Category Archives: The Political Money System

Do Banks Create Money out of Nothing?

One of my correspondents recently referred me to an article and asked for my opinion about it. The article is Creating Money out of Nothing: The History of an Idea, by Mike King, dated April 2012 .

I read the abstract, the conclusions, and part of the body text, but could not bring myself to make a detailed read. “The history of an idea” is not relevant to my interests nor to the debt crisis that plagues civilization. Verbose and tedious, it seems to be an academic exercise that I doubt  will be of interest even to historians.

On the positive side, it did prompt me to write a few words of clarification on the question, words that I think are both pertinent and helpful to those who truly wish to understand the nature of money and the role of banks in today’s world.

The accusation that banks create money out of nothing has, according to King, been made by many famous economists, including Schumpeter, von Mises, and Keynes. I too must admit to having once or twice used that statement as a sort of shorthand criticism of the global money and banking system.

It is surely true that saying that banks make “money out of nothing” is an exaggeration that can be misleading to the uninitiated.

Bank actually create money out of something. The question is, what is that something, and what is wrong with it?

The short answer is that banks create money on the basis of the promises of their borrowers to repay.

Mr. King would have us believe that banks simply take in money from savers and lend it out to borrowers. That is clearly wrong. Even the Federal Reserve, in its own publications, says that,

The actual process of money creation takes place primarily in banks.(1) As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.-Modern Money Mechanics

As I’ve pointed out in all of my books, banks serve two primary functions. They act as both depositories, reallocating funds from savers to borrowers, and banks of issue that monetize the promises of their borrowers. I’ve explained that in detail in Chapter 1 of my book, Money: Understanding and Creating Alternatives to Legal Tender, and in Chapter 9 of my latest book, The End of Money and the Future of Civilization.

But not all promises provide a proper basis for creating money. As Edward Popp, describes it, banks create both bona-fide and non-bona-fide money. (See Money, Bona Fide or Non-Bona Fide at http://www.reinventingmoney.com/documents/bonafidePopp.pdf).

The vast majority of the non-bona-fide money that banks create, is created on the basis of loans made to national governments (when banks buy government bonds). Further large amounts of non-bona-fide money are created when banks make loans to finance purchases of consumer goods and real estate (see my books for details).

The bottom line remains: the present global, interest-based, debt-money system, is dysfunctional and destructive.

The creation of money on the basis of interest-bearing loans is the cause of the growth imperative, and the creation of non-bona-fide money is the cause of inflation.

If we are to achieve a sustainable society and assure the survival of civilization, we must transcend the present money and banking paradigm and reinvent the exchange process.  – t.h.g.

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Can governments and banks be trusted with the money power?

As governments around the world struggle to manage their soaring debt burdens, the wisdom of E. C. Riegel rings ever more true. The masters of the political debt-money regime are pressuring Cyprus to confiscate part of the savings of their citizens, and Greece and other countries to impose budgetary cuts that burden the poor and middle class. Argentina wants to grab their people’s savings by nationalizing their pension funds. All the while, the purchasing power of national currencies shrinks as governments inflate them to enable deficit spending.

Riegel’s call for monetary freedom must no longer be ignored. –t.h.g.   

LET FREEDOM RING THE CASH REGISTER

[by E. C. Riegel, written circa 1940s]

Old Liberty Bell rang out the political freedom that we cherish. But unless we learn how to make freedom ring the cash register, bureaucracy will ring down the curtain on our liberties.

What is the strange power that makes the government at Washington grow stronger and our state and local governments grow weaker while the people suffer the torment of war and the travail of insecurity and the shadow of dictatorship falls across the land? It is the same power that oppresses the people of all the world — the political money power.

The political money power is the power of national governments to buy the people’s sweat and blood with scraps of paper – paper that falls like a blotter upon our production and our freedom. Each day our

wealth diminishes and more of our liberties vanish. Inflation that threatens to bring chaos is just around the corner. As our sons bleed and our mothers weep, the same grinding power throws its pall over other lands.  Yet our chains are paper – paper money that, through our ignorance, binds us to the treadmill of our own destruction.

We can be masters of our destiny; we are all powerful, if we but realize it. In each of us resides the power to assure liberty, prosperity, security and peace. In each of us lies the money power, which, when springing from us, is democratic and virtuous; when springing from government is authoritarian and vicious. As we liberate our inherent money power we curb the political money power, for the more we use our self-created money, the less we need political money. Thus we defeat dictatorship. Thus we reconstruct the shattered world on a free democratic basis. Thus we save civilization.

Parchment freedoms are but taunts and mockeries without money freedom. A people dependent upon their government for money is a subject people regardless of the form of their government. No people can declare their independence and govern their government unless they assert their money freedom. A government that is not dependent upon its people for money supply is a tyranny regardless of its professions. Government must be made to beg the people for money; the people cannot be sovereign while petitioning government for money. The citizen must command both government and business through his money power. Political democracy is a delusion without economic democracy and economic democracy can function only through the power to issue money – the power to ring the cash register – the power to support and the power to withhold support. To prevent political dictatorship the citizen must himself be a dictator. To prevent centralization of power, power must be reserved by the people. Money power is sovereignty; without it democracy is impossible.

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From Money Freedom, organ of The Private Enterprise Money Movement.

More monetary wisdom from E. C. Riegel, including his book, Private Enterprise Money, can be found at http://www.newapproachtofreedom.info/, and via my website http://beyondmoney.net/.

– Thomas H. Greco, Jr.

You are the target

The graphics below capture the essential nature of western civilization today–everything is for sale, the main source of revenue for businesses and governments is advertising, everyone is trying to colonize your mind.

Corporations say, “buy, buy, buy.”
Religious organizations say, “believe, believe, believe.”
Governments say, “obey, obey, obey.”

– t.h.g.

AdBuster$5Bill

ForeheadAd1

Too big to fail equals too big to take to trial, or punish, or effectively control…

Senator Elizabeth Warren asks the embarrassing questions.

Davos-What’s missing from the conversation?

Professor Jem Bendel is Director of the Institute for Leadership and Sustainability at Cumbria University in the UK, and a “young global leader” of the World Economic Forum. In this short video interview, he expresses his views on what is, and is not, happening at the Davos forum to address the global crisis.

How did Iceland recover? Report from Davos

In this three-minute interview, Iceland’s President Olafur Ragnar Grimson explains that their recovery from the economic crisis was based on actions that went against the orthodox prescriptions–Let the banks fail, introduce currency controls, provide support for the poor, don’t push austerity measures. Why are banks the “holy churches of the economy?”

Will we ever see a world without money?

If you doubt it, think about these famous words from experts of the past–t.h.g.

“The bomb will never go off. I speak  as an expert in explosives.” – - Admiral William Leahy , US Atomic Bomb Project

“There is no likelihood man can ever tap the power of the atom.” — Robert Millikan, Nobel Prize in Physics, 1923

“Computers in the future may weigh no more than 1.5 tons.” — Popular Mechanics, forecasting the relentless march of science, 1949

“I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943

“I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won’t last out the year.” — The editor in charge of business books for Prentice Hall, 1957

“But what is it good for?” — Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.

“640K ought to be enough for anybody.” — Bill Gates, 1981

This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us” — Western Union internal memo, 1876.

“The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?” — David Sarnoff’s associates in response to his urgings for investment in the radio in the 1920s.

“The concept is interesting and well-formed, but in order to earn better than a ‘C,’ the idea must be feasible” — A  Yale  University management professor in response to Fred Smith’s paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)

“I’m just glad it’ll be Clark Gable who’s falling on his face and not Gary Cooper” — Gary Cooper on his decision not to take the leading role in “Gone With The Wind.”

“We don’t like their sound, and guitar music is on the way out” — Decca Recording Co. rejecting the Beatles, 1962.

“Heavier-than-air flying machines are impossible” — Lord Kelvin, president, Royal Society, 1895.

“If I had thought about it, I wouldn’t have done the experiment. The literature was full of examples that said you can’t do this” – - Spencer Silver on the work that led to the unique adhesives for 3-M “Post-It” Notepads.

“Drill for oil? You mean drill into the ground to try and find oil? You’re crazy” — Drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859.

“Stocks have reached what looks like a permanently high plateau.” – - Irving Fisher, Professor of Economics,  Yale University , 1929.

“Airplanes are interesting toys but of no military value” — Marechal Ferdinand Foch, Professor of Strategy, Ecole  Superieure de Guerre ,  France .

“Everything that can be invented has been invented” — Charles H. Duell, Commissioner, US Office of Patents, 1899.

“The super computer is technologically impossible. It would take all of the water that flows over Niagara Falls to cool the heat generated by the number of vacuum tubes required.” — Professor of Electrical Engineering,  New York  University

“I don’t know what use any one could find for a machine that would make copies of documents. It certainly couldn’t be a feasible business by itself.” — the head of IBM, refusing to back the idea, forcing the inventor to found Xerox.

“The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon,” — Sir John Eric Ericksen, British surgeon, appointed Surgeon-Extraordinary to Queen  Victoria 1873.

And last but not least…

“There is no reason anyone would want a computer in their home.”  — Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

“There is no reason anyone would want a computer in their home.”  — Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

Greek economy running backwards, a WSJ video report

The Greek economy has been crippled by the austerity demanded by international financial institutions. This Wall Street Journal video report shows how some Greeks are coping by going back to the land.

Every country is caught in the usury trap that is inherent in the global debt-money system, and all will follow the same course in turn. Those who happen to have land to go back to are the lucky ones.–t.h.g.

The New York Times discovers Bernard von NotHaus and the Liberty Dollar

Here below is a recent article that appeared in the New York Times. It provides background and an update on one of the most bizarre trials to be held in the United States since the Scopes “monkey trial.”–t.h.g.

Prison May Be the Next Stop on a Gold Currency Journey
By
Published: October 24, 2012

MALIBU, Calif. — High above the cliff tops and the beach bars, up a winding mountain road, in a borrowed house on someone else’s ranch, an unusual criminal is waiting for his fate.

His name is Bernard von NotHaus, and he is a professed “monetary architect” and a maker of custom coins found guilty last spring of counterfeiting charges for minting and distributing a form of private money called the Liberty Dollar.

Described by some as “the Rosa Parks of the constitutional currency movement,” Mr. von NotHaus managed over the last decade to get more than 60 million real dollars’ worth of his precious metal-backed currency into circulation across the country — so much, and with such deep penetration, that the prosecutor overseeing his case accused him of “domestic terrorism” for using them to undermine the government.

Of course, if you ask him what caused him to be living here in exile, waiting with the rabbits for his sentence to be rendered, he will give a different account of what occurred. …more…

Realpolitik 201, by Richard K. Moore

Realpolitik 201 by Richard K. Moore

The money power preys upon 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. —President Abraham Lincoln, before his assassination by Rothschilds’ agents

The real rulers in Washington are invisible and exercise power from behind the scenes. —Felix Frankfurter, United States Supreme Court Justice, 1952

Of course there is a class war, but it’s my class, the rich class, that is waging the war, and we’re winning. —Warren Buffet

There is something behind the throne greater than the King. —William Pitt, 1770

What is not already obvious here? —A Plebeian

Greetings,

In Course 101, we examined the work of some thorough and reliable researchers, giving us a basic picture of who is guiding world events, how they exercise their power, and what their basic agenda is. In 201, we will be looking at how to make use of this basic information, and we’ll look at some examples, re/ interpreting ongoing events.

But first, let’s summarize a few key points about the bankster elite, using a few quotations from our sources.

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…the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrive at infrequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements [BIS] in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

In the years before and during WW1, the Secret Elite took control of virtually the entire banking, industrial and armaments might of the British Empire and the United States… Namely, J. P. Morgan, J.D. Rockefeller, Jacob Schiff and Paul Warburg in the US, and Lord Nathaniel Rothschild in England

They controlled the press, the politicians and more importantly perhaps, they controlled the Federal Reserve System and the Bank of England. Professor Quigley clearly explains and details their ‘triple front penetration’ of politics, the press and education. Virtually every major geopolitical event over the last century stems from this tiny, all-powerful clique.

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The first thing one needs to do, to make use of this kind of information, is to contemplate a bit on what it implies, and on how it relates to what’s going on in the world today. One observation that emerges from such a contemplation is that we seem now to be in the endgame of the installation of the ‘feudalist’ system envisioned by the banksters, back in their early planning days…

By acting in concert and in secret, in alliance with associated financial institutions, the central banksters orchestrated the banking system collapse of 2008. By their control of politicians, they then achieved a transfer of insolvency from banks to national treasuries (the bailouts), creating an economic regime of unrepayable sovereign debt, a trap that will soon also ensnare the USA, Germany, and the rest. The banksters are then using this debt-enslavement to impose an austerity regime that is reducing Western populations to the level of feudal serfs, disempowered both economically and politically.

The feudal model applies quite closely to what is happening. As nations are forced to sell off all their assets (universal privatization), in a hopeless attempt to escape from insolvency, a situation is created where all land and resources will be owned by corporations, and ultimately controlled by the banksters, just as in feudal days all was owned by the lords of manors, and ultimately controlled by the crown.

The main difference seems to be that the bankster regime will be more centralized than the feudal system was. With modern communications and technology, there is no need for subsidiary lords and nobles, with their own semi-automous realms, to provide a stable political platform for the royal realm. In the bankster regime, it is more like all estates will be owned directly by the crown, with centrally-appointed estate-manager technocrats enforcing central directives locally. Exactly as we see unfolding now, most clearly in Greece, Italy, Spain, and Ireland, where Goldman Sachs, co-orchestrator of the collapse, is providing some of the estate-manager staff.

It seems that we have a very good fit, between design and outcomes – the bankster clique is evidently still very much in charge, on course, and in the endgame of installing their long-sought neo-feudal world order.

I emphasized that paragraph, because it is the central thing to keep always in mind when seeking to interpret the meaning of unfolding events. In particular, it is important to contemplate on what it means to be in an endgame scenario.

When you begin making your bold endgame moves, pushing toward a forced checkmate, you must have a combination worked out, so that you prevail against all available lines of defense. Otherwise your bold moves may open you up to a decisive counter-attack and rout. And quite clearly, the bankster clique has demonstrated over the years its proficiency, and thoroughness, as regards chess-like great games. If we are in the endgame, then we can be sure they have preparations in place to deal with all aspects of the transition to the new regime, taking into account alternatives available to other players in the game.

One of those players is us 99%, who might be expected to rebel, in one way or another, as we see our society being destroyed, and as the perpetrators become more and more visible, as they reveal their endgame moves. Their preparations to deal with us are very clear: the ‘anti-terrorist’ no-civil-rights legal regime, militarized and federalized police forces, and crowd-control protocols based on suppression by any means necessary. All of this facilitated by false-flag events that created the excuse. Ducks carefully arranged in a row, prior to endgame moves.

Russia and China are the players, at the geopolitical level, who have alternatives available that can effect the nature of the endgame. They are also players with an impressive centuries-long track record with chess-like engagements. They know very well the nature of the endgame they find themselves in, and they want desperately to force a multi-polar draw, and prevent a unipolar checkmate.

The bankster elite, however, have demonstrated over the years singleness of purpose, and a total unwillingness to accept anything as an outcome other than complete, unchallenged, unshared power. A multi-polar outcome is not on the table for consideration, in their endgame plans. If Russia and China will not capitulate, the regime will be forced upon their territory by whatever means necessary, based on the preparations that have been made.

Among those preparations is a first-strike nuclear capability, with US bases and missle-defense systems surrounding Russia and China, with tactical nuclear weapons widely deployed, under the control of local commanders, and with electronic satellite-based systems that can critically disable the communication and defense systems of adversaries.

In order to interpret unfolding events, one needs to be aware, at a visceral level, that we are in the midst of a dynamic transition process, involving the rapid demolition of an old order, and the rapid creation of a new order, all being carried out according to a carefully designed game plan. With this awareness, the mainstream media can be very helpful in tracking the ongoing moves of the endgame. For the mainstream media has a very predictable way of covering key moves in the game, key shifts in the board positions.

For a start, such moves are always given front page attention, as leading news items. Always with these moves some old-system taboo is being violated, and some new-system principle is being put in place as a justification. The function of the media is to dismiss the taboo as out-of-date thinking, and embrace the necessity and wisdom of the new principle, despite unfortunate side-effects that cannot, unfortunately be avoided.

Thus torture becomes acceptable, along with unprovoked invasions, drone strikes on the civilians of allies, targeted killings of your own citizens, supplying arms to active Al Qaeda terrorists, and the list goes on. By following the headlines associated with dramatic incidents, and reading the propaganda copy, you can track the step-by-step demolition of the old order, and the systematic construction of the new system architecture.

This applies to all aspects of society, not just to geopolitical events. Wherever you see dramatic precedents being set, in leading news stories, you are probably seeing signs of what is being abandoned, and what is being planned for the future. The example that comes most quickly to mind is the celebrated swine flu ‘pandemic’, which was carried on mainstream media for many months, and which led to the setting of several important precedents.

Not only was the definition of pandemic given a nonsense redefinition, but a regime was set up where the bankster-controlled WHO can decree a pandemic on the flimsiest of excuses, and can designate which vaccines must be used in treating it, with no accountability as regards testing, and with no liability being assumed for any ‘side effects’. In addition there was an intense and ongoing worldwide propaganda campaign about the value and necessity of getting vaccinated.

And there were clearly steps being taken toward creating a forced-vaccination regime, beginning with health workers all over the world as a test population. If total control over the global population is the goal, then the ability to inject arbitrary substances at any time into the bodies of any segment of the population is certainly a very powerful tool to have in your toolkit, whether it be to narcotize, hype-up, temporarily disable, or eliminate altogether.

And this ends Course 201, of the Realpolitik series. If some of you want to try your hand at interpretation, by delving into some dramatic media story line, we can perhaps continue with a seminar series. Your analysis is just as important as your conclusions, as regards any seminar contribution. What we’re after is an understanding of why a given precedent is relevant to the new regime, and what that indicates about the nature of the new regime.

rkm

Richard K. Moore is a political analyst and author of Escaping the Matrix