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THE WIZARDS OF MONEY Script for Episode 1: "How Money is Created"
 
TABLE OF CONTENTS
 1) Introduction to Wizards of Money 2) Why this Name for the Series? 3) The Birth of the Federal Reserve 4) Misconceptions About Money 5) The Money Creation Process 6) Is Money Democratic?7) The "Zero Sum Game" 8) Ancient Monetary Wisdom 
1)
This is THE WIZARDS OF MONEY Your Money and Financial Management Series…but witha twist. My name is Smithy, I’m a wizard watcher in the land of Oz.In response to the ever growing supply of business and personal finance shows, from CNBC, toCNNfn and CNN Money, to Public Broadcasting's Wall Street Week and Suze Orman Specials,we bring you this new series on money but "with a twist". In this series we will look beyond thelatest DOW and NASDAQ ups and downs, past the hot stocks of the day and the investment tipof the month, and see just how tricky and undemocratic our monetary system really is. TheWizards of Money will take a critical look at the mechanics of today's capital and debt markets,study those who make the critical decisions that drive them, and examine how these marketsthen affect everybody’s lives.Humans have inherited a monetary system that fueled the industrial revolution, lost its commoditybacking during the Vietnam War and now travels by the trillions in the form of information packetsover millions of miles in a matter of nano-seconds. Gold, silver and physical currency notes arealmost irrelevant these days, having been replaced by a system of bits and bytes accounting inelectronic networks. While money is simply an abstraction, an invention of the human mind - why,it's a mere measure stored in the computers of the banking system! - our lives revolve around itand its disappearance can bring trade to a grinding halt, collapsing whole communities. Thisbizarre situation is may be compared to a carpenter stopping work because he has run out ofinches! Or a musician calling it quits because she's run out of decibels!Funny, isn't it, how of all the things we wonder about when growing up - like "Where do babiescome from?", "Why is the sky blue?", "How does this or that work?" there is one thing that neverseems to be addressed. Sure you can ask grown-ups about money but all you'll hear is "Moneydoesn't grow on trees", "I'm not made of money, you know", "Money isn't everything". "Money isonly useful when you get rid of it", and of course "Money is the root of all evil". This is all goodadvice, but good luck getting an answer about where money really comes from. Well, that's whatWizards of Money is all about. Wizards of Money will discuss the mechanics of money in a waythe wide selection of today's financial shows wont. And today, we'll be finding out where moneycomes from.Today, in Episode 1, we'll examine how money is made and who makes it. We'll explore themysterious money making process by first exploring the origin, and role of, one of the mostsecretive bodies in the world, the Federal Reserve System. We will also look at the role of thecommercial banking system, and why it is that the money origination process is not only magicaland mysterious, but also quite unfair and undemocratic.In future editions of the Wizards of Money we'll look further into the workings of the FederalReserve, and its sole shareholders, the private banking industry. We will also investigate similarly
 
mysterious bodies such as the Bank for International Settlements in Switzerland, as well as therapidly growing unregulated parts of the capital markets like Hedge Funds and the DerivativesMarkets. We'll investigate the wizardry of financial accounting, and the role these things play inour own lives.Wizards of Money has a web site with even more information about the wizards behind themonetary curtain located atwww.wizardsofmoney.org.There you can find references and theaudio and text of every episode of the Wizards of Money. And, for those wanting to wrap theirheads around more intricate monetary mysteries, there's even a monetary quiz called the "MoneyMysteries Game" to test your own wizardry skills.
2) WHERE DOES THE TITLE "THE WIZARDS OF MONEY" COME FROM?
 The explanation of this will provide a good historical framework for this series, and remind us of atime a hundred years ago when the American citizenry had a much better understanding of theirnational monetary system and demanded active participation in it.Today, however, for reasons that can only be speculated on, the majority of world citizens havevery little understanding of how the international monetary system works. Yet in this day and ageour lives are largely determined by our relationship to, and we are highly dependent on, theinternational monetary system.When you live and work amongst something day in, day out, you take it for granted. Just like fishsurrounded by water, many people seem to have stopped questioning the foundations of themonetary system and go through life unaware that these foundations may be on very shakyground. Additionally those of us who work in finance have been "trained" to understandeconomics and finance in a certain way, often blinding us to new ways of looking at money.Personally, I like to look back on a time when lots of people were questioning all of these things.The name of this series, the "Wizards of Money" is derived, of course, from the title of a bookwritten just over 100 years ago, called "The Wonderful Wizard of Oz", by journalist L. FrankBaum. Many believe this book to be a social commentary of the times. And one of the mostcontested issues of the era was the monetary system and whether America should stay on thegold standard or move to a bi-metallic standard (meaning gold and silver). Gold would benefit thealready rich and powerful financiers of the northeast, who owned most of the gold, such as JPMorgan and others. The bimetallic standard would make money more available to farmers andregular workers and was backed by the Populist movement of the time. The monetary systemwas such a popular public discussion item that talks on this issue drew crowds of ten ofthousands from across the country. Interpreters of the "Wizard of Oz" have suggested thefollowing meanings of characters and places in Oz:
•
Oz, short for Gold Ounces, may be symbolic of the Gold Standard of Money
•
The Wizardry in Oz may refer to the mysterious money making process itself.
•
The YELLOW brick road to Oz, is probably the way to the grand financiers whosupported the gold standard.
•
I like to think of Emerald City as Wall Street, where the wealthy financiers who ownedmost of the gold were based, and where green glasses (green for money) were worn.
•
Dorothy’s shoes in the original book were SILVER, not red as in the movie, and likelyrepresented the other component of the bimetallic standard.
•
The man operating the Wizard possibly represents the financiers behind the presidentialcandidate at the time who favored the Gold Standard. This candidate was WilliamMcKinley.
 
"Wizards" of Money, as in Oz, is a most appropriate name for those who are responsible for themysterious money making process today. In this process, as we shall see, money is essentiallycreated "out of thin air". It is only the Wizards who get to practice this art, and they do so in theabsence public scrutiny which might ruin the magic.The other main characters of Oz also have counterparts in US society at that time, that is, at thestart of the 20
th
century. You can find some references to these interpretations atwizardsofmoney.org. Well, as it turned out, the Populist movement lost, McKinley was electedpresident and the Gold standard defined the monetary system. But the US still did not have aneffective central bank system. At the instigation of financiers like JP Morgan and his right handmen, but most of all from the sheer energy and genius of one Mr. Paul M. Warburg, that was allabout to change.
3) THE BIRTH OF THE FEDERAL RESERVE
 The birthplace of the Federal Reserve System was not Wall Street or Washington as peoplemight think. The founders wouldn’t dare hold a monetary design meeting in a place where publicscrutiny might threaten the magical handiwork of the first Wizards. The target destination for thefirst wizard convention was in a place one generation removed from slavery, and with such aremarkable devotion to gold that, less than a century earlier, it uprooted its indigenous inhabitantsand marched them off to Oklahoma at the first smell of gold. What better place could there be todesign an undemocratic monetary system based on the gold standard? This state was Georgia,and in 1910, a special Wizard convention took place there on Jekyll Island. Duck-hunting was theexcuse given for the participants having to go there. But numerous historical accounts of thisevent reveal that the duck population remained fully in tact and, instead, the Federal ReserveSystem was designed.Three years later, during the week before Christmas 1913 when several representatives werealready on vacation, the US Congress slid through the Federal Reserve Act, thereby giving birthto the Federal Reserve System. Today, though the gold standard is "no more", we still live withthe legacy of that Jekyll Island meeting and some of history’s real monetary wizards, particularlyone Mr. Paul Warburg - a prominent banker of the times, who is also rumored to be theinspiration for the character Daddie Warbucks in the cartoon and then musical, Annie. Needlessto say, the system they designed had little (well, effectively no) room for public input. It hassurvived fairly well, with the exception of the 1929 crash and subsequent depression, becausethe general public trusts it. However, they do so mostly without understanding it. This is a veryinteresting situation to have in a so-called democracy.To this day, the mysterious body known as the Federal Reserve is not a government body. It'sownership equity is 100% held by the private banking system. It's one of those strange partlyprivate, partly public bodies that have so much to do with how the world and its' markets run.True, its governors are appointed by the President, but their terms are for 14 years and thestructure of appointments guarantees they represent the very best interests of the wealthy.
4) SO, How is money created, and what role does the Federal Reserve and its memberbanks play
?
Lets start with some common misconceptions
about money, and why they are not true:
Misconception 1:
You make money by going to work, or by selling something.FALSE: Nobody can make money except commercial banks (also called depository institutions)and the Federal Reserve, which is owned by the commercial banking industry. When you get paidfor work it is merely a transfer of money that already exists. It was, at some time in the past,
of 00

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