According to the documentary
http://moneyasdebt.net">Money as Debt, most of the money that is in circulation in our modern, debt based/fractional reserve monetary systems is newly created each time banks make new loans (ie. some individual, organization, corporation, or government goes into debt).
To summarize (as per the video and in a very simplified manner) how most money is created and put into circulation:
Joe Schmo goes to First Bank of Moneygrubbers to to get a $15,000 loan to buy a used car from his neighbor. The bank figures he is a good risk and grants him the loan by a simple book keeping entry that creates, basically out of thin air, $15,000 that didn't exist before . Joe Schmo takes a cashier's check drawn on the Bank of Moneygrubbers for $15,000 dollars in newly created money to his neighbor with the used car, hands over the check and drives away the car. The neighbor now has $15,000 that he can use to buy a new lawn mower, TV set, refrigerator etc. So by taking out his loan (i.e. going into debt), Joe Schmo has put into circulation $15,000 that didn't exist before. If he hadn't gone into debt to the bank, there would be $15,000 less money in circulation to enable his fellow citizens to buy stuff and to percolate through the economy and keep people gainfully employed.
There are reserve requirements that dictate to the commercial banks how much new money they can create through loans and mortgages etc. These reserve requirements force the banks to keep a certain amount of money on deposit at the Federal Reserve (or another central bank in other countries) that is proportional by some ratio to the amount of loans they are allowed to make. However, as the Money as Debt video explains it, over time these reserve requirements have been getting lower and lower to the point of becoming negligible allowing the banks to make more and more new money with each loan they grant.
As explained in the video, the big drawback to this scheme is that all the new money created and put into circulation as a result of new loans does not put into circulation enough money to pay back the original loans plus the interest charges incurred. The banks' answer to that problem is to get more money into circulation by encouraging more debt and making more loans. This, of course, ends up in a dog chasing its tail scenario, as it just means overall debt has to keep spiraling upwards and upwards ad infinitum, otherwise the money supply would shrink leading to a catastrophic economic crash.
The end result in the case of the USA is this:
BIG PICTURE - $48 TRILLION of DEBT in America, and rising rapidly
the economy is 2-3 times more debt-dependent - -
with $29 Trillion DEBT EXCESS compared to prior debt ratios
Here's one graphic of many shown in the main Total Debt Report, linked below.
This is A SCARY CHART - showing trends of total debt in America (the red line, reaching $48 trillion in 2006 vs. growth of the economy as measured by national income (blue line). (adjusted for inflation). That debt increased $3.9 Trillion (9%) in the past year.
Which line goes up faster, the red debt line or the blue net national income line? Answer: the debt line.
And, that debt line is going up faster and faster than national income! Right?
(maybe, like this chart, your own personal or business debt is also going up faster than your own income - - possible?)
As mentioned, debt is here defined as all U.S. debt (sum debt of federal and state & local governments, international, and private debt, incl. households, business and financial sector debts, and federal debt to trust funds).
This chart shows, for the period 1957 to mid 1970s, total debt (red line on chart) was increasing close to the growth rate of national income (blue line on chart), despite war debt for WW II, Korea and Vietnam.
But, in the last several decades total debt has zoomed up, up and away - - growing much faster than national income. It has now reached $48.4 Trillion ($37.7 trillion private household/business/financial sector debt PLUS $10.7 trillion federal, state and local government debt).
http://mwhodges.home.att.net/nat-debt/debt-nat.htmA few quotes used in the video Money as Debt:
"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible -- but there it is."
Robert Hemphill. Credit Manager, Federal Reserve Bank of Atlanta “One thing to realize about our fractional reserve banking system is that, like a child’s game of musical chairs, as long as the music is playing, there are no losers.”
Andrew Gause, Monetary Historian “’The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented.
Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again...
Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit’.”
Sir Josiah Stamp Director, Bank of England 1928-1941(reputed to be the 2nd richest man in Britain at the time)
"Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognised as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile."
William Lyon Mackenzie King(Canadian Prime Minister during WW11 /JC)
http://paulgrignon.netfirms.com/MoneyasDebt/references.htmQuote from the producer of Money as Debt, Paul Grignon:
Money created as interest-bearing bank credit is a magic trick, a fraud - now 3 centuries old; one that very few people have seen through despite, or rather because of, its utter simplicity.
It is my intention to make this mysterious debt-money system comprehensible to everyone. It is also my intention to foster sufficient understanding of the problems with this money system that citizens will be motivated to join the monetary reform movement and/or create local alternatives to the global monetary system - a system in which most of the productive people of the world are collectively chained to an ever-increasing and perpetually unpayable debt.
This is a system designed for elite control of the people by those who have given themselves the privilege of creating money. It is also, I believe, a system that is designed for catastrophe. As the movie explains, there can be no sustainable civilization without a sustainable money system
http://paulgrignon.netfirms.com/MoneyasDebt/ProducersComments.htmlYou can purchase the video Money As Debt from
http://moneyasdebt.net , or if you have a high speed connection you can watch the 47 minute video on Google video here:
http://video.google.com/videoplay?docid=-9050474362583451279
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(161 posts)
Send PM |
Profile |
Ignore
