The question of the banking sector is something that is avoided today by many movements and thinkers as somehow outside the realm of concern whether by the Left or the Right. Indeed, the Left seldom addressed the matter, and still refrains from doing so, content with taxing the middle class. The Right, meanwhile, turns a blind eye to the evil of usury.


As the socialist movement has shown, nationalisation means little and often nothing as far as securing financial and hence political sovereignty. Often a so-called ‘state bank’ such as the New Zealand Reserve Bank or the Bank of England, and many others, gives the appearance of financial sovereignty. In reality, it does nothing of the sort. A state bank such as those that have long been common in the social democracies, merely serves as the means by which the state borrows from private and usually international, financial sectors.

During the Great Depression central banks were promoted as a panacea for booms and busts and to secure financial and economic stability. While Paul Warburg of the Warburg international banking dynasty, had previously drafted the bill for the USA’s Federal Reserve Bank, and this was promoted as being a ‘state bank’, during the early 1930s Otto Niemeyer of the Bank of England toured the British Empire promoting the idea of central banks like the Bank of England. These would be based on private bond holders.

In New Zealand the Reserve Bank was created in 1933. This bank, like all such central banks, however, merely served as the state’s medium for borrowing from private sources. Harvard and Georgetown historian, Dr Carroll Quigley, close to governing circles, stated the purpose of these central banks as being ‘to form a single financial system on an international scale which manipulated the quantity and flow of money so that they were able to influence, if not control, governments on one side and industries on the other’.

Congressman Louis T McFadden, who had for ten years served as Chairman of the US Congressional Banking and Currency Committee, and had been a banker himself, exposed the nature of the Federal Reserve System and the operations of the international debt-finance system in speeches before US Congress. In 1932 McFadden stated in the House concerning the Federal Reserve Bank:
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. 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 money lenders.

New Zealand Experience

In 1936 the New Zealand Labour Government nationalised the Reserve Bank, bought out the private bond holders and made the bank the instrument of state policy. As mentioned, nationalisation by itself, however, means little or nothing, if such a ‘state bank’ merely acts as the state medium for borrowing privately created credit, and thereby merely sustains accumulated debt to the international banking system. The First New Zealand Labour Government was voted into office mainly on the issue of banking.

Unlike today, the masses of people understood banking and financial issues far more deeply than our present economists and academics. The Great Depression gave impetus for a worldwide demand for banking reform, prior to which practical men such as Major C H Douglas in Britain, who formulated the theory of Social Credit, and even prior to him the inventor Arthur Kitson; Gottfried Feder in Germany, who campaigned for the ‘breaking of the slavery of interest’; and Silvio Gessell in Austria, developed their ideas on banking reform which were widely accepted.

The New Zealand’s Labour Government was among the most successful in its banking reforms, mainly thanks to the iconic Labour politician John A Lee, a one-armed war veteran who was determined to keep Labour at its word, despite the attempts at compromise by orthodox Fabians such as Minister of Finance Walter Nash.

From 1933, after the Labour Party Conference, the party adopted a policy for the full and total control of the ‘nation’s financial machinery’. Lee pointed out that in other countries (Britain and Australia) where Labour had assumed Office, they had declined to take such steps in regard to the financial machinery, and their polices in dealing with the Depression had come to nothing In the nine points on finance that came out of the 1933 Party Conference, the first demanded ‘immediate control by the State of the entire banking system. The State to have sole authority for the issue of credit and currency’. The issue of credit would be based upon the productive needs of the country.

The Bank’s function set out in Section 1 of the Reserve Bank Act was to ‘regulate and control credit and currency in New Zealand’ for the ‘economic and social welfare of New Zealand’ The Bank would underwrite any loan the Government desired to raise, and Treasury was empowered to borrow from the Reserve Bank the complete amount of estimated revenue for the year.

The Bank also had complete control over the ownership of sterling exchange, which Lee explained was of ‘vital importance’ in controlling the ‘international movement of gangster financial capital that can occur in times of political emergency’ and can ‘raid a country’s external credit’. Subsection 3, Clause 18 of the Act gave the Government authority over the operations of the trading banks, and they were to be audited by the State.

New Zealand’s success was most evident and longest lasting in the creation of Reserve Bank state credit, issued at 1% interest, for the funding of the state housing programme. Not only did this programme provide stoutly-built houses at low rentals on quarter acre sections, where it was customary for families to grow their own vegetable gardens, and often to keep poultry, but the building and spin-off work on this one programme found work for 75% of New Zealand’s unemployed. A massive injection of state credit into the economy meant that there was no debt accrued by the state or the people, and that it was done moreover without causing inflation.

The Reserve Bank also issued the dairy industry low-interest state credit, and the profits that were made by the State on these advances were placed back into a Consolidated Fund for farming.

In a Government document ‘State Housing in New Zealand’ the project was explained as follows:

Reserve Bank Credit: To finance its comprehensive proposals, the Government adopted the somewhat unusual course of using Reserve Bank credit, thus recognising that the most important factor in housing costs is the price of money – interest is the heaviest portion in the composition of ordinary rent. The newly created Department [Ministry of Works] was able therefore to obtain the use of funds at the lowest possible rate of interest, the rate being 1% for the first £10 million advanced, and one and a half percent on further advances. The sums advanced by the Reserve Bank were not subscribed or underwritten by other financial institutions. This action shaped the Government’s intention to demonstrate that it is possible for the State to use the country’s credit in creating new assets for the country. This pioneering measure by the Labour Government, funding a large state construction project entirely with state credit, succeeded without accompanying inflation or any other adverse side-effects that orthodox economists insist would result.

New Zealand was not the first nor the last nation to inaugurate a sovereign banking system, albeit of short duration. In Alberta, Canada, at the same time a Social Credit party came to Office, and despite being obstructed at every occasion by the Courts, issued ‘Prosperity Certificates’. Previously a similar scheme had been tried in the small town of Woergle, Austria, and by so doing this community got itself out of destitution, but was then obliged to discontinue its ‘scrip’ by central Government, and went back to destitution.

During the 1930s communities across the USA issued their own local ‘scrip’. Although it is not politically or academically expedient to say so, Germany, Italy and Japan all overcame the Depression by bringing banking under state control and issuing state credit for public works. They undertook on a large scale what New Zealand undertook on a limited scale.

The miracle that was Peron’s Argentina was achieved in significant measure by the Peronist understanding that national sovereignty cannot be achieved without economic sovereignty. That in turn is a primary prerequisite for the Peronist goal of social justice as the unifying factor for any genuine nation.

Peron had stated, ‘In the capitalist system the currency is an end and not a means, and its absolute value subordinates everything, including man’. Dr Arturo Sampay, drafter of the 1949 Peronist constitution, an internationally acclaimed legal and constitutional scholar, succinctly explained after Peron’s ouster:

The modern way with which a country develops the economy, is no longer with outright annexation of territory, as was the method during the eighteenth and nineteenth centuries, but handling your own credit and currency. Indeed, the development of a country is through its investment policy. Whoever gives the orders on credit and the expansion or contraction of the money supply, controls the development of the country.

Peron’s economic adviser Arturo Jauretche gave a detailed account on the importance of state credit, including its relation to national sovereignty, stating that bank nationalisation is ‘fundamental to the implementation of a national policy’.

Whoever handles credit controls more than the issue of currency. By controlling credit trade export and import is also controlled. The control of credit can encourage certain forms of production and weaken others; determine what is to be produced and what not , what can and what cannot get to market facilities, and consequently sales and consumption is also controlled.

Jauretche explained with exactitude the organic character of credit as but a means of exchange, a convenient method of barter of goods and services:
The secret of prosperity or decline, development or backwardness, is held in banks. Laws and business organisations are just the anatomy of economic society. But money is the physiology of a society’s commerce. Money is the blood circulating within it, and the price of money, its abundance or scarcity , is determined by the banking system.

However, credit and currency have become in themselves commodities, bought and sold at profit (usury). Without understanding this premise, all else is folly in terms of politics, economics and even the arts and morality. The question is one of subordinating the role of money; quite literally dethroning the worship of Mammon.

Jauretche also explained how banks create credit when he stated,

‘Banks create money through credit, because credit is converted from deposits at a multiplicity of times, and the abundance or shortage of hard cash in circulation is a reflection of the number of times a bank multiplies its lending’.

This is called ‘fractional reserve banking’ and has been the method of credit creation for centuries, allowing private banks to create credit that is only backed by a fraction of the amount of actual reserves the banks have on hand. Every time a deposit is made by a bank’s customer, the bank is able to create and lend out credit at many more times than the amount deposited. The bank then charges interest (usury) on that credit. Therefore the borrower must pay back in real wealth – created with his own labour – not only the principal of the loan that has been created out of thin air by a mere ledger (or computer) entry, but also added interest.

This is how the entire international banking system runs. When a nation becomes so indebted that it cannot even keep up interest payments on loans, it must either take out further loans to pay off the interest on previous loans, or it must start selling off state assets and resources, in a process that is often called ‘privatisation’, and adopt ‘austerity measures’, which cause social dislocation, economic stagnation, and can be a means by which international finance brings down inconvenient governments through well-plannd an funded ‘spontaneous revolutions’. We have seen this taking place for several decades all over the Western world, and since the implosion of the Soviet bloc, in the former Soviet states. The outcome is ‘globalisation’ and the increasing concentration of wealth by oligarchs and plutocrats. Those states that resist the process are often bombed into submission, and their statesmen demonised, jailed or lynched in the name of ‘democracy’ and ‘human rights’.

Professor Carroll Quigley, likewise explained the mechanism of credit creation and its historical development:

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’.

Peron related that in 1946 a delegation from the International Monetary Fund were prompt in visiting him when he assumed Office. His rejection of Argentina’s membership of the IMF was also prompt. He stated among the reasons:

For us, the value of our currency was fixed in the country, and we were setting changes according to our needs and conveniences. For international exchange we resorted to barter: our real currency was our goods. The permanent reality of international monetary manoeuvring of all types on which the insidious system was created, gave us no recourse but to do so or be robbed with impunity.

Mammon versus Culture

Ezra Pound, and the New Zealand poet Rex Fairburn, both became interested in Social Credit at around the same time and for the same reasons. Like Peron, Sampay and Jauretche in their rebellion against plutocracy after World War II, the two poets realised that the question of man’s higher development, that is to say, his culture, is impacted by materialism, signified by the rule of money. Oswald Spengler had pointed out in the aftermath of World War I that Western Civilisation had been in decline for centuries, and that the war had brought matters to crisis point. He saw plutocracy ruling behind liberal-democracy.

Looking at the analogous cycles of prior Civilisations, Spengler stated that money rules during the epochs of decay, prior to a reaction that overthrows plutocracy. This overthrow of money was called ‘Socialism’ by Spengler, a conservative, while all money-thinking was regarded by him as capitalistic, and this included most forms of ‘socialism’, including communism, which aim not to transcend money-thinking but to expropriate it.

In this manner we might understand why the poets Pound and Fairburn sought a third way which would overthrow money-rule and return to a culture-state. Pound turned to ‘Fascism’ because he thought such militancy was required to overthrow plutocracy. Fairburn regarded Social Credit as sufficient. In Britain Social Credit did take on a militant form with the Green Shirts, whose paramilitary formations, rallies, marches and throwing green painted bricks through bank windows, sought a place beyond the Communist Party and Mosley’s Black Shirts.

The Role of Money in Cultural Decay

However, before Spengler, there was Brooks Adams’ Law of Civilisation and Decay, now little known, which Ezra Pound recommended as essential to understanding the causes of cultural decline and fall. Adams can be read profitably with Spengler. Adams outlines the enervating force of money on the aesthetics and morality of a Civilisation. Adams held that ‘commerce is antagonistic to the imagination’. Where a state is commercially based, as are most states in the world today, aesthetics stagnates.

Hence the great Gothic era that epitomises the flowering of Western Civilisation (what Spengler called the ‘Spring’ epoch) did not flourish in the commercial city-states Venice, Genoa, Pisa, or Florence, ‘nor did any pure school of architecture thrive in the mercantile atmosphere’. The enervating effects caused by energy expended on mercantile pursuits is explained in terms that fit well with Spengler’s conclusions about the role of money-thinking at the end-cycle of a Civilization, Adams writing:

Whenever a race is so richly endowed with the energetic material that it does not expend all its energy in the daily struggle for life, the surplus may be stored in the shape of wealth; and this Stock of Stored energy may be transferred from community to community, either by conquest, or by superiority in economic competition. However large may be the store of energy accumulated by conquest, a race must, sooner or later, reach the limit of its martial energy, when it must enter on the phase of economic competition. But, as the economic organism radically differs from the emotional and martial, the effect of economic competition has been, perhaps invariably, to dissipate the energy amassed by war.

When surplus energy has accumulated in such bulk as to preponderate over productive energy, it becomes the controlling social force. Thenceforward, capital is autocratic, and energy vents itself through those organisms best fitted to give expression to the power of capital. In this last stage of consolidation, the economic, and, perhaps, the scientific intellect is propagated, while the imagination fades, and the emotional, the martial, and the artistic types of manhood decay.

When a social velocity has been attained at which the waste of energetic material is so great that the martial and imaginative stocks fail to reproduce themselves, intensifying competition appears to generate two extreme economic types, — the usurer in his most formidable aspect, and the peasant whose nervous system is best adapted to thrive on scanty nutriment.

At length a point must be reached when pressure can go no further, and then, perhaps, one of two results may follow: A stationary period may supervene, which may last until ended by war, by exhaustion, or by both combined, as seems to have been the case with the Eastern Empire; or, as in the Western, disintegration may set in, the civilized population may perish, and a reversion may take place to a primitive form of organism.

The evidence, however, seems to point to the conclusion that, when a highly centralized society disintegrates, under the pressure of economic competition, it is because the energy of the race has been exhausted. Consequently, the survivors of such a community lack the power necessary for renewed concentration, and must probably remain inert until supplied with fresh energetic material by the infusion of barbarian blood.

Where a people fails to be reinvigorated with ‘barbarian blood’, and remains stagnant, they are what Spengler referred to as Fellaheen, no longer within the scope of history, inert from century to century, the peasantry and the urban mass dwelling within the shadows of ruins of once great monuments.

Hence, as Ezra Pound and Faibrun realised from the aesthete’s outlook there is more to the economic question than eocnomics or politics alone. T S Eliot also espoused economic reform, as did Hilaire Belloc and G K Chesterton, while other aesthetes, such as W B Yeats and D H Lawrence, who rebelled against the crassness of the times, did so without apprehending the economic factors involved. Fairburn and Pound knew exactly what processes were at work in eating away at the cultural organism.

Pound’s ‘With Usura’ (Canto XLV) reflects lucidly the manner by which the primacy of money, as shown by Spengler and Adams, intervenes in the culture of a society, acting as a contagion on the social organism, on work, craft, art, religion, and all else associated with a High Culture:
With usura no picture is made to endure nor to live with but it is made to sell and to sell quickly…
Stone cutter is kept from his stone Weaver is kept from his loom…


Wool comes not to market Sheep bring not gain with usura…
Usura rusteth the chisel It rusteth the craft and the craftsman…
Pound stated succinctly in a three-sentence section on Kulturmorphologie in a pamphlet written in Rome in 1942: ‘To repeat: an expert, looking at a painting (by Memmi Goya, or any other) should be able to determine the degree of the tolerance of usury in the society in which it was painted’.

Fairburn wrote a poem on themes very similar to those of Pounds ‘With Usura’, but entirely independently, in his ‘Dominion’:

The house of the governors, guarded by eunuchs, and over the arch of the gate these words engraved: HE WHO IMPUGNS THE USURERS IMPERILS THE STATE

Within the gates the retinue of evil, the instruments of the governors: scabs picked from the body of the enslaved well-paid captains and corporals in the army of privilege taking the bread of tyranny, wearing the livery of extortion; and those who keep the records of decay, statisticians and archivists, turning the leaves with cold hands, computing our ruin on scented cuffs. For the enslaved, the treadmill; the office and adoration of the grindstone god; the apotheosis of the means, the defiling of the end; the debasement of the host of the living; the celebration of the black mass that casts the shadow of a red mass.

This is our paper city, built on the rock of debt, held fast against all winds by the paperweight of debt. The crowds file slowly past, or stop and stare, and here and there, dull-eyed, the idle stand in clusters in the mouths of gramophone shops in a blare of music that fills the crumpled air with paper flowers and artificial scents and painless passion in a heaven of fancied love.

The Challenge of the Times: End Mammon

With the USA whose very foundation starts with Puritanism, an edifice was built that combined messianism with the concept of profit as Godly. America’s culture was distorted as a consequence, and today stands at the depths of depravity, as a world contagion heralded as such by neocon zealots such as Lt. Colonel Ralph Peters and promoted by the US State Department in alliance with a myriad of NGO’s across the world. The entire world is supposed to be recreated in that image, on the ‘rock of debt and artificial scents’, as Fairburn put it.

Mr E Fyodorov, of the ‘Our Sovereignty’ Russian parliamentary group, and the National Liberation Movement, has alluded to the necessity of nationalising the Central Bank of Russia, which he states does not report to the president or the state. He states that ‘most of the problems’ of Russia are related to the Central Bank, based on a constitution that was drafted by US advisers, allowing external political and economic influence. Fyodorov has expressed rare insight in stating that ‘most problems;’ center around the banking system.

This applies not only to Russia, but also to much of the world, as the same system operates globally. New Zealand’s central state bank went down the same path of being detached from parliament. Therefore, more than ‘nationalisation’ is required. New Zealand’s Reserve Bank has remained nationalised for eighty years. It was only detached from parliament under the Reserve Bank Act in 1989. Until that time it existed to implement state economic policy. However, as John A Lee lamented from the start, this nationalised bank never did break New Zealand free from international finance, despite the issue of state credit for some public projects. The intentions were compromised by the party that nationalised the bank.

Until such time a state has leaders of stamina who will break the bondage of international finance, and its pervasive tentacles, it makes little or no difference whether a bank is nationalised or privatised. Until such time also, any talk of real national sovereignty is nothing other than rhetoric. Once the Russian central bank is nationalised, the next task is to ensure that the Russian state assumes the prerogative and the duty to create and issue its own credit.