Why is there such widespread denial of the theft inherent in our monetary system?

‘In common usage, theft is the taking of another person’s property without that person’s permission or consent with the intent to deprive the rightful owner of it.’ – Wikipedia.

Our modern monetary system was invented and developed between 1688 and 1704 in England by English parliamentary representatives and English bankers and capitalists. It has since become established all over the world.

The scheme of the system is (and was) twofold: one, to provide government with a way of borrowing money without asking anyone’s permission; and two, for capitalists to raise potentially unlimited amounts of money, created out of nothing on the speculation that they will be able to pay it back with interest.

The system is maintained by governments and capitalists, with banks and central banks acting as intermediaries. Banks profit too, by taking a cut.

What are the thefts involved?

Heaping debt on someone without their permission is a fairly simple form of theft. If I borrow at my neighbour’s expense – if my neighbour has to pay both interest and capital and I spend the money – that is a pretty outrageous theft.

This primary theft continually impoverishes citizens, and makes them easy prey for the second theft when someone – a capitalist – is able to conjure up money out of nothing and buy their assets.

The theft is therefore a double act. Governments impoverish their citizens: capitalists buy up their assets. Eventually all assets would end up in the ownership of capitalists, except that crisis intervenes when there is not enough money left in general circulation.

Ignorance of the system is now at its greatest since the system began.

In the early days of the system, representatives and capitalists had no need to dissemble. They were the ruling class; they were openly in the business of getting rich by putting their citizens, and the rest of the world, to work. Objections were also open and vociferous, but ineffectual, because the ruling power called the shots.

Around 1920, understanding of the system was at its greatest. C.A. Phillips, J.M. Keynes and others published books clearly explaining the process by which banks create and destroy money.

Around 1920, poor people began to get the vote. Straightforward acknowledgement gave way to obfuscation, not noticing, not discussing. Since then, although the system is not hard to understand, ignorance of it has been carefully nurtured and maintained.

How does the system work today?

The system works today on a two-tier basis: real money (cash) and claims on that cash.

The only real money we citizens ever get our hands on is notes and coins. All other real money – ‘cash’ – is owned by governments and banks. The money we citizens spend – whether by bank transfer, credit card, debit card, cheque, e-transfer or any method other than cash – merely transfers a claim against our bank to someone else. At the end of a day’s trading, the banks tot up all these claims and decide how much they owe each other.

Governments create cash, and banks create claims against cash. Because almost all the money we use consists of claims against bank cash (‘credit’), banks create almost everything that we think of as ‘money’. What banks call ‘credit’ is exactly and precisely these created claims.

Why do so few people discuss this scenario?

The governor of the Bank of England recently announced (25/10/10): ‘Of all the many ways of organizing banking, the worst is the one we have today.’ Yet talk of fundamental reform is more-or-less absent from any agenda.

A few reasons for this are fairly obvious. No politician – mainstream or extremist – wants to give up the ability to borrow without limit, and without permission. No one who is influential by reason of being rich, or being favoured by the system, or who is beholden to rich and powerful employers, wants to change a system which benefits them. Others are terrified that tinkering would only make a bad situation worse.

Meanwhile the poor, who might be able to recover some assets if the system was reformed, are kept in the dark about it – and about how they have been dispossessed.

What are the consequences of bank-created money?

There is scarcely an evil in the modern world that is not created or exacerbated by banks being privileged to create the money-supply. Here are a few of the more obvious.

First and most obvious, all the money tends to end up in the possession of capitalists – that is, people whose only business is making money from the efforts of others. This means not only that the ‘others’ are impoverished: they are also thrown on the mercy of capitalists and governments, degraded and dispirited into a condition where they feel they have no rights, only ‘entitlements’ to hand-outs specified by the floating voters who have effectively authorised the latest government.

Secondly, a need for growth is built into the system: only exponential and relentless growth can continue to increase the amount of money in circulation. (Claims are created, and subsequently circulate, when banks make loans: interest payments drain money from circulation and into capital).

Thirdly, the system favours vast capital projects destructive of the natural world: slow & responsible development by saving-and-lending is disabled.

Fourth, artificial markets are created and fed by collusion between governments and capitalists. For instance, the ability of governments to recklessly borrow provides assured clients for the arms industry; and the ability of banks to create capital for assured markets creates a ready supply of arms.

Fifth, when capital can be cheaply created to buy machines, and when human employees come with heavy tax burdens, an artificial advantage is given to machine labour over human labour. Unemployment is exacerbated.

Sixth, power deserts elected representatives and lodges with money pure and simple. ‘Representative democracy’ becomes a managerial front for a system favouring one group – a non-productive group – at the expense of all the rest. Moreover, the favoured group enjoys power without responsibility for ‘money is power in its most liquid form’. Next to the power of created capital, the power of voting once in a while is a pitiful paper doll confronting a mechanised army.

This is a summary of Chapter 4 of my book In The Name of the People published 25/02/13.

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