When an individual borrows money from a bank, does the banker lend him money that other private individuals have brought to the bank?
No. That is what the bankers would like to have you believe, but it is not true.
How do banks create money out of nothing by mere book-keeping entries?
By the following manufacturing process:
* John Jones, a business man, needs $10,000. He goes to the bank and explains the nature of the busi ness he proposes to conduct. He takes to the bank certified figures indicating the value of his business, factory, farm, home, etc. If the banker is satisfied with the amount of real wealth to be pledged, he gives John Jones a note to sign. This note is a mortgage upon the wealth John Jones owns, and gives the banker legal power to confiscate the wealth, if John Jones does not pay at a specified time the number of dollars he is borrowing. The banker then manufactures the money on his ledgers.
How does he do this?
* When the banker accepts John Jones' note, on the asset side of the ledger he writes: Assets Liabilities Loans and Discounts...............$10,000 On the liability side he writes: Deposits.......................................10,000 At that instant, there is $10,000 more money in existence and available for use than before the banker made these entries.
What does John Jones do with this bookkeeping money?
* He goes back to his factory with a bank book, not with actual currency, showing a deposit to his account of $10,000.
What is the exact nature of the item on bank balance sheets called "Deposits"?
* The "Deposits" are actually and legally nothing but liabilities of the bank. They are the money the bank owes, not what it has. A bank deposit is actually a bank's promise, nothing more.
What can John Jones do with this newly created deposit?
* He can and does write cheques against this deposit to pay labourers, buy raw materials, and pay general overhead, incident to carrying on the manufacture and distribution of wealth.
How is this possible?
* Other banks are doing the same thing at the same time. A bank against which cheques are drawn receives the proceeds of similarly manufactured deposits in other banks. Each bank receives cheques drawn on other banks which offset those drawn against it. They all have to work together. If there were only one bank the fraud would be soon discovered.
Is this process honest where John Jones pledges real wealth to secure the banker's fictitious bookkeeping money?
* No, because it enables the banker to lend purchasing power (money) which costs him nothing but the general overhead of running a bank, and forces John Jones...to pay interest for the existence of bankers' bookkeeping money, with which 95% of...business is transacted.
When the banker manufactured $10,000 and loaned it to John Jones, who began to write cheques, exchanging that bookkeeping money for wealth and services, what happened to the price levels?
* They were increased, because there was $10,000 more money in existence than there was prior to John Jones' loan. This new money came into existence, however, without a corresponding increase in the volume of goods and services, thus decreasing the unit value of money already outstanding. The value of outstanding money went down, which meant that the price level went up, i.e., the same amount of goods would then command more money. This principle is well recognised by all economists.
* For example, if there are only $10,000 in existence in the egg market and only 10,000 eggs to be had we will say that each egg is worth $1.00. Now supposing that there are $20,000 in existence in the egg market and still only 10,000 eggs to be had. Each egg becomes worth $2.00. It is the old law of supply and demand. The double amount of money represents the demand. But the same quantity of eggs represents the supply. The egg merchants desirous of getting as much as they possibly can per egg will exhaust the supply of egg money.
When John Jones, the business man, is forced to pay his loan at the bank, what happens to the volume of money in the nation?
* It is reduced by the number of dollars that John Jones pays.
What happens when a large number of business men are forced to pay their loans?
* A large volume of the necessary medium of exchange is extinguished, i.e., cancelled out of existence.
What is a genuine loan?
* In making a genuine loan the lender advances real money which represents a transfer of real purchasing power. Thus, if "A" earns $1000 working at the production and distribution of wealth, he may exchange that $1000 for wealth, or he may abstain from using or possessing wealth and lend his $1000 to another. If he lends his $1000 so acquired, he is a party to the making of a genuine loan.
Why are bankers as a rule opposed to the existence of genuine money and prefer the existence of so-called credit money?
* If bankers are compelled to lend genuine money they are merely acting as agents for some real depositors and thereby are profiting only insofar as they are handling genuine money to the extent of the total amount of genuine money deposited with them. If bankers are privileged to lend credit money it means that they are not lending, as a rule, depositor's genuine money but are lending ten or fifteen or twenty times the amount of genuine deposits. They create credit money or fictitious money by a flourish of the fountain pen. Thus instead of lending only actually, for example, a million dollars of total deposits at 3% with the return of $30,000 profit the bankers are lending under the credit money racket, for example $20 million, $19 million of which is fiction. In this latter case their profit would be approximately $600,000.
* Therefore, bankers are opposed to honest money and to honest lending because of the difference of profits which in the case above would amount to approximately $570,000.
But why should citizens be opposed to bankers making this extra profit?
* Because this extra $570,000 must be taken out of the sweat of the labourer. It is a social injustice which permits privileged classes to reap where they did not sow.
Do fundamental, Christian, moral, ethical and philosophical principles harmonise with private ownership of property employed in or available for use in producing wealth?
* Yes. Private ownership of honestly acquired property, employed in production is in full harmony with Christian principles.
Is capitalism, as we find it in operation today, in perfect harmony with Christian, moral, ethical and philosophical principles?
* Emphatically, no. Masquerading under the title of capitalism, modern capitalism is notorious for the following errors which are contrary to human nature and to good government.
* 1. Modern capitalism borrows money at interest for non-productive and destructive purposes.
* 2. Modern capitalism, while professing in the belief in private ownership, concentrates the wealth in the hands of a few and deprives the mass of private individuals from owning the tools of production.
* 3. Modern capitalism professes to believe in the private coinage and regulation of money...
Does social justice imply that its followers adhere to the doctrine of modern capitalism?
No. In the four above mentioned errors of modern capitalism, social justice is opposed to this economic system.
Did Karl Marx ever attack private money creation privileges and international bankers?
No, his whole system proposed not the abolition of illicit private money creation and destruction powers, but its consolidation under a system of complete economic, political and religious domination of the entire world by a few internationalists.
Do all people have equal opportunity under our present money system? No, they do not.
"They say to us that we all have an equal opportunity, and that it is our fault that we do not become rich. They seek, however, in every way possible, to prevent us from taking the only opportunity we have to all become successful for they know that if we did, it would end their exploits." (From "Why is Your Country at War" by Charles A. Lindbergh, Sr. in a speech urging the passage of a bill to provide a honest money system.)
Why is it that the modern newspaper (free press) upholds modern capitalists?
Because the modern newspaper, in many instances, is owned or controlled by the banker or the banker dominated advertiser who insists that the editorial matter in a modern newspaper does not militate against the interests of the modern capitalist.
Is usury opposed to morality?
Yes, and it is also opposed to Christian teaching.
