75 Years Ago, a Great Canadian Solved the Problems Engulfing the World Today

William Krehm

A Vancouver high-school drop-out, G.G. McGeer, beat John Maynard Keynes by several years in figuring out the mysteries of money and the wiles of unrestricted banking years. And, there was no let-up in his wit in tracking down the surrender of reformers, who had traded conformity for a title or a cushy appointment. Eventually he earned a law degree, became mayor of Vancouver and ended up as a Canadian senator. For years he served as the bumble-bee on Prime Minister Mackenzie King's bottom that left him with little choice but to nationalize the Bank of Canada. It had been founded as a private institution only four years earlier by a Conservative government.

Nor did he stop there: he went on to analyze the betrayals of monetary reformers bribed and fawned upon into passive conformity. And delving into the origins of banks, he tracked the processes by which from providing useful services, they have come to undermine society and hasten its ultimate collapse. And from all this he reflected with great originality and depth about the essence of money.

As representative of the Vancouver, New Westminster Trades and Labour Council, he reported: "In pursuance of the instructions contained in your letter of 10th August, I appeared before the Royal Commission in Banking, Currency and Economy at its sittings in the Court House in this City on the 16th ult.

"In the short time at my disposal it was not possible to present a closely reasoned brief upon the many phases of the monetary and economic situation with which organized labour is definitely concerned.

"In addressing a properly constituted, impartial tribunal charged with the great responsibilities that this Commission has undertaken, all will agree that both fact and argument should be presented in restrained language, advancing plain reason and simple logic. There is, however a proper time and place in advocacy for appeal, conciliation, argument and denunciation. Upon this occasion I determined that the course most likely to produce results beneficial to labour called for 'an evangelical bombardment of invective' directed at the private money system and proprietary interest….

"The Commission consists of:

"The Right Honourable Lord Macmillan, PC, KC, a man who has risen from the humble position of a Scottish minister's son, and who is now steeped in the tradition of institutionality that has generously bestowed upon him some of the highest honours in the gift of an aristocracy based on money power.

"The Honourable J.E. Brownlee, KC, lawyer premier of the Alberta farmer government. Sir Charles Addis, KCMG, a director of the Bank of England, an institution whose monetary policy has brought Great Britain and every other nation, including Canada, which has attempted to follow it, into a veritable chaos of unemployment and bankruptcy.

"Sir Thomas White, PC, KCMG, Vice-President of the Canadian Bank of Commerce, and Canadian war-time Minister of Finance, under whose ministry war-time rates of interest charged to government for credit loans were increased by 50%, while, as an added inducement to credit dealers to plunder a nation at war, Victory Bonds carrying 5.5% were issued free from taxation. He was Minister in 1914 when $10,000,000 of Dominion legal tender currency notes were issued unsecured by gold and paid out on account of the Canadian Northern Railway, the bankrupt undertaking of MacKenzie & Mann.

"Beaudry Leman, BSc, CE, General Manager La Banque Canadienne Nationale, was formerly President of the Canadian Bankers' Association. Mr. Leman is reported, in an extract from The Organizer, Vol. XII, No. 3, page 39, as stating on November 16th last to a meeting of the Purchasing Agents' Association:

"A symptom of that disorderly metabolism may be found in the attempt to maintain high wage rates and reduce the number of working hours. I suggest reverting to a twelve or fourteen-hour day of labour.

"Now while it is quite true that on the following day this bald statement was denied and qualified, the correction clearly indicated Mr. Leman's adherence to the outworn theory of banker management under which bankers, by lowering interest rates and encouraging borrowers to accept credit loans repayable in money, create booms of prosperity. And then, by raising interest rates and withdrawing and withholding credit loans from circulation, precipitate depression crises.

"This theory compendiously described as 'bank rate policy' permits the banker to profit by loaning the people credit when they do not need it and take their securities away from them by demanding repayment in money which borrowers cannot secure for the simple reason that it does not exist.

"In describing the effect of this policy on business and wage-earners, the Macmillan Commission report says: 'Its efficacy depends upon reducing business profits and increasing unemployment up to what figure is necessary to cause business men rather to decrease their cost by additional economies or to insist on and their workers to accept a reduction in wages.' (Section 221).

"In view of the fact that our railways, the largest employers of Canadian labor, are at the present time demanding that a substantial section of their employees accept a further cut of 10% in their wages, and at the same time the government is encouraging the raising in the level of prices of necessities, the attitude of the members of the Commission to banks rate policy is of public interest.

"Lord Macmillan's attitude may, I think, be properly inferred from the language used in describing a theory of trade management employed by bankers which involves the reduction of business profits, the increase in the hours of labour, the reduction of wages and the increase in unemployment, which is contained in Section 218 of the report of which he is the author. It reads:

"Bank rate policy…is a most delicate and beautiful instrument for the purpose.

"I am afraid that wage-earners from whose ranks the army of the unemployed has been developed, will find difficulty in agreeing with this conclusion.

"Labour, industry, commerce, and academic economy are not represented on the Commission. It is a bankers' enquiry. The destiny of the nation, the well-being of the people and the general standard of living are placed within the power and under the control of men engaged in a business that prevents them from acting with freedom in the public service. The plain fact is that the government has entrusted the standard of living of the people to the care of the very men that the government should have guarded the people against.

"No provision has been made to provide the people with Counsel for the purpose of protecting the interests of the public.
"In view of the power to establish facts and to propose changes in our Canadian banking and currency laws, now vested in Lord Macmillan, I think there are certain matters relating to his public service in Great Britain with which you should be acquainted.

"As the Right Honourable H.P. Macmillan, KC, he was Chairman of a Royal Commission appointed on the 5th day of November, 1929, by the British government 'to enquire into banking, finance and credit, paying regard to the factors, both internal and external, which govern their operation, and to make representations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour.'

"The Committee, consisting of bankers, business men, industrialists, economists and representatives of labour, filed their report on June 23, 1931. For his service the Chairman was apparently promoted to the Peerage along with Philip Snowden, who was responsible for his appointment and who is now the most outspoken champion of the Bank of England, Montague Norman and the gold standard.

"In a reservation to the report filed by Sir Thomas Allen and Mr. Ernest Bevin, the following disconcerting statement is made: 'We also desire to point out that the Committee decided to examine monetary policy only on the basis of the gold standard and, therefore, no alternative was examined or discussed.'

"The decision of the majority members of the Committee, unsound in law, satisfied the desire of and served effectively the private money system which secures its power and profit from the shortage of money that the gold standard deception maintains. No matter what the national situation was, there was no good reason why an alternative basis should not have been considered.

"Within three months of the filing of the report, the policy of the Bank of England, which Lord Macmillan and a majority of the Committee endorsed, had reduced Britain to a state of bankruptcy. England was forced to abandon payment in gold, but she has not yet repudiated the private management of public credit, nor has she abandoned the gold standard insofar as it denies to government the right to issue national currency and public credit free of interest charge, and compels the government to pay an unnecessary toll of interest to bankers for the public credit now used to finance public enterprise."

A Needless Toll of Interest

"That is the outstanding feature of the gold standard money system from a banker's point of view, and the part to which the public, unfortunately, gives the least attention.

"Canada, Great Britain and the US still maintain this feature of the gold standard. Certainly the Bank of England in 1931 has not changed the attitude with which it dominated the Macmillan Committee in 1931. It was openly associated with the gold standard group which wrecked the economic conference recently abandoned in London.

"There is no good reason for believing that Lord Macmillan in Canada in 1933 will repudiate Lord Macmillan in England in 1931 by disagreeing with his colleague Sir Charles Addis who as a Director of the Bank of England, is now one of the official priests in the 'High Cathedral of Usury.'

"It is difficult to believe that Lord MacMillan and Sir Charles Addis were selected by the Right Honourable Mr. Bennett for any other reason than that their views on fiscal policy coincide with those of Mr. Bennett, who is reported to have publicly stated as recently as September 1st the following:

"The monetary committee of the World Economic Conference accomplished a tremendous amount of good. It reaffirmed gold as the only satisfactory medium of exchange. It was also agreed that paper money must have a backing of metal reserves…. Canada's national life depends on the maintenance of her position as a great exporting nation and therefore this country cannot experiment with shorter hours of work and higher rates of pay.'

"Apparently Mr. Bennett, at the time of Lord Macmillan's selection, had fallen completely under the spell of the men in London who were conspiring to enslave mankind with a gold standard money system. He is willing to permit international credit dealers to do to the Canadian wage earner and wealth producer what President Roosevelt definitely refused to permit them to do to the wage earners and wealth producers in the US.

"Under such circumstances the appointment of Lord Macmillan, Sir Charles Addis, Sir Thomas White and Mr. Leman to investigate the Canadian monetary system should be viewed by all wage earners, business men and wealth producers with fear and grave misgiving.

''[Given] the charge made by men in every walk of life that the existing economic disaster is due in substantial measure to the mismanagement of the banking system by banking authorities, this Commission, consisting of bankers and a safe chairman from the bankers' point of view, offers a unique example of a group of men conducting an investigation of matters wherein the conduct of some of the Commission members should properly be the subject of the enquiry. If the charge were made that this Commission might be likened to a 'thieves' kitchen court, in which the wrong-doers were both upon the Bench and in the Jury box,' I do not see how it could be successfully refuted.

"This Commission stands condemned under 'the ancient truth' that propounds this postulate:

"When the lucrative profession of usury becomes likewise a post of honour, the State is ruined and the people are doomed to the wretchedness of destitution.

"I cannot see how bankers can investigate their own mismanagement.

"Nor can I see how this Commission can investigate the management of national currency and public credit during the time that Sir Thomas White (formerly connected with the financial groups closely associated with MacKenzie & Mann and the Canadian Bank of Commerce) was Minister of Finance.

"It is impossible to believe that Sir Thomas White and Mr. Leman can, with any degree of comfortable safety, conduct an enquiry into the credit peregrinations of Sir Herbert Holt as President of the Royal Bank of Canada; nor are they likely to disclose the more than significant relations that exist between finance and industry when so prominent an industrialist as Sir Charles Gordon presides over the destinies of the textile industry and the Bank of Montreal.

"There is not the least prospect of this Commission investigating and disclosing the truth in detail of the transaction last November wherein the government advanced to the banks $35,000,000 in Dominion legal tender notes by making a double shuffle of Dominion 4% notes, bank credit and legal tender currency notes. At the time the issue was made the Prime Minister declared that:

"It was in accordance with the idea that the easing of money is highly desirable in the interest of business recovery,' indicating that credit was tight and would be loosened up.

"The confusion that was engendered when Mr. M.W. Wilson, as Manager of the Royal Bank at its last annual meeting declared:

"At no time during the present depression has it been necessary to withhold bank credit for commercial purposes when proper security was offered will no doubt remain undisturbed.

"The attitude of this Commission in Canada to the great problem of public management of public credit will be identical with the attitude taken by Lord Macmillan and the majority of the members of his Commission in 1931. It will not even be considered.

"It would be a great mistake to permit the public to believe that Lord Macmillan is either representative of the progressive thought of Commercial Great Britain or that he was in any way a contributor to those sections of the Macmillan Commission that are now worthy of consideration.

"In less than two short years passing events have proven the main reports, the only part with which Lord Macmillan was associated, to be unsound, impracticable, wholly in error in its interpretation of established fact, and wrong in every detail where the anticipation of future possibilities was assumed.

"That commercial Great Britain is no longer willing to accept blindly the blind and misguided leadership of the Bank of England and the author of the Macmillan report is now definitely indicated. As recently as July 29 of the present year I received a letter from the Secretary of the Empire's most representative commercial and industrial organization, the London Chamber of Commerce, in which he said:

"I think we all owe a very great debt to the American President for having defeated the conspiracy at the Economic Conference to get the world back on to gold. I agree with you, however, that unless he appropriates the national credit to give the people of the States the necessary purchasing power to enjoy the vast abundance of real wealth which is at their disposition, his domestic policy must in the long run fail."

"In the July 1933 issue of its official publication, that great organization of Great Britain's industrial leaders repudiates the policy of the Bank of England and the recorded views of Lord Macmillan and Mr. Bennett in these unmistakable statements:

"Having evaded recognition of the root cause of the trouble, which, as has been consistently stated by the London Chamber of Commerce for the last eighteen months, is a vicious monetary system, the Conference will now concentrate upon trying to mitigate its effects. The problems of tariffs, exchange restrictions and quotas, cannot be solved until the monetary system has been reformed, nor can prices be raised and stabilized. There is about as much chance, with the restoration of the old monetary system in sight of inducing nations to modify their tariffs or exchange restrictions, as there would be persuading by argument a drowning man to leave go of a life-buoy. He must first be lifted out of the water, life-buoy all and then, finding himself safely seated in a boat, he will begin to wonder that he has the lifebuoy around him, wriggle out of it, and cast it into the water.

"That the conventions of the International Gold Standard are so fundamentally opposed to modern social and economic conditions that no government could, even if it wished to, give effect to them. The International Gold Standard system is an anachronism in the Twentieth Century. It can never again function, but as its high priests still hold sway over the nations and regard it sacrilegious even to discuss alternative systems, there appears to be nothing for it but to await the further inevitable collapse of the structure built upon it."

In the face of this conclusion expressing the opinion of unbiased and unquestionable authority, the appointment of Lord Macmillan, a Director of three Bank of England and two Canadian bankers to find Canada's way out of the Depression might well bring people to a realization of our ex-Prime Minister Mr. Bennett's conclusion: "Nothing but the Grace of God can save us in this crisis."

We are back there once more with the stakes even more steeply favoring speculative cowering behind an ever higher technology of swindle and ever more murderous military might.

And our promising reformers today even without the prospects of lordships are woefully short of the high spunk and genius for analysis that animated McGeer.

That shines through in McGeer's appearance before the Commission in Vancouver to present the Macmillan Committee Minority Report.

I quote: "The Macmillan Committee's report will be recognized by historians as an epochal monument in the record that mark the ordered progress of the evolution of enlightenment.

"I believe this to be true because the members of the Committee were skillful enough and sufficiently wise to write in to the main report qualifications and findings of fact and to lay down specific recommendations, from which can be drawn a plan of fiscal and economic reconstruction and policy that will satisfy the needs of twentieth century progress. Everything and more than Roosevelt's 'Brain Trust' has yet attempted was considered and proposed.

"With this Lord Macmillan is in no way associated. It contains a definite scheme of national management of public credit, the deliberate regulation of domestic and international trade and the use of public credit as the means of financing public enterprise, social services and the improvement of the general standard of living."

National Banking

"My conclusion in this regard is based upon the following extracts which I believe contains a definite scheme of national management of public credit, the deliberate regulation of domestic and international trade and the use of public credit as the means of financing public enterprise, social service conclusion that the minority, consisting of J. Maynard Keynes, Reginald McKenna, Sir Thomas Allen, Ernest Bevin, J. Prater Taylor, A.G. Tullock, and Sir Walter Raine, would now agree upon and present as the minority findings, if the report were being written today.

(1) 'The Bank of England ought to be transformed into a public corporation" (page 240).

(2) "The monetary system must be a managed system, operated by individuals placed in a position of unchallengeable independence" (Section 280)."

The acceptance of these conclusions would completely destroy the bankers' monopoly of public credit management for private gain. Public service and private profit do not go together.

Public Credit

(3) "The vicious circle is now complete. The decline of new enterprise has reacted adversely on profits and prices, and the low level of prices stands in the way of new enterprise. It is for this reason that some of us think that in the domestic field it may be necessary to invoke government enterprise to break the vicious circle" (Section 316).

(4) "The best hope of a remedy lies in a monetary policy designed to increase the volume of purchasing power" (page 190).
(5) "It is not necessary that the volume of note issue (a fortiori, or the creation of national bank credit) should continue to be regulated as it is now by reference to the amount of gold held in reserve" (Section 148).

(6) "Since the bankers as a whole under banking practice maintain a cash proportion of deposits of roughly 10% of the cash held in reserve (i.e., legal tender paper money borrowed from the Bank of England or the Department of Finance in Canada) the bulk of the bank deposits arise out of the actions of the banks themselves, for by granting loans, allowing overdrafts and purchasing securities, a bank creates a credit in its books which is treated as the equivalent of a deposit of money" (Sections 71 to 74 inclusive).

(7) "The theory that governmental expenditure in the promotion of public enterprise and social service is restricted by the accumulated savings available for investment is erroneous. When governments distribute wages by financing public enterprise with national currency and credit, the volume of capital investment is increased") (Section 47 of Addendum 1, page 203 and Section 24 of main report).

(8) "If governments pursue an inflationary policy, i.e., meet expenditures not out of revenue, but by the issue of paper currency for the creation of credit in a national banking system), forces are set in motion increasing profits and wages and additional spending arises" (Section 24).

During the war period the bank deposits in Great Britain rose from less than £1,000.000.000 to more than £2,000,000,000. In the US. They were increased from $18,000,000,000 to $37,000,000,000, and in Canada the increase was from less than $1,000,000,000 to $2,400,000,000. Our prosperity continued until this enormous increase in purchasing power was withdrawn from circulation by interest and profits allocated to capital. The fact that the total accumulation of money wealth alleged to be on deposit in the banks in 1914 was increased by more than 100 per cent during the period of war when wealth in the form of life and property was being destroyed proves that the creation of purchasing power upon which progress depends is an independent economic function of the government. The fact that the credits were created in private banks does not affect the conclusion in any way because the banks themselves are the creatures of the government, taking their right to operate from the charters issued under the banking laws. They are merely exercising a delegated authority of government.
By nationalizing the management of the issue and circulation of national currency and public credit, the government becomes possessed of the economic organization from which may be secured an inexhaustible supply of governmental purchasing power. This purchasing power can be used to finance progress and eliminate unemployment, by advancing the intellectual and cultural tone of public opinion and the health and contentment of the people.

Governments, by paying national spending power out for public enterprise and social service that improve the outlook and contentment of the people as a whole, are investing public credit in the best reserve that can be developed for maintaining the stability of government and the economic stability of the social system. It is in this power of government to issue its own purchasing power that we find the way to extend to mankind the enjoyment of the standard of living that an age of plenty warrants.

The adoption of these conclusions of the minority members of the Macmillan Committee would deny to the banker the right to create purchasing power in the banker's books by the mere stroke of a pen but it would open the way to the conquest of poverty.

Surely, what the banker has been able to do with the manipulation of credit for the banker and financier can be done for the benefit of the people and the State.

The lucrative business of converting public credit into private bank credit and loaning it at interest to the government at the expense of the tax-payer as a private banker's monopoly would be eliminated and the use of public credit as the means of financing twentieth century progress would be restored to responsible government. Taxes other than regulatory would, like the gold standard would become relics of the illiterate past.

Public credit would become the "economic blood-stream" of the social system, and the going concerned activity of human progress would take the place of gold as the security for the value of all wealth, real and representative, including gold, silver, paper currency and credit in the banking institutions.

By these findings of fact, the members of the Committee responsible for them have shown the way by which the purely artificial shortage of buying power can be overcome simply by eliminating the impossible money and credit cost that the private money system imposes upon the circulation of credit as the purchasing power of government and commerce. They point to the way that will serve our greatest necessity, that of financing both government and progress.

By changing the administration of public credit from a private profit-making privilege to a public trust, the spending power of government can be increased and the buying power of the consumer can be sustained.

Price Control and Trade Management

(9) "Gold reserves are held today solely to meet temporary deficiencies in the balance of international payments" (Section 340).

(10) "The circulating media consists overwhelmingly of paper money and bank deposits. It is this volume of purchasing power which directly affects the price level and not the amount of gold which may be held in reserve" (Section 45).

(11) "There is nothing inherently impractical in the exercise of the government's power to deliberately control the price level. We should be ready to attempt the task and to gain experience by practice) (Section 210).

(12) "International trade can and should be regulated and controlled by deliberate management" (Section 41, Addendum 1, page 201).

"Here (we) find the sacred power of gold repudiated and a common-sense recognition of the necessity of setting up a system of regulated trade and planned economy under which the people can maintain a system of properly balanced government.
"The minority members of the Committee, in addition to these specific qualifications and conclusions, fully discussed the possibility of eliminating unemployment in Great Britain by State-aided industrial activity; the promotion of public enterprises such as electrification of the entire railway system; the reclamation of land by drainage; and the rebuilding of the slum areas of cities. The proposals were directed to breaking the depression by finding the means of distributing wages.

"Recognizing that there could be no substitute for the weekly pay check that provides the necessities and meager comforts of the worker's humble home, they tried to get Lord Macmillan and his associates to recommend a program more far-reaching than that which Roosevelt has inaugurated. They were unsuccessful in this attempt. They failed in their attempt to establish that the maintenance of the right of men and women to living wages is a more sacred responsibility of government than is the right of the usurer to the collection of interest, now nothing but the wages of book-keeping entries, because of banker opposition.
"The distinguished economists, J. Maynard Keynes, the minority leader on the Committee, recently summarized the attitude of the minority by saying:

"Let us rebuild our market within the area we control and by State action enforce a decent level of wage standards. To do this we must reorganize the entire economy, develop our resources to the full and maintain armed forces, not for conquest but only for the adequate defense of a peaceful Commonwealth."

William Krehm

-- from COMER, May 2010