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Thursday, 26 June 1941

Senator DARCEY (Tasmania) . - The best advice thatI can give to the Government is that the necessary credits for the prosecution of the war be obtainedthrough, our great Commonwealth Bank. I am induced to this belief by the answer which was given to a question that I asked in connexion with the matter. My question was -

Is it a fact that the findings of theRoyal Commission on Banking. show that the Commonwealth Bank can lend interest-free money to the Government?

The reply that I received from the Minister representing the Treasurer was that the Commonwealth Bank was so empowered. Therefore, the Commonwealth, should not continue to raise money from private banking institutions to aninsupportable amount, and thus burdenthe people with a tremendous interest bill.

My friend Senator Herbert Hays asked my leader (Senator Collings) this afternoon- what the "new order" was to be. I shall quote words uttered in New. York by the Prime Minister (Mr. Menzies), in order to enlighten the honorable senator. Mr. Menzies said; -

There will never he in our lifetime extreme riches and poverty. Whatever the outcomeof the war the world, as we know it, has gone for ever, and the new world will be very unlike . the last..

Some two years ago, before the war commenced, I. read in this chamber a statement under the caption "Warning! Europe." It was a complete statement of the European situation. I believe that warcould have been averted at that time, had the people known, who were to be the greatest beneficiaries from it. I quote the Prime Minister of Great Britain in the following terms-: -

Our aims will he to build a society in which, there will be wealth and culture, but one in. which wealth shall not prey upon the common weal, nor culture degenerate into class and pride.

Mr. Bevinis reported to have made the following statement : -

Unemployment has been, the devil which has driven the masses in large areas of the world to turn to dictators. The greatest social implications rising out of this war, to achieve which every one must he willing to place their all on the altars, is the efforts to get rid of that horrible queue line-up outside the labour exchanges.I am afraid that unless at the endofthis war we solve this problem we may well slip into the most revolutionary action - though I do not mind revolutions if they are well directed. What I am horrified at is a blind revolution of starving men that isundirected and that ends in disaster for the whole community.

Hermann Bergmann, one of the most noted of German writers, has said that, had it notbeen for the deliberate debasement of the German mark - not- inflation, assome persons say: - which reduced' the German people to poverty and despair, there would have been no room for a man like Hitler to attain to power, and this dreadful war would have been 'averted. I said two years ago that the existing monetary system had brought the world to poverty and chaos, and was rapidly heading us into a war which would destroy our civilization. Unfortunately, that proved to be quite true. I was induced to make that remark by the following prophecy, which I read in 1929-

There will probably come well withinthe lives of the present generation a period at which the blind forces of destruction will appear to be in the ascendant . . . but it is difficult to believe that the whole, world is so bereft of sanity that a pause for reflection is too much to hope for, pending a final resignation to utter catastrophe!

While I was in Sydney, two years ago, I saw a wreath placed on the Cenotaph in Martin-place. It bore a large card with the inscription "Because you would not think, we had to die ". Those words are taken from a poem written during the lastwar. Because there has been no constructive thinking since, millions more will have to die. There is no doubt whatever in my mind , that there is a power which can sway governments to its will. I believe that there is no such thing as democracy. We were told by the great Abraham Lincoln that "Democracy is government of the people, by the people, for the people ". It is not logical to contend that the people,' who are said to govern, get whattheywant. Do the people want wars?' They do not; yet we have them. Dothey want poverty, malnutrition, slums? No; yet we have all of those dreadful things, proving conclusively that. we have not democracy as we visualizeit, and that, the people are not governing: George Bernard Shaw was once asked to define political economy, or the art of government; and he said: "Political economy is the art of spendingthe national income in such a way as will bring happiness and prosperity to the greatest number of people." No State in theCommonwealth much less the Commonwealth itself is working, on the true lines of political economy,. because undoubtedly the greatest good goes to the smallest number; and that is what all the trouble is about today. The LondonTimes published the. following : -

Much harm has been done to our cause, both in Europe andoverseas, by the insinuation that we stand for the old order, and that our only aimisto restore the status quo in Europe and to maintain it at' home.

The liberals in the Church of England in GreatBritain, led by the Archbishop of York, with 23 supporting bishops - including top-ranking-. London and Durham - 14 deans, and some 2.00 churchmen, made history at a notable conference. They gave a lead to the British Government to plan for the new order, and without a dissenting voice adopted a resolution presented by the Archbishop himself, one of the chief planks of which read -

Christian doctrine must insist that production exists for consumption . . .

Many years ago, it was stated that the only thing,which justified production was consumption. That is axiomatic, but we find that, while we have the greatest production system ever known, we have poverty inthe midst of plenty. Anything which is physically possible is financially possible, but out efforts are stultified by the foolish monetary system: which afflicts the world. The statement continues -

The monetary system must be so administered that what the community can produce is made available tothe members of the community, the satisfaction of human needs being accepted as the only true end of production.

Recently a committee was appointed to consider social questions, but there is no chance of improving the social conditions of anybody so long as the present monetary system obtains. That is the system which is responsible for all our economic difficulties, for poverty and for the existence of slums, and this is so because the banks can say at, any time how much money there shall be in existence. They have had this power for a long time, ever since 1694. That is the cause of all our economic distress to-day. We are told that if certain things are done they will lead to inflation. That is a meaningless expression. The word should never be used except in conjunction with two other words, " of prices ". We have a Prices Commissioner at the present time. I do not say that his efforts are wholly successful, but he is making some attempt to fix prices. When money is brought into existence by the banks it tends to increase prices; when the banks withdraw money from circulation prices decline. The banks can restrict credit and call up overdrafts, and thus reduce the Volume of money in circulation. So longastheyareabletoexercisethis power, there is no hope of improvement. His HolinessthelatePopePiusXI., statedinoneofhisencyclicals: -

Inourdaysnotwealthaloneisaccumulated,butimmensepoweranddespotic economicdominationareconcentratedinthe handsoffewwho,forthemostpart,are nottheowners,butonlythetrusteesand directorsofinvestedfunds,whichtheyad- ministerattheirowngoodpleasure.This dominationismostpowerfullyexercisedby thosewho,becausetheyholdthecontrolof moneyalsogovernthecreditanddetermine itsallotment,forthatreasonsupplying,so tospeakthelifebloodtotheentireeconomic bodyandgraspingintheirhands,asitwere, theverysoulofproduction,sothatnoone can breathe against their will.

Lastyear, our war budget was £100.000,000 ; this yearwe have been told thatitwill be £250,000,000. The taxationimposedinthat £100,000,000 budget was' three times' asgreat as in any previous year. How areweever going to pay the taxation onthe £250,000,000. budget if the Government continues to raise money through the private- banks ? When the first £20,000,000 loan bill was before Parliament, we were told that the money was to be raised through the agency of the Commonwealth Bank, assisted by the private banks, but it has now been made clear that the whole amount was raised through the private banks. When I asked in this chamber how much had been raised through the

Commonwealth Bank, the Treasurer refused to tell me. Honorable senators were given to understand that they were not entitled to this information, but the manager of the Bank of New South Wales, Mr. Gillespie, in telling his shareholders of the patriotic efforts of that institution, said that the whole of the £20,000,000 for the first war loan had been subscribed through private banks. It is well known to those who take the trouble to find out that when the loan was subscribed no money was transferred from the banks to the Commonwealth Treasury. All the Government got was the right to draw cheques on the private banks for the various rams which they subscribed. The banks do not lend money. It is fundamental that banks are instituted for the purpose of creating credit. When the war savings certificates scheme was first introduced, the banks were confronted with a difficulty, because it was laid down that no one person could own certificates to a greater value than £250. Then the banks went into the matter and persuaded their employees to become, patriotic, and subscribe' for the purchase of warsavings certificates: It might be more accurate to say that theydemanded that their employeesshoulddoso.Thebanks stopped the cashout of their em- ployees' wages, : and atthe end of a certainperiod sent,a cheque to the Treasury for that amount. I know a woman in Hobart whose two children only recently started work. This boy and girl had for a considerable time been walking1½ miles to their work and back again sothat they could subscribethe amount representedby their tram fares for the purchase of warsavings certificates. When the banks sell war savings certificates over the counter, the notes or cheques tendered in payment do not reach the Commonwealth Treasury. Not on your life! That money goes into the bank's cash reserves, and a cheque for the total amount received weekly or monthly, as the case may be, is sent to the Commonwealth Treasury. A bank which sells £100,000 of certificates in this way can then lend the Government £1,000,000, because the bank is authorized to lend up to ten times the amount of its cash reserve. I honour the people who are lending their money to the Government by subscribing for war savings certificates-, but that is what happens to it: As a- matter of fact, wars . are not fought on cash, but on- credits. The difference between taxation and credit is this: Taxes must be paid in cash out of earnings or savings, whereas; credits are created. The last war is not paid- for yet. It would- have been, much better if the Government had: devoted the energy which was- expended, upon the raising ofthe last war. loan, upon the production of essential war equipment. Recently, I heard a professor of- economics, a most conservative man, state that the first 'task of the . Government is notto. raise money to fight' the war ; it should be to- get machines- and war materials. Until', the Government grasps that fact, it willcontinue to waste time. Several days ago I received a note from the Treasurer stating that it was- intended to withdraw permis- . sion. to erect buildings of a smaller value than £5,000, except in special circumstances. That will affect thousands of workers, and inflict great hardship. What sort of a mad system is this under which the Government goes on taxing the -people when it can get the money it needs in the form of credit from the Commonwealth Bank? Many years ago, Abraham Lincoln, the great liberator, said -

The monetary needs- of an increasing number of people advancing toward higher standards of living can and should be met by the government.

Such needs canbe- served by the issue of national currency and credit- through the operation of a national banking system - government has the power . to regulate . the. currency and credit of the nation.

The government should create, issue and circulate all the currency and credit needed to satisfy the spendingpower of the government and the buying-powerof consumers.

The taxpayer will be saved immense sums in interest, discounts and exchanges.

The financing of all public enterprises.- the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration.

Money will cease to be master and become the servant of humanity.. Democracy will rise superior to the money -power.

Lincoln's work was not in vain, and the knowledge of' money, and what it should do and could do, is growing at a great pace, and there is hope for humanity, notwithstanding the chaos. In the House of Representatives- of the United States of America- on the 6th January. 1941, Mr. Voorhis, of California, introduced, a bill dealing with the money question the first clause of which reads -

A bill to provide for national defence without incurring public debt': to reduce the federal -deficit; to lighten the burden of debt-; and to improve the domestic economy. &c., &c.

The measure was referred to the Committee on Ways- and Means-. It is evident', therefore, that I am not standing alone; In the last few years,, the people havebeen educated. The first State inAustralia to grasp the significance of this was South Australia, in which there is a United Australia party Government. By eighteen votes to thirteen, the Parliament of South Australia- passed- a- resolution to petition the 'Governor-General- that the Commonwealth Bank be used to issue interest-free credit for the prosecution of the war, and to assist primary-productions. At my request, the Treasurer of Tasmania, Mr. Dwyer Gray, placed, a similar motion on. the notice-paper, of- the Tasmanian Parliament, and it- was duly carried. Similar' action was taken later, in Western Australia; and: then, in Queens? land, and recently the Premier of Victoria, Mr. Dunstan, was told by the Victorian Country party, -which keeps him in office, that he should have a similar resolution passed, through, the Parliament of that State. Ihave an appointment- with Mr; McKell; the Premier of New South Wales, and I believe that I- shall be able to persuade him to put a similar measure through the Parliament of New South Wales. Then all the States- will be unanimous in demanding this reform. Public meetings are being held all over the country to discuss it, and the matter has been taken up by some of the most important newspapers. Recently, Mr. H. J. Kelleher, a director of the Bank- of New Zealand, said -

If the British Empire was to escape the burden of crushing interest payments after the war, it must immediately replace its privately-created finance by State issues. State-created money would be interest-free. To fight a war with privately-created money is to light two enemies, one outside our country and one within. The second is the enemy of perpetual national debt which we have never defeated:

What is the secret of Hitler's, " financial miracle " ? Here further' shocks await us. We find a reversal of our customary rules' and practices. We are buying our financial ammunition from our enemy. . The enemies of this country, and indeed . of every country, are the private banks. They have never created any wealth, but- according to an official report, which was issued a few years ago the.)': held mortgages over the wheat lands of Australia amounting to £161.000,000. Before the war, the' wool-growers' of Australia were so burdened with overdraft and interest costs ' that' they were about to ask the Commonwealth Government for a grant of Id. per lb. on wool. At that time, they owed £175,000,000. How can any country make progress under such a financial system? We must get down to fundamentals. It is axiomatic that there is no effect without a cause. In other words, there is a cause for every effect. How can a nation of a little over 7,000,000 people meet an indebtedness of £1,400,000,000? That is. the position confronting Australia to-day. We are told that, before long Australia's war expenditure will amount to £20,000,000 a month. Does the Government" think that that amount can be obtained from the people by means of taxes? The only three ways by which money can be provided ,are first, by means of taxes; secondly, by borrowing from the private banks, and thirdly, by using the credit of the nation through the medium of. the Commonwealth Bank. I advocate the third, method. When a bill to provide for the acquisition of the apple and pear crop involving a possible expenditure of £750.000 was before this chamber I asked the then Treasurer if the Commonwealth Bank charged interest to the Government. The Treasurer did not reply to me at the time, .but, later, he said that the banks charged the Government interest at the rate of 3¾ per cent. I then asked whether that money did not go back to the Government in the form of hank profit? Of course, it did; and therefore I ark "why charge yourself interest on your own investment"? If I borrow £1 from myself on Mon,lav. what is the use of paying back 22s. 6d. on the following pay day? Yet that is what the Government is doing, and. will continue to do so long as it is dominated by the private banks.

In the orthodox way of raising credits for. war purposes or public works, the Commonwealth Government sets out to raise a loan. Who subscribed to that loan? When Mr. Casey was Commonwealth Treasurer, the Commonwealth attempted to float a loan of £9,000,000, but only £4,850,000 had been subscribed when the loan was closed. Subsequently, I asked how much money was subscribed through the Commonwealth Bank, and how much through the private banks, and I was informed that £3,750,000 had been subscribed through the private banks. We are paying interest on that money to-day. I have mentioned in this chamber before that the annual interest bill on the first war loan of £20,000,000 amounts to over £600,000 per annum. Why do we pay that money? It is inexplicable that the Government should continue to plunge the nation into debt year after year, thereby necessitating the imposition of heavy taxes which the people find difficulty in providing. In order to meet demands made on them to provide interest, on borrowed money, the people are forced to deny themselves food, clothing and shelter. I emphasize that that is done in order to meet the exorbitant demands of the banks which do not lend money. That is a fundamental of banking - that they do not lend money. I have had experience of that in my own business. Mr. W. G. Hawtrey, exsecretary of the British Treasury, writing in the Encyclopaedia Britannica said that banks are institutions for the creation of credit, which they create out of nothing. No man can have his views printed in the Encyclopaedia Britannica unless he is an acknowledged authority on the subject of which he writes. I suggest that the Government should do the sensible and honourable thing in carrying out its war effort, and not allow that effort to be hampered by want of money, or credit. 'We have become accustomed to speaking of money, whereas the fact is that, except in a limited way, we do not use money at all. The latest, statement issued by the Commonwealth Bank in connexion with the note issue states that the private banks together hold notes to the value of only £15,000,030. The rest of their money consists of silver and copper. It does not follow that that money belongs to the banks- because the money, in every account in credit belongs to a customer, not to the bank. Yet the banks have been able to buy, by means- of cheques, war bonds and treasury-bills to the value of £67,000,000. Although I have said these things over and. over again, and notwithstanding the high standing of authorities- whom I have cited my words must have fallen on deaf ears, because no changehas taken place. I shall, conclude by reminding the Leader of the Senate that I am still willing to show the Government how to fight the war with interest-free money. [Quorum formed.]

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