Private Banks Creating Money is Really Only a Circulation of Money
That private banks create money whenever they make a loan is being pushed by a large number of otherwise sincere monetary theorists.
Perhaps they can be forgiven for their error. After all, the measurement of base money circulating around and around, moving from person to person measures a nation’s GDP and is called the money supply. But you can follow the money you spend, watch where it is spent each time, take note that each time it is spent it increases the GDP, but at all times it is the same dollar (base money that had been created by the central bank) circulating.
Private banks can only increase circulation, they can never create money because they can no longer add a credit without accounting for a debit as they did for centuries under the goldsmith theory of banking. Today only the Fed can credit without debiting and they can only do so under the authorization of Congress who give them that authorization in big blocks such as the $2 trillion authorized 2008 to early 2009 to support the shaky banking system.
Though they are many times the formal activator of the process, the Treasury cannot create money either because they can neither debit nor credit anybody’s account. They can only request (by check) such debiting and crediting just as you and I do.
But that is old theory. This crisis has taught us that the Treasury can, under Congressional authority, print treasuries, give them to bankrupt banks, and all without debiting or crediting anyone’s bank deposit. Since it adds to a bank’s net equity balance, that is creation of money.
We leave aside that many books have not been balanced by massive infusions of money. Those unbalanced books eventually show up as a cost to you, me, and every other American. The managers of this financial crisis only have their fingers crossed that the economy will turn around, values will rise, leverage ratios will rebalance, and those banks will repay those soft loans.
Every monetary textbook carefully describe how the Federal Reserve, a central bank, creates base money and the circulation of that base money is known as the money supply. Not taking a serious look and sloppy use of words has created a large following that believes private banks create money when all they do is maintain, or accelerate, the speed money is circulating.
The faster it circulates, the more money an economy has even though base money has not increased. These theorists cannot mention base money when they make the claim that “private banks create money.” To do so, would destroy their theory.
There are many evasions of former fractional reserve rules that lead to higher leveraging rates–the current $1.5 quadrillion derivatives market, 25 times the size of the world economy, being a good example–which shows up as increased money. But those are only ever faster circulations of base money.
Meantime the actual printing of more money, which is a creation of money, further blurs what is really a very simple process.
We list below 12 logical reasons why challenges all claims that private banks create money is only cult thought.
When a loan is made under 10% mandated reserves, 90% of the original unit of value is only starting its circulation, it continues to circulate in ever-smaller increments, and eventually trades equaling roughly 10 times the original loan will have been accounted for, roughly 33 times if mandated reserves are 3%.
Loan repayment continually replaces those reserves so, on balance, at 10% mandated reserves, 90% of base money is continually circulating. Keep your eye on the italicized words accounted for, that is all that is going on. Each dollar going out of one bank is coming right back into the banking system under the name of the person who received that money.
The money supply is only base money’s measured circulation. If the receiver of what is commonly, and wrongly, referred to as “private-bank-created money” puts it under the mattress instead of into a reserve deposit, money circulation stops and, so long as it remains there, money not only not been created it has been destroyed.
But as soon as that person spends the money, where it is soon deposited into a reserve account, again 90% is loaned back out, that money is then committed and there is no surplus to loan until it is again deposited (typically within hours or days if the transaction was by check and instantly if by debit card) and 90% of each deposit circulates as it is again loaned out.
In the act of being accounted for each time it changes hands, the money totals increase and these increasing totals within double-entry bookkeeping make it appear that money has been created. But each trade of money for value has only been counted; base money has not increased.
Unless one trades paper for value, which America has done for decades in overseas trades, money in a monopolized economy does not increase until values increase.
When land and businesses gain in value, monopolists claiming a larger share of real wealth, either money must be created by the Fed to buy and sell those increased monopoly values or base money must circulate faster.
A bank could have bought a bond, a business, or a vacation for its entire staff instead of making a loan and it would have had exactly the same effect as loaning money. The check written would have returned to the bank as another deposit ready to loan out or to spend.
Go to any major coin-currency show and any theorist on money creation will become humble. Counties, railroads, communities, and banks have created so many different issues of money that a deeply-researched book on the history of money creation within almost every state is in print.
The few successful examples of money creation addressed in most histories of money creation has been repeated over and over again throughout each state and the world. Each of the coins and bills in collections today were successes for their moment in time and testify to most money creations as having some measure of success.
Alternative money theorist’s fractional reserve banking assertions are clear, “Deposited money sits in an account until withdrawn by the depositor and, while on deposit, it serves as reserves for the money the banks create through loaning money into existence.”
A private bank makes a loan for $10,000. We all agree we had fractional reserve banking when those theories were created. So those theorists are saying, “Private banks create money by crediting it to the borrowers account and must have 10% that amount on deposit [$1,000 in reserve] to back that creation. That $10,000 is spent, and is deposited back into a reserve account which becomes a total of $11,000 in reserve. The $1,000 remaining in the original reserves is still backing that original loan while the $10,000 deposited after that first loan was spent is now additional surplus reserves for further loans.”
Challenge 1, Money theorists cannot have it both ways. If that first $1,000 in reserve deposits backs a $10,000 loan, their goldsmith-wildcat banking view of how fractional reserve banking works, that secondary deposit of $10,000 into a reserve account becomes reserves for a $100,000 loan which completes cycle two.
Cycle three creates $1 million.
Cycle four $10 million.
Cycle five $100 million and four more cycles would reach $1 trillion.
No bank will claim that ability or that right. Such a money creation process would destroy the very meaning of both M1 and fractional reserve banking.
2 Theorists do not claim expenditures as a creation of money yet MMM says clearly, “deposit expansion can proceed from [bank] investment as well as loans.” The process is deposit expansion (or loan expansion, or simply the spending of those funds), it is not money creation.
3 The creator of money owns that representation of value. If a bank could create account deposit money this easily, banks would have tons of money and never go broke. Yet they are going broke all the time.
4 Competition for profits made from money created with a few key strokes would competitively shrink interest rates to just that necessary to keep the bank solvent.
5 The same money theorists that claim private banks create money push for 100% reserves (cash in the vault to back all deposits). If deposits had not been loaned out, that money is still in the bank—available by check, credit card, or debit card—and 100% reserves are already in effect.
6 In the current (2007-08) worldwide liquidity-solvency crisis, banks all over the world are in trouble. Because they cannot, none have created money to solve their problem and central banks are pouring newly-created money at them.
7 All money currently circulating within the banking system (digital, paper, and metal) is effectively federal fiat money where money created by private banks have always had that bank’s name printed on it. As all digital deposit money is convertible to cash money, which is federal fiat money (greenbacks), no one would consider giving a private bank the right to create Federal Reserve notes and no one can point to a law giving them that right.
8 Historically interest was normally paid on deposited money. They are not paying that interest out of the goodness of their heart. Bank deposits are nothing more than a loan to the bank that can be rescinded by the depositor at any time by simply withdrawing it.
9 It is against the U.S. Constitution, Article I, Section 8, “The Congress shall have power….to coin money, regulate the value thereof, and of foreign coin.”
10 The fundamental principles of double entry bookkeeping does not permit it.
11. The seal of the nation, the signature of the Treasurer of the United States, and the signature of the Secretary of the Treasury on every bill, and it being fiat money “good for all debts public and private,” prove only the federal government—through the Federal Reserve—creates money.
12 James Livingston, in Origins of the Federal Reserve, chapters 7 & 8, John Kenneth Galbraith in Money: Whence it Came, Where it Went, pp 126-83, 188, especially pp 134, 144, 177-90, 195-96, 199-200, and William Greider’s Secrets of the Temple, especially pp 49-50, 280, clearly say (throughout their books) the Federal reserve is Federally owned and only they create money.
They do acknowledge that between 1913 and 1936 reserves banks created money independently for their regions. That freedom led to the Great Depression and, as per laws enacted under President Roosevelt in 1935-36, all creation of money powers were placed under the authority of the Board of Governors of the Federal Reserve.
However, through precious metals as reserves and the faith and credit of nations, that right to money creation had been ebbing and flowing between private banks and governments for centuries. Any time money was created by private banks and loaned for successful endeavors, wealth was appropriated from society as a whole. But that was real wealth that would never have been produced without the money being created first and governments were not yet serious about bringing everybody within the flow of money.
As wealth represented by newly created money obviously belongs to all, over time governments created all money and theoretically, but not actually because political control still guided that free money to the powerful, all citizens gained their share. It is time for citizens to understand that wealth represented by newly created money is theirs collectively, it does not belong to either banks or governments.
Base Money Circulating is the Money Supply: Creation of the Federal Reserve
With 13 banking panics over a period of 80 years, one every six years and the worst one just ending (1907), the U.S. decided to eliminate wildcat banking through the establishment of the Federal Reserve in 1913. Since that act, member banks could only loan from their reserve deposits of which a mandated percent must remain in reserve.
This was a seismic change in banking. Previously a supply of gold, silver, or gold certificates were necessary to establish a bank which then printed currency with the bank’s name on it (personal signature banknotes) with a total value of 10 times the value of their precious metals reserves.
But now member banks, still privately owned, could loan only a percentage of their deposits. Instead of loaning money they created, they were now loaning money created by the Federal Reserve which was continually deposited in their bank as that base money circulated. Non member banks (state banks) operated under state law which eased the 67-year-transition from privately created money to government created money.
The government effectively said, “Join us and we will create the necessary money in the form of Federal Reserve notes.” But it takes time to change social customs. Slow communications in outlying areas, along with money still being kept under mattresses, required creation of money by state banks along the principles of goldsmith-wildcat banking along with loaning a share of their reserve deposits.
Then, in 1980, the Monetary Control Act brought all U.S. deposit institutions under the Federal Reserve. Creation of money has ever since been by the Federal Reserve and wildcat banking—an extension of goldsmith banking, private banks creating money through loaning a multiple of their gold or silver reserves, which had not been practiced for decades—was officially relegated to history.
Private banks today do not create money. However, private bankers do control the Federal Reserve where they create all the money they need to protect their monopoly system and that process is on full bore during the current, 2007-09, financial crisis.
Due to the immense wealth that can be guided to their coffers, bankers, with the support of other non-producing monopolists, deny society the enormous efficiency potentials we demonstrate are possible within a socially-owned banking system.
The huge profits bankers make on high interest rates were theoretically to control inflation or deflation. But they were actually protecting the massive profits pocketed as they moved back and forth between bonds and stocks. The simplicity and instant effect of controlling the money supply through slight increases or decreases in mandated reserves was ignored.
Between 1913 and 1936 each of the federally owned, but privately managed, 12 central banks created money for their regions. However, from 1926 to 1929, the old guard running the New York Federal Reserve poured created money at their New York banks which loaned it to stock speculators.
When the NY Fed heard the Federal Reserves Board of Governors had held an all night meeting on their practice, they pulled back, the funding to support the bubble was not there, the stock market crashed, and the Great Depression was on.
The problem was traced to the independence of those 12 reserve banks. So, in 1935-36, the Roosevelt administration assigned all money creation decisions to the Board of Governors, America finally had its central bank and, though mandated reserves and other protections such as the Glass-Steagal act, that Board has made all final decisions on creation of America’s money ever since.
High Powered Money and Base Money are only different names for Created Money
The Fed calls the reserves they created, the reserves deposited as that base money circulates (up to the point in time it is again loaned out), and currency in circulation as “high-powered money.” Through their control of the Fed, private bankers create all the money they need to cover the ever-expanding values of their monopolies and profits are made on loaning out those reserve deposits.
In federally mandated modern fractional reserve banking, only the Fed can credit one account without debiting another and expand those reserves (create base money). Only in the sense that private bankers control the Fed do they create money.
The creation of base money, an insertion of money into the economy, is only a precursor to the circulation of that money. What some theorists call creation of money by private banks as money circulates is really only an accumulative accounting of whose hands base money passes through as it circulates.
What is happening, and the terminology used, is deposit creation. When that $10,000 loan is withdrawn, spent, and redeposited into the receiver’s reserve account, the 10% reserve for that loan and the latest deposit exactly match the original $11,000 in base money.
Ninety percent of that 2nd deposit is loaned out, spent, and returns to the banking system as a 3rd reserve deposit. The 10% in reserve backing the first two loans and the 3rd reserve deposit again exactly equal the original $11,000 in base money.
In the 4th, 5th, 6th, and all subsequent circulations, the deposits added to the retained reserves always add up to the original reserves, base money. One person’s spent loan is quickly redeposited as another person’s reserve deposit. Never is money in two people’s hands at the same time and at all times there is only a set amount of base money in existence.
Beyond the initial creation of money by the Fed, there is only an accounting of whose hands base money is in at any one time. That accounting accurately measures economic activity and the number of times money has been spent and redeposited. At all times the money supply is the speed of circulation of base money.
At 10% required reserves for a $10,000 loan issued from a reserve deposit, when the cycles—anywhere from 30 to 50 in ever smaller increments—of the acclaimed circulation of money is complete, a total of roughly ten times that original loan will have been accounted for. Though $100,000 in trades has been accounted for, $330,000 if considering required reserves of 3%, no more money beyond that first $11,000 reserve deposit will have been created.
That is exactly what MMM says: there is “no net change in the total reserves” and “the supply of reserves [base money] in the banking system is controlled by the Federal Reserve.” That $100,000, or $330,000, is only an accounting of the committed (loaned) reserves circulating, loaned, deposited, and reloaned 30 to 50 times or more in ever-smaller increments.
The reserves backing those multiple deposits, or loans if you are looking at the other side of the double entry bookkeeping ledger, are, at all times, the original $11,000 created by the Fed-Treasury.
Modern Money Mechanics Errs in Their Choice of Word Usage
Modern Money Mechanics (MMM) also states, in error, that private banks create money. But when analyzed carefully it is clear they, and many money theorists, are calling each change of ownership or control of money as it is loaned as a creation of money.
The proof of their error is their accounting of the money supposedly created exactly matching what we demonstrate is only a total accounting of whose hands base money (created money) has been in as it circulates. Loan repayments closely match the funds held in reserve as loans are made.
MMM misnames a loan as created money when they have only moved deposited money (which is effectively a loan to the bank that can be withdrawn at any time) from their control to the borrower’s control. Their statement, “checks drawn against borrowers’ deposits result in credits to accounts of other depositors, with no net change in the total reserves,” proves this.
We will use diamonds to prove our point. The bank has in its reserves (base money) eleven $1,000 diamonds and loans me ten $1,000 diamonds keeping one $1,000 diamond in reserve. To buy a $10,000 car, I write out a check for ten $1,000 diamonds. The car dealer deposits the $10,000 diamond demand (the check) and the bank moves the ten $1,000 diamonds (base money circulating) from my account to the car dealer’s account.
Those diamonds (money) were not created by being loaned to me. Base money was only transferred from the bank’s reserves (customer reserve deposits) to my account as borrower and then to the new depositor’s account as current owner. The original money (base money) has returned to the bank both as a liability and as a replacement for the reserves (again circulating base money) loaned to me. The bank’s revolving reserves (still that same base money) are again in balance (totaling $11,000) with $9,000 available to loan and I still owe the $10,000.
But that $10,000 was from the previous $11,000 deposit of base money, not this latest $10,000 deposit which did not exist as a deposit of base money until my check was cashed and the base money in my account was moved to become the base money in their account.
MMM recognizes deposits, until they are loaned, as “excess reserves.” In Section three, it states that since “lending banks expect to lose these deposits, and an equal amount of reserves, as the borrowers’ checks are paid, they will not lend more than their excess reserves.”
Despite saying, in error, “private banks create money when they credit a borrower’s account,” the previous statement acknowledges that loans are made from excess reserves. It was not created by being loaned.
Both the Federal Reserve and money theorists stating that “each loan is balanced by a deposit [in an account] somewhere” is also an acknowledgment money is debited from one reserve account within a bank, credited to the borrowers reserve account, and then transferred to other deposit accounts within the banking system when those loan funds are spent.
The use of base money (originally created money) has been accumulatively accounted for but it already existed and was not created through that loan. Reserve deposits were only expanding as both loaned money and owned money was spent and those expanded deposits were compensated for by debts, on the average, being extinguished (repaid) at roughly the same rate they are created.
Base money is first created by the Federal Reserve-Treasury (government) typically by purchasing debt instruments. By crediting the selling agent’s bank’s reserves without debiting anyone’s account, newly created money has replaced the funds which originally funded that debt instrument.
If a new debt instrument is bought directly from the Treasury, those funds are deposited directly into a treasury account within the banking system, again without debiting anyone’s account. Those new reserves of base money are loaned out, spent, and return to the banking system to be credited to the next depositor’s reserve account.
By crediting deposits and then loaning 90% back out, private banks are only in the business of accounting for who is in control of a measured amount of already created base money at any one moment. They are not in the business of creating money.
I have asked money theorists what happens to their deposits and am told “it just sits there.” But there being no increase in total reserves within the banking system by those deposits, stated specifically by MMM and proven in their charts, belies that statement.
In other places MMM supports the goldsmith theory of private banks creating money but, throughout their outline of how modern fractional reserve banking works, then thoroughly prove, and in many places clearly say, “only the Federal Reserve creates money.”
Private bankers tried hard to get past the U.S. Constitution, Article I, Section 8, saying that, “The Congress shall have power….to coin money, regulate the value thereof, and of foreign coin.” Their lawyers simply could not get around those words in the foundation law of the land that, even allowing for shortcomings in that statement, only the government can create money.
So, when technology advanced to money as digits in an accounting system they designed an appearance of ownership of, but not actual title to, the Federal Reserve, all this to maintain control of fiat money creation which is not permitted under the Constitution.
Except for private bankers being in charge, by 1935-36, when President Roosevelt’s government assigned the authority for money creation to the Board of Governors of the Federal Reserve (in concert with regional reserve banks), America’s banking system was brilliantly established. Doing away with fractional reserve banking, as proposed by some monetary theorists, is a monumental mistake.
The simplicity of controlling the money supply through mandated reserves is lost. Unwittingly, their goals of eliminating fractional reserve banking are the same as the corrupt bankers who pushed through legislation in the 1990s which eliminated most reserve requirements (only $40 billion are at this time backing $3.5 trillion in deposits).
But they did not, because they could not by constitutional law, eliminate the principle that only the government can create fiat money. That is the prerogative of the Federal Reserve which is—as proven by all profits, almost 98% of the Fed’s gross income, being paid to the Treasury—federally owned. See also John Kenneth Galbraith, William Greider, and James Livingston.
Hiding the Simplicity of Money Creation
To maintain the secret of how simple money creation really is and to avoid the creation of debt-free money for infrastructure and essential services so as to reserve those investment opportunities for monopoly capital, bankers conceived the Fed’s devious Open Market Operations. All profits from money creation, plus other profits, being turned over to the U.S. Treasury (roughly 98% of all earnings) leaves no other conclusion than the Federal Reserve being an arm of the government.
Money is created when the Fed buys or funds debt instruments. The reserve accounts of the bank where that check is cashed being credited with the amount of the sale or funding with no debiting of another reserve account creates money. That base money circulating (which includes currency and coin) is the only “real” money within modern fractional reserve banking.
Once the limit of circulation of money is reached, yet there are legitimate endeavors to fund under Congressional oversight, increases in the money supply requires banks borrowing from the Federal Reserve or the Fed purchasing more bonds in the market. In each case no other bank’s reserves are debited as that banks reserves are credited and money has been created.
If there are no purchasers for treasuries in the market, the Fed can purchase that U.S. debt directly but will do so only as a last resort and even then do so surreptitiously. If imminent failure of large banks threatens to damage the economy, the Fed may, beyond a certain level and under Congressional approval, create money as a loan to those banks. In all four instances, the Fed simply credits the accounts of the seller or borrower and debits no other account.
Lowering or raising reserve requirements does increase or decrease the number of times already-created money circulates, but does not increase or decrease primary-created money (base money).
It would be transparent and much simpler for the Fed to credit the Treasury’s account and the government spend that money into circulation. But that would expose the obvious; treasury bonds held by the Fed are owned by the government.
As those just-purchased treasuries were originally printed by the Treasury, they can be destroyed rather than go through the ritual of the government paying those debts off and the money then promptly returned to the Treasury by the Fed. Bonds held by the Fed under repurchase agreements is only money and bonds going back and forth between the Fed and private banks keeping their loanable funds in balance.
The interest and principle paid by the U.S. Treasury on Fed-purchased T-bills goes to the Fed, which returns that and a part of other profits—bonds, currency trading, priced services to banks, etc—to the Treasury. In 1994 the Fed received $19.247 billion from the Treasury as interest on bonds and paid to the Treasury $20.470 billion, or $1.223 billion more than it received in interest.
The dividends investors in the Federal Reserve may receive are laid out in Section 7 of the Federal Reserve Act (http://federalreserve.gov/aboutthefed/fract.htm). Those dividends are dictated by that section, not by bank officers, and, by that same law, profits are distributed to the Treasury. Those touted as owners are not paying almost 98% of all earnings of the Federal Reserve to the Treasury out of the goodness of their hearts. At the mandated 6% interest on their bonds, private bankers have under a 2% interest in the Federal Reserve.
That the Fed is privately owned is a shell game. The unpaid principal and interest on those Fed-purchased, and thus government-owned, bonds are simply credits and debits on the Fed’s and Treasury’s books. Both are government agencies and when payments are made to the Fed by the Treasury that interest, principle, and other profits are promptly returned to the Treasury, thus proving there never was a debt.
The Treasury-Fed could have openly created that money without any debt. But the simplicity of creating money and spending it into existence would be visible to all and maintaining that secret is the very purpose of the whole charade.
Private bankers politically control, but do not own, the Fed. If they really did, the Fed would pay taxes and the owners would be receiving the interest and principle on Fed-owned debt instruments. The $212 million in dividends member banks received in 1994 would be earnings on the money they have invested, as allowed in the Federal Reserve Act, not profits of ownership which would have been 100 times that amount.
Operation costs are paid for by charges to banks, the Fed reports to Congress, and the payment of all profits of the Fed (almost 98% of its gross income) to the Treasury is proof that bankers know well that the Fed is an appendage to the Treasury and both are arms of the federal government Well over 98% of the trillions of dollars of value of the Federal reserve is publicly owned. As bonds are just bonds, actual title is 100%.
Borrowing and Saving Balances the Money Supply
All borrowers, consumers of the moment, are borrowing the deposits of savers of the moment. One may be borrowing from oneself, either from a checking account or out of pocket, and expecting to replenish the bank account or pocket change, both are savings.
The banking system keeps an account of these trades between people. Many are equal trades, in a month, or year, most people earn roughly what they spend. But the unequal trades, more produced (earned) than spent or more consumed (spent) than earned are balanced by lending and borrowing deposited savings residing in banks’ reserve accounts.
The Theory of Interest as Usury
Working on a bill to submit to the Eighth Session of the Provisional World Parliament, Professor Glen Martin of Radford University expanded upon the Biblical and Koranic principles that it is wrong to charge interest.
As money and banking are social technologies understood for thousands of years and ownership is only proper for items built by one’s labor or purchased with funds earned by one’s labor and banking systems are neither, they are properly socially owned.
What caught Professor Martin’s attention was that, if properly structured, the elimination of the waste of monopolies and the attaining of full and equal rights through sharing the remaining productive jobs, with paid employment only two to three days per week and being equally-paid for equally-productive labor, equalizes the earnings of all relative to their productivity.
It also does away with the huge blocks of wealth formerly appropriated from its proper owners through exclusive title to nature’s resources and technologies. This is the disappearance of the ethereal world of high finance.
Beyond application, approval, accounting, and brick and mortar costs, recoverable at a 1/2 of 1% interest rate on loans, there is no one within a banking system applying anything other than normal mental or physical labor.
Therefore, though all are entitled to be well paid, no one is entitled to the unearned profits earned through 6-24% interest charges or the many other methods of bankers for their unearned claims to wealth produced by others. The ethereal world of high finance will have disappeared.
By raising required reserves in step with the creation of money, it is possible to create debt free money for a developing region’s first industries and infrastructure. As the economy develops, industries can be financed from savings and infrastructure from resource rents paid to society.
At a modest level—by raising mandated reserves every two months for a year (it is now 17.5%), raising interest rates six times, and by creating money (increasing base money) 18% during the same timespan—China is, at this moment and again at a modest level, testing this theory.
Surely other developing regions will be studying that model. Our judgment is that it will work beautifully so long as you use a currency spendable only within the borders of a region and trade between regions through an internationally-created trading currency.
Once substantial industry and infrastructure is in place, mandated reserves can be lowered as the economy is funded more and more from resource rents and banking profits. Without an honest international trading currency in place so that internal currencies can be controlled, China is doing the next best thing.
The 3rd primary monopoly is technology. The gains here are so massive that most will push aside any statement that technology is monopolized.
But, as rapid as that wealth is pouring in, those wealth production gains would double if technologies were not monopolized. In a few years they would double again, and do so again in another few years, until the world was fully developed, roughly within 50 years.
We now turn to the huge gains through Eliminating Monopolization of Technology
Those crucial 170 words describing an honest, efficient, capitalist economy. Does anyone have the ear of President Barack Obama’s Economic Recovery Team?
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 Run a Google search.
 William F. Hixson, Triumph of the Bankers: Money and Banking in the Eighteenth and Nineteenth Centuries (Westport, Conn: Praeger, 1993), chapter 23; William F. Hixon, It’s Your Money (Toronto, Canada, COMER, 1997), chapter 5.
William Greider, Secrets of the Temple: How the Federal Reserve Runs the country (NY: Simon & Schuster, 1987) throughout but especially pp. 49-50, 280; James Livingston’s Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890 to 1913 (Cornell University Press, 1986), chapters 7 & 8; and John Kenneth Galbraith, Money: Whence it Came, Where it Went, (Boston: Houghton Mifflin, 1995), pp. 176-83, 188, especially pp. 134, 144, 177-90, 195-96, 199-200
 By removing bankers from the helm and keeping the money supply in balance, a Federal Reserve overseeing required reserves is pure gold to an economy. With it an economic collapse can be stopped in its tracks and a developing region, utilizing a currency viable only within its borders, can create money for both infrastructure and industry. Once a region is developed, mandated reserves can be lowered and industry and infrastructures can be financed from savings or recycling bond payment.
 Eighty percent of capital formation is through pension funds, mutual funds, insurance companies, security dealers, and finance companies. Spending or loaning that privately owned money is not subject to reserve requirements. But that is only a one time thing. While it is on deposit waiting to be loaned and after it is loaned, that money is identical to all other circulating deposits.
Loan repayments work in sync with the mandated fractional reserves to limit the money supply. Eliminate fractional reserves and base money can circulate ever more rapidly and expand the money supply with no relationship to loan repayments.
 MMM, http://landru.i-link-2.net/monques/ mmm2.html or run a Google search.
 Please run a search in the MMM webpage for those key words.
 The Bank of England was chartered in 1694 as a privately owned central bank. Government IOUs instead of Gold were used as reserves. Those debt instruments were nothing more than the faith and credit of the British government. Something visible and valuable to back money was only because citizens were habituated to money backed by gold. Today all central banks create money backed by the faith and credit of the government and they ignore the ritual of a symbol of value backing money.
 William Greider, Secrets of the Temple: How the Federal Reserve Runs the country (NY: Simon & Schuster, 1987) throughout but especially pp. 31, 49-50, 280; James Livingston’s Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890 to 1913 (Cornell University Press, 1986), chapters 7 & 8; and John Kenneth Galbraith, Money: Whence it Came, Where it Went, (Boston: Houghton Mifflin, 1995), pp. 176-83, 188, especially pp. 134, 144, 177-90, 195-96, 199-200
 Hixon, Triumph, chapter 5.