Lieut.-Colonel Hamilton
(Sudbury)
I hope
that this House, with
the kind indulgence it
always shows to a new
Member speaking for the
first time, will forgive
me if I say a few words
on first principles.
Although for a large
number of hon. Members
what I say will be
elementary and well
known, there may also be
those in the same
situation in which I was
in when an inquisitive
mind led me to inquire
into the processes of
banking. I used to
regard banks as very
useful institutions for
safeguarding a man's
money and for saving him
the trouble of handling
large quantities of cash
himself. I knew also
that they were agencies
for large-scale
borrowing and lending
transactions.
I had a subconscious
feeling that money was a
commodity limited in
extent, like potatoes.
You either had it or did
not have it, and if you
did not have it, you
certainly could not
create it out of thin
air.
For us private
individuals that is only
too true, and painfully
true sometimes. But I
found that in the case
of banks the situation
was entirely different.
Money was a medium of
exchange and could
easily be created out of
nothing. When a bank
made a loan, it was not
a loan in the ordinary
accepted sense of the
word, the transferring
of purchasing power from
one party to another.
For the greater part,
the money was created in
the act of making a
loan, and, similarly,
when a bank purchased
securities, the purchase
money was created in the
very act of purchase.
I
realised also that this
process of creating
money, and, at other
times, the converse
process of destroying
it, is far and away the
most important function
of our banking system.
It is true that there
are people who deny that
the banking system
creates money, and they
point to the fact that,
if you look at the
balance-sheet of any
bank, you find deposits
on the one side pretty
equal to the advances,
securities and other
assets on the other
side. That is true
enough, and they say,
further, that that shows
that the bank is only
using the money
deposited with
107
it by its depositors to
lend to other people or
for other uses. None the
less, usually it is the
other way round, and the
balancing of the
balance-sheet is very
simply explained,
because, when the money
is created, obviously,
the man into whose hands
it comes will deposit it
in his banking account.
Therefore, a new entry
on that side corresponds
to the entry on the
other side.
If we
have any doubt whatever
in this matter, we have
only to consider the
vast volume of money
which is represented by
the total deposits in
our banks—vast in
proportion to the actual
cash in existence—and
ask ourselves, if all
that money has not been
created by the banks,
where in the world has
it come from? Once we
fully realise that the
banking system has this
great power of creating
money, we surely must be
impressed with the
position which it gives
that system—a position,
virtually, of
dictatorship in the
financial and industrial
sphere, because it
means, in the first
place, that the banking
system decides at any
given time what the
volume of purchasing
power in the country
shall be, and it decides
in accordance,
naturally, with its own
interests, which may or
may not always be the
interests of the
community.
It
has been pointed out
that, during that long
period of terrible
depression which we went
through in the 20's, the
banks alone were
practically the only
type of business which
prospered, which surely
goes to show that their
interests are not always
the same as the
interests of the
community. Further, the
banks also obviously
have power to decide, in
large measure, which
undertakings and which
branches of industry can
go ahead and which must
contract their
operations. I know, of
course, that industry
gets its funds to a
considerable extent from
private investors, but,
to a greater extent, it
gets its financial
resources from the
banks, and, in that
degree, they are the
dictators. I do not want
it to be thought for an
instant that I am
casting any aspersions
on bankers or
financiers. They are
honourable citizens,
doing their duty
according to their
lights, neither better
nor worse than the rest
of us, but I think it
would be miraculous if
they always put the
interests of the
community before their
own interests. It would
indicate a degree of
saintliness in their
case which I do not
think they would
actually claim
108
or which any of us would
grant them if they did
claim it.
It is
not their fault if their
interests run counter to
the interests of the
community. It is our
fault for letting the
system continue which
puts them in that
position—a system which
places millions of
ordinary citizens in the
hands of a few people
responsible, virtually,
to no one but
themselves, although I
know that an hon. Member
opposite did claim that
it was the shareholders
who told them what to
do. I doubt myself
whether that hon. Member
was innocent enough to
think that that really
represented the
position. This is a
system which places
these citizens at the
mercy of these few
private men carrying out
operations which these
citizens hardly
understand at all and
over which they have no
control whatsoever, and,
further, operations
which, at one time, may
plunge numbers of these
citizens into the misery
of short time and low
wages, and, at other
times, into the greater
misery of rotting in
enforced idleness. We
have got to change that
system. The Chancellor
has told us that the
method of choosing
Governors of the Bank of
England needed to be
replaced by one that is
more intelligent and
more dignified. I would
go further and say that
it needs to be replaced
by a system which is
democratic and which
enables the ordinary
man, through his
representatives, to
control who is going to
be Governor, and who are
to be part of the
management, of the Bank
of England.
No
industry has suffered
more under the
vicissitudes which I
have been describing
than agriculture, the
one with which my
constituency in West
Suffolk is principally
concerned, and I may say
that people in that
industry are beginning
to realise it. The farm
workers are giving very
sensible and practical
expression to their
realisation, and did so,
in the recent General
Election, by supporting
Labour's policy. The
farmers, as a body, have
not yet got quite so
far, but they did do a
rather remarkable thing
in my constituency,
where a large number of
them sponsored for a
time an Independent
candidate, who was not
himself an agriculturist
at all. He was a
technician and a great
student of economics,
and his study of
economics had led him to
believe whole heartedly
in this very step we are
considering to-day—the
nationalisation of the
Bank of England and
putting finance
109
fully under the control
of the nation—although,
apart from that, he was
still a capitalist. I
hope that, in time, the
farmers will progress
still further and
realise that the Labour
Party is agriculture's
best friend.
Coming
back to the Bill, I have
spoken of the banking
system so far as if it
was one unit. So, in a
sense, it is, but we
know also that it is a
two-storeyed edifice. On
the upper storey comes
the bankers' bank—the
Bank of England, which
controls, under the
limits of the note
issue, the total
quantity of credit which
will be available at any
time. In the lower
storey come the joint
stock banks, with which
we ordinary mortals have
dealings, and which,
subject to the demands
imposed by the central
bank, can create and
destroy money and also
decide who is to get the
money. I must confess,
for my part, that I was
disappointed when I saw
that pleasant pamphlet
which the Chancellor
showed us just now, and
found that it was only
proposed to nationalise
the top storey.
I
would have preferred to
nationalise the whole
system straight away,
and that for two
reasons. First, I think
all experience shows
that you can control a
thing far better if it
belongs to you than if
it belongs to someone
else. Secondly, we know
that the banks, by
charging interest on all
the money that they
create, levy a heavy
toll on the community,
and I cannot really see
why that toll should go
into private hands.
Still, there are those
provisions in the Bill
which give the central
bank the power to
request information from
the joint stock banks,
to make recommendations
to them and to give
directions to them, and
I am very glad that they
are there.
The
Chancellor has also told
us that if they are not
sufficient he can take
other radical measures
later on. I wondered
whether the right hon.
Gentleman who represents
the Scottish
Universities (Sir J.
Anderson) was, in a way,
my ally in wishing to
nationalise the joint
stock banks, because he
spoke of the
difficulties the
directors of those banks
might have in
discharging their
responsibilities as
trustees. Perhaps he
feels it would be far
better if they were
relieved altogether of
those responsibilities
by having the banks
taken over entirely by
the nation.
In
conclusion, I welcome
this Bill. We welcome it
on this side. I would
not
110
agree with the hon. and
learned Member for
Montgomery (Mr. C.
Davies) in saying that
no question of principle
is involved; I think a
very important question
of principle is
involved. I think this
is our first step
towards the Socialist
Commonwealth, the first
step towards an ordered
economy, organising our
resources for the
benefit of the community
in place of the present
chaotic, wasteful and
unjust muddle. I think
it is the first step
towards giving us the
same liberty and
democracy in the
economic sphere which we
already enjoy in the
political sphere, and it
takes place at the
strategic key point of
the whole economic
system because, after
all, money is the
life-blood of that
system. If the supply of
the life-blood is not
adequate, the system
will be anaemic and
depressed; if it does
not circulate properly
to every part, then
those parts that are
neglected will become
gangrenous and diseased.
This Bill, when it
becomes law, will enable
the representatives of
the nation to ensure
that the supply of money
is always adequate to
the national needs. I
look forward to a series
of Measures in the
months and years to come
which will ensure in
every part of our
economic system that
money will be used in
the best and fullest
way.
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