----- Original Message ----- From: John Hermann <[EMAIL PROTECTED]> To: John Hermann <[EMAIL PROTECTED]> Sent: Friday, 12 November 1999 8:59 PM Subject: 100% MONEY > Economic Reform Australia > ERA EMAIL NETWORK > > 100% MONEY > by John Horrocks, > ERA NSW > > > 100% MONEY, designed to keep chequing banks 100% liquid; to prevent > inflation and deflation; largely to cure or prevent depressions; and to > wipe out much of the National Debt > by IRVING FISHER, LL.D., Professor of Economics, Yale University. > > On the very cusp of the 1929 bust, leading to a 4 years of "Meltdown", the > US's most illustrious economist at that time, said: "All the fundamentals > are very sound". His 'Mea Culpa' was this most famous publication, produced > in March 1935 (available in the NSW library). The foreword written by > Robert H. Hemphill, former Credit Manager of the Federal Reserve Bank of > Atlanta, gives us an insight into this perverse, unsustainable system. > > > To the "man in the street," or to one whose wages, salary or income is paid > in currency or coin, banking appears to be a remote subject, in which he > can have little direct interest. To such a man it may be a great surprise > to read that the amount of his wages, salary or income depends on the total > of loans outstanding by the commercial (private) banks of a nation. And yet > such is the case. Certainly this is the most vital question of the moment. > You who read this are not buying the things you normally purchase for the > very simple reason that you haven't the money. Your friends and > acquaintances seem to be in the same boat. What does all this add up to ? > > If your personal difficulty and that of all the people you know or know of, > is lack of money, is it not obvious that the central national difficulty is > but the aggregate of the difficulties of all its citizens, that the > scarcity of money is our paramount national problem? We have ample > producing and distributing facilities to supply everyone with an abundance > of the essentials for a high standard of living, and we are desperately > anxious to produce, but we haven't sufficient money to effect the exchange > of our goods and services. > > It is only in very recent years that we have collected sufficiently > accurate data to calculate the amount of money which must be in circulation > to make possible a given national income. We find that this ratio is about > one to three, and persists at that figure with remarkable constancy, under > widely varying conditions. > > To bring the significance of this important fact home to you--- there must > be one dollar in money or some useable substitute (like credit) in > circulation for each three dollars of your annual wages, salary or income, > and there must be an additional dollar in circulation for each three > dollars of the annual income of every other individual in the nation. > According to my estimates, which are in substantial agreement with those of > other students, we had in circulation in 1929 twenty-seven billions of > dollars in cash and demand bank deposits, (M1: a measure of the > transactional means of exchange) exclusive of an estimated amount employed > in stock speculations. Our national income for 1929 was eighty-one billion > dollars. This eighty-one billions was but the total of your wages, salary > or income and that of all other individuals in the nation. > > In 1932 the volume of currency, coin and bank deposits in circulation had > shrunk to approximately sixteen billion dollars, and our national income > had shrunk in precisely the same proportion, to approximately forty-eight > billions of dollars, and of course this means that the average personal > income had shrunk proportionately. Currency and coin issued by the > government, play a minor part in the transaction of our business > > The vast majority of our transactions are paid by cheques drawn against > the demand deposits, or chequing accounts, in commercial banks. These > deposits are created by the commercial banks and the people who borrow > from them. The borrower gives the bank his note (usually a pledge to repay > the loan) and the banker credits the face value of this note as a > "deposit" (a liability) on the books of the bank. Cheques drawn against > this deposit are charged against the borrower's account and credited to the > account of the persons who receive them. This person again "spends" this > "deposit" and it continues to circulate through an average of the accounts > of twenty-five or more persons or firms per annum. In this way, these book > credits operate as a synthetic substitute for money (legal "promise-to-pay > money" as Prof. John Hotson would say) performing every monetary function.( > the same as Fed. Res. legal tender does). > > The total business of the nation is simply the aggregate of the > transactions we effect by means of these borrowed credits and of the > trifling amount of cold cash that circulates.( the Fed. Reserve money is > sometimes called the "Monetary Base".) > > Neither the banker nor the borrower ordinarily realize that the loan just > completed, is putting into circulation that much new money, or as our > reactionary friends would say, "inflating the currency", by the amount of > the loan.(or that the substitute is created from "thin air"). Neither the > banker nor the borrower ordinarily realize,(because this is secret stuff, > not known to academics, some economists and 99% of politicians) that he is > starting an endless chain of successive transactions which will continue as > long as this credit substitute for money remains in circulation.(but that's > the problem, at every recession or depression it disappears, back to the > "thin air" from which it came.) > > When a bank loan is paid, someone draws on one of these deposits to pay it, > and of course so much of that deposit goes out of existence, and a train of > successive transactions which would otherwise have been made with that > portion of that deposit ceases. (NB, the lender only creates the principal, > not the interest, causing shortage). If all bank loans were paid, no one > would have a bank deposit, and there would not be a dollar of currency or > coin in circulation.(our "Money Supply" would vanish). > > This is a staggering thought . We are completely dependent on the > commercial banks. Someone has to borrow every dollar we have in > circulation, cash or credit. If the banks create ample synthetic money we > are prosperous; if not, we starve. WE ARE ABSOLUTELY WITHOUT A PERMANENT > MONETARY SYSTEM. When one gets a complete grasp upon this picture, the > tragic absurdity of our helpless position is almost incredible--- but there > it is... > > If all the 14,500 banks of the nation begin calling their loans > simultaneously, the aggregate destruction of this synthetic money is > enormous. Almost immediately, practically no one seems to have the normal > amount of money to spend. The business of the nation decreases so rapidly > that merchants and manufacturers are suddenly compelled to decrease their > forces and lower the wages of the remainder. This is a "depression. "Its > severity depends on how many of these loans are called and paid--- how much > of our principal money is destroyed by the payment of these loans. It is a > baffling and mysterious disappearance of money-- mysterious because of > course the general public (and 99% of politicians) is unaware that the > 14,500 banks of the nation are busily destroying our principal substitute > for money-- bank deposits. > As the depression deepens, prices and values decline and the banks are > forced into further and more drastic efforts to preserve their solvency. > Ruthless foreclosure becomes the only doctrine consistent with their > self-preservation. > > Our statesman have consistently declined to study this question (our media > and press are gagged) and provide a SOUND monetary system, an adequate > permanent currency, scientifically calculated to expand consistently with > our increasing population and our increasing ability to produce. > > Somehow, the intelligent public of this nation must learn the fundamentals > of this question. We can no longer depend upon our banking system to > furnish all the money we have to do business with. The principal reason > this depression continues is that the banks are not lending, and as a > result, the money with which to expand business does not exist. It is so > simple that business men largely overlook this fundamental situation and > continue to search for some economic "fourth dimension" to explain our > distressing situation, but there is no mysterious force defeating our > efforts to exchange goods and services. We haven't the money nor any > substitute in circulation, and that is the essence of the story. (now, 1999 > this refers to Japan in spades.) > > In Professor Fisher's book (and now William Henry Pope's latest book, "All > you > MUST KNOW about economics, a COMER publication) he presents in lucid detail > the operation of this erratic banking-monetary system, and the obvious > remedy. It is the most important subject intelligent persons can > investigate and reflect upon. It is so important that our present > civilization may collapse unless it is widely understood and the defects > remedied very soon. It is your problem and mine. > > Robert H. Hemphill --Former Credit Manager of the Federal > Reserve Bank of Atlanta, Georgia, U.S.A., 1935. > > > Facts: Between 1935 and 1950 under its first Governor, the Bank of Canada > (government owned) financed the end of the Great Depression, Canada's > massive participation in World War II, and their post-war > industrialization. The Bank of Canada created up to 80% of the transactions > money (M1) that was added to the money supply and 37% of the addition to > (M3) the broadest definition of money. > > In 1936 New Zealand was the first democratically elected country in the > world to get back to full employment, before the war brought most countries > to full employment, by using their government owned bank, the Reserve Bank > of New Zealand. > > Australia led the world: in 1911 the Commonwealth Bank of Australia was > established by the Fisher labour government to be the People's Bank. During > World War I it created 350 million pounds to fund the war, without interest > and free of debt to be repaid by future generations, and before he died in > 1923 Sir Denison Miller the first governor had provided millions of pounds > at miniscule interest for roads, tramways, harbours, gasworks, electric > power etc. In an interview with a deputation of unemployed in 1921, he > affirmed that similar sums could be made available for productive purposes. > > However a change to the Bruce-Page coalition government led to a Bank Act > amendment in 1924, and labour's charges that it was "nothing less than an > attempt to kill the bank" and Mr Makin to declare "The government > undoubtedly desires ... to place the bank in subjection to private banking > institutions, and to prevent it from fulfilling the real purpose for which > it was established". "It is to be prevented, by unsympathetic > administration from functioning in the interests of the general public." In > 1937 an Australian Royal Commission into the "Monetary and Banking System" > under the Chairmanship of Justice Napier said as follows ... "The > Commonwealth Bank can make money available to Governments and others on > such terms as it chooses, even by way of a loan without interest, or even > without requiring either interest or repayment of principal". So money was > provided at 1% or less to fight World War II and later to get Australia > back to full employment. A Labor Govt. halted it by accepting > recommendations of the Campbell committee in the early 80s. > > The Hon. Paul Hellyer has made the point that during last year only 1% of > the $30 billion increase in Canada's money supply (her life-blood) was > permanent legal tender. The journal of the Committee on Monetary and > Economic Reform, ER, illustrates graphically the abandonment of the > foundation of sound legal tender, leverage of Canadian private banks in > 1946 $7.233 billion assets/ $653 million legal tender, 11.1%, in 1998 > $1,456.965 billion/ $3,600 million legal tender, a leverage now of 404.7%. > During the depression of the 30s, Henry Ford 'Senior' said: " If the people > understood the monetary system there would be a revolution before tonight". > And their ignorance is in part attributable to misleading statements such > as "banks lend you other people's savings"! In fact only about 6% of our > money is actually lent, the rest, 94% is created, as previously explained > by a banker who should know... even if most of us don't... As W.F. Hixson > says: There is almost no intermediation. > > You would expect that our elected representatives in parliament, very well > paid party or independent politicians, should know where our money comes > from. The appalling fact is that they don't. In Canada only 4 MPs know! And > out of 100 academic, business and media friends of Paul Hellyer...None! > > Former Labor Health Minister the Hon. Dr Doug. Everingham told me that he > was over 40 years of age before he discovered the "Truth" and it wasn't > from Sydney University or his Parliamentary colleagues. Sir Arthur Bryant > C.H., C.B.E. a very eminent British Historian, guided me to an American > publication "The Truth In Money Book", which not only pointed out the flaws > in the present system but revealed how it can be made to work: at present > hidden from us, poor citizens. We don't have to put-up with an economy that > not only breaks down every 10 years, but which will eventually break down > altogether. As Professor of Economics John Hotson warned us in 1993 the > present system is unsustainable, because the debt and interest on the debt > grows much faster than the real income with which to pay that debt. And it > really doesn't have to happen. > > This is why ERA, COMER, and a host of concerned people round the world > advocate a fundamental reform of our monetary system. W.F. Hixson warns us > that total interest payments have increased from 5% of GNP in 1950 to 20% > today, 4 fold in 50 years. It is obvious that in time all our income will > be going to service that debt. We have a debt-money system that brings > money into existence but only the Reserve Bank can provide it interest free. > > ----ooOoo---- > ---------------------------------------------------------------- This is the Neither public email list, open for the public and general discussion. 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