Friday, February 9, 2007

Chapter One

"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 control credit, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from the bankers and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a better and happier world to live in. But if you want to continue the slaves of bankers and pay the cost of your own slavery, let them continue to create money and to control credit."
- Sir Josiah Stamp, Director and President of the Bank of England during the 1920's




QUESTION: If you had personal assets totaling hundreds of millions of dollars, would you give me $1,000,000 so that I could lend it back to you whenever you had a need to purchase anything? Oh yes, I would also require you to repay this loan back over lets see, shall we say ten years. And one more thing, you would be required to put something up as security, you know, just in case something unforeseen changed in your cash flow situation and you were unable to repay the loan. In the event that, some time in the future, you did not meet your commitment to me I would be forced to seize the property you put up as security.

I’m sure you understand and agree that this would be fair and justified on my part if and when these events were to transpire. Oh, I almost forgot, there would also be one more small detail of which you would undoubtedly also agree is necessary. Because of the cost of all the services I would be performing for you at your request, it would be necessary that one last obligation be placed on you. You would be obliged to pay a small yearly interest fee. On my part I would bind myself to the commitment that this said interest would never exceed thirty per cent (30%) per year.

Oops, almost forgot again. Keeping with the common sense of the above, and because of the great investment I have in this agreement you would have to agree that you would come to me for all your future money needs. In the event that you may one day require additional financing of an amount over and above the original $1,000,000 you initially gave me you would be obliged to forward these additional funds to me in advance to the loan being granted. Other obligations that would be bound only to you may be added to our contract at my discretion at the time of signing. (Our monetary system in a nutshell.)


If your answer to this question is yes, please forward your blank check to: No, please do not send your check. I do not wish to be a banker.

I’m sure that none of you answered this question with a yes. But let me be the first to inform you that as a citizen of Canada you have answered this question in the positive. You have, and so have I, because that is exactly how money starts its journey through this country. You and I, through the “wise” decisions of our Canadian government have agreed to establish the Bank of Canada with the sole authority as our fiscal agents. You’re probably thinking that that is the way it should be, right? But you’re probably basing that decision on the fact that the Bank of Canada is a government owned and controlled agency. Oops, the government in their “abundant wisdom” must have thought that it was for your own best interest that you not know that the Bank of Canada is both owned and controlled by private entities.

You’re probably thinking that our government must have some officials on the bank’s Board of Directors who have some voice in the decisions of the bank, and you would be partly right. There is one and only one government official on the board. And that is our Deputy Minister of Finance. But don’t believe that is any kind of protection for you because he has no vote! And no vote means no control, no power, no influence and ultimately no voice in any of the operations of the bank.

Before we carry on with this discussion, and before the rest of the world laughs too hard at us Canucks, let me assure you that this exact process has occurred and is still occurring in virtually every country of the world. For example, the Federal Reserve in The United States, like The Bank of Canada, is not an agency owned by the American people. And like the Bank of Canada, the Federal Reserve is basically given the money by the federal government (the American people) that it in turn lends back to congress (the American people) that finances the workings of the government (for the American people).

Oh, I can hear you now. As a well-informed Canadian you’re letting me know that I missed an important point. That point is that the Canadian government nationalized the Bank of Canada in 1938 and since that time the bank has really been a publicly owned bank. That may be true but benign shares carry with them no control. I’m sure that it was only an oversight on the federal government’s part that they forgot to tell you that before the bank was nationalized the bank owners changed its class shares to completely benign shares. It then traded these benign shares with the government for five million dollars ($5,000,000). In effect our government bought nothing and paid five million dollars for it. And the situation remained the same, and has continued the same to this day. So even though the Bank of Canada may claim to be a public agency, it is still very much a private bank operating a form of The Private Debt Money System.

Private Debt Money System

The Private Debt Money System is one in which all money enters a society as a debt/credit created out of nothing merely by the flick of a computer key by a private bank. In Canada, and virtually every other country of the world, every dollar you have ever had in your possession was borrowed by some entity (government, corporation, private business or individual), and eventually must be paid back to the bank, which on the surface seems fair and deserved. The flaw in this system is that interest must also be paid on these loans. Again this seems fair and just, however, where does the money come from that is used to pay this interest?

As an example lets say a society consists of 1000 people and each of these people borrowed an average of $100 dollars at 10% interest for one year. This would mean that there now is $100,000 dollars circulating within this society. But in one year each member of this society would have to pay to the bank the original loan of $100 dollars plus $10 interest for a total of $110 dollars. This brings the total necessary to repay all the loans plus the interest on those loans to $110,000 dollars. As only $100,000 dollars exists within this society where does the $10,000 dollars needed to pay the interest come from?

To this question some have answered, “From production.” They believe that by the production and marketing of goods and services a profit can be generated. And, from this profit the interest can be paid. The truth is that production itself creates no positive or excess money that can go to pay the interest. In fact, it only creates more debt. Production does cause the existing debt money to circulate and it does add to this debt money but of itself not one penny is created. This is another one of those instances where half the wool that is pulled over our eyes is cotton. Our attention is directed to the end “result” and we are told that simply by manufacturing a product and selling it for more than the cost of production we create a “profit”.

We are also told that if everyone participated in this effort we would all have an abundance of money to purchase goods for ourselves that would facilitate a happy and prosperous life. This would not only hold true for our life but also for our whole country. With this thinking we look upon others who find themselves living in poverty because of unemployment or find themselves homeless, as people who are lazy, don’t care or just expect a free handout. Thus arises the concept that the poor are poor because of their own lifestyle choice.

To understand how the production of goods increases the debt we need only look at the following simple example. The production of a product has a cost. Let’s say this cost is $10.00. And let’s say the product is sold for $20.00 producing a profit of $10.00. If the original $10.00 was borrowed at an interest rate of 10%, then when the loan ($10.00) plus interest ($1.00) is repaid a net profit of $9.00 is realized.

It is important to keep in mind that every dollar in circulation has been borrowed and represents a debt to a bank. So in order for someone to purchase this product for $20.00 someone somewhere had to borrow that $20.00. With this in mind we see that what is a $9.00 profit for the producer becomes a $20.00 debt for someone else. Add interest and it becomes a $22.00 debt. Each time this product changes hands the total amount of debt increase. The production of a profitable company creates two things. The first, a profit, the second, a debt. But always, always, the debt is greater than the profit. Simple math says that if a positive is added to a negative where the negative is greater, the result is always a negative. Whether we look at this simple example or the most complicated one, the result is the same. Always the debt will be greater than the profit!

It is also suggested that if the private debt money system always ends with bankruptcy the banks would be foolish to lend their money knowing that it could never all be repaid. But remember that the banks do not lend their own money. In fact, the banks have no money to lend. All money that is lent is merely created with the stroke of a computer key and the only cost is the printing of the paper bills. [This is one of the main reasons the banks will push for a cashless society. They will eliminate their only expense, that of printing paper money.]

If some of this money is never repaid there really is no loss to the bank because of this. In other cases it would appear that the bank purposely lend money that they know will never be repaid. Then, when some third world country cannot repay their massive debt the bank steps in to tell that country how it should run its affairs. Always this advice benefits the banks. The banks act like a loan shark who lends someone more money then they can ever repay just so they can say, “In order to repay your debt you must do this service for me.” The bank’s profits come from the interest collected on the loans that cost them nothing to give and the control they are accorded when loans cannot be repaid.

The Private Debt Money System creates a situation within our society of millions where debt is eliminated for one by passing in on to another. This causes a few entities to go bankrupt and the many that succeed in repaying their loan are allowed or forced to borrow more in order to repeat the process. If this borrowing did not continue the entire amount of money in circulation would disappear as it is used to repay the existing debts. The important point to be aware of is that there is never enough money to completely repay the debt no matter how many products are produced and no matter how much profit these products generate. Because of this flaw in The Private Debt Money System and because of the necessity of constant competition for the existing money, it is guaranteed that some must fail to repay their debt. Over time this effect starts to show up in our society as poverty, unemployment, cutbacks, downsizing and eventually homelessness.

Benjamin Franklin knew this. Before the revolutionary war while on a visit to England he was asked the reason for the colonies’ prosperity while England was experiencing a bust. His response was, “That is simple. It is only because in the colonies we issue our own money. (Interest free) It is called ‘Colonial Scrip’ and it is issued in the proper proportions to the demands of trade and industry.”

When the English banks learned of this they pressured the government of England to pass a bill that said that no colony of England could issue its own money. The colonies where forced to discard their Colonial Scrip and mortgage themselves to the British banks to get their money. From that day to this, with few exceptions, (including the money printed by order of President Lincoln and President Kennedy) The United States money has been based on debt. Benjamin Franklin later said that, “…in one year from that date the streets of the colonies were filled with the unemployed”.

Also guaranteed to start showing up is public school closures, overcrowded class rooms, over worked teachers, more students dropping out, emergency ward wait lines, crowded hospitals, waiting lists for operations, overworked nurses, more unemployment, more homelessness, corporate and government cutbacks, corporate downsizing, privatization of government controlled utilities and much more as governments corporations and every person struggles to reduce their costs because of their enormous debt.

In his 1993 report the Auditor General stated, “From confederation up to 1991-92, the federal government accumulated a net debt of $423 billion dollars. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous shortfalls.” This means that 91% of the debt was made up by borrowing money to pay the interest on what is now (or was then) 9% of the debt. And to think we are such intelligent creatures.

The poor are poor because of the monetary system we all support. They are the effect. The Private Debt Monetary System is the cause. To blame the poor for their situation reminds me of another situation that occurred in my own life. In the 1940’s and 50’s when I was going to school I had a terrible time learning. I could not read well, and my grades were consistently the lowest in the class. I failed grade three and grade six. Constantly I was told that I was just lazy, that I just did not want to learn or I was stupid. I knew that my efforts were maximal so I was not lazy. I knew that I desperately wanted to learn. That left only one option; I was stupid. I was finally expelled from school half way through grade eight.

I have since learned that my inability to learn was caused by a learning disability, and if I had been taught in a way that enables me to learn I would have been able to learn quicker and more thoroughly than most. From this experience I know the frustration and anger that builds from having others point fingers at me saying, “It’s your own damn fault.”

With the understanding I have of The Private Debt Money System I know that it guarantees some will be poor, some will be homeless and some will starve. The only thing that this system does not stipulate is who these ones will be. Until someone can come and show me how all people can experience prosperity under the rules of The Private Debt Money System I will stand and say, “It is not their fault. They are but an effect of a faulty system.”

Before we in this country think that we are the only insane ones, let’s look at the monetary system of our neighbors to the south.

The United States Private Debt Money System

In the United States the creation of money starts with the federal government’s creation of government bonds that are basically given to the Federal Reserve. These bonds or government IOUs represent a government debt. When these bonds reach the Federal Reserve (Fed) they become an asset of the Fed. The Fed now balances this asset by creating a liability in the form of a check made out to Congress.

[Once again, the government gives money to a private bank so that the private bank can lend it back to the government at interest. Don’t you get the feeling that something is wrong with this picture?]

Now that the Fed has given congress the check, congress endorses and deposits it in their account with the Fed.

Now, based on this deposit, congress writes checks to its contractors.

These government checks are deposited in the bank accounts of the government contractors and become commercial bank deposits.

G. Edward Griffin in his book, The Creature from Jekyll Island states:

Commercial bank deposits immediately take on a split personality. On the one hand, they are liabilities to the bank because they are owed back to the depositors. But as long as they remain in the bank, they also are considered as assets because they are on hand. Once again, the books are balanced: the assets offset the liabilities. But the process does not stop there. Through the magic of fractional-reserve banking, the deposits are made to serve an additional and more lucrative purpose. To accomplish this, the on-hand deposits now become reclassified in the books and called bank reserves.

Reserves for what? Are these for paying off deposits should they want to close out their accounts? No. That’s the lowly function they serve when they were classified as mere assets. Now that they have been given the name of “reserves” they become the magic wand to materialize even larger amounts of fiat money. This is where the real action is: at the level of commercial banks. Here’s how it works. The banks are permitted by the Fed to hold as little as 10% of their deposits in “reserve.” That means, if they receive deposits of $1million from the first wave of fiat money created by the Fed, they have $900,000 more than they are required to keep on hand ($1million less 10% reserve). In bankers’ language, that $900,000 is called excess reserve.

The word “excess” is a tip-off that these so-called reserves have a special destiny. Now that they have been transmuted into excess, they are considered as available for lending. And so in due course these excess reserves are converted into bank loans.

But wait a minute. How can this money be loaned out when it is owned by the original depositors who are still free to write checks and spend it any time they wish? The answer is that, when the new loans are made, they are not made with the same money at all. They are made with brand new money created out of thin air for that purpose. The nations money supply simply increased by ninety per cent of the bank’s deposits. Furthermore, this new money is far more interesting to the banks than the old. The old money, which they received from depositors, requires them to pay interest or perform services for the privilege of using it. But, with the new money, the banks collect interest, instead, which is not too bad considering it cost them nothing to make. Nor is that the end of the process. When this second wave of fiat money moves into the economy, it comes right back into the banking system, just as the first wave did, in the form of more commercial bank deposits.

The process now repeats but with slightly smaller numbers each time around. What was a “loan” on Friday comes back into the bank as a “deposit” on Monday. The deposit then is reclassified as a “reserve” and ninety per cent of that becomes an “excess” reserve, which, once again, is available for a new “loan.” Thus, the $1million of first wave fiat money gives birth to $900,000 in the second wave, and that gives birth to $810,000 in the third wave ($900,000 less 10% reserve). It takes about twenty-eight times through the revolving door of deposits becoming loans becoming deposits becoming more loans until the process plays itself out to the maximum effect, which is bank fiat money = up to 9 times government.”

To summarize:

United States money (Debt) Creation

Basically, money circulating in the United States was created by the following steps:

1. The government issues a bond (Basically an IOU).

2. This bond is then given to the Federal Reserve.

3. This bond now becomes an asset of the Federal Reserve.

4. The Federal Reserve now issues a check to the congress to enable them to conduct all government business. [The Federal Reserve has just given the government back its own money and now begins to charge the government interest on it!]

5. Congress now deposits this check in the Federal Reserve. [Are you getting dizzy yet?]

6. Congress can now issue checks to its contractors.

7. Government contractors deposit their government checks in their commercial bank accounts.

8. These commercial bank deposits are first a liability because they are the property of the depositor. But they then become an asset by way of a name change.

9. These deposits go through a name change and become a “reserve”.

10. 90% of these “reserves” then become an “excess reserve”.

11. This “excess reserve” becomes the source of all bank loans to corporations and to the public.

12. These corporate and public loans in turn become more bank deposits.

13. These commercial bank deposits start as a liability but become assets by changing their name to “reserves”.

14. 90% of these “reserves” then become an “excess reserve”.

15. Steps 9 to 14 can then be repeated over twenty times before the process plays itself out.

In the United States, for every dollar of debt the government creates, the banks can create an additional nine dollars of debt. Don’t let them know down south but we actually have the Americans beat on this craziness scale. You see, whereas the Fed permits the banks to hold as little as 10% of their deposits in reserve, we in Canada do not require our banks to hold any reserve. They have total freedom to create as much debt out of nothing as will benefit them the most.

At a public meeting discussing economics, I once heard an economist state, “People do not understand economics.” The retort from the audience was, “And economists do not understand people.” There may be some truth in both of these statements, but total truth resides in neither one. In general the public is led to believe that economics is quite complicated and that only economists with masters or doctoral degrees can understand it completely. Actually it is quite simple to understand once all the smoke and mirrors have been taken away.

By studying the above steps that are taken in almost all countries in varying degrees one can see that enormous amounts of money (debt) are created out of nothing. And for the use of this money (debt) created from nothing borrowers must pay interest. The banks never lend the interest and because of this there is never enough money in circulation to pay all the debt and all the interest. As borrowers compete with each other for the existing money to pay their debt plus interest, someone must end up unable to do so. The system resembles a giant monopoly game.

[The word “monopoly fits this scenario perfectly.] And as in every game of monopoly there can be only one winner. We cannot play a game of monopoly and have everyone win. We cannot play The Private Debt Money System and have everyone win. In fact you cannot have 50% of the people win. In the end, whether in monopoly or The Private Debt Money System, only one will win. In The Private Debt Money System every individual, every business, every corporation and every government will eventually lose.

And, within the losing come unemployment, poverty, homelessness, starvation and finally death. These things are built into the system. They are, in an insidious way, assured, mandated and even guaranteed. This is not difficult to understand. It is also not difficult to understand that those who have temporarily amassed large amounts of wealth have contributed to this situation of unemployment, poverty, homelessness, starvation and finally the death of 18,000 children a day in this world.

If the above is still too complicated to understand, think of the game children play called musical chairs. One day only the banks will have a chair to sit on. Even if you are a CEO of a large corporation you will lose your chair. It is guaranteed!

The sad part is that the wealthy do not know that as they amass their fortune they contribute to the creation of the poverty that ends with death. They, like all of us, have been told that with honest effort and dedicated labor we could all have what they have. But that is mathematically impossible using The Private Debt Money System.

The words that Walt Kelly first used on a 1970 Earth Day poster fit well here: “We have met the enemy and he is us.”

To help us understand why The Private Debt Money System must fail think of any circulating system. Let’s take all the water on the earth. Most of us can remember the illustrations shown to us in science class in grade five or six. We were shown how the water evaporates and rises to form clouds, how these clouds would eventually release the water they carry over land as snow or rain. How this snow and rain would make its way back to the ocean by way of lakes and rivers. We were told that this cycle repeats itself continually.

Let’s look what would happen if we were able to give some private enterprise control of this water cycle? [We all know that this is what some private enterprise does want now.] And let’s look at what would happen if this private enterprise decided that every time any of us used this water they would remove an amount of water equaling 10% of the amount of water we used. They would place the 10% they removed in their own private container. It is not hard to see that eventually this private enterprise would control all the water. Over time the 10% they take would amount to 100% or all the water. Then they would be able to say, “We will let you use some of “our” water for control of your labor, and then control of your land, and finally control of your person.” This is precisely what is happening to third world countries now and what is in store for our country soon.

This is what is happening in the world today. As long as we continue to use The Private Debt Money System it will continue to happen. As has been happening, the debt will continue to rise. Poverty will increase and more children will die due to hunger.

There is an alternative

The following was taken from the Internet.

Alternative Monetary system: Republic of Saltspring Dollar

Robert McGinn

Thursday, December 27, 2001 7:59 PM

Season’s Greetings to All and a Prosperous 2002:

Let me add my 2 cents worth:

I had occasion to write an article for the Monetary Reform Magazine on the Guernsey Monetary System on the Island of Guernsey in the English Channel, just off the French coast. Both Guernsey and Jersey, famous for their dairy cows, are what is called a ‘Bailiwick’ or territory under the authority of a Bailiff or sheriff. This all goes back to the 13th century and before to 1066 and the Norman Conquest.

These islands are semi-independent and are not actually part of the UK and not responsible to parliament. They are directly responsible to the Crown and Privy Council. They do have a defense agreement with the UK.

Back in 1816, they were bankrupt due to the Napoleonic Wars and were in a desperate situation. High unemployment, extremely high debts, poverty, large emigration, no services or public infrastructure and worst of all the island was being washed into the sea due to the deteriorating dikes and sea walls.

Desperation has a way of broadening one’s vision and the Council decided to strike a committee to look into this situation. The committee reported that there was only one way out and that was to print their own money, hire contractors and repair the sea walls immediately. This was all well and good except that the merchants wanted to know how they were going to get rid of this money if they accepted it. The Council agreed that all taxes could be paid in this currency. Thus, a circular system was created from creation of the bank notes to eventual destruction. This all worked well and all notes were recovered and burned as agreed. In the process, a church, a war monument and some repairs to sea walls and dikes were completed.

Then, in 1822, they once again printed 4500-One Pound notes to construct a covered market building. This was completed and every year 450 notes were burned. At the end of ten years all the notes were gone and the building was debt free at zero interest. This building still stands to this day with two additions all paid for with ‘printed’ money. The Council still owns these buildings and I estimate that they have returned at least $5 million or more in today’s money to the treasury over the past 179 years. This profit has, of course, been used to finance other public projects and today Guernsey has a flat income tax of 20% and no other taxes. They are not needed.

The circulation is about 17 million Pounds and this in effect is an ‘interest-free’ loan to the Treasury from the note holders. The benefit to all citizens of Guernsey are very low taxes, excellent public infrastructures and lower prices compared to the UK, which is still paying for the War of Independence against the Americans, plus all other war debts.

This massive public debt, which is totally unnecessary, causes both inflation in prices as the interest must be paid by taxing everything and immense poverty, not to mention vast lost opportunities to create all manner of beautiful public works and infrastructure.

It boggles the mind that the solution to our economic problems is so simple and authorized by our Constitution. In Canada, we are very fortunate to own our central Bank of Canada, which is NOT the case in the US or UK. * We could simply issue all the money needed for federal, provincial or municipal public works at whatever interest we decided was reasonable or at zero interest if we were really smart. The interest goes back to the Bank of Canada and is then paid as a dividend to the Federal Treasury at year-end. They do this now on their excess profits. Furthermore, the Bank of Canada could charge a ‘royalty’ on all commercial bank loans of say 0.5%. This ‘royalty’, which is for the privilege of creating money out of nothing, which is how 95% of all ‘money’ is created by the chartered banks, would bring in billions of extra revenues and do away with all manner of idiotic taxes.

The Republic of Salt Spring could do the same. Issue SS Dollars for all manner of public works, charge a ‘royalty’ on all commercial loans issued by banks under SS Charter, tax land (not improvements) at say 1% of its assessed value. There would be no need for any income or sales taxes and we could probably issue a ‘national dividend’ to all citizens of any excess revenue.

The State of Alaska does this now with excess oil revenues. Each resident gets US $I,000-1,500. The penalty for fraud is severe: jail, total loss of all future dividends and repayment of all past dividends. BUT, some still try it and a few get caught and loose everything.

Needless to say, the banks and the wealthy won’t like it because they ‘print’ the money and run the nation for their own benefit.

Had enough yet?

Best regards,

Baron Fowler

* Author’s note: As stated above this is really not the case in Canada either. It is another case were even half the wool that is pulled over our eyes is cotton. We are told half a truth and left to assume that the other half is true as well. In this case it is not. The Bank of Canada is NOT a public agency!

For more information on this and other related topics check out the following site,

This web site offers information on The Bank of Canada, Canadian income tax, our constitution or The British North American Act of 1867, The Public Credit Money System, The Provincial Credit System and much more.

This site however, as with most writings on this subject has an “us” vs. “them” scenario. On the surface this scenario appears to be an intelligent conclusion based on the evidence. However, that conclusion assumes that the “them” is aware of the effect their actions have on the “us”. In a few cases this may be true, but in the vast majority of cases the “them” believe that the “us” can reap the same advantages they have if the “us” just go and find a job or start working harder to contribute to the growth of this country. Very few of the “them” or the “haves” see that it is their actions that contributed to the “us” or the “have-nots” in the first place.

Actually, because one of the results of The Private Debt Money System is the “us” vs. “them” scenario, we find ourselves almost constantly bickering with any who we see as the cause of our inability to have abundance, or, to increase our present abundance. Each political party points fingers of blame at all other political parties. Governments blame the unemployed and those on some form of social assistance. Management blames unions and unions blame management, etc., etc., etc.

As long as blame is laid on the effect instead of the true cause we will never be able to find a true and lasting solution. We need to keep our eye on the true cause. The true cause is The Private Debt Money System. The solution is some form of The Public Credit Money System.

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