Money and Debt  

There is a fundamental truth about money and debt which few people know and even fewer believe that something should be done about it.

Those who have taken action to change the situation have invariably been assassinated or otherwise silenced if they did get close to being effective. The truth is so monstrous that it is unbelievable, it is something that we would rather not think about, more so because we have "experts" who should know all about it, so why would any one of us "non experts" even bother to try and figure it out?

The problem

We are quite aware of the problem, it is in plain sight, it is the solution that escapes us, probably because we think the problem is so big we cannot solve it.

Now the problem is, that neither governments nor the vast majority of people have money. Maybe that sounds like an exaggeration but if we think about it some more, it is the gospel truth. Governments, whether liberal, socialist, conservative, democratic, whatever you may call them, do not have money. They are taxing us to death and yet they are making debts. And most of them are already so deeply in debt that there seems to be hardly a hope to pay off what was borrowed.

A sizeable percentage of all taxes collected, different from country to country but in every case considerable, goes towards "debt service" (that is what the government calls the paying of interest on it's debt), before even discussing the "budget", which really is only about how to spend the rest.

As far as people go, I don’t think you have to look very hard to see families struggling to make ends meet, even though there is no lack of willingness to work. Sometimes both man and wife have a job; family life and children suffer, and in many cases there still is barely enough to pay the bills and take a holiday.

You might say that that’s quite normal, it has always been like this, and nothing can really be done about it. — You see? That is exactly what we are programmed to think.

The problem is there, but it is so big and so prevalent in everyone’s life, and it is such a "complicated" problem, that we must leave the solution to the "experts".

Right? No — wrong.

The first step to solving a problem?

We must recognise it is there.

Start observing economic reality around you. Find out how much money your government spends on "debt service". Find out how much the developing countries have to pay to service their debt. Observe how many people from developing countries are emigrating or rather are immigrating into your country in search of economic "relief". You will be shocked.

The cause

Now that we have recognised that there is a problem, we must take the next step. That is, we must find the cause. One thing we cannot do is to turn to the "experts", because if they knew, they would have told us long ago and something would already have been done to remedy the appalling state of affairs.

It is not that the cause is unknown. A few people and a couple of organisations try desperately to inform us about it. Only — they do not have access to the public media, and if they had such access, and started an effective information campaign, chances are that they would meet an ugly fate.

I suppose you are getting impatient to know what that cause might be, and whether it is something that we can, as simple citizens of the earth, act upon. It is no good finding the cause of evil if it is something that nobody can do anything about. You might as well have saved your effort for something more rewarding or more pleasing.

Without beating around the bush, here is the hot potato: Money is being created not by our governments, but by a private monopoly run by the (private) banking corporations.

It is as simple as that.

How so, you might ask, and why would this be a problem?

Let's deal with one thing at a time.

The creation of money

It would seem natural, that money is created by the State, and in fact most Central Banks seem to be owned by the State and run by it. I say "seem" because, to all intents and purposes, it is an apparency. They are almost constituting a "fourth power" in addition to the three legally constituted and well known "traditional" powers, legislative, executive and judicial.

When the State needs money, it does not order the Central Bank to credit some money to the treasury’s account. The State has only two ways to obtain money. One is taxation of it's citizens, the other is borrowing from the banks.

When the Central Bank issues money, this is done in the form of a loan. The State has to borrow this money, and must promise to repay it, with interest.

The same is true of course for a private person who needs money borrowing from a commercial bank. The bank is happy to loan, as long as you can show you have security, and promise to repay with interest.

How can the banks "create" money? That is a good question. Is it not the State's printing office that prints all the banknotes?

Banknotes, when they are printed, are considered the property of the Central Bank. They are not given to the State to spend, but are brought into circulation against a corresponding debt. Anyone wanting some of those notes to spend, has to "buy" them by giving up some of their credit. And in any case, most of the money in circulation (more than 90%) is not banknotes but "credit".

When you go to your bank asking for money, the loan you get is created right there in your bank. The "money" consists of figures on your bank account, and it can be spent writing checks, giving an order to transfer or drawing the cash. Banks only have to have a small percentage of their loaned-out money actually available. The rest can be paid out just by moving some figures from one account to another. The important thing to know: Money is created just by inserting some numbers into a computer.

In practice, it works like this: For every 10.000 a bank gives out as loans, 1000 or 2000 have to be deposited at the central bank. That means, if a bank collects 100.000 in deposits, it could keep 10.000 for liquid cash, put 90.000 into deposit with the central bank, and it is then allowed to create 900.000 of fresh money just by writing the figures on someone’s accounts!

In the case of the government needing money to spend, the procedure is slightly different, but the result is the same. The government has to issue papers that promise interest and repayment. Those papers are "bought" by the banks, who "sell" them to their wealthy clients, or who may also keep them, and the government gets credited an equivalent sum of money.

The irony here is that the government, who should by rights be the issuing authority of the money that circulates in the country, has to borrow the money from privates (through the bank) and that is has to pay interest for this.

Now we start to see why the government never has money, and why much of our taxes go "off the top" of the budget, towards debt service.

The diabolical mechanism

What happens, when a debt gets repaid? Now this is interesting. The interest on the debt is of course the property of the bank. The amount that was loaned out and has now been paid back is destroyed. Just as it was "created" it is now "uncreated" or destroyed at the moment of extinction of the loan. So your bank can create money out of substantially nothing, it can cash in the interest, and then it can uncreate that money, having subsequently the possibility of repeating the cycle with another willing customer.

If you ever wondered where the banks get the money to buy the best and largest buildings in town, here is the explanation!

If this seems unjust, wait for the diabolical part.

An economy needs money so that goods and services can be exchanged. If there is too little money goods will remain unsold, prices will fall and we call this deflation. If the scarcity of money becomes serious, eventually the economy will go into recession, that is, production comes to a halt, people lose their jobs, misery starts to reign. So it is very important that the amount of money in circulation is at all times sufficient for people to buy the goods and services that are being offered.

If on the other hand, too much money is available, inflation, which is a general rise in prices that diminishes the "buying power" of money, is the result. Inflation is as undesirable as deflation, and it would be best if money were stable in it's buying power.

At this time, government has only indirect means, to assure such stability, because it is the banks who can determine how much credit to create.

Also with the government unable to create it’s own money, the only way to make sure there is enough money to buy the goods that are on offer, is to continue taking loans! Of course that means to continue to pay interest! That is why governments never have enough money, and why we have to be taxed to the limit of endurance to pay for debt service, in addition to all other government expenditures. Diabolical indeed. A private money issuing monopoly run through Banking corporations: first of all the "central banks" and then, in a chain, all the other banks to follow. It is our banking laws that allow banks to create credit themselves, instead of money being issued by the government, for the people.

The solution

Having found the exact reason for misery and economical hardship, and having described it, a solution becomes immediately visible.

Banking laws should be changed to exclude the autonomous creation of credit by banks except for the issue of new currency by the Central Bank, to be created as a credit, not a debt. The creation of money must return to the control of the people and must directly benefit each one of us.

How to exclude the creation of credit by the banks? Simple. Instead of requiring a 10% or 20% deposit to the Central Bank for every loan given by banks, a 100% deposit should be required. That means, a bank can collect the savings of it’s clients, it can deposit them at the Central Bank and it can then, and only then, give out loans up to the same amount it has deposited.

Now as to the creation of money having to return to the control of government, or actually to the control of the people, this is an exquisite problem. First and foremost, a mechanism must be available which allows to keep track of prices on a continuous basis. Having such a mechanism, it is now possible for the money issuing institute (the Central Bank) to exactly control the buying power of money, putting inflation and deflation under its direct control.

In accordance with the principle that the amount of currency in circulation must exactly match the amount of goods and services on offer, we can now eliminate inflation and keep the currency stable, by one simple mechanism. The issuing authority is instructed to stabilise the price index. This is done by decreasing liquidity at the first sign of increasing prices, and by increasing the amount of money in curculation by the issue of new money when prices start to fall.

There is absolutely no need to have price instability!

It is important to know that inflation is caused by the fact that more money is in circulation than is necessary to buy the goods and services that are available, and deflation is caused by the opposite — too little money in circulation.

This has been known for decades, only that with the money issuing authority in the hands of the (private) bankers instead of a (public) central issuing authority, it was very difficult to fine tune the monetary mass to keep pace with the fluctuations of economic activity.

It is really as simple as that, a centralised money issuing authority that is responsible for keeping prices stable, will be able to do just that by regulating the issue of new currency.

Credit money versus debit money

Today, when money is created, it is created in the form of credit for the banks, and is issued in the form of debit to whoever takes the loan, private citizen or government. Of course the debt must be repaid, the money is considered to be "the bank's money", and of course for that reason we must pay interest. I call that debit money and I have already pointed out that this debit money is the cause of much — if not all — of our economic suffering.

Credit money, on the other hand, does not have these drawbacks. The money should be issued and be given — yes, given not as a loan, but as a rightful share in the development of the economy, to each and every citizen. When money gets created, it was not the banks that worked for it, but the people, and so quite rightfully, the people should become the owners of the money once it is issued.

Social credit

One could call such a system a social credit system. In fact, the term "social credit" was coined by a certain Clifford Hugh Douglas, and has been promoted by a Canadian named Louis Even, who has founded a regular publication to bring the philosophy of social credit into public consciousness. Social credit is probably more than what I am describing here, but credit money would certainly be an important part of it.

So when money is issued by the central issuing institute, does it not belong rightfully to all of us who have contributed in one way or another in bringing about economic growth? We produce, we consume, we live, we have ideas, we have children, we teach, we learn. All those activities and others make up the country’s economic life and so it would seem quite logical that the benefit from the issuance of money should not go to a few private bankers, but to those who cause the economy to grow in the first place!

Action to take

Apart from the necessity to end the private money making monopoly by the banks by requiring a 100% reserve for loans given, it must be decided how to organise the creation of money in the future, and how to make sure that each citizen does get their fair share of the increase in economic activity.

Some might say that the State should be given power to create money and that the money created should be the State’s to spend. There is a certain appeal to this logic, but still — it does not respect the principle of giving each citizen their fair share.

Since we are all contributing, in one way or another, to the economic activity of the country, I shall relate here an idea elaborated by an Italian, Prof. Giacinto Auriti of the University of Teramo. His proposal was actually presented as a bill to the Italian Senate some years ago. It is extremely simple and the translated text is given below:

"Article 1

At the act of emission of currency, money is the property of the (our country’s) citizens and shall be credited by the Central Bank to the State".

"Article 2

A social income code is assigned to each and every citizen and it is through this code that all citizens shall be credited their share of income from the emission of currency and from possible other sources of social income".

Auriti, a professor of law, who has made the above proposal, is quite explicit when describing the current situation. He explains that our monetary system is the biggest fraud in history. The people are being defrauded, says Auriti, by twice the total amount of currency in circulation, because not only have they been denied their rightful share in economic development, but when issuing currency, the money was issued as a debt, adding damage to insult, as it were and inflicting a double loss on the populace.

A word of warning

Please do not believe that such a drastic change to our financial system as proposed here can be brought about by politicians, even willing as they may be, if they do not have overwhelming public support.

It is the responsibility of each one of us, now that we have discovered the cause of economic misery and hardship, to bring about a change, primarily by making politicians aware of the situation and by providing the support they need.

You are free to copy this article and give it to your friends, but you should also think about practical and effective action.

I will not make proposals here for what you should do, but will leave this entirely up to you. The choice is yours, just do not say that you did not know.

Josef Hasslberger
Rome, Italy
September 1999



  1. Michael Journal "Social Credit, for a healthy economy" Maison Saint-Michel, 1101 Principale Street Rougement, Quebec Canada JOL 1MO tel. (514) 856 5714 (450) 469 2209, fax: (450) 469 2601

  2. Prof. Auriti "Value and structure of money"

  3. Josef Hasslberger Articles on "interest"
    What is wrong with our Economy?
    Interest Suffocating the World
    Economy in Need of Change

  4. The Moneymasters. Book and Video and further information at: