Sie,—In connection with Mr. Benvenisti's kind review of my book on Money, may I suggest that I was correct—in company with Pere Muller, Dr. Coffey, Action Populaire, etc.—in citing (on p. 249) Pope Pius XI as referring to banking?
(1) Quadragesimo Arnica §105.
" It is patent that in our days not wealth alone is accumulated, but immense power and despotic economic domination are concentrated in the hands of a few, who for the most part are not the owners but only the trustees and directors of invested funds which they administer at their own good pleasure."
This, I take it, refers to the abuses of modem corporations: trusts, holding-companies, irresponsibility of directors, etc.
(2) Quadragesimo Anna S106.
" This domination is most powerfully exercised by those who, because they hold and control money, also govern credit and determine its allotment—for that reason supplying, so-to-speak, the lifeblood to the entire economic body and grasping in their hands, as it were, the very soul of production, so that no one can breathe against their will."
It was this paragraph which I quoted; still think it refers primarily to the banking system. I have mislaid Mr. Benvenisti's review, but I think he objects that the banks concentrate on supplying only short-term capital. Now I very much doubt this British theory. Before the war the British banks had 27 per cent. of their assets in investments, thus creating funds for depositors to invest in new issues. Similarly the banks invest in Treasury Bills, and a large portion of their advances are quite unconnected with production. In any case, the expression " liquid short-term capital " for industry is rather misleading. It is liquid only in a statistical sense, in so far as a new investor takes the place of a liquidating one ; and when fully analysed, a short-term loan to industry will, I believe, he found to involve permanent investment somewhere. Sec F. Machlup, " The Liquidity of Short-term Capital," Econontica 12 (1932) 271-284.
But if Mr. Benvenisti refers the paragraph to money-holders as well as to moneycreators, a careful reader of my book will know that I would not disagree with him.