Money Creation Must Be Made Public — Without “Radical” Reform, Banks Will Soon Own the World

This Week in Money October 15–21

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This Week In Money helps you discover the history of economics.

OCTOBER 15

1908 — BIRTH OF JOHN KENNETH GALBRAITH, U.S. ECONOMIST “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” Source: ‘Money: Whence it came, where it went’ (1975)

Also: “The problem of the modern economy is not a failure of a knowledge of economics; it’s a failure of a knowledge of history. Do not be alarmed by simplification, complexity is often a device for claiming sophistication, or for evading simple truths. There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have insight to appreciate the incredible wonders of the present. Faced with the choice between changing one’s mind and proving that there is no need to do so, economists get busy on the proof. Their conventional view serves to protect us from the painful job of thinking.”

1982 — U.S. CONGRESS PASSES GARN — ST. GERMAIN DEPOSITORY INSTITUTIONS ACT The act deregulated savings and loan associations and allowed banks to provide adjustable rate mortgage loans. Many believe it contributed to the savings and loan crisis of the late 1980s.

2007 — PUBLICATION OF “LYCURGUS: LAWGIVER OF SPARTA” BY LLOYD DULHAIME Lycurgus was a monetary reformer and leader of the military city-state of Sparta around 700 BC. He banned gold or silver money, replacing it, instead, with money made of iron dipped in vinegar to make it brittle and useless as iron. Lycurgus understood the nature of money — not as a source of wealth (which can be gold, silver, land, diamonds, etc.) but rather anything affirmed by the government as currency to exchange for goods and services of a society. Its value was not as a commodity. http://www.duhaime.org/LawMuseum/LawArticle-189/700-BC--Lycurgus-Lawgiver-of-Sparta.aspx

2015 — PUBLIC HEARING ON MONETARY REFORM IN HOLLAND The Dutch lower house’s permanent commission on financial affairs of the (Tweede Kamer) conducts a public hearing on the money system. The hearing is a result of a citizen’s initiative that gathered about 100,000 signatures, much more than the required 40,000 to mandate the public action. The initiative and hearing triggered a debate in Parliament in 2016 that ended up with a majority in the Dutch parliament voting in favor of further investigation, to be carried out by the Scientific Council for Government Policy (WRR). On January 17, 2019, those efforts finally bore fruit, with the publication of the WRR’s report entitled “Money and debt: the public role of banks.” According to the WRR, a financial system should fulfill 4 core values: service, stability, justice and legitimacy.

2020 — “DEMONSTRATION AT THE FEDERAL RESERVE BANK OF NEW YORK” POSTED ARTICLE BY HARRISON “TESOURA” SCHULTZ “Our latest grassroots demonstration at the Federal Reserve Building of New York to raise awareness for how the NEED Act can fund a Green New Deal for the 99% on the nine-year anniversary of Occupy Wall Street (OWS) was a smashing success!… “My ultimate goal is to inspire more and more of my fellow occupiers to use their grassroots direct action, street theater and social media skills to help me to gradually organize a new occupation, a 24 hour a day, 7 days a week monetary reform teach-in, and to lead a nation-wide call-a-thon of millions of phone calls to Congress with demands to pass the NEED Act into law, from the Federal Reserve Building of New York.” https://www.monetaryalliance.org/demonstration-at-the-federal-reserve/?fbclid=IwAR3od6jl6WuokdpBmnws234Gtw68qdKRCzTj4PMW37PB_TtiIAUlM6OUeR4

OCTOBER 16

1815 — THOMAS JEFFERSON ON POWER OF BANKERS Excerpt from a letter written by President Thomas Jefferson, then out of office, to his former Secretary of the Treasury Albert Gallatin: “The treasury, lacking confidence in the country, delivered itself bound hand and foot to bold and bankrupt adventurers and bankers pretending to have money, whom it could have crushed at any moment…These jugglers were at the feet of government. For it was not any confidence in their frothy bubbles, but the lack of all other money, which induced…the people to take their paper…We are now without any common measure of value of property, and private fortunes are up or down at the will of the worst of our citizens…As little seems to be known of the principles of political economy as if nothing had ever been written or practiced on the subject.”

1962 — BIRTH OF MICHAEL KUMHOF, GERMAN ECONOMIST AND CO-AUTHOR OF “THE CHICAGO PLAN REVISITED,” From the paper: “At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher’s claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.” https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

2018 — VIDEO, MARTIN WOLF (FINANCIAL TIMES WRITER) ON RADICAL REFORMS FOR FINANCIAL SECTOR Keynote speech by Martin Wolf, economic commentator of the Financial Times, about the state of the financial sector. Wolf concludes that radical reforms are needed in which money creation comes into public hands.

OCTOBER 17

1785 — FIRST GATHERING OF DELEGATES OF THE COMMONWEALTH OF VIRGINIA Private bank notes are barred from circulation following the passage of a law by the General Assembly of the Commonwealth of Virginia. It was unlawful “for any person to offer in payment a private bank bill or note for money.”

1991 — ITHACA HOURS FOUNDED BY PAUL GLOVER Ithaca HOURS was a community paper money system. The currency was backed by the skills and time of local people. The system was based on time — one HOUR of labor could be based on any combination of HOUR notes, time or Federal Reserve notes. One HOUR was valued at $10. By 1998, over 65 systems existed across the U.S. as a means of democratizing and localizing money creation and distribution.

2014 — MARTIN WOLF ON RADICAL REFORM FOR THE GLOBAL FINANCIAL SYSTEM — VIDEO “Martin Wolf, chief economics commentator of the Financial Times, joins R. Glenn Hubbard, dean and professor at Columbia’s University’s Graduate School of Business, to discuss the state of the world economy following the financial crisis. Wolf comments on the causes of the global financial crisis, radical solutions for reform, and the still-unstable financial system.”

2017 — WHERE DID MONEY REALLY COME FROM? — video posting “Professor David Graeber, anthropologist and author of “Debt: The First 5,000 Years,” discussing the history of money and credit. The economics profession tends to teach that money arose from barter. However, anthropologists have been searching for 200 years and found absolutely no evidence for this. “Instead, it seems that early human societies had reciprocal gift exchange, whereby one person would gift something to their neighbor, and that person would be tacitly indebted for something of similar quality. “Barter has only been observed between groups that didn’t frequently come into contact, and sometimes between outright enemies, or among people that are already used to money but for some reason have no access to it. “

2019 — “WHY SUPERVISE BANKS? THE FOUNDATIONS OF THE AMERICAN MONETARY SETTLEMENT” LAW REVIEW ARTICLE BY LEV MENARD “Banks do not simply lend; when they lend, they create money. Indeed, government-chartered banks create most of the money in the economy… “Banks create deposits by crediting accounts (using the ‘bookkeeper’s pen’) when they originate loans. In other words, banks lend to account holders by plussing up their balances.” “For example, when a borrower comes to a bank to finance a new venture, the bank is not constrained by the amount of cash that already exists. The bank can empower the borrower to requisition the necessary social resources by creating new money instruments out of thin air.” 74 Vanderbilt Law Review 951 https://ssrn.com/abstract=3421232 or http://dx.doi.org/10.2139/ssrn.3421232

OCTOBER 18

1790 — BIRTH OF EDWARD KELLOGG, BUSINESSMAN AND ECONOMIST. HIS IDEAS INFLUENCED THE POLICIES OF THE POPULIST AND GREENBACK PARTIES “Legal value belongs to anything which represents actual value, or capital. Its existence depends upon actual value. The worth of things of legal value depends upon their capability to be exchanged for things of actual value.” Since money is our monetary system is created as debt, the “legal value” of money includes both the principal debt and interest — which exceeds the “actual value” of a nation’s real wealth or claims on collateral at any point in time. The only means to close this gap and cover interest payments is to create additional collateral (goods and services) via economic growth. Of course, this additional debt-based money used to pay the previous interest has its own interest. Thus the downward debt cycle never ends until it collapses.”

1931 — DEATH OF THOMAS EDISON, U.S. INVENTOR “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good… If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency… instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?” [NOTE: This is one of the clearest statements on the ease and legitimacy of the government creating its own money.]

2019 — OCCUPY THE NEED ACT MEETING IN NYC “This is a meeting of #OccupyTheNeedAct at Famiglia Pizza 83 Maiden Lane, NYC that then moved outside to Louise Nevelson Plaza a Private/Public Park across the street from the New York Federal Reserve Building. This meeting was led by Harrison Tesoura Schultz with Sue Peters from Alliance For Just Money Group https://www.facebook.com/groups/99328... and www.greensformonetaryreform.org. Mark Apolloa videoed the meeting making comments. “#TheNeedAct Nationalizes The Federal Reserve, Ends the ability of the Commercial Banks to create our money and Spends money into the economy for the thing we the people decide we want like Universal Health Care, Universal Education, Universal Housing, Universal Transportation, GuaranteedAnnualincome, Renewable Energy. “The #NeedAct ends…the ability of bankers to create money for their friends and puts that ability back into Congress where the Constitution put it before Hamilton and Washington got that power given to their friends who became our first bankers. These men capitalized The First Bank Of The United States with money they got by defrauding the workmen, merchants and farmers of the colonies. #Bankers have no better qualities, they are 100% liars and some of them know it. The Officers of The Big Wall Street Banks know what they are in fact doing.”

2022 — “WITH MONETARY REFORM INTEREST RATES ARE NO LONGER A MONETARY ISSUE,” ARTICLE BY JOHN HOWELL “Under monetary reform regulating the money supply will no longer be based on lending. The money supply will be the result of a balance between the rate of money creation by government and the rate at which money is withdrawn from circulation by taxation. Monetary policy should only regulate the money supply. With lending no longer being a tool of monetary policy, interest rates are no longer a matter of monetary policy.: https://www.monetaryalliance.org/with-monetary-reform-interest-rates-are-no-longer-a-monetary-issue/

OCTOBER 19

1841 — BIRTH OF NELSON A. DUNNING, JOURNALIST AND AUTHOR FOR THE NATIONAL FARMERS ALLIANCE His book The Philosophy of Price and Its Relation to Domestic Currency, published in 1887, was one of several recommended for inclusion in the circulating libraries of local National Farmer Alliance’s sub-alliances. Here is an excerpt: “The truth is, the most enormous power known to man, or that can ever be his, lies in money — in the increase and decrease of its quantity. It is the tide of human affairs upon which all things must rise or sink. It is inevitable and cannot be resisted. This power has been obtained through the carelessness of the people, who have been and are now held in ignorance for that very purpose. So early as 1577 we find the keen and piercing intellect of Bodin saying the following: ‘For men have so well obscured the facts about money that the great part of the people do not see them at all. The money era do as the doctors do, who talk Latin before women, and use Greek characters, Arab words, and Latin abbreviations, fearing that if people understood their receipts they would not have much opinion of them.’”

1987 — U.S. STOCK MARKET CRASH Known as Black Monday, stock markets around the world crashed. The Dow Jones average dropped by 508 points. It was the largest one-day percentage decline in Dow Jones history.

2004 — QUOTE BY ALAN GREENSPAN, CHAIRMAN OF THE FEDERAL RESERVE His comments on subprime lending… “Improvements in lending practices driven by information technology have enabled lenders to reach out to households with previously unrecognized borrowing capacities.” Lenders began lending to those who they knew would be unable to pay back mortgages. They engaged in riskier and riskier loans. The entire system eventually collapsed. US taxpayers bailed these lending financial corporations out. Homeowners who were duped into signing contracts with hidden fees and adjustable rate mortgage loans received little federal assistance.

2019 — US FEDERAL RESERVE STARTS “QUANTITATIVE EASING FOREVER” “Together with the Fed’s decisions to twice cut interest rates, with the prospect of another cut at the end of this month, these moves make clear that, in conditions characterised by the International Monetary Fund as a ‘synchronised’ global slowdown, any efforts to “normalize” monetary policy are well and truly over. “The European Central Bank has reversed its plan to end financial asset purchases and lowered its base interest rate further into negative territory, while the Bank of Japan continues to be the virtual sole purchaser of government debt and a major buyer of corporate shares. In other words, the policy of the world’s major central banks, acting on behalf of a global financial oligarchy, is quantitative easing ad infinitum.” https://www.wsws.org/en/articles/2019/10/19/pers-o19.html?fbclid=IwAR2q0AGJSfeXpDQKVgBbZTMxZzgSRYxgsdzf7ip1ibLxJkRRsxw_KMASr18

OCTOBER 20

2005 — QUOTE OF BEN BERNANKE, CHAIRMAN OF THE US FEDERAL RESERVE “House prices have risen by nearly 25% over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.” Less than 3 years later, the housing market collapsed.

OCTOBER 21

1808 — BIRTH OF SAMUEL FRANCES SMITH, MINISTER, JOURNALIST AND AUTHOR Smith was also a songwriter. He is best known for writing the lyrics to “My Country Tis of Thee,” which he entitled “America.” Using the same tune, Greenbackers (those who advocated issuing and circulating debt-free US public money) in the 1880’s came up with their own rendition:

Thou, Greenback, ’tis of thee, Fair money of the free, Of thee we sing. And through all coming time Great bards in every clime Will sing with joyful rhyme, Gold is not king.

Then smash old Shylock’s bonds, With all his gold coupons, The banks and rings. Monopolies must fail, Rich paupers work in jail, The ring will then prevail, Not money kings.

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This Week In Money by Greg Coleridge helps you discover the history of economics. Get TWIM delivered directly to your email inbox for free.