The money issued by the Government will be no more inflationary than the money created by the banks: it would be the same figures, based on the same production of each country. The only difference is that the Government would not have to get into debt, or to pay interest, in order to obtain these investments.
If every Government issued its own money for the needs of society, it would be automatically able to pay for all that can be produced in the country, and would no longer be obliged to borrow from foreign or domestic financial institutions. The only taxes people would pay would be for the services they consume. One would no longer have to pay three or four times the actual price of public developments because of the interest charges. ( ten times on 50 years with a ten percent interest )
So, when the Government would discuss a new project, it would not ask: "Do we have the money?", but: "Do we have the materials and the workers to realize it?". If it is so, new money would be automatically issued to finance this new production. Then the people could really live in accordance with their real means, the physical means, the possibilities of production. In other words, all that is physically possible would be made financially possible. There would be no more financial problems. The only limit would be that of the producing capacity of the nation. The Government would be able to finance all the developments and social programs demanded by the population that are physically feasible.
Under the present debt-money system, if the debt were to be paid off to the bankers, there would be no money left in circulation, creating a depression infinitely worse than any of the past. Let us quote again the exchange between Messrs. Patman and Eccles before the House Banking and Currency Committee, on September 30, 1941:
Mr. Patman: "You have made the statement that people should get out of debt instead of spending their money. You recall the statement, I presume?"
Mr. Eccles: "That was in connection with installment credit."
Mr. Patman: "Do you believe that people should pay their debts generally when they can?"
Mr. Eccles: "I think it depends a good deal upon the individual; but of course, if there were no debt in our money system..."
Mr. Patman: "That is the point I wanted to ask you about."
Mr. Eccles: "There wouldn't be any money."
Mr. Patman: "Suppose everybody paid their debts, would we have any money to do business on?"
Mr. Eccles: "That is correct."
Mr. Patman: "In other words, our system is based entirely on debt."
How can we ever hope to get out of debt when all the money to pay off the debt is created by creating a debt? Balancing the budget is an absurd straight jacket. What must be balanced is the capacity to pay, in accordance with the capacity to produce, and not in accordance with the capacity to tax. Since it is the capacity to produce that is the reality, it is the capacity to pay that must be modeled on the capacity to produce, to make financially possible what is physically feasible.
Repayment of the debt
Paying off one's debt is simple justice if this debt is just. But if it is not the case, paying this debt would be an act of weakness. As regards the public debt, justice is making no debts at all, while developing the country. First, let us stop building new debts. For the existing debt, the only bonds to be acknowledged would be those of the savers; they who do not have the power to create money. The debt would thus be reduced year after year, as bonds come to maturity.The Government would honour in full only the debts which, at their origins, represented a real expense on the part of the creditor: the bonds purchased by individuals, and not the bonds purchased with the money created by the banker, which are fictitious debts, created by the stroke of a pen. As regards Third-World countries' debts, they are essentially owed to banks, which created all the money loaned to these countries. These same countries would therefore have no interest charges to pay back, and their debts would be, virtually, written off. Banks would lose nothing, since it is they that had created this money, which did not exist before.
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