It is difficult to know where to start with this slight piece of whimsy.

I know that it is the current fashion to look to blame as many external factors as possible, for what is essentially a problem that individuals have created for themselves, but this is more an exercise in "wouldn't life be wonderful, if only..."

And as such, it fails to come to grips with the major pitfalls associated with its primary proposition.

For a start, the author substantially underplays the political angles.

"...under the control of a public agency responsible for carrying out money supply objectives laid down by the elected government, accountable to the legislature, and subject to democratic control... Safeguards would ensure that the agency did not allow politicians to create additions to the money supply for their own electoral or other narrow political purposes."

Anybody who believes that our politicians will suddenly become apolitical, simply because we give them the keys to the piggy-bank, deserves a special award for naivety.

But there are in fact two key areas to consider here. How we make the journey from A to B, and what life will look like when we get there.

The first, interestingly, doesn't even warrant a single sentence in the article. But re-engineering the entire system from a base of democratic capitalism to a centralist command-and-control system won't be particularly pleasant.

And if we need to understand what life will be like if the objective is ever achieved, it may be worth swotting up on the US experience, prior to the creation of the Fed.

"The main motivation for the third central banking system came from the Panic of 1907, which renewed demands for banking and currency reform." (Wikipedia)

http://en.wikipedia.org/wiki/Federal_Reserve_System

It's a good read.

It is a great idea to stop banks from being able to create money substitutes at will, unbacked by money in specie. That is what has caused the current depression and the boom that preceded it; and the same for the Great Depression.

But it is laughable to suggest that the way to achieve this end is to centralise a monopoly of creating money in the hands of the state. That is what is causing the problem in the first place.

To talk of ‘the money power’ is to assume that it is a valid function of government to print money out of thin air, and that the political process would provide an adequate protection against government abusing this monopoly.

Both these assumptions are false: as the history of the 20th century, and the Federal Reserve, have shown.

The author talks of a government monopoly of money are returning the money power to “the people”, but it would do nothing of the sort. The state is not the people, and the people are not the state.

The state has a direct conflict of interest with the people in that the state has an endless interest in inflation, which causes enormous social and economic chaos and hardship. Inflation is a sneak tax. The effect of it is to transfer money silently from everyone’s pockets and bank accounts, to government and the political favourites that they bribes for votes.

The banks’ ability to create money substitutes out of thin air is enabled by monetary policy, without which, the market disciplines of loss and bankruptcy would return real power to the people.

It is interesting to do the thought experiment of what would happen if governmental control of the money supply were abolished. There would then be no more occasion to talk of ‘the money power’, than there is now to talk of the ‘the food power’ or ‘the sex power’. Should government have monopoly control of these things too, on the ground that they’re so important, they should not be left to the operations of liberty and competition?

Whatever system is used:
1) Make it transparent. Secrecy causes corruption.
2) Make it efficient. Massive profits are as bad as massive taxes.
3) Make is sensible. Current systems don't even make sense in theory, let alone practice.
We currently have a mish mash of centralised system that has been neutered so that it can protect the corperations, yet not actally regulate them.
Prepare for inflation folks.

There's a free DVD to download, burn, and share at

http://www.chrismartenson.com/crashcourse

It explains why exponentially increasing money supply loaned into existence with interest attached CANNOT be sustainble.

What if we reach the "maximum" goods and resources that the world can support? What if we need a "stable, no-growth" economy, whatever that looks like?

Do you really think loaning money into existence WITH INTEREST is a way to achieve that, and doesn't inherently demand economic growth so that the extra money is not inflationary?

My understanding is the argument that giving money control to the State at least makes them accountable to US at the ballot box. Giving money supply control to fat-cat bankers makes them accountable to the public... how exactly? Oh, you mean we get to have our economy and jobs crash when they walk out with $10 million dollar pay bonuses, and that's "punishing" them?

Wing-Ah-Ling, you don't happen to be a corporate banker do you? ;-)

(Nudge nudge, wink wink, say no more, say no more!)

This is why we need an independant National monetary Fund whose board members are elected by the people.If a reponsible independant body can create currency and be responsible to the people for excessive inflation,then we will have sustainable growth.We then would not be in so much debt.Our govts could borrow from and NMF and we could own our roads instead of paying tolls.

Many self interested groups want the present system to remain,since the inflation created by the private banks feeds the avaricious share market that eventually distorts and perverts the real economy.We should never have sold the CBA or any of the state banks since they did the job of the Global Reserve Banksters.We cannot build infrastructure because we have to borrow too much.Soon Kevin will have us in $300 billion in debt.Add to this the balance of payments deficit of ove $600 billion nad we are in serious trouble.

Why borrow from the likes of Rothschilds who create money from nothing,when we can create currency based on the real productivity of the Australian people?

it must be clear that both systems have their mistakes..[yet the current system clearly isnt working..[when tax payers bailout millionairs we got communism...pure and simple]

we need a new system[this point must be clear]...and the new system is that moneyt creation returns to the people..[who's labour is the only valid currency]...now how to make it work...becomes the point

the only thing i see is that each elected-member[of govt]gets elected to supervise their own local currencies...and held to account for their missuse...thus local govt members get a purse to spend in their constituency...federal members get a purse to spend in their portfolio

the ammounts they get to spend are set at city/state/federal levels[directly by the peoples vote[the elected have nominated their spend in the process of their election,and each vote is accorded a value

the biggest vote..runs the dept till his/her cash reserves are runout,..then the next elected goes in and does their spend...yeah its complicated but the totality of govt oversees the spend...

the current system sees 51 percent lording it over the 49 percent..[who are kept perpetrually disempowered]..simply because they never get the numbers...when each vote is worth a value,..the limitation of funds at least falls back to the number of votes you got

it would be nice if i could qwuote an egsample of where it works,under the current system...but clearly it is too much of a franchise,..giving money to your mates,and able to create as much as they can get away with...till they default[leaving their stolen gain in some family trust/or with the misses]

there must be a way to create monetary units and not get ursury[the big problem being the intrest..[if all money was to repay debt..[we wouldnt need inflation...

i guess to keep it simple..toss away the right to issue ursury...it is enough/to be able to acces credit...in the end all wealth was stolen from the poor...either via taxes..[or ursury..leading to reposession..or from their labour they needed to give..to simply survive

Whilst this comment does not do justice to the article and to the comments in response, I think my post to John Quiggin's sit may still be of interest:

http://johnquiggin.com/index.php/archives/2009/06/29/monday-message-board-142/#comment-240582

I thoroughly recommend “The Web of Debt” (http://www.webofdebt.com/) by Ellen Brown (http://www.ellenbrown.com/). There can be little doubt that most of the world’s economic problems are due to the fact that, from the 18th century, at least, the global banking cartel has usurped from sovereign nations such as Australia, the right to issue the means to enable the exchange goods and services (i.e. money) amongst their citizens.
This view is solidly backed by copious quotes from a large number of credible historical figures including Benjamin Franklin, US President Abraham Lincoln, Otto von Bismarck, US President Theodore Roosevelt, US President Woodrow Wilson etc, etc.
In the 18th century, the governments of American colonies assumed the right to issue currency. This facilitated great prosperity until the British Government and the behest of private Bankers, outlawed the practice, causing the colonies to descend back into poverty. This resulted in the American War of Independence. However, the US government never fully regained the right to issue currency. This right was usurped by the private banking cartel known as the “Federal Reserve”. This caused nearly all the economic problems and indebtedness with which the US economy has been subsequently afflicted.

Well we all seem to be agreed that the source of the problem is banks being able to print money out of thin air, The issue is whether this phenomenon originates in government interventions in the money supply, or in the unfettered markets’ failure to properly regulate the money supply.

The blame must lie on government, for several reasons.

To start with, the market is not unfettered. The whole purpose of central banks is to control the price of money, in other words, to set it at prices other than the unfettered markets would set it.

Now the whole point of prices is that they regulate supply and demand. Thus the problems with the supply of and demand for money, in other words, economic booms and depressions, must be blamed on government, not unfettered markets. The whole purpose of central banks is to stop such booms and depressions happening. Unfettered markets, by definition, do not exist as concerns money under central banking.

Secondly, if government control of the money supply were abolished, the market would impose a much better, though still imperfect control over the problem. There would be no monopoly of printing money. Anyone could do it. The problem would be getting merchants like Harvey Norman to accept my Wing Ah Ling Dollars. Thus the market would evolve its own money, just as it did before government took over and imposed the National Mega-State Bamboozling Corporations, aka central banks. These monies would most probably be gold, silver and other precious metals. Their price would vary with supply and demand.

Thirdly, in the absence of profit and loss, how is government going to regulate supply? How? How are they going to know which amount is appropriate? How are they going to stop systematically favouring debtors or creditors?

And how is government’s own endless appetite for inflationary finance to be kept from endlessly generating booms and depressions, as it does now?

Under private markets, the citizens would have power to stop governments endless fraudulent inflating, as well as stopping the licence to inflate that government grants to banks

Under free banking, banks could issue money substitutes, eg cheques and credit cards unbacked by money in specie and this would entail some of the inflationary problems we now have.

But a lot less because:
1. The law against fraud would prevent banks from misrepresenting their reserves, as the government does (the very name “Reserve” bank is a fraud)
2. People could choose what level of reserve they were comfortable with, and have or not have the commensurate risk
3. The market discipline of loss and bankruptcy would extinguish banks that pushed their fractional reserve too far.
4. There would be no reason why loss-making banks, and loss-making individuals, should not face losses.
5. There would be no justification for government intervening to stop runs on banks, because government would not have lent its authority to money and banking; any more than government now saves pizza shops.
6. The only ones exposed to loss, would be those who voluntarily undertook the risk, unlike the situation now, in which *everyone is made the donkey to pay for governments’ endless and scammalicious Ponzi schemes of fake paper money backed by nothing.

Last week, gold coins from 60AD were dug up in Britain. They have retained, and even improved, their purchasing power.

Can anyone with a straight face assert that any governmental paper money anywhere in the world ever in the history of fiat money would retain its value even 20 years into the future, let alone 100? The very suggestion is laughable, and demonstrates the fraud that government monopoly control of the money supply institutionalises.

It is also laughable to suggest that government control of the money supply is necessary to guarantee economic stabilisation. It has the opposite effect.

Government control of money and banking is utterly failed; it is no more justified than government monopoly control of the supply of shoes or pizza and should be abolished.

Since the US Federal Reserve[a private cartel of banks] took control of the US currency in 1913 ,the $ US has lost 96% of it's value.We have suffered a similar fate.

Why did we give the right to produce currency to a private elite group that no other corporate entity individual or Govt can do?

When an individual counterfeits money say $22 million,equal to the pop of Aust,that dilutes the value of our currency by $1.00 per person.To counterfeit money is paramount to theft from the rest of society,yet banks do it with impunity.When we went off the gold standard in 1974 the money supply accelerated as never before in our history.Presently they are trying to solve a debt/inflationary dilemma by doing more of the same.They are propping up failed financial institutions by destroying the productive ones.Where will that lead us?

The US is currently losing almost half a million jobs per month and Obama thinks that corporate communism is the answer.Presently we are in the eye of the cyclone as a result of bailouts and stimulus packages,but the storm will soon rage more ferociously than ever we could have imagined because of our failure to address the real issues.

Arjay, I thought you had learned better, from previous threads where you have said the same stuff, only to retreat when challenged.

>>Why borrow from the likes of Rothschilds who create money from nothing,when we can create currency based on the real productivity of the Australian people?<<

There is so much wrong with that question, it defies coherent analysis.

When you are able to demonstrate that you understand a simple balance sheet, it is just possible that you will come to understand just how logically void are your posts on financial topics.

Just two questions. Neither of which you will understand, but here goes anyway.

On what basis will your "NMF" create new money, i.e. how will it enter the economy?

And what will be the economic impact of the process you have described?

Don't be shy. I know you cannot actually answer either of these, but it will be interesting to see what you come up with.

there goes periculiour with his destractions again,the current system creates money via the creation of debt..[basiclly i sign a loan document,that gets securitised and sold off up the chain via my loan bank...[through thier loan bank's...to the securities traders

thus the co signing little bank,takes my loan paper's to the central bank...central bank to the fed reserve,fed reserve to imf/house of settlements etc,its a complicated chain[that pericules him/herself cant describe and many bankers cant describe,..thus he/she keeps asking his/her inane destractions

if he could he would say this world organisation lends to this lends to that etc..[but the simple fact remains..our promise to pay is securitised,..and in the end a credit and a deficite appear on their books

[when the debt is re-paid it's credit trail majicly disappears,..into the credit accounts held by business..banks and agencies owned dirrectly and indirectly..vairiously by the rothchild's/fed reserves and other agencies,owned by other bankers and multinationals

the facts as previously stated and ignored is the house of international settlements[..assets include 25 trillion of shares..[with a debt..to some unknown rothchild type figure of 23.5 trillion,holds directly the shares as security the house of settlements is allowed to trade with to settle..

their speculative leveraged trading...at no time do these traders actually hold any share..[they are held as surity for the outstanding debt...any proffits they make go into repaying...

i have pasted the story for perculiour many times..with links,he studiously[selectivly ignores...wanting it in our own words[in 350 words or less]

again and again with his simplistic platitudes..[insults and destractions discised as questions...he claims the win...so i will leave you with his spin

The only real money is tax bills, as evidenced by the current crisis. As soon as credit (funny) money fails, everybody wants real (tax) money.
The only ethical way to introduce money into the system is for democratic governments to spend it in, instead of borrow it in, as the author suggests.
And yes, it must be done by an independent reserve or central bank and not by the political government of the day, or overspending and hyperinflation would be inevitable.
Governments, in setting their budget for the coming year, would have to nominate the amount of new money they would spend into the system, according to how much they would be taxing the people for the services the money would be spent on.
We need to recognise the current system of compound debt, constant growth and constant inflation is a debt that our children, and now our grandchildren, will have to repay.

James Robertson is spot on.

I urge everyone to immediately visit his web site at http://www.jamesrobertson.com and subscribe to his newsletter and then to order a copy of the abovementioned "The Web of Debt" at http://webofdebt.com which will cost you US$33.50 (= US$22.50 + US$11.00 postage)

The greatest idiocy is for governments to have surrendered to private banks the right to create money out of thin air.

Money should be nothing more than the means to exchange goods and services. It has no intrinsic worth and should not be used as a means to derive income through the charging of interest.

---

Wing Ah Ling wrote: "Government control of money and banking is utterly failed; ..."

To the contrary, it has been a huge success nearly everywhere it has been tried. This included the British American colonies until 1764 when the Bank of England used its influence over the British Parliament to pass the Currency Act which made it illegal for the colonies to print their own money.

Prior to that Benjamin Franklin had said to an incredulous British audience:

"We have no poor houses in the Colonies; and if we had some, their would be no-one to put in them, since their is, in the Colonies, not a single unemployed person, neither beggars nor tramps"

That was to change very rapidly after the passing of the Currency Act, with the streets filling with unemployed beggars, just as they were in Britain. This in turn led to the American War of Independence. ("The Web of Debt" (2008) pp40-41, Ellen Brown)

I agree with Robertson about the systematic problems caused by the way we increase the money supply. We do not have to increase debt to increase the money supply and there are many ways that it can be done.

Here is one practical way to increase the money supply by $43 Billion dollars that will result in no debt to the government, a flat wholesale price for broad band throughout Australia, competition from suppliers of wholesale broadband, most people signing up for broadband which in turn will make broadband accessible to all at a reasonable rate.

http://stableproductivemoney.wordpress.com/2009/06/12/submission-to-national-broadband-network-greenfields/

The issue with increasing the supply of money is to ensure that the money created will be spent increasing the productive capacity of society and not wasted on asset bubbles or non productive consumption.

There are many places we can productively invest money - if only it was available and if we could pay it back including interest once the investment was earning money.

Take a look at this work in progress on how to fund innovation in our community.

http://cscoxk.wordpress.com/2009/06/18/a-strategy-for-investment-in-innovation/

I am now working on a variation on this idea that could be funded through the current banking system and does not require as Pericles states "a reengineering of the financial infrastructure" or centralisation of control.

There are many practical incremental ways to "fix" the financial system that will be efficient, will break the link between loans and money, and will be decentralised as Robertson (and Wing Ah Ling) suggest.

*We should never have sold the CBA or any of the state banks since they did the job of the Global Reserve Banksters*

I'd have to strongly disagree with that one. I have just renewed
my Eureka Report subscription, so they sent me an " Andex Chart
for Australian Investors" which makes for interesting study.

If we look at the broad figures and decades, the 70s and 80s were
high interest and high inflation years. I remember the 70s, obtaining
credit was extremely difficult.

Keating eventually deregulated the banking system, the money supply
increased, yet the 90s and 00s were far lower in terms of inflation
and interst rates. We all benefitted.

What made the difference to inflation was not those "evil" banks, but
globalisation. Local companies could no longer increase their prices
at will, they had competition. The Melbourne old boys club could
no longer screw the consumer, as they did for years, hiding behind
large tariff walls.

Our present banking system is in fact working quite well. Yes,
banks make profits and pay them to shareholders. By far the biggest
shareholders in Australian banks, are in fact Australian workers,
via their super funds. So in fact all of you benefit, if you work
and have money in a super fund.

The author forgets that the Reserve Bank can change the money supply
at will, by changing banks level of required reserves.

Exasperating as they are, threads like this - and there have been many in the past few months - are an important outlet for the frustration we all feel when faced with an economy as sick as this one.

However, it is necessary to keep a measure of common sense when proposing a "cure".

>>there goes periculiour with his destractions again,the current system creates money via the creation of debt..<<

Absolutely correct. Poor lending procedures have been at the heart of many of our current problems. But I would like to remind uog that the borrowers of this money did so willingly, and with the expectation of personal benefit.

>>thus the co signing little bank,takes my loan paper's to the central bank...central bank to the fed reserve,fed reserve to imf/house of settlements etc,its a complicated chain[that pericules him/herself cant describe<<

That's nonsense. It is a very simple process, and one that is completely transparent. Once you accept that Banks do not force-feed loans into other people's (or businesses') pockets, it all falls deliciously into place.

Remember, you cannot create a liability without creating a corresponding asset. Simple bookkeeping.

>>[when the debt is re-paid it's credit trail majicly disappears,..into the credit accounts held by business.<<

Nothing magic about it, oug.

And when it disappears, it disappears completely. It doesn't - magically or otherwise - reappear elsewhere.

In fact,if you follow your own example through, you will see that it returns, by definition, to the same place it came from.

Think about it this way. The government allows the Banks to create a million dollars, which they lend to you. You start a successful business with it, and are able to pay it back, with interest, after a year.

That money that they created for you doesn't exist any more, does it?

And on a slightly larger scale, that is why governments around the world have authorised the creation of more credit. So that we can keep the economy rolling while the underlying problems - masses of bad debts from people unable to pay back - are sorted out.

Yabby the reserve bank can change the interest rates and the level of required reserves but that does not necessarily change the rate at which banks lend money. Banks lend money when it is prudent for them to do so - that is when the loans are covered by mortgages or liens on existing assets.

The difficulty with this approach is that if asset values drop so does the capacity of banks to lend and so increase the money supply and that banks seldom lend for innovation yet innovation is the generator of increased wealth through doing things more simply or in different ways. Banks favour lending to preserve the status quo which is not necessarily the best way to generate increased wealth.

Pericles you state that when a loan is paid back the money goes away. That is true but it doesn't have to "go away" if money is not the same as debt. When a loan is repaid the loan can be cancelled but the money can remain and not have to be "recreated". In the current system money does not exist without debt. However we do not need to link money to debt if we create enough of it in other sensible ways. We hope that banks will only lend money for sensible purposes but unfortunately the system encourages banks to lend for non sensible reasons such as feeding asset bubbles.

We want banks to lend money that is deposited but we do not want them to lend to increase community money supply. This is the only change needed and it does not require a reengineering of the money system. It would in fact make the banks stronger and better able to resist the pressure on them to increase the money supply unwisely

Australia has a small pop with enormous resources,energy and land mass.Why do we need to borrow from the global banksters who create money in their computers anyway.Why pay your criminal neighbour to counterfeit your own money?

The IMF a few months ago created $1.4 trillion.This added $220.00 for every person on the planet,but this money is not going to be shared equitably.It will be used to bail out failed institutions that should be put into liquidation.

Pericles and Yabby are just feeling a bit frustrated since finally people are questioning the status quo that has brought the world to it's knees.It is a failed system that feeds of the productivity of the real economy putting too many people in poverty.

A single computer can do the job of many people today,yet why are so many worse off than 30yrs ago?

oh peridiculous here we go again

ok lets value assets on the books..[say houses in usa..[they have fallen a little bit..[you might have noticed]...so please advise me..oh sage..has the debt been corrospondingly fallen..in line with the fallen book value of the assets..[please provide proof]

how about the frauds..conducted by your hero,..that did his ponzi sceme...does that fall under your common sence..[or is it conman defence?]...how about the overvaluation of the stock market that recently fell near 40 percent...

remembering bankers were so sure asets would keep on rising..they didnt even need any deposit..[lending full value...because they know its only a book credit..[and the know they can on sell the lending documentation into securities]...

how can one as intelligent as you be pleased to defend this artistic enron-esque fraud...facilitated by the very institutions you so readilly defend

yes the bakers dont forcefeed...but they decide who gets the cash/credit...and KNOW who will default...the only excuse to give further credit on credit cards was to allready be in danger of default[knowing they turn the paperwork into tripple AAA securities,

by securitising the blue ink credit applications intO a form of bond[A highly likely defaulting..promise to repay...banker facilitated..needing..their extra defaulted DEBT/spending..TO CREAT THE INTREST TO REPAY THE LOANS

if you recall enron played..the game of book-keeping/..where the debts were off their balance sheets..[but on little shelf companies set up to defraud]...

look commonsense indicates..we need to audit the fed..[as you see by the link the bankers are pulling all sorts of treasons to make sure it cant happen
http://www.infowars.com/senate-blocks-bill-to-audit-the-fed-as-government-prepares-for-second-round-of-looting/

http://www.infowars.com/senate-update-on-audit-the-fed-legislation/

why bother explaining the bigger picture to you,...your simply in denial

http://www.infowars.com/european-central-banksters-seek-world-currency-total-control/
http://www.infowars.com/obama-adviser-says-u-s-should-mull-second-stimulus/
http://www.infowars.com/californias-nightmare-will-kill-obamanomics/
http://www.infowars.com/unemployment-worse-with-stimulus-than-without/

but why bother..[your as believable as blair].touting for carbon cap and TRADE,..by feigning intrest in the planet...just as he didnt bring peace to middle east
http://www.infowars.com/tony-blair-im-a-planet-saving-kinda-guy/

or even the pope
http://www.infowars.com/pope-calls-for-world-political-authority/
simply creating the distrraction from the real game
http://www.infowars.com/israel-air-force-preparing-for-iranian-strike/

OUG,Obama is just a puppet of the finance capital.He will not change anything.In fact Abama is making things a lot worse.I do not think that Ron Paul will get Congress to Audit the Fed.They just have too much power and the US political system is totally corrupted.Not even the Hollywood Glamours have the insight or the courage to fight the most important battle in our history.They would rather lasiviate in the death of a pop star than face the reality of economic ruin and debt slavery.

Perhaps the Hollywood Glamours realise who their real masters are and can only be courageous in their imaginary world,rather than fighting for the people who idolise them.

*and that banks seldom lend for innovation yet innovation is the generator of increased wealth through doing things more simply or in different ways.*

Ah Fickle Pickle, you are confusing the role of venture capital,
with that of banks. If banks took your advice, they would become
gamblers backing your seemingly "it seemed like a good idea at the
time". When Murphy's Law sets in, as it invariably does with
new innovation, the banks would be left with huge losses. So
to protect themselves and us, they require you to provide surety.
Your house or other assets which can be liquidated, should your
hairbrain schemes fail!

There is of course no shortage of venture capital in this world,
ready to back great ideas. But you need to convince hard nosed
realist business people of your claims, they are generally not bad
at separating great ideas from just dreamers. They'll provide
seed capital, next an IPO is possible, if that innovation is really
so good.

*Pericles and Yabby are just feeling a bit frustrated*

More like bemused by your ignorance Arjay, but then you are not
the first on OLO with a hairbrain scheme which he hasn't thought
through.

*yet why are so many worse off than 30yrs ago?*

Who are all these people who are worse off then 30 years ago?

Now we may actually be getting somewhere, oug.

>>ok lets value assets on the books..[say houses in usa..[they have fallen a little bit..[you might have noticed]...so please advise me..oh sage..has the debt been corrospondingly fallen..in line with the fallen book value of the assets..[please provide proof]<<

You have - quite possibly by accident - put your finger on the root cause of the present crisis.

When an asset backing a loan decreases in value, it must be "written down" on the Bank's books. Revalued, to properly reflect what cash would be realized if the borrower defaulted on the loan, and the property had to be sold.

The individual debt itself might or might not decrease, but a little item called "provision for bad or doubtful debts" certainly would increase. So in a very real sense, yes, the debt has "correspondingly fallen"

This appears in the Bank's P&L as a loss, of course.

Too many of these write-downs, and you can see how the Bank gets into trouble. Option one, let the Bank fail, like any other business that makes a bad decision. Option two, assess the damage to the economy - and society - to be too great, and pump a whole load more cash into the system.

I hope this helps.

>>why bother explaining the bigger picture to you,...your simply in denial<<

Now that *is* funny. The concept of you somehow explaining to me "the big picture", when you are unable - or unwilling - to grasp the most basic fundamentals of accounting, is simply too precious for words.

pere cute quote<<Too many of these write-downs, and you can see how the Bank gets into trouble.>>>because the balance sheet is a lie

<<Option one, let the Bank fail, like any other business that makes a bad decision.>>option one a recover the gross proffits made by lies/deception and greed

<< Option two, assess the damage to the economy - and society - to be too great, and pump a whole load more cash into the system.>>>oh great oh book keeping sage..the assets fall to near half the value....so pumping in more money..only makes the disparity between real value and book value..[more out of whack]...

more cash means the assets inflate in monetary value..[but because the extra cash didnt add value ..it only stole worth from the true value of what the assets really are/were allways worth...

but the thing is..no one audits..the fed to find out..who stole /what via inflated valuation's and/bonus scams...the thing is your ledger is a lie...treasonous theft from the tax payer...the idea of privatising the fed was so govt couldnt do it

[now we need to prevent rothchild and co..from doing it every 10 years or so...those who collude to steal from the public weal...via over valuing their mates assets ...must get jail time...no more bonus

audit the fed...these incompitants are a threat to themselves and all the people having the worth of their money devalued... what cost 2 dollars pre privatisation now costs 99 dollars.

.because more cash to criminals..means..less buying power for those doing the right thing

your accounting is fraudulent...treasonous comes to mind..one daY THE SERFS REALISE..YOU LOT BEEN STEALING THE VALUE FROM THEIR CURRENCY, AS A DELIBERATED COLLUDED FRAUD

"Who are all these people who are worse off then 30 years ago?"
Collectively, they're called the working class, Yabby.
Where wages have increased about 400%, real estate has increased about 800%. Petrol has gone from 45c a gallon (10c litre) to well over a dollar.
Small cars from $2500, to $25,000
Where once the salaries of the CEOs were around 10 to 15 times the median wage, now they're more like 300 times.
About the only things to become more affordable, are electrical goods.
It seems gadgets have replaced religion, as the 'opiate of the masses'.
Sadly, even these goods come at a steep price for the low paid; the majority of these items are purchased with credit cards, and the stats are, more than 70% of credit cards are not paid in full at the end of the month.
And yes, obviously no one is forced to take up a credit card, or max it out. But how would our standard of living compare, if everyone actually lived within their means?
Remember, in the 60s and 70s, must households only needed one breadwinner, and he generally only worked 40-45 hours a week.

Pericles wrote, "The government allows the Banks to create a million dollars, which they lend to you. You start a successful business with it, and are able to pay it back, with interest, after a year."

The problem is that it is mathematically impossible for everyone to repay that debt. The banks create out of thin air the principle, but not the interest. As all money is ultimately debt, there can never be enough money for all who are in debt to repay their debt. One way or another someone will be unable to repay the debt and their loan will be foreclosed. Thus the contract that banks force us to sign is an impossible contract to meet if we take the viewpoint of society as a whole.

That money was created out of thin air was established in a 1969 US court ruling in favour of plaintiff Jerome Daley whose 14,000 home loan was threatened with foreclosure. As Ellen Hodgson writes:

"Daley, an attorney representing himself, argued that the bank had put up no real money for his loan.

"... (Associate Justice Bill) Drexler hadn't given much credence to the theory of the defense until Mr Morgan, the Bank's President took the stand. To everyone's surprise, Morgan admitted that the bank routinely created money it lent 'out of thin air', and that this was standard banking practice.

"'It sounds like fraud to me,' intoned Presiding Justice Martin Mahoney. ...

As a result, the bank's claim for foreclosure was rejected and Jerome Daley kept his house. This ruling has never been overruled, although, obviously, it hasn't changed prevailing bankin practice in the US or Australia.

"Justice Mahoney went as far as to to threaten to prosecute and expose the bank. He died less than six months after the Daly trial in mysterious accident that appeared to involve poisoning." ("The Web of Debt" (2008) Ellen Brown, pp28-29).

In fact, quite a few US public political figures who have stood up private banks have been murdered. (tobecontinued...)

(...continuedfromabove) Those who have been assassinated include President Lincoln (whom Otto von Bismarck stated was murdered for standing up to the bankers (Brown, p91)), President James Garfield (Brown, p94), President John F Kennedy (Brown p203). A number of attempts have been made upon the lives of others, including President Andrew Jackson.

In this light, it should be hardly surprising that President Woodrow Wilson wrote in 1913:

"Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it." ( http://en.wikiquote.org/wiki/Talk:Woodrow_Wilson#.22I_am_a_most_unhappy_man....22 )

If our Government simply took back from banks what should be their sovereign right, that is to create money to facilitate the exchange of goods and services, most of our society's economic problems would vanish almost overnight.

As long as they take care to issue no more money than the level of truly productive economic activity would warrant, there should be no problem.

---

Grim has responded very well to Yabby's nonsensical implication that everyone's standard of living has risen. The fact that people like Yabby are able to claim that we are all somehow better off in the face of such indisputable facts as Grim has given show what a fraudulent sham are the indicators such as GDP that economists use to measure our prosperity.

This has also been discussed at length by Yabby, amongst others, in response to my article "Living standards and our material prosperity" of 6 Sep 2007 at http://www.onlineopinion.com.au/view.asp?article=6326&page=0 http://forum.onlineopinion.com.au/thread.asp?article=6326&page=0

Yabby,

You have hit upon the fundamental problem with banks. They are not Venture Capitalist but I am saying they should invest some money in innovation as well as in bricks and mortar - but they don't. As banks are the organisations in society responsible for increasing the money supply they have a responsibility to invest some of it in innovation.

This is what the article "Money from nothing: supplying money should be a public service" is all about. Banks are given the privilege by society of creating bank money nominated as regular currency. They have made a mess of this privilege and one of the problems is not investing in innovation.

You think money for good new ideas is easy to come by. You are wrong. In Australia it is almost impossible to get investment in innovation (which is ways of doing things more efficiently and for less cost) unless you have assets to mortgage. A company in which I have a small early investment and now with 30 patents and contracts with several of the top companies in the world has had to go overseas for development funds because no bank or institution in Australia was willing to put up the money. This is a story continually repeated in my circle of entrepreneurs and innovators.

My own company is in a similar position and could expand at several times its current rate if capital was available - but it isn't.

However, watch this space because I think there is room in Australia for a bank that does not pay interest on deposits and only loans money for innovation. In doing this it would obey Islamic principles so it may have plenty of willing depositors.

*they have a responsibility to invest some of it in innovation.*

FP, you simply dreamed that up, but they have no such responsibility
at all. The stockmarket is littered with companies which have failed,
backed by Australian venture capital, some them CSIRO inventions.
It takes more then a good idea, to make money these days.

Grim, what has changed overe time is expectations. In 1970, the
average weekly wage was 71$, now its 900$. Back then people aspired
to a fibro 3by1 of 13 squares, now its a 4by2 of 25 squares.
Back then a colour tv was a luxury, now a million widescreens
a year are sold in Australia. Back then a car was basic, now they
are air conditioned, as are houses. Today middle class welfare
is huge, back then if a girl got pregnant, she would have to give it
up for adoption, there was no unmarried pension.

Back then to travel overseas or make a phone call overseas cost
an arm and a leg, now its standard, internet and mobile phones are
standard too.

Food, clothing, power tools, electricals, electronics, all cheaper
today in real terms, by a long way too for alot of goods.

Today Australians can afford to lose 18 billion $ a year gambling
and use more botox per head then any other country.

Building a house is still not expensive, but I grant you, land is
more expensive, as we have alot more people competing and Govts
restricting release of it. Blame Govts for that

Yabby,

Banks are in a privileged position in society with respect to the provision of money. They are allowed to create extra money out of thin air. In this capacity they have a responsibility to society to finance innovation. They do not finance innovation but overwhelmingly finance stuff that already exists. Did you know that last year 90% of loans for housing was for old houses while only 10 years ago it was 80% and 50 years ago it was 50%. This has happened because banks have increasingly and with alarming regularity continued to feed asset bubbles instead of constructing new productive enterprises.

They could finance innovation but they choose not to because they have turned from being investors into being cost accountants as this is better financially while assets increase in price. Cost accountants are needed to look after existing assets but we need investors to establish new enterprises and to expand old enterprises and they should get all the increase in the money supply for such investments. This is the best way to expand economies, control inflation and halt asset bubbles.

The problem is that the current system does not distinguish between money that already exists and extra money created from an expanding economy because it uses the loan mechanism to create extra money as well as lend existing money.

Banks serve a very useful purpose and are needed to look after and conserve "old money" but what we do with the money from the increase in the money supply is different and that is what Robertson's article is about and what I am talking about.

Yabby wrote, "Grim, what has changed over time is expectations. In 1970, the average weekly wage was 71$, now its 900$. Back then people aspired to a fibro 3by1 of 13 squares, now its a 4by2 of 25 squares. Back then a colour tv was a luxury, now a million widescreens a year are sold in Australia. ..."

This is the kind of sweeping generalisation that I have become accustomed to Yabby using in apparent attempts to confuse discussions about questions of prosperity and economic justice. For further examples, see the abovementioned discussion in response to my article "Living standards and our material prosperity" of 6 Sep 2007 at http://www.onlineopinion.com.au/view.asp?article=6326&page=0 http://forum.onlineopinion.com.au/thread.asp?article=6326&page=0 as well as the discussion "Housing affordability squeezed by speculators" of 30 Nov 2007 at eopinion.com.au/view.asp?article=6697&page=0 http://forum.onlineopinion.com.au/thread.asp?article=6697&page=0

Yabby is essentially saying that everyone in this country has been adequately provided for and that those who face desperate financial hardship have only themselves to blame because their expectations are too high and because they have wasted their money.

There are at least three facts which Yabby has not acknowledged:

1. That a lot of what used to be free or very cheap has not been factored into the measures of prosperity. These include access to recreational areas and open spaces in general, fishing resources, uncrowded roads, unpolluted rivers and air, etc, etc. Most scandalously, housing is not included, but there are many other examples, which I have listed in the abovementioned article.

2. A good many may have done relatively well, at least up until now, but only in a far more limited sense that largely excludes the factors mentioned in point 1. This form of prosperity for some has often been made possible because they have bought a house, when they were cheap in comparison to today. Consequently they did have a lot of money to squander on the plasma TV's, gambling and TV's that Yabby is practised at alluding to, if they so chose. However, In our pyramid-selling real estate economy, it is not possible for everyone to come out ahead. (tobecontinued ...)

(... continuedfromabove) Someone else ends up paying for the inflated housing values enjoyed by others, either through gigantic mortgages with crippling interest or as tenants.

3. That the material prosperity that some members of our community enjoy comes at a horrific ecological cost.

I think the following included from a post to the discussion about the article "Living standards and our material prosperity" is much closer to the mark, even before the current economic crisis began:

"Too many people are being forced into 3rd world conditions (and yes, I have seen some). Am I (and I suspect others) better off than my parents 40 years ago? No. On a comparative scale I have far fewer benefits than they did then. More importantly, they agree with this." (http://forum.onlineopinion.com.au/thread.asp?article=6326#93239)

Yabby wrote "... land is more expensive, as we have alot more people competing and Govts restricting release of it. Blame Govts for that"

Yes, we have a lot more people, because our Governments serve the Growth Lobby, which paradoxically profits, principally through land speculation, from population growth which must necessarily make our community as a whole poorer. (See my article "How the growth lobby threatens Australia's future" of 9 Feb 09 at http://www.onlineopinion.com.au/view.asp?article=8485&page=0).

In fact the Queensland Bligh Government is largely following your advice, and as a consequence, the habitat of the Koala in South East Queensland is being destroyed. The Koala is now endangered in SEQ and and we can expect it to become extinct in as little as two years.

It's astonishing that someone who claims to be concerned about the problems of our environment and of overpopulation continues to post such nonsense to OLO.

A bit late, but my comment on the topic is:

Money supply should be a public service in as much as toothpaste supply.

Banks cannot create endless supply of money without serious consequences. The correct regulation is all that is required to achieve this.

Gov banks have always been a black hole into which taxes disappear.

All in all an ill informed post.

*That a lot of what used to be free or very cheap has not been factored into the measures of prosperity. These include access to recreational areas and open spaces in general, fishing resources, uncrowded roads, unpolluted rivers and air, etc*

Wow poor Daggett, now you have to pay a few bucks for a fishing
license! Where I am, there are plenty of uncrowded roads and
unpolluted air, but its your choice to live in the big smoke, so
wear it.

*Am I (and I suspect others) better off than my parents 40 years ago? No*

Daggett, stop blaming the world for your bad judgement. It was you
who seemingly got married, divorced, lost money on real estate etc.
This is not a nanny state. But its certainly a place of opportunity,
for those who can be bothered to take it. But I know, its a human
foible, lets just blame the whole world for our problems, rather then
face the stark reality that it could be ourselves. You are seemingly
a classic example of such a case.

That's just bizarre, daggett. Even for you.

>>Pericles wrote, "The government allows the Banks to create a million dollars, which they lend to you. You start a successful business with it, and are able to pay it back, with interest, after a year."

The problem is that it is mathematically impossible for everyone to repay that debt. The banks create out of thin air the principle, but not the interest.<<

"Everyone"doesn't need to pay it back. Only me.

I pay back the principal, it exits the economy.

I make a profit. It stays in the economy, in a number of ways.

I share my profits.

With the Bank, who lent me the money.

With the government, who extract taxes from me (assuming I pay myself from the profits I make), from the staff I pay in the process of making those profits, from the company itself, and from the Bank on the interest I paid them.

And with myself.

As you can see, all of this stays within the economy, thanks to my ability to turn a profit on borrowed money, through my business.

Makes sense now?

Yabby,

If you had properly read my previous post, as well as those of Grim, Under One God and others, you would have understood that there is a strong prima facie case that living standards of ordinary Australians have declined in recent decades, and that is regardless of individual circumstances, so perhaps you should address those arguments instead of making cheap personal attacks against me.

It may well be that there are parts of the country that have not yet been ruined by globalisation and population growth, but I don't see how having hundreds of thousands of people to move to those places is a viable solution. If they did all decide to move to where you now live, can you be certain that it will remain so idyllic?

Pericles,

I can see that the point of post has gone right over your head.

Obviously it is possible for some individuals to repay their own loans to the bank, but if we understand that all money in circulation has originated as debt to a bank somewhere, and that banks have only created the principle and not the interest, there cannot possibly be enough money for everyone to repay their debts to the banks. This is explained in the movie "Money as Debt" at http://www.youtube.com/watch?v=vVkFb26u9g8

It is like a game of musical chairs. When the music stops, someone inevitably finds that they have no chair.

Similarly, some inevitably must default on their loans and that is what happens in practice, wherever governments have handed over what should be their own responsibilities to private bankers.

---

Shadow Minister wrote, "Gov banks have always been a black hole into which taxes disappear."

In fact, the opposite is the case. When the Governments of the American colonies, throughout most of the 18th century, took on the functions of banks, the revenue they gained from interest allowed them to provide government services without having to resort to taxes. (Brown Op. cit, pp38-39).

That's a little patronizing, daggett.

>>Pericles, I can see that the point of post has gone right over your head. Obviously it is possible for some individuals to repay their own loans to the bank, but if we understand that all money in circulation has originated as debt to a bank somewhere, and that banks have only created the principle and not the interest, there cannot possibly be enough money for everyone to repay their debts to the banks.<<

For start, there's nothing obvious about it.

If I can generate the productivity necessary to repay the principal (note the spelling, by the way; it could come in useful), thus extinguishing it from the economy, and the interest, which becomes an element in the growth of the economy, then so can everyone else.

Simply calling all money "debt" makes not the slightest difference. It is still money. The fact that it is money that is owed to someone else does not diminish its ability, in the hands of competent business people, to generate economic growth.

The YouTube piece you refer to uses verbal sleight-of-hand to avoid this obvious truth.

This comment of yours reveals the trickery involved:

>>Similarly, some inevitably must default on their loans<<

Explain, in your own words, why this is "inevitable".

Some will, of course. And the Bank takes the hit. If there are too may of them, the economy takes a hit.

But it is by no means "inevitable"

>>It is like a game of musical chairs<<

That is simply a childish - and mendacious - verbal device. It has no contact with reality.

>>that is what happens in practice, wherever governments have handed over what should be their own responsibilities to private bankers.<<

What has not been made clear, of course, is how matters (loans, repayments, capital, interest) would work differently, if governments took over the functions of Banks.

Perhaps you could tell us, daggett?

Well said Pericles.

None of the interventionists has said how having a government printing money is going to be any improvement on the original problem. And that is to say nothing of government's interest in endless inflation.

To talk of the government being 'accountable' to the people at the ballot box is simply fiction. And talk of 'democratic' control is base economic ignorance.

The choice is not between a government monopoly of fraud or a banking monopoly of fraud. The very fact that the interventionists think in terms of that false dichotomy is because they are ignorant of the theory of money and credit, and cannot imagine a system in which government control is not spreading chaos into every corner. They think fraudulent chaos is inherent in money somehow.

It is ironic that those who are most opposed to the bankers' privilege, are most in favour of the government control of the money supply which is what is causing the problem in the first place.

Money is not instrincally based on debt. Money *substitutes* are. For example, gold as money does not appear as a debt somewhere else in the economy.

The problem is, those advocating intervention simply don't understand what they are talking about. They do not understand the difference between money properly so-called, and money substitutes. They call both of them "money", and even insist they are the same thing, thus displaying their utter confusion. Like Fozz and Grim, they are economically illiterate socialists entertaining a fantasy of magic pudding based on government's having a power of endless inflation (theft) which is what caused the entire meltdown in the first place, and no understanding of how wealth is actually produced in the real world.

Pericles,

Your post ignores the sorry record of our financial system.

Whether or not it is inevitable that there will be loan defaulters, that is certainly the record.

Pericles, wrote, "What has not been made clear, of course, is how matters ... would work differently, if governments took over the functions of Banks."

I would have thought that would be obvious. Firstly there would be no imperative to gouge every possible dollar from the bank's customers. The bank would simply be required to perform a service and balance its books, that is, unless it is used to raise revenue to spare the Government the need to raise taxes as the American colonies successfully did.

Furthermore, Government banks could take care to only lend money to truly productive businesses. They would have little interest in lending money for land speculation or company takeovers as examples.

The fact is that government-owned banks do work better. They worked better in the American colonies. President Lincoln funded the war against the British-funded Confederate States' rebellion by simply issuing dollars as legal tender on behalf of the US Government, instead of borrowing it from banks. As a consequence the war was won without the US Government incurring crippling debt (although at a terrible human cost).

Today, the US state of North Dakota, with its state-owned bank is solvent, whilst nearly all the rest who rely on private banks are not:

"North Dakota is a sparsely populated state of less than 700,000, known for cold weather, isolated farmers and a hit movie -- Fargo. Yet, for some reason it defies the real estate clich&#56319;&#57065; of location, location, location. Since 2000, the state's GNP has grown 56%, personal income has grown 43%, and wages have grown 34%. This year the state has a budget surplus of $1.2 billion!" (See "Cash-starved states need to play the banking game: North Dakota shows how" of 2-Mar-09 at http://www.webofdebt.com/articles/state_bank_option.php)

See also "But Governor, You CAN Create Money! Just Form Your Own Bank" of 29-May-09 at http://www.opednews.com/articles/But-Governor-You-CAN-Crea-by-Ellen-Brown-090529-87.html, "Revive Lincoln's monetary policy - an open letter to President Obama" of 9-Apr-09 at http://www.globalresearch.ca/index.php?context=va&aid=13118

Just for the record Jardine, I am not a socialist; I'm a firm believer in private ownership of property and small business. I just don't see how having everyone work for a global corporation is better than working for a democratic government.
As to your comments about banking, governments print money now, as you know. The point is, the amount of money the government prints, is only about 3% of all the money in circulation.
Statistically, about half the cost of any item you buy is interest; loans by the producer, the wholesaler, suppliers, transporters, the retailers... If you want to talk about 'distorting the market' how about that distortion?
I suggest you check out Wikipedia, on fractional banking, and review the money multiplier effect for a simplified explanation of how banks can lend many times more money into the system than they borrow; the root cause of inflation.
There is a very good vid here:
http://www.brasschecktv.com/page/642.html
which demonstrates very clearly how Americans are worse off today, than they were a few decades ago. In the US, the median wage has actually dropped, while the average wage has risen. With better regulation, the situation in Australia isn't quite as bad, although the difference between the median and average continues to increase.
To me, it is all about Democracy. The difference between one person, one vote, and one share, one vote. Banks and businesses that were 'too big, to be allowed to fail', are now merging and amalgamating.
I guess they found the very idea that some tax payers might jack up, a little disturbing.
At the end of the day, borrowing money is simply living beyond your means. That 97% of the money in circulation which is credit, is a debt we force on our children and grandchildren. We just take it for granted that a home today is supposed to cost 8 times or more times more than when we boomers bought our homes.
We are frogs in a pot which is slowly coming to the boil.

You miss the point again, daggett.

>>Pericles, Your post ignores the sorry record of our financial system. Whether or not it is inevitable that there will be loan defaulters, that is certainly the record.<<

You contend that it is the system itself that causes the problem, with your insistence that "there cannot possibly be enough money for everyone to repay their debts to the banks".

This is nonsense.

The fact that some are unable to repay does not prove that they are prevented from doing so by some magical formula created by the Banks.

The manner in which you envsage your nationalized Bank would work is also a trifle bizarre.

>>The bank would simply be required to perform a service and balance its books, that is, unless it is used to raise revenue to spare the Government the need to raise taxes<<

How do you suggest it raises this revenue, if not from its customers? Would that not tread into the "gouging" territory that you accuse the banks of occupying?

>>Furthermore, Government banks could take care to only lend money to truly productive businesses.<<

That is *most* humorous. Anyone who imagines that public servants have the faintest clue as to what constitutes "truly productive business" has never been in business themselves, for sure.

And what you describe as "the sorry state of the financial system" is to me the result of its abuse, and not the system itself.

It's like blaming the bridge that someone jumps off for their suicide

*of how banks can lend many times more money into the system than they borrow*

Ah Grim, you had better tell me which bank can do that, for I am
really keen to buy some shares in it! Sorry, but the Reserve Bank
does not sell its shares.

My poor old Westpac can't do that, they actually have to pay
interest.

All banks -with the arguable exception of Moslem banks, and just 2 others- do it Yabby; including your poor old Westpac.
http://en.wikipedia.org/wiki/Fractional_Banking
Fractional reserve banking is universal throughout the western world.
The real crime is that a large percentage of tax dollars recently donated to banks to bolster the system has simply allowed banks to increase their reserves.

Grim, it seems to be that you suffer the same misunderstanding as
Arjay, which I have been patiently explaining to him on another
thread. So I will explain it for you too.

If I had 1000$ and put it in a bank vault for safekeeping, ie they
were not allowed to lend it out, it would be there waiting for me,
to spend when I want. If you wanted to borrow, you would have to
pay cash. Banks have the right to lend out my money, so in that
sense I still have it, can still go and get it at any time, but
if you borrowed it from the bank, you too have 1000$ in your pocket.
The money supply has effectively doubled, my 1000$ and your 1000$.
That does not mean that banks do not pay interest on money which
they borrowed, or have it for free.

I even did some homework for Arjay, delving into the Westpac
financials.

http://info.westpac.com.au/Sites/1/pdf/WBC08AR_Financials.xls

Go along the bottom of the spreadsheet to "Fin data", it shows
interest received and interest paid. Based on those, even you
can figure out that there is no magic money, as you seem to think.

Its simply the same money, circulating over and over.

Yabby and others,

Banks do increase the money supply even if the money they create gets removed from the system when the borrower pays back the money. Some call this money that the bank creates bank money. I would too except it is Australian Dollars not bank dollars. The fact that the money the bank creates is put back into a bank and the bank pays interest on it in no way removes the fact that the money was not there before the loan was made- the bank created it and the person receiving the money put it back in the bank.

The fact is that a bank can lend out money at zero interest if it was prepared to take deposits at zero interest. If the fractional reserve is say 10% then it can have $100 of "real money" on deposit and in effect lend out another $900 in Australian currency. The fact that the $900 will "go away" when the money is repaid and the fact that the bank pays interest on the $900 if it is deposited in no alters the fact that there is $1000 in circulation whereas once there was $100.

I say there are other ways of increasing the money supply than through the loan mechanism - however I know that I will not win that idea until people truly understand money so I am approaching banks with a system to take money on deposit at zero interest and give people who make zero interest deposits of $100, loans of $900 at zero interest. There will be a few other restrictions on the loans but the loans will be paid back from the returns on investments. This of course is Islamic banking so it can be done and we can do it in Australia and so get us out of this current liquidity mess without increasing government debt.

This thread is starting to drown in misunderstandings, one following another like dogs in heat.

Fickle Pickle, what you describe is frankly farcical...

>>a system to take money on deposit at zero interest and give people who make zero interest deposits of $100, loans of $900 at zero interest.<<

Why would you need to make a deposit of $100, if you are borrowing $900? Why not just borrow $800 in the first place?

I suspect it is because you are confusing the fractional system, in which a Bank needs to maintain a level of assets in order to underpin its lending, with Sharia banking, that disallows interest (usury), and investment in any disallowed (haram) venture.

http://www.islamic-banking.com/aom/ibanking/sh_siddiqui.php

You will quickly notice that although interest per se is forbidden, there are multiple methods that ensure a return on any investment.

What you fail to point out is exactly how this will...

>>...get us out of this current liquidity mess without increasing government debt.

Any ideas?

And Grim, I'm afraid that you too have been totally misled on the process of fractional banking.

It does not, as you seem to imagine, remove the need to borrow the money before you are able to lend it out. It simply governs the volume that you are permitted to lend.

You also have become somewhat confused about the relationship between currency-in-circulation, and money...

>>governments print money now, as you know. The point is, the amount of money the government prints, is only about 3% of all the money in circulation.<<

The fact that money doesn't exist as notes does not automatically make it debt, as you seem to think:

>>That 97% of the money in circulation which is credit, is a debt we force on our children and grandchildren. <<

We simply have found more convenient, electronic means to keep track of it, that's all.

Pericles,

Getting a $800 interest free loan makes good sense to me as it does to most. Paying back more than $800 after the loan has earned money rather than interest before the loan makes money also makes good sense for both borrowers and lenders.

The critical idea that few understand or bother to think through is that the system I am proposing will keep very close track of how loans are spent and the lender as well as the borrower will know how each dollar is spent. By knowing exactly how each dollar is spent lenders and borrowers can work together to get value - and the lender can be assured of getting back the loan when the investment starts to earn money. The important issue is how money is spent not how we get it to spend.

A problem with today's financial systems is that they were designed for pen and quills. Double entry bookkeeping is unnecessary in this day and age as it was invented to make sure that arithmetic clerical errors were picked up. Fractional Reserve Banking was invented to limit how much credit (and hence money) banks created. Computers do not make errors of addition. We can keep track of each dollar printed if we so wish. To bring finance out of the middle ages we need to start to rethink some of these antiquated methods.

People in finance think that the tools that they have are the way it has to be. It doesn't. There are better ways

dagget,

The banks of the American colonies operated largely as a monopoly and were essentially free to gouge the clients at will.

The reason modern western governments don't run banks is because they have almost always been a mess dreamt up by socialists that have to be disposed of later. Perhaps you could provide an example in recent times?

There are many better things to do with state money.

Pericles and Yabby, I don't know if you didn't bother to check the link to fractional reserve banking, or you didn't understand it; I thought it gave a fairly clear example of how a bank can borrow (say) $1000. from the central bank, and then lend out $4000.
No mention of interest yet, and I haven't suggested banks get the money for nothing.
The multiplier effect is real and (I thought) undisputed by any economist.
For a very simple example of how this system works, I found this gem on Youtube:
http://www.youtube.com/watch?v=nH2-37rTA8U&feature=SeriesPlayList&p=CECDA315A8848B99&index=2
Another point is, -which isn't mentioned in the vid- that banks do multiply the money they borrow, and they do charge interest on the 'multiplied' amount(M1); while they pay interest on the borrowed amount (M0).
And yes, the money that isn't printed, is borrowed into the system. The reserve bank releases funds to the banks, and the banks aren't in the habit of just giving it away.
I strongly urge you to watch the vid. It makes the point that the multiplier effect doesn't necessarily have to be inflationary; as Pericles has pointed out, a business loan can be profitable, and can be paid back. If it is profitable, and increases real production, then there is no inflation.
Unfortunately, the bulk of loans made are either for depreciating assets, which do not increase real wealth over time, or for real estate; which logically should also depreciate.
Why should a 10 year old house be worth more than it was when it was new?

quoted from
http://neithercorp.us/npress/?p=74

site has numerous links

...While the Private Federal Reserve has continually printed up bailout after bailout for entities such as Bank of America,leighman/sax or Fannie Mae and Freddie Mac, the regular American has plunged deeper into debt than ever before.

The government has deliberately tried to fix the situation from the top down, squandering the wealth of the entire country on the coffers of elite bankers, knowing that the collapse is occurring from the bottom up.

In a credit based economy, if people do not have the ability to take on new debt, then the act of repairing credit markets so that they can lend again is meaningless. Credit is NOT the same as SAVINGS.

In their ignorance, Wall Street automatons have completely forgotten what makes all economies run; the everyday consumer, not banks...[after all our savings become the 'fractional..reserve'...under pinning their new money creation

This ignorance has kept the illusion of market stability going for far longer than it should have, just as credit cards and mortgage loans kept American consumers spending money they never really had.

At this moment, the DOW and everything associated with it are running on the acrid fumes of blind faith. Recent signs show that the smoke and mirrors are beginning to falter, and a timetable for the collapse is beginning to reveal itse

Grim, sorry but I don't do Utube, for my net connection is a mobile
one, with a 1 Gig monthly limit. Vidoes chew up Mbs. Personally
however, I don't think that you should believe all that you see
on Utube lol.

Yup I know how fractional banking works.

*Another point is, -which isn't mentioned in the vid- that banks do multiply the money they borrow, and they do charge interest on the 'multiplied' amount(M1); while they pay interest on the borrowed amount (M0).*

So Grim, basically you are claiming that a bank only has to pay
interest on 1$ and can claim interest on a number of $. Not so,
you have your wires crossed. Take another look at the Westpac
figures and show me where they get money for nothing, apart from
shareholders, which is their Tier 1 Capital.

Yes, banks create money, every time they write another loan, as
its money circulating, the total money supply grows. We know
that. I explained it in a simple way with 1000$, to clear away
the noise and focus on the basics.

Yabby I guess we all tend to make the same mistake; oversimplifying to clarify a point.
I know I have.
To use your example of you putting $1000. in the bank, let's say the bank is generous, and pays you 2% interest on that money.
In the traditional American system, the mandatory reserve banks had to keep was 10%; money held to meet withdrawals.
So the bank holds on to $100 of your money, and lends out $900, at say 4%. We all know banks have to charge more interest than they pay, to cover their costs and make a modest profit, right?
After the $900 is spent, it inevitably winds up back in the (or 'a') bank again, at which time the bank holds on to $90, and lends out $810; at 4%.
The trick can be played over and over, until the total lent is $9000. ($1000= 10% reserve).
The books always balance, as the money is listed on both sides of the ledger; an asset and corresponding liability.
That's as I say, traditional fractional reserve banking. Steve Keen mounts a very persuasive argument that we have passed that stage; as banks hate having that reserve cash sitting in their vaults doing nothing, they tend to lend money first, and worry about raising the reserve later.
http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
Shadow, Daggett did supply an example of a state bank which has continued to profit right through the GFC. It's in the real state of North Dakota, and it's a real (state owned) bank.
http://www.webofdebt.com/articles/state_bank_option.php
You'll notice it still uses the multiplier effect, but it does so on behalf of it's citizens, instead of shareholders, and is able to lend money to the state interest free, for essential services.
Follow the link, it's definitely worth reading.

Pericles wrote, "If I can generate the productivity necessary to repay the principal ..., thus extinguishing it from the economy, and the interest, which becomes an element in the growth of the economy, then so can everyone else."

Pericles, where do you suppose the. money that is paid to your business that, in turn, allows your business to "repay the principal ... and the interest" comes from? It can only come ultimately through someone else having borrowed that money. However, instead of having just had to borrow the original principal, they would have had to borrow the principal plus the interest.

So, for the economy to function, larger and larger loans need to be taken out. This cannot continue indefinitely, except in a perfectly functioning constantly growing economy on a planet with infinite resources.

In the real world, sooner or later people will default on their loans, as we can see happens all too often, usually with the result of smaller farms or businesses being bought out by larger farms or businesses.

This is almost certainly the reason that Islam decided to outlaw usury (whatever other faults that religion may or may not have in the 21st century).

---

Shadow Minister wrote, "The banks of the American colonies operated largely as a monopoly and were essentially free to gouge the clients at will."

I guess 'gouging' is in the eye of the beholder. The evidence cited in "The Web of Debt" shows that the system in the colonies worked perfectly well with everyone prospering until the private Bank of England had the English Parliament outlaw the colonial governments issuing money and forced the colonists to borrow from private banks.

By your logic, the English Parliament thereby liberated the American colonists from the tyranny of their Government operated banking systems.

Why then, do you suppose the colonists, instead of thanking the English Parliament, waged a war to gain independence from that Parliament from 1776 onwards?

Grim has it right and the video he refers to is a good one.

I started thinking about this problem many years ago in a different context. I was looking for a way of preventing water restrictions. The solution I came up with was to pay people who consume little water with special money. The money came from high consumers who paid more for their water. The special money had to be invested in ways to save or increase the supply of water. It turns out that this takes money from one group with whom others share a common resource but gets the other group to invest it increasing the common resource. This "solves" the so called "tragedy of the commons".

It turns out to give us a way to increase the money supply without loans. We look for common resources and fund them through a similar approach of giving everyone who may use the common resource money to invest in increasing the common resource.

However, this idea of giving people money to invest gives rise to a puritanical conditioned response that says people should not get something for nothing. An alternative is to fit within the system and give people loans that have zero interest provided they make a small deposit at zero interest. It doesn't matter where the money comes from as long as it spent on productive assets. This way people do not get "something for nothing" and people are more willing to listen to the solution.

I am about to start to sell the idea to existing financial institutions and to build a demonstration system. This series of posts has enabled me to work out how to approach bankers with the proposition - so thanks to all for forcing me to try to articulate a solution. My next task is to get it into a presentable form and to show a financial institution how they can make a lot of money out of it with zero risk. If anyone knows a financial institution that might be respond then let me know.

Grim,

From the link: “By law, the state must deposit all its funds in the bank, and the state guarantees its deposits.”

In what universe can this be called a competitive environment?

Dagget,

Any monopoly can be profitable and in your example formed some form of tax. The English saw this as a gold mine and wanted it for themselves, I am not surprised there was a revolt, but what is your point?

Fickle Pickle,

There is a similar system called venture capital. The Islamic banks work this way.

*After the $900 is spent, it inevitably winds up back in the (or 'a') bank again, at which time the bank holds on to $90, and lends out $810; at 4%.
The trick can be played over and over, until the total lent is $9000. ($1000= 10% reserve).*

Yes Grim, that is correct. When it inevitably lands up back in a
bank again, it becomes another deposit, again gaining interest.
Again it can be lent to another customer.

So what exactly is your problem with that?

Now the Reserve Bank, which can change the level of reserves that
banks need to keep, could specify that banks need to keep 100%
of reserves on hand. In that case, banks would simply become
large vaults, to store your money. If you wanted to buy something,
you would need to pay cash.

Now if there was no credit, how many people would build houses,
buy cars, run businesses, grow crops etc? Not too frigging many
lol. I thought that you wanted people to have a job.

The money that banks have for free is shareholder capital or tier
one capital, which our banks at present have at around 8%.
For providing and risking that capital, which shareholders can
lose if there are too many dud loans, shareholders are paid a
dividend.

You too can risk your savings, buy bank shares and obtain a dividend,
if they make a profit. Just recently Australian banks raised another
16 billion $ from shareholders, to guarantee their expanding loan
book, as a number of overseas banks are deserting Australia.

its a little known thing [that fiat currency is a debt]...that we regard as legal tender..[that fraction that they hold in reserve[isnt really..a value..held in reserve..its a debt

i will put up a link that describes the issue..[knowing gabby dont read this stuf anyhow]..cause once he knows the only real value behind the whole fed banking scam...is in our signed promise to repay in the same coin we borrowed...

lol..ie fiat paper..that can only come via the fed...[that isnt really coin]..lol...thus never was LAWFULL nor legally any form of value..[tender]
http://www.worldfreemansociety.org/forum/viewtopic.php?f=49&t=1995

noting the ONLY constitutionally legal tender is coin...its about time people knew that the fed..dont promise legal tender ..anymore[read a pound note it promised to redeem one pound of sterling SILVER in exchange for that note...

the fed dont have that promisary..[on their notes]...as govt is bankrupt...thats the reason the fed took our gold and silver reserves..and gave us a legal fiat..that is a debt note,...its time people knew the truth

We are getting close to a fantasy-land here, where reality no longer seems to matter.

I don't really mind that, there is always a place for an unfettered imagination, but it is a little one-sided.

It seems to be a substantial disadvantage in this discussion to deal only in facts and reality, as I have been doing, when some take it upon themselves to invent a parallel universe.

Fickle Pickle:

>>problem with today's financial systems is that they were designed for pen and quills. Double entry bookkeeping is unnecessary in this day and age as it was invented to make sure that arithmetic clerical errors were picked up.<<

Utter nonsense. It is used to ensure that all parties in a transaction are recognizable at all times for what they owe, or what they are owed.

http://members.iinet.net.au/~patrick6/kiss38.html

>>Pericles, where do you suppose the. money that is paid to your business that, in turn, allows your business to "repay the principal ... and the interest" comes from? It can only come ultimately through someone else having borrowed that money.<<

Only fro borrowed money, daggett? Only?

Utter garbage.

How about where they, too, have created it from the sweat of their brow? What about the millions of wage-earners, going about their business, paying for goods and services from after-tax income?

There is no inevitability about debt. You volunteer for it, when you buy a house or when you finance your new car.

And once and for all, people, there is no such thing as imaginary money. It is created, it is used, and it is extinguished, in a long chain of transactions that until recently were beneficial to every single man woman and child in this country.

If we all stuck to the facts for a change, and stopped relying on tendentious snippets from YouTube for our information, we would all be able to take a more sanguine and constructive view on how to minimize the impact of the current problems.

Seriously. This is not difficult stuff.

It is misuse of the system that is problematic. The system itself is just fine.

Pericles,

The financial system is not fine and the recent activities of many governments would show that others think the same.

The solutions are not going to be found in doing more of the same and simply increasing debt and praying that the system will sort itself out.

The financial problems can be fixed but we cannot do it with the antiquated systems we use today. I used double entry bookkeeping as an example of something that everyone thinks is fundamental but it is not only way to keep track of who owes what to whom. It is one way of solving the problem but it is not the only way and it makes our accounting systems unnecessarily complicated.

We all know that money is created and is not imaginary. But some of us know that the current method of creating money is not the best way. I have given two different methods of creating money without debt or interest and so far there has been no arguments saying why they would not work. The only 'arguments' seem to be that because we can create money with debt we do not need other ways.

In most industries we have evolved our technologies and we do things differently from 100 years ago. Unfortunately the financial industry is still using the same techniques built for small communities, pen and paper recording of transactions and when communication was by horse drawn vehicles. Double entry bookkeeping and creating money through debt are two technologies that can and need to be replaced.

Say what, Fickle Pickle?

>>I have given two different methods of creating money without debt or interest and so far there has been no arguments saying why they would not work.<<

It is possible that they were misunderstood.

Was this one of the two?

>>I am approaching banks with a system to take money on deposit at zero interest and give people who make zero interest deposits of $100, loans of $900 at zero interest.<<

And was this the other?

>>give people loans that have zero interest provided they make a small deposit at zero interest. It doesn't matter where the money comes from as long as it spent on productive assets.<<

But it does indeed matter "where the money comes from". Particularly when there is no visible consideration (interest) in the loan itself.

The $900 has to be sourced from somewhere. It doesn't magically appear, just because you say that it does. It has to be borrowed from another financial institution, or sourced from private wealth.

What you are attempting to describe is a form of "innovation partnership", where the investor shares in the rewards created by the profitable venture. To call them loans in the first place is actually misleading, since the provider of the cash is only rewarded when and if the venture is successful. This is of course why...

>>the system I am proposing will keep very close track of how loans are spent and the lender as well as the borrower will know how each dollar is spent.<<

This is classic venture capitalism, that you have dressed up as lending. The "lender" is in fact committing resources, based on uncertain prospects of a return on that investment.

The existing system, on the other hand, is able to provide cash on the basis of a promised return (interest payments).

It doesn't take a financial genius to work out why there are a great many more interest-bearing loans entered into, than zero-interest "shared destiny" investments.

By the way, in my view Sharia Banking is an admirable system, but is certainly not appropriate for all transactions.

Yabby, you and I both know a $1000. deposit in a cash account isn't going to get 2%. In fact, in many cases the bank will charge you for the right to turn your $1000, into $12,500, (BIS 8% requirement) which they can lend out at up to 19%. What's wrong with this?
Currently money outstanding on American bank accounts is now estimated at a breathtaking $180 trillion. The sum represents an impossible-to-fill black hole that is three times the gross domestic product of all the countries in the world combined.
This is a debt our children and our children's children will have to pay; not as an inherited mortgage, or car loan, but in taxes and prices.
The houses we bought for $50k in the seventies are now worth around $450k. In another 40 years, 4 million and 50k.
For every $1 in aid a developing country receives, over $25 is spent on debt repayment. Children are dying, to pay off debt.
For a more mundane example that I have used before, my Westpac Ignite card is a totally free service -provided I can afford to pay it out every month. Need I point out how the bank can afford to be so magnanimous?
A basic fridge you or I could buy for $1000. could cost any of the 50% of Australians on less than $35k a year more than $1300. on a master or visa card purchase.
This isn't a system that is just uncaring, or indifferent to the poor. This is a system which deliberately fleeces the poor, to benefit the rich.
And making unborn children pay for our excesses, is even better than fleecing the poor.
They have no voice at all, apparently.

Grim, I just checked the Westpac website and if you have 5k plus and
commit to lending for 5 years plus, they will pay you 6%! My E-saver
account right now pays 3%, one deposit which has just run out from
earlier, was paying 8%. I've reinvested it short term at 4%. For
I think that once inflation kicks in, rates will rise.

NAB recently took out a huge overseas loan at 5.76%, St George
borrowed from overseas last year at 8.5%, again for a number of
years. So you have to average out all these sources to know what
money actually costs banks. Yes, on what is in my cheque account,
they don't pay anything, so I have have much in there :)

What money costs banks, is revealed in their annual report and what
they call their spread, ie the difference between what they charge
and what they pay. Currently its about 2.5%. Take out costs of
running the show, they are left with 1%.

Yes, cost of credit card loans is much much higher, for there is
no security on those cards, so defaulting individuals who don't
pay, go bankrupt etc, is quite high. My question is, why would
anyone use their credit card to borrow money? I've never paid
a cent in Visa card interest, I simply did without. When I moved
into my house, it had concrete floors, the sink was on 4 posts
that I welded up, the kitchen was much the same. I finished it
as I could afford it. Most consumers don't do that, they want
things now, they spend more then they earn. That is their choice.
Do it by Visa card and it cost a fortune, but that is only a small
% of money which banks lend out. Their main loans are housing
loans and business loans.

Your 180 trillion seems to be confusing bank loans with derivatives.
Derivatives are quite useful in many ways, like for hedging grain
prices.

Pericles,

A variation of the first method is one I have described at http://stableproductivemoney.wordpress.com/2009/06/12/submission-to-national-broadband-network-greenfields/

The critical factor in making this work is spending the money wisely.

The other method is Sharia banking. You say the money has to be sourced from somewhere but you have been saying that banks create bank money that has to be repaid. I am agreeing with you and using exactly the same approach. The "money" that is lent is backed by the original amount that is put on deposit at zero interest. The bank money is deposited at zero interest and its expenditure is tightly controlled.

The scheme I envisage is that this bank money has to be spent on "approved" investments that are highly probable to generate wealth. The system I am talking about will keep track of every dollar individually and where it is spent and will keep track of the returns the dollars generate and "automatically" take some back to repay the loan.

To give you an idea of what can be done I also claim that I can save the government more than $400 million dollars on its proposed health information system. You can view the key idea behind that proposal at http://www.slideshare.net/cscoxk/identity-by-presence-take-2. The identification part of that system is built and is available today at http://greenid.com.au. The government can use it today and use phones for id rather than use printed id cards and in the process save $400M. The actual savings will be at least a billion per year because electronic health ids done this way enable other savings - like a cheaper alternative to health insurance - but that is another story.

What I am suggesting for the finance industry does not change the current banking system. The current banking system can remain exactly as it is which is why I think we will be able to make it happen.

I'm not sure you have grasped the essemtials yet, Grim.

>>in many cases the bank will charge you for the right to turn your $1000, into $12,500, (BIS 8% requirement) which they can lend out at up to 19%.<<

The $1,000 doesn't "turn into" $12,500.

If there is a sufficient quality asset base, the Bank is able to support that amount of lending. But in order to do so, it still must go to the market, and borrow.

Perhaps instead of using the term "fractional banking" and loan multipliers, you might think of the assets as "prudential reserves".

Which is in fact what they are there for. And why the central Banks around the world insist on their amount, and their quality.

But the important part is that the money to lend isn't conjured from thin air. It is usually borrowed.

And so the equation, as once again Yabby is trying patiently to explain to you, is not earning "19%" on unencumbered, newly-minted money. But the difference between the cost of the money you borrow, and the rate you charge your borrowers.

"Capital adequacy" is merely the security blanket.

http://www.investopedia.com/terms/c/capitaladequacyratio.asp

Fickle Pickle, the one thing that your NBN piece doesn't address - and I think it is a reasonably important component - is exactly where the initial investment comes from.

Your "third way" posits that "Government money is provided on condition that the funds are spent building fibre to the home (FTTH) infrastructure or equivalent"

But isn't this exactly the same as the "first way" you describe, as "One way to achieve this is for the Government to fully fund the NBN"?

What is the difference between your proposal and a taxpayer-funded NBN?

"The system would be relatively simple to implement as the government only has to provide the rules, the funds and ensure that private companies deliver and deploy the system according to the rules."

Government provides the rules, the funds, and the governance.

It sounds like a fully taxpayer-funded roll-out?

And if it isn't, where does the money come from, if not through debt instruments?

Pericles wrote, "How about where they, too, have created it from the sweat of their brow? What about the millions of wage-earners, going about their business, paying for goods and services from after-tax income?"

Pericles, once again:

All the money in circulation (or, if we consider Australia and not the US, the 97% of the money in circulation that is not created as notes and coins) originates as debt. It is beside the point that some wage earners may have earned the money and not be in debt. For the money to have been created, someone, somewhere had to go into debt to a bank.

Pericles wrote, "There is no inevitability about debt. ..."

Yes there is. Our whole stupid financial system depends on some hapless mug going into debt that he/she canot repay. If some of us manage to avoid debt, that is only because someone else has gone into debt, instead.

Pericles wrote, "And once and for all, people, there is no such thing as imaginary money. "

In fact all money is imaginary. It is merely a token to represent real wealth.

And bank's also conjure up money out of nothing as was admitted by a banker in that 1969 US court case involving Jerome Daly, referred to above. The mechanism whereby $1,000 of deposited money can be conjured by banks up into loans worth $10,000 is explained on pages 163-167 of "The Web of Debt" (2008 edition).

In order to run any economy that is not just based on bartering, there are too alternatives:

1. Give sovereign governments acting on behalf of the people the right to create those tokens in quantities sufficient to enable the exchange of the goods and services created within the economy of that country; or

2. Hand that right across to a private banking cartel and allow them to gouge the rest of us with compounding interest and inflect almost perpetual economic mayhem upon society.

(tobecontinued)

(continuedfromabove)

As I have shown, there are many examples of the first system having worked very well before, so there is no reason why it could not work just as well again.

The latter system leads to what is effectively slavery. And don't just take my word for it. Listen yourself to the words of the bankers themselves in 1862, during the American Civil War in the infamous Hazard Circular cited on page 90 of "The Web of Debt":

"Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are glad of, for slavery is the owning of labour and carries with it the care of the labourers, while the European plan, led by England, is that capital shall control labour by controlling wages. This can be done by controlling the money, The great debt that capitalists will see to it is made out of the war, must be used to control the volume of money. To accomplish this, the bonds must be used as the banking basis. ... It will not do to allow the greenback to circulate as money any length of time, as we cannot control that."

(The 'greenback' referred to was money directly printed by the US Government to pay for the war and to expand infrastructure. Because of this the Union won the Civil War and without incurring the crippling debts contrary to what the author of the Hazard Circular had hoped.)

Today, many people I come across, whether they are paying rent or mortgages, describe their circumstances as 'slavery'. It is clearly no accident.

Pericles,

You ask where the money comes from for the NBN. You keep making the assumption that money has to be created as a loan. It doesn't and for most of human history it wasn't a loan. Money is not the same as a loan and whomever is the "controller of the currency" can create as much money as they think fit. The banks have been given the responsibility of creating money (call it bank money if you like but it is still money). So the government can create as much money as they like without creating a loan.

You ask what is the difference between scheme 1 of the NBN and scheme 3

The difference is that in 1 the government would ask the banks to create loans and lend the money to the government or the government would collect extra taxes or the government would borrow the money from overseas - probably a bit of all. At the end the government would end up with a lot of debt and paying interest.

In the third approach the people would end up owning the network and there would be no debt because the government simply created the money and gave it out.

Daggett has it right. It is madness for the government to outsource the creation of extra money to the banks for new public assets. Let banks lend money that already exists but leave the creation of extra money to the government or alternatively the extra money created should be zero interest until it is first spent.

The government provides the rules the funds and governance is not the same as tax payer funded. Tax payer funded assumes that the money already exists before we start. In what I am talking about the money comes into existence as we build.

Yabby and Pericles, I really think you should go back and read the article again, and consequent comments.
The thrust of the argument is about the morality of introducing new money into the economy as debt.
Yabby responds by giving an example of overseas borrowing. (?)
No one is denying the existence of the money market; after all, if it didn't exist, we couldn't question the morality of it.
We are still all over simplifying. We haven't made any distinction between loan banking and deposit banking, cash on demand or term deposits, whether money deposited with banks should be considered a loan or a bailment, (ie, if it is your money, should it even be entered on the banks' balance sheet?).
If you are still stumbling over the multiplier effect, Pericles, you can look it up on your own Investopedia link; thanks for that, by the way.
If the Utube link I supplied was beneath your dignity, Pericles, perhaps I could recommend Murray Rothbard's “Mystery of Banking”. If you Google it, you'll have no trouble finding a free download. Rothbard was a staunch follower of Mises, and so was emphatically not a socialist by any stretch of the imagination. He gives an excellent history of the evolution of fractional reserve banking, from the outright embezzlement by the old gold and silversmiths.
What I find most curious is why no one has even attempted to address my concerns about the consequences of current banking practices; ongoing and inevitable inflation, debt relief for starving children, the continual widening of the gap between rich and poor...

*ongoing and inevitable inflation, debt relief for starving children, the continual widening of the gap between rich and poor...*

Deary me Grim, it sounds like you are mixing up all your social
concerns and just blaming it on those "evil bankers". Life
is more complicated then that.

I remind you that those countries with starving children, also run
large armies, not a cheap little joke. I remind you that many
countries with starving children like Congo, Ethiopia, Sudan,
and a number of others, are now leasing out large tracts of farmland
to China, or one of the Arab countries, so that they can grow food
for their own people, not the starving children.

If you really want to do something about starving children, then
you should be lobbying for some family planning aid for their
mothers, for many are still forced to pop em out like little rabbits,
due to a lack of family planning availability. Mr Bush thought
that preaching abstinence would do it, but its been a huge failure.

Today's Central Banks are kept at arms length from Govt, for very
good reasons! Politicians, deciding to give away printed money to
their favourite pork barrel, would be a disaster! Profits from
Central banks are still returned to treasuries as it is now.

The money supply has to grow, as economies grow, or you land up
with a credit squeeze. Credit in fact empowers little people to
have a go if they want, to start a business, build a house, you name
it. If there was no credit as it now, only the rich with cash
would hold the monopoly on assets, to become even richer, the poor
would simply work for them with little option. Now they have options,
due to our banking system.

Looks like a number of fronts opening up here

daggett claims that:

>>All the money in circulation (or, if we consider Australia and not the US, the 97% of the money in circulation that is not created as notes and coins) originates as debt.<<

What on earth does "orignates as debt" mean?

In the sense that anything that isn't actually in a physical form has to be recorded as a debit/credit transaction in the Bank's books, you could say that it "originates as debt"

But that would completely overlook the simultaneous creation of a credit transaction.

If you mean something else entirely, please explain. With actual examples, not theory.

Meanwhile Fickle Pickle is confusing himself even further.

>>Money is not the same as a loan and whomever is the "controller of the currency" can create as much money as they think fit.<<

But this isn't the case, FP. At the same time the money is created, by whomever, a corresponding liability is created. Or to be quite specific, when that money is put into circulation, a liability is registered. Otherwise, how would we know how much the government is in debt? How would we say to Kevin "you're creating a debt burden for our children" (which seems to be the catchcry) if we aren't able to keep track of it?

And Grim.

>>...whether money deposited with banks should be considered a loan or a bailment, (ie, if it is your money, should it even be entered on the banks' balance sheet?).<<

If they didn't record the amount, the money wouldn't be available to them to employ in the cause of earning interest for you.

If your question is "why Banks", we have a lot of ground to cover.

To start with, if you get your wages in cash, keep it in a tin, and only spend what you have earned, Banks would be superfluous.

But society has decided that it occasionally has needs that require money now, against a promise to repay later.

On this basis, Banking began.

Let me know if you need more information. I have plenty.

Yes war is terrible, Yabby, thank you for pointing that out to me.
The specific stat I posted was:
“For every $1 in aid a developing country receives, over $25 is spent on debt repayment. Children are dying, to pay off debt.”
I have to love this line of yours, Yabby:

“If there was no credit as it now, only the rich with cash would hold the monopoly on assets, to become even richer, the poor would simply work for them with little option.”

Gee, imagine a world like that.
It's an old and fairly accurate adage that 'banks only lend money to people who don't need it'. We used to have a bank of last resort (to customers); the CBFC. The other Neo Liberal party (so called Labor) decided we didn't need it.
Pericles, again you fail to discriminate between cash on demand, and savings deposits. Checking (cod) accounts attract little or no interest; more often a cost. In other words, in theory at least, the money in a check account should be exactly the same as keeping your money in a tin; it's there whenever you need it.
Except it isn't.
I imagine you know enough about business to agree that the very best financial situation for any business, is to have cash customers, and account creditors. You have cash deposits coming in daily, and up to 55 days to save for bills.
Fractional reserve or credit money banks are the exact opposite. Creditors can demand their deposits daily, whereas their 'customers' may not have to pay up for years. If you tried to run your business on that basis, you would be declared bankrupt.
I can already hear Yabby screaming, “that's why they charge interest, to offset the risk!”
What risk? Recent events demonstrate that while banks routinely post 'record' profits, on those occasions when they do post a loss, they get bailed out by tax dollars.
Except in Sharia, or venture capital banking, the great risk is taken by the customer, not the bank.

*Children are dying, to pay off debt.*

Grim, you are mixing up a mumbo jumbo of facts, to try and create
a tear jerker. Lets put it another way "Children are dying,
because Govts prefer to buy military equipment, rather then
feed them"

*It's an old and fairly accurate adage that 'banks only lend money to people who don't need it *

So Grim, are you telling me that young people don't need to buy houses,
that hard working tradies don't need a loan to start up
their businesses, that farmers don't need loans to plant crops?

I see this stuff every day, particularly compared to what things
were like, before deregulation of the banking system. I know,
I too was knocked back by banks, when I want cap in hand, asking
for a loan. The Govt bank knocked me back straight away. It
was a nice old bank manager at the Commercial Bank, later taken
over by Westpac, that saved me and gave me a chance. I still thank
him for it.

*Recent events demonstrate that while banks routinely post 'record' profits, on those occasions when they do post a loss, they get bailed out by tax dollars.*

Not quite correct. If you check out who got the biggest bail out,
it was AIG, an insurance company. Some mega banks, critical to the
economy as a whole, were loaned money, of which they have already
repaid 80 billion, with the rest not far away. Smaller banks still
fail all the time in the US, they close down and go broke.

If you are saying that the US Govt should have let the whole
financial system collapse, well the cost to citizens would have
been enormous. This way, what was loaned to big banks, taxpayers
will actually make a profit on that money.

Pericles,

You cannot accept the idea of money being different from debt. As I have said previously double entry bookkeeping while having great utility does have its downfalls. One of these is that some people think that because you create money you have to create a loan because that is required to "account" for money. They are different things and simply because your method of accounting requires this does not make it a reality.

Even when I show you how to fit the system into double entry bookkeeping model by giving zero interest loans that may or may not be repaid you still do not accept the underlying proposition.

Unless you recognise this you will never understand what I am talking about and why it works.

Probably little use in continuing the dialogue - but thanks because it has helped me work out why people have this misconception that money = loans.

In my view Pericles is attempting to turn this discussion into one of semantics in an attempt to avoid acknowledging the incontrovertible evidence that private bankers' interests are immensely detrimental to the interests of society as a whole.

Pericles asks, "What on earth does 'originates as debt' mean?"

Then he answers his own question: "In the sense that anything that isn't actually in a physical form has to be recorded as a debit/credit transaction in the Bank's books, ..."

And with the debt, there is an obligation to pay back the debt with compounding interest which, as I have shown, is an impossible obligation for society, as a whole, to meet.

When governments assume the right to create money themselves, there need be no debt.

During the American Civil War, instead of borrowing from private banks to pay for goods and services, the US Government simply issued its own money as legal tender. Not only did they fund the war, but they funded a massive expansion of infrastructure and without incurring crippling debt.

Perhaps, Anna Bligh and Andrew Fraser could learn a lot from this.

As I have shown the private bankers did not approve and that seems to be why President Lincoln was murdered shortly after the end of the war.

So, Pericles, instead of continuing to split hairs, why not tell us why you think it was a bad idea for Lincoln not to have financed the war by borrowing from banks?

And tell us why you think that North Dakota would be better off today without its state owned bank?

And why not tell us why you think the British Parliament was right in the middle of the 18th century to force the American Colonies to borrow from private British banks instead of simply printing their own money?

---

Yabby wrote, "Politicians, deciding to give away printed money to their favourite pork barrel, would be a disaster!"

Why need sovereign governments controlling the supply of money be a disaster?

As I have shown it can and has worked and has worked far better than (tobecontinued ...)

Pericles is very adept at reducing all economic activity as a double entry book keeping charade,since Pericles and many others realise the advantage that the finance industry has over the rest of society purely by having the ability to create counterfeit money legally.

This is the most powerful slight of hand that underpins the banking industry and it's financial parasites.

(... continuedfromabove) it has with any private banking system.

And if it occasionally doesn't work properly, then in a democracy, we can usually fix the problem by removing from office those who have mismanaged the finance system.

All the rest of the edifice of Yabby's case since then rests on this very shaky foundation.

---

Hear! Hear! Arjay (and Fickle Pickle, Grim and under one god also).

Whew, fortunately even politicians are smarter then many of the
cowboys posting on this thread :)

There are good reasons why central banks were set up in most
countries. For their job is to focus on keeping the economy
healthy and ticking over, not just winning the next election.

I can just see it now, Dagget's dream of hooking up election
promises, directly to the printing presses. In your next
breathe, you will be telling us, that you are concerned about
inflation!

Given that even politicians agree that they could not be
trusted with the above, frankly I think that you are peeing in the breeze of fantasy there.

As it is, central banks are still the only ones allowed to print
money, they are still under the control of parliaments and
their profits are paid back to treasuries.

Australian Govts did in fact compete directly in the
banking market, when they owned the Commonwealth Bank. It was
sold off however, to pay off Govt debt. Its easier for Govt
to simply cash in on the enormous amount of tax revenue that
banks generate, with no investment required. Consumers have
benefitted as well, for today bank spreads are roughly half of
what they used to be, in the days of the old Govt owned Commonwealth
bank.

its sad gabby can see govts cant be trusted with owning the henhouse/bank

but humans being human..those wanting to controle the money simply get into banking...lol...

where the same scum..get to run the hen house anyhow...[WITHOUT HAVING TO ACOUNT to pesky voters]

your points as usual are really pathetic gabby

if govts cant be trusted..then the same type in bankers costume..cant be trusted EITHER...

but your refusing to face facts...scum will do what scum does...at least if govt owned...the full proffits would return to the people

your other points are equally feeble..the govt control you imply..is via the fed or treasury...and who gets picked to run them...former bankers..like were seeing in usa...ALL members of the ursury boys club banker cartel

Not quite, daggett.

>>In my view Pericles is attempting to turn this discussion into one of semantics in an attempt to avoid acknowledging the incontrovertible evidence that private bankers' interests are immensely detrimental to the interests of society as a whole.<<

On the contrary, I seem to be surrounded by folk who want to turn the whole process into some political polemic - along the lines "Banks are evil, governments can be trusted".

All I have been trying to do is to retain some foundation in the realities of finance and trade, simple arithmetic and the needs of our society to function effectively.

>>there is an obligation to pay back the debt with compounding interest which, as I have shown, is an impossible obligation for society, as a whole, to meet.<<

You may think that you have shown this, daggett, but you patently have not. When challenged to support your supposition with facts, you simply ducked for cover. Pointing your cursor to a couple of nutters on YouTube, who are saying things that you clearly do not understand, does not constitute an effective argument.

Fickle Pickle makes the same strange assumption.

>>Even when I show you how to fit the system into double entry bookkeeping model by giving zero interest loans that may or may not be repaid you still do not accept the underlying proposition.<<

Now stop fibbing, FP. Where did you even come close to achieving this little miracle? Zero interest loans that "may or may not be repaid"? That's not finance; that's charity.

>>Unless you recognise this you will never understand what I am talking about and why it works.<<

Dam' tootin' right there, pal.

I strongly doubt I would be Robinson Crusoe on that score either.

>>Pericles is very adept at reducing all economic activity as a double entry book keeping charade<<

meantime:

"Arjay is very adept at reducing all economic activity to the creation of money from thin air"

Every building needs bricks, Arjay. Keeping accurate records via a set of readable accounts form the brickwork of any credible financial system.

Including the Government's.

I note Pericles has failed to take up the challenges I made in my previous post and has said nothing substantial in has last post.

Pericles, what's wrong with engaging in a political polemic on Online Opinion? Anyway do you seriously maintain that you aren't also doing the same?

Pericles, yes, I think I have shown that repaying debt to private bankers with compounding interest "is an impossible obligation for society, as a whole, to meet."

If you insist that I have not, then please show where my argument was wrong.

What challenge was that, daggett?

>>I note Pericles has failed to take up the challenges I made in my previous post<<

Was it this one?

>>I think I have shown that repaying debt to private bankers with compounding interest "is an impossible obligation for society, as a whole, to meet."<<

That's hardly a challenge, daggett. As I pointed out at the time, if it is possible for an individual to take out a loan, and repay it with interest (as millions have done) then there is no logical reason why "society as a whole" cannot.

You failed to show anywhere that the two situations - millions of individuals meeting their obligations, and "society" doing the same, can possibly be different.

Yes, people can and do default on debt. But that doesn't mean that they will inevitably do so.

Where's the logic, daggett?

Actually Pericles, the challenges were, once again:

"... instead of continuing to split hairs, why not tell us why you think it was a bad idea for Lincoln not to have financed the war by borrowing from banks?

"And tell us why you think that North Dakota would be better off today without its state owned bank?

"And why not tell us why you think the British Parliament was right in the middle of the 18th century to force the American Colonies to borrow from private British banks instead of simply printing their own money?"

These are concrete examples of how financial systems have worked vastly better when the power to create money has been placed in the hands of sovereign governments which are accountable to ordinary people instead of in the hands of secretive private banking cartels.

---

Pericles wrote, " if it is possible for an individual to take out a loan, and repay it with interest (as millions have done) then there is no logical reason why 'society as a whole' cannot."

Yes there is, Pericles.

As I already said, if all money in circulation originates as loans, then it is only possible the principle alone to be repaid by society as a whole. If both the principle and interest have to be repaid, then it is not possible for all that money to be repaid unless the economy expands forever.

I think the word you need to stress in your argument, Daggett, is TIME.
The major problem, as the Post Keynesians and followers of Minsky et al understand, is the egregious levels of debt; a situation which cannot be relieved by going into more debt.
Currently, as already mentioned, 97% of all world currency exists as credit. As Keen points out, it's not about having a fiat money system with a credit component tacked on, but rather the reverse.
We have a credit money system, with a very small fiat component.
Banks are inherently bankrupt. At any given time, they have only a fraction of their assets on hand to meet creditors claims. And those assets are nothing more than IOUs, all of which could not possibly be honoured on the spot.
Mortgage agreements include the right of banks to onsell the contract. The buyer has the right to change the terms of the contract, or demand payment of the full amount on the spot. When the mortgagees can't meet these obligations, they are thrown out on the street.
Although have you heard the latest Obama bailout? Some of these people will be allowed to rent the homes they were going to own.
Does that really make sense to you, Yabby and Pericles?
Money outstanding is currently about 2 and ½ times the world GDP, and this gap is constantly widening.
This is the legacy we are leaving our next generation, and the one after that.
In the last great depression, there were stories about bankers and stock brokers jumping out of windows. Millionaires losing everything.
This time, the millionaires are still receiving bonuses, and the big losers will be pensioners.
Super funds are history.

Daggett,

You are correct. The current method of increasing the money supply through the use of loans also means that we have to increase the money to supply the money for interest.

The current method where central banks attempt to control the money supply through changing the interest rate at which they lend to increase the money supply does not work very well. The fact that they "target" inflation shows how ineffective it is.

If the government took responsibility for increasing the money supply and if we stopped banks creating new money through loans then we would have a much better system. However, we need to require the new money to be spent on building productive assets for this approach to work. We cannot increase the money supply and allow the increase to be used for consumption otherwise we would get inflation.

One reason it would be better is that we would now have a true market place in money. If the money supply was too low then the interest rates would increase and governments could increase the supply and if the money supply was too high the government would decrease the money supply.

My proposal for a bank to start to issue zero interest loans for specific purposes would work as a way of increasing the money supply in a productive way. Governments would soon get into the business of directing new money for community purposes where the communityu externalities are high value but the worth to individuals are low. Project such as the National Broadband Network and the building of Renewable Energy Plants to reduce green house gas emissions.

Those are pretty pointless questions, daggett.

>>why you think it was a bad idea for Lincoln not to have financed the war by borrowing from banks<<

I don't, particularly. Desperate times, desperate measures.

He was forced to borrow from the citizens themselves, instead, which would be somewhat less popular today.

It is also worth noting that Lincoln's banknotes were not backed by gold. A thoroughly modern approach.

>>...tell us why you think that North Dakota would be better off today without its state owned bank?<<

North Dakota has a population about the same as Tasmania. It is well suited to having a State-owned Bank. But I do notice that its loan book has doubled to $2.6 billion in the past five years. I thought you guys believe debt is something to avoid.

>>why you think the British Parliament was right... to force the American Colonies to borrow from private British banks instead of simply printing their own money?<<

I dunno. Maybe they were opponents of fiat money, fiercely opposed to deserting the gold standard or something. Or maybe it was political, to keep the dam' colonials in their place.

It was, after all, a long time ago, and much has been learned in the meantime. By some people, anyway.

>>These are concrete examples of how financial systems have worked vastly better when the power to create money has been placed in the hands of sovereign governments<<

I'd stop there if I were you. It wouldn't do to spoil the picture with boring stuff like the history of the Second Bank of the United States, would it?

>>As I already said, if all money in circulation originates as loans, then it is only possible the principle alone to be repaid by society as a whole. If both the principle and interest have to be repaid, then it is not possible for all that money to be repaid unless the economy expands forever<<

I know that you have said that, daggett, but where's your evidence?

And don't just point to some incomprehensible garbage on YouTube.

Explain it yourself, using your own words.

oh dear perculiour is back to demanding it in our own words,..tell me in your own words perculiour..how the assets would sell if there was no means to obtain fictions

we would be stuck with them selling for whatever cash we hold[or trading them for other assets we hold]..but instead everything becomes monetised...into inflating fiat dollars...dollars issued by a cartel of bankers...who are creating ever higher debt...ever more impossable to fully repay

look at the money you owe...it will read no doudt much like mine[or any others]....my debt binge became with a two thou loan..i repaid in full...next i asumed a 25 thou loan...paid off in 10 years...next 65 thou loan...now a 200 thou loan...there will be the same patern in any other loan bound personage

we have huge multinationals[their outstanding debt will reflect much the same thing...sure that debt is offset by assets...in my case about half a mil in assets...but as we all know iof we all liqidate our assets their value...will rapidly deflate to meet supply..[real supply..not the artificial supply were having with unlimited credit

every one of our credit...is subject to our collective debit...as we have recently seen with the bailouts...firms with book values being sold for one dollar...why?..because the botom line is they were valueing debt as value...

and valueing the value excluding the debt,..worse the debt keeps inflating..while a-holes are sukking commision on sale value including the debt...not real value...we have even got to the level where debt has been onsold as assets...called prime AAA securities...these are that bad debt..cleverly hidden as asetts in the plus side of the ledger

such is the fruit of allowing those with love of others money run the hen house

AUDIT THE FED
AUDIT THE FED

audit the damm fed...get greed and ursury out of banking
return the control of the fed to treasury/govt

Pericles

No one has said that we should not have debt. What we are talking about is the separation of debt and money. You fail to acknowledge that money can exist without debt.

It is not debt that is the problem. It is increasing the money supply through debt.

It is the ability of banks to increase the money supply through creating loans that is the problem and don't give me this red herring that money that banks create is not "real" money because the money "goes away" when it is repaid. That is a specious argument as the money is real enough when it is being spent.

To repeat, the problem is caused by the linking of the variation in money supply to loans. Loans are fine if you have the money to lend. It could be OK to create money with loans but we have seen time after time that it fails to give a stable money environment and we get wild fluctuations in exchange rates, in prices, in asset bubbles, and we get inflation.

The fundamental mechanism when loans are used to create extra money is flawed and is uncontrollable because an increase in demand causes more loans which creates more money which creates more demand because there is more money to lend which causes the price of money to drop which causes more demand.

If we separate money from loans then when demand increases interest rates will rise which will cause the government to issue more money. That is the way markets are supposed to work.

Alternatively increasing the money supply through zero interest loans will also work provided the loans from new money create new productive assets.

I think you may be slowly getting there, Fickle Pickle. There are some good signs, anyway...

>>don't give me this red herring that money that banks create is not "real" money because the money "goes away" when it is repaid. That is a specious argument as the money is real enough when it is being spent.<<

Hallelujah!

That certainly seems to settle the argument about Banks conjuring money from thin air.

The money doesn't "go away" Fickle Pickle, when it is used to pay off the debt. But the debt that was created for that individual certainly does disappear.

And in that sense, debt and money are fungible.

You have an IOU for $10 in one pocket, and a $10 note in the other. Put them both on the table at the same time and they cancel each other out.

In the bigger picture, if the central bank tips more money into the economy, it is basically taking an IOU on itself, which will at some point need to be repaid by the collection of taxes from you and me.

Which is of course why everyone is moaning that the current "fiscal stimulus" (borrowing from the future to put money into the economy now) will be a burden to future taxpayers.

And it will.

But the idea is to avoid a lurch into recession, which would be far more likely if the government simply let the Banks fold. Which of course they could have done, by not printing more money.

So yes, of course money can exist without debt.

But debt was invented, a long time ago, to grease the wheels of commerce and enable economies to grow more quickly. And our present system relies upon the government to manage the amount of debt within the system, by buying and selling it (via Treasury bills, notes, bonds etc.) into the economy itself when it thinks it is needed.

You don't have to agree with the politics.

But the mechanics are relatively straightforward.

Pericles wrote,

"I know that you have said that, daggett, but where's your evidence?

"And don't just point to some incomprehensible garbage on YouTube.

"Explain it yourself, using your own words."

Not for the first time on OLO, Pericles has demanded to be spoon-fed before acknowledging and responding to my argument.

Pericles, if all money in circulation (or in Australia, 97%) originates as a loan somewhere, then the loan can only be paid off by someone somewhere taking out a loan that would be sufficient to pay for both the principle and interest.

In turn, that loan has to be sufficient to pay for the principle and interest as well as interest on the combined principle and interest.

That loan can only be paid off by someone else taking out another loan.

In turn, that loan has to be sufficient to pay for the principle and interest as well as interest on the combined principle and interest as well as the interest on the principle and interest as well as interest on the combined principle and interest.

That loan can only be paid off by someone else taking out another loan.

etc, etc,

The loans can only be paid off if the economy expands indefinitely.

---

(I will have to return some other time day in order to shoot down in flames the rest of the nonsense, furthe above.)

Daggett,

I believe 100% of money in Australia originates as loans. Even bank notes are "loaned" into existence by Treasury lending to the Reserve Bank some money so the Reserve Bank can print the bank notes. A bank note says that the bearer has the right to exchange the note for something of the same value. That is, the bank note can be seen as a loan.

I think that this is at the core of the problem. We have become conditioned to thinking that we have to have an IOU for money to exist.

We don't. That is, money exists in its own right without there being a loan.

We have come to equate loans with money because that is how money originated. We left an asset (gold, grain) with a "bank" and they gave us a note saying we were entitled to retrieve it at some later stage.

However we found that the note was a convenient way of "trading" items of value and so the use of money as a medium of exchange was invented.

Thus we had money originally as a representation of value. Then we had money as a medium of exchange of value.

When money is used as a medium of exchange it should not "attract interest" as that is covered by transaction fees.

Interest should only be paid when money represents a productive asset. Interest is really rent on the asset that the money represents. When I take out a loan for a house the bank owns the house through the mortgage and the interest I pay on the money can be considered as rent on the house.

Taking this line of reasoning we have interest payable on money when the money represents an asset.

However, when the money is created and used just as a medium of exchange then we should not pay interest on it and only pay transaction fees.

One way to ensure this is not to charge interest on "new money" that does not yet represent an asset. This is what I am proposing at http://tinyurl.com/nxogdm

Fickle Pickle,

The way you describe the origin of money in the second millenium is the same conclusion I have drawn upon reflecting on the film "Money as Debt".

It was an accident that the scraps of paper that goldsmiths gave out, which promised to exchange them for the gold that had been deposited, were used to exchange goods and services.

As they realised that not everyone was likely to demand the return of the deposited gold at the same time, the goldsmiths, who became bankers, lent out more such notes than actual gold they had in the vault and charged interest for doing so at the same time.

This led to the fractional reserve system and all the financial mayhem we have suffered in the centuries since.

If governments had simply assumed the right to print those scraps of paper from the outset and not have required their be any gold for which those scraps of paper be sold, we could have all avoided a huge amount of calamity in these past centuries.

We know this because when governments did that as in the American colonies, those societies prospered in comparison to those which continued to operate with the millstone of the private banking system around their collective necks. The stark comparison between the prosperity of the American colonies with the poverty of Britain is confirmation of this.

The fact that many in the American colonies also descended into poverty after the British Government forced them to borrow from private banks once again (which Pericles excuses above) is further confirmation of this.

There are also a number of examples from more recent times which I also intend to cite.

---

Your proposal about the NBN is interesting, but requires more thought than I can give at this time of day.

I can see that you are making a genuine attempt to understand all this stuff, daggett, but you need to keep working on some of your assumptions.

>>if all money in circulation (or in Australia, 97%) originates as a loan somewhere<<

There's your first assumption. On what is it based - i.e. how did you arrive at the figure of 97%?

Take your own case as an example. Let's say you have $3,000 in cash. Does that mean that you necessarily have debts of $97,000? And that picture is repeated across Australia?

If not, what does it mean?

>>the loan can only be paid off by someone somewhere taking out a loan that would be sufficient to pay for both the principle and interest.<<

Not at all.

As I have pointed out before, there is absolutely no logic behind this. There is no need for "someone somewhere" taking out a loan to pay off your loan - it doesn't make sense. It doesn't happen. It is a misunderstanding - probably originating from your first error, which is to assume that 97% of Australia's wealth has been borrowed from somewhere else.

>>That loan can only be paid off by someone else taking out another loan.<<

Nonsense. If I run a business where people pay me from their after-tax income, and I use the profits from that business to repay the Bank, where's the need to take out a loan to repay me?

And that, daggett, is what happens in the real world, multiplied a gazillion times as people do their grocery shopping on the weekend, using the money they have earned.

>>The loans can only be paid off if the economy expands indefinitely.<<

Doesn't work like that. You've been misled somewhere along the line - probably back there when you assumed that 97% of all money in existence is in the form of debt.

I suggest that's where you look first, to find out where you went wrong.

Pericles, I think the funniest line you have come up with so far was:
"That was a bit patronising, Daggett".
Perhaps on should see to the mote, in one's own eye?
Until you manage to grasp the mechanics of fractional reserve banking (as explained rather well on one of your own links) and how $100. in foldable (M0) banknotes can become $1250. dollars in bank deposits (M1, at an 8% reserve), this discussion will never advance.
You mentioned once you had a loan and had no trouble paying it off. What if that loan had been onsold, and payment was demanded immediately?
You were only able to pay off the loan because you were given *time* to do so. In other words, you borrowed on your own future earnings.
About half the cost of almost every item you buy is interest on loans. The farmer borrows to buy a tractor. The transporter borrows to buy a truck. The truck manufacturer borrows to build the truck. His bank borrows, so they can lend again.
You must realise the fiat component (printed money and coin) is only a fraction of all the money in circulation.
All the other money goes through banks, and they don't give away nuthin.

Back atcha, Grim.

>>Pericles, I think the funniest line you have come up with so far was: "That was a bit patronising, Daggett"<<

So far, so good

>>...Until you manage to grasp the mechanics of fractional reserve banking<<

Uh oh. That was pretty patronising, wasn't it?

>>...how $100. in foldable (M0) banknotes can become $1250. dollars in bank deposits<<

It doesn't "become" anything. It just "is".

Let me quote Wikipedia for a moment, since it uses the simplest language.

"Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand"

The key phrase here is "lend out the remainder"

There is not the merest hint of the manufacture of money that didn't previously exist, somewhere in the system.

If they only have your $100 in the vaults, they would not be able to lend you $1,250.

They would certainly be permitted to do so, under the reserve requirements. But unless they find some capital from somewhere, or borrow on better terms than they lend, they physically cannot. What would they use to fill the ATM?

>>What if that loan had been onsold, and payment was demanded immediately?<<

Doesn't need to be onsold for that to happen, Grim, if the conditions on the loan were repayment-on-demand, my Bank can do that anyway, so nothing changes.

If I am unable to pay, I would be bankrupted, and the loan would have to be written off as a bad debt.

The value to the new owner of my debt would be exactly the same as to the originator. Provisions for defaulters like me are a standard feature of any Bank balance sheet.

As long as you believe in P&L and Balance Sheets, that's where you can track the whole process of deposits, loans, and the Bank's adherence to reserve requirements.

Here's how NAB describe the process

http://www.nabgroup.com/0,,53013,00.html

It's actually quite interesting, so long as you understand double-entry bookkeeping.

Sorry, was that patronising?

I accept the criticism Pericles; I was being patronising, and quite deliberately so.
Still, I find it incomprehensible that a gentleman of your obvious intellect didn't bother to scroll down to the bottom of your own wikipedia link. If you had done so, you would have seen a table which demonstrates precisely how a bank with 100 central bank dollars can lend out $357 dollars, while keeping a (quite hefty) 20% reserve.
Seriously chum, I don't blame you for refusing to believe the simple multiplier effect of fractional banking. It is pretty unbelievable.
As Galbraith said: "The process by which banks create money is so simple that the mind is repelled."

Grim,

You cannot convince Pericles as he (and others) have a different definition of money from the idea that you and I and most of the population.

Pericles thinks there is fiat money - that is money that has no asset backing and is created by governments through "printing money" and there is credit money that is money that is issued to people as loans and is backed by an asset.

What he thinks happens is that part of the real money is lent to someone. They deposit that and then the real money is lent again and again and again. We all agree that this is the way it works. What Pericles does not accept is that at the end of the process there is more money. He says no there is still the same amount of fiat money and there is a lot of credit money that is not the same because his double entry bookkeeping says that the credit money is backed by an asset and hence no money was created.

Now you and I know that this is smoke and mirrors and that if we take snap shot of all the bank accounts we would find that there is a lot more money in accounts. Pericles would say - but the extra money is going to go away when the money is repaid because double entry bookkeeping tells him so.

Pericles is right and if the system worked this way then it would be OK. Unfortunately there is a problem. The problem is that some (most) of the new credit money is not actually backed by a real asset. It is backed by other credit money. An essential part of the equation to make credit money OK is that it only be backed by real assets.

This is the problem I am trying to address.

I have various ways and zero interest loans on a zero interest deposit fits into Pericles model so I was surprised when he still did not see it.

But I did, Grim.

>>I find it incomprehensible that a gentleman of your obvious intellect didn't bother to scroll down to the bottom of your own wikipedia link<<

And what did I find?

>>no new money was physically created in addition to the initial $100 deposit<<

Which has been my point all along.

I have been trying to explain, to Fickle Pickle and others, that Banks cannot create money “out of thin air” whenever they feel like it. There is always an obligation to repay.

I have not been denying “Fractional Banking”, although I think it is a misleading term.

“The requirement to maintain prudent reserves” says the same thing.

I fully understand that there is a chain of transactions that expands the economy through the use of debt instruments, underpinned by reserve requirements.

But at one end of that chain there is a real asset deposited (that $100), and at the other, there is government policy.

Ultimately, if the debt isn't available from the government's coffers – that is, created by the government through Treasury Bonds, Bills etc. that borrow against future tax revenues – it won't be available at the Bank counter.

That's what monetary policy is all about.

Fickle Pickle asserts:

>>The problem is that some (most) of the new credit money is not actually backed by a real asset. It is backed by other credit money.<<

If you mean “it is backed by money the government has borrowed from us”, then yes, we can agree.

Banks cannot create it. The lending capacity has been created at government level.

Once and for all, that wretched $100 does not turn into $357 of new cash. But it can be turned into $357 of obligations to repay.

So if we can now get past the emotion-laden rhetoric of “evil Banks who create money out of thin air”, we can move on to addressing the real issue.

Governments' monetary policies.

This is becoming like arguing about how many angels can dance on the head of a pin.

If we keep firmly in our minds that money has no inherent value of its own, then it will make things much simpler. When we talk about creating money out of thin air, we essentially mean creating nothing out of nothing.

If any of us were to suddenly find ourselves on our own in the middle do the Sahara Desert, a long way from any water or food sitting on top of a large pile of bank notes, we would very quickly understand that point.

If Pericles won't acknowledge that money is created out of thin air by banks, then quite a few other authoritative sources cited in this thread have. This includes that 1969 US court ruling in favour of Jerome Daly, based on the admission of a Bank Manager, which has not been overturned and John Kenneth Galbraith.

The real issue, once again, Pericles, is whether Governments or private secretive banking cartels should have the right to create money out of thin air so that the rest of us can trade goods and services which have real tangible value.

---

I have shown above that when Governments do their economies prosper.

No, Pericles, printing money during the Civil War did not indebt the US to future generations as you wrongly assert. Where is your evidence to the contrary? That certainly would have been the case if Lincoln had done what the bankers wanted him to do and borrowed from them (and that is almost certainly why he was assassinated as I have shown).

Instead printing money allowed productivity to occur that otherwise would not have. It was inflationary to a degree, but that was a very small price to pay considering the circumstances.

The experience of Lincoln getting the US through the US Civil War and massively expanding the US's infrastructure is good reason to believe that Governments creating money as a service, as James Robertson advocates, can work.

I am perfectly willing to concede that "money" has no inherent value, daggett.

>>If any of us were to suddenly find ourselves on our own in the middle do the Sahara Desert, a long way from any water or food sitting on top of a large pile of bank notes, we would very quickly understand that point.<<

I'm equally sure you would freely accept that precisely the same observation could be made if you were sitting on a pile of gold ingots.

So we can forget that little sidetrack.

And you do seem to have some odd heroes in your corner.

>>1969 US court ruling in favour of Jerome Daly<<

Jerome Daly was a disbarred lawyer and a convicted tax cheat.

(The official record of his disbarment hearing is useful background. It makes great reading, although unfortunately I don't have a URL. "...respondent has persistently and perniciously used his position... to subvert the processes of justice" Priceless.)

One of the grounds he put forward for failing to pay was that "the only 'Legal Tender Dollars' are those which contain a mixture of gold and silver". This was rejected - quite reasonably, I think - by the Eighth Circuit of the US Court of Appeals.

Their verdict. "This contention is clearly frivolous."

http://cases.justia.com/us-court-of-appeals/F2/481/28/292674/

For additional colour, the Eighth Circuit earlier had this case involving Mr Daly to handle. It makes fun reading.

http://openjurist.org/397/f2d/124

But doesn't help your case a great deal.

I'll see your John Kenneth Galbraith, and raise you a Friedrich von Hayek:

"So long as we make use of bank credit as a means of furthering economic development we shall have to put up with the resulting trade cycles. They are, in a sense, the price we pay for a speed of development exceeding that which people would voluntarily make possible through their savings"
(Hayek, Business Cycles and Fractional Reserve Banking: Block/Garschina 1996)

http://mises.org/journals/rae/pdf/RAE9_1_3.pdf

Acceptance. By a pupil of Ludwig von Mises, no less.

Grudging acceptance, I'll grant. More of an admission, I suppose.

But practical, as opposed to dogmatically idealistic.

I'm sorry, Pericles, what was that?
“Once and for all, that wretched $100 does not turn into $357 of new cash. But it can be turned into $357 of obligations to repay.”
But hang on, wasn't a bloke named Pericles who said:
“Simply calling all money "debt" makes not the slightest difference. It is still money. The fact that it is money that is owed to someone else does not diminish its ability, in the hands of competent business people, to generate economic growth.”
So a debt is still money, but an 'obligation to repay' is...what? Not cash? Not debt? Perhaps we could give it a new name like oh, I don't know, maybe M1, to distinguish it from Mzero, or fiat currency.
Which, oddly enough, is fully exchangeable for a wretched (fiat) note, of the same colour, and same denomination, as 'real' money.
Whenever you get sick of arguing about the theory of money, I'll be happy to argue about the physical reality; like how bankers are all filthy stinkin' rich, despite not producing, creating or building anything...
Just for the record, Wing ah Ling/Peter Hume is/are about the only proponents of Hayek/Mises on this thread, and he/they bowed out about a week ago.
They like the gold standard, and commodity money, as does Rothbard, whom I mentioned.
We simply agree that fractional banking is fraud.

* I'll be happy to argue about the physical reality; like how bankers are all filthy stinkin' rich, despite not producing, creating or building anything...*

So the problem is revealed once again Grim. Envy. I thought so.

So lets clarify a few things. If a bank was broke and on its knees,
nobody would trust them, savers would run a mile. So a bank doing
well is a good thing, not a bad thing.

Yes, those who work in the banking industry are generally well paid.
As we saw with Westpac recently, having employees pop 10 million
into the wrong account, can be expensive for the bank. So it pays them
not to employ dimwits.

So who profits from all those bank profits? Firstly taxpayers,
for a third of bank profits go straight to the treasury as taxation.

Next we have literally hundreds of thousands of grey nomads, mums and
dads etc, who own bank shares directly. Even you can buy them if you
wish.

Thirdly the largest shareholders, Australian Super Funds. If you
worked and have money in a super fund, as do nearly all Australians,
then you too benefit from bank profits, through your super fund.

So virtually every single Australian gains in some way from bank
profits.

Not a bad system at all really.

Judge not, lest ye yourself be judged, Yabby.
Far from being envious, I honestly can't understand how such people live with themselves. How can any person believe they are 'worth' a million dollars a year (and much, much more) when there are millions of children starving for want of one dollar?
As to your assertion that 'everybody benefits', where does the money come from, Yabby? Are you now suggesting money comes from 'thin air'?
Have you seriously not noticed there are a handful of people in the world who collect interest, and several billion who pay interest? For the record, I am semi retired, and have no debt.
You may also want to watch your super funds balance levels. You might be in for a little shock.

*How can any person believe they are 'worth' a million dollars a year (and much, much more) when there are millions of children starving for want of one dollar?*

Grim, you are confusing two entirely separate issues here, which
is not unusual for you. If an employee at one of our major banks
declined the salary offered, do you think there would be less starving
babies?

As a matter of interest, the Vatican owns several banks, but if they
were really concerned about starving babies, they might finally get
sensible about contraception.

Even you could sell your computer and save another couple of starving
babies. But you prefer to fool around on OLO. So those are your
priorities, when we look at the reality of it.

*Have you seriously not noticed there are a handful of people in the world who collect interest *

Grim, I have just shown you that millions upon millions of Australians benefit from banks collecting interest. They take it
from your left pocket, then put it back in your right pocket,
for when you retire. Those grey nomads cruising around Australia
in their caravans, just love their income cheques!

Well spotted Grim. I'm glad that someone here is able to follow Pericles' twists, turns, convolutions and obfuscation in order to spot his self-contradiction.

I'm not sure what point Pericles was trying to make when he wrote, "I'm equally sure you would freely accept that precisely the same observation could be made if you were sitting on a pile of gold ingots."

Of course I agree. Gold is also inherently worthless. Its actual monetary value is determined by its scarcity and is far more than its value as something that can be put to good use, particularly in the middle of the Sahara Desert.

---

I have no idea what bearing on the court case of 1969 the conviction in 1973 of Jerome Daly for failing to lodge tax returns in 1967 and 1968 was.

---

I note that Pericles has not further responded to my point about the US Government under President Abraham Lincoln printing its own money instead of mortgaging the future of the United States to private bankers. So presumably, Pericles concedes that it was a good idea.

So, if it was a good idea in war time, why not in peace time, also?

---

Pericles wrote, "North Dakota has a population about the same as Tasmania. ..."

It's interesting that a population growth pusher like Pericles can acknowledge that not having a massive population can be advantageous. Nevertheless, I don't see why larger states such as California cannot do the same as North Dakota.

---

Pericles wrote, "I dunno. Maybe they were opponents of fiat money, ..."

Or maybe the British bankers wanted to gouge the American colonists. The point remains that after the British bankers got their way, the colonies descended into economic chaos.

In the 20th and 21st centuries, a similar banking system helped the Japanese and Chinese economies to prosper (although obviously at a cost to the environment), so the claim of neo-liberal ideologues that governments reclaiming the right to create money from private banking cartels would automatically cause economic problems is not borne out by the evidence.

Not so fast, Grim.

>>So a debt is still money, but an 'obligation to repay' is...what? Not cash? Not debt?<<

You are suggesting that this contradicts:

“Once and for all, that wretched $100 does not turn into $357 of new cash"

The "obligation to repay" is the essential constraint that prevents a Bank from "routinely creating money it lent out of thin air", as daggett describes the process.

The fact that $100 does not turn into $357 of new cash is... a fact.

Both are in context therefore correct.

And daggett, you really must read your own posts sometime.

The gold/notes in the desert observation was to point out that in those circumstances they have equal value, which you appear to accept. So why make a fuss about them being banknotes in the first place?

>>I have no idea what bearing on the court case of 1969 the conviction in 1973 of Jerome Daly for failing to lodge tax returns in 1967 and 1968 was.<<

You introduced him. I didn't. The judge in this case simply pointed out the fatuous nature of his assertions – that you keep referring to – on the nature of finance.

I didn't answer the Lincoln question because his policies were a failure. He ran out of the money that he had printed against the government's credit, and couldn't print any more without borrowing.

So the government decided to revert to the tried-and-tested system.

Incidentally, if Lincoln had felt strongly about it, he had a veto he could have used. Why didn't he?

As for North Dakota, they are one day going to have to support all that new debt they are creating. So don't put them on too high a pedestal right at this moment.

>>maybe the British bankers wanted to gouge the American colonists<<

Changing the subject again, I notice.

If you want this to be a thread discussing the evils of Bankers, that's fine.

Go ahead.

Just don't try to force-fit the realities of profit-and-loss, balance sheets, lending and borrowing to suit your agenda.

Pericles, that was simple unadulterated bull. Of course it was a contradiction. Go back to your own link, (Wikipedia, fractional banking) and read the first paragraph after the table.
Let me quote the key sentences for you:
“Although no new money was physically created in addition to the initial $100 deposit, new commercial bank money is created through loans.”
“When the reserve rate is 20%, as in the example above, the maximum amount of total deposits that can be created is $500 and the maximum amount of commercial bank money that can be created is $400.”
And Yabby once again, IS the world. Since Yabby is making money out of interest, everyone must be.
I have no doubt the 'millions' of Australians would agree that the 2% they are getting on the $500 they squirrelled away in the Xmas club account, more than makes up for the 5 or 7% they are paying on their $300,000 mortgage. Currently, around 73% of Australian households are in debt. That means, they are paying, rather than receiving (net) interest.
“Grim, you are confusing two entirely separate issues here, which
is not unusual for you.”
You mean like confusing Super funds with bank deposits, Yabby? Yes, that would be really stupid, wouldn't it.
As I have pointed out before, there are only 2 ways of looking at real wealth. Either it is limited only by human imagination and innovation, or it is inextricably tied to resources and energy.
In the first instance, wealth is effectively infinite, so there can be no excuse for children starving; why would anyone deny them a small part of an infinite resource?
If, however, wealth is tied to resources, then it is strictly finite; in which case the bigger the slice of the pie one person takes, the less there is for everyone else.
As Gandhi so eloquently put it: “the rich must learn to live more simply, so the poor can simply live.”
As Pericles is fond of pointing out, it really isn't that complicated.

*Currently, around 73% of Australian households are in debt. *

You are quite correct Grim. For millions of Australians realise
that having cash in the bank means that the taxation office screws
them blind. For inflation takes a big chunk of any interest payments,
taxation, which does not allow for inflation, takes another chunk.

So Australians prefer to borrow, for good reasons. They buy an
investment property and negative gear it, so reducing taxation.
They buy shares on margin loans, anything to avoid being screwed
by the tax office not accepting the reality of inflation.

Despite all this, we can see by bank retail deposits that there
are still huge numbers of Australians, usually oldies who might
have inherited a bit, or sold some property, or earned more then
they spent, who hold bank retail deposits. An old invalid pensioner
mate of mine has his 80 grand squirreled away, left to him by his
mum, as he trusts no investment but his bank deposit book. Fair enough.

*You mean like confusing Super funds with bank deposits, Yabby?*

No Grim, confusing starving babies with commerce.

*As Gandhi so eloquently put it: “the rich must learn to live more simply, so the poor can simply live.”*

Gandi seemingly forgot the laws of nature. As Darwin pointed out,
far more individuals of any species will be created, then can ever
survive. There are good reasons why pairbonding evolved in humans,
for it gives a child two parents, to provide the resources to feed
the offspring. That is their role as parents.

Now even in Australia, people limit their offspring to how many they
can afford to feed. What you are saying is that bugger the laws
of nature, if I have 12 kids, you will happily feed the lot.

As Bob Geldrof found out, send boatloads of food, planeloads
of vaccines and no contraception, twenty years later you will have
twice as many mouths to feed.

Just for the record, Yabby, my goal has never been to convince you of my point of view. Rather, my goal has been to help you to demonstrate to all the readers at OLO just exactly what a kind, selfless and compassionate individual you are, and how valuable your insights are, not only to all Australians, but indeed to all Humanity.
BTW, Daggett and Fickle; I have started a thread in the General discussion area with the rather uninspiring title: Sentimental or Rational:
http://forum.onlineopinion.com.au/thread.asp?discussion=2956
I would appreciate your input on the question posed.

*Rather, my goal has been to help you to demonstrate to all the readers at OLO just exactly what a kind, selfless and compassionate individual you are, and how valuable your insights are, not only to all Australians, but indeed to all Humanity.*

That is very thoughtful of you Grim. But a word of advice here: I
have posted on OLO for a fair while now and have never tried to be
anything but a realist. Reality does not go away, when you close
your eyes and wish it so.

The emotionally engulfed who wear their heart on their sleeves like
yourself, may feel better because of it, but the world needs realistic
and practical solutions, to achieve win-win outcomes.

But just switch on your latest Hollywood movie Grim, mostly you
will find a happy ending and all the tear jerker stuff that you
can handle.

Sadly the laws of nature just don't work that way, ignore them
at your peril.

Pericles, obviously I introduced the 1969 court case involving Jerome Daly. However, you have failed to explain the relevance of the 1974 case to the 1969 ruling that has never been overturned that banks' practices were fraudulent.

---

Pericles, would you mind citing your sources for your claim made about Lincoln's policies being a failure so as to reassure the rest of us that you aren't simply making things up in order to avoid having to admit that you are wrong?

In any case, your statement makes no sense.

A government doesn't need credit to print money. A government can print as much money as it likes. The fact that they won the war, suffering only mild inflation and massively expanded the country's infrastructure and without incurring massive debt, is proof that they printed roughly the right amount of money.

Lincoln never reverted to the 'tried-and-tested system'. He was shot in 1865, almost certainly because the bankers objected to his Government having assumed the right to print money for itself instead of borrowing money conjured out of nothing by them.

---

As for your point that North Dakota might one day become 'have to support all that new debt they are creating', you are overlooking that most other states are insolvent and that North Dakota's current system has worked perfectly well since 1919.

---

Pericles, I asked you, "why you think the British Parliament was right ... to force the American Colonies to borrow from private British banks instead of simply printing their own money?"

You responded by waffling, "I dunno. Maybe they were opponents of fiat money, ..."

I pointed out the most obvious and most likely explanation for the actions of the private British banks, and I am accused of wanting to change the subject!

Pericles wrote "If you want this to be a thread discussing the evils of Bankers, that's fine."

Pericles, when are you going to acknowledge what a number of credible authoritative historical figures, including President Wilson, have said of the insidious hold that private bankers have over the US political system?

I feel that you are sidetracking the discussion into selected historical trivia, daggett, and are asking me the same irrelevancies over and over, so this will be the last time I cover these topics for you, OK?

>>the 1969 ruling that has never been overturned that banks' practices were fraudulent.<<

You haven't actually produced any evidence for this "ruling".

One thing you can be sure of, even in the land of the drop-of-a-hat litigator it hasn't had much of an impact in the last forty years, has it?

My point was that Daly was clearly a fruitloop with a chip on his shoulder, and was therefore a thoroughly unreliable witness for your suppositions.

>>would you mind citing your sources for your claim made about Lincoln's policies being a failure<<

Surely, if they had been a success, they would not have had to pass the National Banking Act, that repealed the Greenback Law.

And if Lincoln himself had believed them to have been successful, he would have used his veto, against what was effectively a reinstatement of the status quo ante.

That would seem to be pretty strong evidence.

>>A government doesn't need credit to print money<<

Well of course they don't. But the supposed beauty of Lincoln's scheme was that it used government credit, rather than borrowing from the Banks.

>>He was shot in 1865, almost certainly because the bankers objected to his Government having assumed the right to print money for itself<<

Check your timeline. Congress passed the National Banking Act in 1863. And Lincoln was alive at the time, but did not use his veto.

I refuse to buy into your conspiracy theories about his shooting. You'll be telling us next that 9/11 was a CIA operation!

>>when are you going to acknowledge what a number of credible authoritative historical figures, including President Wilson, have said of the insidious hold that private bankers have over the US political system?<<

Woodrow Wilson?

"Wilson maneuvered through Congress... the Federal Reserve Act [that] provided the Nation with the more elastic money supply it badly needed."

http://www.whitehouse.gov/about/presidents/woodrowwilson/

Smart man, that Wilson.

Pericles wrote, "You haven't actually produced any evidence ..."

Yes, I have, and much, much more than you have, by the way. Read my post dated 9 July above.

Furthermore, Justice Mahoney stated in his court memorandum:

"Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, ... did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note." (cited in "The Web of Debt" (2008) page 29)

It is well documented and Justice Mahoney's ruling has never been overturned. Obviously, it has not changed practice. On page 30, Ellen Brown cites an off-the-record comment by another judge:

"If I let you do that (default on the loan) - you and everybody else - it would bring the whole system down."

The only conceivable reason that the powerful private banks have not attempted to have Justice Mahoney's 1969 ruling overturned is that they know they don't have a leg to stand on. Any attempt to do so would entail a serious risk of revealing to the entire world how fraudulent and unnecessary our entire private banking system is.

---

In regard to the 1863 Banking Act, there are complex political reasons (difficult to explain in 2x350 words/day) why it was passed. The section (pp91-93) in Chapter 9 of "The Web of Debt" which covers this is called "The Worm in the Apple: The National Banking Act of 1863-64"

(tobecontinued)

(continuedfromabove)

Part of the reason it was passed was (as with the Federal Reserve act of 1913 and the 2001 (so-called) "Patriot Act" ) was that not many legislators understood the legislation they were voting for. It appeared quite different to what it actually was. A private communication from a Rothschild investment house in London to an associate banking firm in New York dated June 25, 1863, confided:

"The few who understand the system will either be so interested in its profits or so dependent upon its favours that there will be no opposition from that class while, on the other hand, the great body of people mentally incapable of comprehending ... will bear its burdens without complaint." (Ellen Brown p91)

Did you get that Pericles? Yabby?:

"... the great body of people ... will bear its burden without complaint".

If you cannot grasping the meaning of these words (and the above-cited Hazard Circular) from the mouths of the private bankers themselves, I expect that other forum users, who are open-minded and genuinely here to arrive at the truth, are.

---

I don't know what Pericles imagines he stands to gain by dragging 9/11 into this discussion.

If Pericles means to accuse me of choosing the Laws of Physics (http://www.youtube.com/watch?v=xG2y50Wyys4), over the Official 'explanations' of three unprecedented engineering disasters that all occurred on the one day, including the 'collapse' of World Trade Centre Building 7 (http://www.youtube.com/watch?v=POUSJm--tgw http://www.youtube.com/watch?v=X8cU9i7-e9M http://www.youtube.com/watch?v=fnF4Hv-ePR4), which was not even struck by an aircraft, then I plead guilty.

If Pericles was not aware of the largest single forum thus far to have been held on OLO -- "9/11" at http://forum.onlineopinion.com.au/thread.asp?discussion=2166&page=83 -- then he would have to be one of very few amongst my OLO detractors.

I urge people to look at the forum and judge for themselves which side of the controversy discussed the evidence and which side relied on smear and ridicule.

*Did you get that Pericles? Yabby?:*

Deary me Dagget, so now I should get my knickers in a twist because
of what some American banker said in 1863 ?

Frankly I am happy to judge things as I see them here and now,
or have experienced in my lifetime. Results matter.

You seem to have this fixation in your mind, that Govts only do
good but if something is for profit, it must be bad. Let me tell
you, Govt monopolies are commonly a frigging disaster, for they
have no compeition and the staff no reason to get out of their comfort
zone or achieve anything, for dinner is assured for their lifetimes.

Daggett, I went to the Commonwealth Development Bank, cap in hand
for a loan, over 30 years ago. They sent me packing. The
CBA were a Govt bank then, they were no cheaper, or better then
any other bank. Spread margins were over 4%, twice what banks work
on these days, due to competition. But of course the Govt flogged
them off, for it got into too much debt and had to repay some.

Today I see all sorts of young people with a bit of drive, plumbers,
carpenters, auto electricians, shearing contractors, you name it,
using competitive bank credit to start their own businesses.

They are probably not even aware as to how lucky they are, compared
to how things were, only 30 or so years ago, when all that would
have been impossible.

Now you come along and tell me that because some bloke in 1863
said something, I should think that banks don't play a vital role.

Think again Daggett.

Firstly, I apologise for the grammatical abomination in my previous post, It occurred because I only half way changed:

"If you incapable of grasping the meaning of these words (and the above-cited Hazard Circular) from the mouths of the private bankers themselves, I expect that other forum users, ... are."

... to the less verbose:

"If you cannot grasp the meaning of these words (and the above-cited Hazard Circular) from the mouths of the private bankers themselves, I expect that other forum users, ... can."

---

Yabby wrote, "so now I should get my knickers in a twist because of what some American banker said in 1863?"

Firstly, Yabby, I was refuting Pericles' claim that Lincoln's policy of printing Greenbacks (US$400,000,000 in all by the end of the war), rather than borrowing an equivalent amount of money conjured up out of nothing by bankers, was a failure.

The quote from the bankers themselves shows conclusively that they understood that the 'tried-and-tested' system that was reintroduced into America by the National Banking Act of 1863 was not in the interests of ordinary Americans.

I would suggest that the mindset of bankers in those days differs little from the mindset of bankers today.

This would appear to be confirmed by the experience of the "Yes Men". They attempted to parody the bankers and other profiteers, but ultimately failed.

They found that they were taken as genuine by those they were attempting to parody on their web site and were actually invited to address business conventions.

At the conventions they attended they failed in their endeavours to get thrown out. No matter how extreme and outrageous was their parody, they were assumed to be genuine and warmly applauded by their audiences.

Check out this video where they explain how today's system of exploiting abysmally paid third world labour is cheaper and more profitable than slavery: http://video.google.com/videoplay?docid=-5206347030584294754

If you check out these and other "Yes Men" videos and their web site at http://www.theyesmen.org/ and read their book, you will see that quotes of the 19th century are just as applicable today.

I think that it is entirely appropriate, dagget, that you enlist the support of a group of US satirists to support your views on the finance industry.

>>Check out this video where [the Yes Men] explain how today's system of exploiting abysmally paid third world labour is cheaper and more profitable than slavery<<

And they're not even as accomplished - or even remotely as funny - as The Chaser.

Meanwhile, back in the real world...

Pericles, it's beside the point, whether you or I subjectively judge the "Yes Men" to be 'funny' or not.

They attended a succession of business conventions and presented views that any thinking, decent and compassionate human being would have found repugnant and found that, instead of being rebuked and thrown out, they were applauded.

The presentation in the above film occurred because someone organising the the "Textiles of the Future" conference in Tampere, Finland in August 2001, took as serious the parody website http:/gatt.org and invited them to give a keynote address.

At the same presentation (it would seem, see http://www.rtmark.com/yesfinland.html):

'Finally, to applause from the highly educated audience, Unruh's business suit was ripped off to reveal a golden leotard with a three-foot-long phallus. The purpose of the "Management Leisure Suit", he explained, was to allow managers, no matter where they were, to monitor their distant, impoverished workforces and to administer shocks to encourage productivity--assuring that no "Gandhi-type situation" develop again.

'"If a group of Ph.D.s cheers at such crudely crazy things, just because it's the WTO saying them, what else can the WTO get away with?" said Andy Bichlbaum of the Yes Men, the impostors' umbrella group.' (see also http://www.theyesmen.org/hijinks/tampere)

---

That all seems real enough to me.

Anyhow, returning to what, at least, Pericles agrees is part of the 'real world'.

The memorandum cited above, together with other material including Jerome Daly's cross-examination of Ronald Graham, Vice President of the Federal Reserve Bank of Minneapolis, is included in the document "What the banks don't want you to know" at http://www.hiddenmysteries.org/themagazine/vol14/research/bank-secrets.shtml.

You will find that Ronald Graham confirms everything stated by myself, Grim, Fickle and one under god.

---

In regard to the Federal Reserve Act of 1913, an article in the "American Mercury" magazine in 1924 quotes Woodrow Wilson as having saying "I have unwittingly ruined my country" (cited also in Brown, p123). Given the Great Depression and the situation of 2009 where all credible authorities agree that the debt to the Federal Reserve is unrepayable, this would seem to be right.

This speaks for itself, daggett.

>>'Finally, to applause from the highly educated audience, Unruh's business suit was ripped off to reveal a golden leotard with a three-foot-long phallus.'<<

These are merely the antics of a US version of Elliot Goblet.

>>That all seems real enough to me.<<

Yep, I can see that it does.

>>You will find that Ronald Graham confirms everything stated by myself, Grim, Fickle and one under god.<<

This is why I mentioned 9/11 earlier, daggett.

You are hooked on conspiracy theories.

You invariably produce "evidence" from sites with the same bent as yourself - this, entitled beguilingly "Hidden Mysteries", being a classic example.

Having said that, I genuinely enjoyed reading through the piece you highlighted for us here, even though the court case is fortyone years old.

It provided me with some insight into how, by simply assuming that "they're out to get you", it is possible to manufacture a case of such magnificent improbability, that its very impenetrability becomes its most convincing asset.

How else can you believe that the 1968 findings of a Scott County, Minn. Court proves that the entire Banking system is invalid?

The cross-examination reads like the Chewbacca Defense in the South Park parody where Chef is on trial.

http://www.southparkstudios.com/clips/103454

And you do like parodies, daggett, we have ascertained that already.

There's little point proclaiming that "it has never been overturned". More significantly, it has never been used in front of a different judge.

Come to think of it, no-one ever used it again in the same courtroom.

There are only limited number of times you can get a court to assist you in fraud.

I'm afraid your other current heroine, Ellen Brown, is also a little suspect.

Here's her first-up "solution" to the current US financial problems.

>>The federal government could issue credit through its own lending facility, leveraging "reserves" into many times their face value in loans just as banks do now.<<

http://model-economy.wikispaces.com/E+Brown+monetary+proposal

She proposes the same medicine, but from a different bottle.

But why trust government to do it better?

After all, they authorized 9/11, didn't they?

Pericles wrote, "This speaks for itself, daggett. ... (blah, blah, rant, blah, rant, ...)"

It seems as if my point has gone right over your head.

---

Pericles, wrote, "You invariably produce 'evidence' from sites with the same bent as yourself."

Pericles, the film footage that forms the basis of those YouTube broadcasts is the same film footage that was captured on the day and has been viewed again and again by hundreds of millions of people.

What they have done is, by measuring the speed and acceleration of the 'collapses' at a number of short intervals, shown that the official explanation of those 'collapses' contradicts Newton's laws of motion.

If you understand year 10 physics and you are right, then you should be able to show that what is said in those videos is wrong.

---

Pericles wrote, "But why trust government to do it better?"

"After all, they authorized 9/11, didn't they?"

That seems to me like a non-sequitur.

I would suggest there's a world of difference between a government which serves the interests of ordinary citizens and the criminal cabal that ruled the US from early 2001 until early 2009.

If you had followed the debate properly, Pericles, you would understand that those of us who favour government, rather than private unaccountable banks, assuming the right to create money, have acknowledged that, on occasions, governments can get it wrong.

In a democracy, a remedy for that is available. We can throw such a government out at the next election.

And if we have the right to recall unsatisfactory elected officials and if the decision-making is more transparent, then we could remedy the problem even sooner.

---

Pericles wrote, "The cross-examination reads like the Chewbacca Defense ...."

Here's some of the cross-examination:

Q. Now, the Federal Reserve Bank actually creates credit on its books, does it not?

A. The only way in which it creates credit is by its discount policy, in which it may credit, by making a temporary loan and credit the reserve account of that individual bank.

(tobecontinued)

This "debate" has gone off the tracks. The title of the article was "Money from nothing: supplying money should be a public service".

Pericles argues that credit money is NOT money from nothing but is money backed by assets and the money "goes away" when it is repaid and if it does repaid then the bank repays it from their reserves - hence there was no real money (by which he means fiat money) created.

Daggert and I and others say that because the bookkeeping says the money goes away is immaterial. Credit money creates money because there clearly is more money in the system before the money is repaid. The distinction between fiat and credit money is a bookkeeping exercise and not substantive.

I argue that we can eliminate the need for credit money and use fiat money provided there is enough fiat money available for loans. Alternatively we can get the same effect by banks issuing zero interest loans as long as the zero interest loans are for productive community infrastructure - such as ways of producing energy that does not emit greenhouse gases

The banks should be allowed to "write off" the zero interest loans and not write off from their reserves if the loans are not repaid.

This approach will satisfy the author of the original article because the increase in the money supply will be created in general areas of the public good. Pericles will be happy because the existing money system remains intact with a market place still doing the allocation of investment funds to the best advantage.

So perhaps everyone can take a look at what I am proposing and if it is OK help me in trying to sell the idea to both banks and government.

It's no surprise, daggett, that your thread on 9/11 is so long.

>>If Pericles was not aware of the largest single forum thus far to have been held on OLO -- "9/11"<<

You single-handedly kept the discussion going, long after all logic and reality had fled.

Much as you are doing here.

There is no conspiracy.

Just Bankers doing their job. Somewhat badly, in recent years, it is true. Which I have never argued to the contrary.

But the system itself is well-established and transparent. You may not like what they do, and that is your prerogative. But just because you personally don't like it - and, dare I suggest, don't actually understand it - that doesn't indicate the presence of a massive international conspiracy.

Fickle Pickle, you are a worry.

>>Pericles argues that credit money is NOT money from nothing but is money backed by assets<<

I maintain that the practice of a Bank keeping a particular level of reserves against the loans that it makes, is not "creating money from nothing".

As proof, I can review the balance sheets of that Bank and see both sides, Assets and Liabilities, plus the fact that they balance.

If your argument is that the level of prudential reserves should be 100%, that's fine. While satisfyingly conservative, it would stifle growth and drive the economy into recession.

If your argument is that only the government should be allowed to lend to the people, that is fine too. But is a political argument, that rests entirely upon your view of the government's role in our lives.

But Fractional Banking is not synonymous with the creation of money out of thin air. It simply governs the amount of credit that a bank is allowed to provide, which is always balanced against another source of funds.

But how does this work?

>>The banks should be allowed to "write off" the zero interest loans and not write off from their reserves if the loans are not repaid<<

What are they "written off" against?

Come to that, what does the term "written off" mean, in your world?

(continuedfromabove)

Q. It can credit the account of the individual bank by making a loan to the bank?
A. Yes, sir, this is a loan that is repaid.


Q. And when the Federal Reserve bank makes the loan or that credit first comes into existence, is when they manufacture it on the books?
A. It is a credit to their reserve?

Q. And it first comes into existence at that time?
A. These are temporary loans.

Q. And it doesn't make any difference if it is temporary or long term, the first time it comes into existence is when it is credited on the books of the bank?
A. Yes, sir.

---

Of course it comes as no surprise that Pericles has, yet again, attempted to avoid discussion of the evidence by trying to divert the discussion into subsidiary issues---and on another thread at that---such as attributing blame for the length of that thread.

Actually, Pericles, the 9/11 Truth discussion was kept alive by quite a few others as well as myself, including some who disingenuously claimed to have no interest in the topic and repeatedly promised to leave only to subsequently poke their noses back in when they thought they saw an opportunity to take a cheap shot at me.

I only mentioned the discussion's length in order to try to establish whether you had truly been unaware of it through its eight months of existence. It strikes me as intellectual cowardice to have not joined in at the time and then attempt to drag 9/11 into this discussion, seemingly as a red herring.

Pericles wrote, "There is no conspiracy."

I have already shown that a number of credible and authoritative historical figures believed that there is, including Bismarck and Woodrow Wilson. I could easily add to that many more, including Jefferson, President Andrew Jackson (who had several attempts made on his life) and Henry Ford.

What makes you so certain that they are wrong?

---

Pericles wrote, "But the system itself is ... transparent."

Please, whatever you do, don't stop making such idiotic assertions.

Nothing new here, move along...

>>Pericles has, yet again, attempted to avoid discussion of the evidence<<

I fail to see any value in dissecting a fortyone-year-old verdict that has absolutely no impact. On anything.

Apart from allowing an about-to-be-disbarred lawyer to get away with failing to pay his debts, naturally.

The case was not binding, by the way, on anybody except the Bank, with whom Daly mortgaged the property. It was a "Justice of the Peace" trial, held in the storeroom - complete with the obligatory wood stove - of the local General Store in a tiny mid-Western town,

The verdict - or more accurately, opinion - has no value.

No substance. No impact. No significance. No relevance.

Put it behind you. Move on. It is only confusing you.

>>Actually, Pericles, the 9/11 Truth discussion was kept alive by quite a few others as well as myself<<

As you are well aware, the last few months of that "discussion" was populated by you, one acolyte, and a couple of others who pointed out that you were being faintly ridiculous.

As CJ put it so succinctly "Still channelling my late ex-mother-in-law I see, Jimmy."

>>It strikes me as intellectual cowardice to have not joined in at the time and then attempt to drag 9/11 into this discussion, seemingly as a red herring.<<

Sorry to disappoint you. I'm willing to join a thread where I can offer opinions or discuss facts. A discussion based on pure paranoid fantasy and a visceral devotion to conspiracy theory doesn't interest me one tiny bit.

And far from being a red herring, I referred to your "previous" as an indicator that you quite happily drive endlessly pointless arguments, based solely on your own vivid imagination.

It exposes the greater part of your motivation, given that your grasp of either topic is based wholly and solely on information you have gleaned and reprinted from similarly conspiracy-inclined web sites.

Which is one of the reasons I occasionally ask that you use your own words. Just to see whether you are thinking, or simply regurgitating the thoughts of others.

Pericles,

Please read and try to understand what I am saying. I am saying that the ideal is to have 100% reserves - or that banks only lend money that is on deposit. We can get there in different ways and that is what I am advocating. We set up a system that reduces the need for credit money and always uses fiat money. We can move to this desirable outcome by having a way of creating money that is backed by assets without at the same time creating loans. It is possible to do it and that is what I am proposing.

Look at what I am saying and think it through. It will work and it will increase the ability of banks to create loans and grow the economy and it will stop inflation in its tracks.

What the Fed is REALLY Trying to Hide In Fighting an Audit
(Washington’s Blog)
http://www.washingtonsblog.com/2009/08/what-fed-is-really-trying-to-hide-in.html

75% of Americans and at least 276 Congress members and 19 Senators want to audit the Fed,
http://www.ronpaul.com/2009-07-21/ron-pauls-bill-to-audit-the-federal-reserve-now-has-275-co-sponsors-in-the-house-and-17-co-sponsors-in-the-senate/

but the Fed is fighting tooth and nail to keep everything hidden.
http://www.washingtonsblog.com/2009/06/federal-reserve-to-hire-ex-enron.html

Most people assume that the Fed wants to keep secret the list of banks which received bailout money. You know, something along the lines of “we gave Goldman Sachs $100 billion”.

But what the Fed is really struggling to keep hidden is the fact that the entire financial system is based on massive manipulation and fraud by the Fed and its primary dealers.

Specifically, the Fed is desperately trying to hide that many trillions of the government’s bailouts
http://www.washingtonsblog.com/2009/07/government-watchdog-bailouts-could-rise.html

have gone to inflating the stock market, buying up the U.S. government’s own treasuries, and gaming the currency and gold markets.
http://www.washingtonsblog.com/2009/08/real-economy-versus-fake-economy-of.html

Of course, when the New York Federal Reserve’s “primary dealers” (the dealers through which the Fed carries out its open market operations in general, and its PPT, ESF, and other schemes through) get the huge sums of cash from the Fed,..they place bets based on inside knowledge of where the money flows are going

(they also, supposedly, skim off part of the cash, but that’s for another essay).

In other words, the Fed’s primary dealers engage in insider trading and frontrunning on a scale which would make your normal white collar felons look like a silver nanoparticle.

Finally, the Fed is not the only central bank engaging in manipulation. An audit would show how the Fed is playing footsie with other private central banks in an international con game.

Don’t believe me?

Show me the books and prove me wrong.

Pericles, please don't let anything I, or anyone else says on this forum, shake you in your resolve to play the man and not the ball.

---

Pericles wrote, "Which is one of the reasons I occasionally ask that you use your own words. Just to see whether you are thinking, or simply regurgitating the thoughts of others."

Now, who was it that complained earlier about being patronised?

When I did explain to you earlier, in my own words, why our privatised money-creation system leads to an impossible contract for society as a whole, it went completely over your head.

You wrote, "If I run a business where people pay me from their after-tax income, and I use the profits from that business to repay the Bank, where's the need to take out a loan to repay me?"

The need originates from the fact that that money used to repay the debt, originated as debt somewhere. Of course, the person paying you may not have had to go into debt to get the money, and maybe the person who paid him/her did not have had to go into debt, but somewhere at some point someone did have to go into debt to get that money.

Why is that so difficult for you to comprehend?

If, instead something like Lincoln's Greenback system were to be used, that need not be the case. The start of the whole chain could simply have been the money having been created on the government printing press, or, possibly as a ledger entry in the Government owned bank in return for work, or goods of some sort. If that money had eventually been used as payment for goods and/or services from your business, then, unlike our current system, no-one -- no government and no individual -- need to have gone into debt in order for you to have been able to run your business profitably.

And as we have shown many times before, that need not be inflationary if the introduction of money into the system has allowed sufficient additional real wealth to be created.

We might be suffering from terminological overload, Fickle Pickle, but I'm even more puzzled than ever, thanks to this:

>>the ideal is to have 100% reserves - or that banks only lend money that is on deposit... We set up a system that reduces the need for credit money and always uses fiat money<<

I thought that the weight of opinion here is that "fiat money" is the root of all evil? And that if you have "100% reserves" (whatever that means), there is no need for "fiat money", where...

"the only thing that gives the money value is its relative scarcity and the faith placed in it by the people that use it"

http://www.kwaves.com/fiat.htm

Colour me confused, again.

>>When I did explain to you earlier, in my own words, why our privatised money-creation system leads to an impossible contract for society as a whole, it went completely over your head.<<

Only if you believe that you were talking sense, daggett.

Which you weren't.

>>The need originates from the fact that that money used to repay the debt, originated as debt somewhere. Of course, the person paying you may not have had to go into debt to get the money, and maybe the person who paid him/her did not have had to go into debt, but somewhere at some point someone did have to go into debt to get that money.<<

"Someone, somewhere, at some point"?

Hardly definitive.

Come now daggett, admit that it is pure invention.

There is no imperative for anyone to go into debt, in order to repay a debt. Heck, if they have to repay a debt, then they are in debt already.

>>The start of the whole chain could simply have been the money having been created on the government printing press<<

I know a government that did that once.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html

The present setup - so long as you are prepared to discard international banking conspiracy for a moment - operates on a system of checks and balances.

It is not perfect.

But trusting governments to do it on their own is, frankly, more scary.

Pericles,

Yes we have a problem with matching our world views (or economic views). I know where you are coming from but I do not think you understand what i am talking about.

In summary I believe that we would be better to have more fiat money and less credit money. I do not think it possible or desirable to get to 100% fiat money all that quickly but that should be the aim.

I think your difficulty in understanding what I am talking about comes because you think that the only way to create fiat money is for the government to "print money". I say there other ways and I have given a few ways it can be done. The one that is probably achievable is the zero interest loans approach as it fits in with the existing system.

The reason I have persisted in this dialogue is that I am giving a presentation next week to government officials who could endorse the idea and make it happen and I want to find the problems with the idea and why people cannot understand what I am talking about before I go into the meeting.

Fickle Pickle,

Of course, I wish you well in what your are trying to do.

Please keep us posted on the outcome of your presentation to government officials next week, whichever way it goes.

My only concern is that if we ever did achieve a thoroughgoing financial reform in which the right to create money is taken back from private bankers by our Government, then these sorts of measures which would considerably improve our circumstances, in the context of today's dysfunctional financial environment, may become redundant.

Those employed to run such schemes would have to be offered employment somewhere and somehow within our publicly owned banking and financial system.

Ellen Brown discusses this extensively towards the end of her book.

Fickle Pickle, I also wish you well.

If we assume that your theories meet with agreement, the biggest remaining question will be the political hot potato of legislation that allows the government to print money at will, instead of having to borrow, as it does at the moment.

This is in fact the point at which theory meets reality.

In your reality, the government will only print the amount of money needed to fullfil its particular project obligations, be it NBN or whatever. Because it is project-oriented, it cannot spill over into the existing economy (if I read you correctly).

Keeping it within these boundaries, given the exhilaration that such freedom brings, will test the most sober of Treasurers.

Which is why the governance model to oversee such projects would be pretty crucial, I think you would agree. Whom would you trust to take on this role - given of course the government would say "trust me, trust me".

Very loudly.

On the theoretical side, there are still a couple of questions that you may be quizzed upon.

What do you see as the realistic limits (i.e. checks-and-balances) that should be placed upon a government that is allowed to create "debt-free" money?

In a steady-state environment, you could possibly stipulate that any increase in supply should equal the country's productivity increase.

But how do you reach that point in the first instance, given that other instruments are already in use?

A corollary question would be, how would your system respond to an economic downturn, e.g. a decrease in the country's productivity, or adverse international terms-of-trade.

There will be others, depending on who you are talking to.

Incidentally, if you are planning to use TransACT as an example, I would look again very closely at your own evaluation of the reasons for the changes in their capital requirements over the years. I think you are making too many assumptions on the relationship between capital investment and subscriber uptake.

Keep us posted. Fascinating stuff.

the current system..[of bankers creating the boom bust depending on monetory supply and inflaTION..is flawed...if money creation returned to govt it would be accountable...extra supply atomaticly deflates the exchange rate...bad govt is soon exposed...not so bad banking that collapses overnight...and only the insiders know of it

currently the whole game is played by non electable elites who control..who gets what...and we have all seen how sustainable the huge bebt defaults..leaving investers holding empty promises or getting cents in the dollar invested...isnt working

these defaults..are built-in to the current ursury based system..[never an audit of the fed who plays games with monetory supply and intrest rates that increase defaults...to the advantage of their shareholder banks...holding shares of the silver/gold looted from the people..by demonetising gold/silver coin[..the only constituted legal tender

only bankers or banker shrills would blindly say huge bonus is fair return...for money created at the whim of bankers..suplying their mates...with no oversights at all...thec oversight bodies are a sham...run by former insider stooges

the curreent system sees capitalists capitalising themselves or their mates with fiat availment or credit.. to each other..while the lender of last resort..[the tax payer still needs to bail them out when/while they suck us dry]...

we seen how the current banking system failed...how our taxes underpin /underwrite..their excess...while we get bankfees and charges..where we used to get intrest...now its only the elites get intrest...and the credit...never having to acount for their lies

audit the fed...or return the power to govt...govt that is restricted by having to explain to the people at budget time...as well as the market..via exchange rates

Pericles,

You have hit on all the big issues and I had thought of possible solutions before latching on to the idea of printing money to fund investment in "community goods".

Although the government is allowing the printing of money the real advantage of the system is that we use a market to distribute the money. The market is not the one we normally think of but is the "investment market". The reason for distributing the money (or the zero interest loans) widely is to have a lot of buyers in the market. The reason for specifying the "general area" for investment is to have a lot of sellers where people can invest their money.

The reason it does not matter if the Treasurer prints too much money for say renewables is that the renewables vouchers will become worth less if too many are printed and people will hold them rather than spend. That is, inflation will be restricted to the area for which the loans are being made. That is there is only a certain amount of investment in a particular area that an economy can sustain and once we get to that then pouring more money in will simply inflate the money for that area or reduce the price of the right to get a zero interest loan.

The elephant in the room in such a system is ensuring compliance and stopping people ripping off and abusing the system. However, we have a good model of how to do this with EBay. What you do is to require both buyers and sellers to agree to the terms and conditions of the market place which includes investing the money on new assets not on buying old assets. If either buyer or seller is suspected of breaking the rules they are simply suspended from further operation in this market place or in any similar ones unless they can prove otherwise.

(Cross-posted from http://www.911oz.com/vbulletin/showthread.php?t=5305)

http://www.youtube.com/watch?v=ggADLt4s4pM

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy's order gave the Treasury the power "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This meant that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.

With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level. Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the (... more at http://www.911oz.com/vbulletin/showthread.php?t=5305)

talking about money from nothing
i think the banks are covering themselves

2 Japanese carrying $134 bil worth of U.S. bonds detained in Italy
Japan Today ^ | Thursday 11th June, 06:18 AM JST | JapanToday

Posted on Thursday, 11 June 2009 3:45:08 PM by Xenophon450

ROME —

Two Japanese nationals were detained by Italian financial police last week after trying to enter Switzerland with $134 billion worth of undeclared U.S. bonds, mostly Treasury bonds, an Italian daily said Wednesday.

The Japanese consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals and their identities.

According to the report in il Giornale, two unidentified Japanese in their 50s concealed the bonds, including 249 U.S. Treasury bonds each worth $500 million, in a suitcase with a false bottom that was searched by the Italian authorities June 3 when they were in Chiasso, at the border with Switzerland, about 50 kilometers north of Milan.

The daily did not say on what charges they have been detained, but the two may have been detained on suspicion of attempting to take a large amount of securities out of Italy without declaring it because the paper said they had not declared the bonds.

seems they have been declared fake
http://www.reuters.com/article/marketsNews/idUSN1944623120090619
but how many are held...as bad securities in the so called bad banks...we tax paying sukkers have been buying off the banks

just like drugs you gotta be thinking...the bankers are dangerous...could this only be the tip of the iceberg?

add in their securitised debt swaps..you gotta wonder if your super or bank...is holding this fake paper...and who will be left holding the baG...looks like media didnt tell you...and no one wonder why

Just a thought, daggett.

There's currently around $11 billion (market value) of silver in the US government vaults.

>>If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes... Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money.<<

If the available money stock had been limited to $11 billion in today's dollars, what do you imagine would have been the growth of the US economy, between Kennedy and today?

That's why the governments had to unshackle themselves from artificial constraints such as the gold standard, and start using their economy's intrinsic strengths to borrow against the future.

It's the same reason people take out mortgages.

They can't afford to buy out of savings, so they borrow against future earnings.

As with people, so with governments.

And it is also the reason why governments' economic strategy suffers, when they allow the people to borrow beyond their means.

Well for what its worth, I think that what will happen to FP is
what usually happens when people have so called bright ideas.

Those that matter will pay him heaps of compliments and make him
feel great, then the moment the door is shut, they will roll around
their offices laughing :)

Some just never twig how the system works, but let him learn.

Now lets think just a teeny bit of this one through. One moment
the Govt flogs off the local Telco for top dollar to pay off its
debts. In the next moment, that Govt is going to print $, to build
a system which sends that telco broke.

Sorry, it won't happen chldren.

But believe whatever you will, if it get's you through the night.

Yabby,

One of the things I learnt many years ago is not care that others think I am "impractical" or a "rat bag" or "delusional" when I am discussing ideas. The reason is that I know that some of them are off the planet but the only way to refine them is to put them out there for criticism so that you can discover the difficulities and work around them.

This works. For the past five years I have been working, with others, on revolutionising the way we use the Internet and it is now starting to happen. The idea is to give everyone - who wants it - an "electronic presence" that can act on their behalf and exists on the Internet. You can think of it as being you in "the matrix" and it has electronic capabilities that empower you as you deal with others and other organisations. We call it your edentiti and you can see the idea at www.edentiti.com.

Selling this idea has been difficult. For three years we got nowhere except develop prototypes of things your edentiti could do. Others have taken the idea worked with me to make it "acceptable" and the first steps of deployment can be seen at www.greenid.com.au If you are gambler you may use the system to identify yourself. All sorts of things are now happening and keep an eye open for instances of greenid - such as the latest product from a very large bank.

One of the things that I thought your edentiti could do would be to help you cooperate with others electronically in ways to "solve" the "Tragedy of the Commons" by getting Rewarded not to consume but using your rewards to increase the size of the commons. Keeping track of Zero interest loans given to a person is one the things that can be done by an electronic presence.

Anyway my thanks to you and others for persisting in discussing it because it has enabled me to formulate this next effort.

(To continue from where I left off above ...)

http://www.911oz.com/vbulletin/showthread.php?t=5305
Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve's control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank. His efforts to have all troops out of Vietnam by 1965 and Executive Order 11110 would have severely cut into the profits and control of the New York banking establishment.

---

Pericles' response included, "That's why the governments had to unshackle themselves from artificial constraints such as the gold standard, ..."

Pericles, how about telling us all something we don't already know?

The whole point that I have been making over and over and over again is that money has no intrinsic value of its own. The only constraint that should be made is that imposed by the strength of the real economy (and not the insane paper economy created financiers and speculators).

If, as Pericles asserts, that $11billion would not have been enough for all the needs of the US economy, it would have been a good start towards eliminating the needlessly imposed dependence of the US Government upon the Federal Reserve. Kennedy should then have taken the extra step of resuming the complete right of the US government to issue currency as Lincoln had done.

But let's not also forget that if Kennedy had lived, the money squandered on the Vietnam War and other military adventures would have been saved.

---

Those who go back over this thread will notice a good many of my arguments that Pericles has failed to acknowledge.

He attempted to ridicule any suggestion of a conspiracy by bankers to murder Lincoln, ignoring the testimony of Bismarck. He also ignored the fact that two other Presidents, who since stood up to the bankers have also been murdered and he ignored Wilson's stated fear of the power of the banks.

Absolutely right, daggett.

>>Those who go back over this thread will notice a good many of my arguments that Pericles has failed to acknowledge. He attempted to ridicule any suggestion of a conspiracy by bankers to murder Lincoln, ignoring the testimony of Bismarck. He also ignored the fact that two other Presidents, who since stood up to the bankers have also been murdered and he ignored Wilson's stated fear of the power of the banks.<<

Unlike you, I don't subscribe to conspiracy theories.

You, on the other hand, seem to live in a world where nothing happens unless there is a secret cabal of evil manipulators at work, subverting all civilization to their evil ends.

It's not healthy, you know.

You also have a very strange take on "alternative history"

>>let's not also forget that if Kennedy had lived, the money squandered on the Vietnam War and other military adventures would have been saved.<<

"Let's not forget" Kennedy's role in the escalation of the US involvement in Vietnam, eh?

"In 1961, the newly elected Kennedy Administration promised more aid and additional money, weapons, and supplies were sent with little effect. Discussions then began in Washington regarding the need to force a regime change in Saigon. This was accomplished on November 2, 1963, when the CIA aided a group of ARVN officers to overthrow Diem. To help deal with the post-coup chaos, Kennedy increased the number of US advisors in South Vietnam to 16,000"

http://militaryhistory.about.com/od/vietnamwar/a/VietnamOrigins_2.htm

It helps, when you make these ridiculous claims, to at least get some of the basic facts right.

But you prefer to rely on your imagination, I guess.

Pericles wrote, "Unlike you, I don't subscribe to conspiracy theories."

Yes, you have already said that. But what does that add to this discussion?

What is " [not] subscribe to conspiracy theories" supposed to mean?

Does that mean that you believe that conspiracies somehow defy the laws of nature and never happen, even when many credible authorities and, often, the laws of physics applied to observed events (such as JFK's head jolting back towards the direction in which the fatal shot was allegedly fired by Oswald instead of away) suggest that they do?

Pericles wrote, "You, on the other hand, seem to live in a world where nothing happens unless there is a secret cabal of evil manipulators at work, subverting all civilization to their evil ends."

What have I said that makes you think that?

I have shown that the outcome of a large number of critical turning points in our history have, in all probability, been determined by conspiracies. However, I have never suggested that absolutely everything is.

Pericles ranted "Let's not forget" Kennedy's role in the escalation of the US involvement in Vietnam, eh? ..."

"'In 1961, the newly elected Kennedy Administration promised ... Discussions ... November 2, 1963'"

This is so simple-minded that it barely deserves a response.

This assumes that:

1. Everything was fixed in concrete from 1961 onwards.

2. Kennedy was in total control that everything the military and the CIA did at all times.

We, know, for a fact, that Kennedy was not totally in control of the military and intelligence agencies at all times. At many critical times, the military acted contrary to his wishes. On many occasions, when he was able to exercise his authority, he did, as, for example, when he refused to provide air cover for the Bay of Pigs invasion of Cuba and when he closed down the US military's Operation Northwoods (http://en.wikipedia.org/wiki/Operation_Northwoods) plans to stage 'false flag' assassinations of US citizens and highjackings that were to be blamed on Cuba.

The evidence is conclusive that Kennedy planned to withdraw US forces from Vietnam.

His murder changed that.

Your incoherent burbling hardly warrants the time expended on a response, daggett.

You are a dyed-in-the wool, one-eyed, full-on dedicated conspiracy theorist, with little of any importance or relevance to bring to an intelligent debate on any topic, as evidenced by this latest post of yours.

I'll simply let it speak for itself, with a quiet QED.

Pericles wrote "I'll simply let it speak for itself, ..."

Thank you, Pericles.

Bye.

---

One correction:

"such as JFK's head jolting back towards the direction in which the fatal shot was allegedly fired by Oswald instead of away"

... should have been:

"such as JFK's head jolting back towards the direction from which the fatal shot was allegedly fired by Oswald instead of away"

(i.e "the direction from which" and not "the direction in which").

duggit i havnt been following the debait for a while...but thankfully per-ridicules has given some response...meaning it keeps moving as a topic

anyhow caeser's murder was by the money changers...he dared mint coin with his head on it...built colloseums galore intrest free...with his gold/silver/copper coin...but cutting out the money changers results in sure death...as with jfk..lincon and a few others

there are links too with 911...there was a massive reserve of gold suposed to be held on the site...what is little discussed is that the gold wernt there...see they leased it out[at 44 bucks44 cents per oz]...this west german gold was being asked for return...the collapse of the towers ended that[but gold dont get destroyed in fire]lol...never the less it has never been recovered

the links to 911 are extensive[the enron evidence was held there for egsample...and with the destruction of the evidence...no case to answer...gwbusches brother run the security at the buildings...there was 2 billion of astbestos to be removed[a contract term which gave cheap lease...that was insured specificlly for act of terror[via israel insurors]6 weeks before the towers fell down..from a few spot fires[recently a chines building of simulat type burned fircly for two days [and diddnt fall down

its amasing what a little theremite..planted over a weekend a few days before...can do...the money changers greates hour...the israel insuror pays off..[all the under writers must too]..and yet another money changer..of sematic overcast..walks away with billions..[and eventually a 50 year lease on new buildings]

yes not everything is conspiricy...but there is a lot of gold hungry types who will bribe or murder to get into power[look only as far as what is laughingly called marfiosa]...but im over explaining...enjoy your stick with it ness..[and your foil..[and mine]as well peridicule's

one under god,

To the contrary, I think the participation of the likes of per-ridicules in this discussion has not served to move the topic on, rather it has held it back.

On OLO and other forums, one is often tempted to allow disinformation or various debaters' tricks and attempts at obfuscation to go unchallenged, in order to be able attend to other priorities. Often I choose not too. The result can be extremely lengthy debates, such as the aforementioned debate on 9/11 at http://forum.onlineopinion.com.au/thread.asp?discussion=2166&page=83 and, to a lesser, extent this debate.

Then, of course, those who caused the prolongation of the debate by their dishonesty, or their co-thinkers, will often try to use that very length of the debate as claimed evidence of their opponent's obsessiveness, but, of course, never daring to address the actual arguments put by me.

However, whilst some attempt to depict this as a vice, others including yourself and the legendary Erin Brockovich (see http://www.brockovich.com), who was played by Julia Roberts in that famous movie, and who is now in this country, have held stick-to-it-ive-ness to be a virtue, so, thank you.

---

To those pondering the meaning of QED, it is shorthand for the Latin Quod Erat Demonstrandum which means "Which was to be demonstrated."

In fact, I think I have demonstrated nearly all that I have claimed in this discussion.

As just one example, I have demonstrated that a number of US Presidents - Lincoln, Garfield and Kennedy, who have stood up to the sectional greedy interests of bankers have been murdered, and that others in US history who have stood up to the bankers have also mysteriously lost their lives. I have shown that credible authorities, such as Bismarck have held the banks responsible for Lincoln's murder.

Pericles has completely failed to acknowledge or respond to these points.

---

What you write of gold in the WTC is very interesting. Of course, the information can't be used effectively until such time as the authoritative source for that information is produced.

There can be no doubt that, as well as the obvious (tobecontiuned)

its obvious to most of us...but they are such lovable rogues...[who dosnt love alan bond....lol...he is a joke but it works for him...im not so much complaining about what they done...but what they mindlessly alllow to be done to others

pericules is quite right to make questions of you[to explain it better...more conclusivly...here we have a bright intelligent mind being asked to drop the covers from his eyes but briefly...and he is saying for what...what will my opinion hold that changes anything

the importance of fully presenting our case must be seen as a calling...and your persisting in the face of adversity...but not for adversity sake...but that we be more clear in revealing the info we want others to taste

i reason the powers that be have gone too far...i dont know what other options at the time were...

but do know that that is past...what really maTTERS IS WHAT THEY DO NOW...damm cap loc...will they persist in ever more gross manipulations...or accept they won...

now lets all become winners..[not whiners]...knowing what we know is painfull...but we sought to know...not all the others..may be ready to forgive...yet...

but its either learn a bit now...calmly...or riots in the street...later..which they are expert at bringing to heel....with blood...and rubber coated bullits...or haarp...and the mobile phone towers...or sicknes/disease...or mass poisening....

no more fear
as long as we can discuss the proof is there...
we know there is hope..they may change...were only doing as we can