The role for banks
The Christian Heritage Party
by National Leader Ron Gray

If you and five of your neighbours get together and build a house, right from scratch -- let's say it's a log house, made from trees on the property -- who owns it?

Logic would say (if you all own your own tools, and that all the trees came from land that the six of you share) that the house belongs to all six of you: it was your work that made it out of materials you all own, with tools you all own.

Okay. Now let's suppose that you repeat the performance five more times. Now every one of you has a house. Let's assume that each house (apart from the land it sits on) is worth about $50,000. Your team has created $300,000 worth of value where none existed before.

Now suppose that you decide to sell your house to someone else, someone outside the circle of six. How will you find someone with 50 grand?

Well, the only way you'll find that buyer is if (a) someone else has created something else -- say a luxury car, or maybe 200 snazzy overcoats -- that would be worth $50,000 to you, or (b) a bank cranks out a $50,000 credit into his bank account, so that he can write you a cheque. That is, he takes out a mortgage.

But in the latter case, there are now three participants in the deal: you, the buyer of your house, and the bank. As the buyer repays the mortgage over 25 or 30 years, he'll have to create about $150,000 worth of something he can sell to other people. Those people will get the money to buy his goods from the bank.

The bank has now created a quarter of a million dollars by a mere bookkeeping entry -- money on which it will continue to collect interest. And where will that interest come from? You can be sure the bank will be willing to bring it into being. for a price.

On the other hand, the government could create the money interest-free, as a medium of exchange, to lubricate the exchange of goods that is the national economy.

If the bank creates the money, what backs it? Nothing, really, but wealth that has been created by the efforts of you and your friends.

If the government creates the money, what backs it? Exactly the same productive effort.

The only real difference is that (a) if interest is charged, eventually the institution that charges the interest will own all the houses; and (b) if the banks create the money for the goods, and for the interest -- and for the interest on the accumulating interest -- they'll wind up creating far more money for the same basic productivity. This will cause inflation, which erodes the wealth of anyone who saves. But savings are the capital - the source of the tools that you use and your friends used to multiply your productivity.

Are we beginning to see a picture?

Am I saying that we should abolish the banks? Not at all! Banks serve an invaluable purpose in the economy: they provide a safe place for the savings that are the capital, and they provide a necessary service by clearing the cheques we write. And without them, we'd all have to be involved in (and limited by) bartering cars or overcoats for houses.

Banks are very good at what they do, and we need them. They just shouldn't be allowed to create our money.

The Christian Heritage Party is a Christian political party. Its founding convention was held in Hamilton in 1987. Although we have not yet elected a member to parliament, our objective is to provide true Christian leadership; to defend, promote and uphold Biblical principles in federal legislation; and to gain seats in parliament so that we can have a direct influence on policy changes. Learn more about CHP by visiting our website at