Under the current fractional reserve banking model, operating in almost every country across the globe, money is created in the following way:
- The central bank decides to increase the money supply by say £1m. It does so by purchasing government bonds/treasury bills from a dealer in government securities.
- In order to pay for these bonds the central bank creates a liability against itself – a simple accounting exercise.
- The dealer’s bank account is credited with £1m as payment for the bonds.
- £1m of credit money that did not previously exist, now exists in the banking system.
- Because the government bonds are interest bearing, the government has effectively borrowed the credit money for its banking system from what is effectively a private corporation at interest (there can never be enough money in circulation to pay back this loan because the interest payable on the government bonds has not yet been created – hence the perpetual and intentional cycle of boom and bust).
- Income taxes pay the interest to the bondholders.
- The central bank can control the supply of credit money by buying and selling its holding of government bonds at will. In this way does one single corporation control the entire economy.
- It is the promise of the future labour of mankind which underwrites this entire operation. The ‘security of the person’ (birth certificate) of every man, woman and child alive today is collateralized to fulfil this function, based on the presumption that we all will agree to stand as surety for the debt money created. Here we see again the true purpose of the birth registration process… indentured servitude.
The £1m created by the central bank can then be expanded to a theoretical £10m through the following process:
- The high street bank(s) who received the £1m from the dealer’s transaction is allowed to lend £900,000 of the original £1m, assuming a 10% fractional reserve requirement.
- However it does not lend any of the original £1m, if it did this no new money would be created. Instead it keeps the whole £1m in its vault and creates, out of thin air, up to another £9m to satisfy the 10% requirement.
- It can do this because it accepts promissory notes [loan application forms and offers] in exchange for credits to the borrowers’ transaction account.
- The bank lies to the public, telling them that they are making a loan (that must be paid back at interest).
- The bank then accepts the loan application form/offer as a promise to pay in accordance with the relevant national Bills of Exchange Act (much like the ‘promise to pay’ bank notes in your wallet).
- Because they now have something of value from the ‘borrower,’ they are authorised by the banking system to create out of thin air the credit money that the ‘borrower’ wishes to ‘borrow.’
- In essence the bank has simply converted the ‘borrowers’ promissory note into useable credit money. They have not lent a single penny of their own money or of anyone else’s money. 100% of the monthly payments you make on a loan, mortgage or credit card are effectively profit to the banking system.
- It is the promise of future labour of the man acting as the legal fiction ‘borrower’ that increases the supply of fictional credit money in the fractional reserve system.
- Essentially it is us, the alleged lenders, who make the loan to the bank, not the other way round.
This credit expansion process is a massive fraud upon the people.
In reality we have never been debtors, and any notion that we are the true creditors is a fictional distraction. We simply are, and have always been, creators; we are the source of all fictional credit money currently in circulation. That power has always been ours. Now, at last, it’s time to cut out the middle man.