By R. Mak
Posted January 30, 2011 Disclaimer The information displayed herein is intended to simplify the complexity of the global economy.
The creation of money is called most astounding sleight of hand ever invented. The creation of money is now privatized, as it is now being hold by a private banking cartel instead of congress. Most people think that government is the authority behind the issuance of money, but actually this is not the case. Except of the coins, the banks create all money, not the government. Federal Reserve Notes are issued by a private banking cooperation named the Federal Reserve, and lent to the government. Moreover Federal Reserve Notes and coins together compose less then 3% of the money supply. The other 97% is created by the commercial banks as loans.
This seems unbelievable that banks create money, they lend. Same was the feeling of the jury in a Landmark Minnesota case, until they heard the evidence. First National Bank of Montgomery vs. Daly (1969) was a courtroom drama worthy of a movie script. Defendant Jerome Daly opposed the bank’s foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan. Associate Justice Bill Drexler recorded the courtroom proceedings; he said his role was to keep order in the courtroom. Drexler had not given much mental acceptance for defense and watching the proceedings. The Bank President, Mr. Morgan, took a stand and admitted that the banks routinely created money for loans and that this was standard banking practice. Presiding Justice Martin Mahoney and the jurors all agreed that it seems like a fraud.
In his court memorandum, Justice Mahoney stated:
The defendant won this case and he kept his house. To Daly, the implications were enormous. If it was true that bankers were extending the credits without consideration. It was great defeat for them, as their loans could be declared void in the decision. Daly wrote in a local news article that:
The decision that was made has not been implemented at all. Although at that time judges and courts were not dependants. After exposing this secret of banks Justice Mahoney lived for less then six months, and in a mysterious accident that appeared to involve poisoning, he died. Since that time a number of defendants are attempting to avoid loan defaults using the defense that Daly raised; but they have had only limited success. As one judge said off the record:
But the discovery work has been done on this critical issue. And the curtain has risen to give the in-depth view. Many reputable persons admitted to what is going on. Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s, declared in an address at the University of Texas in 1927:
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta in the Great Depression, wrote in 1934:
Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged:
Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report:
The Shell Game of the Goldsmiths
The question that rises here is how all this process started and who started it? To get this answer we have to go back to the seventeenth century, when trade was done in gold and silver coins. It was hard to take plenty of these coins while traveling. So solution to this problem was goldsmiths who had the strongest safes in town. The gold smith issue receipts that can be used in place of coins. These receipts were also used when people came to take loan from gold smith. But gold smiths noticed that only 10% to 20% of receipt came back. So they made the receipts of values 10% to 20% more than the value of gold they actually lend. This means they issued notes. Their only principal was to lend more money. This resulted into more money eventually owed back in principal and interest. They had to continually take out loans of new paper money to cover the shortfall, thus decreasing the value of currency while the people fell progressively into their debt.
In nineteenth century America, private banks issued their own banknotes that were ten times greater than their actual reserves in gold. This was called “fractional reserve” banking, meaning that only a fraction of the total deposits managed by a bank were kept in “reserve” to meet the demands of depositors. But when all the customers demanded their gold back simultaneously, then this made the system unstable. In 1913, the private banknote system was therefore consolidated into a national banknote system under the Federal Reserve, a privately owned corporation given the right to issue Federal Reserve Notes and lend them to the U.S. government. These notes, which were issued by the Fed basically for the cost of printing them, came to form the basis of the national money supply.
The down fall of dollar came twenty years later. At that time the value of Dollar was backed 40 percent by gold. The money supply was reduced. To overcome this situation in 1933, Franklin Roosevelt took the dollar off the gold standard. Today the Federal Reserve still operates on the “fractional reserve” system, but its “reserves” consist of nothing but government bonds. The government issues bonds, the Federal Reserve issues Federal Reserve Notes, and they basically swap stacks, leaving the government in debt to a private banking corporation for money the government could have issued itself, debt-free.
Theft by Inflation
M3, the broadest measure of the U.S. money supply, shot up from $3.7 trillion in February 1988 to $10.3 trillion 14 years later, when the Fed quit reporting it. Why the Fed quit reporting it in March 2006 is suggested by John Williams in a website called “Shadow Government Statistics” (shadowstats.com), which shows that by the spring of 2007, M3 was growing at the astounding rate of 11.8 percent per year. Question here is from where did this new money come? Banks are creating money in a similar way. This process of printing more money results in inflation of money that results in inflation of prices. This inflation of prices is blamed on the government. But the only money that is issued by the US government is coins. And the countries where banks are nationalized, paper money, along with the coins, can be issued by the government. But actually the private banks create the money. This results in price inflation. Banks only create the principal not the interest necessary to pay back the loans. A dollar lent at 5 percent interest becomes 2 dollars in 14 years. That means the money supply has to double every 14 years just to cover the interest owed on the money existing at the beginning of this 14-year cycle. The Federal Reserve’s own figures confirm that M3 has doubled or more every 14 years since 1959, when the Fed began reporting it. Thus the privatization of money is the underlying cause of poverty, economic slavery and under funded government.
The only solution of this problem is for congress to take back the power to create money. Fractional reserve banking needs to be eliminated, limiting banks to lending only pre-existing funds. If the power to create money needs to be returned to the federal government; the federal debt could be paid off; taxes could be slashed, and needed government programs could be expanded. Money should be created only on the government printing press. This new money should be used for betterment of the country. New money should be added in market without inflation of prices. This whole process would eventually reduce the taxes and new energy sources can be developed.
Mak R., "Dollar Deception: How Banks Secretly Create Money," Fair Loan Rate, May 01, 2009. Mak: Dollar deceptionFurther Reading: