Monetary Reform

Money-System Reform would save the Environment!

You may or may not know (and most people don’t know) that we have a debt-based money system, not just in this country but in most countries of the world, 97% of our money supply is issued as an interest-bearing debt owed to the private banking system, whilst only 3% is issued debt-free by the government as notes and coins (seigniorage). The money-supply consisted of around 50% notes and coins (debt-free) money after the War and has steadily decreased as a proportion of the total money-supply to its current level with more and more of the money-supply issued as a debt due largely to the increase in mortgages. It is a corrupt and undemocratic system built on a pyramid scheme, whereby the private banking system create over 97% of our money supply as an interest-bearing debt, they don’t however create the interest and this results in the so-called “business-cycle” of booms and busts, recessions and depressions, as we are in now, as there comes a point when there simply aren’t enough new people or businesses to borrow more and more loans necessary to repay earlier debts!

What is Money Reform?
Money Reform (sometimes called, Monetary Reform) highlights the fact that our economy today is “debt-based”, meaning that virtually all money is supplied into the economy as a debt owed to the private banking system. We are reliant upon this banking system for the supply of almost all our means of exchange. In Britain today, 97% of our money stock is created by this private banking system as a debt, while only 3% is created by the government debt-free. As we explain on this website, that is both a technical absurdity and a democratic offence.
As a consequence of virtually all our money coming into existence as a debt, we see the indebtedness of people, families and countries growing daily. Money Reformers believe the present debt-based system perpetrates debt slavery, and this is destructive of society, the environment and the planet. Money Reformers believe this debt-based money supply is the big issue which governs all the issues.
Money Reformers advocate that the virtual Monopoly of Money Creation must be removed from the private banking system and we work to establish a publicly-created supply of debt-free money, created on behalf of the people, by a public body. This money should be spent, not lent, into society on the basis of proven need. This will gradually reduce the overall burden of debt in society, break reliance upon the private banking system for the supply of money, open potential for change, and empower people democratically. The Money Reformers’ proposal is not a left-wing, or right-wing idea. It’s just good sense!

Who creates it?

If you thought that our government issues our currency, think again. It only issues a tiny, almost negligible, 3% of it.

The remaining 97% came into existence through bank lending. Almost all of the money in circulation exists as a loan, over which the lender retains the right of ownership and which must be paid back, with interest.

Take a look at this simple fact: every country has a national debt. Britain’s, for example, currently stands at a colossal £796.9 billion, (and set to rise to over £1.7 trillion over the next 5 years according to Alistair Darling, Chancellor of the Exchequer). A national debt is essentially what a country’s government has borrowed from private financial institutions like the Bank of England. Without exception, banks are private corporations, owned by private investors for private profit.

Government borrowing is one major route through which money is created and then circulated in the economy.

The other major route is private and commercial borrowing, through mortgages and other forms of credit.

97% of all the money in circulation is borrowed, either by the government or by you and I, only 3% is created by the government free of debt.

Britain is typical of every nation.

But if every national economy on the planet has outstanding debts to the tune of trillions or billions of pounds, where do their creditors find the money to lend?

Where does such a vast sea of money come from?

The answer is: it does not come from anywhere. It does not exist until the moment it is loaned. It is conjured out of thin air!

Banks are not lending money some depositors left in their vaults. When they lend, no depositor’s account is debited.

For instance, the bank lends Joe £5000; Tom does not then receive a letter from his bank manager saying his savings are temporarily unavailable because they have be lent to Joe. It does not work like that, although people have been allowed to believe it does.

So what does go on when Joe is loaned £5000?

What actually happens is that the bank simply enters the figure £5000 in Joe’s account…..And that’s just about it!

No money moves from one account to the other. The transaction is purely and only a ledger entry, the writing of figures in a column, the changing of numbers on a computer screen. In essence the process is the same as a forger printing fivers in his basement and lending them out at interest. Only in this case the government has secretly given the forger carte blanche to do so.

A stab of computer keys and, hey presto, Joe now has the figure of £5000 in his account, which he can spend by writing cheques or changing it for cash at the cashpoint, through direct debits, standing orders or using plastic cards. That £5000 has now entered the economy as money although it did not exist until the moment it was loaned.

But the money thus created is only Joe’s to use temporarily. Like anything that is loaned, the lender still claims ownership of it and in the case of money, a toll is charged for its use – which is what we call interest.

Joe has to pay that money back, plus interest. He does that by working hard to earn it, selling assets or whatever and eventually pays the bank more money than he borrowed, say £6000.

The bank’s effort in creating £5000 out of nothing amounted to entering figures in a column. Joe’s effort in accumulating and handing the bank £5000 involved real work, real production – the creation of wealth – of some kind.

The bank now has £6000 in its vaults where no money existed to begin with. Although the bank gave Joe temporary use of the money it created, that temporary use obscures the fact that ultimately the bank was creating money for itself.

Neat, isn’t it?

This is how all but a minuscule proportion of the money circulating in the economy is created. Although it is often hidden by a smokescreen of complexity and jargonated gobbledegook this is what happens when you, for instance take out a mortgage. The £70,000 you borrow to buy a house is created at the moment it is entered into the seller’s bank account. It did not exist until it was loaned. The £200,000 or whatever that you pay in interest over the next 25 years is what the lender charges you for the use of the money he created by tapping computer keys. And don’t forget: if you fall behind on those interest payments, the lender can repossess your home and wind up owning a £70,000 property into the bargain.

Your mortgage and loan repayments are your share of the burden of supplying money to the economy.

Mind you, that’s not the only millstone you carry. The government pays back its own loans using money taken from the citizenry through taxation. In fact, central banks lend to government on the collateral of taxation levied on the people! So when we say the government pays back the non-existent money it borrowed, what we really mean is you pay.

As this lending mechanism is the way our currency is created and if for every billion that enters circulation, a debt of one billion plus interest is immediately owed, it follows then that the total debt must be more than the total amount issued!

And we discover that more money is owed to the banks than actually exists in circulation. Far more. Britain’s combined debt is just over a trillion pounds, but all the money in circulation only totals about £680 billion.

If all the money owed to the banks were paid off, the entire money supply of the country would disappear into a black hole and there would still be colossal debts.

In other words, we cannot get out of debt. Ever! It is a mathematical impossibility.

Let’s dig further into the basics of this thing.

Money was originally invented by some genius whose identity is lost in antiquity as a convenient alternative to barter, an alternative without which a highly developed civilisation like ours could not exist.

Imagine trying to pay the taxi driver with a bag of coal or the grocery bill with a box of spanners and a set of golf clubs. Imagine trying to carry all that around with you when you go shopping.

So the idea of money was conceived. All money is (or rather should be) is a system of tokens (notes or coins or even symbols) adopted to represent or stand proxy for goods and services. One can then exchange the tokens rather than bags of coal, boxes of spanners or what-have-you and the tokens are easy to carry around. One can then exchange the tokens for actual goods when one wishes to.

That’s just about all money is: a system of tokens that have been adopted and agreed upon by people to represent goods. People have agreed to use it and they have confidence that they will be able to exchange the tokens for goods whenever they wish to.

Whatever value is assigned to the token (one token is equivalent to one bag of sugar, bushel of wheat, tin of sardines or whatever) there have to be enough tokens in circulation for people to be able to exchange among themselves goods and services easily and smoothly. If tokens are scarce relative to the amount of goods and services available to be exchanged, then that exchange cannot easily occur, the producer cannot sell his goods and the consumer does not have enough tokens to express his demand or desire for the goods. That is called deflation.

If there are far too many tokens in circulation for the amount of goods and services available, then the value of the tokens declines and prices rise. There are too many tokens chasing too few goods. That is called inflation.

That’s all there is to it.

Each time new money is created and borrowed into circulation, a debt is created. But as the debt has interest attached to it, it automatically exceeds the amount of new money created. The debt owed by the rest of the economy to the lender increases faster than the supply of money to the economy.

When the debt is paid back, that creates a shortfall of money supply that must be made up – by further borrowing.

The overall indebtedness of the economy to the lending institutions ratchets ever upwards.

That debt is spread throughout the economy amongst all the people within it. It is not necessarily distributed evenly. The portion of that burden borne by some is greater than that borne by others and a lucky few perhaps manage not to carry any. But the point is that indebtedness must be carried by someone, through overdrafts, loans, credit cards or – the biggest slice by far – mortgages.

Everyone of course wants to get out of debt but if the economy’s money is supplied as a debt, then for money to be in circulation someone has to be in debt. For someone to get out of debt someone else has to go into debt!

When the level of indebtedness has reached such astronomic proportions that the total debt is far more than twice the entire money stock, as it is in Britain today, then the entire economy becomes riddled with debt, assailed by a seemingly unstoppable epidemic of borrowing, and it appears impossible for anyone to maintain their standard of living without going slowly but inexorably (or quickly but inexorably) deeper and deeper into debt.

If you want reality on this, try living without debt (no credit cards, mortgage, H.P., deferred payments, loans or overdrafts of any kind) or try setting up and expanding a business without any borrowing and see what happens to your standard of living.

But consider this: one borrows when one is short of money; that is, spending power. When the entire economy is madly borrowing, the entire economy is very, very short of spending power. In other words, there is a huge shortage of money and a vast surfeit of debt!

The existing monetary system has been firmly established for 300 years.

Money’s original purpose, as we have shown, was as a system of tokens to represent or stand proxy for goods and services. Were it is issued to a nation by that nation’s government debt-free, that is precisely what it would do; it would remain a flexible and convenient system that enables the basic principles of exchange, supply and demand and reward for endeavour to operate smoothly.

Where money comes into existence as a loan, the obligation behind it to repay at interest pulls it in two fundamentally different directions at once. It becomes dysfunctional as a means of exchange and the whole economy, originally evolved to serve human need, begins to operate like a faulty machine spinning increasingly out of human control.

Imagine a calculator, which unbeknownst to the operator has a fault which holds down the number seven and multiplies every answer by seven: that calculator will always give the wrong answer. Two times two becomes twenty eight, three plus four becomes forty nine and so on. If the operator uses the calculator to work out his accounts or do his tax returns he will pretty soon wrap himself around a pole trying to make anything make sense.

The current money system has become just such a “held down seven” wrapping governments and honest men around said proverbial pole and thwarting their best endeavours to come up with workable solutions to economic problems.

The dysfunctional machine has been with us for a long time. So long, perhaps, that we think that is how the machine is supposed to work, that nothing better should be expected from it.


Money went of the rails long ago when banks started lending certificates purporting to represent and “pay the bearer on demand” gold they did not actually have. The certificates became the first paper money, and each time one of these bogus certificates was loaned to an unsuspecting borrower, new money entered circulation.

That practice of lending pieces of paper falsely claiming to represent wealth that did not exist became and remained both the foundation of banking practice and the basis of supply of money to the economy.

The fraud was set in stone in 1694 when William of Orange, who had invaded England and taken the throne a few years earlier courtesy of finance provided by the international bankers of the day, found himself in debt to the tune of £20 million. He could not pay his army and his pals the financiers advised him to borrow money which they would issue to him.

Someone should have warned King William of the perils of listening to “experts” with a vested interest in their own “advice”. Part of the “deal” was the setting up of a privately owned central bank run for the private profit of its shareholders which would become the lender of money to the English government.

It was named the “Bank of England” so that generations of Englishmen would believe it to be part of the government, which it was not. In fact its investors were probably not even English.

The Tonnage Act was passed which empowered financiers to create the currency required to run the economy.

But instead of just supplying the economy with it, they called it “credit”, in other words a loan. Calling it a loan enabled them to charge interest on it.

Note that the use of the word “credit” in this context is a lie. Credit assumes that you have been provided with money from somewhere else that you can use. But that is not what happens at all: you are not being loaned existing money, new money is being created, coming into existence as a debt, which did not exist until you borrowed it!

When the proportion of debt money increases to the point it has reached today where it comprises 97% of the total money stock, and the overall debt is impossible to repay, what occurs then is a continual rescheduling of the loans, borrowing to pay back what one owes, then borrowing more to pay that back and so on forever.

Money used to be assigned a value, by representing something, often a certain weight of gold or silver. By now it is assigned a value by having it represent debt and debt is not just nothing, it is less than nothing. In the modern economy the money channels are clogged by debt.

At every level indebtedness to the banks, the continual repayment of money to them, is becoming a bigger and bigger component of costs, committing more and more of disposable incomes, company profits or local and central government revenues to debt servicing. Money committed to debt repayment cannot be spent on anything else. Therefore consumer and producer alike experience a continual and worsening shortage of spending power.

As a system of currency it does not work, except to make those who issue it very, very rich by gradually siphoning off all the wealth of the country.

As the stock of money in circulation has grown, debt has increased, as it must where money is borrowed into existence. As debt, and the burden of paying it back, have increased, spending power has declined. As spending power declines, it can only be compensated for by the supply of more money to the economy. But that money is supplied by borrowing it into existence, which increases the overall level of indebtedness, reducing spending power and necessitating more borrowing.

The government borrows, local councils borrow, we borrow to buy our houses, our cars, washing machines, refrigerators and deferred payments, HP, credit cards and overdrafts are used to obtain more and more of what we purchase.

Instead of saving in order to buy what we need, we take what we are seduced into believing we want and then work to pay for it later.

There used to be a finite gap between earning and buying: a man earned the money, then went out and bought something with it. Nowadays there is an ever-widening gap between earning and buying: we buy something now but must then go on earning further and further into the future to pay for it.

Increasingly what we buy today ties up spending power into the future. What is borrowed today must be paid back in greater amount tomorrow. When we pay back from our income what we have already borrowed, the amount of that income that remains available for further spending on goods and services is reduced. Spending power is reduced. Consequently a shortage of spending power runs through the entire economy.

While the system of debt-money is in place there can never be other than a shortage of money and a vast surfeit of debt.

The volume of money in circulation and available to buy goods and services can never match the volume of goods and services that are available to be bought. Industry can produce goods but cannot sell them, more and more tax pays for less and less service.

Among producers competition for the consumer’s scarce spending power steadily increases. The battle for market share and sales intensifies. There is said to be a “drop in demand” but it is not demand that has dropped, it is the ability of the consumer to express the demand because he cannot get his hands on enough of the tokens he needs to do so!

People buy cheap and shoddy products not because they demand cheap and shoddy products but because they do not have enough money to express their demand for higher quality products. Producers likewise are forced to embark on a quest for cheaper and cheaper ways to produce their products, by mass production or gradually dropping quality, because the consumer does not have enough spending power for the producer to be able to demand the prices he needs to cover the cost of producing higher quality products.

Suppose we need to build a new hospital. The materials to build it exist, the people to build and man it exist, the demand for it exists. But it cannot be built. Why? Because there is not enough money. So why not create more money so that the materials, skills and demand can come together?

That does not happen because governments simply refuse to take responsibility for a job that is rightfully and logically their duty: the creation and issuance of the nation’s money.

Instead of creating and issuing money into the economy to satisfy the economy’s demand for it, what they do instead is have banks create it, then borrow it from the banks, then issue it into the economy, then take it, plus interest, out of the economy again and hand it back to the banks, then ask the bank to create even more money to replace what has just been removed, borrow it, issue it, pay it back with interest!

The only real limiting factors to our standard of living, to what we can create and have and do, are absence of resources, skills, people or need. For example, if there was no coal in the ground we would obviously not be able to have coal. Or if coal existed but no-one knew how to mine it or no one were willing to go down mines, then we would not be able to have coal. If no-one wanted coal because everyone prefers gas, then there would be no market for coal. Fair enough.

But where coal exists and there are people who can dig it up and who are willing to dig it up and want the work and people want it to warm their homes but great mounds of it sit there unsold because the consumer cannot produce enough tokens with which to buy it, then that “lack of demand” for coal is an entirely artificially created scarcity. It is not the coal that is scarce. It is money – spending power – itself.

So we have a scarcity of money, an artificially created barrier to quality and need because the only real barriers are absence of resources, skills, people or need.

While we live in a civilisation of unprecedented technical know-how and massive productive potential, the legacy of the debt money system is increasing taxes, unemployment, business failure, declining services, decaying cities, bad food, poverty, a deteriorating environment, shoddy goods and a very uncertain future.

As you can see our economy runs as smoothly as an old banger with sugar in the petrol.

What is real wealth? Real wealth is anything that improves the quality of our lives, that makes them more comfortable, fulfilling and pleasurable. It may be air that is healthy to breathe, safe drinking water, wholesome food, a decent car, comfortable home, freedom from taxation, recreation, art, happy personal relationships, whatever people value, which enhances their survival.

Real economic growth then would be a growth in the abundance of those things which enhance our survival. That would include clean air, wholesome food, durable high quality products and does not necessarily mean more and more shoddy goods mass produced with short life-spans that have to be changed every few years.

Trade is the exchange of goods and services for the mutual benefit of both parties taking part in the exchange. It is through trade that the quality of our lives is improved and that is real wealth.

Trade got into trouble the moment the government surrendered to the banks its job of creating the nation’s money.

The cost of debt repayment is now built into the cost of virtually everything we buy. Producers are squeezed by two pressures: the rising cost of borrowing eating into their viability on one hand, and on the other the problem of competing with other producers for the consumer’s own shortfall in spending power occasioned by the increasing burden of the consumer’s own debt servicing.

This creates an interminable, desperate paper chase for scarce money.

Industry is forced to cut costs and find every way it can to maintain financial viability, by producing ever more cheaply and that pressure has bedevilled us all with cheap and shoddy goods, goods produced with far less quality and durability than industry could achieve were it not forced into this state of perpetual desperation.

As these pressures increase, producers are forced into commercial warfare, a life or death struggle for money that is always in short supply through bulk sales of cheaper goods, the desperate quest for new and ever more distant markets, by never surrendering an inch of market share to rivals because the tiniest slip can mean the difference between staying afloat or going under. And there is the bank waiting to foreclose or repossess one’s property.

Thus we arrive at debt-driven growth, growth driven not by real human need but by artificial “market forces” implanted in the economies of nations by the method of issuing currency as debt.

Real economic growth would mean a growth in all those factors conducive to survival, to a decent healthy life, and that would include better quality and durability of goods, cleaner air, more nourishing food, more drinkable water, well stocked oceans and rivers, and lead to improvements in the whole ecological balance upon which we depend for our very lives.

Debt-driven growth certainly does not deliver that. The existing money system, which is not a true money system, means that growth in economic terms and growth in survival terms have become contradictory, even mutually exclusive.

An inherently insolvent nation cannot balance its books, so the nation seeks to export in order to obtain enough foreign revenue to make good the short-fall. So does every other nation because every other nation has exactly the same problem.

Trading from a position of interminable insolvency, every nation tries to invade every other nation’s home market. Nation A desperately produces beef to export to nation B, while nation B is just as desperately trying to invade nation A’s home market with its own beef.

Export-or-bust becomes the overriding preoccupation. So great is the desperate scramble for foreign revenue, one of the biggest components of the export trade is the sale of arms, one of the great evils of the modern world.

Selling products abroad becomes not so much a matter of trading some surplus for things we do not produce ourselves but a matter of dire necessity. Foreign sales bring in foreign revenue. That foreign money is raised in its country of origin with a debt behind it but when it buys our exported goods it arrives here as debt-free money because the debt remains behind in its country of origin.

Similarly when the nation buys goods from abroad, the money goes overseas and becomes debt- free revenue for some other nation, but the debt behind it remains here.

In this way pressure is created to export goods and to resist importing goods. And every nation is trying to export like mad and avoid importing at all costs. But for one nation to export another nation has to import!

The world in other words is at war. Companies are in a state of commercial warfare with other companies. Countries are in a condition of commercial warfare with one another.

Commercial warfare has replaced trade. It is a war of attrition in which there are no winners.

There is no place for ethics in war. No place for honesty, decency, trust or respect for human life. No respect for the environment and no possibility of long-term survival for anyone.

Trade was supposed to be a matter of mutual benefit but the mad, desperate, tooth-and-claw scramble for scarce spending power is to the universal detriment.

This is a vicious export war all due to the debt-based money system where currency is issued as a debt!

It is suggested in some quarters that GM foods may solve the problem of “world hunger”.

It is certainly true that people in many parts of the Third World are being slowly tortured to death by starvation.

But before we buy the PR from food giants, perhaps we had better remember that one of the “virtues” of GM crops is that the farmer is obliged, by contract, to buy new seeds each year from the seed producer, and if the likes of Monsanto get their way the “terminator gene” will render seeds produced by the GM crops sterile, thereby obliging the farmer to buy seeds each year. This will further harm farmers in the Third World for obvious reasons.

It would be a good idea to take a closer look at exactly why nations which, for example, can keep half the planet supplied with coffee, tobacco or bananas cannot prevent the very people who produce the tobacco, coffee or bananas from going hungry or living in squalor.

Nowhere is the iniquity of the fraudulent debt system of issuing money more ugly than the atrocity visited upon the people of the Third World.

The debt that afflicts Third World countries, though it derives from the same scam of lending money that was conjured out of thin air, operates somewhat differently to the national debts of richer nations.

By differently we mean more viciously.

At the end of World War Two, the World Bank (WB) and International Monetary Fund (IMF) were set up as institutions to administer international lending. They have played a leading role in creating the insoluble indebtedness of the Third World.

The WB was set up by the Bretton Woods agreement of 1944, to “aid” reconstruction – particularly of poorer countries – in the aftermath of World War Two by providing countries with loans with which to rebuild their economies.

This is a neat formula by the way: lend nations the money to fight a war and then when the war is over lend them more money to rebuild everything they smashed up.

The IMF meanwhile was created to provide an international pool of money – a kind of vast overdraft facility – on which countries with balance of payment difficulties could draw.

In the half century since their inception, the IMF and WB have largely replaced country-to- country lending and have advanced hundreds of billions of dollars in loans to developing nations.

Where did the money come from for these loans? Exactly the same place as the money loaned to your to buy your car or your house: thin air.

The theory of such lending goes something like this:

A country borrows money (at interest) in order to build a development project or range of projects.

This would help its economy – particularly to produce goods for export.

From the increased revenues earned by these increased exports the borrower should be able to repay the loans plus the interest.

The borrower winds up thereby in better economic shape. This all sounds very plausible. Unfortunately for the borrower this is not how things have worked out in practise. Not by a very long way.

The reality is very different.

Let’s take Brazil for example. By 1980, 78% of her export revenues were going on servicing debts to her creditors. Despite increasing repayments on her debts more than tenfold and repaying her original debts several times over, she wound up far more heavily in debt than when she started!

By 1996 Brazil had reached a point where her entire export revenues were not enough to cover the interest on her loans!

Where a country’s economy is geared for exports, a vast proportion of the food, goods and products her people make leave the country. That material wealth does not benefit the people that create it. Neither do the people benefit from the debt-free revenue brought in as a result of the country’s exports because it goes to pay off the interest on loans from the IMF and World Bank. No matter how much and how hard its people work, nor how much wealth they create, they will not benefit from their production and will become poorer.

The cruelty and injustice of this process is mind-boggling. To labour and receive no or paltry share in the fruits of one’s labour is surely slavery by definition – with the IMF and WB in the position of the slave owner.

No matter how much it is dressed up, given a contemporary gloss, justified or excused, that is the basic fact of the matter for millions of human beings. Where once the leverage that made one man a slave and another his master was force of arms, the leverage now takes a form more clever, more covert, more hard to see and because it is hard to see more difficult to fight. That leverage is the money system itself.

In the prophetic words of Sir Josiah Stamp, once governor of the Bank of England and therefore in a position to speak with some authority: “…if you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit.”

Brazil’s experience is typical of Third World countries. Such nations are virtually working themselves to death and rendering their own people destitute in an effort to honour debts to the international money lenders who lent them money created out of thin air!

Why does this happen? Well, what happens to the money borrowed by the Third World nation? That nation spends the borrowed money abroad in order to buy the oil and other wherewithal it needs to modernise its economy. The money goes abroad and becomes part of the economy of the developed nations but the debt remains behind in the debtor nation.

These countries are forced to export all their wealth to pay the interest. The loan itself could never be redeemed.

Unfortunately, as you will see, the cards are stacked against it ever being able to do so in sufficient amount to pay off the loan.

The massive and relentless drive for exports in order to obtain the foreign revenue needed to pay off the debts has devastated local economies. Third World nations have been obliged to give priority to producing goods for export rather than for use by their own people. Export crops, for instance, monopolise the best land, smallholders are squeezed out and move to the crowded cities or onto poorer land. Self-evidently local people cannot eat food that is shipped abroad.

The advantage of exporting, theoretically, is that it brings in debt-free money from abroad, as discussed earlier, but where that debt-free revenue goes to paying off debts to foreign institutions, none of that money benefits the local economy.

The IMF and WB constantly try to dump the blame for this remorselessly tightening poverty and the attendant ruination of local infrastructure, social services and education upon the developing countries themselves.

The fault however lies squarely with the IMF and WB and is built into the monetary system they administer. It is a system of plunder and conquest by proxy of unprecedented cruelty.

The debt trap of these IMF and WB loans is that they deliver control over the economies of entire nations to international bankers because the loans come with conditions attached to them.

One such condition is the removal of government protection for home markets, which lays the less developed and therefore more vulnerable economies of such nations bare before the forces of global markets, themselves embroiled in global commercial warfare. The debt-driven goal of every nation from the biggest to the smallest, who are all trading from a desperate position of insolvency, is to become net exporters. On the global markets the corporations based in the richer nations are king and into this theatre of warfare the less developed economies of often small nations are expected to compete. To pay off their loans is impossible – to even come close, they would have to compete more successfully in terms of trade balance than the richest and most powerful nations on Earth!

The dropping of trade barriers which protect home markets always results in more powerful nations and their dominant trans-global corporations taking over many domestic markets and causes a rise in imports. For developing nations, desperately trying to become net exporters in order to pay off loans that were originally intended to enable them to become net exporters, a rise in imports is about as needed as a nuclear warhead detonated in the skies above the capital city.

Loans are often granted on the condition that they are used to purchase goods in the creditor nations. This means that the debtor country, in searching for whatever fuel, machinery, computer equipment and so on it needs to develop its home industries cannot shop around for the best deals. Neither can it spend the loan in another debtor country, which prevents developing countries helping one another. It also means that instead of remaining as spending power either in the debtor country or in Third World, the money brought into existence by the loan ends up debt-free back in the creditor countries! Only it arrives back in the creditor country without the debt attached to it! The debtor country meanwhile no longer has the money but it still has the debt!

With so many debtor countries re-orienting their economies for export and so many seeking to export the same goods, the resultant glut on various markets intensifies competition and results in a fall in prices and hence a fall in export revenues.

As the level of indebtedness has mushroomed out of control and the Third World’s debts have become progressively more unrepayable, what begins to happen then is that new loans cease to buy anything at all and simply fund interest payments on old loans.

The attachment of conditions to the granting of loans, then gradually more stringent conditions to reschedule loans gradually moves control and direction of the debtor nation away from its people or government and into the hands of the banking elite that administers the global debt- money supply. Such conditions often empower the lender to oversee the development of an entire economy. The measures imposed stipulate drastic cuts in social services, welfare, education, housing, domestic food programs and in fact anything that would divert money away from the paying off of escalating loans or furthering export growth, ie the removal of wealth from the debtor country.

All the countries of the Third World are being covertly stripped of the ability to determine their own futures and direct their own resources in whatever directions they see fit – particularly in the direction of doing something to improve the lot of their own people.

Inflicted on developing nations IMF and WB conditions have proven to be utterly devastating, with falling incomes, unemployment, inflation, increased trade deficits, increasing outflow of capital, mounting external debts, de-industrialisation, displacement of people and the destruction of communities. They lead inexorably to massive deprivation, particularly among the poor and those social groups less able to defend themselves against such harsh strictures.

In terms of helping the debtor nation develop its economy and pay off its debts such conditions are tantamount to tossing three tons of lead into a sinking dinghy.

This is not incompetence or inferiority on the part of Third World nations. They are simply obliged to play the game on a playing field about as level as the north face of the Eiger. This is a game that was rigged from the outset, to their disadvantage While such a system exists not only is it impossible for them to pay off their loans it is impossible for them to establish thriving economies for the benefit of their own people.

The international banking elite which controls the money supply to all the nations of the world can do what they like to any economy simply by extending or withholding credit or manipulating interest rates. What they have done to the Third World nations, they have done out of choice. The impoverishment and enslavement of people, the starving to death of children that has resulted from their deliberate, calculated policies.

This process of legalised global fraud has delivered into the hands of the financial dictatorship that controls the world’s money supply, covert but factual sovereignty over millions of people.

The financial elite, creating money with a sweep of the pen, making massive profits from the risk free investment of numbers in columns, have acquired dominion over the Earth.

This is the source and cause of world poverty and world hunger. All other “reasons” given are but myths trotted out to hide from view the ugly crime at the bottom of it.

The excesses of multi-national corporations (MNCs) are not what is wrong with the global economy. They are an extremely unpleasant symptom of the underlying malaise.

The debt-driven economic system we have briefly discussed makes the supremacy of MNCs inevitable because it creates an economic climate where “ruthless and amoral big business” is the creature best equipped to survive.

All the strictures of the debt-money system: debt-driven growth, fierce commercial warfare, the desperation of nations to export, shortage of spending power leading to the need to cut costs in labour, raw materials, production and transport best achieved by bulk production and economies of scale, the inevitable insolvency of all productive enterprise, dangerously low profit margins, and all the rest in fact render “ruthless and amoral big business” the only direction industry can go.

Quite frankly if you want quality and human scale production, economic growth that takes into account morality, care for the environment and the needs of people, you are currently living on the wrong planet. Planet Earth does not have an economy geared for that kind of thing, however much its five billion inhabitants wish it did.

The success of the MNCs lies in the fact that they have evolved so as to command massive resources, which enables them to mass produce like never before, market globally, hold governments to ransom and so persuade them to relax labour laws and environmental protection, cut unit profits to the bone, achieve economies of scale, take advantage of the huge economic disparities between nations, particularly between rich nations and the Third World where banking activity establishes in debtor nations the very economic conditions that favour MNCs.

These are the very qualities you need if you are to survive in the debt economy.

No-one in such an economic climate can take their foot off the pedal for a second. Concern for human sensibilities, the environment or indeed any consideration other than the next sale are simply not compatible with survival in a market place where one grapples with equally desperate rivals. Success is now scarcely measured in profit margins. Market share is the goal, driving MNCs to acquire assets which they can offset against their debts and thus remain solvent at least on paper, hence the predatory, acquisitive, expansionist approach that so marks the MNCs.

None of this excuses the behaviour of MNCs but it at least helps one understand the environment which has spawned and now drives them.

To say MNCs are innocent victims of an insane environment is being over kind. At the highest levels the banks and MNCs are intricately interwoven. The men with shareholdings in the commercial banks are frequently the same men with shareholdings in MNCs. The Rockefeller family’s control both of Standard Oil and various banking interests is but one example and the recent dismantling of Yugoslavia and its takeover by western banking and corporate interests – using western armies as their muscle – show how the international loan sharks and MNCs act in concert.

At the very highest echelons of planet Earth we have the hidden financial dictatorship that can make or break nations and has the Third World in factual bondage.

by Richard Greaves

The cost of borrowing by producers, manufacturers, transporters, and retailers all has to be added to the price of the final product.
They are burdened by the cost of mortgages, overdrafts, credit cards, personal loans and as a result of 1 and 2 above …
… because the population can’t afford to buy up all the goods and services being produced. This in turn creates …
Businesses try to cut prices and costs to grab a share of this limited purchasing power in the economy, as illustrated by:
(i) Wages being held down as much as possible.
(ii) Shedding of jobs.
Both of these reduce people’s spending power even more.
(iii) Retailers importing cheap products from abroad where wages are much lower.
(iv) Production of cheaper goods that don’t last as long.
(v) Protection of the environment a low priority.
(vi) Mergers and take-overs — corporations get bigger and bigger, driven to search out new markets.
(vii) Big companies shifting production to poorer countries which have cheap non-unionised labour and the least stringent safety and environmental laws or …
(viii) Demanding large government subsidies and tax free incentives as the price for setting up new production or not relocating abroad.
– This is guaranteed because producers constantly have to borrow more, and must add the cost of that increased borrowing to the price of the goods produced.
– Why is it that when the bankers hike their prices (ie put up interest rates) this is supposed to reduce inflation?
– It doesn’t. It’s just that there’s a delay in industry putting up prices.
– Initially, industry is forced to hold or even reduce its prices with its profits down, or even sustain losses, in a desperate bid to sell its products in an economy where the money available for spending has been reduced, because of higher interest payments being made to the banks.
– Inflation may be held in check or even reduced temporarily, but eventually industry must put its prices up in order to recover these higher costs.
– This most readily happens when interest rates come down, more people borrow, and money supply and consumer spending increases. Inflation then races ahead.
– The fact that — in a debt based economy — levels of borrowing/money creation have to keep on rising, and thereby adding to the overall burden of interest payments, guarantees that inflation will be present as long as we have an economy based on an increasing burden of debt.
– Surplus goods in the national economy have to be disposed of somehow. The obvious way to do this is to try to export them!
– The absurdity is that every nation is trying to do this, because of the same fundamental problem at home.
– This creates frenzied competition in world markets and masses of near identical goods madly criss-crossing the globe in search of an outlet.
– Instead of international trade being based on reciprocal mutually beneficial arrangements where nations supply each others’ genuine needs and wants, the whole thing becomes a cut-throat competition to grab market share in order to stay solvent in a debt based economy.
– Big corporations demand unrestricted access to every nation’s market — so called “free” trade.
– The European Union “single market”, the North American Free Trade Agreement and the World Trade Organisation are the best examples of the drive to open up all national markets.
Exporting is good for a nation’s economy because when exported goods are paid for, this brings money into the exporting nation’s economy free of debt.
– The money to pay for them was borrowed from banks in the importing nation.
– That money is lost to the importing nation’s economy, but the debt that created that money still has to be repaid by the importer out of the remaining money in the importing nation’s economy.
– If a nation can become a big net exporter, for a time its economy will boom with all the debt-free money coming in — a trade surplus will exist.
Importing is not so good for a nation’s economy because if some nations are building up trade surpluses in this way, others must be net importers and building up trade deficits.
– Ultimately, those with big deficits can no longer afford to import, since so much money is sucked out of their economies leaving a proportionally increasing burden of debt behind.
– The International Monetary Fund (IMF) was set up to provide an international reserve of money supposedly to help nations with big deficits.
– In practice it makes matters worse. A nation with a big deficit has to seek a bail out from the IMF.
– But this comes in the form of a loan, repayable with interest.
– Like loans from a commercial bank, IMF loans are money created out of nothing, based on a cash reserve pool, which is provided by western nations who go into debt to provide it (see “National Debt” below).
– The nation with the deficit goes even more heavily into debt.
– It will however be able to carry on trading and importing goods from the wealthier nations.
– As a result, much of this borrowed IMF loan money flows into the economies of wealthier Western nations.
– However, the repayment obligation, including the interest payments, remains with the debtor nation.
– This is the horror of third world debt — the poorest nations borrow money to bolster the money supply of the richer nations. In order to secure income to pay the loan and interest, and redress the trade balance, these poorest nations must export whatever they can produce.
– Thus they exploit every possible resource — stripping forests for timber, mining, giving over their best agricultural land to providing luxury foodstuffs for the West, rather than providing for local needs.
– Today, for nations in Africa, Central and South America and elsewhere, the revenue from their exports does not even meet the interest payments on these IMF loans (and other loans from Western banks).
– The sums paid in interest over the years far exceed the amounts of the original loans themselves.
– The result is a desperate shortage of money in their economies — resulting in cutbacks in necessities such as basic health and education programmes.
– Grinding poverty exists in nations with a great wealth of natural resources.
– Structural Adjustment Programmes — these are now attached to IMF loans and include conditions that recipient countries will reduce or remove tariff barriers and “open up their markets to foreign competition” — in other words take surplus goods off another country that can’t be sold at home.
8) WAR
– War means enormous increases in national debt and enormous profits for the banks
– Massive government borrowing and money creation by banks is required to fund a war effort.
– Financiers and bankers have covertly funded both sides in both World Wars and many other conflicts before and since.
– Having profited from war leaving nations with massive debts and more beholden than ever to them, the banks then fund reconstruction.
– British national debt now stands around £796.9 billion — the annual interest on that debt is around £40-45 billion, the Chancellor Alistair Darling has announced another £700 billion to be borrowed over the next 5 years taking the total National Debt to over £1.4 trillion! The government can only pay it by taxing the population as a whole, so we pay! National debt is up from £26 billion in 1960 and £90 billion in 1980.
– Successive governments have borrowed this money into existence over the years.
– Instead of creating it themselves and spending it into the economy on public services and projects, boosting the economy and providing jobs, they get banks to create it for them and then borrow it at interest. And we pay it back in our taxes!
– It all started in 1694 when King William needed money to fight a war against France. He borrowed £1.2 million from a group of London bankers and goldsmiths.
– In return for the loan, they were incorporated by royal charter as the “Bank of England” which became the government’s banker. Interest at 8% was payable on the loan and taxes were imposed on a whole range of goods to pay the interest.
– This marked the birth of national debt. Ever since then, the world over, governments have borrowed money from banks and taxed the population to pay the interest.
How the Government Borrows Money
– When governments borrow money, in return they issue to the lender, exchequer or treasury bonds — otherwise known as government stocks or securities.
– These are basically IOU’s — promises by government to repay the loan by a particular date, and to pay interest.
– They are taken up by banks, but also by individuals with money to spare, including wealthy ones in the banking fraternity and, in more recent years, pension and other investment funds.
– When government securities are taken up by banks, this is money creation, out of nothing, at the stroke of a pen.
– Banks are creating money as loans, out of nothing, by lending it into existence to the government in very much the same way as they do to individuals and companies.
– The government now has new money in the form of loans to spend on its requirements, such as public services.
– If this money were not borrowed into existence in this way, there would be less economic activity as a result.
– Under this system national debt is money issued to the government and, as such, has become a vital part of the total money supply of any modern nation.
– The government constantly tells us that “there isn’t enough money”, because it knows that the cost of borrowing money this way has to be passed on to the taxpayer.
– Instead, it sells off state assets and now gets the private sector to fund public services instead.
The Constant Increase in National Debt
– In the same way that under the present system, industry and individuals must keep borrowing more and more to enable interest payments to be kept up on their existing loans, so government must constantly borrow more and more to keep up interest payments on its existing loans.
– Furthermore, when a particular government stock is due for repayment, the government simply borrows more by issuing new government stocks.
– And it’s we who pay for it in our taxes!
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.” Thomas Edison, The New York Times, December 6, 1921.
– Government could stop borrowing money at interest, and start creating it itself by spending it — debt free — into the economy on public projects and services, at the same time creating jobs and stimulating the economy.
– It already does this to a limited extent — the amount it receives from banks when it sells cash to them is added to the public purse and is available for spending on public services and projects.
– For a start we could, at least, fund the interest payments on the National Debt by government created debt-free money, instead of by taxation — as advocated by James Gibb Stuart in his book The Money Bomb (available for £5 payable to Prosperity, at the address below).
Seeking to redistribute what money there is by taxing the rich to pay for services for the less well off does nothing to solve the problem of the overall shortage of money in the economy caused by the debt based money supply — a problem which most socialists have yet to recognise.
The nation’s economy is our economy. We create the real wealth through our ingenuity, enterprise and hard work. The current banking system operates as a massive drain on that public wealth as well as concentrating power and control in the hands of a tiny, private minority.
Money is the means of facilitating the exchange of goods and services.
There is nothing wrong with creating it out of nothing, because this is the only way to provide the means of exchange.
What is wrong is that the right to do this has been allowed to pass to private interests who create it as loans for private profit.
Can we not ultimately incorporate the humanitarian principles of a fair distribution of wealth that underlies socialism with the dynamic benefits of a free enterprise economy that lies at the heart of capitalism?
For as long as the power to create money is in the hands of private interests who do it for profit and control, we can never say that we live in a democracy.

As we can see the current debt-based money system has very bad consequences for the environment of our planet. A vicious export war ensues because of the pernicious need of businesses and countries to gain debt-free money in order to pay off interest and loans in an ever increasing spiral of debt. This has encouraged the rape and pillage of the planet in an ever-increasing battle for growth in order to pay off loans, which in the third-world are utterly illegal and bogus as we in the West have been paid many times over in goods and raw materials from these third-world nations!

If we had a debt-free money system we could use this to money to pay for green projects and technologies, facilitate local industry and produce and build a brighter future for our children and grandchildren!


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