The Money Deception.

Posted in Finance by earthling on December 9, 2009

Please note that this blogpost was written 5 years ago. Over that time, I have researched the issue far more and recognised that this is not the full story and that, in fact, the fundamental issue lies in the fact that banks DO NOT create money but we do, When I wrote this blogpost, I saw a part of the problem as, essentially, the whole problem while there still existed niggling doubts about something I felt I could not quite put my finger on. Now, since late 2012, those doubts/issues have been resolved by way of the understanding of Mathematically Perfected Economy which describes the entire issue perfectly and “irons out” all the questions/issues which perturbed me before. MPE and the more correct explanation of what is going on is written about here.


Let’s start with the United Kingdom Parliament and an excellent summary of the WORLD’S issue. No it is NOT only the UK’s issue:


It is important that you read the above memo to the UK Parliament and House of Commons Treasury regarding the Banking Crisis and how the entire scam has come about, before continuing…

Ok, done I hope?

Next. Just in case you have some doubts regarding whether the Reverend is correct in his assertions or not. The following are excerpts from the FEDERAL RESERVE BANK OF CHICAGO’s book entitled “Modern Money Mechanics”. The Bank describes it as a “Workbook”:

Who Creates Money?

Changes in the quantity of money may originate with actions of the Federal Reserve System (the central bank), depository institutions (principally commercial banks), or the public. The major control, however, rests with the central bank.

The actual process of money creation takes place primarily in banks.’ As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them.

People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment.

These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money.

More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.

Transaction deposits are the modem counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could “spend” by writing checks, thereby “printing” their own money.

What Iimits the Amount of Money Banks Can Create?

If deposit money can be created so easily, what is to prevent banks from making too much -more than suffcient to keep the nation’s productive resources fully employed without price inflation? Like its predecessor, the modem bank must keep available, to make payment on demand, a considerable amount of currency and funds on deposit with the central bank. The bank must be prepared to convert deposit money into currency for those depositors who request currency. It must make remittance on checks written by depositors and presented for payment by other banks (settle adverse clearings). Finally, it must maintain legally required reserves, in the form of vault cash and/or balances at its Federal Reserve Bank, equal to a prescribed percentage of its deposits.

The public’s demand for currency varies greatly, but generally follows a seasonal pattern that is quite predictable. The effects on bank funds of these variations in the amount of currency held by the public usually are offset by the central bank, which replaces the reserves absorbed by currency withdrawals from banks. Oust how this is done will be explained later.) For all banks taken together, there is no net drain of funds through clearings. A check drawn on one bank normally will be deposited to the credit of another account, if not in the same bank, then in some other bank.

These operating needs influence the minimum amount of reserves an individual bank will hold voluntarily. However, as long as this minimum amount is less than what is legally required, operating needs are of relatively minor importance as a restraint on aggregate deposit expansion in the banking system. Such expansion cannot continue beyond the point where the amount of reserves that all banks have is just sufficient to satisfy legal requirements under our “fractional reserve” system. For example, if reserves of 20 percent were required, deposits could expand only until they were five times as large as reserves.

Reserves of $10 million could support deposits of $50 million. The lower the percentage requirement, the greater the deposit expansion that can be supported by each additional reserve dollar. Thus, the legal reserve ratio together with the dollar amount of bank reserves are the factors that set the upper limit to money creation.

Let us assume that expansion in the money stock is desired by the Federal Reserve to achieve its policy objectives. One way the central bank can initiate such an expansion is through purchases of securities in the open market.

Payment for the securities adds to bank reserves. Such purchases (and sales) are called “open market operations.”

How do open market purchases add to bank reserves and deposits? Suppose the Federal Reserve System, through its trading desk at the Federal Reserve Bank of New York, buys $10,000 of Treasury bills from a dealer in U.S. government securities.

In today’s world of computerized financial transactions, the Federal Reserve Bank pays for the securities with an “electronic” check drawn on itself! Via its “Fedwire” transfer network, the Federal Reserve notifies the dealer’s designated bank (Bank A) that payment for the securities should be credited to (deposited in) the dealer’s account at Bank A At the same time, Bank A’s reserve account at the Federal Reserve is credited for the amount of the securities purchase.

The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank A’s books are matched by $10,000 of the dealer’s deposits that did not exist before.

See illustration 1.

How the Multiple Expansion Process Works

If the process ended here, there would be no “multiple” expansion, i.e., deposits and bank reserves would have changed by the same amount However, banks are required to maintain reserves equal to only a fraction of their deposits. Reserves in excess of this amount may be used to increase earning assets – loans and investments.

Unused or excess reserves earn no interest Under current regulations, the reserve requirement against most transaction accounts is 10 percent. Assuming, for simplicity, a uniform 10 percent reserve requirement against all transaction deposits, and further assuming that all banks attempt to remain fully invested, we can now trace the process of expansion in deposits which can take place on the basis of the additional reserves provided by the Federal Reserve System’s purchase of U.S. government securities.

The expansion process may or may not begin with Bank A, depending on what the dealer does with the money received from the sale of securities. If the dealer immediately writes checks for $10,000 and all of them are deposited in other banks, Bank A loses both deposits and reserves and shows no net change as a result of the System’s open market purchase. However, other banks have received them. Most likely, a part of the initial deposit will remain with Bank A, and a part will be shifted to other banks as the dealer’s checks clear.

It does not really matter where this money is at any given time. The important fact is that these deposits do not disappear. They are in some deposit accounts at all times. All banks together have $10,000 of deposits and reserves that they did not have before. However, they are not required to keep $10,000 of reserves against the $10,000 of deposits. All they need to retain, under a 10 percent reserve requirement, is $1,000. The remaining $9,000 is “excess reserves.” This amount can be loaned or invested.

See illustration 2.

If business is active, the banks with excess reserves probably will have opportunities to loan the $9,000. Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts. Loans (assets) and deposits (liabilities) both rise by $9,000. Reserves are unchanged by the loan transactions. But the deposit credits constitute new additions to the total deposits of the banking system. See illustration 3.

How Much Can Deposits Expand in the Banking System?

The total amount of expansion that can take place is illustrated on page 11. Carried through to theoretical limits, the initial $10,000 of reserves distributed within the banking system gives rise to an expansion of $90,000 in bank credit (loans and investments) and supports a total of $100,000 in new deposits under a 10 percent reserve requirement.

Page 11 Illustration:

Now, if you give all of this some thought, you will very quickly conclude exactly how we are getting shafted MASSIVELY by paying a debt (our own ones and the National Debt) which is an interest payment on money created out of nothing.

Bear in mind that those who create that money end up with the principle AND interest. WHERE does the money come from to pay the debt interest on the principle?

Again, it is BORROWED and created out of nothing from those same people who loan it to us. Therefore, every single country under the label “Western democracy” and under the IMF is forever and ever (Amen) indebted to?

We can NEVER get out of that debt because the money we seek to pay the debt off comes from the same source who lent it!!

Now think of the Treaty of Versailles and the debt that Germany were in (to who? :-)). A man named Hitler recognised how to lift his country up again (even though he MAY have been one nasty dictator – I’m very very unsure about that now) and started to have GERMAN banks print GERMAN Marks INSTEAD OF borrowing from those who the debt needed to be paid back to – therefore spiralling Germany into a never ending debt trap.

Those who had loaned the money to Germany (just as is happening today in the USA since the Federal Reserve Act of 1913 and the UK since the 1600s) didn’t like the idea of Germany issuing its own currency to pay back the loans and along came WW2.

Now think of today and why, over the past decades and particularly now, the UK is being told to sell off it’s actual natural assets (and who is and has proposed all of these sell offs to the UK Government over the decades?).
Why is this happening? Because the UK’s GDP is piss poor. Why? Because our industrial and manufacturing base has been decimated and the ONLY “industry” worth much in the UK today is?
Perhaps also the Defence Industry. An industry which exists to kill people.

Why was Libya brought into the fold of “Western Democracy”?

We’re told (propaganda) that Libya agreed to non proliferation of their nuclear weapons development (do you remember much about Libya having one the way we hear about Iran today? I don’t) in 2003.

But this is a smokescreen.

The fact is Gaddafi “sold out” and signed the IMF Articles of Agreement VIII.

If Iran did the same tomorrow, there would be no more “Iran are a rogue nation and scary”.

Then think of Cap and Trade and the Carbon Tax, offsets etc.

It is transparent when you see it folks. Just dig and keep digging and when you see it and you pick up on the deep deception of it all – scream it from the rooftops and share it because these sick sick people behind this, who have started wars and ended them and in the meantime made fortunes out of it while they have then been able to redefine the borders of the world and who lives and who dies, need to be condemned to life sentences. Make no mistake about that.

8 Responses

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  1. John O'Sullivan said, on December 10, 2009 at 12:10 am

    Very thought provoking – you just need to sort out the broken graphics links.

  2. earthlinggb said, on December 10, 2009 at 12:25 am

    John, the graphics are showing just fine when I check the post. ??

  3. David said, on December 29, 2009 at 11:24 am

    Very informative. Thank you.

  4. Eddie said, on March 12, 2010 at 1:45 am

    A good article laid out in layman’s terms.
    I am glad you pointed out how Germany lifted itself from zero “credit” to Europe’s industrial leader and had completely rebuilt the infrastructure with full employment in 5 short years. this link explains it in more detail
    Also Mary Croft’s FREE ebook explains Banking, “law” and so so much more. I have shared this as much as I can because this information is so important to set the world free.
    Also glad you understand the politics of all this. It is to implement this fraud on a global scale to enslave us all.

    Best wishes

    • earthlinggb said, on March 12, 2010 at 1:55 am

      Cheers for that Eddie. I purposefully attempt to put it in layman’s language as far as possible because the idea is to capture the imaginations of those who have not yet “awakened”. I’ve read and heard much from Mary Elizabeth Croft but I’ll also take a look at the poketheeye link. Thanks for that.

  5. Weidgeillinia said, on May 28, 2010 at 4:07 pm

    Just want to say what a great blog you got here!
    I’ve been around for quite a lot of time, but finally decided to show my appreciation of your work!

    Thumbs up, and keep it going!


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