Second in a Series
16: The Astounding Conversion of Finnolly Servus
After his epiphany, Finnolly Servus thought about money differently. He had always thought about money. But he had thought things like: there’s only so much money (and it’s not enough); it takes money to make money; and all money originates from the government (which makes a handsome profit creating it). Now everything had to be re-assessed in the light of the new truth: the money supply is loaned into existence.
The first thing he did was to buy more bank stock. If banks had obtained a near-monopoly on the creation of money, they couldn’t go wrong, could they? If 97% of the money supply was owned by the chartered banks – and they were collecting interest on it – why, nothing moved in the economy that did not render a tax to the banks! They are a pot of gold at the end of the rainbow, he thought – and then he smiled at that. He knew that since the 1970s, there had been no gold to back the dollar. The dollar is backed, he had been told, by the taxing power of the federal government. But taxation, his training had dinned into his simplicity-loving head, is a bad thing! At this point Finnolly Servus’s mind went a little mushy.
At breakfast, however, he burst out to his wife with, "Now I know why we are in debt!"
"We are?", said his wife. "I thought you told me we are in positive net territory again."
"No – I mean yes, we are. But I mean "we", "us", the whole country, I mean, is in debt."
Mrs. Servus wrinkled her forehead. She had heard these enthusiastic outbursts before – most recently when her husband was extolling the virtues of – what were they? Income trusts? Well, she would listen him out. Maybe it was good news and she would get another winter holiday in Switzerland.
"I met a couple of guys the other night at the panel – real smart guys who know a lot", Finnolly went on, "and I’m going to a lecture tonight by an accountant. The title is" – and he fumbled in his dressing-gown pocket and pulled out a little monogrammed notebook – "Why paying off the national debt is the second-worst thing the government could do. The worst was getting into debt in the first place."
That’s the title? It sounds like the whole lecture."
"I don’t need jokes this morning," said Finnolly, testily. "He’s a very well-informed guy."
That evening, he made sure he arrived a few minutes early at the lecture. It was in a school auditorium. At the door he paused and looked around the room. Quite a mixed batch: a pony-tailed figure (male) in jeans was explaining to a thousand-dollar suit why George Bush was going to win the 2004 election. "They’ve mandated the installation of these rigged voting machines all over the country", he was saying. The suit was nodding sympathetically. Finnolly caught his eye and winked. His salute was not returned.
He moved on and again stopped to watch. The audience ranged from a clutch of bright-eyed university students congregated down front to a couple of well-coiffed older ladies in the back row. A lot of expensive casuals, some blue-jacket-and-grey-flannels, women with long hair and women with short hair, in jeans and sweeping gowns. Among the men, a lot of face hair. They were not homogeneous, nor quiet.
But Finnolly recognized no one. Finally he decided he’d prefer the old biddies to the brash youngsters. He joined the two ladies in the back row.
"What brings you here tonight?" he asked, in response to a welcoming smile from the nearer one.
"I suppose I could say, ‘The Main Street bus’", she quipped smartly.
Finnolly was a little taken aback. In his experience, ladies of her age were usually interested in grand-children, fashions and hair styles (and maybe finding a second husband). But he quickly recovered, introduced himself – as Finnolly Servus, Investment Counsellor.
Fay and May were unimpressed. They gave their names and went on to say they had come because they hoped to hear somebody talk about "what was really going on."
"And what do you think is really going on?" he asked.
"We think our democracy is in serious danger, the government is in the pay of a very few rich people, and its policies are dedicated to two things: getting re-elected and making its rich backers richer."
Finnolly had heard it all before, though never expressed quite so tersely. A month earlier he would have trotted out his persuasive (dismissive) answers. Instead, he heard himself asking, "Do you know anything about the debt money system?"
"Sure," said May. "That’s what this guy is going to talk about to-night – how the government’s debt is really a big chunk of the money supply, and we tax-payers pay the interest on it. I hope he’ll say something about the government transferring its debt to the Bank of Canada, which we still own."
Finnolly was beginning to realize he had underestimated the two "old biddies." In the few minutes before the meeting began they gave him what turned out to be a capsule outline of the speaker’s talk.
He was about to ask where they got their information, when a chairperson, young, blonde and quite attractive, whom he recognized as a prominent journalist, began to tap the mike. The audience settled down, the Chair welcomed them, and before introducing the speaker identified various members of the audience. He was totally surprised to be included as "Finnolly Servus, prominent investor." But he managed a wave of the hand.
The speaker was introduced with an impressive litany of credits: director of companies, author of books, adviser to governments. He was a little grey man, who was funny, clear, and quietly confident. Finnolly wished that his economics professors of years ago had been so well-prepared, incisive and in control of their material. The speaker’s theme was simply put and massively backed with anecdote and readable charts:
1. The government should have run its debt since the mid-seventies through the Bank of Canada, which it owns, instead of through private and foreign investors.
2. Yes, the $30 billion a year in interest payments on the debt are a charge on taxpayers, but if the government were to levy taxes sufficient to pay off the $500 billion debt, there would be little economy left, and certainly no civilized country.
3. Parallel to government debt is private debt. Consider specifically mortgage debt. Over half the money supply consists of money loaned on mortgages. If everybody with a mortgage decided that instead of buying cars and clothes and food, taking vacations, painting their houses, going to sporting events, and donating to charities, they would use all their income to pay off their mortgages, there would be, to repeat the phrase, "no economy and no civilized country."
"So if the money supply is all debt, what should be done? The question was unasked, but palpable in the air above the audience.
To be continued.
— from Economic Reform, October 2003