Debt-damned economics: learn monetary reform or kiss your assets goodbye. 2 of 2

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There are five topics to understand for civic competence in creating and managing money. The first four are standard to economics curriculum; the last is rational analysis. The first three topics are in the first part of the article; this has the final two:

Money and bank credit.
Fractional reserve banking.
Debt (public and private) and money supply.
Historical struggle between government-issued money and private bank-issued credit.
Cost-benefit analysis for monetary reform in your world of the present.

I promise you can easily understand each topic and that your understanding will give you an informed policy voice over trillions of dollars. I encourage you to verify and supplement the information in this paper through additional research. My experience as a teacher is that the best tool to visualize this information is to literally see it through an online 78-minute video, “Money As Debt II: Promises Unleashed” (and for your use: background and transcript of Money as Debt). Four other sources of information that I recommend: an excellent overview of our monetary system from Want to, incisive articles from the most-read authors on this topic, Ellen Brown and Stephen Zarlenga, and the most-viewed documentary, Zeitgeist: Addendum.

“The process by which banks create money is so simple that the mind is repelled.”

– John Kenneth Galbraith, Money: Whence it came, where it went (1975), p.29. Galbraith wrote five best-selling books on economics (best-selling to the public), was President of the American Economic Association, economics professor at Harvard, and advisor to four US Presidents.

Please be advised that the ideas most people have about how money is created and managed are false. Because the facts are so different from what most people believe, cognitive dissonance will push some people to reject the facts. Please reaffirm your commitment to embrace the facts.

Here we go:

Historical struggle between government-issued money and private bank-issued credit:

“The treasury, lacking confidence in the country, delivered itself bound hand and foot to bold and bankrupt adventurers and bankers pretender to be money-holders, whom it could have crushed at any moment. ...Yet there is no hope of relief from the legislators who have immediate control over this subject. As little seems to be known of the principles of political economy as if nothing had ever been written or practiced on the subject, or as was known in old times, when the (bankers) had their rulers under the hammer. It is an evil, therefore, which we must make up our minds to meet and to endure as those of hurricanes, earthquakes and other casualties: let us turn over therefore another leaf.” – Thomas Jefferson, October 16, 1815 letter to Gallatin. Letters and Addresses, edit. William Parker, (New York: 1905).

“The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson — and I am not wholly excepting the Administration of W.W. (Woodrow Wilson). The country is going through a repetition of Jackson's fight with the Bank of the United States — only on a far bigger and broader basis.” - Franklin Roosevelt, letter to Col. Edward Mandell House (21 November 1933); as quoted in F.D.R.: His Personal Letters, 1928-1945, edited by Elliott Roosevelt (New York: Duell, Sloan and Pearce, 1950), pg. 373.

As you can imagine, privately-owned banks would love to have the legal right to create and manage a nation’s money. This authority gives a whole new meaning to “taking your work home with you.” For an excellent comprehensive history, watch “The Money Masters” online (made in 1996: among many) and/or read the transcript.[9] Watching “Money As Debt II” will give you a general appreciation of the history, as will the historical quotes at the end of this lesson.

Watching “Money As Debt II” is important. From my conversations among AP Economics teachers, their reports are in agreement with my experience that students (of all ages) will not be able to understand our monetary system and creation of debt without a walkthrough demonstration. I highly recommend that you watch the beginning of “The Money Masters;” if you like what you learn, keep watching. The entire video is 3.5 hours, so you might want to watch in chapters. A short written parable might also help: The Money Myth Exploded.[10] The bottom-line of the history is a centuries-long struggle of wealthy bankers who have endeavored for the ultimate banking job. In the US, this struggle was won by the banks with the passage of the Federal Reserve Act in 1913. This allowed for the legal practice of fractional reserve banking and a monetary system of perpetual debt. Let’s consider the alternative envisioned for the Constitution but not included because the debate took so much energy and time at the Constitutional Convention that the members tabled the issue for Congress to resolve later.

Cost-Benefit Analysis for Monetary Reform:

"That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt. Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 -- that is what it amounts to, with interest. ...But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. ...It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people.” - Thomas Edison and Henry Ford, interview with NY Times, 1921

"The art and mystery of banks... is established on the principle that 'private debts are a public blessing.' That the evidences of those private debts, called bank notes, become active capital, and aliment the whole commerce, manufactures, and agriculture of the United States. Here are a set of people, for instance, who have bestowed on us the great blessing of running in our debt about two hundred millions of dollars, without our knowing who they are, where they are, or what property they have to pay this debt when called on; nay, who have made us so sensible of the blessings of letting them run in our debt, that we have exempted them by law from the repayment of these debts beyond a give proportion (generally estimated at one-third). And to fill up the measure of blessing, instead of paying, they receive an interest on what they owe from those to whom they owe; for all the notes, or evidences of what they owe, which we see in circulation, have been lent to somebody on an interest which is levied again on us through the medium of commerce." --Thomas Jefferson to John W. Eppes, 1813. ME 13:420

Monetary reform would nationalize the Federal Reserve (this name is deceptive so the public would perceive it as a government entity) and retain its use for bank administrative functions. Fractional reserve lending by private banks would be made illegal, with the US Treasury having sole legal authority to issue new money for the benefit of the American public rather than the benefit of the banking industry. About 40% of the national debt is intra-governmental transfers and 10% held by the Fed; this debt would be cancelled as it becomes a bookkeeping entry with nationalization. Of the publicly-held debt of various parties holding US Securities, the US Treasury would monetize (pay) the debt in proportion to fractional reserves being replaced with full reserves over a period of one to two years to monitor money supply and avoid inflation. The American Monetary Institute has a proposal called The American Monetary Act.[11] Ellen Brown has extensive articles, including how states can act now rather than waiting for federal reform.[12]

The governmental cost of this reform is negligible. The benefits are astounding: the American public would no longer pay over $400 billion every year for national debt interest payments (because 30% of the debt is intra-governmental transfers, this is a savings of ~$300 billion/year). If lending is run at a non-profit rate or at nominal interest returned to the American public (for infrastructure, schools, fire and police protection, etc.) rather than profiting the banks, the savings to the US public is conservatively $500 billion.[13] If the US Federal government increased the money supply by 3% a year to keep up with population increase and economic growth, we could spend an additional $400 billion yearly into public programs or refund it as a public dividend.[14] This savings would allow us to simplify or eliminate the income tax.[15] The estimated savings of eliminating the income tax with all its complexity, loopholes, and evasion is $250 billion/year.[16] The total benefits for monetary reform are conservatively over a trillion dollars every year to the American public. One trillion is $1,000,000,000,000. I invite professional economists and committed citizens to analyze and comment on my observation of costs and benefits.

To give you an idea of this amount, imagine a new stack of $1 bills. New bills are about 200/inch. Imagine if you laminated bills in a horizontal stack; this would be the same size as a 2x4 board. Now imagine that this board of money was to travel on your nearest freeway. How far would the money-board go to equal $1 trillion? Make your guess, then check the footnote.[17]

The private sector economic costs of monetary reform are transfers of wealth from the banking industry to the American public. The replacement would be either non-profit banks operating as needed with minimum public cost such as fire departments and the postal service, for-profit banks lending time-deposits in regulated free-market competition, or a hybrid of the two (perhaps with government mortgages at a non-profit rate of 1%).

Monetary reform stops the current built-in increases of the money supply through fractional reserve banking, and redirects it for direct payment of taxes for public goods and services. Each dollar transferred from bank creation to public benefit is one dollar less in public tax payment.

Opponents of monetary reform claim that even if government issued money with transparency, any oversight created would be defeated; government would issue too much money and cause inflation. Ron Paul believes that gold should be used as a physical-limit barrier to creating money. Some fear that any change will make things worse. Some also claim that competition for large profits in the banking industry spur innovation that wouldn’t occur in a non-profit design. Improvements such as ATMs, on-line banking, instant purchasing are worth the cost of giving monetary power to the private sector.

The statutory purposes of the Fed are stable prices, maximum employment, and moderate interest rates. For prices, consider for yourself how well they’ve done since the Fed began in 1913. Ask parents and grandparents if prices have remained stable in their lifetimes or if they’ve increased just a teensy-weensy little bit. You could, of course, also check the data and confirm that the dollar has lost over 95% of its value since the Fed went to work for stable prices.[18]

For employment, consider that we have unemployed people in this country, resources to put to work, and infrastructure to improve; then judge the Fed’s effectiveness in creating money only as debt. For example, consider in California that 20,000 teachers were scheduled to be laid-off in 2008 and again in 2009 because of government budget cuts.[19] We have the need for teachers, the teachers are available, but we have unemployed teachers because the government must borrow its money to hire them rather than issue money directly. Nationally, the US had over 11 million unemployed workers at the end of 2008,[20] and perhaps up to 30 million at the end of 2009.[21] These millions of individuals are key income earners to a multiple average of 2.5 additional Americans. This unemployment rate puts these Americans livelihoods at risk. This only occurs because money is debt in our current system; we would not have this problem if government restored this Constitutional power and issued money directly. If we were serious about achieving the goal of full employment, OBVIOULSY the only way to achieve it is for government to be the employer of last resort. In market failure of what free-market capitalism cannot employ, we either put people to work on infrastructure/public service jobs or we don’t achieve our goal of full employment. Please ponder that idea to full realization. If the public jobs provided to the unemployed and funded by government-created money provide greater economic benefit than their cost, then inflation will actually decrease from creating those jobs. That is conservative definition of how inflation/deflation works.

Another angle of minimizing our costs: consider that the US Government Interagency Council on Homelessness has compiled every known study on cost-benefits of housing the homeless and providing food, medical care and job-employment services versus just leaving them on the streets. In every case study the costs are less to take action for their care.[22] Ponder that.

For interest rates, the non-profit rate of borrowing money is generally considered among economists at 3% in our current inflationary economy caused by fractional reserve banking. With monetary reform, the non-profit rate for a home loan would be less than 1%. Ask yourself if the value added by the banking industry is worth the amount you currently pay above 1%, understanding as you do that your total cost of a home loan has a higher cost of the interest than the principal. That is, you’re paying the banking industry more than your home is worth for them creating credit out of nothing on their bank books.

If the performance of the Fed is acceptable to you along with its trillion dollar annual cost, feel free to defend it. If you prefer monetary reform, a trillion dollars of benefit every year to the American public will go far to building a brighter future. In fact, I almost titled this article, “Either demand monetary reform or kill your assets goodbye.”

Thank you for your attention to learn how “money” is created in the US - really “credit/debt” in not a “monetary system,” but a “debt system.” If you’d like to read my comprehensive analysis of our economic solutions, try these two:

Revolt: US could have full-employment, but chooses our misery, decay, death

Open proposal for US revolution: end unlawful wars, criminal economics. 1 of 4

“There is no Science, the Study of which is more useful and commendable than the Knowledge of the true Interest of one's Country; and perhaps there is no Kind of Learning more abstruse and intricate, more difficult to acquire in any Degree of Perfection than This, and therefore none more generally neglected. Hence it is, that we every Day find Men in Conversation contending warmly on some Point in Politicks, which, altho' it may nearly concern them both, neither of them understand any more than they do each other.

Thus much by way of Apology for this present Enquiry into the Nature and Necessity of a Paper Currency. And if any Thing I shall say, may be a Means of fixing a Subject that is now the chief Concern of my Countrymen, in a clearer Light, I shall have the Satisfaction of thinking my Time and Pains well employed.” – Benjamin Franklin, A Modest Enquiry into the Nature and Necessity of Paper Currency, 1729.

[1] Chicago Federal Reserve Bank. Modern Money Mechanics:

[2] Washington Post. Phillips, K. The Old Titans All Collapsed: Is the US Next? May 18, 2008:

[3] Shadow Government Statistics. John Williams. .

[4] Wikipedia for overview: , alternative statistics: Shadow Government Statistics homepage. Williams, J. , and The Mess that Greenspan Made. M3, We Hardly Knew You. Nov. 22, 2005: .

[5] This has been the practice for as long as I remember. I wasn’t able to find documentation from the media; sorry!

[6] Treasury Direct. The Debt to the Penny and Who Holds it:

[7] Treasury Direct. Interest expense on the debt outstanding: .

[8] Borgen Project: FAQs.!__globalpovertyfaqs and The End of Poverty: Economic Possibilities for our Time. Jeffrey Sachs. .

[9] Many of their quotes from Presidents are not included at the end of this lesson because their sources are usually the Congressional Record. Members of Congress did not footnote their sources and we do not have other written sources to corroborate the quotes.

[10] Evan, L. The Money Myth Exploded: The Financial Enigma Resolved – A Debt-Money System:


[12] Web of Debt is Ellen’s book. My favorite state-solution article is California dreamin: how the state can beat its budget woes: .

[13] Of $50 trillion total debt, a conservative current interest cost of 5% is $2.5 trillion every year. The academic estimate of the true cost of borrowing is about 3%. A $500 billion savings if the profits are transferred to the American public rather than to the banking industry is probably low.

[14] The US GDP is ~$13 trillion. Three percent growth is moderately conservative.

[15] Of the US Federal government’s ~$2.5 trillion annual budget, about $1.2 trillion is received from income tax.

[16] Tax Foundation. Hodge, S, Moody, J, Warcholik, W. The Rising Cost of Complying with the Federal Income Tax. Jan. 10, 2006: .

[17] Over three times around the world at the equator. Yes, that’s a lot. Earth’s circumference is ~25,000 miles. There are 63,360 inches in a mile.

[18] US Bureau of Labor Statistics. CPI Inflation Calculator: .

[19] California Department of Education. State Schools Chief Jack O'Connell, Teachers, Support Staff, Administrators Announce More Than 20,000 Teachers and Support Staff Getting Layoff Notices Due to Budget Crisis. March 14, 2008:

[20] Bureau of labor statistics: .

[21] Huffington Post. What a jobless recovery today means for tomorrow? . August 17, 2009. Also consider economist John Williams Shadow Stats site: .

[22] Interagency Council on Homelessness: , and here:

Continue reading on Debt-damned economics: you MUST learn monetary policy; let me teach you. 2 of 2 - National Nonpartisan |


I am a portion through Part 1. This is pretty good. I like articles like these because it provides another entry point to raising awareness to the unawakened... ...and money hits home for most. I will be forwarding it to some friends and family members.

the leaders in various truth movements say...

that we see either 9/11 Truth or the massive criminal economic frauds as the breaking points for critical mass recognition of the fascist criminal oligarchy we have for government.

'Follow the money'

and the points above are where it leads to, ultimately. The reason finance is complex is that the artificial complexity is used to pull the wool over our eyes. The scam of the privately-run, unaudited Federal Reserve is hardly understood by the public. And why has no one audited Fort Knox's gold since 1954! (It was confiscated in the 1930's from our grandparents, and is probably stolen by now.)

The worst is probably coming for the US in the next year or 2. Just look what is happening to Greece now.

The writings and talks of G. Edward Griffin are very good, or else for front-line info try Max Keiser's web page. Keiser is great! Get informed!

Thanks synergist!

You're welcome, Kevin O;

together with each doing what we see to be done, we'll expose and end this fascist psychopathic criminal oligarchy.

Thank you for all you do.

Stay strong, and be open to even more paradigm-changing Truths.