Freedom is Slavery: our Monetary System and Economic Dictatorship

"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-28th United States President)

What is money? When many of us contemplate this question we picture the government mint printing paper dollars or metallic coins. While this may be partially true, only a small percentage of currency originates at the mint which, contrary to public opinion, is not under the direct control of the federal government. In truth, the majority of money is created by banking institutions without regard for a sustainable economic system. This money is produced every instance a loan, or debt, is made. Money is debt.

How can this be? Let us begin with the goldsmith’s tale. Long ago virtually any commonly agreed upon object could be used as money, such as shells, stones, or even feathers. Gold and Silver, being extremely easy to shape, soon became a widely used standard of trade. After a while, the goldsmiths, who formed coins with the metals, created vaults to store their gold. Consequently, other wealthy townspeople began to request the storage of their own gold in the vault. Once the gold was deposited they received receipts which could be used to withdraw deposits. Due to their convenience, these receipts were traded in the marketplace more often than the gold itself and very few depositors ever came back for their original deposits. This gave the goldsmith, who had a side business in which he lent his own gold, a brilliant idea. He would now lend out his depositor’s gold through receipts and earn an interest on these loans. Once the depositors agreed to this arrangement, the system of banking was born.

"The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it (Galbraith, 15). The process by which banks create money is so simple that the mind is repelled." (Galbraith, 29)

Now, while this system seems reasonable, it is not the way banking is done today. Due to an increasing demand of credit through European colonial expansion the banker (once goldsmith) began to loan out receipts for gold which in fact did not exist. Say a friend of yours asked you for a pen and you gave them a picture of a pen with an I OWE YOU written on it. Regardless of how ridiculous this seems it is the process by which money is created.

A logical action would be to ban the process, however, the large lines of credit provided by the bank had become integral to European expansion and therefore the act was legalized with a limit. This limit, called a fractional reserve requirement, established a fixed ratio for the amount of currency units that could be created from one unit of currency’s value in gold stored within the vault. Another phrase to represent this system could be legalized counterfeiting, something you or I would be arrested for.

Let us apply this system to modern banking. Approximately 5% of our money is created by the Federal Reserve Bank (paper dollars we are so accustomed to picturing). In the past, the dollar was a receipt exchangeable for a dollar’s worth of gold or silver. Today, the dollar is a digital dollar, a Federal Reserve Note exchangeable only for another digital dollar. In addition to this, as the amount of digital dollars has rapidly increased, the amount of gold backing the system has shrunk to virtually nothing.

The other 95% of our money is bank credit. For example, when John Smith signs for a loan of $50,000, no money is actually lent to him. As soon as he signs the loan document he has pledged to repay the amount of the loan, at which point $50,000 is typed into a computer and created out of no value but that of debt. When most people contemplate a society in which all debts are paid off, they conclude that we would have much more money to spend. Being that money equals debt, if debt equaled $0 money would also equal $0. Under the current monetary system debt is essential to avoid collapse.

"Banks lend by creating credit. They create the means of payment, out of nothing." (Ralph M. Hawtery-Former Secretary of the British Treasury)

Now that a general understanding of banking has been established, let us examine the interest attached to debt. At one time, usury or making money by having money (interest) was banned as it should be today and not only to an extent (NYS penal codes specify a 25% cap on interest rates). For example, when a bank loans out a principal of $10,000 at 5% interest ($500), $10,000 is created, not lent out. Therefore, banks create only enough money to pay the principal, not the interest. The borrower is required to repay $10,500 despite a loan of only $10,000. On an individual basis this may be acceptable because that additional $500 can be taken from the loan of another. However, on a societal basis, the principal and interest is unable to be paid back by the principal alone. In other words, more debt is owed than money is created to pay it off.

To have a functioning economy under this system, foreclosure rates need to be low. How can this be accomplished? To pay off existing debt a large amount of new debt or money has to be created. But of course this just makes the total debt larger which means more interest must ultimately be paid resulting in an ever-escalating, inescapable cycle of mounting indebtedness. It is only the time lag between the creation of money in loans and its repayment which prevents the overall shortage of money from catching up and bankrupting the entire economic system. Yet, as the amount of debt grows larger, the urgency to repay it increases as well. Could this be the true reason for skyrocketing government spending? The rational person must wonder if this can really go on forever.

Perpetually accelerating growth and sustainability are not compatible. To keep up with exponential economic growth, the real world resources must also be used in an exponential amount. Kenneth Boulding, former president of the American Economics Association, stated that “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” It is only a matter of time before the entire world monetary system comes crashing down around us and our economy and means of survival with it. This could be equated to a depression of unprecedented proportions. What we must also understand is that a depression is not the destruction of wealth but the transfer of wealth from the hands of many to those of a few. Who could gain this wealth you might ask. The answer is bankers.

How can government, corporations, and individual households all be in debt to bankers at the same time and for such astronomical amounts? How is it that bankers, who create nothing of value but representation of debt, have a direct control over each and every one of our lives? To understand this let us look to history.

In 1694, the privately owned central bank, The Bank of England, was chartered and given a monopoly on the printing of currency in Britain and Wales. As we have learned throughout history, a monopoly on any commodity is not beneficial. Lord Acton, the historian and moralist, expressed this opinion on human nature in a letter to Bishop Mandell Creighton in 1887: "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men." Human nature is consumed with power and greed. Therefore, a privately owned central bank in control of a nation’s currency will use all its power to manipulate and exploit in order to obtain the greatest possible profit.

Much of American history has been a power struggle between central banks and democracy, a battle which was recently lost due to the signing of the Federal Reserve Act in 1913 by Woodrow Wilson. If you remember, our journey began with Woodrow Wilson’s famous speech on how he has ruined his country. Hopefully this quote is now understood. Once Woodrow Wilson signed the Federal Reserve Bank into existence, the economic future of our country was handed over to the hands of a quasi-public (80% privately owned, 20% publicly owned) corporation with profit as its main priority.

By now, you may be wondering how it is that a central bank could possibly have all this power. Simply put, they not only create money for the government through the purchasing of bonds (which must be repaid at interest), but also have the power to set fractional reserve requirements and interest rates which control money supply, inflation, banks, and the general economy. While many will be critical of the statement that central banks have total control, let this idea be submitted. When one has power over your mortgage, car payment, employment, buying power of money, and income they have total control.

Now that the problem has been generally identified, we must contemplate methods in which we regain control. First we must ask ourselves 4 questions. Question 1: If government could create all the interest free money it needs, why does it borrow from private banks? Question 2: Why is money created as debt at all? Question 3: How can a system of perpetually accelerating growth be compatible with a sustainable economy? Question 4: What must be changed to rid ourselves of this perpetually accelerating growth?

The answers to the first two questions can be found in basic human nature. He who has money has power, and he who has power will not surrender that power without a fight. Since the system of debt and interest benefit the central banking institutions so well, great lengths have been taken to conceal the bank’s true intentions. Monetary reform is so difficult to achieve due to the enormously powerful interests that benefit from the current system.

The 3rd question can be answered with a simple no. The resources of our planet can not be exploited at an exponential rate, and therefore a monetary system of exponential or perpetually accelerating growth is also unsustainable.

Finally we come to the big question and the one that requires the most thought. First, the government needs to regain control of the printing of currency as well as the regulation of reserve requirements from the Federal Reserve Bank. Second, the United States must withdraw membership from the World Bank and International Monetary Fund (IMF), the current methods used by international banks to consolidate power and wealth. Once these measures are accomplished, the government can begin creating interest free fiat (by government order) currency in the form of either paper notes or electrons, digital money. However, the creation of this currency must be done proportionate to the reduction of the fractional reserve requirements to a 1:1 ratio. In other words, banks will no longer be able to create money out of nothing, but instead will have to loan money they already have.

Once our monetary system has returned to one based on value not debt, such as the previous Tally-Stick, Colonial Scrip, and Greenback systems, we will be able to reduce inflation or deflation through a fiat-population ratio in which data from a national census will be used to determine the amount of money to be in the economy. This will maintain our buying power and economic stability. At the same time, the government’s responsibility must be reduced to law enforcement, national defense (not offense), and money production. These statutes must be established in an iron clad amendment not subjected to change in order to prevent the regaining of control by banking institutions. With all of this interest free money not going into the hands of private bank corporations, the state of our national economy would skyrocket, and a rational system would once again be in practice.

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks, and restored to the people to whom it properly belongs." (Thomas Jefferson-3rd United States President)

I understand that this proposed system may be considered idealistic, and it very well may be, but I can guarantee you that if something to this extent is not undertaken soon our very livelihood will be at stake. What we have been taught to believe is that in a democracy we the people have direct control over our lives. However, under this monetary system, democracy is no different from economic dictatorship through a dependence on bank credit.

How can this proposal be accomplished when political power is isolated in the hands of the wealthy and powerful? Perhaps a revolution of some sort is the answer. It certainly was for the American colonists over 200 years ago, when the Bank of England took control of the colonial monetary system. Regardless of the means by which this goal is reached it needs to be accomplished soon. Our very freedom is at stake.

"Banking was conceived in iniquity and was born in sin. The bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them control money and control credit." (Josiah Stamp-President of the Bank of England in the 1920's, the second richest man in Britain)