What names comes to your mind if I ask you to list the richest 5 countries in the world ?
You will probably say United States, United Kingdom, Germany, France, Japan right ?
at least most of us will put the above countries in top 10 richest countries in the world.
Here's a small addition to your knowledge base, According to the latest IMF report, those are the top 5 indebted countries in the world, in that order.
US heads the list with more than $17 trillion in debt, which would be more than $22 trillion in the next 4 years.
If you check the list of debt as a percentage of GDP, these countries wont fair well there too. All these countries feature in the top 30 list.
So what does it mean? why are the countries we think as the richest and prosperous are the ones which are in serious debt ?
The reason is because, the banks create money as DEBT.
If you are thinking that your government creates money, you are 100% wrong.
And if you are thinking that your central bank creates money, you are around 3% correct, because 97% of the money circulating in our economy is created by the banks out of thin air as debt,
only around 3% is created by our central banks, which are in the form of notes and coins.
All the money created by banks is just some numbers on your computer screen, numbers in your credit card.
For those who are unaware how banks create money with the stroke of keyboard, here's a quick gyan.
Imagine that there are only two banks in the world, with a central bank mandating fractional reserve ration of 10%.
PROBLEM :
Assume you ask the banker for a $100 loan, banker will provide you the loan by crediting your account with $100.
Bank now will have $100 as loan asset, $100 as deposit liability and $0 in reserve.
Bank needs to have $10 as reserve, which they can borrow from the central bank or from the second bank.
Reserves at the central bank is created by the asset of the central bank including the amount of physical money and the government deposits in the bank.
Lets say, you gave the $100 you took from the bank to me in exchange for some goods, I'll put it in the second bank. Now the second bank has $100 in deposit, which it can turn into reserve and lend $1000 to you again.
As you can see, within the banking system, the reserve never comes down unless we are going to take everything from banks as physical notes and keep them in our home, of course which is not going to happen.
With the central bank having reserve of $10 physical note as it's asset, more than $1000 entered the system as debt created by the banks using some keystrokes in their computer in just two transactions.
Observe, it's the loan which created the deposit, not the other way around.
It's a classic text book theory that, banks save fraction of their deposits and lend the rest as loan.
For example, if you deposit $100 to bank, the bank keeps $10 as the reserve requirement and lends the remaining $90 as loan.
But this is exactly how the way banks don't work.
source : Credit Money Leverage.
Lord Adair Turner (was the Chairman of the Financial Services Authority until its abolition in March this year).
"Under the present system banks do not have to wait for depositors to appear and make funds available before they can on-lend, or intermediate, those funds.
Rather, they create their own funds, deposits, in the act of lending. This fact can be verified in the description of the money creation system in many central bank
statements, and it is obvious to anybody who has ever lent money and created the resulting book entries."
- The Chicago Plan Revisited; by Jaromir Benes and Michael - IMF
"Banks lend by simultaneously creating a loan asset and a deposit liability on their balance sheet. That is why it is called credit "creation"--credit is created literally out of thin air (or with the stroke of a keyboard).
The loan is not created out of reserves. And the loan is not created out of deposits: Loans create deposits, not the other way around.
Then the deposits need a certain amount of reserves to be held against them, and the central bank supplies them."
Paul Sheard, Chief Global Economist and Head of Global Economics and Research Standard & Poor’s Ratings Services.
Source : Paper - Repeat After Me.
Whatever may be the process but the real problem is that you have to pay back the bank $1100 with interest, which never exists. of course when you pay back the loan, it will be destroyed with another key stroke, but Literally you'll never be able to pay the non existent interest on the loan you took without you taking one more loan or someone taking loan from the loan and giving it to you.
This is the problem with banks creating money as debt. It can never be paid back.
When economy booms, just more unpayable debt enters the system or vice versa.
When no one takes loan from the banks or in other words, if everyone starts to save, no new money gets created and the system simply comes to an halt. Depression.
So to keep this system running, people and government has to get into the debt and pay back the bankers with interest which was never created.
This forces the government to cut it's spending on the social work and welfare and increase the taxes, just to satisfy the debt created by the banks and the imaginary interest which is not even exist.
This sounds even more absurd as banks doesn't lend to anyone who desperately need the money. They always run behind those who already have plenty.
"A bank is a place that will lend you money if you can prove that you don't need it."
- Bob Hope
Indirectly banks create the inequality around the world by forcing 99% of the world population to work all their life paying interest and taxes just to hand over everything to the wealthiest 1% .
For instance, Credit Suisse Global wealth database 2013 shows that the top 0.7% owns more than 40% of the global wealth. And the top 10% owns more than 80%.
Figures are almost same if we consider the inequality at the level of individual countries.
For example, 40% of US national wealth is held by top 1% of it's population.
The number of millionaires has increased by 2 million this year compared to last year and the report predicts significant increase in the number of millionaires and the billionaires in the world in the coming years.
When all the money entering the system in debt and rich gets richer, clearly it's the bottom of the pyramid which pays back all the debt and interest created by the banks.
According to latest UNICEF report , more than 20,000 children (under the age of 5) die everyday due to poverty not because there's a shortage of food in the world, but because there's a shortage of common sense.
In fact The Food and Agriculture Organisation (FAO) of the United Nations has estimated that each year, one third of all food produced for human consumption is lost or wasted: around 1.3 billion tons
America's food waste alone is enough to feed every hungry person in Africa.
Around 8000 people die everyday because of AIDS, not because our scientists haven't found any medicine to cure HIV, but because these people don't have enough magic numbers
the bankers create. What kind of system have we created around ourselves where money decides who should live and who should die ?
What else can be done in the poor countries, if the so called richest country in the world had to shutdown, fighting with it's budget plan to bring health care reform.
The process of sending the nations to debt works even so swiftly and it's so simple.
First, the credit rating agencies like S&P, Moody comes and says, your country is not credit worthy, you have too much of debt so we are downgrading you to the junk status.
As a side note, these credit rating agencies are private, for profit organizations who gives ratings for whoever pays them.
In April 2007, one S&P analyst told another,
“We rate every deal. It could be structured by cows and we would rate it.”How credit worthy are these credit rating agencies ?
Well many lawsuits have been filed against these agencies and prosecutions are going on, specially about giving AAA rating to high risk CDO's even after knowing that they were going to fail.
Look at the defence of these agencies
"Everyone should have ignored S&P’s ratings because (and I kid you not) no reasonable investor would ever rely on them, and therefore S&P should not be blamed for the catastrophe."This is the part of email found during the prosecution,
"Lord help our fucking scam . . . this has to be the stupidest place I have worked at," writes one Standard & Poor's executive.
"As you know, I had difficulties explaining 'HOW' we got to those numbers since there is no science behind it," confesses a high-ranking S&P analyst.
"If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value," complains another senior S&P man.
"Let's hope we are all wealthy and retired by the time this house of card[s] falters," ruminates one more.
And then the world bank comes into the picture and says, we'll help your country in coming out of existing debt by sending you more into the debt. But because your rating is low, you have to give higher interest!!
You just have to implement Austerity measures - increase the taxes, cut the jobs, reduce public salaries, scrap social welfare spending.
Don't care if your people starve, don't worry if your people come to street protesting, demanding for job. Allow our multinationals to setup factories and companies signing nonsense pacts to loot your country.
This is called national debt restructuring. This is how world bank helps countries come out of debt problem.
Moreover, if banks go belly up by bankers playing with derivatives, you have to pay your tax money to bail them out.
Greece: People protesting during credit crisis.
"I don't think anyone sets out to malign poor people but certainly that's what we do through organizations such as the World Trade Organization, the World Bank and the International Monetary Fund."- Bob Geldof
This is the absurd system we are having where factories will be there , machines will be there, people are ready to work but are not allowed.
Enough food is there in the world, but more than 800 million people don't have access to it.
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”- Henry Ford
This is the reason why people getting into the street around the world, protesting against the inequality, through the Occupy Movement.
"If you have a Gun You could rob a Bank But if you have a bank you could rob everyone"- Bill Maher
There's a different movement altogether called, The Zeitgeist Movement to completely move from money based system to the recourse based system.
These kind of movements have had their fare share of appreciation as well as the criticism; they also have raised some interesting points and proposed an imaginary system which they feel would solve all the problems of poverty and inequality.
If you have not seen the movie yet, take a look at it, ZEITGEIST: MOVING FORWARD.
Idea seems bit over the top, but sure is an interesting watch, which makes you think, if you watch till the end.
POSSIBLE SOLUTION :
So the point is, money is not the problem, the problem is the way it is getting created.
And the question is not whether this rubbish system is going to end or not, the system itself is so flawed that it itself will collapse in the near future, but the question is whether we are going to wait for it to end or we going to end it.
Can't it print all the money it wants for itself ?
First thing that comes to everyone's mind is inflation/hyperinflation.
How do you stop the amount of money entering the system ?
With politicians having their hand on the printing machine, they definitely will be reluctant to press the pause button.
We have seen in the past how insane printing of money led to lot of pain and suffering of the nations.
But inflation occurs if there's more money in the system. That doesn't occur if we replace bank money by debt free public money. Everything would be same except, this money can be evenly distributed for the welfare of the citizens without having to get into the debt.
Inflation starts if the government starts to print more money than the actual production of the country. of course this has to be taken care of.
For instance there would be strict budgets every year and the government can use the allocated money for spending, if there are any signs of inflation, it can raise the taxes as a first step of reducing the amount of money in the circulation.
This makes the government to concentrate it's energy in increasing the productivity of the country by creating more jobs and creating better social welfare programmes
to better help the people rather than worrying about financing the projects by borrowing from banks and foreign investors.
Good news is, the system of governments creating it's own money for spending is not a new one.
It has already been tried with success and has ended under unusual suspicious circumstances.
Debtless Money in the past.
The US Greenbacks.
So in 1862, the Lincoln government came up with it's own money, popularly knows as the Greenbacks. Just because they were printed with green ink on the back to distinguish from the other notes in circulation.
Nearly $450 million worth Greenbacks were put into the circulation in less than three years.
It was debt free money created by the Lincoln government, so they didn't had to pay any interest on this money to any bankers.
This is what Lincoln wrote, after issuing greenbacks,
"... (we) gave the people of this Republic the greatest blessing they have ever had - their own paper money to pay their own debts..."As you can guess, the move of Lincoln obviously was cheered by the public but not by the bankers, mostly Europeans spearheaded by the Rothschild at that time.
Bankers were all over the London times expressing their anguish and concern.
"If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce.
It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe."Towards the end of the war, the money chargers were successful in seeing the "National Bank Act" passed by the congress, which made banks as the only creators of money in US, taking power off the federal government.
But Lincoln was considering this short successful experiment of greenbacks seriously and was eager bring back the power of creating money to the hands of federal government, but soon after he re elected, he was assassinated.
Greenbacks were gradually taken out of circulation. 1994 marked the official end of greenbacks.
With contracted money supply, US went to depression, people started to protest for the reissue of greenbacks in 1877.
It was at this time, The American Bankers Association secretary James Buel wrote a letter to it's members saying,
"It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the Agricultural and Religious Press, as will oppose the greenback issue of paper money and that you will also withhold patronage from all applicants who are not willing to oppose the government issue of money. To repeal the Act creating bank notes, or to restore to circulation the government issue of money will be to provide the people with money and will therefore seriously affect our individual profits as bankers and lenders. See your congressman at once and engage him to support our interest that we may control legislation."
All these things with contents of the actual letters written by the bankers and Lincoln are documented in detail in DR.R.E.Search's famous book,
"Lincoln Money Martyred". You can download the free ebook here, if you are interested.
After becoming the 20th president of US in 1881, he was eager to make some changes and was not shy to express his views like the one below.
"Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."
And guess what, within weeks of making this statement, he was also assassinated.
But it was president John F. Kennedy who realised the potential of governments issuing money and started to bring US treasury dollars debt and interest free to the circulation using Executive Order 11110.
Leaving little to guess this time, within months, Kennedy was assassinated and the day after assassination, all the money which Kennedy had issued were called out of circulation.
So time and time again, those presidents who dared to bring debt free and interest free money to the system were assassinated and their dollars were called out of circulation.
If you are wondering, whether it was only in US where government tried to bring the debt free money, you are wrong. Even Hitler came up with debt free public money called "German Labor Certificates".
German Labor Certificates.
During the great depression of early 1930's, sick of bankers creating problem and money contraction, Hitler came up with new money, and started spending it on public works like flood control, repair of public buildings and private residences, and construction of new roads, bridges, canals, and port facilities.It created amazing results, within a couple of years Germany's unemployment problem was solved. When Hitler became Chancellor there were as many as 6 million unemployed however by 1935 there were only 2 million, and by 1939 there was a shortage of labour. While on the other side, US and most of the European countries under the control of the international bankers were struggling to recover.
Within five years, Germany was the richest country in Europe, thanks to the guts of Hitler challenging the banking system.
"I sincerely believe that banking establishments are more dangerous than standing armies."
- Thomas Jefferson
Central banks are created by the lobbying of the banks and their is little transparency on how they work.
Watch this 5mins video till the end.
So, for a change the world would be a better place, if we give our politicians, or to rephrase better, the representatives we elect, the power to create money than the bankers, who mere work to show improved numbers of their bank every three months.
Finally, this is what Lincoln said,
"The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power".
