EXPLODING THE MYTHS ABOUT MONEY
Our money system is not what we have been led to
believe. The creation of money has been "privatized," or taken over by
private money lenders. Thomas Jefferson called them “bold and bankrupt
adventurers just pretending to have money.” Except for coins, all of our money is now created as loans advanced by private banking institutions — including the privately-owned
Federal Reserve. Banks create the principal but not the interest to
service their loans. To find the interest, new loans must continually
be taken out, expanding the money supply, inflating prices — and
robbing you of the value of your money.
Not only is virtually the entire money supply
created privately by banks, but a mere handful of very big banks is
responsible for a massive investment scheme known as "derivatives,"
which now tallies in at hundreds of trillions of dollars. The
banking system has been contrived so that these big banks always get
bailed out by the taxpayers from their risky ventures, but the scheme
has reached its mathematical limits. There isn't enough money in the
entire global economy to bail out the banks from a massive derivatives
Web of Debt unravels the deceptions in our
money scheme and presents a crystal clear picture of the financial
abyss towards which we are heading. Then it explores a workable
alternative, one that was tested in colonial America and is grounded in
the best of American economic thought, including the writings of
Benjamin Franklin, Thomas Jefferson and Abraham Lincoln. If you care
about financial security, your own or the nation's, you should read
Review by George H. Crowell
activists need this book! In Web of Debt, Ellen Hodgson Brown
provides an extraordinarily compelling and vivid analysis of one of the most
crucial, and yet least understood of the major social problems that currently
imperil humanity. She exposes and
explains the hidden workings of our money system. The problems deriving from our currently
prevailing money system powerfully pervade and exacerbate the whole range of
social problems that confront us. Brown
shows how this money system has devastating impact, and also how it could be
transformed to provide enormously powerful impetus for needed social change.
great majority of social activists who have worked diligently for many years to
overcome a wide variety of social problems, striving to achieve social justice
and peace, know almost nothing about the workings of our money system. In my own experience of many years, I have
observed how we activists, to the best of our ability, have analyzed such
problems as poverty, environmental destruction, and war, with all their many
manifestations, and how we have strategized and struggled to achieve some
semblance of a viable world order, one in which people could live in harmony
with each other and with our environment.
Our goals have been worthy. But our
analyses have been weakened, and our strategies often ill conceived because we have
failed to understand or to confront the potent underlying realities of the
ignorance is not surprising. The
workings of our money system have been carefully obscured from public scrutiny
and understanding by those in the private banking system who control it. In the "Foreword" to Brown's book, Reed
Simpson, a long-time banker, writes "I can report that even most bankers are
not aware of what goes on behind closed doors at the top of their
field.... I am more familiar than most
with the issues raised in...Brown's book..., and I still found it to be an
eye-opener, a remarkable window into what is really going on.... [The way our
money system functions] has been the focus of a highly sophisticated and
long-term disinformation campaign that permeates academia, media, and
publishing. The complexity of the
subject has been intentionally exploited to keep its mysteries hidden" (p. xi).
does our money come from? It is no
longer based in any way on gold. Nor, as
is almost universally assumed, is it supplied by governments. Almost all our money supply, about 97% in
capitalist economies around the world, is created
out of nothing by private commercial banks in their process of making loans. Moreover, when banks make loans, they do not
lend out the pre-existing money of depositors, as is also almost universally
assumed. As they make loans, the banks
create new money which is added to
the total amount of money in circulation.
are huge problems which result from this system which makes us almost totally
dependent on the private banks to provide the money which is essential for our
economic transactions. Especially
notable is the fact that, when they supply our essential money through making
loans, the banks create money for the principal of the loans, but they do not
create any money for the interest which they invariably require to be paid. They create only debt-money. And they impose a demand impossible for us to
meet collectively! Money to pay interest
is simply not available. In order to make
payments which include both interest and principal, people are driven to
compete with each other to obtain the limited money which was created only as
principal for loans. "The direct consequence is that we have to
fight with each other in order to survive," says monetary expert Bernard
Lietaer as quoted by Brown (p. 31). Moreover
people are driven to borrow even more from the banks, further increasing their
indebtedness. Inevitably some borrowers
must default, enabling the banks to take over their collateral. The few favoured in this system become ever
more wealthy, while many are impoverished.
loans are repaid, the money for the principal goes out of existence! The banks get to keep as their own any money
they collect from payments on interest.
If they do not promptly make new loans, creating new money to replace
that which was destroyed, the amount of money in the economy can shrink,
bringing on recession. In our money system
there must be debt if we are to have money, because almost all our money is
debt-money. Somebody-businesses, individuals,
and/or governments-must carry debt, and also banks must grant loans if there is
to be any money at all.
and businesses cannot avoid either paying off their debts or defaulting and
losing their collateral. Not so with
governments, at least at the federal level.
As long as they pay the interest on their debts, they can continue owing
the principal. Indeed, under our present
private bank-created debt-money system, it is essential for federal governments
to continue in debt (pp. 33-34). The
U.S. government carries a debt of some ten
trillion dollars. If it were
suddenly to pay off this debt, far too little money would be left to keep the
economy running! So U.S. government debt
must continue growing, and even more rapidly now that money borrowed by government
is being spent to bail out irresponsible, failing, giant financial
interest owed on government debt must
be promptly paid, and this money must come out of tax receipts. Indeed, as Brown points out, the income tax
was instituted in the U.S. in order to assure that interest owed to the private
banks would be available to be paid (p. 131)!
But with the debt rapidly growing,
the interest payments will eventually become far too great for taxpayers to
bear (p. 34).
perpetrated through our money system are only possible because governments
allow private banks to control and to create our money. Indeed there is hardly anything more
scandalous than the fact that governments, which are entirely capable of
creating money for themselves, borrow at interest from banks and from other
private money lenders. Governments at
the federal level could be using their own powers for money creation to provide
interest-free loans for much-needed infrastructure, and as the economy expands,
could not only lend but also spend debt-free money into existence to provide
public services. Brown explains how the
alternative of democratically controlled government-created money could make
enormously creative contributions to human welfare.
is not just speculation. Web of Debt, which provides a
reinterpretation of much of U.S. history in light of the money issue, gives
examples of strikingly successful government-created money. The British colonies in America had to pay
taxes in gold to the mother country, and, lacking gold to be mined, were
chronically short of money for their own economic transactions. Experiments with substitutes abounded.
most successful was Pennsylvania under Benjamin Franklin. Its colonial government issued paper money
which it lent primarily to farmers.
Although interest was charged, the government also spent money into
existence to provide public services, so there was no shortage of money to
cover the interest, and no need for taxes.
The interest collected was also spent for public services, and stimulated
economic activity enabling Pennsylvania to thrive, as did other colonies to
varying degrees until the British Parliament in 1751, under pressure from
private banking interests, forbade the colonies to issue their own
currency. As economic hardship resulted,
this issue became a major cause of the Revolution (Ch. 3).
after its war for independence, the new U.S.A. succumbed to intense pressure to
give the private banks control over creation of money. In the midst of this struggle, Thomas
Jefferson is reported to have said: "If the American people ever allow the
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 property, until their children will wake up homeless
on the continent their fathers occupied" (p. 76).
banking interests suffered setbacks under intense opposition from President Jackson,
they soon afterward regained firm control over the U.S. money system until
Lincoln's presidency. When the banks
told Lincoln they would charge 24% to 36% for loans to wage the Civil War,
Lincoln found an alternative. His
administration issued and spent into existence $400 million in paper money, the
greenbacks, which enabled his government to get through that war with little
debt, while stimulating continuing industrial production in the North (Ch. 8).
explains in revealing detail how banking interests connived to regain their
power after the Lincoln presidency, fighting off the Populist campaign for
plentiful government -created money, and establishing in 1913 the Federal
Reserve which, despite presidential appointments of its governor and board
members, is owned and controlled by a consortium of banks. The complicated and confusing Federal Reserve
Act was slipped through an unsuspecting Congress just before Christmas recess
and signed by a naive President Wilson who later expressed deep regret at
having done so, saying: "I have unwittingly ruined my country" (p. 126).
the enormous pressures relentlessly exerted by banking interests, it is not
surprising, although it remains scandalous, that the U.S. and other governments
have been manipulated into borrowing money at interest from private banks. This dynamic is thoroughly documented in Web of Debt.
Brown points out, our system of bank-created money is regularly justified by
the claim that when governments create money, or-as is often derisively said-when
governments "print money," they cause inflation. Brown rejects this claim at numerous points
in her book, including analyses of hyperinflations, even taking into account the
notorious case of Germany in the 1920s, as well as Russia, Yugoslavia, and the
Ukraine in the 1990s, and more recently Argentina and Zimbabwe. She shows how short-selling of the currency
of these nations by large-scale private financial institutions, including
banks, has been a major factor in their inflations. Mere conspiracy theory? Check out the convincing case that Brown
Web of Debt does not deal with
Canada, its explanation of the global bank-dominated money system applies fully
to the Canadian situation. To protect
Canadian interests we need to remain attentive to perils from the U.S.
influences so well described in this book.
Constant pressure is exerted on Canada for "deep integration" with the
U.S., including merging our money systems through adoption of a common
currency. Both our nations are in urgent
need of monetary reform. With our
publicly owned Bank of Canada we are in a better position to achieve reform,
and we urgently need to steer clear of the U.S. money system.
are surprisingly many books which explain the mysteries of our money
system. I recommend this book by Ellen
Brown because it is especially gripping, revealing, and up to date. It is accessible for beginners and informative
for veterans. Brown's book, along with
her website, www.webofdebt.com , could help develop the widespread understanding needed to enable us
to stop our money system from abusing us, and change it to serving our welfare.
George Crowell, retired University of Windsor
professor, has been working on monetary issues since 1994.