Digital Industrial Park

When the Directors of the Bank of England asked Benjamin Franklin what was responsible for the booming economy of the young colonies, Franklin is reported to have said:

“That is simple. In the colonies we issue our own money. It is called Colonial Scrip. We issue it to pay to pay the government’s approved expenses and charities. We make sure it is issued in approved proportions to make goods pass easily from the producer to the consumers…In this manner, creating for ourselves our own paper money, we control the purchasing power, and we have no interest to pay to no one. You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they neither can give away nor spend but a tiny fraction of the money people need. Thus, when your bankers here in England place money in circulation, there is always a debt principle to be returned and usury to be paid. The result is that you always have too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unpayable debt and usury.”

(From Web of Debt by E. H. Brown)

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Musings, Uncategorized bank, credit, franklin, money

The bank on your corner is an interesting place. They employ a system called Fractional Reserve Banking which, to a reasonably honest person, seems dishonest but is entirely legal.

This crafty system, first devised by seventeenth century goldsmiths who discovered that only about 10% of the population actually asked for their money at any given time, allows banks to lend $1000 for every $100 on deposit (a 9-1 ratio).

It gets interesting from time of deposit so follow closely; a bank receives a deposit of $100 and can loan out $90 of that deposit. If the borrower writes a check for $90 to someone who deposits it, the bank receiving it can now lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1000.

But don’t these funds belong to the people who deposited the money and expect it to be available at all times? Yes. The loan money, you could say, is counterfeited. Or you could say that’s just the way it works.

If you are baffled by this, you may want to read through the Chicago Federal Reserve’s, “Modern Money Mechanics“.

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Musings banking, fractional reserve, lending

From a congressional address by Louis McFadden, quoting Robert Hemphill, credit manager of the Atlanta Federal Reserve (1933):

“We are rapidly approaching a situation where the government must issue additional currency. It will very soon be the only move remaining. It should have been the first step in the recovery program. Immediately upon a revival of the demand that the government increase the supply of currency, we shall again be subjected to a barrage of skillfully designed and cunningly circulated propaganda by means of a small group of international bankers have been able, for two centuries to frighten the peoples of the civilized world agains issuing their own good money in sufficient quantities to carry on their necessary commerce. By this simple, but amazingly effective device these “money changers” – parasites in a busy world intent on creating and exchanging wealth – have been able to preserve for their private and exclusive right the monopoly of manufacturing an inferior substitute for money which they have hypnotized civilized nations into using, because of their pressing need to exchange goods and services. We shall never recover on credit.

(See “Web of Debt” by Ellen Hodgson Brown)

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Musings currency, debt, economy