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Fall 2009
Where does our money come from? What is our money? How much is it worth? Why does it seem there’s never enough to go around? Who decides these things?
by Bruce Bolme and Zoë Campbell
Steering Committee members Bruce Bolme and Zoë Campbell attended the SolWest Renewable Energy Fair in July, located in John Day, OR. It was the second time they presented a workshop on local currency, and were pleased to have plenty of curious people who wanted to know more about alternative exchange systems.
Getting There
As we traveled through the rolling hills and pastures of eastern Oregon, I noticed an abandoned old windmill, silent and rusty, that had outlived its usefulness. It stood alone and forgotten in contrast to the rows and rows of huge gleaming white wind turbines providing us with electricity. It occurred to me that there was a parallel between the two kinds of windmills and the two kinds of currency we have in the Gorge. The old windmill pulled water from the earth to sustain crops and animals that were not designed to live there. Although it used the wind to do its work, the resource it extracted was non-renewable fossil water. That windmill was an artifact of an obsolete “use it until it’s gone” and “how much money can I make?” attitude. 
The Old and the New
There’s a fresh breeze in the air these days. We now recognize that many of our resources are finite. We try to live in partnership with our planet, knowing it will sustain us when we use responsibly sustainable practices. The new generation of windmills provides clean, renewable electricity.
The monetary system we have been using has been detrimental to the well-being and prosperity of most of the people in this country and in the rest of the world’s population. It’s like the old windmill that takes from the life-giving resource for all to provide wealth for a few. Why and how is this so?
The text of the handout we gave out at the SolWest Fair helps explain how the old system works
and the need for new systems of exchange that benefit everyone.
Where Does Money Come From?
Congress created the Federal Reserve in 1913, and made its paper money legal tender for all debts, public and private. That means it must be accepted. The Fed is neither a reserve, nor federal. It is a private, for profit banking corporation owned by a cartel of very large private banks. The two biggest are Citibank and J.P. Morgan Chase. These mega-banks are the financial cornerstones of the empires built by J.P. Morgan and John D. Rockefeller, the Robber Barons who orchestrated the creation of the Federal Reserve in 1913.
Most money today is created by neither the government nor the Federal Reserve. It is created by the private commercial banks which own the Fed. These banks hold large amounts of government securities (I.O.U.s representing the governmental debt owed to the private corporation.) Where did this debt come from? How is it the government is in debt at the very beginning of money creation?
What we usually think of as money ~ coins, dollar bills, the money in our checking accounts, makes up only 3% of the total. The other 97% magically appears from somewhere else. That somewhere else is the money created by the big private banks when they make loans. They agree to accept promissory notes (debt) from borrowers in exchange for giving credit to the borrowers’ accounts. Thus loans become deposits. Banks can build up deposits by increasing loans and investments
so long as they keep enough currency on hand for the depositers (borrowers) to withdraw
from their accounts.
The Money Trail
The Treasury Department prints the Federal Reserve Notes (the money). The banks comprising the
Federal Reserve buy them from the Treasury for the cost of printing. These private banks create our money out of nothing and then loan the notes, the money, to the federal government and to various other banks at some amount of interest. This interest is a debt the government and the other banks owe the Federal Reserve (the private corporation of the mega-banks.) The other banks then loan the money they got from the Fed to people and businesses. These banks add more debt to the system by attaching interest to the loans. People and businesses then must repay banks a lot more money than they borrowed. In turn, the banks must repay the Fed (private corporation) with a lot more money than they borrowed. What happens to this money that comes from interest? This is profit to the mega-banks comprising the Federal Reserve. It goes into their private accounts, making the cartel members very rich.
The Interest Problem
The rest of the system (businesses, people, banks, governments) is perpetually without enough money to pay the interest. The money to do so doesn’t exist until the private banking
corporation loans it into circulation. Because it creates the principal of loans but not the interest needed to repay them, there’s not enough money. The only way to get money to pay the interest on old loans is to take out new loans, with new interest (new debt) and the cycle of never enough continues. Some major player has to incur debt that never gets paid back. The federal government does that. It is called the national debt.
Monetized Debt
The national debt becomes monetized (turned into money) in the form of government securities held by the Fed and the banking system. The function of the Federal Reserve is to convert government debt into money. Virtually all money in circulation today can be traced to government debt that has been monetized. The money supply must continually increase (inflate) to pay the debt, which of course makes the federal debt increase. If there were no debt in our money system, there wouldn’t be any money. The money supply is the federal debt and cannot exist without it. The federal debt has been the basis of the US money supply since the Civil War.
Enforced Scarcity
The private banking corporations, through the Fed, maintain the system by deliberately keeping money artificially scarce. Greed and fear of scarcity are continuously created and amplified as a direct result of kind of money system we are using. We all have to scramble and compete against each other to get the biggest share we can so we can pay the interest. We tend to hoard what we have. Some people and businesses and governments never get enough money to pay that interest. They live in poverty or go out of business or their country collapses. If the US government
should ever acknowledge that it cannot pay the interest, it will renege on its debt and the
economy will collapse.
One Solution
There are solutions. The Gorge has its own local currency system, RiverHOURS, already in place to be used as a tool for expanding the money supply. RiverHOURS bear no interest in their issuance. The money comes into existence when a person spends it into circulation ~ they buy something with it. All they are asked to do is to accept it in return when someone buys something from them. There is no hoarding. Money does what it is supposed to do ~ act as a medium of exchange for people’s goods and services. It circulates freely and there is enough of it.
An excellent book to learn more and to get you started is:
Money: Understanding and Creating Alternatives to Legal Tender by Thomas Greco, Jr.
Download E-book here
For more information on the Solwest Renewable Energy Fair, click here
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The Local Currency Education Project is a joint venture of
the Columbia Gorge Earth Center and Gorge Local Currency Cooperative
updated
October 15, 2009
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