An Honest Bank is So Simple You Can Run It
Banking and economic theory, debated for centuries, has been made unnecessarily complicated and confusing. The average reader will be pleasantly surprised to learn that banking is easily understood when applied within an honest economic structure.
A friend was having trouble understanding banking. So I sent her this summary: Alert and motivated leaders had just been voted in with a pledge to clean up the collapsed political and economic system.
As per current law, the bankrupt banks were automatically taken over by the socially-owned Federal Reserve.
As greed and corruption was the cause of the financial crash, the first order of business was legislation that no one with a conflict of interest could be an officer of either the Federal Reserve or a bank.
A new currency was issued spendable only within the nation’s borders. As the books were settled and with negotiations on currency values with other countries ongoing, the newly created money was tradable for the old money.
You were chosen to run one of these banks. You come to work the first day, check that your share of the newly created money to operate your region was in your Federal Reserve account, and sit down at your desk.
As this socially-owned bank established under this financial collapse operates at 1/3rd the cost of a bank within the collapsed monopoly system you can pay higher interest rates on deposits while charging lower interest rates on loans.
As it also has access to Federal Reserve created money to cover any emergency (100% reserves) and thus cannot go broke, depositors and borrowers flock to your bank.
You already understand depositing and loaning with your employees taking in the money and making the loans. There are minor things to pay attention to, such as how to keep your surplus invested, but that my friend is all there is to banking.
All else is smoke and mirrors as the ethereal world of high finance, primarily made up of massive funds appropriated from productive labor, devise devious ways to lay claim to wealth properly belonging to others.
As those huge blocs of capital pile up, more and more obscure debt instruments are devised. But every one of them are nothing more than a bet on values going up or down while in an honest banking-economic system, values will vary only slightly and there is nothing to bet on except new entrepreneurial projects which can be handled by venture capital.
Eliminate the monopolies we are told do not exist and both money and the economy becomes simple, visible, touchable, and understandable by all. Note the title of our book, Money: A Mirror Image of the Economy. Except for gifts, every trade is a transfer of wealth symbolized by money.
You cannot have an honest banking system without first creating an honest property rights system. Neither can you have honest property rights without an honest banking system. One is the mirror image of the other.
The same principles of honesty and equality must be applied to trades between nations. The world will become peaceful and poverty will rapidly disappear once those principles are applied.
War and poverty are primarily rooted in economics and banking, not in human nature. Friendliness and peace is the primary human instinct.
A monopolized economy is just as much smoke and mirrors as a monopolized banking system. Restructure to full and equal rights and those monopolies disappear, economic efficiency doubles, poverty disappears, and, if those principles are extended worldwide, wars will be relegated to history.
Never a Shortage of Finance Capital
We are very conservative in outlining how, under modern fractional reserve banking owned and operated by society; there would never be a shortage of finance capital.
At first look it appears building economic infrastructure with socially-created money would create inflation. But a proper level of base money circulating (the money supply) can be maintained by increasing or decreasing required reserves
Once infrastructure is built and the money supply in balance, the most efficient way to finance and maintain it, plus take care of essential social needs properly funded by governments (universal health care, etc, even retirement), is through calculated, socially-collected, resource rents and banking profits.
Bankers derailed those potential efficiencies because the massive funds generated through monopolies needed a secure place for investment and investors have always chosen loans to governments as that safe haven.
Unrealized by most, including economists, the tax system is paying both principal and interest on wealth appropriated from its rightful owners, the ones paying off those bonds. The annual values appropriated are capitalized by 10 to 30 times, sold, those unearned profits loaned to governments and otherwise invested, and those values are now, in the form of those debt instruments, a debt to be repaid by the same people from which it was appropriated.
Those second generation payments are recycled into more bonds or investments and those appropriated values are repaid, either through taxes or the excess costs of consumer purchases, over and over in perpetuity.
Monopoly values created through exclusive titles to nature’s resources and technologies, denying others their rightful share to what nature offers to all for free and those appropriated values bought and sold on the markets, are also money creation processes. The proof is the capitalized monopoly values of exclusive titles to nature’s resources and technologies, continually appropriating more wealth, and rising in value in the process.
Those increased monopoly values require money be created to finance sales and purchases. The quick disappearance of those appropriated values under conditional titles (social collection of resource rents and bank profits), their transposition into relatively equally-shared use values, and the enormous economic efficiencies, a workweek of two to three days outside the home earning a quality life, that are quickly realized proves the existence of those monopolies as well as their inefficiencies. Such an increase in free time requires a total restructuring of society (see The simplicity of eliminating poverty and war will stun you).
Very little has to be done for society to reclaim their full and equal rights to finance capital. Buy back those “vestigial” privately owned shares in the Federal Reserve system that “have virtually no practical meaning,” remove those bankers from their undemocratic positions of power, put trained professionals in their place, mandate the creation of money for social infrastructure (up to the point the money supply is in balance) raise or lower required reserves to maintain that balance, and run the Federal Reserve efficiently with all regions, all states, all communities, and all entrepreneurs having full and equal rights to finance capital (created money and savings).
So Much Surplus Capital We Must Export It
The huge unearned profits of these exclusive titles to nature’s resources and technologies, appropriating values properly belonging to us all, require a place to be safely invested where they would not devalue those already overbuilt sectors of an economy. This accounts for the export of finance capital buying up overseas properties.
Remembering that all wealth is processed from resources, we have the anomaly of wealthy nations with too few resources and too much money and impoverished nations with huge resources and too little, almost no, money.
Why Private Banks Hate Fractional Reserve Banking
In a society with full and equal rights for all, each unit of money represents a unit of use value within an economy. In a steady state economy, value is being destroyed, by consumption and depreciation, as fast as it is created or, if you prefer, created as fast as it is destroyed. Consumption and production are in balance.
Still assuming full and equal rights as laid out in this treatise, the circulation of money does this naturally while the Federal Reserve-Treasury oversees the primary creation of money so as to maintain base money at the proper level. The circulation of that base money is the money supply.
With corrupt bankers and politicians in control, they create money for wars rather than for a balanced, productive, economy.
They then control inflation and deflation primarily through increasing and decreasing interest rates rather than increasing and decreasing required reserves.
Pointing created money towards the ethereal world of high finance, towards war, and the failure to fully utilize the power of mandated reserves in balance with money creation, seriously lowers economic efficiency. By our calculations and without counting the wars to protect it all, over half of America’s economic efforts are wasted.
America had the good fortune of enough sincere bankers, tired of the multiple crisis of wildcat banking (one every six years for 80 years), establishing in 1913 and restructured to its mature form in 1935-36, super-efficient modern fractional reserve banking overseen by the Federal Reserve’s Governing Board.
Then they had the misfortune of corrupt bankers taking over the beautiful system they designed. For the purpose of laying claim to more unearned wealth, they studied on ways to avoid, and finally effectively eliminate, fractional reserve banking.
With the banking system now designed for maximum corruption, meaning guiding even more massive sums of unearned money into their names, the economy became more and more unbalanced and the banking structure is now collapsing.
Though by law modern fractional reserve banking had to be practiced (until those rules were rescinded in the late 20th century), those selfish few avoided creating debt-free money for building post offices, roads, railroads, water systems, sewer systems, electric systems, schools, parks, museums, etc. (infrastructure) or providing health care and retirement.
Instead created money was pointed towards their ethereal world of high finance and wars while a large share of essential social needs were financed by debt. An ever increasing share of those debts were monies loaned back to the citizenry from which it was unjustly appropriated in the first place.
The ease of analyzing increasing or decreasing mandated reserves as the most efficient method of controlling inflation or deflation means bankers have always known this tool was there but chose to fatten their profits by controlling inflation through higher interest rates.
Bonds and stocks rise and fall in reverse order to interest rates and the wealthy do not want to destroy that honey pot by raising or lowering mandated reserves, instead of interest rates, to control the money supply.
Those crucial 1 words describing an honest, efficient, capitalist economy. Does anyone have the ear of President Barack Obama’s Economic Recovery Team?
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 Market charges above use values are monopoly values appropriated through exclusive title or license. The larger share is wasted through monopolies’ superstructures. Values remaining after those excessive costs are both earned profits (roughly 40%) and unearned appropriated values (roughly 60%) which are capitalized into blocs of capital, capitalism’s mighty financial engine.
 Ibid, p. 50
 A large share of the surplus funds we are addressing being wealth appropriated from the periphery of empire is the subject of this author’s primary work, Economic Democracy: A Grand Strategy for World Peace and Prosperity, 2nd edition. In short, wealth is appropriated both internally and from the periphery of empire.