Brilliant quotes here from Frederick Soddy via Brett Fiebiger at the Monetary Realism site. No comment necessary from me:
On a historical note here is Frederick Soddy, Wealth, Virtual Wealth, and Debt, George Allen and Unwin, London, 1926, p. 147:
“THE PRIVATE ISSUE OF MONEY; A CHANCE RESULT OF THE BANK CHEQUE SYSTEM
No doubt there are still many people, if not the majority, who will be frankly incredulous that money vastly exceeding in amount the total national money can be, and is created and destroyed by the moneylender with a stroke of the pen. How frequently does one still read in the Press that the banks can only loan their customers spare money! Most people still think of what money once was, “a public instrument owned and controlled by the State.””
Methinks much relevance to Krugmanites (i.e. EM) and to State-centric theories of money.
More from Frederick Soddy, The Role of Money, George Routledge and Sons, London 1934, p. ix-x:
“This book will show what money now is, what it does, and what it should do. From this it will emerge the recognition of what has always been the true rôle of money. The standpoint from which most books on modern money are written has been reversed. In this book it is not treated from the point of view of bankers—as those who create by far the greater proportion of money—but from that of the PUBLIC, who at present have to give up valuable goods and services to the bankers in return for the money that they have so cleverly created and create. This, surely, is what the public really wants to know about money.
It was recognised in Athens and Sparta ten centuries ago before the birth of Christ that one of the most vital prerogatives of the State was the sole right to issue money. How curious that the unique quality of this prerogative is only now being rediscovered. The “money power” which has been able to overshadow ostensibly responsible government, is not the power of the merely ultra-rich, but is nothing more nor less than a new technique designed to create and destroy money by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of the community or the real rôle that money ought to perform therein.”
Page x: “To allow it to become a source of revenues to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.”
Remember the context is that the banking community plus orthodox economists were denying that banks can create money (knowing full well the opposite to be true) and at the same getting all “morally outraged” about abandoning gold-convertibility. The era was one were “gold” was hailed as the purest money and bankers were hypocrites for pretending they did not create money.
P51: “The Banker as Ruler.—From that invention dates the modern era of the banker as ruler. The whole world after that was his for the taking. By the work of pure scientist the laws of conservation of matter and energy were established, and the new ways of life created which depended upon the contemptuous denial of primitive and puerile aspirations as perpetual motion and the ability ever really to get something for nothing. The whole marvellous civilisation that has sprung from that physical basis has been handed over, lock, stock, and barrel, to those who could not give and have not given the world as much as a bun without first robbing somebody else of it… The skilled creators of wealth [in industry and agriculture] are now become hewers of wood and drawers of water to the creators of debt, who have been doing in secret what they have condemned in public as unsound and immoral finance and have always refused to allow Governments and nations to do openly and above aboard. This without exaggeration is the most gargantuan farce that history has ever staged.”
Soddy was called a “monetary crank” for describing endogenous money.
Page 62-3: “Genuine and Fictitious Loans.—For a loan, if it is a genuine loan, does not make a deposit, because what the borrower gets the lender gives up, and there is no increase in the quantity of money, but only an alteration in the identity of the individual owners of it. But if the lender gives up nothing at all what the borrower receives is a new issue of money and the quantity is proportionately increased. So elaborately has the real nature of this ridiculous proceeding been surrounded with confusion by some of the cleverest and most skilful advocates the world has ever known, that it is still something of a mystery to ordinary people, who hold their heads and confess they are “unable to understand finance.” It is not intended that they should.”
BTW Irving Fisher stole debt-deflation and the ‘100% Money’ reform from Soddy.
Did you have a comment or question about this post, finance, economics or your love life? Feel free to use the discussion forum here to continue the discussion.*
*We take no responsibility for bad relationship advice.