Banking and Debt
But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” Sir Josiah Stamp, former director of the Bank of England
Rowbotham (The Grip of Death,1998) demonstrates, using the UK’s economic experience, that accepted banking practices are crippling the world with debt. Stockman (2016; ibid) provides an insider American’s perspective on banking:
“…the U.S. banking sector is vastly bloated, inefficient, unstable and destructive owing to a government policy regime that subsidizes and privileges banks… Accordingly there is monumental overinvestment and malinivestments in the banking system.”
As we saw earlier, banks do not lend deposits, they simply create new credit as debt out of thin air. We are thus left with an iniquitous situation where all money comes into existence as an interest bearing debt (credit) from private banking interests and little cost to them. Because they charge interest they take in more money than they lend out so the system is constantly starved for money as new money can only come into being via new loans. Government sanctioned quantitative easing and deficit budgeting compounds this iniquity. The banks and global corporates have gorged themselves on government defcit spending and central banking’s creation of money. It is also supposed to encourage private sector borrowing under the ghostly imprimatur of Keynesian economics. It worked and now the western world has leveraged itself up to its eyeballs. Apart from the monstrous wealth inequalities this creates it also leaves the host nations under this parasitic system mired in systemic debt. Here are a few of Rowbotham’s examples:
· In 1963 total domestic debt in the UK was £9 billion. Thirty-four years later it was £780 billion.
· Over the same period the UK’s domestic debt increased beyond its entire stock of money in circulation.
· Between 1960 and 1996 the number of home owners with a mortgage rose from less than 20% to 37%, with the amount of money in mortgages rising from £3.5 billion to £409 billion.
Mortgage costs in the UK eat into disposable income three times more so than in 1963.
· Between 1963 and 1996, personal debt, commercial debt and other financial institutional debt rose from £8.2 billion to £788 billion. Personal debt alone accounted for 70% of GDP (Gross Domestic Product).
· The net income of UK farmers almost halved between 1978 and 1992 while their interest charges on debt increased by 44%.
Increases in indebtedness are replicated across the Western world and thanks to IMF and World Bank practices the Third World has also been mired in debt. By 2011 the meteoric rise in debt, following the doubling time principle, outlined earlier, has become glaringly obvious. The private personal debt of Americans has now hit 14.3 Trillion (Stockman, 2016), while medium household income has dropped by 21% since 1987. Lately, Greece, Italy and Ireland have tottered on the edge of insolvency closely followed by Portugal and Spain. The UK has had to adopt some stringent cost cutting measures to hold the line against its total debt burden. Even as I write the U.S.A. is days away from defaulting on its huge federal debt and will no doubt capitulate by raising its debt ceiling. Under both the Bush and Obama administrations the national debt has been rising exponentially. Globally, the total (unrepayable) debt, from printing fiat money out of nothing and with no pegged-to gold standard, has risen meteorically to $225 trillion. This madness has created deflationary pressures and condemned the West to sluggish, or no growth, at best.
All of this debt is entirely unnecessary. Let me repeat; banks do not lend deposits and make their profits by pocketing the difference between lender and borrower interest rates. They claim this is how it is done. The truth is, when making a loan, banks create the credit out of nothing. Just about all money comes into existence as an interest bearing debt. Interest bearing debt subjects the borrower to the doubling time principle. Modern banking does not rely on a gold standard and it is not subject any longer to issuing credit on a reserve asset ratio. It is simply a book entry and an almost costless exercise. For that they exact interest that reaps huge gains for private banks while saddling nations with an unnecessary and equally huge burden of public and private debt. Thanks to the exacting of usury (interest) an average borrower can end up paying a bank 2-3 times the value of the original loan. Note also that the so called central banks, like the Bank of England and the Federal Reserve are not government institutions. They are operated by private banking interests.
To make matters even worse banks play with their ill-gotten gains by investing in stocks, bonds and other risk-laden money market schemes, like the derivatives market. Little money trickles down to ordinary consumers and producers. The banks and financial institutions get very wealthy while loading the whole economy with unnecessary volatility and risk. Then they and their political lackeys claim the banks are too important to fail and use taxpayers money to bail out those banks that exploit this crazy system to the point where they fail – as key players did in 2008-9. Central banking’s near to or sub-zero interest rate policies has robbed the ordinary person of any gain on deposits, to the point where many are choosing to hold their wealth in cash outside the banking system. To counter this central bankers are talking about eliminating cash.
This system is not etched in stone. It is not governed by the rules of nature or physics. It is simply a contrived artefact of tyranny, greed and the will to power. It can be changed at any time. In 1947 that is what happened in Germany where all debt was cancelled overnight to give all Germans a clean slate re-start. The Weimer republic in 1920s Germany did much the same thing. All that is needed to rid the world of ever rising debt, following the repudiation (default) of all banking debt, is to lift the creation of credit from the private banking corporations and vest the responsibility in suitable independent, not for profit, public authorities. Credit would then be created without interest, with the money being cancelled out of existence as it is repaid. This public banking approach is now being flagged by bankers as ‘unfair competition’, against which they are lobbying for legal sanctions. The credit for interest rort is perhaps the worst kept secret and yet the most widely ignored fact of human history. Rather than accepting my word for this staggering reality I will hand over to a number of well-known figures, whose first-hand knowledge of this issue cannot be impugned:
“The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums in interest, discounts, and exchanges. Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.” USA President Abraham Lincoln.
"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." USA President Thomas Jefferson.
“I sincerely believe that banking institutions are more dangerous than standing armies.” USA President Thomas Jefferson.
“Although we have so foolishly allowed the (power of issuing our own debt free money) to be filched from us by private individuals, I think we may recover it…The states should be asked to transfer the right of issuing paper to congress in perpetuity.” USA President Thomas Jefferson.
“Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence…would be more formidable and dangerous than a military power of the enemy.” President Andrew Jackson (1832).
“I fear that foreign bankers with their torturous tricks will entirely control the exuberant riches of America and use it systematically to corrupt modern civilisation. They will not hesitate to plunge the whole (world) into wars and chaos in order that the earth should become their inheritance.” Prussian President Otto von Bismarck, on hearing of President Lincoln’s assassination.
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” Sir Josiah Stamp, Director of the Bank of England (appointed 1928).
"Those who create and issue money and credit direct the policies of government and hold in the hollow of their hands the destiny of the people." Reginald McKenna, (1863-1943) British Chancellor of the Exchequer.
(On the banking system) “The few who understand the system will be either so interested in its profits or so dependent upon its favours that there will be no opposition from that class while, the great body of people, mentally incapable of comprehending… will bear its burdens without complaint.” A private communication from the Rothschild Brothers of London to an associate banking firm in New York, June 25, 1863.
“Let me issue and control the nation’s currency and I care not who makes its laws.” European banker Amschel Rothschild, 1791.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes.
“The supply of money is controlled by central banks, which raise and lower interest rates to either stimulate or depress borrowing. This system is crude, has had no effect on rising indebtedness and would be unnecessary if usury free credit creation was vested in a public body. It also has the effect, when used to depress markets, of unjustly penalising people with existing debt.” (Rowbotham, p. 27).
It is fascinating that this corporatist racket is both so obvious, so passively accepted and so reliant on rank ignorance. Under the Judeo-Christian tradition the taking of interest, other than from one’s national enemies, was strictly forbidden, even at only one percent. Imagine a world where credit was issued as a socially responsible activity, for the public’s benefit as an interest free loan. What might the world have been like had massive debts not accrued across the world. For one thing the corporate sector and certain individuals would never have amassed so much unnecessary wealth and consequential power. It is a human tragedy right up there with any genocidal episode you might like to consider. Add the banking sectors pre-occupation with the many stock and money market rackets to this mix and the reason for the massive global inequalities become apparent. Despite that the Toynbee blighted population of the western world go on accepting it all. The Church, if it had paid some heed to its Bible, might have sounded the alarm and fought for economic justice, but they have remained as ignorant and mute as everyone else.
But it gets much worse because the role played by central banking has to be taken into account. It is almost universally assumed central banks, tasked with fiscal regulation, are publicly owned when they are in fact largely privately run institutions designed to use Keynesian principles to stimulate economies, only it does not work. The idea is that you print money, keep interest rates low so Jill and Jack Blow will borrow more to buy things. This is supposed to stimulate the economy with more business activity and more jobs so the whole economy bubbles along. This has worked, more or less, since the 1960s because a strong middle class had the ability to leverage off savings and other assets to support stimulus debt, but not anymore. Under the banking system I’ve just described debt tends to accumulate until the whole system grinds to a halt. Wall Street insider and whistle-blower David Stockman explodes the Keynesian stimulus myth by showing that the Fed’s quantitative easing (printing extra money) has stimulated no one but Wall Street and corporate elites. He describes as “insane” the growth in credit since 1987 from 8 trillion to 64 trillion. Despite that and the 3.5 trillion in money printing since Obama came to office and the GFC happened Ma and Pa Kettle have added next to no extra borrowings to their wallets for stimulus spending since 2007 (2007 - $14.2 trillion in loans and 2016 - $14.3 trillion), so there has been no stimulating trickle down to them. As Stockman explains the average taxpayer’s ability to take on more debt to stimulate the economy has been well and truly ‘tapped-out’, so pumping more credit for debt into the economy has only been done to further the interests of the already insanely wealthy elite. All quantitative easing has done is encourage the people who can least afford it into more debt while oiling corporate elites with speculative financial market opportunities so they can become even wealthier on the back of government debt, which must be repaid by the taxpayers who are tapped out already. Ergo the rest of the western world.
In Part Four a solution to the current banking and money market regime will be offered. Stockman insists the whole central banking system must be phased out so that national debt is no longer monetised in the hands of corporate financial markets. Free financial markets must be left unfettered to serve the needs of business creators. Speculative ‘bubble finance’ would become a thing of the past. Stockman does not deal with the existing debt problem, which I believe must be written off in the way described in the reform section while a cap is put on wealth accumulation by individuals.
Bear in mind that any nation contemplating the reforms I suggest would be exposed to a sabotaging credit squeeze and a capital flight response by corporates that would need to be anticipated and countered. Hard times might follow but the future advantages would be enormous. To mitigate this almost certain adverse reaction I advocate moving, in the first instance, to a parallel public, interest free, banking system. Other reforms would, over time, eliminate large banks in favour of local building societies and eliminate much that we presently call the money markets. The certain shock of the corporate banking counter-attack would then be softened considerably as local industries and entrepreneurs picked up where the multinational corporates used to be and the new banking system supplied replacement credit.
 Predictably there is no talk of restoring the nation’s right to issue its own credit, free of interest. Instead, the USA government toys with package deals to reduce spending and costs in an effort to ward off an inevitable rise in its self-imposed debt ceiling.
 Ibid, Stockman.
 For an entertaining allegory of our present economic system watch In Time (2011) staring Justin Timberlake. Time, monopolised by a privileged few has replaced money as the world currency. Run out of time and you run out of life. Links are also made to Darwin’s survival of the fittest doctrine.
 The Social Credit Movement, started by C.H. Douglas in England early last century, battled for banking reform. The movement spread across the old British Empire. There were various enquiries and royal commissions, but nothing changed. Economists and bankers mounted an excellent misinformation campaign to obfuscating the whole debate.
 The UK’s Financial Times (10th August 2012) reported that the British Government was considering the formation of a nationally owned bank. This has been tried elsewhere with only limited success because the system of interest bearing debt is retained. Usury has to be abandoned, the credit creation system has to be independent and credit has to be interest free.
 See Ellen Brown’s books, You Tube videos and web-of-debt web site for more on public banks.
 From a letter to John Eppes, 1813, You Tube: The Secret of Oz.
 From the same You Tube clip.
 Lincoln issued debt free money (‘Greenbacks’) during the Civil War. Conspiracy theorists believe he was assassinated because he intended to continue the practice.
 In his book The Economic Consequences of Peace.
 In the Bible’s Book of Nehemiah, Chapter 5, the taking of interest at only 1% is condemned.
 Ibid. Stockman’s recommendations can be found in the Kindle version of his book Trumped at location 1555-66.