Citizens Reform Center

["Points to Ponder" is heard every Monday at 6:45pm EST at www.therealpublicradio.net.]

May 11, 2009

Welcome to points to ponder — sparking thoughts to ignite actions.

I am Dianne Ell, your hostess tonight.

The next 15 minutes is sponsored by the Citizens Reform Center, also known as CRC.

If you would like more information about our mission of helping people, please visit our website.

I hope that you had time this past week to ponder on where and how the banks have kept their secret of creating money openly ….in plain site. Perhaps you got to look at a copy of the book Money & Banking 6th Edition, By David R. Kamerschen or The Federal Reserve Bank of Chicago’s publication, Modern Money Mechanics. And if you weren’t able to actually look at the book hopefully you had a chance to Google them and read some excerpts. As we closed last week I said we would be pondering the deep mysteries of creation….money creation, that is.

Let’s take a look at what our favorite dictionary says. According to Webster’s New World dictionary, the third edition, the definition of create is quote “to cause to come into existence; bring into being; make; originate” and if we look at the definition of creation it states “a creating or being created anything created; especially something created by the imagination; convention, design etc..” For many of us when we think of the word creation we think biblically of God creating the world…. creating something from nothing and as you can see in our first definition it says that specifically “to cause to come into existence, bring into being”.

Let’s compare that definition with the one in the Black’s Law dictionary sixth edition. Its definition of create is “to bring into being; to cause to exist; to produce; as to create a trust, to create a corporation”

And as we look at these two we see that they both agree and in fact use the same words quote “to bring into being”.

Let me just remind you about some of the things we went over last week. We looked at. Dr. David R. Kamerschen’s, book ECONOMICS which he wrote along with Richard B. McKenzie, Professor of Economic from the University of Mississippi; and Clark Nardinelli, Associate Professor of economics from Clemson University .

We found this on page 192: “Today, in industrial nations like the United States, money is created principally through the commercial banking system. Banks create money; they create it every time they make a loan.”

So let me just rephrase that sentence according to the definitions that we just looked at it. It would read “today, in industrial nations like the United States, money is brought into being principally through the commercial banking system, banks bring into being money , they bring it into being every time they make a loan.”

Also let’s take a quick look a The Federal Reserve Bank of Chicago’s publication, MODERN MONEY MECHANICS that we spoke of last week.

Reviewing the statement on page 3 that said : “The actual process of money creation takes place in the banks.”. And reword it according to our definition “the actual process of money being brought into being takes place in the banks”

A quick look at the booklet :Our Central Bank: The Chicago Federal Reserve’s reference that can be found in the “Money Manager” section:

“the Fed works to control money at its source by affecting the ability of financial institutions to “create” checkbook money through loans or investments..”

Let us again use our definitions “the Fed works to control money at its source by affecting the ability of financial institutions to bring into being checkbook money through loans or investments”

And the last one that we want to look at is The Federal Reserve Bank (FRB) of New York’s publication, I BET YOU THOUGHT, the sentences on page 5 that we read: quote “Demand deposits are the nation’s most common form of money, comprising about seventy percent of all money in circulation. This checkbook money is bookkeeping money created mainly by the nation’s commercial banks.”.

And we just rephrase that last sentence “this checkbook money is bookkeeping money brought into being mainly by the nation’s commercial banks”

And as we go to page 27 we noted in summary Quote : “Banks create money by ‘monetizing’ the private debts of businesses, individuals and governments. That is, they create amounts of money against the value of those IOUs.”.

And this is the last one that I want to revisit but listen to this quote now “banks bring into being money by monetizing the private debts of businesses, individuals and governments. That is they bring into being amounts of money against the value of these IOUs”

Is your brain rebelling yet? Is it trying to wrap around the idea that we… people, institutions…. especially banks can create something out of nothing, from nowhere, nada …?

Part of the reason we can’t begin to comprehend this is we were taught in school that it is impossible to bring something into existence unless we already have the ingredients.

For instance, if you want water you are going to need oxygen and hydrogen. Elements that already exist. We can not create the hydrogen nor the oxygen..we have to go get it and then merge them to get the water. God creates and man rearranges.

But banks have learned how to circumvent that. If you or I did what the banks do we would be convicted of counter fitting and/or fraud.

What they do is so simple it will amaze you.

Let’s just walk it through. You go into the bank and ask for a loan. By definition a loan is to be granted the use of something from someone else. In return you promise to give it or the equivalent value of it back and to compensate the person for their not being able to use it.

Now back to you at the bank. After checking you out the bank says yes. So what do you think happens? Many people assume that the bank dips into one of its money accounts ..that is any of its accounts that has in it a balance of substance,,,money…the same kind that you have put into your checking and/or savings accounts. And that after they give you the “loan” they will have less “money” to give to the next person who wants one.

But that wouldn’t be creating money and that’s what all the books say the banks do when they give out a loan. They “create” money. They don’t use any of their assets nor those of their depositors.

So lets go back and see what happens after they say yes. They have you sign a “ note” which is a promise to pay back the amount you will be getting and the interest the bank will get paid and how the payments should be made. So far so good ..no creating here here……until……

The bank’s loan officer takes your note and goes to the teller’s window. He hands the teller your note and explains that he needs a cashiers check or whatever motive of exchange that you agreed upon for this new loan. The teller takes your note stamps it for deposit only and puts it into their drawer. Now they must make the correct bookkeeping entries and this is where the creation comes in. Keep in mind what we said from the book I BET YOU THOUGHT, by the Federal Reserve Bank of New York. The part of the sentence that said “This checkbook money is bookkeeping money created mainly by the nation’s commercial banks.”. Think about the word “bookkeeping”. This fraud, this counterfitting..is done by a simple bookkeeping entry.

The teller has received your note and is putting it in their drawer and in order to balance must make a bookkeeping entry. This bookkeeping entry is about to do something that none of us can do …. it is going to create money. The teller accepts it as if it were cash into their drawer as they create and credit a demand deposit account for that same amount. Then they debit the demand deposit account and issue a check for that amount of money. At no time is the money withdrawn from the banks net worth account.

This transaction is entirely different than if you gave me an IOU and I reached into my pocket and gave you the money replacing it with the IOU. My net worth would be less now for having giving you the cash.
This isn’t what happened with the bank their net worth never changed.

The paper the teller put in their drawer becomes an asset to the bank, it is no longer a form, but has been monetized, in other words viewed as currency; money and put into the bank as an asset depositing it into a “demand deposit account” also known as a DDA. They debit the DDA account to give you the check in the amount of the loan. If you wish it to be deposited into your checking account it is still a debit to the DDA account and a credit to your checking account also known as a “demand deposit account” a simple transfer in the account ledger.

The rule in banking is that there must be a credit for every debit and vice versa a debit for every credit in order to balance the books. The other fact that we must remember in the world of banking and anyone who uses GAP, general accounting principles, this formula:

ASSETS = LIABILITIES + NW

I’ve tried to make this a very simple however if you visit next week make sure you bring a paper and pencil as we will go step by step through the procedures the banks use to create money.

It’s no wonder that the average person has trouble grasping this the text books I have on my shelves dedicate whole chapters to the creation of money .They have subtitles such as Multiple Deposit Creation, Influences on Multiple Deposit Creation, and Overviews of Bank Lending and Money Creation.

The bottom line is that we need to do our own due diligence. We can no longer trust those in authority blindly. Turn on any news channel… open up any newspaper and you can find the names of people who were once thought to be the epitome of fiscal responsibility. These people are now just trying to shorten their jail terms.

We must bring back the accountability and open audits of these institutions that we rely on.

And even though you may find yourself getting a headache by thinking about the creation of something out of nothing in the financial realm tried to ponder on this. Do a Google search on money creation and see where it takes you. Come back next week and we will go through the ledger accounts and show you exactly how this is done remember to bring a pen and paper because it is easier to look at this than to try to imagine it.

And here’s a reminder if you need help with an FDCPA lawsuit it is on the way. CRC’s Mickey Paoletta will be holding a 6 week teleconference with a comprehensive study of the ins and outs of such a suit.

Visit our website at www.citizensreformcenter.com for full details. You can also call 212-631-5886. Thank you for listening and have a great night.

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