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Counter-Currents August 2011

Kerry Bolton


"Money is merely the medium of trade. It is not wealth. It is only the transportation system, as it were, by which wealth is carried from one person to another.” — Father Charles Coughlin (1935)

It is historically ironic that at the very time the world groans under the inexorable self-negation of the debt-finance system, nothing is offered by the Right as an alternative. Hilariously, the mighty USA is threatened with default on debt amounting to trillions of dollars. States across the world, from Greece to New Zealand are broke. Their debt is so mountainous it is no longer sustainable. The only answers – offered by those who have maintained the debt system – is to “tighten your belts” with “austerity measures,” sell off assets to transnational corporations, themselves a part of the international debt finance system – and establish a new world banking system that will empower the usurers more than ever.

The reaction of masses of people is reaching violent proportions. Individuals and families cannot “tighten their belts” until they are impoverished, while nothing is done to deal with those responsible for their plight. There is rioting in Greece and elsewhere. The rioting seems to be invariably led by the Left; especially with black masked anarchists in the forefront. Yet the Left has offered nothing at all other than the usually banality about “soaking the rich,” which at best would result in equality of impoverishment rather than assisting the masses of people an iota.

Where is the Right?

But where is the Right with leadership and alternatives? The Right seems to be invisible in issues affecting the inevitable results of the debt-finance system. Where financial matters are examined the policies put forward are as absurd as those of the Left: lower taxes, return to the gold standard, audit the Federal Reserve. None of this amounts to anything. The once impressive Social Credit movement, formulated by Maj. C. H. Douglas during the 1920s and 1930s, squabbles dogmatically over technicalities. Hence, Social Credit in New Zealand, for example, which several decades ago took 25% of the vote, is now about as popular as a neo-Nazi skinhead running for public office in South Auckland.

While focusing on immigration, Jews, holocaust revisionism, etc. the Right in general, and worldwide, now seems for the large part, oblivious to the very crucial issue of finance and banking. The banking system is the mechanism by which world control is exercised by the financial elites. Whether Jewish of Gentile, the system is the same and it is largely a moot point to argue about who invented it if one isn’t even aware of what to do about it.

How the System Functions

One of the most cogent descriptions I have read on the mechanism of the debt finance system was provided not by an economic theorist but by a liberal historian of impeccable Establishment credentials, Professor Carroll Quigley of Harvard University. Quigley’s book Tragedy & Hope[1] is often cited by Right-wing conspiracy theorists, and widely read books largely based on his revelations have been best sellers in the USA, including in particular W. Cleon Skousen’s The Naked Capitalist[2] and Gary Allen’s None Dare Call it Conspiracy.[3] Yet neither or these, nor seemingly any other material drawing on Quigley’s work, addresses any manner by which the problem of the financial system, which empowers these “international conspirators,” could be dealt with. Here is what Quigley stated:

The founding of the Bank of England by William Patterson and his friends in 1694 is one of the great dates in history. . . . It early became clear that gold need be held on hand only to a fraction of the certificates likely to be presented for payment. . . . In effect the creation of paper claims greater than the reserves available means that bankers were creating money out of nothing. The same thing could be done in another way. Deposit bankers discovered that orders and cheques drawn against deposits by depositors and given to a third person were often not cashed by the latter but were deposited in their own accounts. Accordingly it was necessary for the bankers to keep on hand in actual money no more than a fraction of deposits likely to be drawn upon and cashed, the rest could be used for loans, and if these loans were made by creating a deposit (account) for the borrower, who in turn would draw cheques upon it rather than withdraw money, such “created deposits” or loans could also be covered adequately by retaining reserves to only a fraction of their value. Such created deposits were also a creation of money out of nothing. . . . William Patterson however, on obtaining the Charter of the Bank of England in 1694, said: “the bank hath benefit of interest on all moneys which it creates out of nothing.”[4]

That, in a nutshell, is how the international banking system still works. It is fraud legalized by the states of the world that succumbed to financial wizardry. It is theft and parasitism par excellence insofar as it leeches off productive work that must pay usury on interest, as an individual, as a family, as a farm, business, state, and world. Describing how this operates in New Zealand, I have written that:

Banks and bankers are looked upon virtually as wizards and shamans who alone can conjure up “money” or more accurately credit, since most commerce is undertaken through credit rather than currency. For example, New Zealand has a mere $3 billion in Reserve Bank notes and coins in circulation. Of this the banks only hold half a billion NZ Dollars on deposit. However the total of all New Zealand bank deposits is $200 billion. The difference between the $200 billion in bank deposits and the half billion in bank cash is the amount of credit the banks have created out of nothing. Banks thereby reap huge profits in interest by creating credit that did not hitherto exist. This situation is the foundation of banking throughout the world.[5]

Since few banks are New Zealand owned, capital gained from interest is shipped out of New Zealand, and there is thereby a perpetual shortage of money or credit to consume the full value of production. It also explains the seemingly odd predicament where creditor nations are themselves bankrupt, because what “they” have is being lent to other states not as government credit, but as credit created by banks that happen to be headquartered in the so-called creditor states. A supposedly “American” bank such as Goldman Sachs can just as well pack up shop and relocate its headquarters to “The City of London” or to Beijing. As is well known among conservative and libertarian and sundry other circles, the US Federal Reserve Bank is owned by private bondholders; therefore such central banks do not issue “state credit” or currency but credit based on private lending.

The patriotic Congressman, Louis T. McFadden, himself a banker, Chairman of the House Banking & Currency Committee, and an example of those on the Right who – decades ago – understood the nature of banking very well, stated in Congress of the Federal Reserve:

Mr Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation’s debt. The depredations and iniquities of the Fed has cost enough money to pay the National Debt several times over.

This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it.

Some people think that the Federal Reserve Banks are United States Government institutions. But they are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory moneylenders. In that dark crew of financial pirates there are those who would cut a man’s throat to get a dollar out of his pocket; there are those who send money into states to buy votes to control our legislatures; there are those who maintain International propaganda for the purpose of deceiving us into granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime.[6]

Someone in the present Congress could have with equal validity quoted McFadden’s speech of eighty years ago as being relevant for the 2011 brouhaha over the US debt crisis.

The same is true of nationalized banks such as the New Zealand Reserve Bank or any other. The NZ Reserve Bank was established at the instigation of the Bank of London, as a private corporation. In 1935 the First Labour Government nationalized it. However, the only time the Bank issued state credit was for funding the iconic state housing project, and then mainly due to the pressure of the popular Labour Member of Parliament John A. Lee. This will be examined later.

Movements for Banking Reform

As one would expect, the methods of credit and banking were major issues of the Depression Era. Our grandparents were acutely aware of such matters. They were discussed in factories, offices, pubs, and homes. Now few among even the well informed are aware of the issues. Yet banking reform was more an issue of the Right than the Left, the latter hedging their bets on the “nationalization of the means of production,” or on graduated income tax, as they still do. As even hard-line communist states have shown, nationalization of industry, and even an internal credit system operating through state banks, does not necessarily extricate one from the international banking system, as witnessed by the mountain of debt that was incurred by the USSR. Even Vietnam is part of the World Bank, and has embarked on a policy of privatization, which it euphemistically (or dialectically?) calls a “socialist-oriented market economy.”[7]

When economic crisis hit the world during the 1920s, unlike today there was no shortage of programs and movements advocating realistic solutions. Significant impetus came in the English-speaking world from the Scottish engineer Maj. C. H. Douglas who formulated Social Credit. This principle calls for the issuing of credit according to sound accounting principles, based on the productivity of a nation. Douglas wrote his seminal Social Credit book Economic Democracy in 1919, followed by Credit-Power and Democracy (1920), The Control and Distribution of Production (1922), Social Credit (1924), and The Monopoly of Credit (1931), among others. Interestingly, he had discerned the nature of the problem prior to the Great Depression. In 1933, he established as an educational institute, the Social Credit Secretariat, which still exists.[8] The fundamental premise remains: “Money is not Wealth but only its token, and tokens cost next to nothing to produce. So what is physically possible and socially desirable can certainly be made financially possible.”[9]

Another significant impetus came form traditional Catholic Social Doctrine, with the Church’s historic enmity towards usury.

Green Shirts of England

In Depression Era Britain Social Credit assumed a refreshingly militant form with the Green Shirts for Social Credit, led by John Hargrave. Readers might recall the enigmatic dedication in Ezra Pound’s booklet Social Credit: An Impact, to “the Green Shirts of England.”[10] Hargrave had led a woodcraft youth movement emerging from the Boy Scouts movement, called Kibbo Kift, from archaic Kentish, meaning “a proof of great strength.” Like the Wandervogel in Germany, it had folkish interests which harked back to Medievalism and the Saxon heritage. Folk moots and Althings were organized, and the movement’s units were called Clans and Tribes. The movement had support from the Fabian socialists, but at the 1924 Althing a socialist faction attempted to take over and was expelled by Hargrave.

Hargrave met Douglas in 1923 and recognized Social Credit as the means of purging civilization of corruption just as his woodcraft movement helped the individual with that aim. Hargrave stated: “Half our problem is psychological and the other half economic. The psychological complex of industrial mankind can only be released by solving the economic impasse.” By 1927 Hargrave had converted most of the leadership of Kibbo Kift to Social Credit and was able to add a Social Credit plank to the movement’s principles. In 1930 a Legion of the Unemployed was establish in Coventry. In 1930 the Legion adopted a paramilitary style green shirt and beret. Soon the Legion was affiliated with Kibbo Kift and in 1932 the woodsmen adopted the green shirt and changed their name to the Green Shirt Movement for Social Credit.

The movement adopted the attitude of the spiritual soldier and a militancy that is now difficult to imagine from most Social Credit organizations. In 1932 Harbrave had stated at the Althing that breaking the power of the “money mongers” could not be done through parliament but only through a movement that was based on “that absolute, that religious, that military devotion to duty without which no great cause was ever brought to a successful issue.” Hargrave advocated a militant campaign that would break the media blackout, something from which the present day adherents could learn. The Green Shirts took to the streets on marches, behind drums and banners, held street corner meetings, and sold newspapers in the street delivering the Social Credit message in a cogent manner. Facing the violent opposition of the Left, they were noted for their discipline in the face of provoca-tion. They led hunger marches, demonstrations of the unemployed, and thousands of open air meetings. They were also noted for throwing green painted bricks through the windows of banks and using the consequent court cases to publicize their views.

In 1936 Hargrave was appointed economic adviser to the new Social Credit Government in Alberta, Canada, and drew up the “Hargrave Plan.” Not surprisingly, Alberta was prevented from properly implementing the Social credit policy due to the interference of the central government. A post-war campaign for Social Credit continued under the National Social Credit Evangel, along with the Social Credit Party. The movement eventually fizzled, although in 1976 there was even a stage musical about the Green Shirts and Hargrave was popularly welcomed when he attended the performance.[11]

The New Zealand Legion

In New Zealand a conservative reaction to the Left formed around the New Zealand National Movement under Maj. Gen. J. V. R. Sherston. The popular physician Campbell Begg soon assumed leadership, and was renamed the New Zealand Legion. The movement reached 20,000 members and also adopted a Green Shirt uniform. In 1934 C. H. Douglas undertook a lecture tour of New Zealand, which had significant results. Begg met Douglas twice,[12] and the NZ Legion adopted state credit as a means of securing social justice without recourse to socialism. For a conservative reaction to socialism, comprised mainly of adherents from the middle class and veterans, albeit with support from the National Union of Unemployed Workers, the NZ Legion was the most genuinely radical movement in terms of its “Begg Plan.” It was therefore opposed by orthodox elements of the Left which called the NZ Legion “fascist” and a reactionary ploy of the bosses, and by the “Right” which was aghast at the Legion’s radical platform. One of the 12 points of the Legion program was the “control of currency by the state.”[13] Eventually the Legion was undermined from within, with a possibly predominant faction rejecting Begg’s aim for the Legion to put up candidates for Parliament, while many were uneasy at the seemingly “socialistic” policies. Begg withdrew from leadership and settled in South Africa. Those candidates for the Legion who stood in local body elections as Independents did well.

There had been from the start a dichotomy between reactionaries who saw the Legion as nothing more than a reaction against the Labour Party and what was seen as its proximity to Bolshevism, and those around Begg who advocated a social policy that would overcome economic dislocation without the need for socialism, but whose program went so far as to advocate the state control of land development. However, as will be considered below, the 1935 Labour Government – under the impress of the mass demand for monetary reform – did enact a state credit policy that, although half-hearted, was sufficient to eliminate most unemployment during the Great Depression, while Roosevelt’s New Deal was only able to achieve that result by recourse to war.


1. C. Quigley, Tragedy & Hope (New York: The Macmillan Company, 1966).
2. W. Cleon Skousen, The Naked Capitalist: A Review & Commentary on Dr. Carroll Quigley’s Book Tragedy & Hope (Salt Lake City, 1971).
3. G. Allen, None Dare Call it Conspiracy (Seal Beach, California: Concord Press, 1972).
4. Quigley, Tragedy & Hope, pp. 48–49.
5. K. R. Bolton, “The Global Debt Finance System: The ‘Inexorability of its Own Negation,” Veritas, Australia, Vol. 2, no. 1, December 2010.
6. L. T. McFadden, United States Congressional Record, June 10, 1932.
7. K. R. Bolton, “Has Vietnam Lost the Struggle for Freedom?” Foreign Policy Journal, June 10, 2010, http://www.foreignpolicyjournal.com/2010/06/10/has-vietnam-lost-the-struggle-for-freedom/all/1
8. Social Credit Secretariat, http://douglassocialcredit.com/
9. Social Credit Secretariat, http://douglassocialcredit.com/
10. E. Pound, Social Credit: An Impact, 1935; reprinted by Peter Russell, London, 1951. All the Pound pamphlets cited herein are available from this writer.
11. K. R. Bolton, John Hargrave & the Green Shirt Movement (Paraparaumu Beach, New Zealand: Renaissance Press, 2003). K. R. Bolton, “State Credit and Reconstruction: The First New Zealand Labour Government,” International Journal of Social Economics (London: Emerald Publishing Group) Vol. 3, No. 1, 2011.
12. M. C. Pugh, “The New Zealand Legion & Conservative Protest During the Great Depression,” MA Thesis, (Auckland University, 1969), pp. 128–29.
13. C. Begg, “The Legion’s 12 Points,” National Opinion, Wellington, New Zealand, Vol. 2, No. 14, 1934, p. 1.