Money As Debt (2006) Movie Script
"Some of the biggest men in the United States,
in the Field of commerce and manufacture are afraid of something.
They know that there is a power somewhere so organized,
so subtle, so watchful, so interlocked, so complete, so pervasive,
that they better not speak above their breath when they speak in condemnation of it."
~Woodrow Wilson, former President of the United States
"Each and every time a bank makes a loan,
new bank credit is created - new deposits - brand new money."
~Graham F. Towers, Governor, Bank of Canada, 1934-54
"The process by which banks create money is so simple the mind is repelled."
~John Kenneth Galbraith, Economist
"Permit me to issue and control the money of a nation,
and I care not who makes its laws."
~Mayer Amschel Rothschild, Banker
Money as Debt
Debt
Two great mysteries dominate our lives: love and money.
"What is love?" is a question that has been endlessly explored in stories,
songs, books, movies, and television.
But the same can NOT be said about the question "What is money?"
It's not surprising that monetary theory hasn't inspired any blockbuster movies.
But it was not even mentioned at the schools most of us attended.
For most of us, the question "Where does money come from?"
brings to mind a picture of the mint printing bills and stamping coins.
Money, most of us believe, is created by the government.
It 's true
but only to a point.
Those metal and paper symbols
of value we usually think of as money
are, indeed, produced by an agency
of the federal government called the Mint.
But the vast majority of money
is not created by the Mint.
It is created in huge amounts every day
by private corporations known as banks.
Most of us believe that banks lend out money
that has been entrusted to them by depositors.
Easy to picture.
But not the truth.
In fact, banks create the money they loan,
not from the bank's own earnings,
not from money deposited,
but directly from the borrower's promise to repay.
The borrower's signature on the loan papers
is an obligation to pay the bank
the amount of the loan plus interest,
or, lose the house, the car,
whatever asset was pledged as collateral.
That's a big commitment from the borrower.
What does that same signature require of the bank?
The bank gets to conjure into existence
the amount of the loan
and just write it into the borrower's account.
Sound far-fetched?
Surely that can't be true.
But it is.
To demonstrate how this miracle of modern banking
came about, consider this simple story:
The Goldsmith's Tale
Once upon various times,
pretty much anything was used as money.
It just had to be portable
and enough people had to have faith
that it could later be exchanged for things of real value
like food, clothing and shelter.
Shells, cocoa beans, pretty stones,
even feathers have been used as money.
Gold and silver were attractive,
soft and easy to work with.
so some cultures became expert with these metals.
Goldsmiths made trade much easier by casting coins,
standardized units of these metals
whose weight and purity was certified.
To protect his gold, the goldsmith needed a vault.
And soon his fellow townsmen
were knocking on his door
wanting to rent space to safeguard
their own coins and valuables.
Before long, the goldsmith was renting every shelf
in the vault and earning a small income from his vault rental business.
Years went by and the goldsmith made an astute observation:
Depositors rarely came in to remove their actual,
physical gold, and they never all came in at once.
That was because the claim checks the goldsmith
had written as receipts for the gold,
were being traded in the marketplace
as if they were the gold itself.
This paper money was far more convenient than heavy coins,
and amounts could simply be written,
instead of laboriously counted one by one for each transaction.
Meanwhile, the goldsmith had another business.
He lent out his gold charging interest.
Well, as convenient claim check money came into acceptance,
borrowers began asking for their loans in the form of
these claim checks instead of the actual metal.
As industry expanded more and more
people asked the goldsmith for loans.
This gave the goldsmith an even better idea.
He knew that very few of his depositors
ever removed their actual gold.
So, the goldsmith figured he could easily get away
with lending out claim checks against his depositors' gold,
in addition to his own.
As long as the loans were repaid,
his depositors would be none the wiser, and no worse off.
And the goldsmith, now more banker than artisan,
would make a far greater profit
than he could by lending only his own gold.
For years the goldsmith secretly enjoyed a good income
from the interest earned on everybody else's deposits.
Now a prominent lender, he grew steadily richer
than his fellow townsmen and he flaunted it.
Suspicions grew that he was spending his depositors' money.
His depositors got together and threatened withdrawal of their gold
if the goldsmith didn't come clean about his newfound wealth.
Contrary to what one might have expected,
this did not turn out to be a disaster for the goldsmith.
Despite the duplicity inherent in his scheme,
his idea did work.
The depositors had not lost anything.
Their gold was all safe in the goldsmith's vault.
Rather than taking back their gold,
the depositors demanded that the goldsmith, now their banker,
cut them in by paying them a share of the interest.
And that was the beginning of banking.
The banker paid a low interest rate on deposits
of other people's money that he then loaned out at a higher interest.
The difference covered the bank's cost of operation
and its profit.
The logic of this system was simple.
And it seemed like a reasonable way
to satisfy the demand for credit.
However this is NOT the way banking works today.
Our goldsmith/banker was not content with the income remaining
after sharing the interest earnings with his depositors.
And the demand for credit was growing fast,
as Europeans spread out across the world.
But his loans were limited
by the amount of gold his depositors had in his vault.
That's when he got an even bolder idea.
Since no one but himself knew
what was actually in his vaults,
he could lend out claim checks on gold
that wasn't even there!
As long as all the claim check holders didn't come to the vault
at the same time and demand real gold, how would anyone find out?
This new scheme worked very well,
and the banker became enormously wealthy
on the interest paid on gold that did not exist!
The idea that the banker would just create money out of nothing
was too outrageous to believe,
so, for a long time,
the thought did not even occur to people.
But, the power to just invent money went to the banker's head
as you can well imagine.
In time, the magnitude of the banker's loans and his ostentatious wealth
did trigger suspicions once again.
Some borrowers started to demand real gold
instead of paper representations. Rumors spread.
Suddenly, several wealthy depositors showed up to remove their gold.
The game was up!
A sea of claim check holders flooded the street
outside the closed doors of the bank.
Alas, the banker did not have enough gold & silver
to redeem all the paper he had put into their hands.
This is called a "run on the bank"
and is what every banker dreads.
This phenomenon of a "run on the bank"
ruined individual banks and, not surprisingly,
damaged public confidence in all bankers.
It would have been straightforward to outlaw
the practice of creating money from nothing.
But the large volumes of credit the bankers were offering
had become essential to the success of European commercial expansion.
So, instead, the practice was legalized and regulated.
Bankers agreed to abide by limits on the amount
of fictional loan money that could be lent out.
The limit would still be a number much larger
than the actual value of gold and silver in the vault.
Quite often the ratio was 9 fictional dollars
to 1 actual dollar in gold.
These regulations were enforced by surprise inspections.
It was also arranged that,
in the event of a run,
central banks would support local banks
with emergency infusions of gold.
Only if there were runs on a lot of banks simultaneously
would the bankers' credit bubble burst
and the system come crashing down.
The Money System Today
Over the years, the fractional reserve system
and its integrated network of banks backed by a central bank
has become the dominant money system of the world.
At the same time, the fraction of gold backing the debt money
has steadily shrunk to nothing.
The basic nature of money has changed.
In the past, a paper dollar was actually a receipt
that could be redeemed for a fixed weight of gold or silver.
In the present, a paper or digital dollar can only be redeemed
for another paper or digital dollar.
In the past, privately created bank credit existed only
in the form of private banknotes, which people had the choice to refuse
just as we have the choice to refuse
someone's private cheque today.
In the present, privately created bank credit
is legally convertible to government issued "fiat" currency,
the dollars, loonies and pounds we habitually think of as money.
Fiat currency is money created by government fiat,
or decree, and legal tender laws declare that citizens must accept this fiat money
as payment for debt or else the courts will not enforce the obligation.
So, now the question is
if governments and banks can both just create money,
then how much money exists?
In the past, the total amount of money in existence
was limited to the actual physical quantities
of whatever commodity was in use as money.
For example, in order for new gold or silver money to be created,
more gold or silver had to be found and dug out of the ground.
In the present, money is literally created as debt.
New money is created whenever anyone takes a loan from a bank.
As a result, the total amount of money that can be created
has only one real limit - the total level of debt.
Governments place an additional statutory limit
on the creation of new money,
by enforcing rules known as
fractional reserve requirements.
Essentially arbitrary, fractional reserve requirements
vary from country to country and from time to time.
In the past, it was common to require banks
to have at least one dollar's worth of real gold in the vault
to back 10 dollars worth of debt money created.
Today, reserve requirement ratios no longer apply
to the ratio of new money to gold on deposit,
but merely to the ratio of new debt money
to existing debt money on deposit in the bank.
Today, a bank's reserves consist of two things:
the amount of government-issued cash or equivalent
that the bank has deposited with the central bank,
plus the amount of already existing debt money
the bank has on deposit.
To illustrate this in a simple way.
let us imagine that a new bank has just started up
and has no depositors at all yet.
However the bank's investors have made a reserve deposit
of one thousand one hundred and eleven dollars and twelve cents
of existing cash money at the central bank
and the required reserve ratio is 9:1.
Step 1: The doors open and the new bank
welcomes its first loan customer.
He needs $10,000 to buy a good used car.
At a 9:1 reserve ratio, the new bank's reserve at the central bank,
also known as "high-powered money",
allows it to legally conjure into existence 9 times that amount,
or $10,000 on the basis of the borrower's pledge of debt.
This $10,000 is not taken from anywhere.
It is brand new money simply typed into the borrower's account as bank credit.
The borrower then writes a check on that bank credit
to buy the used car.
Step 2: The seller then deposits this newly
created $10,000 at her bank.
Unlike the high-powered government money deposited at the central bank,
this newly created credit money cannot be multiplied by the reserve ratio.
Instead it is divided by the reserve ratio.
At a ratio of 9:1, a new loan of $9,000 can be created
on the basis of the $10,000 deposit.
Step 3: If that $9000 is then deposited by a third party,
at the same bank that created it, or a different one,
it becomes the legal basis for a third issue of bank credit,
this time for the amount of $8100.
Like one of those Russian dolls, each layer of which contains
a slightly smaller doll inside, each new deposit contains the potential
for a slightly smaller loan in an infinitely decreasing series.
Now, if the loan money created is not deposited at a bank,
the process stops.
That is the unpredictable part
of the money creation mechanism.
But more likely, at every step, the new money
will be deposited at a bank, and the reserve ratio process
can repeat itself over and over until almost $100,000
of brand new money has been created within the banking system.
All of this new money has been created entirely from debt,
and the whole process legally authorized by the initial reserve deposit
of just one thousand one hundred and eleven dollars and twelve cents,
which is still sitting untouched at the central bank!
What's more, under this ingenious system,
the books of each bank in the chain must show
that the bank has 10% more on deposit than it has out on loan.
This gives banks a very real incentive to seek deposits
in order to be able to make loans, supporting the general
but misleading impression that loans come out of deposits.
Now, unless all the successive loans
were deposited at the same bank,
it cannot be said that any one bank got to multiply
its initial high powered money reserve almost 90 times
by issuing bank credit out of nothing.
However, the banking system is a closed loop, bank credit
created at one bank becomes a deposit in another, and vice versa.
In a theoretical world of perfectly equal exchanges,
the ultimate effect would be exactly the same
as if the whole process took place within one bank.
That is, the bank's initial central bank reserve
of a little over eleven hundred dollars
allows it to ultimately collect interest on
up to $100,000 the bank never had.
If that sounds ridiculous, try this.
In recent decades, as a result of steady lobbying by the banks,
the requirements to make a reserve deposit
at the nation's central bank have all but disappeared in some countries
and actual reserve ratios can be much higher than 9:1.
For some types of accounts, twenty to one
and thirty to one ratios are common.
And even more recently, by using loan fees to raise the required reserve
from the borrower,
banks have now found a way to circumvent
reserve requirement limitations entirely.
Sowhile the rules are complex
the common sense reality is actually quite simple.
Banks can create as much money as we can borrow.
"Everyone sub-consciously knows
banks do not lend money.
When you draw on your savings account,
the bank doesn't tell you you can't do this
because it hast lent the money to somebody else."
~Mark Mansfield, economist and author
Despite the endlessly presented mint footage, government-created money
typically accounts for less than 5% of the money in circulation.
More than 95% of all money in existence today was created
by someone signing a pledge of indebtedness to a bank.
What's more, this bank credit money is being created and destroyed
in huge amounts every day,
as new loans are made and old ones repaid.
"I am afraid the the ordinary citizen will not like
to be told that banks can and do create money.
...And they who control the credit of a nation
direct the policy of Governments
and hold in the hollow of their hand the destiny of the people."
~Reginald McKenna, past Chairman of the Board, Midlans Bank of England
Banks can only practice this money system
with the active cooperation of government.
First, governments pass legal tender laws
to make us use the national fiat currency.
Secondly, governments allow private bank credit
to be paid out in this government currency.
Thrirdly, government courts enforce debts.
And lastly, governments pass regulations
to protect the money system's functionality and credibility with the public
while doing nothing to inform the public
about where money really comes from.
[The Simple Truth]
The simple truth is that
when we sign on the dotted line
for a so-called loan or mortgage,
our signed pledge of payment,
backed by the assets we pledge to forfeit should we fail to pay,
is the only thing of real value
involved in the transaction.
To anyone who believes we will honour our pledge,
that loan agreement or mortgage is now a portable,
exchangeable,
and saleable piece of paper.
It is an IOU.
It represents value
and is therefore a form of money.
This money the borrower exchanges
for the bank's so-called loan.
Now... A loan in the natural world means that the lender
must have something to lend.
If you need a hammer, my loaning you a promise to provide a hammer
I don't have won't be of much help.
But in the artificial world of money,
a bank's promise to pay money it doesn't have,
is allowed to be passed off as money
and we accept it as such.
"Thus, our national circulating medium
is now at the mercy of loan transactions of banks,
which lend, not money, but promises to supply money they do not possess."
-Irving Fisher economist and author
Once the borrower signs the pledge of debt,
the bank then balances the transaction by creating,
with a few keystrokes on a computer,
a matching debt of the bank to the borrower.
From the borrower's point of view this becomes
"loan money" in his or her account,
and because the government allows
this debt of the bank to the borrower
to be converted to government fiat currency,
everyone has to accept it as money.
Again the basic truth is very simple.
Without the document the borrower signed,
the banker would have nothing to lend
Have you ever wondered how everyone...
governments, corporations, small businesses, families
can all be in debt at the same time
and for such astronomical amounts?
Have you ever questioned how there
can be that much money out there to lend?
Now you know.
There isn't.
Banks do not lend money.
They simply create it from debt.
And, as debt is potentially unlimited,
so is the supply of money.
And, as it turns out
[NO DEBT NO MONEY]
the opposite situation is also true.
Isn't it astounding, that despite
the incredible wealth of resources,
innovation and productivity that surrounds us,
almost all of us,
from governments to companies to individuals,
are heavily in debt to bankers!
If only people would stop and think - How can that be?
How can it be that the people who actually produce all
of the real wealth in the world
are in debt to those who merely lend out
the money that represents the wealth?
Even more amazing is that once we realize
that money really is DEBT,
we realize that if there were no debt
there would be no money
"That is what our money system is.
If there were no debts in our money system,
there wouldn't be any money."
~Marriner S. Eccles, Chairman and Governor of the Federal Reserve Board
If this is news to you,
you are not alone.
Most people imagine that if all debts were paid off,
the state of the economy would improve.
It's certainly true on an individual level.
Just as we have more money to spend
when our loan payments are finished,
we think that if everyone were out of debt,
there would be more money to spend in general.
But the truth is the exact opposite.
There would be no money at all
There it is... We are totally dependent on continually
renewed bank credit for there to be any money in existence.
No loans, no money - which is what happened
during the Great Depression,
the money supply shrank drastically
as the supply of loans dried up.
"This is a staggering thought.
We are completely dependent on the Commercial Banks.
Someone has to borrow every dollar
we have in circulation, cash or credit.
If the Banks create ample synthetic money,
we are prosperous; if not, we starve.
We are, absolutely,
without a permanent money system.
When one gets a complete grasp of the picture,
the tragic absurdity of our hopeless position
is almost incredible, but there it is."
~Robert H. Hemphill, Credit Manager of Federal Reserve Bank,
Atlanta, Georgia
[PERPETUAL DEBT]
That's not all. Banks create
only the amount of the Principal.
They no not create the money
to pay the Interest.
Where is that supposed to come from?
The only place borrowers can go to obtain
the money to pay the Interest
is the general economy's
overall money supply.
But almost all of that overall money supply
has been created exactly the same way
-as bank credit that has to be paid back
with more than was created.
So everywhere,
there are other borrowers in the same situation,
frantically trying to obtain the money they need
to pay back both Principal and Interest
from a total money pool
which contains only Principal.
. It is clearly impossible for everyone to pay back
the Principal plus the Interest
because the interest money does not exist.
This can even be expressed by a simple mathematical formula.
The big problem here is that
for long term loans such as mortgages and government debt,
the total Interest far exceeds the Principal.
So unless a lot of extra money
is created to pay the Interest,
it means a very high proportion of foreclosures,
and a non-functioning economy.
To maintain a functional society
the rate of foreclosure needs to be low.
And so, to accomplish this,
more and more new debt money
has to be created
to satisfy today's demands for money
to service the previous debt.
But, of course, this just makes the total debt
bigger.
And that means more interest
must ultimately be paid,
resulting in an ever-escalating and
inescapable spiral of mounting indebtedness.
It is only the time lag
between money's creation
as new loans and its repayment
that keeps the overall shortage of money from catching up
and bankrupting the entire system.
However, as the bankers' insatiable credit monster
gets bigger and bigger,
the need to create more and more debt money
to feed it becomes increasingly urgent.
Why are interest rates so low?
Why do we get unsolicited credit cards
in the mail?
Why is the US government spending
faster than ever?
Could it be to stave off collapse
of the entire monetary system?
The rational person has to ask:
Can this really go on forever?
Isn't a collapse inevitable?
"One thing to realize about our fractional reserve banking system
is that, like a child's game of musical chairs,
as long as the music is playing, there are no losers."
~Andrew Gause, Monetary Historian
Money facilitates production and trade.
As the money supply increases,
money just becomes increasingly worthless
unless the volume of production and trade
in the real world grows by the same amount
Add to this the realization that when we hear
that the economy is growing at 3% per year,
it sounds like a constant rate.
But is not.
This year's 3% represents more real goods and services
than last year's 3% because it is 3% of the new total.
Instead of a straight line as is naturally
visualized from the words,
it is really an exponential curve
getting steeper and steeper.
["The greatest shortcoming of the human race...]
The problem, of course, is that perpetual growth
[is our inability to understand the exponential function."]
of the real economy requires perpetually escalating use
[ -Albert A. Bartlett, physicist]
of real world resources and energy.
More and more stuff has to go from natural resource
to garbage every year
...forever,
just to keep this system from collapsing
"Anyone who believes exponential growth
can go on forever in a finite world
is either a madman or an economist."
-Kenneth Boulding, economist
What can we do
about this downright scary situation?
For one thing,
we need a different concept of money.
It's time more people ask themselves
and their governments four simple questions.
Around the world, governments borrow money
at interest from private banks.
Government debt is a major component of total debt
and servicing that debt takes a big chunk of our taxes.
Now, we know that banks
simply create the money they lend
and that governments
have given them permission to do this.
So the first question is
why do governments choose to borrow money
from private banks at interest
when government could create
all the interest free money it needs itself?
And the second big question is:
Why create money as debt at all?
Why not create money that circulates permanently
and doesn't have to be perpetually re-borrowed
at interest in order to exist?
The third question:
How can a money system that can only function
with perpetually accelerating growth
be used to build a sustainable economy?
Isn't it logical that perpetually accelerating growth
and sustainability are incompatible?
And finally:
What is it about our current system
that makes it totally dependent on perpetual growth?
What needs to be changed
to allow the creation of a sustainable economy?
[Usury]
At one time, charging any interest on a loan
was called usury
and was subject to severe penalties,
including death.
Every major religion forbade usury.
Most of the arguments made against the practice
were moral.
It was held that money's only legitimate purpose
was to facilitate the exchange of real goods and services.
Any form of making money from simply having money
was regarded as the act of a parasite
or of a thief.
However, as the credit needs of commerce increased,
the moral arguments eventually gave way to the argument
that lending involves risk
and loss of opportunity to the lender
and therefore attempting
to make a profit from lending is justified.
Today, these notions seem quaint.
Today, the idea of making money from money
is held as the ideal to strive for.
Why work when you can get your money
to work for you?
However, in trying
to envision a sustainable future,
it is very clear that the charging of interest
is both a moral and a practical problem.
Imagine a society and economy
that can endure for centuries because,
instead of plundering its capital stores of energy,
it restricts itself to present day income.
No more wood is harvested than
grows in the same period.
All energy is renewable: solar, gravitational or geothermal,
magnetic and whatever else we discover.
This society lives within the limits of its non-renewable resources
by reusing and recycling everything.
And the population just replaces itself.
Such a society could never function using a money system
utterly dependent on perpetually accelerating growth.
A stable economy would need a money supply
at least capable of remaining stable without collapsing.
Let's say the total volume of this stable money supply
is represented by this big circle.
Let us also imagine that moneylenders
must actually have existing money to lend.
If some people within this money supply
begin systematically lending money at interest,
their share of the money supply will grow.
If they continually re-loan at interest
all the money that gets paid back what is the inevitable result?
Whether it is gold, fiat
or debt money doesn't matter.
The moneylenders will end up with ALL of the money.
And after the foreclosures and bankruptcies are all filed,
they will get all the real property too.
Only if the proceeds of lending at interest
were evenly distributed among the population
would this central problem be solved.
Heavy taxation of bank profits
might accomplish this goal.
But then why would banks
want to be in business?
If we were ever able to free ourselves
of the current situation,
we could imagine banking run as a
non-profit service to society,
disbursing its interest earnings
as a universal citizen dividend,
or lending without charging interest at all.
"I have never yet had anyone who could,
through the use of logic and reason,
justify the Federal Government
borrowing the use of its own money...
I believe the time will come
when people will demand that this be changed.
I believe the time will come in this country
when they will actually blame you and me
and everyone else connected with the Congress
for sitting idly by and permitting
such an idiotic system to continue."
~ Wright Patman. Democreatic Congressman 1928-1976
Chairman Commitee on Bankin & Currency, 1963-1975
[CHANGING THE SYSTEM]
If it is the fundamental nature of the system
that causes the problems,
tinkering with the system
cannot ever solve those problems.
The system itself must be replaced.
Many monetary critics clamour for a return to gold-based money,
claiming that gold has a long history of reliability.
They ignore the many scams that can be played with gold:
shaving coins, debasing the metal,
cornering the market,
all of which were abundantly practiced
in ancient Rome, and contributed to its fall.
Some advocate silver, it being more abundant than gold
and therefore more difficult to corner.
Many question the need
to bring back precious metals at all.
No one wants to go back to carrying
heavy sacks of coins to go shopping.
It is a certainty that paper, digital,
plastic or more likely biometric ID money
would be the real medium of trade with the same potential
for creating unlimited debt money we have now.
Beyond that, if gold again became the sole legal basis of money,
those who have no gold would suddenly have no money!
Other monetary reform advocates have concluded
that greed and dishonesty are the main problems,
and that there may be better ways to create
an honest and equitable money system than returning to silver or gold.
Inventive minds have proposed
a variety of alternative ways to create money.
Many private barter systems create money
as debt much as banks do,
but it is done openly and without charging interest.
An example is a barter system
in which debt is expressed as pledges of hours of work,
all work being valued equally at a dollar figure
that then allows hours to be equated
with the dollar price of goods.
This kind of money system can be set up
by anyone who can devise a way to do the accounting
and find willing and trustworthy participants.
Setting up a local barter money system,
even if it were little used now,
would be prudent emergency
planning for any community.
Monetary reform, like electoral reform,
is a big topic,
and one that requires a willingness to change
and to think outside the box.
Monetary reform, again, like electoral reform
will not come easily
because the enormously powerful interests
that benefit from the existing system
will do their utmost
to maintain their advantage.
Now that we have seen that money
is just an idea and that, in reality,
money can be whatever we make it;
here is one very simple alternative
monetary concept to consider.
This model is based on systems
that have worked in the past,
in England, and America,
systems that were undermined
and destroyed by the goldsmith-bankers
and their fractional reserve system.
To create an economy based on permanent,
interest free money,
money could simply be created
and spent into the economy by the government,
preferably on long-lasting infrastructure
that facilitates the economy,
such as roads, railroads, bridges,
harbours, and public markets.
This money would not be created as debt.
It would be created as value,
that value being in the form of whatever it was spent on.
If this new money facilitated a proportional increase
in trade requiring its use,
it would cause no inflation whatsoever.
If government spending did cause inflation,
there would be two courses of action available.
Inflation is equivalent in effect
to a flat tax on money.
Whether the money goes down in value 20%
or the government takes 20% of our money away from us,
the effect on our buying power is the same.
Viewed this way inflation in place of taxation
might be politically acceptable if well spent and kept within limits.
Or, government could choose to counter inflation
by collecting tax monies that it then takes out of use,
thus reducing the money supply
and restoring its value.
To control deflation,
which is the phenomenon of falling wages and prices,
the government would simply
spend more money into existence.
With no competing private debt money creation,
governments would have more effective control
of their nation's money supply.
The public would know whom to blame
if things went wrong.
Governments would rise and fall on their ability
to preserve the value of money.
Government would operate primarily on taxes
as it does now, but tax money would go much, much further
as none of it would be required
to pay interest to private bankers.
There could be no national debt if the federal government
simply created the money it needed.
Our perpetual collective servitude to the banks through interest payments
on government debt would be impossible.
"Money is a new form of slavery,
and distinguishable from the old simply by the fact that
it is impersonal-that there is no human relation
between master and slave." -Leo Tolstoy
[THE INVISIBLE POWER]
"None are more enslaved than those
who falsely believe they are free." -Goethe
What we have been taught to believe
is democracy and freedom has become,
in reality, an ingenious
and invisible form of economic dictatorship.
As long as our entire society remains
utterly dependent on bank credit for its supply of money,
bankers will be in the position to make the decisions
on who gets the money they need and who doesn't.
"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.
Banking was conceived in iniquity
and born in sin.
Bankers own the Earth.
Take it away from them,
but leave them the power to create money,
and with the flick of the pen
they will create enough money to buy it back again...
Take this great power away from them
and all great fortunes like mine will disappear,
and they ought to disappear,
for then this would be a better and happier world to live in.
But if you want to continue to be slaves of the banks
and pay the cost of your own slavery,
then let bankers continue to create money and control credit'."
~Sir Josiah Stamp - Director, Bank of England 1928-1941
(reputed to be the 2nd richest man in England at the time)
The inability of the Colonists to get power to issue
their own money
permantently out of the hands of George III
and the international bankers
was the PRIME reason for the revolutionary war."
~Benjamin franklin
Few people are aware today that,
history of the United states, since the Revolution in 1776
has been in a large part,
the story of an epic struggle
to get free and stay free of control
by the european international banks.
This struggle was finally lost in 1913,
when President Woodrow Wilson
signed into effect the Federal Reserve Act,
putting the international banking cartel
in charge of creating America's money.
"I am a most unhappy man.
I have unwittingly ruined my country.
A great industrial nation is controlled
by its system of credit.
Our system of credit is concentrated.
The growth of the nation, therefore,
and all our activities are in the hands of a few men.
We have come to be one of the worst ruled,
one of the most completely controlled
and dominated Governments in the civilized world.
No longer a Government by free opinion,
no longer a Government by conviction
and the vote of the majority,
but a Government by the opinion and duress
of a small group of dominant men."
~ Woodrow Wilson - President of the United States 1913-1921
The power of this system is deeply ingrained.
So is the educational and media silence on the subject.
Years ago, a Canadian Deputy Prime Minister informally
surveyed scores of non-economists,
both highly educated professionals
and common sense people on the street
and found that not one of them had an accurate understanding
of how money is created.
In fact it is probably safe to say that most people,
including the front line employees of banks,
have never given the matter a moment of thought
Have you?
"All of the perplexities, confusion,
and distress in America arises,
not from the defects of the Constitution or Confederation,
not from want of honor or virtue,
so much as from downright ignorance of the nature of coin,
credit, and circulation."
~ John Adams, Founding Father of the American Constitution
The modern money as debt system
was born a little over three hundred years ago,
when the first Bank of England was set up
with a royal charter for fractional lending
of gold receipts at a modest ratio of 2:1.
That modest ratio was just the proverbial foot in the door.
The system is now worldwide,
creates virtually unlimited amounts of money out of thin air,
and has almost everyone on the planet
chained to a perpetually-growing debt that can NEVER be paid off.
Could it have all just happened by accident?
Or is it a conspiracy?
Obviously,
something very BIG is at stake here.
"Whoever controls the volume of money in our country
is absolute master of all industry and commerce...
and when you realize that the entire system is very easily controlled,
one way or another,by a few powerful men at the top,
you will not have to be told how periods of inflation and depression originate."
~James A. Garfield, assassinated president of the United States
The Government should create, issue, and circulate
all the currency and credits
needed to satisfy the spending power of the Government
and the buying power of consumers.
By the adoption of these principles,
the taxpayers will be saved immense sums of interest.
The privilege of creating and issuing money
is not only the supreme prerogative of government,
but it is the government's greatest creative opportunity."
~Abraham Lincoln, assassinated president of the United States
Until the control of the issue of currency and credit
is restored to government and recognized
as its most conspicuous and sacred responsibility,
all talk of sovereignty of Parliament
and of democracy is idle and futile...
Once a nation parts with control of its credit,
it matters not who makes the nation's laws...
Usury once in control will wreck any nation."
~ William Lyon Mackenzie King Prime Minister of Canada
who nationalized the Bank of Canada
"We are grateful to the Washington Post,
the New York Times, Time magazine
and other great publications
whose directors have attended our meetings
and respected the promises of discretion for almost forty years.
It would have been impossible for us
to develop our plan for the world
if we had been subject to the bright lights
of publicity during those years.
But, the world is now more sophisticated
and prepared to march towards a world-government.
The supranational sovereignty of an intellectual elite
and world bankers is surely preferable
to the National autodetermination
practiced in past centuries"
~David Rockefeller in an address
to a Trilateral Commission meeting, 1991
Only the small secrets need to be protected.
The big ones are kept secret by public incredulity."
~ Marshall McLuhan, media "guru"
Money as Debt
in the Field of commerce and manufacture are afraid of something.
They know that there is a power somewhere so organized,
so subtle, so watchful, so interlocked, so complete, so pervasive,
that they better not speak above their breath when they speak in condemnation of it."
~Woodrow Wilson, former President of the United States
"Each and every time a bank makes a loan,
new bank credit is created - new deposits - brand new money."
~Graham F. Towers, Governor, Bank of Canada, 1934-54
"The process by which banks create money is so simple the mind is repelled."
~John Kenneth Galbraith, Economist
"Permit me to issue and control the money of a nation,
and I care not who makes its laws."
~Mayer Amschel Rothschild, Banker
Money as Debt
Debt
Two great mysteries dominate our lives: love and money.
"What is love?" is a question that has been endlessly explored in stories,
songs, books, movies, and television.
But the same can NOT be said about the question "What is money?"
It's not surprising that monetary theory hasn't inspired any blockbuster movies.
But it was not even mentioned at the schools most of us attended.
For most of us, the question "Where does money come from?"
brings to mind a picture of the mint printing bills and stamping coins.
Money, most of us believe, is created by the government.
It 's true
but only to a point.
Those metal and paper symbols
of value we usually think of as money
are, indeed, produced by an agency
of the federal government called the Mint.
But the vast majority of money
is not created by the Mint.
It is created in huge amounts every day
by private corporations known as banks.
Most of us believe that banks lend out money
that has been entrusted to them by depositors.
Easy to picture.
But not the truth.
In fact, banks create the money they loan,
not from the bank's own earnings,
not from money deposited,
but directly from the borrower's promise to repay.
The borrower's signature on the loan papers
is an obligation to pay the bank
the amount of the loan plus interest,
or, lose the house, the car,
whatever asset was pledged as collateral.
That's a big commitment from the borrower.
What does that same signature require of the bank?
The bank gets to conjure into existence
the amount of the loan
and just write it into the borrower's account.
Sound far-fetched?
Surely that can't be true.
But it is.
To demonstrate how this miracle of modern banking
came about, consider this simple story:
The Goldsmith's Tale
Once upon various times,
pretty much anything was used as money.
It just had to be portable
and enough people had to have faith
that it could later be exchanged for things of real value
like food, clothing and shelter.
Shells, cocoa beans, pretty stones,
even feathers have been used as money.
Gold and silver were attractive,
soft and easy to work with.
so some cultures became expert with these metals.
Goldsmiths made trade much easier by casting coins,
standardized units of these metals
whose weight and purity was certified.
To protect his gold, the goldsmith needed a vault.
And soon his fellow townsmen
were knocking on his door
wanting to rent space to safeguard
their own coins and valuables.
Before long, the goldsmith was renting every shelf
in the vault and earning a small income from his vault rental business.
Years went by and the goldsmith made an astute observation:
Depositors rarely came in to remove their actual,
physical gold, and they never all came in at once.
That was because the claim checks the goldsmith
had written as receipts for the gold,
were being traded in the marketplace
as if they were the gold itself.
This paper money was far more convenient than heavy coins,
and amounts could simply be written,
instead of laboriously counted one by one for each transaction.
Meanwhile, the goldsmith had another business.
He lent out his gold charging interest.
Well, as convenient claim check money came into acceptance,
borrowers began asking for their loans in the form of
these claim checks instead of the actual metal.
As industry expanded more and more
people asked the goldsmith for loans.
This gave the goldsmith an even better idea.
He knew that very few of his depositors
ever removed their actual gold.
So, the goldsmith figured he could easily get away
with lending out claim checks against his depositors' gold,
in addition to his own.
As long as the loans were repaid,
his depositors would be none the wiser, and no worse off.
And the goldsmith, now more banker than artisan,
would make a far greater profit
than he could by lending only his own gold.
For years the goldsmith secretly enjoyed a good income
from the interest earned on everybody else's deposits.
Now a prominent lender, he grew steadily richer
than his fellow townsmen and he flaunted it.
Suspicions grew that he was spending his depositors' money.
His depositors got together and threatened withdrawal of their gold
if the goldsmith didn't come clean about his newfound wealth.
Contrary to what one might have expected,
this did not turn out to be a disaster for the goldsmith.
Despite the duplicity inherent in his scheme,
his idea did work.
The depositors had not lost anything.
Their gold was all safe in the goldsmith's vault.
Rather than taking back their gold,
the depositors demanded that the goldsmith, now their banker,
cut them in by paying them a share of the interest.
And that was the beginning of banking.
The banker paid a low interest rate on deposits
of other people's money that he then loaned out at a higher interest.
The difference covered the bank's cost of operation
and its profit.
The logic of this system was simple.
And it seemed like a reasonable way
to satisfy the demand for credit.
However this is NOT the way banking works today.
Our goldsmith/banker was not content with the income remaining
after sharing the interest earnings with his depositors.
And the demand for credit was growing fast,
as Europeans spread out across the world.
But his loans were limited
by the amount of gold his depositors had in his vault.
That's when he got an even bolder idea.
Since no one but himself knew
what was actually in his vaults,
he could lend out claim checks on gold
that wasn't even there!
As long as all the claim check holders didn't come to the vault
at the same time and demand real gold, how would anyone find out?
This new scheme worked very well,
and the banker became enormously wealthy
on the interest paid on gold that did not exist!
The idea that the banker would just create money out of nothing
was too outrageous to believe,
so, for a long time,
the thought did not even occur to people.
But, the power to just invent money went to the banker's head
as you can well imagine.
In time, the magnitude of the banker's loans and his ostentatious wealth
did trigger suspicions once again.
Some borrowers started to demand real gold
instead of paper representations. Rumors spread.
Suddenly, several wealthy depositors showed up to remove their gold.
The game was up!
A sea of claim check holders flooded the street
outside the closed doors of the bank.
Alas, the banker did not have enough gold & silver
to redeem all the paper he had put into their hands.
This is called a "run on the bank"
and is what every banker dreads.
This phenomenon of a "run on the bank"
ruined individual banks and, not surprisingly,
damaged public confidence in all bankers.
It would have been straightforward to outlaw
the practice of creating money from nothing.
But the large volumes of credit the bankers were offering
had become essential to the success of European commercial expansion.
So, instead, the practice was legalized and regulated.
Bankers agreed to abide by limits on the amount
of fictional loan money that could be lent out.
The limit would still be a number much larger
than the actual value of gold and silver in the vault.
Quite often the ratio was 9 fictional dollars
to 1 actual dollar in gold.
These regulations were enforced by surprise inspections.
It was also arranged that,
in the event of a run,
central banks would support local banks
with emergency infusions of gold.
Only if there were runs on a lot of banks simultaneously
would the bankers' credit bubble burst
and the system come crashing down.
The Money System Today
Over the years, the fractional reserve system
and its integrated network of banks backed by a central bank
has become the dominant money system of the world.
At the same time, the fraction of gold backing the debt money
has steadily shrunk to nothing.
The basic nature of money has changed.
In the past, a paper dollar was actually a receipt
that could be redeemed for a fixed weight of gold or silver.
In the present, a paper or digital dollar can only be redeemed
for another paper or digital dollar.
In the past, privately created bank credit existed only
in the form of private banknotes, which people had the choice to refuse
just as we have the choice to refuse
someone's private cheque today.
In the present, privately created bank credit
is legally convertible to government issued "fiat" currency,
the dollars, loonies and pounds we habitually think of as money.
Fiat currency is money created by government fiat,
or decree, and legal tender laws declare that citizens must accept this fiat money
as payment for debt or else the courts will not enforce the obligation.
So, now the question is
if governments and banks can both just create money,
then how much money exists?
In the past, the total amount of money in existence
was limited to the actual physical quantities
of whatever commodity was in use as money.
For example, in order for new gold or silver money to be created,
more gold or silver had to be found and dug out of the ground.
In the present, money is literally created as debt.
New money is created whenever anyone takes a loan from a bank.
As a result, the total amount of money that can be created
has only one real limit - the total level of debt.
Governments place an additional statutory limit
on the creation of new money,
by enforcing rules known as
fractional reserve requirements.
Essentially arbitrary, fractional reserve requirements
vary from country to country and from time to time.
In the past, it was common to require banks
to have at least one dollar's worth of real gold in the vault
to back 10 dollars worth of debt money created.
Today, reserve requirement ratios no longer apply
to the ratio of new money to gold on deposit,
but merely to the ratio of new debt money
to existing debt money on deposit in the bank.
Today, a bank's reserves consist of two things:
the amount of government-issued cash or equivalent
that the bank has deposited with the central bank,
plus the amount of already existing debt money
the bank has on deposit.
To illustrate this in a simple way.
let us imagine that a new bank has just started up
and has no depositors at all yet.
However the bank's investors have made a reserve deposit
of one thousand one hundred and eleven dollars and twelve cents
of existing cash money at the central bank
and the required reserve ratio is 9:1.
Step 1: The doors open and the new bank
welcomes its first loan customer.
He needs $10,000 to buy a good used car.
At a 9:1 reserve ratio, the new bank's reserve at the central bank,
also known as "high-powered money",
allows it to legally conjure into existence 9 times that amount,
or $10,000 on the basis of the borrower's pledge of debt.
This $10,000 is not taken from anywhere.
It is brand new money simply typed into the borrower's account as bank credit.
The borrower then writes a check on that bank credit
to buy the used car.
Step 2: The seller then deposits this newly
created $10,000 at her bank.
Unlike the high-powered government money deposited at the central bank,
this newly created credit money cannot be multiplied by the reserve ratio.
Instead it is divided by the reserve ratio.
At a ratio of 9:1, a new loan of $9,000 can be created
on the basis of the $10,000 deposit.
Step 3: If that $9000 is then deposited by a third party,
at the same bank that created it, or a different one,
it becomes the legal basis for a third issue of bank credit,
this time for the amount of $8100.
Like one of those Russian dolls, each layer of which contains
a slightly smaller doll inside, each new deposit contains the potential
for a slightly smaller loan in an infinitely decreasing series.
Now, if the loan money created is not deposited at a bank,
the process stops.
That is the unpredictable part
of the money creation mechanism.
But more likely, at every step, the new money
will be deposited at a bank, and the reserve ratio process
can repeat itself over and over until almost $100,000
of brand new money has been created within the banking system.
All of this new money has been created entirely from debt,
and the whole process legally authorized by the initial reserve deposit
of just one thousand one hundred and eleven dollars and twelve cents,
which is still sitting untouched at the central bank!
What's more, under this ingenious system,
the books of each bank in the chain must show
that the bank has 10% more on deposit than it has out on loan.
This gives banks a very real incentive to seek deposits
in order to be able to make loans, supporting the general
but misleading impression that loans come out of deposits.
Now, unless all the successive loans
were deposited at the same bank,
it cannot be said that any one bank got to multiply
its initial high powered money reserve almost 90 times
by issuing bank credit out of nothing.
However, the banking system is a closed loop, bank credit
created at one bank becomes a deposit in another, and vice versa.
In a theoretical world of perfectly equal exchanges,
the ultimate effect would be exactly the same
as if the whole process took place within one bank.
That is, the bank's initial central bank reserve
of a little over eleven hundred dollars
allows it to ultimately collect interest on
up to $100,000 the bank never had.
If that sounds ridiculous, try this.
In recent decades, as a result of steady lobbying by the banks,
the requirements to make a reserve deposit
at the nation's central bank have all but disappeared in some countries
and actual reserve ratios can be much higher than 9:1.
For some types of accounts, twenty to one
and thirty to one ratios are common.
And even more recently, by using loan fees to raise the required reserve
from the borrower,
banks have now found a way to circumvent
reserve requirement limitations entirely.
Sowhile the rules are complex
the common sense reality is actually quite simple.
Banks can create as much money as we can borrow.
"Everyone sub-consciously knows
banks do not lend money.
When you draw on your savings account,
the bank doesn't tell you you can't do this
because it hast lent the money to somebody else."
~Mark Mansfield, economist and author
Despite the endlessly presented mint footage, government-created money
typically accounts for less than 5% of the money in circulation.
More than 95% of all money in existence today was created
by someone signing a pledge of indebtedness to a bank.
What's more, this bank credit money is being created and destroyed
in huge amounts every day,
as new loans are made and old ones repaid.
"I am afraid the the ordinary citizen will not like
to be told that banks can and do create money.
...And they who control the credit of a nation
direct the policy of Governments
and hold in the hollow of their hand the destiny of the people."
~Reginald McKenna, past Chairman of the Board, Midlans Bank of England
Banks can only practice this money system
with the active cooperation of government.
First, governments pass legal tender laws
to make us use the national fiat currency.
Secondly, governments allow private bank credit
to be paid out in this government currency.
Thrirdly, government courts enforce debts.
And lastly, governments pass regulations
to protect the money system's functionality and credibility with the public
while doing nothing to inform the public
about where money really comes from.
[The Simple Truth]
The simple truth is that
when we sign on the dotted line
for a so-called loan or mortgage,
our signed pledge of payment,
backed by the assets we pledge to forfeit should we fail to pay,
is the only thing of real value
involved in the transaction.
To anyone who believes we will honour our pledge,
that loan agreement or mortgage is now a portable,
exchangeable,
and saleable piece of paper.
It is an IOU.
It represents value
and is therefore a form of money.
This money the borrower exchanges
for the bank's so-called loan.
Now... A loan in the natural world means that the lender
must have something to lend.
If you need a hammer, my loaning you a promise to provide a hammer
I don't have won't be of much help.
But in the artificial world of money,
a bank's promise to pay money it doesn't have,
is allowed to be passed off as money
and we accept it as such.
"Thus, our national circulating medium
is now at the mercy of loan transactions of banks,
which lend, not money, but promises to supply money they do not possess."
-Irving Fisher economist and author
Once the borrower signs the pledge of debt,
the bank then balances the transaction by creating,
with a few keystrokes on a computer,
a matching debt of the bank to the borrower.
From the borrower's point of view this becomes
"loan money" in his or her account,
and because the government allows
this debt of the bank to the borrower
to be converted to government fiat currency,
everyone has to accept it as money.
Again the basic truth is very simple.
Without the document the borrower signed,
the banker would have nothing to lend
Have you ever wondered how everyone...
governments, corporations, small businesses, families
can all be in debt at the same time
and for such astronomical amounts?
Have you ever questioned how there
can be that much money out there to lend?
Now you know.
There isn't.
Banks do not lend money.
They simply create it from debt.
And, as debt is potentially unlimited,
so is the supply of money.
And, as it turns out
[NO DEBT NO MONEY]
the opposite situation is also true.
Isn't it astounding, that despite
the incredible wealth of resources,
innovation and productivity that surrounds us,
almost all of us,
from governments to companies to individuals,
are heavily in debt to bankers!
If only people would stop and think - How can that be?
How can it be that the people who actually produce all
of the real wealth in the world
are in debt to those who merely lend out
the money that represents the wealth?
Even more amazing is that once we realize
that money really is DEBT,
we realize that if there were no debt
there would be no money
"That is what our money system is.
If there were no debts in our money system,
there wouldn't be any money."
~Marriner S. Eccles, Chairman and Governor of the Federal Reserve Board
If this is news to you,
you are not alone.
Most people imagine that if all debts were paid off,
the state of the economy would improve.
It's certainly true on an individual level.
Just as we have more money to spend
when our loan payments are finished,
we think that if everyone were out of debt,
there would be more money to spend in general.
But the truth is the exact opposite.
There would be no money at all
There it is... We are totally dependent on continually
renewed bank credit for there to be any money in existence.
No loans, no money - which is what happened
during the Great Depression,
the money supply shrank drastically
as the supply of loans dried up.
"This is a staggering thought.
We are completely dependent on the Commercial Banks.
Someone has to borrow every dollar
we have in circulation, cash or credit.
If the Banks create ample synthetic money,
we are prosperous; if not, we starve.
We are, absolutely,
without a permanent money system.
When one gets a complete grasp of the picture,
the tragic absurdity of our hopeless position
is almost incredible, but there it is."
~Robert H. Hemphill, Credit Manager of Federal Reserve Bank,
Atlanta, Georgia
[PERPETUAL DEBT]
That's not all. Banks create
only the amount of the Principal.
They no not create the money
to pay the Interest.
Where is that supposed to come from?
The only place borrowers can go to obtain
the money to pay the Interest
is the general economy's
overall money supply.
But almost all of that overall money supply
has been created exactly the same way
-as bank credit that has to be paid back
with more than was created.
So everywhere,
there are other borrowers in the same situation,
frantically trying to obtain the money they need
to pay back both Principal and Interest
from a total money pool
which contains only Principal.
. It is clearly impossible for everyone to pay back
the Principal plus the Interest
because the interest money does not exist.
This can even be expressed by a simple mathematical formula.
The big problem here is that
for long term loans such as mortgages and government debt,
the total Interest far exceeds the Principal.
So unless a lot of extra money
is created to pay the Interest,
it means a very high proportion of foreclosures,
and a non-functioning economy.
To maintain a functional society
the rate of foreclosure needs to be low.
And so, to accomplish this,
more and more new debt money
has to be created
to satisfy today's demands for money
to service the previous debt.
But, of course, this just makes the total debt
bigger.
And that means more interest
must ultimately be paid,
resulting in an ever-escalating and
inescapable spiral of mounting indebtedness.
It is only the time lag
between money's creation
as new loans and its repayment
that keeps the overall shortage of money from catching up
and bankrupting the entire system.
However, as the bankers' insatiable credit monster
gets bigger and bigger,
the need to create more and more debt money
to feed it becomes increasingly urgent.
Why are interest rates so low?
Why do we get unsolicited credit cards
in the mail?
Why is the US government spending
faster than ever?
Could it be to stave off collapse
of the entire monetary system?
The rational person has to ask:
Can this really go on forever?
Isn't a collapse inevitable?
"One thing to realize about our fractional reserve banking system
is that, like a child's game of musical chairs,
as long as the music is playing, there are no losers."
~Andrew Gause, Monetary Historian
Money facilitates production and trade.
As the money supply increases,
money just becomes increasingly worthless
unless the volume of production and trade
in the real world grows by the same amount
Add to this the realization that when we hear
that the economy is growing at 3% per year,
it sounds like a constant rate.
But is not.
This year's 3% represents more real goods and services
than last year's 3% because it is 3% of the new total.
Instead of a straight line as is naturally
visualized from the words,
it is really an exponential curve
getting steeper and steeper.
["The greatest shortcoming of the human race...]
The problem, of course, is that perpetual growth
[is our inability to understand the exponential function."]
of the real economy requires perpetually escalating use
[ -Albert A. Bartlett, physicist]
of real world resources and energy.
More and more stuff has to go from natural resource
to garbage every year
...forever,
just to keep this system from collapsing
"Anyone who believes exponential growth
can go on forever in a finite world
is either a madman or an economist."
-Kenneth Boulding, economist
What can we do
about this downright scary situation?
For one thing,
we need a different concept of money.
It's time more people ask themselves
and their governments four simple questions.
Around the world, governments borrow money
at interest from private banks.
Government debt is a major component of total debt
and servicing that debt takes a big chunk of our taxes.
Now, we know that banks
simply create the money they lend
and that governments
have given them permission to do this.
So the first question is
why do governments choose to borrow money
from private banks at interest
when government could create
all the interest free money it needs itself?
And the second big question is:
Why create money as debt at all?
Why not create money that circulates permanently
and doesn't have to be perpetually re-borrowed
at interest in order to exist?
The third question:
How can a money system that can only function
with perpetually accelerating growth
be used to build a sustainable economy?
Isn't it logical that perpetually accelerating growth
and sustainability are incompatible?
And finally:
What is it about our current system
that makes it totally dependent on perpetual growth?
What needs to be changed
to allow the creation of a sustainable economy?
[Usury]
At one time, charging any interest on a loan
was called usury
and was subject to severe penalties,
including death.
Every major religion forbade usury.
Most of the arguments made against the practice
were moral.
It was held that money's only legitimate purpose
was to facilitate the exchange of real goods and services.
Any form of making money from simply having money
was regarded as the act of a parasite
or of a thief.
However, as the credit needs of commerce increased,
the moral arguments eventually gave way to the argument
that lending involves risk
and loss of opportunity to the lender
and therefore attempting
to make a profit from lending is justified.
Today, these notions seem quaint.
Today, the idea of making money from money
is held as the ideal to strive for.
Why work when you can get your money
to work for you?
However, in trying
to envision a sustainable future,
it is very clear that the charging of interest
is both a moral and a practical problem.
Imagine a society and economy
that can endure for centuries because,
instead of plundering its capital stores of energy,
it restricts itself to present day income.
No more wood is harvested than
grows in the same period.
All energy is renewable: solar, gravitational or geothermal,
magnetic and whatever else we discover.
This society lives within the limits of its non-renewable resources
by reusing and recycling everything.
And the population just replaces itself.
Such a society could never function using a money system
utterly dependent on perpetually accelerating growth.
A stable economy would need a money supply
at least capable of remaining stable without collapsing.
Let's say the total volume of this stable money supply
is represented by this big circle.
Let us also imagine that moneylenders
must actually have existing money to lend.
If some people within this money supply
begin systematically lending money at interest,
their share of the money supply will grow.
If they continually re-loan at interest
all the money that gets paid back what is the inevitable result?
Whether it is gold, fiat
or debt money doesn't matter.
The moneylenders will end up with ALL of the money.
And after the foreclosures and bankruptcies are all filed,
they will get all the real property too.
Only if the proceeds of lending at interest
were evenly distributed among the population
would this central problem be solved.
Heavy taxation of bank profits
might accomplish this goal.
But then why would banks
want to be in business?
If we were ever able to free ourselves
of the current situation,
we could imagine banking run as a
non-profit service to society,
disbursing its interest earnings
as a universal citizen dividend,
or lending without charging interest at all.
"I have never yet had anyone who could,
through the use of logic and reason,
justify the Federal Government
borrowing the use of its own money...
I believe the time will come
when people will demand that this be changed.
I believe the time will come in this country
when they will actually blame you and me
and everyone else connected with the Congress
for sitting idly by and permitting
such an idiotic system to continue."
~ Wright Patman. Democreatic Congressman 1928-1976
Chairman Commitee on Bankin & Currency, 1963-1975
[CHANGING THE SYSTEM]
If it is the fundamental nature of the system
that causes the problems,
tinkering with the system
cannot ever solve those problems.
The system itself must be replaced.
Many monetary critics clamour for a return to gold-based money,
claiming that gold has a long history of reliability.
They ignore the many scams that can be played with gold:
shaving coins, debasing the metal,
cornering the market,
all of which were abundantly practiced
in ancient Rome, and contributed to its fall.
Some advocate silver, it being more abundant than gold
and therefore more difficult to corner.
Many question the need
to bring back precious metals at all.
No one wants to go back to carrying
heavy sacks of coins to go shopping.
It is a certainty that paper, digital,
plastic or more likely biometric ID money
would be the real medium of trade with the same potential
for creating unlimited debt money we have now.
Beyond that, if gold again became the sole legal basis of money,
those who have no gold would suddenly have no money!
Other monetary reform advocates have concluded
that greed and dishonesty are the main problems,
and that there may be better ways to create
an honest and equitable money system than returning to silver or gold.
Inventive minds have proposed
a variety of alternative ways to create money.
Many private barter systems create money
as debt much as banks do,
but it is done openly and without charging interest.
An example is a barter system
in which debt is expressed as pledges of hours of work,
all work being valued equally at a dollar figure
that then allows hours to be equated
with the dollar price of goods.
This kind of money system can be set up
by anyone who can devise a way to do the accounting
and find willing and trustworthy participants.
Setting up a local barter money system,
even if it were little used now,
would be prudent emergency
planning for any community.
Monetary reform, like electoral reform,
is a big topic,
and one that requires a willingness to change
and to think outside the box.
Monetary reform, again, like electoral reform
will not come easily
because the enormously powerful interests
that benefit from the existing system
will do their utmost
to maintain their advantage.
Now that we have seen that money
is just an idea and that, in reality,
money can be whatever we make it;
here is one very simple alternative
monetary concept to consider.
This model is based on systems
that have worked in the past,
in England, and America,
systems that were undermined
and destroyed by the goldsmith-bankers
and their fractional reserve system.
To create an economy based on permanent,
interest free money,
money could simply be created
and spent into the economy by the government,
preferably on long-lasting infrastructure
that facilitates the economy,
such as roads, railroads, bridges,
harbours, and public markets.
This money would not be created as debt.
It would be created as value,
that value being in the form of whatever it was spent on.
If this new money facilitated a proportional increase
in trade requiring its use,
it would cause no inflation whatsoever.
If government spending did cause inflation,
there would be two courses of action available.
Inflation is equivalent in effect
to a flat tax on money.
Whether the money goes down in value 20%
or the government takes 20% of our money away from us,
the effect on our buying power is the same.
Viewed this way inflation in place of taxation
might be politically acceptable if well spent and kept within limits.
Or, government could choose to counter inflation
by collecting tax monies that it then takes out of use,
thus reducing the money supply
and restoring its value.
To control deflation,
which is the phenomenon of falling wages and prices,
the government would simply
spend more money into existence.
With no competing private debt money creation,
governments would have more effective control
of their nation's money supply.
The public would know whom to blame
if things went wrong.
Governments would rise and fall on their ability
to preserve the value of money.
Government would operate primarily on taxes
as it does now, but tax money would go much, much further
as none of it would be required
to pay interest to private bankers.
There could be no national debt if the federal government
simply created the money it needed.
Our perpetual collective servitude to the banks through interest payments
on government debt would be impossible.
"Money is a new form of slavery,
and distinguishable from the old simply by the fact that
it is impersonal-that there is no human relation
between master and slave." -Leo Tolstoy
[THE INVISIBLE POWER]
"None are more enslaved than those
who falsely believe they are free." -Goethe
What we have been taught to believe
is democracy and freedom has become,
in reality, an ingenious
and invisible form of economic dictatorship.
As long as our entire society remains
utterly dependent on bank credit for its supply of money,
bankers will be in the position to make the decisions
on who gets the money they need and who doesn't.
"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.
Banking was conceived in iniquity
and born in sin.
Bankers own the Earth.
Take it away from them,
but leave them the power to create money,
and with the flick of the pen
they will create enough money to buy it back again...
Take this great power away from them
and all great fortunes like mine will disappear,
and they ought to disappear,
for then this would be a better and happier world to live in.
But if you want to continue to be slaves of the banks
and pay the cost of your own slavery,
then let bankers continue to create money and control credit'."
~Sir Josiah Stamp - Director, Bank of England 1928-1941
(reputed to be the 2nd richest man in England at the time)
The inability of the Colonists to get power to issue
their own money
permantently out of the hands of George III
and the international bankers
was the PRIME reason for the revolutionary war."
~Benjamin franklin
Few people are aware today that,
history of the United states, since the Revolution in 1776
has been in a large part,
the story of an epic struggle
to get free and stay free of control
by the european international banks.
This struggle was finally lost in 1913,
when President Woodrow Wilson
signed into effect the Federal Reserve Act,
putting the international banking cartel
in charge of creating America's money.
"I am a most unhappy man.
I have unwittingly ruined my country.
A great industrial nation is controlled
by its system of credit.
Our system of credit is concentrated.
The growth of the nation, therefore,
and all our activities are in the hands of a few men.
We have come to be one of the worst ruled,
one of the most completely controlled
and dominated Governments in the civilized world.
No longer a Government by free opinion,
no longer a Government by conviction
and the vote of the majority,
but a Government by the opinion and duress
of a small group of dominant men."
~ Woodrow Wilson - President of the United States 1913-1921
The power of this system is deeply ingrained.
So is the educational and media silence on the subject.
Years ago, a Canadian Deputy Prime Minister informally
surveyed scores of non-economists,
both highly educated professionals
and common sense people on the street
and found that not one of them had an accurate understanding
of how money is created.
In fact it is probably safe to say that most people,
including the front line employees of banks,
have never given the matter a moment of thought
Have you?
"All of the perplexities, confusion,
and distress in America arises,
not from the defects of the Constitution or Confederation,
not from want of honor or virtue,
so much as from downright ignorance of the nature of coin,
credit, and circulation."
~ John Adams, Founding Father of the American Constitution
The modern money as debt system
was born a little over three hundred years ago,
when the first Bank of England was set up
with a royal charter for fractional lending
of gold receipts at a modest ratio of 2:1.
That modest ratio was just the proverbial foot in the door.
The system is now worldwide,
creates virtually unlimited amounts of money out of thin air,
and has almost everyone on the planet
chained to a perpetually-growing debt that can NEVER be paid off.
Could it have all just happened by accident?
Or is it a conspiracy?
Obviously,
something very BIG is at stake here.
"Whoever controls the volume of money in our country
is absolute master of all industry and commerce...
and when you realize that the entire system is very easily controlled,
one way or another,by a few powerful men at the top,
you will not have to be told how periods of inflation and depression originate."
~James A. Garfield, assassinated president of the United States
The Government should create, issue, and circulate
all the currency and credits
needed to satisfy the spending power of the Government
and the buying power of consumers.
By the adoption of these principles,
the taxpayers will be saved immense sums of interest.
The privilege of creating and issuing money
is not only the supreme prerogative of government,
but it is the government's greatest creative opportunity."
~Abraham Lincoln, assassinated president of the United States
Until the control of the issue of currency and credit
is restored to government and recognized
as its most conspicuous and sacred responsibility,
all talk of sovereignty of Parliament
and of democracy is idle and futile...
Once a nation parts with control of its credit,
it matters not who makes the nation's laws...
Usury once in control will wreck any nation."
~ William Lyon Mackenzie King Prime Minister of Canada
who nationalized the Bank of Canada
"We are grateful to the Washington Post,
the New York Times, Time magazine
and other great publications
whose directors have attended our meetings
and respected the promises of discretion for almost forty years.
It would have been impossible for us
to develop our plan for the world
if we had been subject to the bright lights
of publicity during those years.
But, the world is now more sophisticated
and prepared to march towards a world-government.
The supranational sovereignty of an intellectual elite
and world bankers is surely preferable
to the National autodetermination
practiced in past centuries"
~David Rockefeller in an address
to a Trilateral Commission meeting, 1991
Only the small secrets need to be protected.
The big ones are kept secret by public incredulity."
~ Marshall McLuhan, media "guru"
Money as Debt