Funny Money

Article by K. R. Bolton.


Orthodox economists and those with vested interests in maintaining the financial status quo often refer to any scheme that challenges that orthodoxy as ‘funny money’. In a way the term is apt: there have been many examples of states and communities that have been saved from ruin by innovative systems. Hence, they have reason to be happy. The present system of debt finance however, is anything but ‘funny’; in fact it is darn right miserable.

While generations past, particularly during the Depression era, knew much about the banking system and the need for something new, assisted in the British Commonwealth states in significant measure by C. H. Douglas’ tour,[i] the majority of New Zealanders today up to Cabinet level, despite our supposedly better education and lightning speed communications, do not have the foggiest idea of how the rudiments of banking and credit operate, let alone alternatives to it. The same holds true for many other countries in the grip of debt today, including the USA, where during the 1930s the radio priest, Father Charles Coughlin, built a mass movement in opposition to the banking system. However, New Zealand was among the states that did implement a successful policy of banking reform. Few New Zealanders realise that, with a popular electoral mandate, financial orthodoxy and the rule of the Bank of England were thrown out during the 1934 General Election[ii] and in 1936 the First Labour Government was able to reduce unemployment by 75% by the one act of issuing Reserve Bank credit at 1% and 1.5% to fund state housing.[iii]

Little wonder then that fewer still realise that Guernsey Island saved itself from destitution in 1820 by issuing its own currency, which is still used, independently of British Sterling;[iv] that not only did Lincoln issue ‘Greenbacks’ during the Civil War, bypassing the debt finance system, but that the Confederacy also issued Graybacks as ‘non-interest bearing money [which] remained the predominant medium of exchange,[v] and that President John Kennedy did something similar with the issue of US Notes.

While today’s monetary reformers are aware that the Bank of Canada issued over half of Canada’s credit during 1935-1945 and up to 30% until the mid 1970s,[vi] an earlier example of debt-free currency that is unlikely to be known even among most monetary reformers is the manner by which French Canada was saved from destitution in 1685.

French Canada (Quebec) was dependent on an annual remittance from Paris. In 1685 King Louis XIV, with his wars and his extravagance, failed to provide French Canada with its financial sustenance. Fortunately the ‘Intendant’ of the Province, M. de Meulle, had not been blessed with an education into the necessities of orthodox economics as it then was and remains today; of such panaceas as ‘balancing the budget’, ‘belt tightening’, or increasing taxes. Simple man as he obviously was, he apparently did not understand that money and credit are only supposed to appear when loaned into circulation as a usurious debt. So instead of disbanding his troops, whom he could not pay, and making redundancies in his public service, thereby obliging employers to lay off workers due to the lack of purchasing power, de Meulle thought that since money was not available from France he would simply make his own.

Without even a printing press to produce a currency, he called in all the decks of playing cards that could be gathered, and cut them into quarters. On these he wrote the value that each was to represent, gained public confidence in their efficacy as legal tender by giving them his personal guarantee, and spent them into circulation.

While the Mother Country was broke and in such debt as to be a major precipitant of the Revolution a century later, French Canada maintained itself. M. de Meulle reported to the Minister in Paris:

My Lord – I have found myself this year in great straits with regard to the subsistence of the soldiers. You did not provide for funds, My Lord, until January last. I have, notwithstanding, kept them in provisions until September, which makes eight full months. I have drawn from my own funds and from those of my friends, all I have been able to get, but at last finding them without means to render me further assistance, and not knowing to what saint to pay my vows, money being extremely scarce, having distributed considerable sums on every side for the pay of the soldiers, it occurred to me to issue, instead of money, notes on [playing] cards, which I have had cut in quarters. I send you My Lord, the three kinds, one is for four francs, another for forty sols, and the third for fifteen sols, because with these three kinds, I was able to make their exact pay for one month. I have issued an ordinance by which I have obliged all the inhabitants to receive this money in payments, and to give it circulation, at the same time pledging myself, in my own name, to redeem the said notes. No person has refused them, and so good has been the effect that by this means the troops have lived as usual. There were some merchants who, privately, had offered me money at the local rate on condition that I would repay them in money at the local rate in France, to which I could not consent as the King would have lost a third; that is, for 10,000 he would have paid 40,000 livres; thus personally, by my credit and by my management, I have saved His Majesty 13,000 livres. de Meulle, Quebec, 24th September, 1685[vii]

Six years later there was another shortage of money, and again the playing card currency was issued. According to Sir Ralph Norman Angell, Nobel Laureate and British Member of Parliament, the currency became ‘exceedingly popular and remained current during the whole of the remainder of that century and the first half of the next’.[viii] As late as 1749 ordinances were passed in French Canada increasing the issue to a million livres. A. N. Field, a very well-know expert on monetary reform in New Zealand during the Depression era, and a Rightist of radical temperament, commented:

What M. de Meulle did was a very simple thing. At the same time it was a very profound thing. M. de Meulle probably never considered that there was anything very profound about it. It was just an obvious, commonsense step; and it was the right step. Money is merely a ticket entitling the bearer to goods and services, and it matters little whether it is made of gold or cut out playing cards.[ix]

Field concluded with a lesson just as applicable today as it was in 1931, stating that ‘the steps that were taken by M. de Meulle in Canada in 1685 could be taken by the Parliament of New Zealand tomorrow it is wished… Parliament does not take any such step because it is the slave of false ideas, false ideas that are strangling and choking our civilisation. Because of these ideas we remain in a stupid slump that we could walk out of it we chose’. [x] And if the King’s grandson, Louis XVI, had used his head a century later, and had undertaken a method as simple but as effective as M. de Meulle’s, he might not have lost it, and the curse of the French Revolution that continues to haunt Western Civilisation, might not have occurred.

[i] John A. Lee remarked that people became ‘intensely conscious’ of the need for an ‘intelligent money system’ and that ‘wherever people were gathered’, whether at the factory or on the street corner, at the stockyard or on the tram, ‘there was discussion about banking and money’. J. A. Lee, Money Power for the People (Auckland, 1937), p. 1.

[ii] The same year as C. H. Douglas New Zealand tour.

[iii] C. Firth and G. Wilson, State Housing in New Zealand (Wellington: Ministry of Works, Government Printing Office, 1949). Of course, the Labour Government only partially implemented their policies on finance and credit, as John A. Lee was at pains to point out. J. A. Lee and Harry Atmore, This Debt Slavery: July 1940 Budget Speeches of John Alexander Lee, DCM, MP, and Harry Atmore MP (Auckland, 1940); J A Lee, A Letter Every New Zealander Should Read (Auckland: A. B. Parker, 1939), etc.

[iv] Olive and Jan Grubiak, The Guernsey Experiment (1960).

Marc Weidenmeir, ‘Money and Finance in the Confederate States of America’, E. H. Net, http://eh.net/encyclopedia/article/weidenmier.finance.confederacy.is

H. Chorney, Assoc. Professor of Political Economy and Public Policy, Concordia University, Montreal; J Hotson, Professor of Economics, University of Waterloo; Mario Seccareccia, Assoc. Professor of Economics, University of Ottawa; ‘The Deficit Made Me Do It!’, Introduction, CCPA Popular Economics Series, Editor: Ed Finn, Canadian Centre For Policy Alternatives, 2010. http://lists.topica.com/lists/VOW/read/message.html?mid=813781210&sort=d&start=6327

[vii] Canadian Currency, Exchange and Finance During the French Period, vol. 1, ed. Adam Shortt (New York: Burt Franklin, Research Source Works Series no. 235, 1968).

[viii] R. N. Angell, The Story of Money (London: 1929) cited by A. N. Field, ‘The Next Best Thing: Paper Money Better than No Money’, God’s Own Country (And the Devil’s Own Mess), Nelson, 1931, No. 1, p. 3.

[ix] A. N. Field, ibid.

[x] A. N. Field, ibid., p. 4.

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