A PRIMER FOR MONETARY SOVEREIGN NATIONS

The world has been conned for years; for centuries in fact; and it is time to do something about it. Whether we like it or not, our lives revolve around money. Despite what various people claim, when it is all boiled down, the only real value and purpose of money is as a convenient medium of e change. !t really doesn"t matter what form money takes, whether it is a special kind of stone, carved bits of wood, pieces of gold or silver, bits of pretty coloured paper, some figures written in a book, a few keys punched on a computer keyboard, or the issuing of credit, its only real value is whether it can be e changed for something else. !t is important to understand that money is not made by the agriculture or manufacturing industries, or in fact, any other type of productive enterprise. !ndustries and farming create products and services, which, if they can, they e change for money from their customers. !t is an obvious fact that, in a closed community, it is impossible to operate on a profit system without continually increasing the supply of money. !ndividual #ations can be compared to closed communities in this respect, but because of the concerted push for globalisation and free trade agreements over the past years, the whole world has now come to resemble a closed community. $ence, the international monetary crisis that is now engulfing the world. %s they say, all history is legend and all legends become history so, it is probably true that &ayer %mschel 'auer (othschild did say this in )*+), ,Allow me to issue and control a nation's currency and I care not who makes its laws. $e is then reputed to have followed up that very accurate statement with this remark. 'The few who understand the system, will either be so interested from its profits, or so dependent on its favours, that there will be no opposition from that class.' (othschild was a banker, but the -uestion is, how did he get in the position to issue and control a nation"s money supply. This brings us to the ne t bit of historical legend; the birth of modern banking through what is known as the fractional reserve system. The story goes ! in the days when a lot of the money supply was decreed as gold and silver coins, people who accumulated a lot of these coins needed a safe place to keep them so they couldnt be stolen. "omebody came up with the idea of a very secure warehouse, and offered to look

after these e#tra coins for a fee. The warehouse man gave the customer a receipt for the coins that were stored in the warehouse, and guaranteed they would be kept safe, and available, whenever the customer wanted them back. /arrying around heaps of heavy coins could be a risky and inconvenient chore, especially when the customers found they could use their receipt to buy the things they wanted. !nitially, this was all fair and above board because, the number of receipts issued by the warehouse man was e-ual to the amount of coins he kept in his warehouse. 'ut as the acceptance of the receipts became more common, the warehouse man, being an astute entrepreneur, began to realise that all his customers never came to collect their coins at the same time. 0o; putting two and two together, the warehouse man realised he could make five by selling someone a receipt which they could then use to buy things. $e knew he would always have enough coins in his warehouse to cover the e tra receipt if needed, provided only, that all the customers didn"t create a run on his warehouse if they became aware of what he was up to. %s time went by, the warehouse man began doing some calculations and came up with an average figure for the number of times his customers actually came to collect their coins. 1rom this calculation he worked out how many additional receipts he could sell without running too great a risk of being caught for, what was essentially, dealing in stolen goods. Thus, the fractional reserve system was born. !f the records showed that only )23 of his customers collected their coins at any one time, the warehouse man figured he could issue e tra receipts for the +23 that were always in the warehouse. 'ut then he twigged to what (othschild discovered. !f he brought the authorities into the scheme, they would be so enamoured by the process that he could kill two birds with the one stone. 1irst, he would protect himself from the law and prosecution, and secondly, he could convert the whole of the coins in his warehouse to represent the )23 reserve he needed to have on hand. This would represent an enormous increase in the number of receipts he could then sell to customers. While the warehouse man of this story probably started off making his money simply by selling receipts, gradually he found there was more money to be made by converting the receipts to a loan and charging interest on the advance. !t is this latter development that is now standard practice in the banking industry. The private banks, with the protection and permission of the government, can create credit as interest bearing loans, virtually out of thin air, provided each bank has a specified amount of actual cash available as a reserve.

The actual mechanics of the banking process, in the way the reserve funds are handled, and the clearance of money transfers between the banks, is a bit more complicated, but the above e planation is, fundamentally, how the system works. &ost of the current world economies survive on the basis of credit, but it is the ownership of this credit which has never been properly understood, or defined. When it is properly analysed, credit is really 5ust the conversion of future effort into an amount of money that is available today. The thing about credit, and future effort, is that they only pertain to people. !n truth, all credit is the property of the people because; only people are capable of producing products and services that will create the ability to repay the advance. % loan is a legal agreement where the borrower promises to repay the money at a later date from the productive effort e pended in putting the money to good use. !n this respect, all credit is really public property, and that is the rational and logical 5ustification why a publicly owned banking system should be the foundation of any financial system. 'ut it seldom works that way, despite the fact that most nations have the power and authority to create their own sovereign and independent supply of money. %s we all know, moneylenders go back to biblical times, and probably long before that, but what is not e plained is what is this money they were lending and where did it come from. Whatever it was they were lending, it had to have two undeniable properties, it had to be generally acceptable for the buying of goods or services, and the people had to be confident that the tokens they used were not false tokens. 0o; we are dealing with two main issues relating to the creation of any form of money supply, one, that the people must have confidence in the tokens, and two, the tokens must have some sort of guarantee that they are genuine. !t is fairly obvious that the authorities in charge of a nation, which in our modern democratic era, is the 6overnment, is the only authority in a position to provide the confidence and guarantees that the money tokens will be genuine. To extrapolate this further, it means that onl a !emo"rati" Go#ernment of an in!epen!ent nation has the po$er, an! the people%s authorit , to "reate the suppl of mone to a"t as their nation%s "on#enient me!ium of ex"han&e'

So( $h !oesn%t it $or) this $a * To answer this we need to look at some of the relatively recent history, especially from the view of the 8nited 0tates as the 80 Dollar is the current (eserve currency of the world" financial system +hat%s stuffin& it up* The problem goes back several centuries and grew to the e tent that the )+th century became known as the age of the (othschild9s. !t was estimated they controlled half of the world9s wealth. While their wealth continues to increase today, they have blended into the background and the (othschild name is used only for a small fraction of the companies they actually control. The (othschild9s had enormous influence over the 'ank of :ngland, but in );)<, they supported the creation of the 0econd 'ank of The 8nited 0tates, which received its charter from the fledgling /ongress. This was a new privately owned form of a /entral 'ank for %merica and was authorised to supply the money to be used by the nation. 'ut even as early as );24, Thomas =efferson understood the danger of allowing the private banks to control the nation"s money supply and is -uoted as saying, $I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up round the banks will deprive the people of all property until their children will wake up homeless on the continent their fathers con%uered&. To his immense credit, >resident =ackson vetoed the 'ill to e tend the charter of the 0econd 'ank in );74, and it ceased to operate in );7<. When that happened, the fractional reserve system moved like a virus through the other chartered banks and they each began to issue their own form of bank money as interest bearing loans. ?tto von 'ismark, the /hancellor of 6ermany, remarked that slavery was not the only cause for the %merican /ivil War. The high financial powers of :urope had decided on breaking up the 8nited 0tates long before the /ivil War started. They were afraid that if the 80 remained as one nation it would attain economic and financial independence, and upset the world financial domination by the :uropean bankers. Their plan was to split %merica and hand it back to 'ritain and 1rance. The /ivil war began on the )4th of %pril );<) and lasted four long years. >resident @incoln needed money to finance the war effort, but the bankers would only offer loans at 4A3 to 7<3, which @incoln declined. /olonel Dick Taylor solved the problem by getting /ongress to pass a bill to

authorise the creation of treasury notes as full legal tender. To distinguish this new legal tender they were printed using green ink on the back, hence the origin of the greenbacks. The solution worked so well that @incoln seriously considered adopting it as a permanent policy, which would have been great for everyone e cept the 'ankers. The 'ankers -uickly realised how dangerous this policy would be for them. The @ondon Times, in );<B wrote an article to discourage this creative financial policy, but in fact, highlighted its benefits for the people. The article stated, "If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe." 'ut the 'ankers fought back and lobbied /ongress so successfully that the #ational 'ank %ct was passed. 1rom that point on, the entire 80 money supply was to be created as a debt to the bankers who would buy 80 government bonds and issue the 6overnment"s bank notes. That system remains in place to this day and is operated by the 1ederal (eserve 'ank. The greenbacks continued in circulation as legal tender until )++A when they were finally phased out. This process is adopted by all the /entral 'anks of the Western nations and has continued despite the fact it relies on acts of >arliamentC/ongress, which can be repealed at any time, if and when, the people rise up and demand that action. %t the time, it was well known that @incoln intended to repeal the #ational 'ank %ct after he was reDelected, but he was unable to do this in the A) days available to him before he was assassinated. +hat $e nee! to )no$ a,out the Mone S stem The fact that a nation"s 6overnment has the power and the authority to create their nation"s money supply also means they have the authority, and responsibility, to control every aspect of the nation"s financial system. %lthough the private banks have long e isted, and have become an integral part of the finance sector for most nations, it is unrealistic to not to retain their services and incorporate them into a completely reformed system. $istory has shown, despite the misleading propaganda blaming the 6overnment, and especially over the last century, the private banks have

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been the direct cause of the repeated boom and bust cycles, and financial disasters that have been inflicted on the nations around the world. These disasters have occurred despite the creation of the supposedly independent /entral 'anks that were designed to prevent the disasters. This has happened because of the control the private banks have been able to wield over the 6overnments, e actly in line with (othschild"s pronouncements above. The time has come to reverse this disastrous position by demanding the people"s 6overnment assert their given authority to administer the nation"s financial sector for the benefit of the people, and not for the benefit of the banks. %s the 6overnment has the sole authority to create the nation"s supply of money, they have it in their power to properly control the financial system and prevent it from controlling the nation and its economy, e actly as %braham @incoln did in );<). %s stated above, the truth is, it really doesn"t matter what is chosen for the medium of e change as long as it fulfils the two essential conditions of its acceptance by the society and its guarantee of authenticity. !n the past, gold fulfilled these conditions up to a point, and for some people, but it ran into problems because of its limited supply. 0ilver was a good backup, but it too had a limited supply, especially as the population grew and the economy e panded. 1or many years the financial systems of the world operated on what was called the gold standard. What this meant was the amount of money created by the 6overnment depended on the amount of gold they had available. !n actual fact, this was -uite a ridiculous system because, if the government didn"t have enough gold available they were forced to borrow from the private sector, and pay interest on the borrowings. &ostly, they didn"t actually borrow physical gold, the 6overnment 5ust gave the private money lenders an !?8, which is now called a 'ond andCor a Treasury #ote, and the lenders, in effect, let the 6overnment open an account with the private 'ank. !t"s all rather nebulous in terms of the complicated details of how it worked, but the end result has always been crystal clear. The Go#ernment &ot into !e,t an! finishe! up pa in& more in interest than the amount the ori&inall ,orro$e!' +hat this meant $as that the Go#ernment ha! to "ontinue ,orro$in&, , rollin& o#er the IO-%s as the ,e"ame !ue ,e"ause, there $as ne#er enou&h .mone % a#aila,le to pa ,a") $hat $as ,orro$e!' The private banks loved this system for two main reasons. The first, because, it was really a bookkeeping e ercise of transferring numbers from one account to another. 'ut the other reason the private banks were

willing to lend to the 6overnment was because, the 6overnments always had the power to ta their people. The gold standard system eventually fell apart in )+*) when >resident #i on was forced to renege on the promise to foreign holders of 80 'onds that they could e change them for gold from 1ort Eno in the 80. There simply wasn"t enough physical gold available to cover the #otes and 'onds the 80 6overnment had been issuing. Thus, everything about the now abandoned and obsolete gold standard system changed on that fateful day of %ugust )Bth, )+*). 8ntil then, all the world"s ma5or currencies had been linked to the 80 dollar, and thereby to gold, through an agreement hammered out, originally in )+AA at 'retton Woods in the 80. 1orty four countries signed the agreement that established the World 'ank, set the gold price at F7B an ounce and the 80 dollar as the basic currency against which all the other currencies of the world were compared. ?nce that very nebulous and fragile remaining connection to gold was severed, all the world"s currencies became paper money, subse-uently known as fiat currencies, and legitimised through their designation as legal tender by the 6overnments issuing the currency. The !eli,erate misrepresentation to maintain the Status /uo The /apitalist political system that currently dominates the world, and that includes the so called /ommunist countries as well, are tied into the pseudo science of :conomics. That"s why we need to ask, What is this pseudo science of :conomics trying to achieve. (ational people 5udge theories, policies, and practices by how well they satisfy the intentions that led to their implementation. 8nless the intentions are known, no sound 5udgment can be made. ?ver the past 422 years that classical economics has been used as the basis of orthodo capitalism, it has not brought a stable level of prosperity to the peoples in any of the countries where it is practiced. 0purts of apparent prosperity have been continuously destroyed by economic crashes that, over and over again, have ruined the lives of millions. &aybe, the intent of :conomics has never been the promotion of the people9s prosperity. When viewed in a completely ob5ective manner, the overwhelming evidence confirms that, for the past 422 years, the intent of capitalism has consistently been to protect the wealth of the privileged and to maintain the status -uo. Today, this evidence is even more starkly presented with the international kowtowing to the banking fraternity around the world.

Today, the world is in crisis through the default of 6overnments. These 6overnments have granted uncontested power to a relatively small group of financiers and allowed them to dictate and control the issue of tokens used to facilitate trade. This is e actly in line with (othschild"s statement above. Allow me to issue and control a nation!s currency and I care not who ma"es its laws.# The current and established debtDmoney system makes every society sink into financial debt in proportion to its development and enrichment, which it achieves through the productivity, enterprise and initiative of its citiGens. &any countries today are certainly richer, in real wealth, than they were B2, or a )22 years ago. 'ut when comparing the current national debt of those countries today against what it was B2 or a )22 years ago, the increase is both, astronomical and growing. If these "ountries are so mu"h ri"her, $h are the $allo$in& in e#er mountin& !e,t( some to the point of ,an)rupt" * !t is the people who have produced this enrichment by their labour and their knowDhow, but it is they who are collectively indebted for the result of their own activities. The schools, the municipal works, the bridges, roads and every other part of the public infrastructure, is built by the people. These are the builders of the country. The people who supply them with the needed materials are the manufacturers of the country. >eople can be employed in enriching their society through building public works because there are other kinds of workers who produce food, clothes, shoes, who supply all the things and services re-uired for the wants of the constructors and manufacturers. %nd let"s not forget the :ducation system, and all the teachers who have a responsibility to educate the young so they are e-uipped to face the challenges of the future. Thus the whole population of a country, by its work of different kinds, produce all those developments. !f goods must be obtained from abroad, nationally produced goods are e ported in an effort to balance the degree of international trade. The great parado of this system is that citiGens are ta ed to pay the interest and return of capital that 6overnments borrow from the banking system to build those schools, those hospitals, those bridges, roads and other public works. The people, as a collective, are thus compelled to pay for what they produce to increase the wealth of their nation. This was the gold standard system, which had been imposed on the nations of the world by the finacial heirachy and its compliant 6overnments.

'ut in )+*), all that changed. The world was forced to adopt fiat currencies as their official legal tender. 8nfortunately, very few governments, academics and economist understood the the new parameters that came into effect. They all continued to falsly, if not deliberately, apply the parameters of the gold standard to the new system. Thus, the 6overnments continued the unnecessary issuing of government bonds and continued their reliance on ta ation and borrowing. ?f course, the banking fraternity enthusiastically endorsed this approach. They did all in their power to blindfold the general public about how the fiat currency system could work to the people"s advantage in every nation that has the sovereign power to create their own money supply. The Proper +a a Mone S stem "an an! shoul! +or) Despite all the gut wrenching, hoo ha and fear mongering about paper money and printing presses, the fiat currency system has given the world its first opportunity in many centuries to initiate a money system that can truly work for the benefit of the people. >resident @incoln knew e actly how a fiat currency system worked back in );<) when he created the greenbacks. $e is -uoted as follows, "The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government!s greatest creative opportunity. $y the adoption of these principles, the long%felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. &oney will cease to be the master and become the servant of humanity. 'emocracy will rise superior to the money power." !t can do all of the above, and totally eliminate any need to borrow money from the private sector. !t can allow the government to create interest free money to fund it"s approved and agreed programs, without burdening any future generation. The fiat currency system offers the nation the ability to achieve readilyDavailable economic prosperity that has previously been restricted. The idea that a physical policy cannot be carried out unless

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there is sufficient money available is an illusion fostered by the 'anking industry. When unused productive capacity and massive unemployment arises to create a situation of poverty amid plenty, H it becomes obvious D this is the time to -uestion the basic flaws of the financial system. S stems $ere ma!e for men an! not men for s stems' The interest of man is self !e#elopment an! that is a,o#e all s stems $hether theolo&i"al, politi"al or e"onomi"' % lot of people around the world are slowly beginning to grasp the significance of the changes to the financial system that was ushered in by that decision in )+*). That decision completely altered the parameters applying to the way money can be created and used. !t transformed the monetary system into a system that has the power to benefit every member of the society by relieving them, and their society, of the ever growing burden of debt. The fiat currency system is not a freeDforDall and must adhere to a strict discipline on fiscal policy, of which an important aspect should always be, the responsibility for maintaining sustainable levels of employment and stable prices. That policy also depends on what is accepted as the primary purpose for creating a government in the first place. The 1iat currency system provides the opportunity to irretrievably alter the status -uo, and at last, make the financial system work for the benefit of all mankind, and not 5ust an elite few at the top. The potential and the opportunity are there, but it will not evolve of its own accord. There are two words that define what modern economics is all about; those two words are &onetary (overeignty. !t is not a theory or a hypothesis, or a philosophy. !t is the essence of how 6overnment financing actually works. A Monetaril So#erei&n &o#ernment has the ex"lusi#el unlimite! po$er to "reate its so#erei&n "urren" . Monetar So#erei&nt is the foun!ation of e"onomi"s' Anyone who doesn)t understand the differences between &onetary (overeignty an! monetary non%sovereignty, doesn)t understand economics.

+hat Monetar So#erei&nt Means

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The following * points very briefly e plain what &onetary 0overeignty meansI ). A Monetaril So#erei&n entit has the unlimite! a,ilit to "reate its so#erei&n "urren" . :very 6overnment of a monetary sovereign nation has the ability to mark up numbers in any respective denominated book of account, including its own bank accounts. !t can never run short of its currency, and any debts denominated in that currency, no matter how large, are easily serviced. 4. The previous gold standard restrictions on the world"s 6overnments were officially abandoned on %ugust )B, )+*). With the demise of the 'retton Woods %greement, the AA nations that were party to that agreement automatically had their monetary systems converted to fiat currencies. 'y contrast, the States, 0ounties, "ities an! #illa&es, ,usinesses an! the people of those nations are, an! al$a s ha#e ,een, monetaril non1so#erei&n' They can run short of money, and they can borrow money and run up debt, but they can"t create their own legal tender in competition to the 6overnment. 7. The euro nations, apart from the -2, are monetaril non1 so#erei&n, and they sacrificed their monetary sovereignty the day they signed the :uro pact. 'y being forced to use a common currency they were compelled to borrow the money" from the /entral 'ank and immediately created a national debt. A. To!a %s mone 3 irrespe"ti#e of $hat !enominations are use!, $hether the are !ollars, en, euros et al, onl appear to exist in ph si"al form' %ll the coins and paper money are really 5ust receipts with numbers designating the denomination of the currency used by the different countries. %ll of today"s money is 5ust accounting notations, and the designated currency is 5ust numbers on a balance sheet. B. A Nation that has the unlimite! a,ilit to "reate its o$n "urren" means the &o#ernment !oes not nee! an in"ome' !t does not need to borrow money, or to impose ta es in order to get money. 'oth borrowing and ta ing are relics of the previous gold standard era. The private sector is monetarily nonDsovereign and they do need income. 0tate and local 6overnments get this income from ta es and borrowing, while businesses and people get theirs from wages and salaries, sales, investments and borrowing. <. A Nation%s &o#ernment "reates their "urren" , spen!in&' !t buys goods and services from the private sector, and it employs people who in turn spend their income in the private sector. :ffectively, money is delivered to the private sector by crediting the client"s bank account, thus increasing the savings capacity of the private sector. An &o#ernment

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that sets up a tax re&ime is effe"ti#el !estro in& the sa#in&%s "apa"it of the pri#ate se"tor' *. +hile a monetar so#erei&n &o#ernment has no nee! to ,orro$ from the pri#ate se"tor, if it !oes so throu&h the issue of Treasur Notes, or ,on!s, it simpl represents a "han&e in the sa#in&s me"hanism for the pri#ate se"tor' The loan occurs by debiting the private sector bank account and crediting the 6overnment account. $owever, the private sector does derive additional benefits to its savings capacity when the 6overnment spends the money it has unnecessarily borrowed. ;. An Go#ernment !efi"it of a monetar so#erei&n nation is merel the a""ountin& !ifferen"es ,et$een taxes re"ei#e! an! the mone a &o#ernment spen!s' % deficit actually represents the amount of money the government has added to the economy. !t is possible to have government deficits without debt, and it is possible to have government debt without deficits. !n essence, debits and credits for a monetary sovereign nation are really 5ust notions applied to the system of double entry bookkeeping. The !eli,erate !ea!l !istortions of E"onomi" Poli" While the above points relate to any monetary sovereign nation, there are a number of commonly held distortions about how a financial system works, Warren &osler has described these distortions as innocent frauds in his book, 0even Deadly !nnocent 1rauds of :conomic >olicy, but there is little that is innocent about them. They are all deliberately promoted, as is the eighth fraud of comparing the macro economy of a 6overnment with the micro economy of households and businesses in the private sector. !n brief, these fraudulent distortions are as followsI Frau! No 4I That &o#ernment finan"e is suppose! to ,e similar to househol! finan"e' >rivate and household spending can only occur through earning an income, using savings, andCor borrowing, which means they must finance their spending prior to the fact. 6overnment spending is e actly the opposite because, a 6overnment, as the issuer of the currency, can simply spend without the necessity of seeking funds in advance. This is 5uite an irresponsi,le frau! that is !eli,eratel promote! to shore up the status 5uo' Frau! No 67 That a monetar so#erei&n &o#ernment nee!s

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to tax an! ,orro$ first ,efore it "an spen!' 0uch a government can always make any and all payments in its own currency, no matter how large the deficit, or how few ta es it collects. A monetar so#erei&n &o#ernment "annot ,e"ome insol#ent' !n truth, taxpa ers !o not fun! an thin& in a fiat currency system D governments fund spending by spending H ta es simply reduce the savings capacity of the private sector. Frau! No 87 That to!a 9s !efi"its ,ur!en future &enerations $ith &o#ernment !e,t' :verything produced in the future will be consumed in the future. $ow much will be produced depends on how productive the economy is at that time. This has nothing to do with the public debt today; a higher public debt today does not reduce future production D ,ut if it moti#ates $ise use of resour"es to!a , it ma in"rease the pro!u"ti#it of the e"onom in the future' $owever, all the discussion and debate about debt for a monetary sovereign 6overnment using fiat currency is a deliberate fraud. !t aims to hide the fact the economy is no longer operating under the parameters of the gold standard era. The financial sector desperately needs to keep the public in the dark that 6overnment borrowing, and ta es are no longer necessary for the 6overnment to function. Ta ation and borrowing were intrinsically tied to the government"s management of its gold reserves, which in turn, determined the nation"s capacity for growth. !n essence, this was -uite a ridiculous situation and unrelated to the needs of a growing economy. !f insufficient gold were available to a nation, its growth could only be achieved by going into debt and borrowing funds from private sources. The two monetary systems are very different and the economics of the gold standard cannot apply to the modern monetary system. 8nfortunately, most commentators, professionals and politicians, cannot grasp the significance of this and continue to use the old logic when dealing with the current policy options. !t is a basic fallacy and prevents the sensible discussion about what the government should be doing. %ll the fear mongering about the siGe of the deficit and the siGe of the borrowings, and the logic of borrowing in the first place, are all based on paradigms that are totally inapplicable to the fiat monetary system. Frau! No :I That !efi"its a,sor, to!a 9s sa#in&' !n the real world, public deficits serve to increase the savings potential in the private sector. %ny government deficit always

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:J8%@0, e actly, the total net in"rease in the financial assets in the private sector, that is, businesses, households, residents and nonD residents. !t is an accounting fact, not theory or philosophy that 6overnment deficits must %DD e actly that amount to the nation"s savings potential. Frau! No ;7 So"ial Se"urit has promise! pensions an! health"are that it $ill ne#er ,e a,le to affor!' %ll the government does when it makes a 0ocial 0ecurity payment is increase numbers in the beneficiary9s accounts, and decrease numbers in the accounts used to fund 0ocial 0ecurity. There are no operational constraints on a government9s ability to meet all 0ocial 0ecurity payments in a timely manner. 0ocial 0ecurity payments cannot be a ,drain" on the economy, because the beneficiaries spend the money to purchase goods and services in the private sector. This is all part of the productionCconsumption chain. !t is a totally ludicrous argument to propose the privatising of 0ocial 0ecurity services in a monetary sovereign nation. Frau! No <7 That tra!e !efi"its !an&erousl in!e,ts a nation to the $hims of forei&ners 1 $ho mi&ht !e"i!e to "ut off the suppl of loans that the nation nee!s' %s already e plained above, a monetary sovereign nation does not need to borrow its own currency from anyone. 0o; a foreign entity that wants to use any accumulated currency of another country, may choose to buy that country"s 6overnment bonds andCor Treasury notes. !t would only do that if the returns were better than investing the e cess funds in other assets, or there is a benefit in supporting the foreign country"s currency. %ny trade imbalance means that one country has received physical products and the other country has received a heap of foreign money. A nations real wealth is assessed from all it produces and "eeps for itself, plus all it imports, minus what it must e#port. The claim that foreign trade imbalances dangerously indebts a nation to the whims of foreigners, and the risk of being deprived of loans the nation needs, is simply not applicable to a monetary sovereign nation. Frau! No =7 That sa#in&s are nee!e! to finan"e in#estment, an! thus lea!in& to smaller &o#ernment ,u!&ets an! less &o#ernment in#ol#ement in in#estment'

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There are two types of money usage in today"s world; financialised money used by the financial sector for gambling and profit taking, and money used for the production of private and public goods and services. The financialised money is used to blow inflationary bubbles in stocks, real estate and commodities that increase the costs of the real economy through price rises and greater debt repayments. This, ultimately, devours demand in the real economy. 6overnments are lobbied to endorse this through ta Dadvantaged savings incentives, such as pension funds, future funds, and all sorts of ta Dadvantaged institutions that accumulate reserves on a ta deferred basis. The really damaging impact of this fraud is the need to manage this massive pool of funds for the future beneficiaries. The trillions of dollars compounding in these funds are the support base of the dreaded financial sector. Thousands of fund managers use these vast sums of money to gamble on any available market. 1eeding on these Kbloated whales,K are the inevitable sharks D the thousands of financial professionals in the brokerage, banking and financial management industries who owe their e istence to this deadly fraud. Frau! No >7 That hi&her ,u!&et !efi"its impl taxes $ill ha#e to ,e hi&her in the future' %s stated in 1raud #o4, taxpa ers !on%t fun! an thin& because; a monetary sovereign government does not need to ta to get money. There are two points with this issue; first, corporations never actually pay any ta es as this cost is always built into their pricing structure. The second point is ta es reduce the purchasing power of the consumer. %s long as employment is used as the principle means of distributing purchasing power to the general public, it is in the nation"s interest to ma imiGe employment opportunities. This can be done through deficit spending andCor minimising ta es if unemployment levels are high. !t is indisputable that the dynamics of the monetary system is driven by the crucial relationship between government and nonDgovernment sectors. !t is this interDdependent relationship that allows the private sector to save and accumulate net financial wealth. The siGe of 6overnment is not really a crucial issue as long as the 6overnment operates in the interests of its nation. $ow those interests and policies are defined and implemented are the crucial issues. The Role of Go#ernment

)<

There are four a ioms that need to be accepted, if they are not, then the rest of this discussion is pointless. The first, as stated above, is that governments are created to serve a public purpose. !f that purpose were defined as advancing the public interest, then the guarantee of individual rights, the provision of essential services, planned and coordinated infrastructure, the nation"s health, its education, its financial and banking system and a 5ustice system, e-ually available to all, would come under this definition. What we can say without fear of argument is that governments are there for the benefit of the society, and society is not there for the benefit of the 6overnment. The other a iom is that 6overnments are not created to make a profit at the e pense of their citiGens. %ny government that budgets for a surplus is obviously profiteering, especially so in the case of a government operating on a monetary sovereign basis. 0uch a 6overnment can always fund any obligations to which it chooses to commit itself. !t can never go bankrupt, and can never default, unless it voluntarily chooses to do so for some totally irresponsible and vindictive reason. The third a iom is that the rational citiGens of a society consider they have certain inalienable rights to their freedom and liberty, which are protected by a constitutionally controlled government operating within a system of laws. The fourth a iom is that our society operates a mi ed economy with the government having certain identified responsibilities and obligations, but coe isting with a private sector, which is principally responsible for manufacturing, production, resource development, distribution, marketing and selling. !ndividual enterprise and entrepreneurialship are encouraged, but monopolies are prohibited, and the myth of free enterprise e ists only to the limits allowed by social standards, as proclaimed through government regulation. Thus, if a government, especially a monetary sovereign one, operates on the basis of these a ioms it is in a position to foster a healthy, competitive economy and a vibrant, productive private sector, capable of providing the level of employment to sustain the national and international consumption capacity, in keeping with the nation"s resources and demand. $owever, there seems to be one insoluble problem that is common to every form of leadership andCor 6overnment that has evolved throughout history. They all, without e ception, succumb to the power syndrome and act in a way that they always believe they are right. %s a result, they resent opposition, and often adopt e treme measures in suppressing it. 8sually, that has only been a shortDterm remedy as is evidenced by the continuous uprisings and revolutions throughout history.

)*

&odern day politics have developed a system called democracy which shrouds this resentment of opposition by officially allowing an opposition party to e ist. 8nfortunately, all political parties are tarred with the same brush, and they all resent opposition whenever they get to hold the reins of power. 0o far, no solution has been found to overcome this problem, but if a remedy is available that doesn"t involve violence, the best prospect lies in a /onstitution that properly limits the powers of the leadership within the rule of law. That, of course, presents another problem because; it necessitates an independent and incorruptible legal system that upholds the /onstitution. Mo!ern Monetar Theor ?MMT@ There are two prominent positions that need to be adopted if we are to understand the proper way a fiat currency system can be made to work. !n no order of priority, one position is to understand what is known as the &odern &onetary Theory, L&&TM and the second position is the establishment of publicly owned banks. The &odern &onetary Theory e plains how the economics of a &onetary 0overeign nation can be applied. There is -uite a large amount of information available on the !nternet, as well as in the print media that provides a detailed analysis, and e planation, of this theory. !n actual fact, it really isn"t a theory; it is much more like a practical blue print as to how the fiat currency system works. Juite a few prominent people are actively involved in promoting this information, and to name 5ust a few, >rof. 'ill &itchell, >rof. @ (andall Wray, 0tephanie Eelton, =. D. %lt, Dan Eervic, William E 'lack and Warren &osler. The foundation for &&T is the following 6overnments are created to serve a public purpose 6overnments have the overriding authority to authenticate a nation"s money supply and define what shall be used as legal tender. ?ne of the 6overnment"s economic responsibilities is to ma imise employment opportunities for every citiGen willing and able to work. That a properly controlled fiat currency system can work for the benefit of society without causing inflation or deflation. $owever, the one thing &&T does not address is the 1ractional (eserve system used by the private banks to create money out of thin air. The money created by these banks is always as interest bearing credit and advanced as a loan to the borrower.

);

When we look at the current money supply as it applies in today"s economy, on average, only about 73 of the money is in circulation as hard currency, that is coins and notes, while the +*3 is digital money created by punching keys on a keyboard. %ppro imately, two thirds of that +*3 is created by the private banks and the remaining third by the government. Thus, it becomes important to really e amine the role of 6overnment in respect to the economy in general and the financial sector in particular. What role does the 6overnment currently play and what role should it play. The Role of Go#ernment in respe"t to Finan"e an! the E"onom 0etting aside the problem relating to power and opposition, the issue is how best to make a nation"s economy work. %ll e"onomi" activity, but not necessarily physical activity, is conditioned by the amount of money available. Too much money leads to inflation, while too little leads to stagnation and recessions. The )e is to relate the mone suppl to the pro!u"tion an! "onsumption !eman!s of a &ro$in& e"onom ' %s long as that supply can e-uate to the goods and services available for consumption, then inflation does not become a problem. The weak link in that chain is the consumption demand. !t is obvious; there is absolutely no point in producing anything if it is not going to be consumed. 0uch production, whether it is in goods or services, is a complete waste of energy, resources, time and money if it isn"t consumed. Thus, it should become relatively clear that the ma5or concern for a society is finding the best and most efficient means, of distributing purchasing power to the general population. To date, no really effective solution has been adopted, although there are some very valid ones proposed. Emplo ment as the Primar Means of Aistri,utin& Pur"hasin& Po$er $istorically, employment has been used as the practical solution to the problem of distributing purchasing power to the general population. $owever, over the last two centuries, as the industrial revolution took hold, the remuneration from employment alone was no longer sufficient to keep pace with the -uantity of goods produced. The private banking sector leapt into the breach the filled the gap with an ine haustible supply of interest bearing credit. With the connivance of the government, they were able to create this credit, virtually, out of thin air. This free flow of credit was able to ensnare whole populations into a lifetime of debt. Thus, the modern consumer society, and all the vast improvements in every aspect of the standards of living, has been developed on this foundation of everDincreasing debt. @ike so many other aspects of life,

)+

debt is a two edged sword, if properly managed, it comes with its blessings, but if wantonly used, it can be an unforgiving curse. 'ut the point is, that despite the fact the last 422 hundred years has been progressively aimed at producing more with less human effort, in other words, putting people out of work, employment is still perceived as the most effective means of distributing purchasing power to the general population. %s long as this approach remains in vogue, it is incumbent on the part of the 6overnment to foster the best policies to promote employment for everyone willing to work. To do otherwise invites a host of social problems, starting with the loss of income, the increased costs of damaged physical and mental health; family breakdown; increased alcohol and substance abuse; increased crime rates; loss of skills, and various other side effects. !t is ridiculous for the 6overnment to claim that society must tolerate the pain and suffering associated with high unemployment, because it leads to a stronger economy, when that economy is only measured by the bottom line of the financial and banking sectors. %ny government that considers ma imising employment opportunities is not a legitimate responsibility has forsaken their obligations to their society. $ow can a policy that promotes suffering and hardship from unemployment be considered a good and moral policy. Finan"ial Options for a Go#ernment %s stated above, the supply of money available to the modern day nation is crucial in determining every aspect of its e istence, and the welfare of its society. ?bviously, the amount of money needs to be conditioned by some logical and rational parameters. !f, as is currently accepted, the nation"s 6overnment is the only authority authorised by the people to create legal tender then the 6overnment has the responsibility for establishing the necessary parameters. %t the moment, the investment side of the financial system has become a gigantic gambling casino through the creation of a multitude of dubious financial products. These derivative products have no productive benefit to the society, but do have an incredibly destructive potential for the financial systems around the world. The notional #alue of all outstan!in& !eri#ati#es no$ totals approximatel B4'4:: /-AARICCION' This means that the siGe of this unregulated derivatives market is something like 42 times the value of all products produced on the planet. $ow could supposedly intelligent people be party to such utter stupidity.

42

@ogically, this sort of thing should not be allowed to e ist, but if this is portrayed as an e ample of free market innovation, then it must be totally divorced from any 6overnment support or involvement at every level of 6overnment. The soDcalled free trade agreements championed by most politicians of all shades over the past few decades, has always been less about trade and more about restricting the policy options of governments through treaties. %lthough this derivative market is described as having a notional value; somewhere along the line, an enormous amount of fictional money has been created. $ow was this done. Who created it. Who allowed it to be created if the 6overnment is supposed to be the only authority with the power to create legal tender. !s there a way to defuse this enormous financial time bomb. What really would happen if these huge international investment banks were to collapse into the cesspit of their own corruption. $ow would it really affect the billions of ordinary people who have no connection with this soDcalled high finance. !f the answer happens to result in the 6overnments being forced to recognise the public purpose for which they are created, and to also realise they can actually make the financial system work for the benefit of the people, and not the bankers, might this not be a good thing. :very monetary sovereign nation must take full responsibility for the financial system they allow to e ist. 0o; what are the options available to properly control the money supply for a nation. The Parameters for "ontrollin& the Nation%s .Mone D suppl The first step is to establish the controlling parameters which dictate the amount of money a nation can rationally absorb without creating inflationary or employment problems. %s the basic purpose of money is to act as a convenient medium of e change that means it is intimately related to trade, and trade is directly connected to production and consumption. Thus, we arrive at the logical conclusion stated above, that any nation"s supply of money must use production and consumption as the parameters to monitor the rate by which money is created. These parameters must apply to both the private sector and the public sector. The financial needs of the public sector are relatively easy to determine when the public purpose of the 6overnment is defined as advancing the public interest, guaranteeing individual rights, providing the essential services of the nation, which includes the construction and maintenance of planned and coordinated infrastructure, the nation"s health, its

4)

education, its financial and banking system and a 5ustice system, e-ually available to all. +hat ten!s to ,e entirel misun!erstoo! a,out pu,li" spen!in& is that e#er !ollar spent en!s up in the pri#ate se"tor' %s the primary interests in the private sector revolve around the needs and wants of the individuals, this financing can be left to the private sector as dictated by market forces. %s stated above, the private sector is the domain of the manufacturers, of production, resource development, distribution, marketing and selling, all of which go to service both private and public spending. !n a rational world, production has one single purpose and that is consumption. !f production does not lead to consumption then the whole e ercise is a waste of energy and resources. To date, the consumption factors are a combination of income, savings and borrowing, but both optimised production and consumption are capable of being calculated to relative levels for determining the money supply. A Metho! of Monitorin& an! 0ontrollin& the .Mone D Suppl There is little dispute that a growing economy, and population, re-uires an e panding supply of ,money". This increasing supply of ,money" has to be related to the productive capacity of the goods and services re-uired by the e panding society. !f this applies, then the new ,money" will be backed by physical assets, and thereby, constitute the creation of a ,sound" money supply. The contention that ,sound" money can only be created if it is related to gold or silver, is a spurious argument that only applies if ,money" is treated as a commodity rather than the ,ticket" system which it really is. % 6overnment is in the position to establish a genuine, honest and practical banking system based on the creation of ,sound" money related to physical assets. The primary ob5ective of this system must be to serve the needs of the public in providing effective banking services. While the fractional reserve system is essentially a ,ponGi" scheme, it can be modified and properly controlled to serve the benefit of society. 'y reversing the current procedure, and instead of allowing the private banks to create ,new" money as they currently do, the 6overnment, on behalf of the people, creates this ,new money" and sells it to the private banks. ?bviously, the creation of this ,new money" would be a simple bookkeeping, or computer spreadsheet activity, e actly as it currently applies. The private banks would be set up in the same manner as presently in place, by obtaining capital from investors through the issuing of shares, debentures or bonds. %s legitimate registered businesses, they would be eligible to apply for, and purchase, ,new money" from the government at a low enough price to allow them to reDsell it to their

44

customers. The amount of ,new money" they re-uest would be set as a ratio of their capital, plus money they hold in deposit from their customers. That ratio can vary depending on the economic activity of the nation. %s the economy grows so would the customer"s deposits, thus allowing the banks to apply for additional ,new money" to support the continued growth. The necessary controlling regulations would be related to the nation"s productivity and consumption factors, which the 6overnment would monitor as the primary determination for the creation of ,new money". Esta,lishin& a Pu,li" Ean)in& S stem 0pecifically, the 6overnment would set up a publicly owned 'ank to monitor the nation"s productivity factors and handle the sale of ,new money" on behalf of the people. >ublic finance would be reserved for the publicly owned 'ank which could provide the necessary investment funds, at cost to the 1ederal and 0tate 6overnments, and municipal organisations, in accordance with independently assessed costCbenefit analysis for any proposed pro5ects. The other ma5or role of the >ublic 'anks would be to monitor the financial parameters of the nation, logically on a 0tate by 0tate basis, and arrange the issue of new money according to the respective 0tate re-uirements and demand. Detailed information on the principles, benefits and practicality of publicly owned banks are being well promoted by many people, including 'llen (rown, a lawyer, who is the author of )The *ublic (ank "olution) and the >resident of the *ublic (anking Institute The arrangement for a controlled fractional reserve ,ponGi" system is a way of increasing the money supply in keeping with the needs of a growing economy. !t achieves two ma5or ob5ectives LaM it allows the private banks to operate in the private sector and LbM it gives the 6overnment the overriding control of the money supply that is conditioned to properly defined productivity measures. This would effectively control inflation as the volume of money would keep pace with the volume of goods and services available. The public sector would avoid the subse-uent unnecessary interest charges relating to bond issues and borrowing from the private sector. This would have a ma5or impact on the cost of 6overnment and municipal services. To ensure the private banks operated in a prudent manner and for the benefit of the nation, there would be a clear understanding that the

47

6overnment would not be a lender of last resort should a bank get into financial difficulties. >rivate 'anks would take out a level of insurance cover to protect their customer"s deposits as part of their standard business practice. !f a bank is properly managed, this should not present a problem. !f it couldn"t obtain the insurance, it would lose its licence to operate. The advancing of credit will always carry an element of risk for the lender. This can be mitigated to a degree by due diligence analysis andCor a re-uirement of the borrower to supply some collateral. Theoretically, there would be no restrictions on how a private bank used their funds, other than those imposed by their shareholders. %ny time private banks re-uest additional ,new money" they would need to present an audited statement of their accounts showing their current assets and liabilities along with proof of their reserve holdings. While the banks would have no direct control over the way their client"s use any credit given them, that risk would, in part, be covered by the collateral held and the reliability of their customers. %s the banks are fully aware they are entirely responsible for any financial risk involved, and cannot e pect any bailout or rescue package from the 6overnment, this should be sufficient for their shareholders to demand prudent management. 0ontrollin& the Mone Suppl , the Go#ernment >robably, the greatest concern for any reader who is unfamiliar with the terms &onetary 0overeignty and fiat currencies is the concept of a 6overnment having the complete monopoly to print any amount of money it desires. !t is an unfortunate fact that there are very few, if any, 6overnments in this world that function entirely for the benefit of their citiGens. !n every democracy, the 6overnment operates in the interest of the >arty rather than the nation as a whole. ?ther 6overnments operate in the interest of maintaining power and controlling the people. &onarchies operate in the interests of maintaining the status -uo, and the privileges and superiority of the aristocracy. To give any of these 6overnments the unrestricted power to create unlimited amounts of money can be a recipe for disaster. $owever, if the concepts proposed in this paper are in place, they would establish limitations on the amount of money a responsible 6overnment could create. 1or e ample, there would be no bailing out of the banks H the 6overnment would not be the lender of last resort. The obvious limit on

4A

how much the 6overnment could spend would depend on the goods and services available from the private sector. Defence spending would need to be restricted to what the term means H defence H and not war mongering aggression against other countries. &onetary controls would need to be constitutionally embedded relating the money supply to the parameters of the nation"s production and consumption capacity. The people"s inherent distrust of politicians, and 6overnments, stems from the potential for the corruption that is always associated with power structures. $istorical evidence 5ustifies that distrust, but it is not impossible to create a regulatory and administrative framework that would minimise the opportunity for corruption. So, $h !on%t Go#ernments 0ontrol their Nation%s Finan"e* The simple answer is H blackmail. %ny 6overnment that proposes to operate outside the established system is immediately threatened with sanctions and ostraciGed from the global market to the point that no international trade is allowed. %ll sources of foreign investment capital are froGen; as are any foreign investments or bank accounts that nation might have overseas. Three recent, and tragically clear e amples of what happens to nations that try to trade outside of the 80 dollar (eserve system are the illegal invasion and destruction of !ra-, the overthrow of 6addafi and the deliberate bombing of @ibya, and the sanctions against !ran because they set up their own bourse to trade their oil. While the 80 military has assumed the role of the world"s policeman, in reality, it is carrying out the policies of the cartel of /entral 'anks whose ape in the 'ank for !nternational 0ettlements L'!0M, located in 'asel, 0witGerland. '!0 was founded in )+72, and apart from being described as the most e clusive, secretive, and powerful supranational club in the world it is a private bank, owned and controlled by the worlds central banks, which are themselves, private corporations. The '!0 is, in effect, the central bank of all the central banks. While the '!0 currently has a membership of /entral bankers from BB nations, the real business gets done by done by the /entral 'ankers from 6ermany, the 8nited 0tates, 0witGerland, !taly, =apan and :ngland. This inner committee has two common beliefs; that central banks should act independently of their home governments, and politicians cannot be trusted to decide the fate of the international monetary system.

4B

Today, '!0 has governmental immunity, it pays no ta es, has its own private police force, and is, as &ayer (othschild envisioned, above the law of any nation. Thus, the '!0 sets the rules for the /entral 'anks of BB nations around the world, and the 5ob of each of those /entral 'anks is to provide their governments with the nation"s currency as interest bearing debt. This network is so tight, so connected and so powerful that no independent nation can challenge its control. 0o, while all the above information about monetary sovereignty and fiat currencies is true and accurate, it can never be put into practice as long as '!0 and its membership control the finances of the world. 8nless NN maybe NN. someone challenges the standing of the 80 dollar as the world"s reserve currencyO +raham *aterson is the author of this paper, which he freely admits is, in part, plagiarised from a whole series of different sources, some acknowledged, some not ,through lost data-. The purpose of the paper is to bring these disparate sources together in an effort aimed at coordinating their valuable contribution into a coherent whole. The hope is to try and e#plain the way this .pseudo discipline/ of economics affects the lives of ordinary people, and suggest how it can be made to work for their benefit if the distorted and fraudulent beliefs, promulgated by the banking fraternity, can be overcome. Go#ernment Finan"e 1ar too many people, and this includes most, if not all, politicians, think that the 1ederal 6overnment L16 in the diagram belowM are financed entirely from the >ublic 0ector L>0 in the diagramM They also have the belief that the 1ederal 6overnment operates in the same way as a household, or a business in the >rivate 0ector. 1or any nation that has the right, the authority, and the ability to create its own supply of money, which we must assume applies to %ustralia, then that belief is completely false. ! am sure every Treasurer of the 1ederal 6overnment, and every senior 'anker in %ustralia who perpetuates that belief, do so with the total knowledge they are deliberately deceiving the people of %ustralia. These people try to portray 6overnment financing as shown in this diagram

4<

!t assumes that all the KmoneyK in the nation is owned by the >rivate 0ector, which is e actly what every banker wants people to believe. Thus, they keep telling us there is a limit to how much the 6overnment can e tract from the >rivate 0ector, and therefore, a limit on how much the 6overnment can spend. What is never defined, or discussed, is where this KmoneyK in the >rivate 0ector comes from in the first place. The truth of the matter for a monetary sovereign nation, such as %ustralia, is actually the reverse of the above diagram. The reality is shown in this diagramI

%s everybody knows, the 6overnment of %ustralia is the only authority that can legally createCprintCpunch a keyboard, or by any other means, supply the KmoneyK used in the nation. !f you or ! try to do that, we are charged with counterfeiting and thrown into gaol. $owever, there is a huge anomaly in the financial system, not only in %ustralia, but around the world. The fact that this anomaly has been in e istence for centuries, does not, and should not, condone its illegitimacy. The anomaly is what is known as the, 6overnment endorsed and approved, 1ractional (eserve banking system. !t allows the banks to create KmoneyK out of thin air. This is based on having access to the small reserve amount, necessary to meet the estimated daily demand for

4*

physical cash, which is in the form of notes and coins. (oughly, +*3 of the KmoneyK in circulation is digital, and simply a computer record in someone9s bank account. !n effect, the banks are allowed to counterfeit the nation9s currency by a process that would land any other person, or organisation, in gaol. So, the 5uestion is7 F+h !oes the Go#ernment allo$ this to happen*F !f the 6overnment has the sole authority to legitimise the nation9s money supply, why do they let the banks do it, and charge interest on this Kfictional moneyK that is nothing more than some figures in a book, or in a computer. Isn9t it a,out time $e &ot an ans$er from our politi"ians* Way back in );<7, >resident @incoln had the answer and he used the authority of his 6overnment to create the 80 money supply known as the Kgreenbacks.K $is answer to the critics is the answer we should get from our politiciansI The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers*.. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government)s greatest creative opportunity. $y the adoption of these principles, the long%felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. &oney will cease to be the master and become the servant of humanity. 'emocracy will rise superior to the money power.# To return to our diagrams, in the one above, it shows the ta es disappearing as they leave the >ublic 0ector tank. !n actual accounting practice, that is e actly what happens to them, they are credited to the account held in the name of the ta payer, thus leaving a Gero balance in the account. 'ear in mind that most ta payments are simply book entries, and very few are actual physical cash. When the 6overnment, supposedly, spends this money, all it does is transfer figures to an account in the >rivate 0ector and deducts that figure from an account kept by the 6overnment. !n practice, every dollar the 6overnment spends eventually finishes up in the >rivate 0ector. % &onetary 0overeign 6overnment cannot run out of

4;

KmoneyK D it cannot go bankrupt, and it cannot become insolvent D it can always fund any program to which it is committed. E#er sin&le !ollar a &o#ernment spen!s !ire"tl , or in!ire"tl , in"reases the sa#in&s potential in the Pri#ate Se"tor, $hether it9s in Australia or o#erseas' $ence, every 0ocial 0ecurity payment and every dollar paid as interest to bond holders, is ultimately spent in the >rivate 0ector, and this includes payment for 6overnment services such as the >ost ?ffice, the $ospitals, unemployment benefits, and every other public service. This is why the belief in the first diagram of this article is both ridiculous and destructive. The real diagram related to 6overnment spending actually looks like thisI where the spending of ta es are misleadingly depicted as paying for the support services that form the foundation of the society.

While the 1ederal 6overnment has monetary sovereignty, the 0tate 6overnments do not. $owever, the 0tate 6overnments have the /onstitutional right, and power, to set up their own 0tate 'anks and operate these on e actly the same basis as the private banks D that is D the fractional reserve banking system. Thus, the 0tate 6overnments can have all their revenue paid into their own 0tate 'ank and use this as the reserve for creating credit in the same way as the private banks create credit of )2 to )4 times the amount of the reserves they must hold. 'ecause of the almost total ignorance most politicians have about 6overnment financing, they all act like lemmings and seem -uite content to make the society suffer. 'y talking about Kbudget deficitsK, Kbalanced budgetsK , KausterityK, and the most obno ious of them all, running a Kbudget surplus,K they promote profiteering from their ta payers. These

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politicians deliberately set out to debilitate the society they are supposed to be elected to support. The term Kbudget deficitK does not, and cannot apply to a monetary sovereign 6overnment. The 6overnment does not have any shortage of funds when it has the authority to create the nation9s money supply' In fa"t, e#er !ollar spent in ex"ess of $hat re#enue the Go#ernment ta)es in, represents a !ire"t in#estment into the nation9s future' Rather than ,ein& a F!efi"itF it ser#es to in"rease the sa#in&s "apa"it of the pri#ate se"tor' $ence, for the 6overnment to talk about a Kbalanced budgetK means they refuse to fund any investment for the nation9s future. What is even more harmful is for a 6overnment to try and operate on a KsurplusK because, that can only happen by reducing the savings capacity of the >rivate 0ector. No Go#ernment shoul! ,e "reate! to ma)e a profit out of its people' While the above diagram is correct in respect to 6overnment funding and spending, a ma5or addition to the >ublic 0ector tank is missing. This addition is the huge amount of interest bearing credit that is created by the private banks, and is responsible for the ever growing mountain of debt placed on the shoulders of the public. This private bank credit far e ceeds the amount spent by the 6overnment !n reality, it is this poorly regulated supply of Kfictional moneyK that is responsible for the inflationary, and deliberately derived deflationary pressures that are inflicted on society through continuous boom and bust cycles. The banks have very skilfully foisted the blame on the 6overnment because, the 6overnment tries to manipulate inflation through the futile ad5ustment of interest rates. The futility of this approach is amply proven by the ongoing boom and bust cycles that have occurred throughout the last century, and continue to occur today. It shoul! ,e ma!e #er "lear to people that it is not the Go#ernment that is t in& the !e,t noose aroun! people9s ne")s, ,ut the pri#ate ,an)in& se"tor9s poli" of loa!in& people $ith eas a#aila,le "re!it' The Go#ernments must ta)e some responsi,ilit for allo$in& the fra"tional reser#e s stem to ,e pra"ti"e! , the ,an)s' The %ustralian nation, and every other monetary sovereign nation around the world, are faced with a huge education problem. % -uantum leap is re-uired to overcome the centuries of misinformation and brain washing that has been drummed into people.

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?ne of the first lies that must be corrected is that 6overnment spending, and budgets, are the same as household and private business spending. 0pending the >rivate 0ector can only occur through earning an income, using savings, andCor borrowing. This means they must finance their spending prior to the fact. Go#ernment spen!in& is exa"tl the opposite because, a 6overnment, as the issuer of the currency, can simply spend without the necessity of seeking funds in advance. This deliberate fraud is perpetrated on the public to shore up the status -uo by maintaining the financial control e erted by the banks. &ore detail is contained in the article, K% >rimer for &onetary 0overeign #ations.K 0ith acknowledgement to 1.2. Alt and the 3ew 'conomic *erspective ,3'*-blog.