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Meaning of Money Part 4.
The entitlement to create money
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a. money created through debt
b. money created privately
c. money created publicly
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a. money created through debt
In a sense all money is created through debt. Money is a claim that someone owes you something. Even considering money backed by gold. The money / currency is saying that you are owed that amount of gold. You can sell / give / trade that currency / claim / money to someone else who will then be owed the gold. If not gold then something else that backs the currency. Silver, fish, whatever. In the case of fiat money it is the 'claim' itself that is backed by the issuing authority. So long as one has trust in that authority and they are able to make good their backing all is well.
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�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.�
Chairman Wright Patman
United States House Committee
on Banking and Currency
(1965-75)
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From a bulletin of
the Federal Reserve Bank of St. Louis
"Modern monetary systems have a fiat
base, 'literally money by decree' with depository institutions, acting as fiduciaries, creating obligations against themselves with the fiat base acting in part as reserves. The
decree appears on the currency notes: 'This note is legal tender for all debts, public and private.' While no individual could refuse to accept such money for debt repayment,
exchange contracts could easily be
composed to thwart its use in everyday commerce. However, a forceful explanation as to why money is accepted is that the federal
government requires it as payment for
tax liabilities. Anticipation of the need to clear this debt creates a demand for the pure fiat dollar."
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US Congress
House Committee on
Banking and Currency
September 30, 1941.
Congressman Patman: "How did you get
the money to buy those two billion dollars worth of Government securities in 1933?"
Federal Reserve Board Governor Eccles: "We created it."
Patman: "Out of what?"
Eccles: "Out of the right to issue credit money."
Patman: "And there is nothing behind it, is there, except our Government's credit?"
Eccles: "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."
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Congressman John William Wright Patman
(August 6, 1893 � March 7, 1976)
Chair of the United States House Committee
on Banking and Currency
(1965-75)
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Here is a Staggering Thought
"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. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse, unless it
becomes widely understood, and the defects remedied very soon."
Robert Hemphill,
Credit Manager
Federal Reserve Bank
Atlanta, Georgia
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William Butler Yeats -
(13 June 1865�28 January 1939)
Irish poet
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�Things fall apart; the center cannot hold; Mere anarchy is loosed upon the world, The blood-dimmed tide is loosed, and everywhere The ceremony of innocence is drowned; The best lack all conviction, while the worst Are full of passionate intensity�
Note by Bruce:
Yes, Things Have Fallen Apart
We are experiencing Economic TEOTEWAWKI
the end of the
(The End Of The Economic World As We Knew It).
The catastrophe of the economic / financial collapse may be such that it will cause nuclear WW3 and the end of the whole world as we knew it.
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Statistics are difficult to deal with - but here are some anyway with the intention to show that it is not just a US problem:
2008 External Debt as a Percent of GDP (Gross Domestic Product)
Countries with greater external debt
than the US | Debt as
% of GDP | Debt
per Capita | Gross
External Debt | GDP |
| United States | 95.09% | $44,358 | $13.627 trillion | $14.330 trillion |
| Norway | 114% | $118,353 | $551.59 billion | $481.1 billion |
| Finland | 116% | $62,579 | $328.56 billion | $281.2 billion |
| Sweden | 129% | $73,245 | $663.58 billion | $512.9 billion |
Spain | 137.5% | $57,091 | $2.313 trillion | $1.683 trillion |
| Germany | 137.5% | $63,767 | $5.25 trillion | $3.818 trillion |
| Denmark | 159% | $107,026 | $588.7 billion | $369.6 billion |
| France | 168% | $78,070 | $5.001 trillion | $2.978 trillion |
| Austria | 191% | $100,787 | $827.49 billion | $432.4 billion |
| Switzerland | 264% | $171,478 | $1.304 trillion | $492.6 billion |
| Netherlands | 268% | $145,959 | $2.439 trillion | $909.5 billion |
| Hong Kong | 295% | $93,539 | $659.93 billion | $223.8 billion |
| Belgium | 327% | $155,362 | $1.618 trillion | $495.4 billion
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| United Kingdom | 336% | $153,616 | $9.388 trillion | $2.787 trillion
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| Ireland | 811% | $549,819 | $2.311 trillion | $285 billion |
External Debt information from The World Bank (unless otherwise noted), GDP information from the CIA World Factbook.
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Explanation About Debt
A full explanation about debt would be as lengthy as an explanation about money itself. While it is explained above how money is created by debt - and that in fact money is debt there will remain many fantasies in the minds of the uninformed reader regarding debt.
One of the fantasies is that we are somehow passing a burden of debt onto future generations. The truth is the opposite because the debt is a measure of created wealth that is being passed on to someone in the future generation. The question is - "Who is going to be the owner of the debt - and who is going to be the ower of the debt." Well, obviously, the owners of the debt are going to be the wealthy - and the owers of the debt the poor. BUT there is no net debt being passed on to the future generation. Most people just can't grasp that.
Even more importantly - each previous generation in the US has so far passed on increasingly immense amounts of 'real' capital to the next generation because of technological development and the fact that the US has not been directly devastated by war.
None of the countries in the table above compare to the US as to its GDP. Yep, the US has trillions of dollars of debts but its GDP is gigantic. Think of it this way. Some fellow like Sam Walton may owe millions, and always be complaining about it - so that his children thought that they were poor (a true anecdotal note). But another fellow may owe only twenty thousand dollars and the burden be so great to him that he will commit suicide - as is often the case in Punjab.
Most of the countries in the world, like Bangladesh, are so poor compared to the US that while they are concerned about debt - they have very little compared to the US and don't even make the list. Among nations they are like the Punjabi farmers.
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b. money created privately
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In the US the money is created by a privately held banking system which happens to be called the Federal Reserve which just like Federal Express is a private corporation with no direct link to the government even though the US president appoints its supposed head.
While it is true that the US Treasury prints US dollars - those dollars are only issued when debt has been created. Even the US government gets its money by creating debt with the Federal Reserve. However complicated the game of smoke and mirrors becomes the fact remains that US money is created by the private individuals who own the banks and that the money is fiat money only backed by the word of the bank.
The privately owned Federal Reserve bank loans money to other private banks in the US and these in turn loan the money to US citizens to buy homes, run businesses, manufacture goods and whatever. To give one more example about how money is created this way. The privately owned Federal Reserve bank tells a bank or financial institution that it can loan / create a certain amount of money. That bank / institution sends you a credit card with a 'limit'. That limit is how much money you can create. The moment you use that 'credit' to buy something you have then created a debt for the amount of whatever you have purchased. That debt is the money. It is money owed to the bank. It didn't exist until you created the debt. So the bottom line is that in this system you are the one who creates money, and it is money that you owe. You now have to go out and try to get some money that someone else has created so that you can pay back the money that you owe. You will also have to pay back interest.
And so it goes in cycles. Create debt and money. Get money - claim on debt from someone else to pay back the money and interest you owe. This whole system just goes humming along in cycles except sometimes it runs off the rails when there isn't enough money to pay the interest.
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"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
Money as Debt
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When the Music Stops
The private banks are supposed to get back all the debt which you created - plus interest - so they that can continue to build bigger and bigger buildings and empires and pay their owners and executives millions of dollar salaries with the money they create for you out of nothing when you take on the debt (or just as often - the government takes it on for you and then collects the payments in taxes). Eventually the greed amounts to such a point that the whole system crashes and the workers cannot find jobs to pay back the debt and money they created.
Anyway, when collapse happens, the way that it works is that the government bails out the banks and the big corporations for billions or even trillions of dollars but many of the workers in the economy are then unemployed. As I heard a Rothschild say on TV this week - "Then it can be hard times for the poor." (True - but it remains good times for the rich until the whole system collapses.)
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Rothschild's View
"Let me issue and control a nation's money and I care not who makes its laws."
Amschel Mayer Rothschild
(23 February 1744 � 19 September 1812)
founder of the Rothschild family international banking dynasty
[Forbes magazine called him the "founding father of international finance".]
[Many people feel that the Rothschild family still controls the Western / Capitalist world's money system - and therefore in effect, at present, the world's money system.]
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John Adam's View
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance."
John Adams
(October 30, 1735 � July 4, 1826)
Second President of the United States (1797�1801) First Vice President (1789�1797) for two terms. One of the most influential Founding Fathers of the United States.
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The following statement is often attributed to a member of the Rothschild family:
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"The few who can understand the system [of fractional reserve banking] will be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the
system is inimical to their interests."
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Thomas Jefferson's View
"A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army."
Thomas Jefferson
(April 13, 1743 � July 4, 1826)
third President of the United States (1801�1809)
[principal author of the Declaration of Independence (1776), and one of the most influential Founding Fathers.]
"If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and the corporations that will grow
up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."
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Abraham Lincoln's View
"The money power preys on the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces,
as public enemies, all who question
its methods or throw light upon its crimes."
Abraham Lincoln
(February 12, 1809 � April 15, 1865)
16th President of the United States.
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James Garfield's View
"Whoever controls the volume of money in any country is the absolute master of all industry and commerce."
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James Abram Garfield
(November 19, 1831 � September 19, 1881)
20th President of the United States.)
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[Warning against letting private banks gaining control over the money supply.]
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Woodrow Wilson's View
"I have destroyed my country."*
Thomas Woodrow Wilson
(December 28, 1856�
February 3, 1924)
28th President of the United States
[*A controversial statement abstracted from his biography regarding his having signed the bill giving the US money creation rights to the privately owned Federal Reserve.]
Wilson did say:
'Since I entered politics, I have chiefly had men's views confided to me privately. 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,The New Freedom
(1913)
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Barack Obama's View
"Change you can believe in."*
Barack Hussein Obama II
(born August 4, 1961)
44th President of the United States.
* But is it change for the better?
Take note of the news item below.
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News Item:
Associated Press �
Sat May 9, 2009
WASHINGTON � The Federal Reserve could become the supercop for "too big to fail" companies capable of causing another financial meltdown under a proposal being seriously considered by the White House.
The Obama administration told industry officials on Friday that it was leaning toward making such a recommendation, according to officials who attended a private one-hour meeting between President Barack Obama's economic advisers and representatives from about a dozen banks, hedge funds and other financial groups.
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[After all the warnings by prior presidents, Woodrow Wilson gave the private bankers the chickens and the eggs. Now the plan appears to be to give them the hen house as well. Is this something new - or just the fulfillment of what has been going on all along, no matter which party was in power? It is now generally understood that the candidates of both political parties are supported (paid for) by the money powers - and both equally enact the policies of the money powers.]
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c. money created publicly
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Money might just as well be created by banks that are owned by the government rather than by banks that are privately owned. Some people think that the government wouldn't do as well. For one thing they are concerned about government bureaucracy but in actuality big corporations and giant banks can be just as bureaucratic.
Another thing is the concern that government will not be constrained by prudence but will just keep creating more and more money to meet the demands of the people who elect them.
In point of fact the government isn't much constrained anyway and just keeps creating more money for what Eisenhower called the Military / Industrial complex which results in death and destruction for people throughout the world.
The way it really works is that the people who run the government are the same people who run the big corporations through what is called a revolving door policy - and it is the big corporations owned by the big banks who fund the politicians who get elected so that they are the ones to decide the government policies - anyway.
The US government policy, no matter who was in office, was to always create more money for the big corporations, the big banks, and the privately owned Federal Reserve but greed still has its limits and the system can collapse.
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"Each and every time a bank makes a loan (or purchases securities), new bank credit is created � new deposits � brand new money."
Graham Ford Towers, CC
(September 29, 1897 � December 4, 1975)
first Governor of the Bank of Canada
from 1934 to 1954
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"I am afraid that the ordinary citizen
will not like to be told that 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 hands
the destiny of the people"
Reginald McKenna (1863-1943)
British Home Secretary
Chairman of the Board,
Midlands Bank of England
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"Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognised as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile."
William Lyon Mackenzie King
(December 17, 1874 � July 22, 1950)
10th Prime Minister of Canada
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