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Forget about Full Reserve Banking

May 8, 2013
Full Reserve Banking

A large number of monetary reform proposals include Full Reserve Banking. However, the Money Power will continue to control the money supply in this scheme. The problem is not credit creation, but who’s in control and what is he doing with that control. Getting rid of Usury is the main issue.

The Greenback, Social Credit, Positive Money, Austrian Economics, the Chicago Plan and undoubtedly many more propose full reserve banking. There is a general dislike of Fractional Reserve Banking. The idea is, that money through bookkeeping is unfair.

We have always believed that we borrow from savers. Because of this programming, we instinctively want to ‘repair’ the situation by making it what we always thought it was.

And this is a grave misunderstanding: the problem is not credit creation, it’s interest.

When we calculate that a mortgage at 5% over thirty years costs 150% of the principal in interest, we can easily see that this has nothing to do with ‘costs’ for the bank. Managing such a risk free loan over thirty years should never cost more than 10% of the principal.

Interest on mortgages which are created by bookkeeping are wholesale plunder. The bank doesn’t risk anything anyway, since there is the house as collateral. To say housing is under water today is not a valid argument: the banks create the boom-bust cycle themselves. Rational monetary management would not know sudden changes in prices, save for massive disaster. Only a few hundred years ago, when Usury prohibition was already on the wane, a combination of collateral and interest was unheard of. It was either the one, or the other.

But to say then, that we will solve it by ending double entry bookkeeping? Shouldn’t we just end the usury on the bookkeeping and let the credit facility take a small one off percentage as a handling fee to cover its costs?

Double entry bookkeeping knows credit and debit by nature.

The key issue to understand is that it is not the bank’s credit, it’s ours. We give each other credit. The credit is mutual. We allow each other to buy now and pay later. The bank only does the bookkeeping. In the current paradigm the bank has usurped this credit and is extorting us through interest on it.

Consider it for yourself: would you prefer to continue to pay $300k interest over a $200k mortgage to savers and a bank, or would you prefer to pay 0% interest to a credit facility?

Case closed.

The Money Power is comfortable with Full Reserve Banking
Of course the right to create credit must be taken away from the Money Power and its banks. We cannot allow them continued control, even without Usury. They’d continue to boom/bust the hell out of us.

That’s another problem with Full Reserve Banking: it’s still, well, banking. We need to get rid of banking altogether. This in itself is an important point. No real monetary reform is thinkable while leaving the Banks alive: a vampire will not lose its tricks. It was bred to suck blood. It will always look to reassert domination.

This problem shows also with Full Reserve Banking: the banks would regain full control over the entire money supply in a short while.

Should we replace our current money by spending into circulation a batch of debt free money, the Money Power would quickly get a hold of a sizable chunk of that batch. Both through its own wealth and income of its Transnationals. It would then start lending this money out at interest in her banks that have switched to Full Reserve Banking. It would then continue to not spend, but lend their profit through interest back into circulation. Thus, through compound interest, the entire money supply would end up again with the Plutocracy within a few years.

The Money Power cares not whether it gets its interest through Fractional Reserve Banking or Full Reserve Banking. It cares not whether it is paid in paper or in coin.

The Money Power cares about the Trillions in interest it rakes in yearly.

The IMF is discussing it openly and positively. Gold based full reserve banking is the classical Austrian approach. Why? Because it is does not touch Usury.

That’s why the talking heads of the Mainstream are always talking about debt, debt, debt. They even talk about burning creditors. But never about stopping interest payments. While even Greece could pay off its entire national debt in 20 years just with what it loses to debt-service now.

Usury is the heart of the matter. Full Reserve Banking does not end it. Interest-Free Credit by bookkeeping does.

Full Reserve Banking Revisited (discussing the IMF’s paper on the Chicago plan)
The Problem is not Debt, it’s Interest (with Video)
Gary North’s Bluff: the Lie he’s been sitting on for 50 years
Debt free money alone does not solve compound interest
Mutual Credit, the Astonishingly Simple Truth about Money Creation

  1. marxbites permalink

    Usury is NOT the HEART of the matter, fiat from thin air is.

    The 1880’s, America’s single longest period of TRUE economic growth rates and increases in living stds from the bottom up are the PROOF. And this in spite of CW era bank nationalization.

    Only unconstitutional central banks with the monopoly privilege to create debt from thin air plus interest are the problem.

    MONEY, real money, is that commodity that free market participants through a positive feedback loop becomes the universal media of voluntary exchange.

    Hell yes we should repossess all the nation’s stolen gold & silver, and let the FREE market of free individuals decide once again for themselves what they came to do before, which was to settle on precious metals, or fully redeemable paper receipts as we had pre-FED.

    As the hipocrit par excellance said;

    Gold and Economic Freedom

    by Alan Greenspan

    An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

    In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

    Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

    The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

    What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron…………….

    …………….Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which — through a complex series of steps — the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
    Hasn’t humanity suffered ENOUGH statism already?????

    • Dark Dirk (Симо) permalink

      You are an IDIOT. Money SHOULD NOT be saved. The biggest savers controls the money supply and creates conditions of money scarcity and the boom-bust cycle. They use money to earn more money and do not produce any goods and services. At the end all money ends in the hand of a few men hwo controls the entire state (world) and rob us through interest.

    • You must learn the difference between a commodity and a medium of exchange.

      Real money is not a commodity and cannot be bought and sold. Why would you pay more than a dollar for a dollar? (Let’s leave monetary exchange rates out of this for now, I’m talking just one country’s currency.)

      What makes money seem like a commodity to the common man is the vast conspiratorial propaganda the bankers have used to pollute his mind. If a small group controls the amount of money in circulation (keeping it “short”) then they may convince you to pay more for a dollar than a dollar is worth. Paying off the government to allow their scam makes it easier to convince the public at large that there is a “market for money.” It’s really all quite preposterous.

      Gold is a commodity so it follows logically that gold is not money. You may exchange it for money, however, and so it is easy for bankers to blur the definitions and obfuscate their simple theft.

  2. marxbites permalink

    by Jacques Rueff

    The problem of Western currency is more topical than ever. For ten years now, the international monetary system has been patched up by many expedients that were intended to extend its assured life. It cannot endure very long in the present state.

    The following pages afford a description of its modifications over time. They provide a diagnosis and make a prognosis possible.

    Some qualification is necessary, however, as regards the rate of foreseeable evolution. The art of monetary expedients has been refined to such a point over the last ten years that no one can predict what artificial devices can be generated by the fertile minds of experts. One thing is certain, however: while additional innovations may stave off the gradual deterioration of the system for a while, they cannot change the outcome. As far as prognostication is concerned, events can never be wrong. But unfortunately, events have already passed judgment. It is to be hoped that they will not continue to show that in the monetary field, as indeed in other fields, the same causes always bring about the same effects, and those who persist in ignoring the past are irrevocably doomed to live the same sequence of events again.

  3. marxbites permalink

    And, btw, only in FREE markets of commodity money does the natural interest rate float dependent on the amount of savings available, eg high savings-low rates, and low savings-high rates.

    And slow deflation due to innovation and productivity gains EQUALS higher stds of living for the lowliest beggar to the very wealthy because commodity money increases it’s purchasing power the more products become available.

    Yer NEVER gonna actually read a Rothbard book on money are you Anthony?

    Howz about a listen while you work then?

    What Has Government Done to Our Money? – Chapter 1

  4. Another brillaint article, Anthony. The point of departure for all fractional lending lies in commodity money. To say that you are against fractional lending by mandating 100% reserves is only to say you want to reset the ponzi scheme after a deflatinary crash. That is how it has always worked out in history. You start with full reserve ratios, only to loosen them until you are left with exponentially unsustainable disparities. Creditors with real gold buy everything for pennies on the dollars.

    Interest free fiat has been the only currency with a 100% success rate. Ancient rome, 700yrs of tally sticks in england, colonial script, greenbacks all brought prosperity and were discontinued only through bankster lobby and sabotage.

    • That’s an interesting point PM, that ‘they’ use it as a way of restarting the System after a deflationary crash. I think it’s very much on target. Some debt-free money would certainly be welcome at this point (to them) to plug a few gaping holes here and there.

    • Interest-free and created by the people themselves, not the government. Not “fiat.”

      • im not an anarchist and believe that if the money is sanitized of interest, govt will BE the people, for the first time in history.

  5. Buzz Suit permalink

    I give you credit for another great article to stimulate constructive dialogue, Anthony, you get as much credit with me as you want…

    I love this quote: “We have always believed that we borrow from savers. Because of this programming, we instinctively want to ‘repair’ the situation by making it what we always thought it was.”

    We must admire the great deceptions imposed on us, and only by educating ourselves can we free ourselves from these illusions. We maintain these illusions with our own mind, so freedom starts with ending the brainwashing by stooges and useful idiots working for those who want to implement certain Agenda. An example of this are the posts above by Marxbites (what is revealed by that name?)

    One of the great ways this deception is perpretrated is by posing that there is a choice to be made between two choices of a false dichotomy. These so-called opposames are meant to distract us from the real situation by entrapping us in some kind of ideology.

    A great example of these opposames are the monopoly of the state as proposed by the communists or the monopoly of the banking cartel (and the corporations controlled by them) as proposed by the so called libertarians. These are both monopolies designed to crush individual freedom.

    Another great example is when George Bush (the idiot) said: “You are either with us or with the terrorists” – because in fact both choices are to choose for the terrorists … the ‘us’ referred to by Bush the idiot are the terrorists.

    Keep up the good work,

    • Thanks a lot Buzz!

      However, I have zero collateral to offer for any credit. Thankfully, I wouldn’t have even a beginning of a notion what I would want to buy with it anyway, hahaha. There is great wealth in poverty!

      • A fair society would offer you the opportunity to earn and keep (existing) money in order to build collateral. The status quo today seeks instead to keep you impoverished and feeding it.

        We all have a certain amount of collateral in our ability to perform work and earn income. (Don’t get me started on how income taxes serve to keep us broke. That too must go.)

  6. Isn’t full-reserve banking the pet project of your mentor, Bill Still? are you now saying that Bill Still is a charlatan (dear-oh-dear, you are agreeing with me, again) if you are right, B.S. knows not what he is talking about)

    >>>>And this is a grave misunderstanding: the problem is not credit creation, it’s interest.
    You may repeat this mantra ye invented, it doesn’t make it true

    >>>>> We have always believed that we borrow from savers
    And the solution would be that we return to the practice of borrowing that which someone has already earned (and saved), that which already exists; but ye hate the concept of saving, the concept spending what ye have

    The actual heart of the matter –which you fairly well described but are un-willing to say for the usual reasons– is the printing up currency units based on the credit and good name of the printer (private or public), and on the credulity and desparateness of the customer

    (double entry book-keeping was developed by a christian monk)

    • No, Bill Still in not a full reserve gold/silverbugger. It’s actually the nonsenical response of austrians like Tom Woods when asked if he advocates fractional reserve commodity banking. I had this dialogue with him on twitter, so it’s straight from source.

      Bill Still believes in in the issuance of interest free credit by a nationalized Federal reserve, as well as by state banks.

      • funny; i think i still have somewhere an email from Migchels which claims that B.S. is supporting full reserve

        is this a rejection of the chicago plan ?
        “unfortunately Roosevelt ignored the chicago plan”

        is this not B.S.’s site?
        is it not supporting the concept of full reserve ?

        and how did this get there?

        The monetarist school, of which Dr. Milton Friedman was the acknowledged head, has been rightly criticized by the Austrian school of economics for failing to recognize and deal with the fact that no fiat money system has ever lasted long before the government instituting it succumbed to the temptation to inflate the money supply as an indirect tax on the people, proportionately decreasing the value of their savings and wages, and transferring their wealth into the hands of the government. This is certainly a valid critique. The so-called “Great Recession” beginning in 2007, TARP, QE1, QE2 etc. and the staggering increase in the national debt has proven the validity of that critique – the Austrian school was right.

        • The Chicago plan, as I understand it, knows two components: debt free money and full reserve banking.

          It’s close to what Bill Still promotes. I also accept it as a step forward, I just take issue with the Full Reserve Banking thing.

          I’ve been in contact with Still and he’s the first to admit that the nitty gritty of the monetary is not his forte. He sees as his task to stress the need for monetary reform and sees himself as a historian first and foremost. He’s open to other ideas. For instance: he met up with Walton and spent some of his Mountain Hours. In the video Wayne made of this, Bill Still admits the Hours are money and are a great and viable way of starting monetary reform NOW. He just was not aware of this option.

          Still has also shown interest in Social Credit when he became aware of it. He does not want to write the reform program. He wants it written.

          This shows a man who is willing to learn and this, for me, is one of the key qualities distinguishing real men from the sheep.

          • >>>>Still has also shown interest in Social Credit when he became aware of it.
            B.S. (at the time he was still William Still) published his first piece of garbage in 1991; are you telling me that it took 25 years for this deep researcher to hear of social credit ?

            //* inyour relply i have not noticed any answer to the quest

            If and when you don’t know history, you keep repeating the same (and expecting a different outcome):

            “It would mandate Minnesota’s Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans – simply by “monetizing” the projects themselves.

            so this expert, –who, as usual, is religiously attached to fabricated quotes– would join government and bank at the hip, and grant the good name and credit of the State (of Minnesota) to chartered (privileged) joint stock companies ?
            None of ye knows this, but this has been done many times (for canal projects, for turn-pikes, for railroads &c)
            why would this hero (and expert) reward banks ? why would he legitimaze the banks’ practice of creating money for their private gain ?

            No; what Minnesota should do –if there is a need and prospect of a revenue-generating road project (if a road or bridge does not generate at least the cost of building and upkeep, it is not legitimate)– is what Guernsey did, what Ford/Edison recommended: authorize the issue of notes and pay them out directly to contractors. If the independent State of Minnesota is in need of currency: after the project is finished, simply leave these notes in circulation, or even re-cycle them through user-fees

          • What Minnesota should do is the very same thing you or I should do — take an interest-free loan from a “government entity” and pay it back over the course of the loan.

            Your idea makes no sense at all to me beyond projects should be legitimate. What do these “notes” represent? How long would they circulate? How does a “user fee” recycle anything and what form (note) should the “fee” take? Simply confusion, my friend.

            Everybody wants a convoluted solution, it seems. MPE(tm) is simple and mathematically solid.

          • >>>>Your idea makes no sense at all
            Then, the simple historical example of Gurnsey is not what you would like to learn from.

            “government entities” do not have money to lend — and why would anyone person, or a village in need of a road, borrow money that the government doesn’t have, if he could just print/issue his own money, based on his good name and the credulity of road constructors ?

            Has this trade marked class-room theory of mpe ever been tried in the real world ? Because the experiment of everyone issuing notes and currency has been tried; please entertain yourself with this satire of 200 years ago, when every dick and hairy was allowed to circulate his notes:–

            after that you may expose yourself to the real life experiment of Guernsey, as related to us by an eye witness:–

        • at a cursory glance it does indeed appear that Bill Still favors full reserve banking. However given his adamant stance against gold backed money in his past books, documentaries and speeches , his notion of fractinal lending and full reserve must accordingly differ from the kind put forth by Woods, and Paul,ect.

          What i believe Still means by fractional lending of interest free fiat is money hypothecated (ad infinitum) by dint of greed and not public sector need — e.g, demand in form of goods, labor & services.

          Thus, his notion of Full reserve lending for interest free money would mean the issuance of money only corresponding to productivity demands and lending in (fiat) dollar to (fiat) dollar ratios of 100% deposit value.

          As for that quote from the chicago school i can only hope that Still is stating the danger of merely nationalizing the banks instead of nationalizing the interest free currency; The danger is allowing the govt the sole power issue money without regard to the welfare of the public it serves. His disagreement with freidman not to “… restore a gold-or-silver coin standard” really doesnt make any sense. Maybe its an error?

          Otherwise, you might be on to something,…

    • I agree BS is BS, but what are you proposing, sir?

      Money is really our promissory obligations to one another and so our ability to create new money must be limited by own creditworthiness. The bank (whatever its vigorish) only publishes our obligations and issues a common currency that is difficult to counterfeit and widely accepted.

      Money ain’t that hard, folks. Search for Mathematically Perfected Economy(tm.)

      The overall economy does not need “savers” to issue new money. If usury had not destroyed most of the economy already, there would be plenty of actual “investments” in which to park your cash — but they would be profitable, not usurious.

      Why should I borrow your money if I may create new money with my own credit?

      • Greenbacker84 permalink

        So money changing parasites can exploit for labour, production and charge you compounding interest. Think you knew that already tho.

  7. bob klinck permalink

    This faith in government not to use control over the ‘spending into the economy’ of new money to consolidate its power over the population is unbelievably naive. Migchels is very thin on the processes by which the issuance and distribution of money would occur. His proposition that getting rid of interest would solve fundamental problems of personal survival in an economy being revolutionized by robotic production is risible.

    • The article does not say WHO spends the money into circulation Bob. We could do it both Greenback and Social Credit style. I maintain it’s better to let the people do it. In terms of full reserve banking it’s not relevant.

      Futhermore, it IS Usury that underlies the concentration of economic power. The Transnationals are unthinkable without Usury and would not exist without it. Large corporations finance themselves interest free and thus have far lower cost for capital than small and medium businesses, which rely on banks. It is a law of nature that he with the lowest cost for capital wins.

      This is not to say that we should or could not have a basic income as an expression of the sharing of people in the commonwealth, which has been robbed by these Transnationals and the banking system that owns these Transnationals.

      So you did nothing to explain away usury as the problem. Your ‘risible’ is not laughable, it’s annoying, because you’re sitting in this little limited hangout known as the Social Credit community, which is just as programmed to believe they know it all as the Austrians do and thus never really try to understand what others are saying.

      And the simple fact is: Usury IS the problem. Social Credit COMPENSATES for the problem. But does NOTHING to solve the 5 to 10 trillion wealth transfer from the poor the very richest that is going on globally each year.

    • Risible? I had to look that one up! You’ve obfuscated your own joke.

      Eliminating interest (and loan to collateral value and life) would absolutely increase the average person’s standard of living by an order of magnitude.

      Once we solve the money problem, we will work on the psychopath problem.

  8. Full Reserve Banking changes the model as banks become recyclers of existing money. No new money would be created – banks would match those with a surplus to those with a need. The cost of borrowing would dramatically increase.

    There has to be a mechanism to continuously add new money to the system as the existing money is destroyed through the re-payment of principal debt to a bank. The money supply shrinks at a rate equal to the duration of the loans that created it.

    Proponents of Full Reserve Banking recognize this need and they propose a system modeled after the old “Chicago Plan.” The Federal government assumes the role of new money creators by spending debt free money into the economy. The new money can be spent on social programs and in building the national infrastructure.

    The “Chicago Plan”

    Steve Zarlenga helped write Congressman Dennis Kucinich’s National Emergency Employment Defense (NEED) Act, HR 2990, into the 112th Congress. It was based on the less than famous “Chicago Plan” from the 1930’s. Bill Still also supported a close version of the plan during his run for President (Libertarian Party).

    The plan makes banks money recyclers and new money is “spent” (debt free) into the economy by the Federal government through a special advisory board that may operate independently from congress. The idea is that that debt free money (not destroyed in the repayment of bank principal) will build the economy by keeping enough money in creation. Since money is not destroyed, the theory is that many will be willing to rent some of their to others through via interest bearing loans arranged by banks.

    Wouldn’t this create two classes – borrowers and lenders – with many of the lenders holding the money in perpetuity? And we know that charging interest will destroy any economy.

    Private citizens and companies should have access to as much new money they want – limited only by their credit and collateral allow. The people and their private and public property ultimately back the money and they should have direct access to borrow new money interest free.

    This is a human rights issue; no one should have the legislated power to forever own a nations mean for exchange.

    Debt Free Money

    One good part of the plan is the idea to spend debt free money into the economy. This is very much needed from a mathematical view point. There exists a lot more debt than money which means that the debt can’t be fully repaid. This will create defaults and bankruptcies if an inadequate amount of new money is added.

    The question becomes, how should the new “debt free” money be spent into the economy?

    Byron Dale proposed the Minnesota Transportation Act to create what he calls “wealth money” at the state level.

    “It would mandate Minnesota’s Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans – simply by “monetizing” the projects themselves. Banks routinely monetize the promissory notes of borrowers just by making book entries to a checking account and saying “you have a new deposit with us.

    “Indeed, banks create all the money they lend. This was confirmed by the Chicago Federal Reserve in a booklet called “Modern Money Mechanics,” which states:

    “Of course, [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount].

    “Many other authorities have confirmed this money-creating mechanism of commercial banks. State-chartered banks get their authority to create money from the State, and the State has the authority to determine the purpose for which banks create money. State banks are now permitted to create money to monetize a mortgage or other promise to repay. They could as easily be authorized to “monetize” the promise of contractors to deliver labor and materials to the State in the form of road and bridge repair and construction.

    “The argument against this creative approach is that it would be inflationary, but would it? Inflation results when “demand” (money) increases faster than “supply” (goods and services); and in this case goods and services would be increasing along with the money available to spend, keeping the money supply in balance and prices stable. In fact, it is the lending of money created out of thin air that is inflationary, because banks create the principal but not the interest necessary to pay back their loans. Additional loans must therefore continually be taken out just to service the “money” (or debt) that is already in the money supply; and this newly-created money goes into the pockets of middlemen rather than contributing to the productivity of the community. “Demand” (money) thus goes up without a corresponding increase in “supply,” creating price inflation.”

    Debt Free Money – Great Idea
    Full Reserve Banking – Bad Idea

    • “Debt Free Money – Great Idea
      Full Reserve Banking – Bad Idea”

      That’s the issue I think we need to settle Larry!

    • REN permalink

      “Wouldn’t this create two classes – borrowers and lenders – with many of the lenders holding the money in perpetuity? And we know that charging interest will destroy any economy”

      In a gift economy, there are borrowers and lenders. The idea is to not have rents in both cases. The Chicago plan limits rents to enterprise. Private citizens would be willing to lend their surplus savings to each other at a non usurious rate. Remember, loans cannot compound by law, similar to the 7 year biblical injunction. By the way, I’ve proposed a superior system, so I’m not full throttle defending CP, but we must look at it more seriously. The usury is held to bounds. If we don’t give other systems a full analysis, we lose credibility. What little usury there is could be inflated away. CP could easily be a stepping stone to (SCD) Social Credit with demurrage. In this way, there is a practical path to an advanced money system.

      SCD still needs MC systems to limit outflows and give local economies more control. MC will never grow to national acceptance unless it becomes good for paying taxes. MC is limited to its smaller tributary circuit.

      “Private citizens and companies should have access to as much new money they want – limited only by their credit and collateral allow. The people and their private and public property ultimately back the money and they should have direct access to borrow new money interest free.”

      When you have surges of credit going into the money supply, it causes an instant jump, which is inflationary.. The credit circulates as money until it self liquidates, causing deflation. This is part of the Volume Velocity aspect of money that I mention. The extra “money” volume will be a problem unless velocity slows down. Also, liquidating private assets into money is fundamentally flawed. All wealth degrades and sufferers entropy. Credit must then match entropy, but it doesn’t. Credit issuers want “more” back, so there is a mismatch of types. Credit that is created and spent, but then allowed to remain in supply, the main argument of greenbacker’s circa 1870. They saw their greenbacks as seigniorage credit that paid for the war, then they wanted posterity to enjoy their real money forever.

      The ideal money supply is issued debt free and has maximum velocity. That way, volume can then more “easily” be controlled. The dual nature of money -volume velocity – needs to be dealt with.

    • Dark Dirk permalink

      I think that the combination is important. If you combine debt free money with demurrage tax and FULL reserve banking, that is a GOOD idea. Banks will be small and powerless, and there would be no savers who would damage the money supply. Investments will be made with selling shares of companies to the public.

      • REN permalink

        Make the tangible part of the money supply as coins only. Then make them big and heavy, and limit their value to $20. That means they are a litterally a pain in the pocket, so they have high carry costs. Then recall them periodically like they did in the Hanseatic league – which means physical money cannot be hoarded for long.

        This propels people into abstract ledger money, where demurrage can be easily implemented. Already, most of the supply (97%) is abstract numbers in a computer. We aren’t going backwards because technology cannot be un-invented. We don’t need stamp script money.

        Direct spending into households first – Social Credit style, means that Government has to wrestle the public for “their’ money. Government will be held small, as the people will own their money power. Any inflation allows the people to get first seigniorage. Government will hunt for rent seekers as Gov. needs tax money to operate; taxing rent seeking will be an easy sell to the public. Government can only tax and recycle – it cannot make new money. New money is the sole perogative of Monetary Authority. If people want to have MC for local economies, then it should be freely available.

        The monetary authority has to be a fourth branch of government, answerable to the people; and under the guidance of law. It also must be populated by moral individuals.

        The election process for the Doge of Venice is an interesting mechanism for preventing humanities worst elements from gaining power.

        I would estimate that about 5% of our human population are psychopaths; they are drawn to money power centers like flies to rotting flesh. As long as there is private issuance of money, in the cloak of darkness, the psychos will be feasting.

    • “There has to be a mechanism to continuously add new money to the system as the existing money is destroyed through the re-payment of principal debt to a bank.”

      Taking a loan creates money. As Anthony said, we provide credit to one another.

      Why do these Chicago guys propose such convoluted ideas? Money is properly created by loan, it is the very nature of what money is — debt AND credit — bookkeeping. As money is repaid it must be destroyed for there is no longer collateral backing its circulation.

      Convolution and obfuscation are the tools of usurers. MPE(tm) is simple:
      1) Zero interest, ever (by law)
      2) Loan to value over the lifetime of collateral
      3) National credit source (not private bank)

      A $100,000 new house should be paid off over 100 years at $1,000 per year ($83.34 per month.)

      The honest answer is real simple but it doesn’t let anyone rip other people off so few like it.

  9. REN permalink

    In fairness to accuracy:

    “Should we replace our current money by spending into circulation a batch of debt free money, the Money Power would quickly get a hold of a sizable chunk of that batch.”

    The Chicago Plan converts the money supply from Bank Money, to U.S. dollars – overnight. The public would never know the money supply converted. All of the money supply becomes Treasury Greenbacks (U.S. dollars) overnight. Bankers would never have time to call in U.S. dollars in exchange for their bank money.

    All of the credit money (bank money) on the private bank ledger is converted to U.S dollars as issued by the Treasury. When debtor pays down their loan, the money vectors out of said debtors pocket, goes through bank, and then on to treasury, where the single entry ledger is marked down.

    Treasury dollars are a division of the commonwealth, not a division of assets. Treasury dollars are seigniorage money, and once the initial seigniorage is taken, they are free to transact forever.

    So, with the Chicago plan (CP), the bankers would never know what hit them. They would become mere accountants shifting treasury dollars about.

    However, with CP there is a real problem with money power and political power concentrated and abused by the Executive branch. Also, there is no comprehensive fiscal policy to tax away rents, especially those on land. Rents on land and other schemes can grab floating money over time. For example, owning all of the oil producing lands, would enable rents, and then aggregating money into a plutocratic spiral.

    Mutual credit is also weak on fiscal policy.

    Chicago Plan also does an interesting trick with credit. They denominate it in public assets. How this is done I don’t know. But, the idea is to issue credit only to those who can pay the usury back with improved productivity. Since credit is public, it can be forgiven, yet the banks remain private. In this way, private money powers are thwarted and the people do transactions with private entities – not the government.

    Personal loans are held to a doubling of principle, so the usury doesn’t compound and go exponential.

    I’m not defending the CP per se, but it is a serious system where bad money is replaced with superior money, and usury is contained to productive enterprise. Usury is not foisted onto the money we use as a general transaction medium; debt free money has become zero cost especially after the original seigniorage has been taken by government.

  10. “Gold is money, everything else is credit” –J.P. Morgan

  11. The vast majority of mankind is still ignorant about money matters. Two major religions warn about the evils of usury, but usury is everywhere. We are all debt slaves. It will take a long time for things to change, but eventually good always prevails over evil. The bankers did not have to create the mess we are in. They could have managed
    their piracy in a much better way. The present economic situation actually exposes their overall poor management and vision.

  12. Another great article, anthony.

    I would argue only that the banks really DO care to keep fractional-reserve lending because it enables them to steal your money that much quicker and easier.

    The bottom line is that the system (all of it) is designed to maintain the status quo. Everything exists to continue usury. The idea is to keep the poor working to feed the rich. The fruits of our labor flow uphill. Full-reserve banking or returning to the gold standard would still work for them, but I don’t see either happening without a terrific fight. Neither option will help the average person in any way.

    As for the Austrians, they’re just ticked someone else is collecting their interest.

    As you know, I advocate MPE(tm,) but I believe mankind must evolve enough to see the flaw in usury before any laws will be adopted. It will probably take a good (financial) swat upside the head.

  13. Bill Still cannot articulate his positions on money because he “borrowed” most of them from Mike Montagne without first understanding what Mike was writing. He understood that money must be created interest-free but never understood that money must also be destroyed interest-free or it inflates the supply and ruins the economy.

    Bill Still also does not honor the rights of individuals if he advocates monetary circulation by committee. Who decides how much money is enough to print? Government? It boggles the mind.

    Under MPE(tm) everyone may create as much money as they can afford, including the government. And, they pay it all back without interest. No one has any actual control of the economy because everyone is participating with equal footing (according to their creditworthiness.) Everyone except usurers will have a creditworthiness about ten or twelve times higher than whatever they have under the current oppressive system today. No one has to be poor because of bankers anymore.

    You know, if I had the money (how many times have you said that?) I could hire painters and carpenters and plumbers to fix my home. I could have a new car built for me. I could be a “job creator.” Jobs come from customers (not corporations) but customers need money to pay!

    • REN permalink

      Social Credit with Demurrage vs MPE

      SCD vs MPE. Interest FREE money SCD- yes MPE –yes: Money supply stability SCD – Yes MPE –No: Counter-cycle spending availability in the event of a disaster: SCD – Yes, MPE- NO. Law extends to overseas trade, thus preventing extralegal hoarding: SCD-YES MPE-NO: Money supply predicated on the full asset value of a country: SCD-YES MPE-NO. Structure of government and law extends to limit marketplace rents: SCD-YES MPE-NO. Surges across time, to settle the S shaped curve of production cycles: SCD – Yes MPE- maybe, but it is has asset class dependencies.

      New money generation morality: SCD-YES (Law) MPE – YES (Function machine, like a voting machine. Maybe corruptible)

      A new function machine replacing the double entry ledger is the main feature of MPE as far as I can tell. I’ll learn more in future, but I’m seeing lots of problems.

      When I analyze MPE it comes up wanting. Sorry, it is not a panacea as it fails so many tests. I don’t enjoy dissing a brother who wants the same thing as me.

      • Greenbacker84 permalink


        MPE restores the issuing power DIRECT to the people/commerce free of bankers, usury, and government officials. Its little more than accounting software.
        Social Credit is better than our current system, but does NOT allow people/commerce to freely issue their own money/contracts.

        I don’t want a government hand out, I want to issue my contracts MYSELF.
        I don’t want the government controlling our supply or the banks. It should simply be the level of commerce the people desire to have.

        IN event of disasters, the state, local government, or or even communities could issue their own money to pay for emergency funds, far far easier than today.

        As for Marketplace rents, we’d have almost full home ownership in MPE, as the schedule of payments in a FRACTION of what we pay today. Who cant afford 83 dollars a month on a 100k home?? It CHEAPER than renting, and incurs no interest, deposit, or fees.

        • REN permalink

          SCD a home is 83 dollars a month too. Also, in SCD there is no fatal flaw of grinding single assets through your function machine to make money, then used as a public good. In practice, property and homes will be monetized, similar to the double entry ledger.

          The money supply is allowed to drain and then is refilled? Tell me this isn’t so, because when you buy a house, the original owner gets the full value of the house, and is free to spend that money into the money supply. It then converts to a public good.

          Also, how does MPE deal with triangular flows against foreign currency. It can’t because MPE won’t be extended overseas. Local law over MPE cannot extend overseas, to another legal system. With demurrage currency the foreigner accepts that attribute because it is attached to the money and known upfront. He then uses SCD to purchase good as the money is cycled back to its source…and it is compelled to do so, maintaining velocity.

          There is no provision in MPE for dealing with rents in the marketplace, nor with rents on land. And yet, land is what is likely put through the asset conversion meat grinder.

          In SCD we have almost full home ownership too. MPE comes up wanting as it is not a fully coceptualized plan, it only deals with replacing double entry ledger with your own function machine.

          We all (ok some of us) get how usury compounds and flows into the upper tier, where it becomes stagnant capital. That defect is also dealt with in SCD.

          Sorry, MPE comes up wanting. The more I look at it, the less impressed I become. I appreciate the sentiment though, wanting to overcome political oligarchy. We all want that.

          • Greenbacker84 permalink


            I’m sorry, Social Credit, at least in the traditional sense advocated money being ‘gifted’ to us by the state, at a fixed rate.

            What your now describing, is MPE’s 1:1:1 ration between remaining debt/vaule/ and remaining circulation.

            There is nothing in Social credit describing homes as 83 dollars per month, this equation was created by Mike Montagne, NOT CH Douglass. Your taking the exact terms described by Mike Montagne, the principles of MPE and latching that to Social CRedit, which any researcher can see is not the case.

            You still dont see that WE create money, its OUR promissory obligations/contracts. Neither the state, nor banks give any equal consideration to our labour/production. Social Credit certainly does NOT discuss or solve the laundering of our promissory notes by banks, or central banks. Nor does it eradicate interest.

            As for ‘triangular flows’ Ill dig further. But the vast majority of trade is INTERNAL, not external. If we can trade internationally with a national dollar, why not with an MPE US dollar/pound to exchange with foreign goods. The same principals apply, only the foreign nations will be LESS competitive, still be subject to usury/banking and far less prosperous. Foreign trade does not in any way negate our ability to issue our promissory contracts to each other.

            Again, what do you mean it does not deal with ‘rents in the market place’?? If you want to purchase a home you issue your own promissory contract at a fraction of the cost and retire principal alone over the lifetime of the property. Heck, you could build your own home if you wanted to. If you really insist on renting no one is stopping you.

          • what i don’t understand about MPE is how they can possibly keep track of the literally trillions of contracts, transactions and money flows that occur in the marketplace daily, so that all the monies involve can be “retired”? It just seems to me that monetary transactions marketplace would be too complicated to micromanage.

            I also don’t understand how debts discharged cause inflation. Would this money just remain to spur investment in more industrial enterprises?

          • Greenbacker84 permalink

            How does it ‘keep track’, retire principal?

            In the same way we do today. The software already exists and is used extensively in the banking industry today.
            In MPE, we can have accounts with a common monetary infrastructure (CMI).
            When I issue 100k for a home, the debt is tied directly to ME.
            We are not ‘chasing’ circulating money, nor forceably taking money from savers or doing Demurrage, nor ‘taxing’ the general populace bc of debts that may have nothing to do with them.

            MPE ties the debt directly to the issuer( be it a person, company, or government agency). We are each accountable for our debts, unlike the banking system, which launders, republishes or sells our contracts, and subjects them to compounding interest.

            If I issue 100k, I retire 100k (alone) in monthly payments. The initial created money will have gone to the home owner/builder who gave up the property (not any bank).

            We’re getting rid of the middle man (banks) and putting the power to monetize our labour and production back in the hands of the people/commerce. The CMI is little more than a non-profit accounting software used to publish our contracts and retire principal.

          • Okay, so MPE only tracks and retires formal loans issued by a banking institution? and not such things as my employers weekly debt to me in the form of weekly paycheck, wherein i create principle via my labours?

          • Greenbacker84 permalink

            Sure, were talking about newly issued money in what are falsely called ‘loans’ and mortgages. This is over 95% of new money issued today.

            As for what your paid, thats between you and your employer. There is absolutely no income tax in MPE. Income tax was created bankers to pay our falsified ‘national debt’ to banks when government issues interest bearing bonds (promissory contracts) to the very same bankers who rob us in every phoney loan/mortgage.

            Basically MPE, means an eradication of national debt to banks, compound interest bearing debt, outstanding debt reduced to a fraction of what it is today, and 10x the liquidity/purchasing power what we have today. All without any income tax, or need to ‘borrow’ from money changers whatsoever.

            Lastly, I don’t think money is typically created by employers when they pay us. My company must earn the money and pay me from their profits, unless they have gone into debt to do so.

          • “If you wish to keep slaves, you must have all kinds of guards. The cheapest way to have guards is to have the slaves pay taxes to finance their own guards. To fool the slaves, you tell them that they are not slaves and that they have Freedom. You tell them they need Law and Order to protect them against bad slaves. Then you tell them to elect a Government. Give them Freedom to vote and they will vote for their own guards and pay their salary. They will then believe they are Free persons. Then give them money to earn, count and spend and they will be too busy to notice the slavery they are in.” –Alexander Warbucks

          • There is much truth in that quote. It sounds like Warbucks was part of the Hazard Circular during the U.S. civil war:

            “Slavery just meant that the owners had to feed and
            care for their workers. The bankers preferred “the European plan” –
            capital could exploit labor by controlling the money supply, while letting the
            laborers feed themselves. In July 1862, this ploy was revealed in a notorious
            document called the Hazard Circular, which was reported to have been
            circulated by British banking interests among their American banking
            counterparts. It said:
            Slavery is likely to be abolished by the war power and chattel
            slavery destroyed. This, I and my European friends are glad of,
            for slavery is but the owning of labor and carries with it the care of the
            laborers, while the European plan, led by England, is that capital shall
            control labor by controlling wages. This can be done by controlling the
            money. The great debt that capitalists will see to it is made out of
            the war, must be used as a means to control the volume of money.
            To accomplish this, the bonds must be used as a banking basis. . . . It
            will not do to allow the greenback, as it is called, to circulate as money
            any length of time, as we cannot control that”.2
            Ellen Brown, web of Debt, pg. 90.

          • REN permalink

            You are using software as a function machine to make money. That money is then “bounded” and held to standards that it cannot get now. However, once the credit as money enters the money supply, it circulates until it is retired. Therefore, you have no control over the volume issue. Also, you are using single assets to trade as the public money supply. There is a mismatch of types, and it is poor thinking.

            I appreciate the idea of grinding assets through funciton machines and trying to make it work. BIBO is another example of this approach.

            But, the bottom line is, you have only dealt with the conversion process i.e. creation process. The rest of the money life cycle is ignored, i.e. its’ it converts to bonds or other vehicles, and also the death where it can collapse the money supply. Asset conversion type money has big time problems, including MPE’s approach.

            I’m not confounding social credit with anything. I’m only using elements of it in a new approach. I see social credit as having many problems too, but there are some good things about it.

            With regards to MPE I do recoginize that we need a tactical way to overcome oligarchy, so I will concede that asset conversion is possibly the only way for now. But, to claim it as a panacea, when clearly it is not, is not being truthful.

            The ideal money supply matches goods and services. Then you have to ask yourself, how do goods and services act at the moment of transaction. When your money instantaneously stands in as a good, it needs to divide down and match the good. This is the bottom line, and what we use money for. If volume is going up and down, then money becomes elastic and cannot do a good job of “standing in” as a good.

          • Greenbacker84 permalink

            Its not just a stagnant ‘function machine’, its a publisher of OUR promissory contracts with one another. That’s what money is and as been for thousands of years. Before gold/silver people have always issued promissory notes. Even today, money is issued via promissory notes. Its more than ‘grinding assets’, the money is a record of entitlement, backed by our labour and production.

            As for ‘its path’ the money issued is paid to the true creditor and allowed to circulate over and over. There is no stopping that.

            However the obligor, who issued the money, will retire the principal (alone) over the lifespan of the acquired asset. That is only fair, and its the only way to keep our currency’s integrity.

            We don’t need demurrage, we don’t need to chase issued money around, confiscate it from other peoples accounts, or tax the general population. Under the current system demurrage has some merit. SC is trying to fix the current issues we have without eradicating the cancer which is banks laundering our contracts, and imposing interest. The banks act as a barrier controlling, manipulating and redirecting the issuance of money and creating deflation via interest.

            SC/demurrage were an attempt to help, or remedy people under the current usury banking system. Banks sat on the money rather than ‘issuing’ it. MPE totally negates that problem, allows us to freely issue our money at minimal cost and ties us individually to our debts to be retired rightfully. I don’t want my neighbors to be taxed to take money out of circulation that I have happened to issue.

            Why would money convert to ‘bonds’ under MPE? You don’t need banks investment houses or banks bonds to issue currency. Its a totally redundant point. The ‘collapse’ of the money supply is caused by interest multiplying debt in proportion to a circulation consisting only of so much principal, leading to price inflation and volumetric deflation. Debt alone is not the issue, paying for what we consume isnt the problem, paying multiple times for what we use to a faux creditor bank is.

            As for ‘confounding’ you just took the exact tenants of MPE (83 dollar home) and tried to claim social credit allows the same. It does no such thing, at all. I also see many good things in social credit, I just think MPE is a far more advanced, fairer and lower cost system. CH Douglass did fine work, but he never realised in his work that the banks handed our own money back to us, our laundered promissory notes and the imposition of compound interest being the root problem. MPE negates having to play begger thy neighbour with the banks or the rich. We need need their money, at all, we issue it ourselves.

          • It’s really a shame we can’t have a economic debate in washington over whether to implement MPE, demurrage, social credit or BIBO (or some medley of them) — instead of our current dystopic QE4, gold standard or RFID chips.
            Althought i have my favorite, i’m certain whichever monetary theory gained supremacy would still be a blessing to the nation.

          • Greenbacker84 permalink

            Sorry, meant to say we DONT need their money, not at all.

          • hallo permalink

            I agree with greenbacker84,how about using a public market like the stock market or forex market to have the precise price for money.i elaborate in the forex market you have usd/eur usd/jpy usd/aussir usd/canadian dollar.the prices of those “goods”constatly moves up down depending on supply and demand.So what we do?we issue our own credit(debt obligations) based on the market prices.

            what if we dont like the market prices?we sell our labor or assets freely,transacting with one another.f.e. i wanna sell my house at a higher rate than the markets price,so i find a buyer,he creates the credit(debt obligation) and he gives it to me,hes account is debited and mine is credited.

            what if everyone created whatever credit he wants??and how are we gonna do international trade?how all of those credit are gonna function and what will link them?well the answer is simple and exists today…in the forex market exists the USDOLLAR.the USDOLLAR is the US dollar compared to a basket of currencies,think of it us usd/eur-jpy-gbp.So what we do is that all assets production and labor is competing with each and the echange rate flactuates but also all of them are “tied” to a single unit of for example if i issue a debt obligation at the public market i will be debited with an ammount of money or a “common denominator”and then my “balance sheet” must be balanced to 0 when it is credited

            if i simply sell something my account is credited and the others person is debited(in accounting credits and debits work in reverse for loans).the bottom line is that the common folk will either see money in hes wallet if he sells something,if he created money he will still see money but also an obligation of debt and a need to balance hes “books”

            This common denominator then can be used us a reserve to trade with foreign countries,the more we export the more “money” we have(apreciaton) the more we import the less we have(depreciation).this can function us our own free floating currency internationally but it will not effect our domestic market credit issuing.of course it will either increase or reduce our capacity to import foreing goods.It will naturally inflate or deflate us it does today.(balance of payments).

            When it come us to how it should function then simple regulations such us weekly or monhly issues can be placed,also colaterals or previous rating credit rating can play a role9as it does today) and such.

            I my opinion money should simply be a scorekeeping operation just like a game of cards,the knowledge exists(accounting) and the technology (softwares the banks use today)so whats stopping us??

    • Greenbacker84 permalink

      Great stuff Usurykills. In total agreement regarding MPE.
      I came into this after watching Money Masters. The movie truely opened my eyes to the scale of what we face. Thing is Bill cant articulate the core issue interest, or our promissory contracts.
      He earlier said the state could issue money at low, OR no interest and then changed this subsequently. Mike Montagne had this down to a tee decades ago with a far more workable system. Is Usury Kills your blog?

      BTW Antony, Ive not forgotten, I will have more detailed MPE posts I’m soon for you to have a gander 😉

      • REN permalink

        You should change your name. Greenbacks were floating currency, initially introduced as seigniorage. Seigniorage is credit against the money supply when it is first issued. But, later as it circulates forever, the credit association is lost.

        Floating money therefore is NOT CREDIT. It is an entity that floats from pocket to pocket and ledger to ledger. It simply is. It is an abstract concept built by man’s abstract nature. Mathematics exists too, but it is not tangible.

        These kind of conceptual errors out there need to be put to reset. MPE assumes that all money is credit, but that is demonstrably false.

        Greenbacker’s would not be for MPE. Greeenbackers wanted their greenbacks to stay in the supply and circulate as a gift to posterity. Unlike MPE credit, they did not disappear, making the supply contract. Go to Name’s Yamaguchy site and read up on the real Greenback movement.


          Is this Montagne also somebody –like Henry Liu & Byron Dale– who looks for fabricated quotes to underpin his theory ? Or, does he invent religious dogma based on fake quotes ? Does he have credit card, bank-book and silver coins, like Migchels and Larry the DrKrbyLuv ?

          Submitted by Larry leech on Tue, 12/13/2011 – 11:50.

          Gold and silver coins would continue to be used to store wealth as they are now. And people would continue to buy gold and silver bars and bullion to store larger amounts of money

          Submitted by Larry the leech on Tue, 12/13/2011 – 17:26.

          I mentioned earlier that I personally own precious metals to protect the value of my money.

          • ohohoh Name! you know I don’t have a credit card or coins! And I never said people should not have some coins, quite the opposite. If you want to make a bundle and call it ‘storing wealth’ than nothing will beat Gold.

            And I can’t operate without a bankaccount, but I’m making sure I use it to do more damage to them than they have fun from my continuous zero balance!!

          • >>>>And I never said people should not have some coins
            I know, and that is exactly what i am driving at; on this blog, in the gessel money article, in response to my question you stated that that is exactly what people should do: run with their gesell notes to the nearest stock market or coin dealer and purchase stock or coin (which will not expire as those notes).

            Somehow you are unable and unwilling to see the inconsistency in this preaching.

            Worse than this is what your kind and kindred, LarryLX, said on the Daily Paul forum, in an attempt to debunk gold standard; and he does not realize the contradiction in his talking agains gold with gold in his pocket. But not only that, on this blog many of you say that money is not (or should not be) the store of wealth, yet Larry wants to protect the value of my money.

            It is the principle of the thing; your mentor, B.S., also: the last time I saw he advertised GoldLine Investment on his forum; has he no shame ?

            If ye preach that the most worthless paper is the best paper, ye should lie in the bed ye make

          • name789 wrote: “…and he does not realize the contradiction in his talking agains gold with gold in his pocket.”

            You cited a post of mine from 2010 I think, and yes, I’m pleased to say that I owned some allocated gold at that time. It worked out well.

            I see gold as a speculative investment and a tangible asset; e.g. allocated or physical possession of gold is safer than having your money act as some one else s liability. It speculative because it goes up and down in value.

            Money held in a brokerage account or deposited in a bank, are liabilities to the holding concern. And BTW, there are other creditors with more senior claims, like other banks. Check out M F Global or bank deposits in Cyprus.

            Money shouldn’t be valued by a speculative commodity where it will be gamed, which is one reason I am against using gold as money. Speculative commodities; like gold, are poor forms of money. And why limit the amount of money by the volume of gold?

            During the past 12 months, gold went from a high of $1790 to $1448 (today closing) – that is a 20% decrease (20% inflation!). Your gold money isn’t so stable after all.

            You favor gold money so please provide us with some logical explanation as to why it should be and stop clouding the issue with huff and puff.

          • How could I say it any better than republicae ? you wiped the floor with yourself when he asked you to back up the ideas you parotted from Lucy Liu and others.
            Your last 3-4 posts on this blog went up in smoke for the exact same reason: you (and Brown) are just bird that can pronounce words, without understanding any of them

            Submitted by Republicae on Fri, 12/16/2011 – 23:27.

            Again, you are doing the same thing, you avoid making any pertinent comment and rather go off on some rant that doesn’t even corespond, amazing proof that you are so insecure with your knowledge on the subject that you use the tactic of deflection to cover your lack of understanding !

            You are great support of my contention that this groupie movement is made up of individuals sorely lacking knowledge, critical thinking, ability to reason

            the source of your finagled wisdom

          • REN permalink

            May I interject here? During the Greenback Era there were bearer notes (money) types such as: Gold, Silver, Greenbacks, National Bank Notes, and State Bank Notes.

            Gold was used for international trade. Silver was used domestically, and as well drained toward India and Japan. National Bank Notes were traded for a bond at 90%. For example a capitalist would give $1M of money, gold or silver usually to the subtreasury, and he would get back $900,000 in new National Bank notes. The banks would then issue the notes in exchange for property, and as well, get 6% from the taxpayers for his bond. Pretty good deal, as the national notes are now backed by property, and additionally his bond earns usury via the tax system. State Banks still issued their BM credit money that came off of the double entry ledger, and hence would return to that ledger. So, BM lost power as you moved away from private state banks geographically. It was “rag” paper money, what I call Bank Money. Greenbacks were issued as bearer notes without any interest. Greenbacks were a division of the commonwealth as they were issued from the Treasury. Greenbacks intermediated bank money as they flowed in the reserve loops of banks. Greenbacks were limited to domestic circuits as the bankers blocked it for buying foreign goods. Gold and Silver money also intermediated Bank Money, which is why the founders wanted specie to flow in the system.

            Think about it. For a double entry ledger system to work, bankers have to intermediate their imbalances across the system. Specie was the mechanism for doing that. This put specie into velocity movement as bankers needed it to settle imbalances. Greenbacks also floated in the same way as specie and behaved similarly. The government ran a surplus budget, and spent surplus specie into the economy. Taxing Greenbacks and Gold (import levies) out of the money supply, and then re spending put specie into velocity. The national bankers did not like Greenbacks draining from their reserve loops, because at the time fractional reserve still sort of worked. The bankers did not like that Greenbacks had control over their private system.

            Any money system predicates its output. You have to look at the system at the time, and then discern the money types, and flow paths. Gold and silver can be made to work. In Venice it worked for many hundreds of years. Gold and Silver in a bad system can also be made to put humans into debt peonage. The system design is critical. Prior to this era, much silver and gold dug up in the ground, found its way from the West Coast to Europe, and then the British Vampire sucked it up. This is how the London Gold Exchange came about, even though “England” is Gold poor. Yes, I know that few historians have adequately described the money systems, because they don’t fully understand money. I don’t get it fully myself. To my mind, floating intangible money can be made very powerful and put to service for the common good.

          • Greenbacks never had a fair chance as the bankers sabotaged them shortly after they were introduced. They lobbied congress to put onerous restrictions on the greenback by making them unsuitable for the payment of taxes and the national debt. They couldn’t compete with gold backed currencies and were bought up and shorted by selling them to the treasury at parity with goldbacked money. They were also unfairly blamed for the resulting inflation.

          • The subject of greenbacks have been thouroughly discussed here:–

            The fact is: it was the bankers who wanted the legal-tender clause.

            The legislative history of the United States notes is here:–

          • I disagreed with Anthony’s article there and i will disagree here for the benefit of those that have never heard about the real reason why greenbacks failed.

            Your notion of a “fact” not only defies logic and reason, but common sense as well. Why would the bankers want a currency from which they could derive no profit and economic control? Gold gives them both in spades.

        • Greenbacker84 permalink

          Im fully aware of the discerpencies between GBs/MPE. They are totally differant. The name just stuck thats all. I cretainly prefer it to the currenct system anyway.

          Yes money should and can circulate, but it also needs to be retired over its natural lifespan. Its a matter of creation and then retiring principal (alone). If you dont you haven’t solved inflation/deflation.

          MPE means never too much or too little in circulation; just as much as WE, the people desire to have to support our industry and commerce. All money is issued via our promissory contracts, backed by our labour and production. I dont believe in a banking commitee or beaurocrats setting artificial rates of control of the supply.

          Again, why ‘gift’ the money, when we can, and should issue the contracts/currency ourselves?

          • REN permalink

            Because your credit as money circulates in the supply for the credit period, hence causing supply volume to cycle up and down. MPE doesn’t have a handle on this, or hasn’t even considered it?

            Why would you bloodlet a body, and then try to re-infuse it with new credit money. Also, the re-infusion is a function of whether or not humans want to take out new loans.

            The circulating medium needs to be under pressure to flow, it needs a pump, and it shouldn’t be bloodlet, it should be recirculated.

          • Greenbacker84 permalink

            I don’t know why your talking about blood letting here.
            Its the issuance of promissory contracts, and then retiring the principal.
            There is enough money is MPE to sustain commerce to our full desire.
            Money certainly does circulate in MPE. The money is issued to the true creditor when you buy a home and they can spend as they see fit, just like today. Currency will circulate over and over again. However the person issuing the contract will retire principal to defeat circulatory inflation.
            Money we earn from work, can be spent as we see fit. We don’t need to penny pinch other people accounts to force money into circulation.

            MPE allows people, companies, and government to issue their money free of money changer laundering and interest. The principal payments are a fraction of what we have today and purchasing power many many times higher, without income tax price inflation caused by interest.

  14. Social Credit does not advocate full reserve banking. Can you please provide a reference of anything that C.H. Douglas wrote where he advocated full reserve banking?

    • Social Credit is Salvation Through Deflation

      Oh dear, they will not like you on this blog; reduction of currency is considered foul language around here.
      The only thing Migchels knows (and likes) of social credit is the prosperity notes which lose 52% by the end of the year

      similarly, by the term greenback he is not referring to 19th century advocates of treasury notes (who wanted the complete prohibition of bank paper), but to present day groupies

      social credit papers:

      • I’m not sure if they’ll like me here or not, but most money is not currency. The vast majority of money is credit created by banks through loans to businesses and individuals.

        Social Credit policy creates an increase in purchasing power for all individuals and a decrease in prices.

        • I should have put smiley face along that comment

          Anyhow, on second thought, i take back my remark; you will be loved here:

          Fortunately, there is a solution, and it’s the only mathematically viable solution. The solution is reduce prices at the point of retail with monies with no cost attached to them. If money passes through the productive system, it has to have a cost attached to it, but if the money is given directly to the consumer it does not. Prices can be reduced to the consumer via a price rebate distributed with debt/cost free money given to the consumer. For instance, if the price of the good or service is $100 and the rebate to the consumer is $25, then the price of the good/service has been reduced by $25 to $75. The retailer receives $100 and the consumer pays $75 – the difference is made up via the creation of new debt free money.

          are you member of Alberta Social Credit party ?

          • I’m not sure whether I will be loved here, but I do not believe there is a need for full reserve banking, and I certainly don’t believe that loans should be issued “interest free”.

            Douglas demonstrated in his A+B theorem that prices always increase faster than incomes. This forces nations to pursue a policy of economic growth, and it also makes it a mathematical impossiblity to balance all budgets in the economy simultaneously, which causes exponentially increasing growth.

            Douglas also proposed that the real cost of production is consumption over an equivalent period of time (as opposed to the goofy theory of orthodox economics that real costs are “opportunity costs). Since consumption is always less than potential production in industrialized societies, prices can be reduced at the point of retail by the ratio of consumption/production in order to equate real costs with finacial prices. This is done by introducing a price rebate mechanism at the point of retail (the mechanism which you quote from my blog).

            To answer your question about the “Social Credit” Party, I have had some relationships with the ASCP in the past (I was a party VP), but left the “Social Credit” Party when I realized that it had nothing to do with actual Social Credit. Douglas was quite opposed to the political party route to promoting Social Credit, and in fact, Social Credit would seek to eliminate all political parties (ie. every candidate should run as an independent).

            The article at Wikipedia is a good introduction to the subject:


            I wrote most of it, and believe it touches on all the key elements.

          • *correction, I said the inability to balance all budgets in an economy simultaneously causes exponentially increasing growth, but what I meant to say is that it causes exponentially increasing debt.

    • REN permalink

      SCD is really floating money, similar to greenbacks. They stay in the supply and circulate. With demurrage, the unit is held stable. The holding tax is applied to the “holder” not the unit. Demurrage tax makes the accounting unit, called money, come up to par. Therefore, prices stay stable for long periods of time. The size and shape of the unit is filled to par, making t;he unit constant.

      SCD is NOT inflationary, as inflation taxes are a bad way to manage the economy. Inflation causes confusion on prices, so the market cannot work well. The idea is to have the market signal prices properly, so market economics begins to work for labor, not usury capitalists. Think of it like a nervous system that suddenly starts to signal well, and the body shakes off an illness. It is not capitalism as we know it.

      There is no reduction of currency volume. Velocity is held to maximum by the tax, and hence volume can be easily controlled to the needs of producers. Most saved wealth will be money converted to owning shares in businesses or physical goods. Need more volume, inject money into the base of the population so they can spend it to match goods and services production. Decrease volume? The monetary authority doesn’t recycle the demurrage tax (maybe 3 percent). Need to decrease volume more? Issue a T bill or bond at zero percent.

      We are not talking about social credit in the sense of Major Douglas. All new money should be injected into the base of the population, so they get first seigniorage. Recycled demurrage will also inject into the base of the population.

      • What is SCD?

        • REN permalink

          Good question. It is unfair to the readers that I discuss a system they have no familiarity with. We will try and rectify that.

  15. Natasha Thoday: Full reserve reform is a stepping stone. In Positive Money’s version of Full Reserve reform, pre emission usury is outlawed. In the UK this is (at least) £60billion/year
    Jct: Full reserve banking is short-circuited when people have interest-free bank accounts. Who would borrow your old savings chips when they can get their own chips at the casino cage interest-free? Who needs to borrow any one else’s chips when they can get their own at the cage? Ergo, the Positive Money crew have no intention of offering interest-free loans to people, just to the state, and then the middlemen banks can loanshark out that money to the people like a 100% full reserve piggy bank. Get it, free the government from the loansharks but not the debt slaves. That’s why you want neutral money, chips, not positive money you’re still forced to borrow from loanshark banks! Positive Money turns out pretty Negative!
    Same with Stephen Zarlenga’s American Money Institute who want to free the government but not the people from the middlemen banks. Put it this way, when you hear any reformer say that full reserve piggy banking is part of their package, then you know their customers will be the debt slaves who can’t get interest-free credit at the top themselves. “Full reserve” reformers are traitors to the debt slaves.
    So think of UNILETS extending interest-free credit to everyone as the vast solution and AMI Positive Money to only the government but not the people as the half-vast solution!

    • Greenbacker84 permalink

      Positive Money are another bunch of pretenders evading compound interest and the issuance of our promissory notes. Its funny how much publicity they get when ultimately they change NOTHING for the average guy.

  16. Jct wrote: “Full reserve banking is short-circuited when people have interest-free bank accounts. Who would borrow your old savings chips when they can get their own chips at the casino cage interest-free? Who needs to borrow any one else’s chips when they can get their own at the cage?”

    Well said, everyone should have equal access to new money as a human rights issue. New money is ALWAYS needed in a debt based money system (even 0%); it is in a zero sum economy (debt = money and when the debt goes away, so does the money; all money is temporary). Why shouldn’t the people have the ability to add new money at 0%? Add interest and the system becomes unsustainable as the money is rented instead of borrowed. Zero reserve banking has a nation and its people rent their money supply when they may create it for free.

    usurykills wrote:

    “Convolution and obfuscation are the tools of usurers. MPE(tm) is simple:

    1) Zero interest, ever (by law)
    2) Loan to value over the lifetime of collateral
    3) National credit source (not private bank)

    A $100,000 new house should be paid off over 100 years at $1,000 per year ($83.34 per month.)

    The honest answer is real simple but it doesn’t let anyone rip other people off so few like it.”

    I sure agree with your position that 0% interest for the people would be a major step forward for humanity.

    One thing that I don’t understand about MPE is the insistence that the duration of the loan should match the depreciation of the underlying asset (“Loan to value over the lifetime of collateral”- see above).

    Mike uses a mortgage example for a $100,000 home that has a payment of $83.33/month. This would be a 100 year mortgage at 0%. The thinking is (I think) that the home should last 100 years and so it should be depreciated of that time period. So, in this example, the duration of the loan is equal to the depreciation schedule.

    It seems as though many cannot resist making 0% loans more complicated than is needed. Granted, 0% loans are ultimately needed for a truly sustainable and equitable economy but let’s keep it as simple as possible.

    The MPE mortgage of 100 years will surely exceed the life expectancy (and working span) of most borrowers. How can anyone hope to fulfill such a lengthy payment schedule? Why not limit mortgages to a more reasonable period of 10 to 30 years? And… if the home included property; that too seems to be deprecated though in reality, it may not.

    I think we already know how to qualify people for loans – we just need to apply our experience to provide 0% loans. The big difference with 0% loans is that the lender is compensated through fees and billable services instead of interest – just like any other business. And, if needed and supported by collateral; the costs of the loan may also be paid for with newly created money.

    • Greenbacker84 permalink

      MPE allows for the home to be retired sooner, if the buyer wishes to do so. However then the monthly payments are higher. People can of course save up the full amount if they desire as well, but that takes alot longer and you’ll be paying rent to a landlord meantime.

      Also as we are not ‘borrowing’ in MPE but issuing our promissory contracts there are no fees or lenders required whatsoever. If someone insists on still going to a bank to charge them interest and claim ownership of their home, there is no law outlawing stupidity.

      MPE is far simpler than mortgages today. No bank. no fees, no deposit, no interest, no multiplication of debt. Just the obligatory schedule of payments to retire principal.

      Check these out

      The root of all money

      The banks first 3 crimes against us

      Usury banking vs MPE Illustration

      This ones for you too Anthony 🙂


      • Greenbacker84 “Also as we are not ‘borrowing’ in MPE but issuing our promissory contracts there are no fees or lenders required whatsoever.”

        0% loan requires, like any other, require due diligence by those approving and processing a loan. The borrower should be checked to estimate their ability to repay the loan and they should meet established standards (e.g. debt-to-income ratios). It would do no good to lend a borrower more than they can repay.

        If the money is being borrowed with a new, underlying asset serving as collateral (e.g.home mortgage); then the real estate should be appraised and the deed should checked to make sure it is clear.

        These prudent actions are not free. Money, manpower and some management are needed and it seems fair to charge these costs to the borrower. If the collateral is adequate, then the borrower should also be able to borrow the costs and have new money created for that purpose.

        We already know how to qualify borrowers and how to issue loans. We just need to change the banking/lender model so that they profit like many other business – through fees and services instead of interest.

        • Greenbacker84 permalink


          Yes absolutely due diligence is required, and MPE ascertains credit worthyness. Yes we have the ability to do so today, and we would do the same with MPE.

          Secondly we are not ‘lending’ money, we are issuing money, as obligors, and retiring principal. The CMI is a PUBLISHER, or OUR promissory notes/contracts. Today, people issue promissory notes, the bank is a pretend lender republishing our own promissory contracts.

          MPE is non-profit accounting software. Very minimal cost. There is no need for a third party interloper (bank/money changer) to launder our contracts, claim debt to themselves, and charge additional fees/deposits etc.

          The BANKS are the fraudsters here, they are lending our own money back to us. We have no reason whatsoever to have our promissory notes laundered by exploiters and money changers.

  17. REN permalink

    Everybody focuses on their narrow positons, but misses the big picture. Turmel: Create enough chips like in a Casino. Answer: Casino chips are a promis to receive in Federal Reserve Notes, hence their value is held by what is received. This is why Casino’s can match each other in chip value. Casino chips are a small fraction relative to the mass of Federal Reserve notes, so it appears that you can make a lot of them. No, you cannot just push money into a real economy, because ultimately volume needs to match goods and services…our labor output is fairly constant with some seasonal variation.

    Moutain Hours. Yes, fine…but you need some way to recall money and also to give it motive force. When the stadium gets full, any more tickets issued is not a new seat. If the stadium shrinks (less goods and services, which happens cyclically in any economy), the money supply must shrink or you get inflation. Can you grow your network at the same rate you issue new time tickets?

    Asset money, like MPE and BIBO, inflates and decreases the supply in an uncontrolled way. People want to work in a regular way, so there is a mismatch. Do a simple thought experiment: A house is put through the function generator, and is liquified into money. The original owner of the house is now paid. What does he do with the money? He spends it INTO THE SUPPLY! This causes the PUBLIC supply to jump up and down in volume. Yes, the new owner of the home is now confined to MPE “law” but so what? The former money created as an asset is now set free to cycle in the supply for x amount of time, until it is recalled by new owner to pay the loan. So, asset money is under pressure to move into the ledger…that’s good as it has motive force. But, asset money disappears and won’t refill under extenuating circumstances. You cannot push on a string. You cannot countercyle spend with asset money. MPE and BIBO would last about a month in a real national economy. They are ok for small circuits, confined to their network.

    100% reserve works if the money type is money, but not if money type is credit.

    • I agree. MPE and most others into interest-free (mutual) credit don’t get this, but they don’t have volume under control.

      It is insufficient to say it’s all backed by assets. Once the credit starts to circulate it becomes money.

      The simple fact is this:
      We have a credit based economy now. People (in good times) can create credit (albeit usurious) as much as they like and use their home as backing. What happens? Booms. Inflation.

      Until the banks put a stop to it and drive them all in bankruptcy, creating a deflationary crash.

      The same would happen with uncontrolled volume in Interest-Free credit.

      This is a serious issue and the interest-free crediters are wrong about this.
      Volume in interest-free credit must be managed, just as with usurious credit (but not by ghouls, of course). The available amount of credit (as expressed by the necessary supply of money) must be divided equitably amongst the people. A decent formula for this must be devised and can easily be devised.

      In the economy the demand for credit is greater than the need for money (the means of exchange). The credit that we need more can be made available interest-free through JAK banking.

      High risk ventures can be financed through brokerages, which are like Islamic Banking.

      • Anthony Migchels: People (in good times) can create credit (albeit usurious) as much as they like and use their home as backing. What happens? Booms. Inflation.The same would happen with uncontrolled volume in Interest-Free credit. .
        Jct: And yet the same does not happen with uncontrolled interest-free credit. Casino banks have completely uncontrolled volume of interest-free credit for all the collateral you can come up with, completely out of the cashier’s control, and though there are booms where lots of gamblers buy in for lots of chips, there are non-booms where many cash out to go home. But never inflation. Each chip, like a receipt, is backed up by the collateral. So anyway, wrong about uncontrolled interest-free chips causing shift a inflation.

        • REN permalink

          Current double entry ledger private banks are Casino, and they definately cause asset inflation. Somebody walks into the bank, becomes hypothecated for their credit. Their asset attaches to the ledger, and bank money (BM) is created. That BM then flies into the public money supply, creating short term demand inflation (e.g. 1990’s) against all goods and services. In the short term, more money chases relatively fixed housing, and you have an asset bubble. The government then balances their budget on the back of private credit debt growth!

          The last 20 years are proof enough that “credit” can cause inflating assets. Later, because the home is not supported by real productivity increases, the population goes into a balance sheet recession. They cannot support the higher percentage flows out of their pocket that vector into the bank as BOTH payments and usury. It is way more than just assets going to zero with money being recalled. There is a temporal dimension to asset money as it surges into the supply or retracts in an unwanted way. Already 70% of the money supply is based on real estate, when everybody uses money from the supply. The FIRE (finance insurance and real estate) sector has teamed up with private banks to liquidate assets into credit against real estate and insurance. Any asset driven money supply will have to deal with many distortions.

          The Weimar hyperinflation were because Marks couldn’t make the exchange rate (due to triangular debts of Versaille treaty). Newly privatized banks – YES it was private banks! creating a pipleine of credit, mostly against the dollar, in order to short the Mark.

        • Well, that’s the whole point, isn’t it John. Should people be able to stake the house at the casino, major problems would arise.

          But the casino chips are backed 1 to 1 by dollars. So the scarcity of dollars guarantees the scarcity of chips.

          • Should people be able to stake the house at the casino, major problems would arise.
            Jct: Should people be allowed to stake the house at the bank, major problems arise because of the interest. But staking the house to the casino for interest-free chips has no problems.
            AM: But the casino chips are backed 1 to 1 by dollars. So the scarcity of dollars guarantees the scarcity of chips.
            Jct: No Anthony, timebank credits are not linked to the dollar and therefore LETS runs out of chips because of scarce money. The national unit is linked to the Hour, not the other way around. LETS is linked to the hour of value, not to the dollar. How can you be so wrong?

          • REN permalink

            If I’m not mistaken, you have conflated two money types. Casino banks issue money based on assets, and when the loan is paid off the money type disappears from the supply. If you issue credit, and let it stay in the supply it becomes floating money. If you allow money to pump in the supply in great volume, pretty soon you have outstripped the labor energy and extraction ability of the economy.

            If we issued a greenback and it was still floating in the supply today, is it linked to some sort of mythical hour of value? It took seigniorage on the supply about 150 years ago, and since then has been an abstract tool for settling transactions. That greenback is no longer credit, it is not debt, and it is not a “time” instrument.

            How about a Chinese bank who forgives loans? The former credit as money is no longer vectoring back to the ledger, and instead now has a path to float. It can be recalled with taxes, but not into a bank ledger. And this, by the way, is one of the secrets to Chinese economic success. They don’t let too much credit, and hence associated debt, drive their economy.

            So, please define the money type: Mountain hours for example, are issued relative to labor, and stay in the supply. Therefore, they behave as floating money. Casino banks, if I understand correctly, recall the money upon loan paydown. These are two vastly different characteristics.

            A Vegas type Casino, who issues chips, is definitely linked to Federal Reserve notes.

            Lets are a floating money type, hence they cannot be issued willy nilly, the volume needs to be controlled. They will float to do transactions over and over. Does LETs tax to have a knob for reducing volume and inducing velocity? If not, it would be defective when applied to a national economy.

      • Greenbacker84 permalink

        Anthony, how is using ‘Islamic’ banking or JAK bank better than us issuing our promissory obligations ourselves with MPE? Any enterprise, free to make the choice would issue the money itself with MPE and NOT share the profits with a third party exploiter.

        We create money, its a product of our labour and production, not any bank. We never have volumetric inflation under usury, the supply is perpetually deflationary as its paying a multiplication of interest plus principal. The state has to artificially reflate circulation with more borrowing to prevent collapse, but of course its to support the banks again.
        The price inflation we see is caused again by interest.

        The ‘boom’ is still a process of exploitation of promissory notes by banks, subject to interest’. The recession is the inevitable result of multiplication of interest debt beyond our ability to service it.

        MPE totally negates this, removes the root cause. It kills the banking system outright. Both JAK/Islamic banks are still banks claiming to lend us our own contracts backed by our own labour. On the one hand I have Ren saying we’re bleeding ‘too much’ money out, in the next its ‘not controlled’ and inflationary? I dont think the goal of monetary reform should be to control, manipulate and direct our purchasing power, when sellers are duly paid for giving up property. The newly issed money is retired, at source, by the obligor. The volume of money issued in MPE ablsolutely matches the level of commerce we decide on, why add redundant costs and complexities?

        The price of homes/assets is decided by people/companies etc (the market). However the problem is not cost alone, its the schedule of payments, to a faux creditor, with interest.

  18. REN permalink

    MPE credit creation and subsequent destruction allows unwanted positive feedback.

    Positive Feedback makes any system go into oscillation. Credit money floods into the supply, making asset inflation. The market signals “UP” and this feeds back to MPE function generator. People are driven to make more money, driving more false asset inflation. Note, this feedback mechanism does not have time for usury to work its magic. This positive feedback mechanism is overlooked by the MPE crowd. Recent housing bubbles used this mechanism, and in the short term, usury didn’t have time to work its cancer.

    The market is not magic. The market can be pushed by money creation, and credit money is especially risky when applied to real estate. Real estate does not follow supply and demand curves, so asset inflation occurs more easily in this domain. MPE is mostly concerned with real estate and housing.

    Just claiming a certain depreciation ratio in MPE models will not work when the market is signaling otherwise. The market needs good money to work properly and signal properly. MPE credit as money does go into the public money supply – this point is a fact. MPE is not confined to certain channels. Therefore its uncontrolled creation can distort what we use as the circulating medium. People will clam up and not take out new loans when there is a disaster, creating a downward spiral as money disappears upon loan pay-down. People will take out more loans when the market falsely signals up, creating a unwanted positive feedback spiral.

    Mutual credit is different. A house can be used as collateral, and then the money assigned to that collateral, can then circulate. It can circulate forever if the collateral stays in place.

  19. Ross N. permalink

    Huber now has an approach where full reserve banking, what he calls a split circuit, can be done.

    The approach requires these elements:

    1. Redefine the purpose of reserves
    2. Increase fractional minimum reserves up to the level of 100% deposit reserves and ensure 100% proprietary reserves on banks’ payments for own account
    3. Exclude deposits in M2/M3 from reserve requirements
    4. Treat reserves as if they were the property of customers
    5. Synchronize demand deposits and 100% deposit reserves.

    Note that M2 and M3 are excluded, as they are already deactived credit, and don’t need backing.

    A split circuit system is sub-opitmal. It is better to just convert the system to all sovereign money. The average laboring sheeple thinks their money is lawful sovereign money anyway (they would be wrong). A split circuit has treasury money units in the reserve banker circuit. The other circuit is what we use i.e. credit as money issued by bankers during loan hypothecation.

    • John Cummings permalink

      lol on the jews. they love gold back reserves and then call in the loans for deflation. Destroy countries, build plutocracies.

  20. ralph47 permalink

    So Anthony Migchels wants interest free loans. There’s a teensy problem with that idea: I’ve asked loads of opponents of usury for an interest free loan, and what do you know? They’ve all refused.


    • If the debt slaves did some actual thinking, instead of being smart asses, they would quickly realize they have a common need for credit, and they would start pooling their savings.

      That is, if they were of only average intelligence. The really smart ones, would figure out that money is just bookkeeping, and that the only reason we pay the bookkeepers interest, is because we have been asleep at the wheel for 5000 years now.

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