Your Worship, Ladles and Gentlemen:
I am, going to talk to you tonight almost entirely about something which is very much talked about, and very little understood, and that is money.
Now it is no use talking about something, or about plans which affect something unless you understand what it is that you are talking about.

There is a great deal of discussion going on in the world today about finance, and about monetary systems and so forth, and I think it is not unfair to say that a great deal of what is said demonstrates the truth of the definition of a political economist as being a man who knows a great deal about "what ain't."
Now let us begin, with your permission, by examining, or by stating a perfectly orthodox definition of money.
Definition of money: that which exists whatever is made, nor why it is wanted, that no man will refuse in exchange for his goods and services provided that he is a willing seller.
Now that definition immediately wipes out at a blow, as you might say, any particular material for money. It says definitely that money is anything no matter of what it is made and so forth.

Money Not Wealth

Now the first thing that is necessary as a very prerequisite to understanding this subject at all is to dehypnotise yourself of those ideas with which we have been brought up in regard to money, which have invested this thing that we call money with almost mystical powers, and value of its own. We have, many of us, probably not yet got rid of the idea that money is in itself wealth. Now money is, of course, not wealth. Money, I have defined as being anything, and you cannot say anything is wealth; but for the purposes of this talk to you tonight, it is not sufficient to take that orthodox definition of money, but we have to go a little further, and we have to realise that there is a great deal of time wasted at the present time in discussing the vagaries of money, the gyrations and tricks of money, as if money was a thing which had a sort of life and a will of its own, and you did not know quite how it was going to work, and the exchanges went up and down, and all you could do was to observe what happened and see if you could not find out why it happened and so forth.
Now, that is not in the least true, or, let us say, it is not in the least necessary.

Money is a word which is applied primarily to an accounting system, and secondarily to what we call an effective demand order system. It is, first of all, an accounting system. There is no such thing, without, let us say, the walls of a lunatic asylum as, a money system which is entirely separated from a real wealth system, and when I say real wealth, I mean things which are of use to individual human beings for the purpose of raising their standard of living. That is real wealth, and the only real wealth there is in the world. (Applause.)

Object of Production

The whole production system sane objective, and that objective is the provision of the goods and services which the individual requires for the raising of his standard of living and the freeing of his individuality for greater efforts in other directions with the least trouble to anybody. That is the only objective of a production system. It is not a system which exists, for instance, for the provision of employment, and it does not, as a matter of fact, exist for nine out of ten of the reasons which are generally given for the existence of a production system. It does not exist for the good of trade, or anything whatever on a sane basis, except for the raising of the individual and general standard of living, and that is what it is for.

Now, a money system is a method, first of all, of accounting for the wealth which is being produced and which exists, and the present money system requires no further condemnation than the fact that it is possible to say, as it is said at the present time, that the world is poor, and, for instance, that nothing but hard work and thrift will get it out of that poverty, when at the same time ordinary common sense will make it obvious to the eyes of anyone that the world is overflowing with real wealth. (Applause.)
That, in itself, is a real demonstration that you have in the money system as it operates at the present time the major defect of any accounting system, and that is that it does not reflect the facts. That is the one and primary thing that you have to realise about the money system at the present time: that it does not reflect the facts.

We know, as an actual matter of fact, that many of us from the money point of view, are poor. There are probably thousands of people in New Zealand, as there are probably hundreds of thousands of people all over the British Empire who do not know where to turn for their next meal, or their next housing; but it is not because the next meal does not exist, or the housing does not exist. It is because they cannot get the money to pay for it, and you have there a complete divergence between the representation of wealth as pictured in the money system, and the facts of wealth as pictured in physical life. That is the first thing. (Applause)

Now, in connection with the money system as it stands at the present time, there are a number of things which are well worthy of note. You have had quite recently in Auckland, a Governor, or a Director rather, of the Bank of England, and I think, if that gentleman was not misreported, he said that we will not allow any wild-cat schemes of inflation to interfere with the return to prosperity of Great Britain, and only hard work and thrift will produce the right result. Now, there is one very notable thing about the spokesman, referring to the gentleman in question because it is quite common and universal countries that they come from. They identify the money system and the financial system generally with, let us say, Great Britain or New Zealand, or Australia, or wherever it may happen to be, and they say, we will not allow this, we will not allow that.
Now, I do not think that it is really reasonable that the Bank of England, which is a private institution, should speak for Great Britain. (Applause.)
I think, as a matter of fact, that if you were to take a plebiscite, a referendum of the people of Great Britain, you would find an overwhelming majority amounting to ninety-nine and some decimals of one per cent. of the population would diametrically disagree with the whole of the policy of the Bank of England. (Applause.)

Press Reports Favourably?

I dare say you may have noticed that, wherever I have spoken in New Zealand, and I should like to say at once that, wherever I have spoken, I have been extremely fairly reported in the press (laughter). No. That is true. I have never been misrepresented; but, on every occasion. I have spoken I think in one of the great cities of New Zealand, there has appeared an advertisement which is headed "Major Douglas would experiment with New Zealand." Now, you will notice the identification of New Zealand with the financial system. It is not that Major Douglas would experiment with the financial system; but Major Douglas would experiment with New Zealand. This Idea of the identification of the financial system with the country might seem, at first sight, to be highly unreasonable, but just let us look into it a little bit further.

The modern production system is a production system highly specialised, so that to an increasing degree, the individuals who are employed in it make things which, except to a very limited extent, are of no use to them unless they are synthesised with the product of other people. It takes probably the product of fifty or sixty men to make those things which are required to keep one man. It is quite true that the fifty or sixty men at the same time make enough of the things to keep thousands of men, but they do not each one of them do it. It takes the synthesis of what they do to be available for the individual.

Now you cannot draw upon that synthetic production of the modern world, except through the agency of this thing that we call money, which forms an effective demand on this synthesised production of the world, and it is true now has ever been world (applause hear! hear!).
So that perhaps those gentlemen who say or who imply that they speak for Great Britain, and they speak for New Zealand, and they speak for Australia, although they represent only perhaps point one or one per cent. of the population of those countries, yet they may be speaking absolute truth. For the purpose of control, they do represent the policy of the countries for which they speak, and that is a matter for your attention.

Now this question of the control of policy is really at the core of the whole of what I am speaking to you about tonight. I want to go over very briefly just exactly how this control of the money system has come about, because I think in that way you will get a clearer idea than is possible any other way, of the peculiar position which we have allowed to grow up, and which has become such a terrible menace to us in various ways.

History of Money

The money system began, so far as history serves us, amongst a pastoral community whose chief wealth was cattle and the owners of the cattle used to punch leather discs which they exchanged for grain, and which the grain dealer eventually presented to them and were presented the cattle they represented, the cattle being bartered for grain to keep the family. That was the original money, an the extraordinary important part about the consideration of that thing is that the owners of the wealth actually created the money. The owners of the cattle punched discs, and they owned both the real wealth, and the money, the discs. Now, I have no doubt at all that a simple money system of that sort was subject to abuse. Some bright man got the idea of punching more leather discs than he had cattle, and that was the first inflation (laughter) That was true inflation. Modern inflation, I will define accurately shortly.
Modern inflation is generally anything done to the money system which a banker, does not approve of (laughter and applause).

But, however, that may be, we will pass on to a period in history very much later: goldsmiths became the custodians of portable wealth. The goldsmiths had the best strong rooms of their time. They were workers in precious metals and, in addition to making articles in gold and silver for the feudal nobles of the middle ages, they also took care of the plate and other valuables because of their facilities for safe custody, and, as you would, of course, expect, they issued receipts for the articles of which they took care, and those receipts were upon parchment, and were consequently very durable, and they were signed by the goldsmith and it came to be a habit of the true owners of the wealth who deposited the plate with the goldsmith to pass those receipts from hand to hand instead of drawing out the valuables to barter them for land or cattle, or anything of that kind. Instead, of drawing those out, they handed over the receipt, and the receipt was the lineal ancestor of the modern bank note, and, at that stage of the evolution of the money system and banking, another important thing took place divergence from, the real state of affairs.

The custodian of the wealth became the issuer of wealth, the receipts, instead of the owner of the wealth. It was the goldsmith's signature on the receipt which made it accepted, rather than the statement that a certain amount of plate was represented by the receipt, because they knew the goldsmith and perhaps they did not know the owner of the wealth.

Figures in a Book

Now that idea of a bank, which was the development of the goldsmith's business, because the goldsmiths are the direct antecedents of the modern banker, that development was the idea on which people dealt with banks for hundreds of years. The idea was that you deposited so much wealth in a bank, perhaps in the form of gold coin, and you got the receipt for it, which was written down in a book, perhaps a pass book, and, you drew cheques against it, or you got notes for it, and the idea was that you could go to that place and draw out that which was called real wealth which was represented by your figures the book, or bank notes, and until just before the war, the Bank of England notes had upon them "I promise to pay upon demand five pounds sterling, from the Bank of England," and if you went and presented your five pound note then you got five golden sovereigns, the idea being that there were five golden sovereigns behind every note and every entry in your pass book.

Run on Banks

Now what happened when the war of 1914 broke out. There was a panic, and everybody went to the banks and tried to draw out the money that was standing to their credit in gold, which they had a perfect legal right to do. That was the contract they had implicitly entered into with the banks. "There were nine hundred millions of deposits in the joint stock banks in England. About two hundred and forty millions, or a little ever, were drawn out in gold and the whole of the banks in England were bankrupt. There was no more gold.
The difference between that two hundred and forty millions and nine hundred millions was represented by book entries, which were not represented by gold anywhere. In other words, they were a duplicate of receipts for value. (Applause)

Well there was a moratorium for about four days, and the banks reopened, and people went to draw out their money, and were presented with little white bits of paper which said "This note is legal tender for one pound sterling "Bradburys." If you took that note to the bank of England and asked for one pound in exchange, they said: "Yes, certainly," and they gave you another bit of paper just like it, and said: "There is your pound." Well, people, in effect, said: "Let us give it a trial, and see what happens," and they took the pound to a grocer and they got a pound's worth of groceries for it, and they said: "Alright, that is a pound."

Now, what did that pound represent really? It represented the willingness of the general community to supply goods and services in return for it. It did not rest upon anything the bank possessed. It represented something that the general community possessed, the power to produce goods and services. That was what that note represented, and the modern financial system rests entirely upon the willingness of the general public to validate, to make of value those claims upon it which are created by the financial system. (Applause)

Money System an Accounting System

Well, you may say, that is very interesting, but I do not just see where it leads. It sounds a very improper thing that one set of people should make the real wealth of the world and another set should make out cheques, write bits of paper, and take it away from them. This is just about what happened. But on the other hand, we do not see where you are getting by this. Let me make it clear. Let us go back to my statement that the modern money system is an accounting system, together with an effective demand system.

You have admittedly an enormously wealthy world which is growing wealthier every day. You have enormous surplus production everywhere. You have surpluses of wheat, a surplus of butter, of rubber, of cotton, and there are many others besides that. Those are actual ascertained surpluses, but beyond that you have enormous surplus productive capacity (Applause)

You have the so-called unemployed, who are potential producers of wealth; you have enormously developed facilities of, let us say, such a wonderful country as New Zealand, which are producing surpluses, but are not producing anything like what they could produce. You have factories all over the world half employed, you have ships rusting in every estuary of Great Britain, and probably here, too, you have everywhere every possible demonstration of an overflowing real and potential amount of physical wealth, and that is created by one section of the community, who actually produce wealth. Those people do not produce money.

You can build ships, or grow grain, or raise sheep or cattle or make butter until the world is overflowing with those things, but you will not make one penny of money. You may get the money which someone else has, you can scramble amongst yourselves by the ordinary business system for whatever money is about, but you cannot by ordinary business methods, or production, or agriculture, or manufacture, make one pound sterling in ten years. (Applause) The people who can make that one pound sterling whenever they like, at any moment, or destroy it, are those people who operate the financial system and do not make one grain of real wealth. (Applause)

Monopoly of Money

Do not mistake me. I am not suggesting by putting the matter in that form that finance, or financiers even, have not in the past, and do not even to a much more limited extent at the present time, serve a definite purpose in the organisation of things. The money system in its conception, is one of the most marvellous achievements of the human mind, and probably the state of everflowing plenty to which we have got at the present time could not have been achieved so rapidly or by any other agency than by the operation of this financial system, with certain reservation; but what we have to recognise is this by the development from the original meaning of money as simply being a tally system representing real wealth it has become separated from the production of real wealth and since the increase and decrease of money in the world is not in any way definitely connected with the actual production of wealth, the consequences is that you have no reflection in the monetary system, as I said at first, of the facts of the wealth producing system, and the consequence of that is that we have allowed to go from us as a community both of producers and consumers, this extraordinarily important, in fact this overwhelmingly important power to monetise wealth.

Now that is the point that I wanted to bring to you in the world, and it may wreck the world, has become a monopoly, that is not representative of the physical facts, and we have allowed it to become the monopoly of this money system, this immensely important, overwhelmingly important power to monetise real wealth. I am so anxious that you should not miss this point that I am going to labour it to you a little more.

Monetising Wealth

Supposing that you have one hundred acres of land, and you have a house and you have a motor car, and somebody inflicts upon you a tax of £15 a year, and no body has any money. What are you going to do about it? You cannot pay a tax with a motor car, you cannot chop a bit off your land and take it to the tax people and say "Take that." They do not deal in those things. They say "No, we want £15 in money." The fact that you cannot get money is not of any interest to us. "Sell your land, sell your motor car, sell your house," and the less money there is about, the more certain it is that you will have to part with your real wealth in order to get those bits of paper.

Now take your mind back to the condition of affairs when the owner of wealth was the maker of money. I am not suggesting that as a cure; but I want you to get the idea of the thing. Supposing you were able to say "Yes, but my land is worth £500, my motor car is worth £200, my house £1000. I have £1700 visible. Now then I will make £1700 of money and give you £15 of this. That disposes of you." You would not have lost your motor car or land or house.

Now there is only one organisation in the world at the present time which actually can monetise wealth, and broadly speaking, that is the banking system. It can actually monetise wealth. It can do it in all sorts of ways. Supposing you have 1000 acres of land. You can go to a bank under certain conditions and say "Lend me £500 on this hundred acres of land." Now, of course the idea you have when you get that £500 is that you merely get somebody else's £500. You have not. You have a new £500 absolutely, created by a stroke of a pen. (Applause)

In other words, you have gone to a completely alien wealth, and the monetisation of your wealth is lent to you, and if it is not repaid, that monetisation which cost practically nothing, is a good and sufficient reason for taking away the real wealth from you. Do you see the point? (Applause) That is most important.

Now, before passing on to the direction of a cure for this situation, I want you to get a clear idea of the form that modern wealth takes, and in order to do that we will refer to a definition of money which is not so popular as it was, but is still quite frequently used, and that is that money is a medium of exchange. Now up to about one hundred and fifty years ago, the wealth production of the world was individual production. It was very largely the result of human labour, and perhaps a little of it was due to human brains; but broadly speaking it might be said that individuals produced wealth, and they required to exchange it with each other, and therefore there was some sort of justification for regarding money as a medium of exchanging individual production between individuals.

But this marvellous production system, of course, in the world of today is nothing like that. It is very largely the result of the application of power solar energy, the energy from the sun producing processes, so that you get as a result of that, and the use of marvellous machinery and invention and organisation and so forth, you get a continually increasing number of units of production for one unit of human energy, what we call in engineering terms "one man hour." One man hour of human energy is producing more and more units of production over what a man would be able to produce if, let us say, he was on a desert island, if this additional wealth which flows to him without extra labour as a result of modern science and so forth, really comes to him as a result of what we call a cultural inheritance, something which has been handed down from preceding generations in the form of inventions and science and things of that kind, and it is a few and decreasing number of workers working on this machine of civilisation who produce this marvellous flow of wealth, and it flows from, you might say, a central pool as the result of a number of individuals working on a sort of central machine.
That is the unquestionable description of the modern productive processes.

Now the form that money has to take in order that it shall draw from this central pool of wealth, is not a medium of exchange, because we have not very much nowadays to exchange with each other. We do not want to exchange with each other. The things we individually make are not what the next man wants at all. He wants something that not merely I, but fifty others with me make, and put into a common store and draw it in a synthetic form, so that what the money system requires today would be an effective demand upon that central pool of wealth after we have properly accounted for the central pool of wealth so that we know what is there. That is the justification, in my opinion, beyond all reasonable discussion, for what we might call, in one form or another, because there are many forms it might take, a national dividend (Applause) national cultural inheritance and the wealth which flows from that national cultural inheritance is drawn upon property by a national dividend.

Deliver the Goods

What is the line to take to turn those words, those generalisations, into a concrete fact? Now let me make this point indeed in the antipodes. What you want individually is to get the goods. We do not want to get the administration of the system. So long as the system delivers the goods, the individual member of the public is not seriously concerned with the administration of the system so long as it works. I want to emphasise that, because people are so hypnotised with such words as "national ownership" and "nationalisation" of this and that, that they fail to realise that changes of that kind, though they may be desirable, do not necessarily ensure that the goods will be delivered to the individual any more than they are at the present time. (Applause)
This is not a failure of administration.

There are no fundamental differences between the methods of administration which are employed, let us say, in the New Zealand Railways and the methods of administration which are employed in the London, Midland and Scottish Railways in Great Britain. One is alleged to be a Government and the other is alleged to be a company railway, and so far as actual methods of government are concerned, they are both administered in very much the same way. It is not in the administration of the system that the trouble lies. It is in the distribution system (applause), and that distribution system is completely bound up with this power to monetise wealth. That is where it lies.

Now, I am going to read to you without further preamble certain proposals which I put before the monetary commission at Wellington as a first step towards allowing the Public, the individuals composing the public, to definitely get hold of the goods, leaving the administration to be dealt with at some future time if necessary. The proposals which I placed before the commission at Wellington were subsequent to a correspondence that I had with them in which I made it clear that, in my opinion, the way to proceed in this matter was to investigate the defects of the exiting financial system first {very loud applause).

It is the existing financial system which is on its defence, not any proposals that I have to make. (Applause) Now the commission, with perspicasity and keenness which commissions share with Scotsmen, said that they were not prepared to prejudge the matter, that they were not prepared to admit that the existing financial system had any defects (laughter), and I did not feel that it was at all my part to take exception to that, and I said: "Very well, we will assume for the moment that the existing financial system is perfect (laughter), and we will see what we can do to make everybody a little bit happier under the present financial system, and these are the proposals made on that basis, made, as no doubt you will soon recognise, with a view that they might form a basis for something a little more extensive later on."

Proposals Read

1. From the enactment of these proposals no Bank of New Zealand shall distribute a dividend either in or outside New Zealand in respect of operations carried on within the Dominion of more than six per cent. (6%) per annum on the subscribed capital.

2. No Bank shall increase its capital in such a manner as to affect the gross amount of dividend distributed in respect to business carried on in New Zealand, except with the consent and through the agency of a legal enactment of the Dominion Legislature. Within three months from the enactment of these proposals, every Bank operating in New Zealand shall make an exact return of its assets, specifying in particular all stocks, shares, and debentures purchased by the Bank, the prices paid, and the prices at which such stocks, shares and debentures are held on the books of the Bank for the purpose of the annual balance sheet. The same procedure shall be adopted in regard to all real estate, buildings, and appliances in the Banks' ownership. Such statement shall include a sworn valuation of the current market value of all such assets at the date of the return, such valuation to be made by an independent surveyor or valuer.

3. Where it is found that the figure at which such assets are held on the books of the Bank for balance-sheet purposes is lower than the market value as obtained by the sworn valuation, an amount equal to such difference shall be transferred to an account to be known as "Suspense Account No.1." Where the Bank in question operates in other countries than New Zealand, a complete return shall be rendered and a proportionate allowance for external business shall be made.

4. All profits earned by the Bank from any source over and above the amount necessary to pay a dividend of 6% shall be transferred to an account to be known as "Suspense Account No.2."

5. Six months from the enactment of these proposals an amount equal to 50% of the amount standing to the credit of "Suspense Account No.1" shall be applied to a reduction of the overdrafts debited to the customers of the Bank, such appropriations being made pro rata on the basis of the average overdraft of the Banks' customers for a period of three years preceding the date of the enactment of these proposals, and such appropriation of half the balance of this Account shall be made annually thereafter.

6. One month after the publication of the annual balance sheet of any Bank, an amount equal to seventy-five per cent. (75%) of the amount standing to the credit of "Suspense Account No.2" shall be applied to the reduction or reimbursement of interest paid on overdrafts being made upon the same pro rata basis as that laid down in paragraph 5.

7. A similar procedure to that laid down in the preceding paragraphs shall be applied to the accounts and assets of all Insurance Companies operating in the Dominion, with the exception that the funds required for (Insurance) "Suspense Account No.1" shall be provided by rediscounting the disclosed reserve with the New Zealand Reserve Bank, and that the disposition of the funds so provided shall be as in the following paragraph:- Fifty per cent. (50%) of the amount to the credit of (Insurance) "Suspense Account No.1" shall be applied annually to pay for preference shares or debenture stocks applied for by any natural-born New Zealand subject over twenty-one years of age, to the extent that applications for shares to be paid for by this fund can be met. Such shares shall be allotted pro rata to the applicants without charge, and shall be registered as non-transferable and as not good security for loans. On the death of a holder, or his permanent residence outside the Dominion, such shares shall be cancelled.

8. (Insurance) "Suspense Account No.2" shall be retained as a Dividend Equalisation Fund to ensure that the dividend on all preference and debenture stocks allotted under the preceding clause shall receive a dividend at the agreed rates. Should this fund increase at a rate exceeding five per cent. (5%) per annum, such excess shall be allotted to a pro rata increase in the dividend on such shares as have been subscribed for under Clause 7.

9. These proposals are intended for consideration in the light of the correspondence which preceded and accompanies them.
That correspondence is, of course, merely an illustration of the suggestions which I put forward.

The idea behind these proposals is this. It is extremely probable, we may say that there is a remarkably large difference between the disclosed assets of financial institutions and the market value of those assets. I do not want to enter into the grounds of speculation and therefore I will not offer any figures as to what that difference is likely to be. That difference between the disclosed value of such assets and the real value of those assets if they were marketed according to ordinary business principles, that is to say, not all put upon the market at once, represents the physical basis for a creation of credit. That creation of credit cannot, I think, by any process, either logic or ethics, or what is perhaps even more important still practically speaking, be regarded as anything but the property of the general public. These proposals are intended to monetise the concealed reserves without traversing the existing financial system.
They are not so far reaching as to deal with the whole of the difficulties which do arise in our opinion out of the existing financial system, but I have no doubt whatever that they will form a very considerable mitigation in New Zealand of the difficulties which arise from that system.

Now, the idea in practical form is that this monetised reserve shall be applied by methods which are quite orthodox and known by bankers and other people familiar with financial processes to wipe off the overdrafts of the general community on a pro rata basis that being done in accordance with the well known principle that the repayment of a bank loan is the destruction of the deposit, that is to say, that the money which was created in this way by the monetisation of these reserves would be destroyed or retarded by being applied to the repayment of an overdraft.

The second provision is that any excess profits over the 6%, which incidentally is the dividend paid by the Bank of England, therefore is the rate of payment of dividend which has a well-known precedent, should he applied to the reimbursement of those people who have provided, at any rate, one source of that excess dividend, that is merely a reimbursement of an excess earning of dividends.

In regard to the insurance Account, Suspense Account No.1, the idea behind the monetisation of the reserve is the same. The application of it to the payment for the allocation of shares on what you might call public funds is, of course, novel, but it does not in any way traverse existing canons of finance. The practical result of that allocation of shares is to provide or allow for or make preparation for the distribution to the general public of a national dividend without the nationalisation of the industry. That is to say, that you have in this way a participation by the general public in all the benefits of shareholding allotted to a national source without any interference with the private initiative of the concerns involved, other than those which are involved in share ownership, and so far as preference shares and debentures are concerned, it is a well known fact that so long as the preference shareholder or debenture shareholder gets his interest he has no say in the management of the concern and in order that he shall get his interest the dividend equalisation fund provided in Suspense Account No. 2 is provided.

In that way you provide an increasing interest, a most definite gain by the whole population in the industries, and the progress of the economic development of the country. It will be small at first; it will increase later. I hope that by the adoption of other far-reaching proposals at a later stage it will increase very much more rapidly, very much further, but the essential point I should like to make is that there is no interference with the actual management of those concerns which are, in our opinion, involved, but what is involved is that the general population obtains an interest in the prosperity and also more purchasing power with which to absorb production. Those, gentlemen, are my main points.

Concealed Reserves

Now you see what we are doing there. We are assuming, and I think I may assure you we are not assuming but with grounds, that there exists a vast amount of wealth in the form of what we call "concealed reserves" which is not represented by money, but which is, from time to time, monetised for the benefit of financial institutions. We say, very well, we will monetise that concealed wealth, but we will monetise it for the benefit of the public. (Applause)

We are not going to take the actual wealth of anybody. We are not going to take a concrete thing away from anybody. They are not, in fact, in actual physical possession of the bankers in any way at all. All they have are bits of paper in relation to those things. We are not going to seize the ownership, but to monetise and distribute that money, because the power to create money is a sovereign power which really belongs to the people (applause); but you will notice that we are not going to interfere with the management of the enterprise to which those shares which are taken up by that monetisation belong.

We are going, first of all, to prevent the going into the possession of financial institutions of further undertakings by reducing the existing overdrafts on those undertakings, and with regard to all future preference shares and debenture shares issued, we are going to distribute those amongst the public free. (Applause)

Now let me make it quite clear to you how absolutely ordinary and within the ordinary practice of the existing financial system that is. You will, no doubt, notice that, when a large public issue is put upon, let us say, the market doubt it is true in New Zealand, too secured preference stocks, you will always find those over-subscribed, and people say "There is lots of money about for that sort of thing." But what really happens is that the greater part of that stock is subscribed for by banks and financial institutions who write a cheque in payment for those debenture stocks upon themselves, and do not omit to honour it. In other words, they get those debenture stocks literally for nothing by monetising.

Exactly the same thing is true when the Bank of England pays for that gold by a draft upon the Bank gold. The Bank of England, when it buys gold in the open market, pays for that gold by a draft upon the Bank of England of paper with a little ink on it. Somebody takes that draft and pays into their account with another bank. They draw upon the account so created, and take it to the tradesmen or manufacturers, and those people give value to the figures which are written on that draft. It is not the Bank of England. The Bank of England gets the gold for nothing, and merely gives a draft. (Applause and laughter)

Remedy for Monopoly

Now it seems to me that, if you once realise that the whole of this question rests on the Power to monetise this abounding wealth which exists everywhere, you can see for yourself quite clearly the line upon which a remedy should proceed, and those lines, if carefully laid down, do not interfere with the just rights of anybody, nor do they necessarily mean any interference with the very successful administration of the production system at the present time. They merely mean that the monetisation of the wealth which is produced is handed over to the public so that the public has an effective demand upon this production, and the production itself can go forward without the worries and troubles that it has at the present time. (Applause.)

No single body of individuals anywhere loses, except the people who have acquired by entirely illegal and, as you might say, criminal, if exercised by anyone else, methods, this power to monetise wealth at will. If you monetise wealth at the present time by counterfeiting a bank note, you know exactly where you will find yourself, but the monetisation of wealth by financial institutions is now legal and it is that which has to be put into such a form that you can get the wealth that is produced. (Applause)

Now, of course, it is obvious that since I feel perfectly certain that most of you tonight can understand what I have been saying in the course of an hour or so, the real trouble does not lie in the making of a satisfactory scheme to produce the right results. That is not where the trouble lies. The trouble is getting that scheme adopted. That is quite a different matter (applause), and I think you can realise that there is bound to be a great deal of trouble, if you realise what tremendous issues are at stake. There never has been in the whole history of the world so tremendous a power as is wielded by what is called the monopoly of credit, which is this power to monetise real wealth, and it is quite childish to suppose that those institutions which have acquired that power, are going to let go without trouble. They are not.

The Game Found Out

Well, the first thing to do, is to make it quite clear that the game has been found out (applause), and the second thing and a most important thing, too, is to realise that the interests of every single individual lie jointly and together in obtaining a proper reform of the monetary system. (Applause)

I hope you see what I mean by that individuals into classes and to say for instance that this is a movement of the down and outs, or something of that sort, is a victory for the financial system. It is not a case of that kind at all. The whole world is threatened with overwhelming disaster within a very measurable period of time, in which even the beneficiaries of the existing financial system may go up in smoke, and that is as a direct result of the operation of this existing financial system. (Applause)

So that if the matter is properly investigated, there is every sound justification for going to anyone may be one enemy, and that is not each other, but it is the financial system. That is the second point to be clear about, because I feel confident that every method will be employed to carry out the old Roman proverb which is translated "Divide and rule." Every, possible effort will be made to create divisions that will prevent unification in a common attack upon the common enemy. This is an important matter to bear in mind.

Take One Trench at a Time

The third matter is this. Do not expect to proceed other than by the methods which were laid down by the finest strategist that the hate war produced, General Foch. General Foch's contribution to the victory of the allied armies of the late war was the principle of a limited objective "take one trench at a time." I have shown you how to take the first trench. Go away and take it.