Chapter 1. Henry George’s Property Rights law: A Modern Money Commons

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Everybody uses money and instinctively understands how it works. Thus it would be possible to outline an easily-understood honest banking system in a few pages. But such a simple book would be ignored by money theorists. So, along with the elimination of monopolies we are told do not exist, we will first go through the ritual of outlining the history of money. Those versed in the subject will quickly spot where our views of efficient banking, partly addressed in the Introduction, diverge sharply from the views of those who advocate elimination of the Federal Reserve and fractional reserve banking.

From Barter to Commodity Money

Before the widespread use of money trading involved the simplest form of commercial transaction, barter, an exchange of two or more products of roughly equal value. This limits most trading to persons possessing equally valuable items. Eventually cattle, tobacco, salt, tea, blankets, skins, and other items were used as a form of money. Such commodities were the most desirable because they were durable, portable, readily exchangeable, and had the most recognizable common measure of value.

Products intended for consumption typically have one to three owners on their way from producer to consumer. Those that are used as money may have dozens or even hundreds of owners. Whether a product is used for exchange or consumption distinguishes it as money or a commodity. The products listed above were imperfect as a medium of exchange, and their limited usefulness limited trade. They also created problems of storage, transportation, protection, and not everyone could use these commodities.

From Commodity Money to Coins of Precious Metal

Only highly desirable, useful items could become money. No one would accept a piece of paper, brass, or copper in trade for what he or she had worked so hard to produce. Such a trade would effectively rob one of hard-earned wealth.

Gold and silver have been highly esteemed and accepted as money in most cultures. The first known coin, the shekel, was minted in “the temples of Sumer about 5,000 years ago,” and coins of measured value have been routinely minted from precious metals ever since.1 Except for scarcity values, the labor required to produce a given amount of gold, silver, or precious stones was roughly equal to the labor required to produce other items this treasure could buy. As accustomed as we are to viewing gold as money, it is still commodity money–desirable, useful, and requiring roughly equal labor to produce.

Inequality of money values is only inequality of exchanged labor values. Often when rulers became strapped for cash, usually because of war, they resorted to debasing their currency by lowering the gold or silver content and replacing it with inexpensive metals such as copper. The labor value represented by these debased coins was less than the labor value of the items purchased. Assuming the labor cost of gold was 300 times that of copper, each day’s production of copper substituted and traded as gold would confiscate the value of 300 days of labor spent producing useful items. It was the universally recognized value of precious metals that became the first acceptable money.2

With gold, or any precious metal, divisible into units of measurable value, a trade could be made for any product. As it was only with universally accepted money that commerce could flourish, this convenience fueled world trade. However, as these precious metals had to be located, mined, delivered, stored and protected before society could have money, trades were still clumsy.

From Gold, to Gold-Backed Paper Money, to Fiat Paper Money

The use of gold as money was handicapped by its weight, bulk, and the need for protection against debasement. These problems were eventually eliminated by printing paper money that could be redeemed for a stated amount of gold or silver. This is known as the gold standard. As this paper money was backed by gold, there remained the complication of finding, mining, smelting, and storing this valuable commodity.

The next step in its evolution was the use of pure fiat paper money, meaning it was legal tender by government decree. It was almost universally resorted to in revolutions although it usually had little value once the banking systems returned to the gold standard. Benjamin Franklin had proposed fiat paper money, and, while it was used less successfully in the New England colonies, it was used productively in the middle colonies in promoting production and commerce while controlling deflation. The powerful of Britain recognized the threat to their control of trade and outlawed the printing of money in the colonies. This effectively dictated control of commerce, determined who would profit, and was a contributory cause of the American Revolution.3

World War I and WWII weakened the old imperial nations and eroded the subtle monopoly of the gold standard.4 As most of their gold had been traded for war materiel, these countries had to keep printing money to rebuild their shattered cities and industrial plants. To return to money backed by gold would have left their economies to the mercy of U.S. bankers. Thus the subtle monopoly of the gold standard was partially broken in these countries. The arms race that followed WWII almost totally eliminated gold-backed money as nations continued to print money wastefully for war.

Once freed from its bondage to gold, paper money represented rather than possessed value. Printed at little cost, it could be traded for as much wealth as its stated value. Society now required only one product to make a trade. Those who sold their labor in the form of products produced or services rendered received in return the paper symbols of value and needed only save this money form of wealth until they wished to buy products produced by others. Fiat paper money, used productively and not backed by gold, was true money.

Paper Money, to Checkbook Money, to Electronic Money

As simple and light as paper money was, it was still too clumsy for most trades. Most of these units of value called money were deposited in a bank, just as gold had been, and trades were then consummated with checks. These were more efficient than cash because each check was a symbol that the signer had produced, saved, or borrowed that much wealth and its money form, safely deposited in the bank, was now being traded for equal value in other products or services. Family, business, corporate, and international trades use these symbols of deposited savings, checks, drafts, notes, bills of exchange, etc.

Commodity money—hides, tobacco, etc—had dozens, possibly hundreds, of owners before this trading medium returned to its status as a commodity to be consumed. Gold, still commodity money, retained the status of money much longer and had thousands of owners. Gold-backed paper money traded more conveniently and passed through the hands of many tens of thousands of owners. Reserve deposit money, traded by check, via bank debits and credits, can have an endless number of owners as this representation of value keeps moving from owner to owner. Modern electronic money, still reserve deposit money, is but a blip on a computer drive that can be instantly debited from one account and credited to another. Though tied closely to the principle of checkbook money, electronic entries are the ultimate in efficient fiat money.

Paper money and checks are familiar to everybody. Even a child learns quickly what they are and how to use them. When most of the historical and ideological mystiques are eliminated, money is easy to understand. The banking system collects all production, symbolized by money, completes society’s trades through debits and credits, and lends the surplus production, savings, to those who, at any particular moment, have capital or consumer needs greater than their savings. The Fed buys debt instruments to expand reserves and increase loan capacity or they and the Treasury create money and spend it into existence. This creates more money for an expanding economy. Money is no more complicated than that.

What makes money appear mysterious is the powerful having always controlled it. Its secrets are protected by governments, bankers, and, in the ethereal world of high finance, finance monopolists of every shade trying to siphon to themselves others’ wealth.

Credit or Trust Money

People accept money because they trust the value represented can be replaced by equal value in another commodity or service. Credit (pure trust) is both the oldest and most modern currency. When credit is given, nothing is received for the item of value except a promise. Each month, families and businesses are provided with products or services (value) and then billed. This is a procedure based on trust. Cash money is also based on the trust that it can be redeemed for equal value.

If money is controlled with equality and honesty, there is trust. Money then exchanges freely and is easily understood. We are describing money and banking in the everyday language that would apply if all were equally paid for equally-productive labor and if they had full and equal rights to a productive job and to finance capital.

The Different Meanings of Money

Money is correctly referred to as a unit of accounting, savings, stored value, a measure of value, a standard of value, a receipt for value, a system of accounting, a deferred payment, a transferable claim, a lien against future production, an IOU, an exchange value, and an information medium. At a fundamental level, money represents the value of the final product of combining the elements of production—land, industrial capital, and labor. In a properly structured society, money represents the value of labor, profits on stored labor (capital), and a share of the costs of running society represented by land rent being paid to society as outlined in the following chapter on land.

To the layperson, money is normally explained as a medium of exchange. This is true. However, a medium of exchange implies equality and it is precisely the inequality of exchanges which is the greatest problem. To understand these inequalities, we must have a better explanation of money.

Money is a Contract Against Another Person’s Labor

Money is first, and foremost, a contract against another person’s labor. Except for wealth produced by nature, value is properly a measure of the time and quality of all productive labor spent producing a product or service. If the difference between the payment received for productive labor and the price paid by the consumer for a product or service is greater than fair value for expediting that trade, either the producer was underpaid, the final consumer was overcharged, or both. When intermediaries underpay producers or overcharge consumers, they are siphoning away the production of the labors of one or the other, or both. This process is seen in the notorious and once common practice of forced shopping at the company store. The underpaid workers’ meager wages were further reduced by their compulsory purchase of overpriced merchandise.5

Savings implies that something has been produced and not consumed. But even if a commodity is produced for consumption, it is properly understood as capital until sold to the final consumer. It then becomes his or her wealth for consumption and is no longer capital. Some commodities, such as a meal, are consumed in minutes and some, such as homes, are consumed in decades or even centuries. Products are sold, production expenses are paid, any surplus is deposited in a bank, and that deposit is credited as an expansion of the depositing bank’s excess reserves. Banks lend that in excess of mandated reserves to others for investment or consumption. The parties who labored to create the value represented by that money are only lending their surplus production in its money form, finance capital, with the promise to be repaid, plus interest, for what their stored labor produced. Interest, as opposed to usury, is the money form of wealth produced by finance capital.

Money Productively Contracting Labor

Because money is always controlled by those who rule, revolutionaries resort to printing money to finance their insurrections. Successful revolutionary wars, like those of the United States,6 France, Russia, and China, were fought for freedom, were productive expenditures of labor, and were all fought with paper money.7 Every battle for freedom requires large expenditures. Most labor is donated, but much of the weaponry, clothing, food, and medicine must be paid for with money. Money is thus a tool for mobilizing society’s labor to produce great things, in this case freedom.

Examples of money properly employing labor are seen every day in farming, in the creation of consumer products, and in the building of homes, roads, schools, shopping centers, and factories. The rebuilding of Europe after WWII was a productive use of labor employed, in part, by U.S. capital, as was the industrialization of Southeast Asia.

Money Unproductively Contracting Labor

An efficient economy has been judged as requiring only $3 of speculation for every $1 invested in the real economy yet currency speculation for financing world trade alone in the year 2000 was 55 times the real economy. The massive profits from unnecessary speculations are charges against other stakeholders within the world economy.

To use one’s earned money for speculation is properly one’s privilege. But borrowing society’s money capital for speculating on, gold, silver, commodities, already issued stock, derivatives, or currency, the ethereal world of high finance, is an attempt to intercept social production by speculating with society’s savings; there is no intent to actually produce. For example: on March 5, 2006, CBS News stated 1/3 of the price of oil as being accounted for within the buying and selling of oil contracts. Other commodities will have similar costs attached through speculations in the market. The massive profits earned in those speculations show up in higher prices. To quote William Krehm of The Committee on Monetary and Economic Reform (COMER), in that process “the real economy is rapidly being reduced to the part of a bit player.”

The uses of society’s savings for corporate takeovers usually are battles between the powerful for control. Whether the takeover is successful or not, these unproductive uses of social capital continually milk money from the economy. All this unnecessary activity diverts money capital from its true purpose, production and distribution. More appropriately, massive speculation beyond that needed for an efficient economy is an exercise in social insanity. By taking the easy way out, society is being irresponsible.

An even more nonproductive use of money occurs when labor is contracted to destroy others’ capital (war) or to work at endeavors from which neither the present generation nor its descendants will benefit. In 1800, Robert Owen, manager of a family textile mill in Scotland, began his famous social experiment of paying workers well, giving them decent housing, educating their children, and doing all this profitably. He calculated this community of 2,500 persons, workers and families, was producing as much as a community of 600,000 did less than 50 years before.

Owen wondered where the wealth from such a large increase in efficiency was going. He concluded it was being consumed by the petty wars continually fought by aristocracy.8 The mill workers were being underpaid for their work, the customers were being overcharged for their cloth, and the production of their labor, in its money form, was being siphoned away and used to contract materiel and labor for war. Labor was being paid to fight because this generated the greatest rewards for those who controlled the use of money. This was wasteful to the rest of society, nothing useful was produced when that confiscated wealth was spent on wars and much of what existed was destroyed.

In the 15th century, “about 70% of Spanish revenues and around two-thirds of the earnings of other European countries” were employed in these wars.9 Most of this revenue was siphoned away from a country’s own citizens. The treasure pillaged from the Americas was but a small share of the wealth destroyed in European wars:

Until the flow of American silver brought massive additional revenues to the Spanish crown, roughly from the 1560s to the late 1630s, the Habsburg war effort principally rested upon the backs of Castilian peasants and merchants; and even at its height, the royal income from sources in the New World was only about one-quarter to one-third that derived from Castile and its six million inhabitants.10

The powerful today are wasting massive wealth battling over the world’s wealth, identical to Robert Owen’s analysis 200 years ago.

Learning the Secret of Bank-Created Money

The secret of creating money was first learned by goldsmiths. Others’ gold was deposited with them for safekeeping. They learned deposits were usually left for a substantial period and they could safely make loans in the form of receipts for gold. These receipts circulated as money with the gold remaining on deposit. On balance, loans were paid off faster than the gold was reclaimed. Loans for several times the amount of gold on deposit were created money.11

Whenever Rothschild or other early bankers loaned 10 certificates of gold at 10% interest, for every unit of gold they owned or held for safekeeping, each year their personal net worth would increase equal to all gold on deposit. When private banks printed their own goldbacked currency, their creation of money and their profits, between collapses, were identical to that of goldsmiths.

One hundred years ago there were no federally required reserves in American banking. For centuries a prudent bank with $1 million in gold that decided to maintain its fractional reserves at 10% could print $10 million in personal-signature banknotes with the bank’s name on each bill, $9 million of that would be bank-created money. All goes well until some banks go far beyond reasonable loan to reserve ratios leading to runs on banks and economic collapses.

Before financial powerbrokers stripped most the mandated reserves out of the Federal Reserve Act of 1913, first, in the 1970s, selling blocs of loans to money markets which bypassed mandated reserves and again in the 1990s when required reserves were removed from all deposits except checking accounts, a private bank with $1 million on deposit and a 10% mandated reserve could initially make only $900,000 in loans as opposed to loaning $10 million under historic fractional reserve banking. That second example is the goldsmith theory of money creation which is totally different than modern fractional reserve banking. In modern banking, as the money is spent and redeposited, a bank can loan 90% of each new reserve deposit as money circulates and eventually can loan out $9 million, the same as the prudent banker 100 years ago with self-imposed reserves of 10% in gold or silver backing each bank’s personal signature bills. The base money created by a socially owned banking system—that circulates productively contracting land, labor, and industrial capital—is backed by the wealth produced. Having the power to create money to cover any crisis, a socially-owned bank will be, again before the gutting of the powers of the Federal Reserve Act of 1913, primarily creating money and then maintaining a proper money supply through raising or lowering mandated reserves.

Here we must detour. Instead of money actually circulating, no checkbook or credit card money (modern money) ever leaves a banking system. It is only transferred from one account to another. Just as goldsmiths loaning certificates of gold 200 years ago, all that is circulating in each case are promises to pay. Where today checks and credit card authorizations are used, historically they were certificates of gold. There was no increase in gold (base money) when certificates of 10 times that in safekeeping were loaned and there is no increase in base money today when 10 times or 33 times, as is possible under 3% reserves, the original primary-created money is loaned. However, gold to repay a debt can be obtained anywhere in the world while money to repay a debt can be obtained only by debiting another account within the banking system. Nor do those promises to pay, checks and credit card authorizations, circulate. When that “promise” to pay is cashed, that “instruction” to pay, is transferred back to the signer as a receipt. Even though nothing is actually circulating, all theorists say it does, loaned cash does circulate in this manner, and it is easier to visualize, so we will continue with the story of creation of money using that faulty terminology.

The 13 American colonies printed money to fight the Revolutionary War but this power of government to create money was not used by the United States again in any great measure until President Lincoln printed greenbacks to finance the Civil War. Though the alert will have spotted this efficiency potential of banking, as soon as that war was over the U.S. government ceased creating money and started pulling those greenbacks out of circulation. This destruction of money caused bankruptcies to soar for the first 10 postwar years as wealth was again consolidated within the hands of entrenched wealth.12

There was no need for those bankruptcies. If those greenbacks had been allowed to stand, and—so long as there were unemployed resources, unemployed labor, and consumer needs—that money would have continued to circulate freely combining labor and industrial capital with America’s immense natural resources, creating even more wealth. A healthy, wealthy, economy requires a measured and balanced creation of money to create wealth, not its destruction. Those greenbacks were withdrawn because their creation encroached upon private bankers self-appointed rights to create money.

As those greenbacks were being withdrawn, conservative bankers required $33.60 of gold or gold-backed currency in reserve for every $100 in currency. As it was gold-backed, it was bank-created money. This privately managed policy changed and the next 40 years recorded greedy bankers loaning 20 to 50 times their reserves or even more. Banks pooled funds to cover runs on banks but those runs would spill over onto strong banks. With their depositors’ money loaned out operating the economy and thus not immediately collectable (illiquid), perfectly sound banks would go under and bankrupt many farms and businesses with them.

Primary-Created Money and Circulating Money

With 13 banking panics over a period of 100 years, the worst one just ending, the U.S. decided to eliminate wildcat banking through the establishment of the Federal Reserve in 1913.13 Since that act, U.S. banks that were members could only loan money from, and could not loan above, a set multiple of their reserves. 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 with a total value of ten 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 loaning money created by the Federal Reserve-Treasury.

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. Again, due to slow communications and limited use of deposit accounts, the entire banking system could not be converted to modern fractional reserve banking for many years yet. To do so would have caused a serous shortage in the money supply on the frontier. Rapid communications and a citizenry accustomed to keeping their money in banks had not yet reached outlying areas.

Thus reserves of state chartered private banks varied for the next 67 years. As communication technology quickened and depositing savings in banks became the norm, and with federal banks as an example, state banks’ policies on creation of money can only have steadily gravitated to the efficiency and sensibility of modern fractional reserve banking loaning deposited money. Then, in 1980, all U.S. deposit institutions were brought under the Federal Reserve system, creation of money has ever since been regulated 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, though it 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.

Due to the immense wealth that can be guided to their coffers, bankers ignore 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.

Modern Money Mechanics (MMM),14 an out of print publication of the Federal Reserve also states 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 when loaned as a creation of money. Though this can be proven analyzing MMM’s statements in a dozen places, the final proof is their accounting of the money supposedly created exactly matching what we demonstrate is only a total accounting of whose hands money has been in as it circulates.

MMM misnames a loan as created money when it has only moved from the bank’s 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.15 Under modern fractional reserve banking, a loan does not create money and nothing circulates. The very meaning of “loan” proves no money is created. If you loan me a diamond, no diamond has been created. I, and all others down the line, can spend that diamond and all I am required to do is, on the due date, pay that diamond back.

So we will use diamonds to prove our point. The bank has in its reserves 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 from my account to the car dealer’s account. Used in this manner, diamonds function exactly as money. That money (those diamonds) were not created by being loaned to me. They were only transferred from the bank’s reserves of diamonds to me as borrower and then to the new depositor as current owner. The original money (those diamonds) have returned to the bank both as a liability and as a replacement for the reserves loaned to me. The bank’s reserves are again in balance with $9,000 available to loan and I still owe the $10,000. But that $10,000 was from the previous $11,000 deposit, not this latest $10,000 deposit which did not exist until my check was cashed. Most likely it will be deposited in another bank which is why electronic money is used instead of diamonds, gold, etc. Yes money theorists, under modern fractional reserve banking, banks loan deposits. They do not loan created money as a multiple of precious metal reserves as was done under historic goldsmith banking and its evolutionary cousin, wildcat banking nor do they loan a multiple of their deposits, see below.a

The statement that money is circulating is also an error. Nothing circulated except the check or credit card authorization and that promise to pay, in the hands of the bank now a request to pay, went from the borrower, to the seller, to the bank as instructions to pay, and, now a receipt the debt was paid, back to the borrower. Cash does circulate but checkbook, credit card, and debit card money only moves from one account to another account. But the faulty terminology, circulating money, does not damage the integrity of the theory and is easier to visualize, so we will use it also. But we will describe it as an accounting of current owners or controllers of money, not a creation of money.

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 first statement acknowledges 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 that money is debited from one account within a bank, credited to the borrowers account, and transferred to other deposit accounts within the banking system. Those checks and credit card authorizations, when honored, become receipts. The use of base money, originally created money, has been accumulatively accounted for but it already existed and was not created through that loan.

Primary money (base money) is first created by the Federal Reserve-Treasury (government) purchasing debt instruments from the public. 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. Those new reserves are loaned out, spent, and return to the banking system to be again credited to a depositor’s reserve account. By recording the debiting of one account, crediting another, and then loaning 90% back out again, private banks are only in the business of accounting for who is in control of a measured amount of original created money (again 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. The answer is “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 careful outline of how modern fractional reserve banking works, then thoroughly prove, and in many places clearly say, “only the Federal reserve creates money.” The author of The Creature from Jekyll Island, a bible of private-banks-create-money theorists, supports our position by specifically saying “the Federal Reserve creates our money.”

Private bankers were trying hard to get past the U.S. Constitution. Article I, Section 8, which says that, “The Congress shall have power….to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” 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 money creation which is not permitted under the Constitution.

Except for private bankers being in charge, America’s Federal Reserve banking system was brilliantly established. Doing away with fractional reserve banking, as proposed by some money theorists, is a monumental mistake. The simplicity of controlling the money supply through mandated reserves is not only irretrievably lost, it is impossible to operate a modern banking system without a neutral clearing house. Unwittingly, these goals are the same as corrupt bankers who pushed through legislation in the 1990s which eliminated a large part of, but not all of, fractional reserve banking. But they did not, because they could not by constitutional law, eliminate the principle that only the government can create money. That is still done through the Federal Reserve which is—as proven by all profits, 98% of the Fed’s gross income, being paid to the Treasury—federally owned.b

The Fed calls the reserves they created, the reserves deposited as that created money circulates, and currency in circulation as “high-powered money.” Among those three categories, electronic money created by the Fed is especially powerful, unique, and, for the sake of clarity, needs a name. We call it “primary-created money” because that and currency-coin (M1) is the only real money in existence in modern fractional reserve banking. Loans and deposits of circulating money are only the original created money, base money, moving from one account to another within the banking system. “Primary-created money” is not a noun phrase used in MMM. But, since, as we prove, the money supply is that original socially-created money in continuous circulation, they should be so termed.

Though judgments are being made on credit worthiness, private banks are not, by the act of making a loan, creating money. Yes, through their control of the Fed, private bankers create all the money they need to cover the ever expanding values of their monopolies and excess profits are made on loaning out those reserve deposits. But, in federally mandated modern fractional reserve banking, only the Fed can credit one account without debiting another and expand those reserves to create money. Only in the sense that private bankers control the Fed do private banks create money. The creation of money, which is simultaneously an insertion of money into the economy, is only a precursor to the circulation of money. What some money theorists call creation of money by private banks as money circulates is really only an accumulative accounting of whose hands that money passes through as it circulates.

This example is on how fractional reserve banking worked in American banking before bankers devised ways of evading mandated reserves. If a bank makes a $10,000 loan and credits a borrower’s account with that money, some money theorists insist this is the creation of money. But that is not so. In federally required modern fractional reserve banking supervised by a central bank, the Federal Reserve and assuming mandated 10% reserves, that private bank must have $11,000 in excess reserves before that loan can be made. Modern money is loaned from deposits, not created by the act of loaning money.

This is the clincher. 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 reserve deposit. 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 reserve deposit.c In the 4th, 5th, 6th, and all subsequent circulations, the deposits added to the reserves always add up to the original reserves, that base money which is primary-created 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. Beyond the initial creation of money by the Fed, there is only an accounting of whose hands that primary-created money is in at any one time. That accounting accurately measures economic activity and the number of times money has been spent and redeposited. It does not measure created 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 deposit will have been created. That is exactly what MMM says: there are “no net change in the total reserves” and “the supply of reserves 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.d

Not one cent beyond the original primary-created money has been created. When that first loan is made, 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%.

These last few paragraphs only describe circulation of money, not its creation. Under modern fractional reserve banking overseen by a central bank, only when a banking system is viewed as one bank does a bank create money and even then it is still the central bank that creates it through crediting a bank’s reserves without debiting another account. Private bankers do control the Fed and banks do collect the substantial difference between interest paid depositors or the Federal Reserve and that collected from the borrowers. But, in a modern fractional reserve banking system, mandated and overseen by a central bank, individual banks do not create money.

Again, if one had been using diamonds, which is commodity money, or for that matter printed $100 bills, they too would have gone from hand to hand, first as a loan and returning as a reserve deposit, each time it circulated that value would have been counted by private-banks-create-money theorists as an increase in the money supply, but, when that circulation began, throughout its circulation and when that circulation was complete, there was at all times only the same number of diamonds or $100 bills. Money will have been accounted for in different hands, in individual bank “accounts,” at different times, but none will have been created.

If the receiver of what is commonly, and wrongly, referred to as “bank-created money” puts it under the mattress instead of into a reserve deposit, money circulation stops. But as soon as that person spends the money, where it is eventually 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 days if the transaction was by check and instantly if by debit card, and the money continues to circulate. 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 can trade 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, meaning monopolists have claimed a larger share of real wealth, electronic money must be created by the Fed to buy and sell those monopoly values.

When loaned money is spent and redeposited, utilized reserves and excess reserves remain at the original combined level, there has been no increase in money. The fact that a bank short on reserves must borrow overnight funds from surplus banks again proves that loans are made from reserves. Each bank sending their balanced accounts to the Federal Reserve which dutifully recorded that bank’s loans and reserve balances is being replaced by instant debiting and crediting which includes crediting mandated reserves to the central bank. That accounting of all banks’ reserves adds up to the original primary-created money, base money, because it is, and always was at every point, that same money.

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. The check written would have returned to the bank as another deposit ready to loan out or to spend. As we all recognize that all bank purchases must come out of reserves, again MMM backs up our assertion that loans are made from reserves: it says, “The net effects on the banking system [by bank purchases] are identical with those resulting from loan operations.16

Further Testing the Assertions that, under Modern Fractional Reserve Banking, Private Banks Create Money

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 bank creates through loaning money into existence.” They are unaware they are describing fractional reserve banking when communications were slow and money had to be created by private banks, the goldsmith theory of banking, as opposed to modern fractional reserve banking utilizing high speed communications which demands that only the federal government create money.

Private-banks-create-money theorists say: A private bank makes a loan for $10,000. They 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, circulates within the economy, and is deposited back into a reserve account. Money was created when loaned and then returns as other accounts which add up to $11,000. 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 available for 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 the very meaning of 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.” Those theorists are speaking of deposit expansion, 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 banks are going broke all the time.

4 Even if conservative banking internal controls held the level of money creation to reasonable levels (those rules were always breached under wildcat banking), the profits (instant claim on wealth yet to be produced as the loan is recorded under assets, plus interest paid each year on money created out of thin air) would be enormous and impossible to hide yet are not accounted for anywhere.

5 Competition for profits made from money (loans) created with a few key strokes would shrink interest rates to just that necessary to keep the bank solvent. If the competitive savings rate was 3% and with the cost of banking being under 1% of total loan values, the competitive loan interest rate would be just over 4%, just enough to stay solvent, not the 6% to 24% currently charged.

6 The question is resolved for good when one realizes that all money in circulation today is effectively federal money where money created by private banks have always had that bank’s name printed on it. As all deposit money is convertible to cash money, which is federal money (greenbacks), no one would consider giving a private bank the right to create federal money and no one can point to a law giving them that right. That settles the question, only the federal government can create money and it is done through the socially-owned, but privately-operated, Federal Reserve in sync with the Treasury.

In the sense that private bankers-power brokers control America’s Federal Reserve and they point that money towards enhancing and protecting their power and wealth, the ethereal world of high finance and wars, private bankers, through control of the Federal Reserve, not through their individual banks, do create money.

Those who believe private banks create money under modern fractional reserve banking have not analyzed how slow communications required fractional reserves as practiced by goldsmiths and wildcat banking, private banks outright creation of money with their name on it, and the chaos those same principles would create when communication shrank to days, then hours, and then the instantaneous debiting and crediting between all deposit institutions that is in effect today. Slow communications required private banks having the right to create money and responsibility required that it be in their name. With high speed communications, a central bank to create money and control the money supply became imperative. The seal of the nation on that money and it being the only money in circulation in America for decades proves that, under modern fractional reserve banking, only the federal government, through the Federal Reserve-Treasury, can create money.

There is precedent for applying the full powers of money creation by, and for, society. Both Presidents Abraham Lincoln and John F. Kennedy felt money should be created by society and spent into circulation on essential social needs without debt.

On June 4, 1963, five months before he was assassinated, President Kennedy signed Federal Reserve Executive order 11110 as a first step towards society creating all monies and spending it into circulation debt free. From this summary of his thoughts put into practice, President Lincoln’s vision may have been even clearer:

The monetary needs of increasing numbers of People advancing towards higher standards of living can and should be met by the Government. Such needs can be served by the issue of National Currency and Credit through the operation of a National Banking system.… Government has the power to regulate the currency and credit of the Nation” (run an Internet search). This book is a summary of an efficient socially-owned banking system as envisioned by these famous American presidents.

The Fed’s Open Market Operations Hide 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. The profits made being from this money creation being turned over to the U.S. Treasury leaves no other conclusion than the Fed being an arm of the government.

Money is created when the Fed buys debt instruments. The reserve accounts of the bank where that check is cashed being credited with the amount of the sale with no debiting of another reserve account creates what we have, for the sake of clarity, labeled “primary-created money.” As pointed out clearly by MMM, that and currency and coin circulating 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, 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, money has been created by the Federal Reserve, not private banks.17

With checkbook, credit card, or debit card money, all that is circulating are instructions to pay. When those instructions arrive at the bank, the money is transferred from the buyer’s account to the sellers. The money moving from person to person remains what it was at all times, primary-created money with, until reserves were substantially eliminated in the 1990s, a part in a reserve account waiting to be loaned and another part in the central bank as a reserve for claims against depositor’s money. Though checkbook money never circulates, we have no problem following the crowd and calling it circulating money. The principle is the same. The accounting of that money moving from person to person keeps adding up but it was at all times nothing more than the original primary-created money owned or borrowed at different times by different people.

Lowering or raising reserve requirements, through increasing or decreasing the number of times money circulates, increases or decreases the number of times already-created money can be used. But it does not increase or decrease primary-created money (base money).

It would be transparent and much simpler for the Fed to purchase treasuries directly from the Treasury with created money. But that would expose the obvious; the government owes that money to itself. To avoid the exposure of that simplicity, the Fed purchases debt instruments on the open market. The Fed’s check is cashed, the banking system returns the check to the Fed for clearing and, without debiting another account, the Fed credits the bank in which its check was deposited with an increase in reserves equal to the face value of the check. By the Feds purchase of treasuries with socially-created money, the banking system has been reimbursed for funds originally paid to the Treasury to purchase those bonds.e As those treasuries just purchased 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.

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.18 The dividends investors in the Federal Reserve may receive are laid out in Section 7 of the Federal Reserve Act, federalreserve.gov/GeneralInfo/fract/ sect07.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 98% of all earnings of the Federal Reserve to the Treasury out of the goodness of their hearts.

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 interest is paid 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.

Member reserve banks 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.19

Operation costs are paid for by charges to banks, the Fed reports to Congress, and the payment of all profits of the Fed (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

However private bankers do control Fed policy. That they do not have the courage to distribute amongst themselves either the principal or the profits from those Fed-owned bonds proves they know they do not own the Fed. That part of the national debt owed to the Federal Reserve can be eliminated by simply writing it off. After all, one cannot owe money to oneself. Besides owning stock certificates, the only other sense in which private banks own the Federal Reserve is that it is they who receive most of the interest on that socially-created money. This is accomplished through the rate spread between the interest paid the Fed and depositors and that charged the borrowers. Obviously, the American people should take advantage of the back out clause in the 1913 Federal Reserve Act, repay those bankers the small amount of money invested and take full control of the Federal Reserve.

An expanding economy requires more money which banks obtain by selling debt instruments to the Federal Reserve.20 To pay for these securities, when the Fed’s check comes back to itself for clearing, the Fed simply credits the selling bank with that number of dollars without debiting from any reserve account; it is primary-created money. That electronic money is deposited into the reserves of the bank that sold those bonds; which can now loan 90% of that money, it circulates, it returns as a deposit, it is reloaned in ever smaller increments, and that cycle continues until a set multiple, dictated by mandated reserves of the socially-created money, has been loaned. When loans are being repaid faster than money is borrowed, money accounted for, known as the money supply, disappears from an economy by the same multiple. But the circulation of base money has only slowed down, none of it has disappeared.

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. To put it another way, 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 the money supply at the proper level. However, with bankers in control, they fail to create money for the right purposes and they control inflation primarily through increasing interest rates rather than increasing 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 that creation, seriously lowers economic efficiency.

America had the good fortune of sincere bankers, tired of the multiple crisis of wildcat banking, establishing in 1913 super-efficient modern fractional reserve banking overseen by the Federal Reserve. Then they had the misfortune of corrupt bankers taking over the beautiful system they had designed. For the purpose of laying claim to more unearned wealth, they studied out ways to avoid, and finally almost eliminate, fractional reserve banking. But, since the right of the government to create and regulate the value of money is embedded in the constitution, and even though this part of America’s foundation law was necessarily ignored for 137 years so as to develop the frontier, modern money is created through the Federal Reserve.

Though by law modern fractional reserve banking had to be practiced, 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). Instead created money was pointed towards the ethereal world of high finance and wars. You and I easily 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 as they rise and fall. The wealthy do not want to destroy that honey pot utilizing mandated reserves instead of interest rates to control the money supply.

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 circulating money, the money supply, can be maintained by increasing required reserves. Once infrastructure is built and the money supply in balance, the most efficient way to finance and maintain it is through calculated resource rents and banking charges.

Through those monopolies being transposed into full and equal rights for all, as addressed in the Conclusion, money circulating back to the government in the form of resource rents and bank profits can be calculated to fund governments, infrastructure, health care, and even retirement.

Bankers derailed the potential efficiencies of government creation of money by spending it into circulation building and maintaining social and economic infrastructure because the massive funds generated through monopolies, exclusive title to nature’s resources and technologies, as we address in depth, needed a secure place for investment and bankers, over the centuries, 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 what we are addressing as 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 bonds and other debt instruments, a debt to be repaid by the same people from which it was appropriated. Those 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 and bought and sold on the markets, are also money creation processes. The proof is in the instant creation of capitalized wealth through exclusive titles continually appropriating more wealth and rising in value in the process, this requires that money be created to finance sales and purchases. The quick restructuring of those appropriated values under conditional titles to full and equal rights, their transposition into relatively equally-shared use values, and the enormous economic efficiencies (a workweek of two to three days per week outside the home earning a quality life) proves the existence of those monopolies. Such an increase in free time requires a total restructuring of society (see Conclusion).

Since, in a socially-owned banking system, any financial need at any time not covered by savings can be covered by creating money, roughly 60% of those huge blocs of capital we are taught as crucial for investment capital need never have been appropriated from true producers. The powerful throughout history have instinctively known both their power and unearned wealth will disappear under full and equal rights. So they protected their superior rights through short circuiting the potential efficiencies of the Federal Reserve to create what is essentially debt-free money. Once created, used for the right purposes, and unless it is destroyed, bankruptcy for example, that money circulates forever.

Very little has to be done for society to reclaim their full and equal rights to finance capital. Simply buy up those privately owned shares in the Federal Reserve system at the price paid as allowed for in the Federal Reserve Act of 1913, 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 (savings and need for loans) 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 which is both created money and savings. That balance will then be finalized through calculating socially-collected resource rents and bank charges to cover infrastructure costs, health care, and—though it can be done through payroll deductions—even retirement.

Accumulation of Capital under Henry George’s Inclusive Property Rights Law

Chapters one through five address the enormous unearned capital accumulations of the various privatized commons. The huge unearned profits of these exclusive titles to nature’s resources and technologies 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 investments. We have the anomaly of wealthy nations with too much money and impoverished nations with too little, almost no, money.f

All borrowers, consumers of the moment, are borrowing the deposits of all producers, 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.

It is possible to be paid but not produce value. If the purchasers think they are receiving value, that is tantamount to real value. However, if money contracted only productive labor and full values were paid for that labor, money would represent real value and would become a symbol of actual wealth (use value). Money would then be only a tool, a symbol for the trade of productive labor, which is the mechanism that functions when we describe the economy increasing equal to the invention of money, the printing press, and electricity once those monopolies and their huge blocs of appropriated wealth are eliminated.

Under conditions of equal rights, when each person is fairly paid for his or her fully productive labor and each has rights to his or her share of the remaining productive jobs, money lent combines land, labor, and industrial capital to produce full value in needed goods and services. A society can be fully productive only if each of its citizens is fully productive. Neither money nor the economy can become truly efficient until all nonproductive siphoning of wealth through unequal trades, in both internal and world trade is eliminated. Likewise, every contracting of labor for nonproductive use must, on final analysis, be paid for by appropriating value from other stakeholders’ productive labor.

Powerful bankers thousands of miles away have no concept of local needs and no loyalty to local people. Farmers, homeowners, and small businesses are strapped for finance capital as their locally produced wealth is siphoned to stock speculators, merger and takeover artists, currency speculators, and other gamblers in the worldwide market casinos.

Do away with the casino aspect of both money and stock markets and local needs can be more easily financed. It would be a simple matter to calculate finance capital needs and assign a surcharge to all loans to go into a socially-owned capital accumulation fund kept in, and loaned from, local banks. Everything is then local as opposed to an ethereal world of high finance. Capital needs of each federated region of the world, each nation, each state, each county, each region of a country, and each community can be calculated. So long as there are surplus labor and resources and real value is to be produced, finance capital can also be obtained through printing money. But once the capital accumulation fund is established, it would largely replenish itself through loan repayments and interest rates high enough to cover loan losses.

A quick analysis of the simplicity of a socially-owned capital accumulation fund makes it clear that wealth accumulated in the past through exclusive titles to nature’s resources and technologies has gone for many other things besides society’s finance capital needs, primarily buying and selling the capitalized values of appropriated wealth (speculation) and for extravagant living.

Every alert entrepreneur knows the big profits end up with those who call the tune with their money. With a socially-owned capital accumulation fund replacing those huge blocs of capital destined for obsolescence under the full and equal rights of Henry George’s inclusive property rights laws, citizens with sound ideas, but no capital, would have the opportunity to realize the profits from their abilities and accumulate capital in their own names. As talent is broadly diffused, wealth, accumulated by true producers would quickly diffuse itself relatively equally throughout the population.

Just as each individual has rights, federated regions, nations, regions within nations, states, communities, and entrepreneurs should have rights to their share of the world’s finance capital, its primary-created money and savings. Denying social funds for speculation in the worldwide gambling casino, but permitting it for new speculative enterprises and giving rights to finance capital as described above, would guide lending into productive channels, the real economy as opposed to the ethereal world of high finance battling to lay claim to wealth produced by others.

Consumer credit, within limits, should be a right quickly available, just as it has been pioneered by computerized credit cards. Using artery, vein, eye pattern; thumbprints, and signature scanning, procedures now in use, along with a credit check, risks would be almost nonexistent. Each person’s right to credit would be tempered by being subject to standards much as they are now, and the local credit union, an integrated member of the banking system, would be in a position to know a member’s creditworthiness. Local bankers should best know the needs of the region and the trustworthiness of those who borrow to build and produce for that society. If not, they should not be bankers.

The economies of prosperous nations are dynamic due to the hopes and dreams of their citizens. These hopes are the motivation for the millions of small businesses springing up. The economic health of a nation requires that those with ideas, talents, and energy have access to finance capital. With rights to credit, a nation’s talented can bring together land, labor, capital, and technology at the right time and in the right place to fulfill society’s needs. If there is a shortage of finance capital for productive use, and the resources are available and can be used without destroying the environment, a nation’s Treasury-Federal Reserve simply creates money up to the level of a balanced money supply and spends it into existence building infrastructure or providing essential services such as health care or retirement. Once an economy is balanced, resource rents and banking charges can be calculated to cover the costs of government, infrastructure, health care, and even retirement. All citizens pay their share of normal social costs through the price they pay running their daily lives.

Only individuals operating under free enterprise and competition, partially so under monopoly capitalism but fully expressed under the inclusive philosophy of Henry George, can develop the millions of ideas necessary for the progress of science, industry, and society. In order for citizens to fulfill these visions and provide their special expertise, it is necessary they have access to credit. With entrepreneurs having rights to finance capital and banking personnel trained to be generous, yet careful, innovation in production by business and industry, productive speculation, would be unhampered.

Credit is currently rationed by the simple method of checking track records and lending up to a certain percentage of a borrower’s equity, a great rule for monopolists. “Loans are made in a very impersonal way, everything depends on ‘track record,’ and if you don’t have a ‘track record’ [or equity], as most young people do not, you can forget it.”21 Access to investment capital should be a right based on productive merit as well as collateralized equity. Thus credit for productive people in their first ventures and those with a vision for productive expansion would be easier to obtain.

With employees of a banking authority trained to be alert to productive investment requests, these loans would be quite simple. When a loan request was received, an evaluation would be made of its potential productive and financial success. If it looked reasonable, the loan would be approved. This is precisely how loans in America were made for the first 15 to 20 years after WWII. After the boom years were over, banks reverted primarily to loans against equity.g

With the disappearance of monopoly values, smaller loans would be backed by a smaller, secure, true value and those values would be matched by the savings of fully-productive labor and entrepreneurs within a much more efficient economy. A loan would, of course, require financial accountability by the borrower just as it does now.

Through regional capital accumulation funds charging higher interest to cover risk, loan institutions can fund new projects. It is not necessary to lend strictly to owners who would then hire workers. Those with insight need only prepare a prospectus describing the product or service, market potential, profit expected, financial requirement, and labor needs. The loan institution would study the proposal and, assuming the ideas were sound and beneficial, would approve the loan. Workers would study the prospectus, and agree to 10-20% of their wages being deducted as payments for 60-80% of the stock. Those who planned the productive endeavor would own, and be responsible for paying for, 20-40% that industry’s value.

With workers owning a share of industry and a share of their wages being used to pay off the loan, those owners of capital would be true producers. Society would receive useful products or services and the nation’s savers and national treasuries, providing primary-created money if necessary, would be fully paid for their finance capital.

With these triple benefits to society, bankers should be taught to pay close attention to requests for investment credits; they are the sinews of capitalism. Most workers would stay on the job, but, once a new business was secure and their new stock had capitalized value, the talented ones would search out another prospectus, help develop another business, train more workers, gain more capitalized value, and move on again.

Labor would be both mobile and highly productive just as capital is now and the most productive of those workers would be the accumulators of capital. This would be mobilization of labor without the dispossession that has been so typical of past capitalization processes. Labor would have the same rights to gains in efficiencies of technology as investors now have. The talented would be in high demand by the developers of industry.

Besides collateral protection, there are three flows of money that make those loans secure, resource rents, profits, and a share of wages. Every success increases the use value, and thus the rental value, of land. As they are sharing in those profits, society’s collection of resource rents—either directly or through lower product and service costs—could, and should, permit it to accept its share of the risks of new entrepreneurs.

With these restructured borrowing rights, many more people would qualify for investment capital than under equity loans. If successful, they and their workers would own that capital honestly, as opposed to the current custom of capitalizing values through exclusive titles to nature’s resources and technologies laying claim to values produced by others.

Those searching for a higher return, and confident they have found good investments, could directly employ their capital. Those with the opportunity to lend their savings at a higher rate would be free to do so. But they could no longer obtain high profits by bidding on exclusive titles to nature’s resources and technologies and, through that monopoly structure, laying claim to wealth produced by others. The huge blocs of accumulated capital confiscated from productive labor would disappear under these proposed conditional titles to nature’s resources and technologies.

Once restructured, a society must reduce labor time and share productive jobs. If this is not done, new mini-monopolizers, in the form of excessive job rights, will emerge. A socially-owned capital accumulation fund within a modern financial commons would eliminate the centers of power created through exclusive titles to nature’s resources and technologies laying claim to wealth produced by others.

Japan operated just such a capital accumulation fund and utilized it with a vengeance to reach its current position in world trade. We do not suggest a nation’s international trade capital accumulation fund be that aggressive but it would be great protection against others’ predatory trade practices.

However, massive accumulations of unearned capital are a loss, not a gain. The roughly 40% honestly earned and saved, is efficient. But that which was not honestly earned is inefficient to the extreme. Not only is creation of money for infrastructure and essential needs more efficient, those massive funds floating around searching for something to own is the ethereal world of high finance laying claim to ever more of the wealth properly belonging to others. A Money Commons

People unproductively attached to the arteries of commerce, either for making a living or making fortunes, see only their momentary self interest and will not permit the necessary legal and social changes to eliminate those wasted labors. Because of the belief systems, spin, frameworks of orientation, created by think tanks established and funded by the power structure and perpetuated through the university system and the media, only under extreme crisis can change be imposed upon them.22 For the sake of precision and clarity, and recognizing that only small changes are likely and then only under severe crisis, we are outlining a reconstructed banking system that avoids monopolization while providing rights to money and finance capital to all relative to efficient productive needs.

The key to understanding an honest banking structure is that money and banking are only social technologies, beyond a little brick and mortar there is nothing there to own. Just as taxi medallions, a license to operate in New York City, develops a value of $200,000 due to the profits guaranteed by that piece of paper, a license to operate a bank develops a value of hundreds of millions, or even hundreds of billions, of dollars due to the profits guaranteed by their monopoly structured into current property rights law. In each case there are few tangible values created by labor, primarily they are monopoly values.

Chapters one through five document that competition does not eliminate monopolization. Instead, those competitors, protected by “exclusive” titles to wealth they did not earn, consume enormous amounts of resources and labor battling over market share and, in most cases, double the cost of services or products. As elimination of the monopoly system means elimination of those huge blocs of unearned wealth and the owners of that monopolized capital controlling governments, at no time, either within the wealthy world or on the periphery of their empire, have societies been given the opportunity to reorganize to efficient social and economic structures.

This is why we have heard all our lives, and still hear, about the horrors and waste of governments and the dictatorships and violence of societies breaking free. Monopolists understand well they disappear if ever the citizenry figure out that an economy controlled by a truly democratic government would double in efficiency and reduce their hours employed outside the home by half.

That efficiency can only be attained when society, not monopolists, collect resource rents and when society shares roughly equally the use values produced by the ever-increasing efficiencies of technology. When all members of society have full and equal rights to primary-created money and finance capital as opposed to its current monopolization; and when the remaining secondary monopolies—health care, insurance, etc.—are also eliminated.

Let’s assume that an economically viable, highly educated population emigrates and starts up a new economy in virgin territory and was planning to manage it honestly, equally, and efficiently. There are no labor-created values in this virgin territory but this population brings with them basic industrial tools and has the knowledge to run an efficient economy and create a new nation. These modern Pilgrims arrive prepared to establish modern fractional reserve banking to create money and keep account of this new nation’s trades.

Their newly established Treasury-Federal Reserve is empowered to create debt-free money to combine their industrial tools (industrial capital) and labor with their resources to produce basic infrastructure, roads, railroads, post offices, schools, water systems, sewers, communication systems, more industrial tools, etc. Henry George taught us these natural monopolies should be socially owned; see Protection or Free Trade, pp. 304, 309.

So long as there is surplus labor, unused resources, and a social need not cared for through the current circulation of money, a nation’s, or a federated region’s treasury can create (print) more debt-free primary (base) money. Through creation of money and raising or lowering required reserves, a society can design the proper balance between socially-created and circulating money.

The process, in use by China and India, is rather simple. If reserve requirements are doubled, loanable funds (circulating monies) are reduced 50%. And if primary-created money simultaneously doubles reserves, the money supply, (loanable or spendable funds) remain the same. When the economic problem is over, money creation and required reserves are returned to normal. Creation of money for infrastructure is a correct monetary policy but only in an initially developing or expanding economy. A fully developed economy no longer expanding can create money only up to the level money is destroyed which is only in bankruptcies or disasters. Once developed, there is still no need for taxes. Infrastructure and essential needs are then funded out of resource rents and socially-owned bank profits whose levels have been calculated to cover those social costs.

Creation of money must be planned within the earth’s resource capacity and its ability to absorb society’s wastes without ecological destruction. In a nation’s early development stage, so long as there are surplus labor, resources, and industry, debt-free primary money can be created to build schools, roads, electric power, water systems, sewer systems, post offices, communication systems, etc. In the very early stages, remembering that balance in the money supply can be retained by increasing reserve requirements, even industry can be built with socially-created money. Those options are only viable if that federated region’s currency has no value outside its borders (see Conclusion for dual money systems in operation).h Once developed, those societies should calculate resource rents and banking charges to cover infrastructure, health care, and possibly retirements.

Basic infrastructure makes society far more efficient and greater wealth is produced as this primary-created money circulates funding the debts incurred to operate other segments of the economy as that circulating money is reloaned to produce more wealth.

When primary-created money is spent for development, society owns what is built or has a mortgage against that created wealth. To the extent there are unemployed workers, unused resources, unused industrial capital, and unmet human needs, and taking into consideration the capacity of the earth to recycle wastes to protect resources, ecology, and environment for future generations, it is only necessary for a nation’s Treasury-Federal Reserve to create the money to employ that labor, utilize those resources, and meet those needs.

It is crucial that we understand how close fractional reserve banking today already is towards a modern money commons. Through “revolving reserve accounts,” total deposits and loans of each individual bank should be accounted for just as they are now through banks debiting and crediting customer reserve accounts and the Fed debiting and crediting bank reserves. Reserve requirements should be regulated just as now but, in place of increasing and decreasing interest rates, an increase or decrease in mandated reserves should be used. Banks should be collectors and loaners of the nation’s savings, just as now. All loan institutions should be under mandated reserves as most once were. All money needed beyond the revolving reserves (base money circulating) would be created by the Treasury-Federal Reserve, just as now.

There are two major differences. 1) We are describing a socially-owned banking system with no intermediaries (private banks) claiming unearned profits. Instead, a share of previous profits, from both smaller finance capital needs and smaller interest charges, go to society to fulfill social needs with the differential, monopoly profits (the values once appropriated through monopolization) remaining with the citizenry. That is the transformation of monopoly values into use values we will be addressing deeply. 2) As the appropriation of the labor and wealth of others will have been eliminated, so long as they are honest and have no conflict of interest, it matters little whether this socially-owned banking system is run by bankers or public servants.

The Fed can lower reserve requirements where loan needs are high, poorer regions which need development, regions of natural disaster, etc, and holding steady, or even increasing, reserve requirements in booming sectors of the economy. The affluent sectors of the economy awash in funds thus rebalance the undeveloped sectors previously deprived of finance capital.

With banking rights held in common, there would be local rights to finance capital. Each federated region, each nation, each region within a nation, each state, each community, and each entrepreneur would have a constitutional right to their share of finance capital (primary-created money and savings) but only a national, regional, or federated world Reserve Banki could create that money. That creation of money would be, by a formula established by law and adjustable to the deficits or surpluses of a region, automatically distributed. There would be neither control by an elite nor control by politics. Keeping money local would be a formula of world regional, national, state, local, and individual rights to primary-created money and savings, a society’s finance capital.

The success of local currencies proves regions, localities, and individuals are denied their full rights to finance capital. But local scrip is enormously labor intensive and it is neither legal tender nor universally accepted, thus it is limited in circulation. With banks attuned to take care of those needs, each locality would, in the form of rights to finance capital, effectively have a local currency and, because it is legal tender and can be spent anywhere, it would be much more efficient than very respectable and currently necessary local currency schemes, LET Systems, Ithica Hours, Time Dollars, etc.j

Honest money, such as we are proposing in a modern commons, is efficient locally, nationally, and internationally. Efficient means they are instantly acceptable anywhere and accounting costs are infinitesimal. The money itself is the accounting system and those costs are reduced to a fraction of accounting under monopolization.

The Populists of late 19th century America studied banking reform and their agenda

became a sourcebook for political reforms spanning the next fifty years: a progressive income tax; federal regulation of railroads, communications, and other corporations; legal rights for labor unions; government price stabilization and credit programs for farmers…. The populist plan would essentially employ the full faith and credit of the United States government directly to assist the “producing classes” who needed financing for their enterprises. In effect, the government would circumvent the bankers and provide credit straight to the users…. The government would provide “money at cost,” instead of money lent by merchants and bankers at thirty-five or fifty or a hundred per cent interest.23

There have been many reforms since those days of blatant extortion by the owners of finance capital, but “the money creation system that the [American] Congress adopted in 1913 [and reformed during the Great Depression] … preserved the private banking system as the intermediary that controlled the distribution of new money and credit.”24

That exorbitant interest rates are unnecessary was demonstrated by early Scottish bankers whose thrift is so well known that even today a person careful with his or her money is called “Scotch.” In the 19th century, the universal practice of Scottish banks was setting interest on loans from 1-2% above that paid depositors. Their innovative practices are still considered a model of banking stability.25 With the proper banking service charge having been well established at 1-2% for small-volume banking using expensive hand accounting, 1% would be a proper service charge for large-volume banking using inexpensive computerized accounting.

During the stable years following WWII, the real rate of interest in the United States, allowing for inflation, hovered around 1-2%. Previously, the normal world rate had been 2-3%.26 Although the real rate of interest during what were considered the best years the world economy has ever known was under 2% we believe stored labor should be well paid and will allow the highest long-term average real rate of interest, 3%, as a fair rate. With monopolization and the waste it engenders eliminated, with workers fully paid for their fully productive labor, and with true interest at the high end of historical norms, both capital (stored labor) and current labor would be well paid. People would save and those savings would be available for productive investments.

As stored labor (savings) should be well paid, savings accounts would pay, by law, 3% interest. The tendency of many people to spend any money in their pocket would require paying interest on checking accounts at half that on savings or even none. Rights to primary-created money and savings (finance capital) would eliminate money market instruments and the attendant wasted labor competing for deposits. Detractors may decry this as a loss of their rights. But the only right lost is that of the powerful to intercept the production of others’ labor, especially those pure gamblers whose wagers within the ethereal world of high finance amount to 50 to 100 times the investment, labor, and commodity, activity in the real economy. An honest banking, production, distribution, and consumption economy will have adequate entrepreneurial speculative funds but not the massive blocs of capital consisting of the capitalized value of wealth appropriated through exclusive titles to nature’s resources and technologies. Though a large share ended up in productive investments where they create immense problems in restructuring to an honest economy—that elephant in our living room will be discussed in detail later—their original purpose was buying and selling those appropriated values which no longer exist.

In a banking system, with the exception of money created and that destroyed, bankruptcy for example, total debits and credits will balance, withdrawals will equal deposits. With a fully integrated banking system, any deviation from that balance could be quickly corrected. The visible flow of funds would be the economic pulse of a community, a region, a nation, a federated world region, and the entire world. Any unexplained deficit in a bank, community, or region could be immediately looked into while normal deficits are balanced by others’ normal surpluses.

To provide an adequate living standard for all people and still protect the world’s resources and environment, a balance between a respectable living standard and the capacity of the earth’s resources and ecosystems will have to be reached. Assuming centers of capital could no longer siphon the world’s wealth to themselves and then waste it battling over that wealth, the thesis of this author’s Economic Democracy: A Grand Strategy for World Peace and Prosperity, 2nd edition; societies throughout the world could then progress calmly.

Every trade financed by money capital that moves between two banks creates a change in those banks’ reserve accounts at the central bank for that currency. If that central bank does not honor a transaction in its currency through suspending targeted banks’ access to their reserves, those banks funds are frozen. In November 2001, President George W Bush threatened to suspend rights of disbursing or accepting dollars for any bank in the world that does not cooperate in the search for those who are funding terrorist attacks on America.

Theoretically other countries can control their currencies but this is true only of economically powerful countries. The power to discount currencies of developing countries gives powerful nations effective control over other countries’ currency values and thus control over their ability to create money.

Nothing is more important for a nation’s or an economic region’s economy than productive use of created money and savings, its finance capital.

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, employed only two to three days per week and 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.

Beyond application, approval, accounting, and brick and mortar costs, less than 1% of loan values, 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.

No interest buffs and socialists here is an opening to expand your philosophies. Roughly 60% of the values bought and sold within America are primarily monopoly claims to wealth produced by, and properly belonging to, all citizens. It is possible to structure an economy with very low debts, public and private.

By raising required reserves in step with the creation of money, it is possible to create debt free money for all except consumer purchases and speculations. However, as savings, honestly earned finance capital is but stored labor we hold that those who did the mental or physical labor to produce that wealth, both finance capital and industrial capital, deserve to be paid. Thus, even with Professor Martin’s pointing out that an economy can run efficiently without paying interest and both Christians and Muslims once prohibited it, we have changed our description of an efficient banking system in our earliest works only to the extent of who besides well-paid banking labor and depositors are entitled to the values that interest represents.

Properly earned depositor savings are entitled to interest on their stored labor. They should be rewarded and we do so through, as outlined above, the payment of interest on savings at the high end of long term averages, 3%. The key is what is done with the greater interest earned by banks. No one’s labor is involved beyond that of well-paid managers, accountants, and clerks within the banking system and we have deemed monopolies structured through exclusive titles to technology, their licenses, are the heart of the current monopolized banking system. So, beyond brick and mortar, there are no tangible, labor-created, values to own. Thus the proper recipient of bank interest, above operational costs, is society itself.

With society collecting banking profits, those charges go right back to the citizenry in the form of essential services. Or society could be paid through interest charges 1% above that paid for savings accounts. As all returns to society collectively, effectively there is, just as preached in the Bible and Koran, no interest. Society has simply taxed the loan structure in the form of an annual percentage on outstanding loans. The differential between the 3% paid savers and that charged borrowers would be well under current interest charges.

Once the impoverished world is developed to a sustainable level, as we demonstrate in the Conclusion can be done, the wealthy world will have repaid the struggling world for 500 years of slavery and plunder through which the massive wealth of the imperial nations was accumulated. At that point interest and resource rents should, except for those protecting against resource depletion and environmental degradation, be reduced to the level required to operate a peaceful federated world. To not federate means continual war. To federate means peace for all time.27

The elimination of banking monopolies through socially-owned banking, with society collecting the profits, engenders an economic efficiency gain equal to the invention of the printing press. This increased efficiency would require democratic, communitarian oversight to conserve the earth’s resources and protect the environment (see Conclusion).

Analyzing Henry George’s philosophy, restructuring exclusive title to land to conditional title, though he did not always use those words, exposes exclusive titles to nature’s resources and technologies as the centerpiece of property rights law for all monopolies. Monopolization of banking, technology, communications—with land they are the four primary monopolies—and the secondary monopolies—insurance, health care, law, etc—are all understandable as monopolization of nature’s resources and technologies which includes social technologies.

As the monopolization of money and banks are eliminated, those huge blocs of capital previously buying and selling the capitalized appropriated values within the current banking structure are transposed into equally shared use values within a socially-owned and operated banking system.

We now turn to Henry George’s inclusive property rights law with society properly collecting resource (land) rents which, written in 1879, provided us the tools with which to understand all monopolies. He laid the foundation for this expansion of his philosophy across the full economic spectrum.

Footnotes

1. For thousands of years money was stationary most of the time and in motion (being transferred to another) only occasionally. Today money in motion as it moves from person to person, buying and selling, is the very meaning of money. Back to text
2. The Bank of England, its privately owned central bank, was chartered in 1694. 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 of value to back money were 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. Back to text
3. 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. Not only can an economic collapse be stopped in its tracks as addressed in the Conclusion, 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 most infrastructures will be financed from savings or recycling payments on previously issued bonds. Back to text
4. 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 as soon as it is spent or loaned and spent, that money is identical to all other deposit money. Back to text
5. We ignore creating money through printing currency and minting coins. Bank’s purchase of that currency comes out of reserves so that is only a trade of reserve deposits for currency. Unless it is loaned by a central bank, used to purchase securities from a private bank, or spent into existence by the Treasury, it is not a creation of money. Back to text
6. 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. Back to text
7. With the elimination of appropriated values in the various monopolies, there will not be those monopoly values against which to lend. But neither will money capital be needed to purchase those fictitious values. Back to text
8. Water, electricity, and natural gas should have very low charges up to a proper amount for an efficient home, higher charges above that, and very high charges for higher usages. When first industrializing in the late 19th and early 20th centuries, and again when rebuilding after WWII, the Japanese government covered possibly two-thirds the cost. Newly developing regions will develop much quicker following the trail that they, and others, blazed for rapid industrialization. Back to text
9. This would establish dual currencies, one for world trade and one having value only within nations or regions. In Protection or Free Trade, p. 322, Henry George, foresaw the day Governments would create money. On p. 331 he hints to the future federation of the world. Back to text
10. An Internet search will locate these local currencies and more. Tom Greco, Understanding and creating Alternatives to Legal Tender (White River JCT, VT: Chelsea Green Publishing, 2001) is one source. Back to text

Endnotes

1. Joel Kurtzman, The Death of Money (New York: Simon and Schuster, 1993), p. 11. Back to text
2. William Greider, Secrets of the Temple (New York: Simon and Schuster, 1987), p. 335. Back to text
3. John Kenneth Galbraith, Money (Boston: Houghton Mifflin, 1976), pp. 62-70. Back to text
4. Ibid, pp. 167-78; Greider, Secrets of the Temple, pp. 228, 282. Back to text
5. Philip S. Foner, From Colonial Times to the Founding of the American Federation of Labor (New York: International Publishers, 1947), p. 67. Back to text
6. John Kenneth Galbraith, Money (Boston: Houghton Mifflin, 1976), pp. 62-70. Back to text
7. S. P. Breckinridge, Legal Tender (New York: Greenwood Press, 1969), chapter 7; Galbraith, Money, pp. 72-75. Back to text
8. Carl Cohen, Editor, Communism, Fascism, Democracy (New York: Random House, 1962), pp. 13-14; Paul Kennedy, The Rise and Fall of Great Powers (New York: Random House, 1987), p. 53. Back to text
9. Galbraith, Money, pp. 18-19. Back to text
10. Paul Kennedy, The Rise and Fall of the Great Powers. New York: Random House, 1987, p. 53. Back to text
11. E.K. Hunt, Howard J. Sherman, Economics (New York: Harper and Row, 1990), pp. 491-93, 505-508. Back to text
12. Thoren and Warner, Truth in Money, pp. 120-24. Back to text
13. 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. Back to text
14. MMM, http://landru.i-link-2.net/monques/ mmm2.html or run a Google search. Back to text
15. Please run a search in the MMM webpage for those key words. Back to text
16. Run a Google search. Back to text
17. Hixon, Triumph, chapter 5. Back to text
18. Ibid. Back to text
19. Ibid Back to text
20. Greider, Secrets of the Temple, pp. 61-62. Back to text
21. Robert Swann, The Need for Local Currencies (Great Barrington, MA, E.F. Schumacher Society, 1990), p. 6. Back to text
22. J.W. Smith, Economic Democracy: A Grand Strategy for World Peace and Prosperity (Fayetteville, PA: The Institute for Economic Democracy, 2008), chapter 6. Back to text
23. Greider, “Annals of Finance,” The New Yorker, November 16, 1987, pp. 72, 78, emphasis added. Back to text
24. Ibid, pp. 72, 78. Back to text
25. George Tucker, The Theory of Money and Banks Investigated (New York: Greenwood Press, 1968), pp. 219, 255. Back to text
26. Michael Moffitt, The World’s Money (New York: Simon and Schuster, 1983) p. 197; John H. Makin, The Global Debt Crisis (New York: Basic Books, 1984), p. 162. Back to text
27. Errol E Harris, Earth Federation Now: Tomorrow is too Late (www.ied.info: the Institute for Economic Democracy, 2005; Glen Martin, Basic Documents of the Emerging Earth Federation (www.ied.info: the Institute for Economic Democracy, 2006). Back to text

This is a chapter from the book, Money; A Mirror Image Of The Economy. Visit that link for more information about the book.