete, Hong Kong, North Borneo, Malaya, Singapore, Rangoon, and the greater part of Burma? Why is the enthusiasm lacking to make this in the nature of a holy war for democracy?" There is one short answer to all these questions: Because of a traitorous financial system. That is what has starved defence and left the Empire perilously unprepared for war; and that is what has piled defeat and humiliation upon the Empire's head. It is the popular doubt about the private banker's financial system, together with the depression and untold suffering that it has caused, which makes too many people treat this struggle with a measure of disinterest and hold back the help that they could give. There was no limit before the war to the Empire's physical resources, but for six years, while Germany and Japan prepared, Great Britain reduced its navy, scrapped or sold a large part of its merchant fleet, failed to mechanize fully its army, and did not do anyt!hing to build a real air force. Why? Because the bankers said that those things could not be afforded. France and the British dominions listened to the same treasonable counsels. They saw aggressive dictatorships grow to menacing size, but they " could not afford " to build and equip their armies, and " could not afford " the " luxury " of a bigger navy or a more powerful air force. When the former Premier of Tasmania, the late Mr. Ogilvie, returned from Europe some years ago he said that Australia's defenceshould be in the air and that we should make the sky black with aeroplanes. But, the orthodox economists of the day who were advising the Commonwealth Government, said, "Where is the money to come from ? " The Treasurer of Tasmania, Mr. Dwyer- urged that the Commonwealth Bank should be asked to find £100,000,000 to provide the aeroplanes. That statement was published in the newspapers and. can be verified. That is the tale of high finance. I am confident that not one honorable senator who has listened to me during the past three years is not convinced that what I say is true, but, unfortunately, it does not suit their purpose to admit it, despite the fact that I have quoted the highest authorities in the world for my state. ments on finance and economics. It was not until the shadow of war was upon us that those who control the money of every nation - the private bankers - made some funds available for eleventh hour defence measures, but it was too late. France was overrun and subdued in a few weeks, and only a miracle saved Britain at Dunkirk. From thence onwards the British Empire has staggered from defeat to defeat. Why was the Maginot Line never completed ? Because the hankers of Paris said that it had already cost £600,000,000 and that was all that was to be spent on it. I grant that no great war can be all victories, but so far, there is no feeling of assurance that the long series of reverses has come to an end, and men and women are asking themselves, " What is the matter with us ? What is holding us back ? " On several occasions I have explained the difference between our financial ^.system and the system used in Germany. When Hitler decided to conquer Europe he required finance. Dr. Schacht had been the head of the German Reischbank for many years, and he wanted to stick to the old orthodox methods of finance. The result was that he lost his job. What is the position in Germany to-day? How have the Germans been able to build up their enormous war machine? The answer is to be found in the difference between their financial system and ours. In Germany everything is rationed, including money, food and clothing. In a totalitarian state, the individual has no claim to anything. That system is responsible for Germany's tremendous strength to-day. When the German State requires 100,000,000 marks worth of guns, an order is given to Krupps, the guns are finished, and the Krupp organization is paid by cheque. It is allowed to make only 6 per cent, profit, but it has to its credit in the bank, 6,000,000 marks. The government comes along and says, " We require your money, so we shall take it and pay you 4 per cent, for it ", and the Krupp organization then has to buy government bonds. The profit motive remains, and that is why the people in Germany work so hard to produce their war requirements. But what do we find in the democratic countries under their out-moded financial system? The profit motive has been taken out of business, with the result that many concerns have no incentive to continue in operation. Recently, I met a man in Sydney who has a large estate on the south coast of New South Wales. He told me that he had a big stock of timber which he could cut and sell at a high price, but he would not do that because it would mean that his income tax would reach 18s. in the £1. Therefore, he was content to let the trees grow. It is true that that is not a patriotic attitude, but this man feels that he is obliged to adopt that course under our present rotten financial system. That is merely an instance of what is going on to-day.

In 1941 the Sydney Daily Mirror published a series of articles by Sir Vincent Vickers, exposing the "money trick". The following is an extract from one of those articles: -

Unless we can contrive to design and establish an improved and reformed financial system, which is the first essential towards a new and better economy in our own country, no satisfactory outcome of the war is possible. It would have been wise to have expended some of our energies in strengthening our home defences by placing democracy in an impregnable position under a money-machine managed and controlled by its government and worthy of the public confidence.

That was published in the Daily Mirror on the 24th October, 1941. Sir Vincent Vickers was for 22 yeaTS a director of Vickers Limited. He was a director of the Bank of England from 1910 to 1919, and a deputy lieutenant of the City of London. He lifted the lid off the banker's " box of tricks " in his book Finance in the Melting Pot. He claims to hold views which the London press would not publish. Of course, the London press would not publish his views, for the simple reason that it is controlled by the banks. Three years ago the bank overdraft of the Melbourne Argus was £224,000. It can be seen, therefore, who controls the policy of that journal. In fact, the banks control all newspapers. The overdraft is a tremendous weapon in the hands of the banks, and they use it on every occasion when it suits their purpose. Sir Vincent Vickers also said -

Let us recognize that great social change is coming to this country also, and that a serious social upheaval, even in this country, is not impossible; that prompt action only can ensure that the future shall bring reform and not revolution.

Recently, Lord Baldwin said that if the present system continued, the people would rise and- tear their Government to pieces. Who is responsible for the terrible state of the world to-day if it is not the Government? I have said before in this chamber that the destiny of the people is placed in the hands of their governments, and if we cannot charge world conditions to world governments, to what can they be charged? I have also said on previous occasions that corrupt and incompetent governments calling themselves democracies brought Hitler and the other dictatorships into existence. There is nothing surer than that. Sir William Vickers also made the following statement : -

I have watched for ten years every move, every wriggle, of financial policy; I have seen the effects of the greatest financial blunder the world has ever known - our return to the gold standard after the war.

In the Atlantic Charter, which was signed by 25 nations, provisions is made for a return to the gold standard, if possible, despite the fact that in the past the gold standard has produced most disastrous results. Again quoting Sir Vincent Vickers -

As long as the present system is allowed to remain unchanged, nothing can permanently alter the present tragic state of affairs or resolve this devastating economic paradox.

Of the " enemy within he says - Are we now fighting to uphold freedom and democracy, or are we fighting to uphold and strengthen the dictatorship of international finance? But this world power, with its permitted control of the national money supply, and with its support of a monetary system that has plunged every nation into the miseries of irretrievable debt and the world into economic strife, should not be underestimated.

It is well known to most honorable senators that I do not approve the present system of raising war credits. I have said more than once that wars are not fought with money, but with credit. Whilst these credits have the same purchasing power as money they are manufactured on the bank premises, and the raw materials used are pens, ink and paper. Banks are allowed to make a profit on advances of over 100 per cent. Some time ago when they were offering 2£ per cent, on deposits they were charging 6 per cent, on overdrafts, which is a profit of over 100 per cent. Australia's development was retarded in the early days of settlement in this country because of the lack of money with which to purchase raw materials. The Government has a £35,000,000 loan on the market today. When the war broke out I said that in a total war there should be only one party, namely, the National party, that there should be financial, industrial and military conscription, and that the Commonwealth Bank should be in charge of the war expenditure. Had that policy been adopted we should have had the whole of the financial strength of the country behind us, but we have been fighting financially with our hands tied behind our backs. Honorable senators opposite do not desire to hear the truth, but the truth must prevail.

Senator Foilspoke of the uneconomic and haphazard way in which men are being taken out of industry. He referred to the jewellery trade. I have been in that trade for over 50 years. A week ago a manufacturing jeweller 'in Sydney told me that there are 165 working jewellers in Sydney, and that 119 of them are between the ages of 50 years and 60 years. It would be useless to put those men into a labour battalion, or to ask them to do work other than that to which

Senator Darceythey have been accustomed for many years. The factory in which I was once employed is now closed, because the only jewellery permitted to be manufactured is wedding rings. Even the manufacture of engagement rings is prohibited. In the House of Commons on the 9th April, 1941, Mr. P. C. Loftus M.P., remarked-

There has been a lot of talk about the period after the war. Many think it premature to discuss what will happen after the war. I think it right to do so. We have the lessons of the last war before us. I well remember coming back from France in 1919. This country' was richer and had a higher prestige than ever before in its history. We had the greatest navy, the greatest air force, and the finest army in the world. We had the land of England better cultivated than it had been for two generations. We had more skilled mechanics, more skilled shipbuilders in the country, with magnificant new factories and machinery. The whole world was clamouring for our goods, and primary producers throughout the world had good incomes because prices were satisfactory, and they could pay for our goods, and they were demanding our goods. Our position was of immense wealth, but financial theory sa id : " You are poor ", and for twenty bitter, heart-breaking years we laboured to make the actual facts fit financial theoryPrices of primary producers throughout the world were forced down by our financial policy of deflation, we ruined the farmers of the world, and the farmers of our own country. We destroyed shipbuilding yards, pulled down factories, scrapped machinery, forced our skilled mechanics and artisans to migrate to America and the Dominions; we made the soil of England go out of cultivation and become more derelict than it had been for hundreds of years. And at the end of twenty such years of "bitter and hard work, we had made the actual facts fit the financial theory, and we 'were poor indeed and unable to keep up adequate armaments, and our prestige sank almost as low as it had ever been.

I remember that in 1922 the Bank of England introduced a deflationary policy, but in Australia the late Sir Denison Miller, then governor of the Commonwealth Bank, purchased £20.000,000 worth of securities in a few months, and thus Australia avoided the experience undergone by the people of Great Britain. Mr. James Griffiths, M.P., speaking in the House of Commons, said -

I came into this House very largely because of the way industry was being neglected. We are paying the price for the last twenty years in allowing our industrial equipment to met and to rot. For twenty years we lived in a period when coal-mines workshops and shipbuilding yards wee being closed down. By whom ? By financiers of this country who are in this House to-day.

Here is an account of how Nazi Germany was financed -

In the spring oi 1934, a select group of international financiers gathered around Mr. Montagu Norman, governor of the Bank of England, in the Bank of England in Threadneedlestreet. Among those present were Sir Alan Anderson, partner in Anderson, Green and Company; Lord (then Sir Josiah) Stamp, chairman of the L.M.S. Railway System; Edward Shaw, chairman of the P. & O. Steamship Lines; Sir Robert Kindersley, a partner in Lazard Bros.; Charles Hambro, partner in Hambro Bros.; and C. Tiarks. head of J. Schroeder Company (international banking houses ) .

But now a new power was established on Europe's political horizon, namely, Nazi Germany. Hitler had disappointed his critics. His regime was no temporary nightmare, but a system with a good future, and Mr. Norman advised his directors to include Hitler in their plans. There was no opposition, and it was decided that Hitler should get covert help from London's financial section until Norman would have succeeded in putting sufficient pressure on the Government to make it abandon its pro- French policy for a more promising proGerman policy.

Immediately the directors went into action. Their first move was to sponsor Hitler's secret rearmament, just about to begin. Using their controlling interests in both Vickers and Imperial Chemical Industries, they instructed these two huge armament concerns to help the German programme by all the means at their disposal. . . .

In the same year your English armament firms placed huge advertisements in the Militaerischer Wochenblatt, offering for sale tanks and guns, prohibited by the Versailles Treaty. A statement made by General Sir Herbert Lawrence, chairman of Vickers, furnished the necessary evidence that the British Government knew about and approved these advertisements. When, at his company's annual meeting, he was asked to give assurance that Vickers arms and munitions were not being used for secret re-arming in Germany, he replied, " I cannot give you an assurance in definite terms, but I can tell you that nothing is done without the complete sanction and approval of our government ".

I often wonder whether honorable senators who have been members of this chamber for over twenty years feel any responsibility with regard to the unpreparedness of Australia for this war. Why do they adhere to the orthodox financial system when the national credit should have been utilized through the Commonwealth Bank? They are largely responsible for the conditions prevailing in Australia to-day. It is fortunate for this country that the Broken Hill Proprietary Company Limited had been developed as it hnd when the war broke out, otherwise we should have been in a particularly unenviable position to-day. The war could be financed without borrowing money as the Government is seeking to raise it to-day. The cost of floating loans is tremendous. The cost of floating the loan raised in February was ?41,800. As the Royal Commission on Monetary and Banking Systems has said that the Commonwealth Bank could lend the necessary money to the nation free of interest, there is no reason why a high rate of interest should be paid for it. Do honorable senators imagine that our financial difficulties can be overcome by orthodox methods ? Australia started the war with a national debt of over ?1,200,000,000. The debt arising from the last war was ?385,000,000, in respect of which we have already paid over ?400,000,000 in interest. Great benefit would have been derived from the use of the national credit. Shall we allow the banks, as in the past, to create credit to the amount of hundreds of millions of pounds and charge the nation 3? per cent, interest upon it, or shall we instruct the Commonwealth Bank to provide those credits? This country has great productive power, yet we are dealing with the economic situation as if we lived in an age of scarcity of commodities. I was glad to hear Senator Sampson say last night that wars could not be won with money; but until the present dreadful tragedy overtook the world the people did not realize it. Money does not count at all. Yet when loans are being floated we are told that if the people will not subscribe to them voluntarily, the money will be taken from them compulsorily. There would be no necessity for the heavy taxes which are being imposed if the Government would decide to use the credit of the nation. All the debate yesterday on uniform income taxation related to measures estimated to yield only an additional ?12,000,000 which, at the present rate, would meet our war expenditure for only twelve days. When Mr. Menzies was Prime Minister, I told him that if his Government wanted credit to finance the war, all it had to do was to tell the manager of the Commonwealth Bank to issue the necessary credit Paragraph 530 of the report of the Royal Commission on Banking and Monetary

Systems stated that, ultimately, Parliament is responsible for finance and everything necessary for the good government of the country. The Government of the day is the executive of the Parliament with power to act up to its constitutional limit. The report to which I referred also said that certain powers had been granted to the Commonwealth Bank by .statute, and that those powers are to be used in the interests of the nation. If at any time there is a difference of opinion between the Government and the Commonwealth Bank Board as to the policy to be followed a free and frank discussion shall take place Should their views still be irreconcilable, the Government shall tell the beard that it takes Ml responsibility for what is to be -done and then direct the hoard how to act. I cannot understand why that system is not being used to-day. Regulations recently promulgated prevent the private banks from buying bonds or issuing overdrafts; but as the Government has gone into debt to the amount of £131,000,000, what is the use of denying the banks the right to buy bonds at one end of the counter, if at the other end of the counter they can buy Treasury bills and inscribed stock which bear interest? In a newspaper published last Monday the following paragraph appear-ed : -

The Federal Government was unable to carry out its banking policy because it did not have a majority in both houses. The Prime Minister, Mr. Curtin, stated this in reply to the Newcastle Australian Labour party -council's protest against the non-use of the Commonwealth Baric to the fullest extent.

Mr. Menziessaid that his Government was prepared to use credit up to the limit of safety, but he did not say what that limit was. The limit of safety is the productive capacity of the nation. Mr.. Menzies did not say that his Government had imposed heavy rates of taxes on higher incomes and had added greatly to the credit issued by the private banks. The operations of the trading banks have not been placed under effective control and so long as the Government is prepared to sell interest bearing inscribed stock and Treasury bills, it will not control them. The control still rests with the banks. For many years no more money was available once a loan which had been placed on the market, was not fully subscribed by the private banks. The Commonwealth Bank did not come to the assistance of the Government. There is some hope that, at long last, national credit will he used. If the private hanks are prevented from buying bonds and issuing overdrafts to customers, only two honest ways to finance the war remain. The first method is by the issue of national credit; the second is by imposing tremendously increased taxes. The Labour party's defence policy provides that war expenditure shall be financed out of taxation. In the year in which that resolution was passed, the total expenditure on defence was £7,000,00©. At present, defence expend iDare is £7,000,000 a week, and therefore, it is clear that effect cannot be given to that resolution. I hope that the new loan will be floated through the Commonwealth Bank, interest fr-ee, .so that the people will be saved from having to bear heavy taxation in perpetuity.

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