From the October 2012 issue of the Socialist Standard
Some of the quotes used by credit creationists to support their view are not genuine but have been fabricated at some point by some dishonest currency crank and then naively accepted and spread by others. Two in particular are all over the internet. One is from Josiah Stamp, who was a director of the Bank of England from 1928 till his death in 1940, the other from Reginald McKenna, who was Chancellor of the Exchequer from 1915-1916 and chairman of Midland Bank (now HSBC) from 1919 till his death in 1943. We present the evidence that these quotes are fakes.
“Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better world to live in. But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits.” Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain.” (LINK)
In his book Debt, The First 5000 Years David Graeber says (p. 344) that “it seems extremely unlikely that Lord Stamp ever really said this, but the passage has been cited endlessly—in fact, it’s probably the single most often-quoted passage by critics of the modern banking system,” In a footnote (pp. 448-9) he goes into more detail: “Said to have been given at a talk at the University of Texas in 1927, but in fact, while the passage is endlessly cited in recent books and especially on the internet, it cannot be attested to before roughly 1975. The first two lines appear to actually derive from a British investment advisor named L.L.B. Angas in 1937: ‘The modern Banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and unmint the modern ledger-entry currency’ (Angas, Slump Ahead in Bonds, New York, 1937: 20-21). The other parts of the quote are probably later inventions—and Lord Stamp never suggested anything like this in his published writings.”
“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924. (same source)
The first sentence is from McKenna’s report to Midland Bank shareholders but in 1925, not 1924. It can be found in Postwar Banking Policy, a collection of his reports to the Annual Meeting of Midland Bank shareholders between 1921 and 1928, published in 1928. The last sentence does not appear anywhere in the book. So, where did it come from?
The earliest reference to it on the internet seems to be a facsimile of a page from an Australian newspaper reporting a speech by Alexander Amess who was standing on a Social Credit ticket in the Australian Federal elections of September 1940. He is reported as quoting the passage and saying that McKenna said it in 1937 (see http://trove.nla.gov.au/ndp/del/article/75036747). This identifies the currency crank group that fabricated the quote and indicates the probable time it was done. If someone was prepared to plough through Social Credit literature of the time no doubt they would find the original source.
Another indication that the passage is a fabrication is that in a lecture on ‘Banking’ he gave on 11 December 1927, McKenna expressed the opposite view: that the government controlled what banks could do, not the other way round. He spoke of ….“the total volume of money, the ultimate control of which lay with the central bank of issue, not with the ordinary trading banks”and went on to say that “the Bank of England was, in fact, controlled by the Treasury, which was, in fact, controlled by the House of Commons as representative of the people of this country.”
Although he advanced the controversial view that banks “create”money, he did not think that they did so out of thin air. The accurate version of what he told Midland Bank shareholders in 1925 (not 1924) is:
“I am afraid the ordinary citizen will not like to be told that the banks and the Bank of England can create or destroy money. We are in the habit of thinking of money as wealth, as indeed it is in the hands of the individual who owns it, wealth in the most liquid form, and we don’t like to hear that some private institution can create it at pleasure. It conjures up a picture of an autocratic and irresponsible body which by some black art of its own contriving can increase or diminish wealth, and presumably make a great deal of profit in the process. But I need hardly say nothing of the sort happens.”
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