Monetary Reform:

To Bail Out The WORLD

Article by

Lewis Verduyn
November 2, 2011

Clutha River Forum PO Box 124, Lake Wanaka 9343, New Zealand cluthariverforum@gmail.com

Campaigns for monetary and banking reform are gathering pace in the USA, UK, and New Zealand, all proposing that we advance from our debt-based fractional reserve banking system to a full reserve banking system that is stable, fair, and ecologically sustainable.
So why is our current monetary system failing? We have a fractional reserve banking system in which private banks create almost all money as debt when they make loans. Banks are required to retain a fractional reserve of their customer deposits for daily transactions. If the reserve is 10%, for example, a bank receiving a $100 deposit can retain $10 and loan $90 at interest. If the $90 is later deposited, the receiving bank can retain $9 and loan $81 at interest, and so on until the initial deposit of $100 expands to $1000 of interest-bearing debt, as both an asset and a liability for the banking system. This is the multiplier of fractional reserve banking.1 Plainly, there is a strong incentive for banks to make loans and promote credit, risking their customer deposits, which are not fully available. This confidence game, played with interest rates, results in destructive cycles of boom and bust, historically triggering periods of recession, depression, revolution and war. Of all the many ways of organizing banking, the worst is the one we have today. Mervyn King, Governor, Bank of England, October 25, 2010.2 By renting money for profit (interest), banks claim it as a commodity, which corrupts its original purpose as a medium of exchange, with toxic consequences. When markets crash, governments usually try to stimulate growth by borrowing money to spend into the economy, but if growth is insufficient, national debt grows instead, services are cut, various taxes rise, and jobs decline further. One of the most insidious effects of interest-bearing debt under fractional reserve banking is that there is a systematic transfer of wealth upward from the net borrowers to the net lenders, causing ever more income inequality.3 4 But there is an even more ruinous problem. The banks do not create the interest component of loaned money, so the debt cannot be repaid unless more money is loaned at interest, which in turn cannot be repaid unless more money is loaned at interest, and so on debt always expanding to keep the system functioning. This relentless debt-growth-debt treadmill is essentially a pyramid scheme. If economic growth slows down, debt goes up. The fractional reserve system needs to grow.5 6 But governments say economic growth is good, right? Consistent economic growth has only occurred during the last eight generations of humans,7 enabled by the harnessing of 'fossil fuels,' which unleashed extraordinary power, driving the Industrial Revolution and stimulating capitalism. By 1900, the global economy had increased 20-fold,8 supported by fractional reserve banking, which dominated European empire building nations. However, in the USA, there was a tug-of-war between the private fractional reserve bankers and politicians defending public full reserve banking. Swings between both systems occurred as the nation expanded.9 10
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The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. Abraham Lincoln.11 Eventually, in 1913, an elite Wall Street money trust, together with allied Congressmen, established the private US Federal Reserve,12 13 setting the stage for Wall Street dominance of the global fractional reserve system, in which national central banks oversee commercial banks and directly influence economies.14 This (Federal Reserve Act) establishes the most gigantic trust on Earth. When the President (Wilson) signs this bill, the invisible government of the monetary power will be legalized ... the worst legislative crime of the ages is perpetrated by this banking and currency bill." Congressman Charles A. Lindbergh, Sr., 1913.15 The Great Depression of the 1930s, precipitated by a credit boom and the 1929 crash, ironically hastened the spread of private central banking to almost every country in the world by 1935.16 By the end of the decade, governments were mobilising for war, and economic growth was returning, albeit the human cost would be horrendous. After the Second World War, economic growth found a new gear, GDP. In the late 1940s, when the UN System of National Accounts was developed, Gross Domestic Product (GDP) became the standard measure of productivity. Designed to gauge the military capability of economies, GDP was never intended to be a proxy for national welfare.17 The welfare of a nation can scarcely be inferred from a measurement of national income. Simon Kuznets, the chief architect of GDP.18 But governments used this national account data to plan rapid and unprecedented economic growth. During the post-Second World War era standards of living improved dramatically, as poverty declined, and life expectancy and leisure time increased. Understandably, with sufficient growth to keep debt under control, and environmental issues not yet recognised, society came to regard economic growth as beneficial. Perversely, activities that degrade our environment and our quality of life, also contribute to GDP growth, which makes no distinction between good and bad outcomes. Ecosystem destruction and pollution, weapon sales and crime, drug and gambling addictions, all improve GDP. The more rapidly we deplete our natural resources, the faster the economy grows. The more we over-fish our oceans, the more we over-pump our aquifers, the more we destroy our rivers, the more we work, stress, and ignore our families thats economic growth. GDP doesnt include the maintenance of natural and human capital, assigning it no value, and counting all depreciation as gain.19 Growth measured by GDP, without concern for ecological and social consequences, has become the overarching goal of governments worldwide, motivated by the need to repay debt under the fractional reserve banking system.
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When did economic growth become a problem? In hindsight, it has been possible to calculate that humankind was at its peak of sufficiency during the 1970s and 1980s, in terms of the balance between human welfare and environmental sustainability. The Global Footprint Network has estimated that by the mid-1980s the scale of human activity on the planet had reached 100% of the Earth's capacity.20 In other words, the human benefits of economic growth were roughly equivalent to the negative impacts of that growth on our biosphere, which was at the tipping point of collapse. Ever since, we have been engaged in pursuing what acclaimed economist and author Herman Daly describes as uneconomic growth.21 After the 1971 Nixon Shock ended the gold standard,22 growth was rapid between 1982 and 2000, as investors gathered up easy credit during increasing financial deregulation. Debt exploded in this fiat money boom, augmented by currency digitisation. But when stocks collapsed in 2000-2002, investment simply moved to housing, and into an expanding portfolio of financial derivatives invented in the 1990s and early 2000s. We have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. Senator John Danforth, 1992.23 With peak oil in 2006-08,24 25 spiralling prices collided with debt, and confidence crashed in 2008-09. Predictably, governments have resolved to acquire more oil, or replace it, to resume sufficient growth in GDP to unload debt. But the ship of growth is already overloaded with debt, taking on more, and sinking. Meanwhile, bailouts cannot restart the flooded engine which runs on oil and confidence. Now, we are experiencing a so-called recession, which is actually a reality check. The total anthropogenic (human species) demand on our planet is approximately 140% of its long term capacity.26 We are up against the growth wall, the debt wall, the ecological wall, the climate wall and Wall Street. The limits of our planet, combined with the fractional reserve banking system, made this crisis inevitable. What about global population growth? The population of the Earth is about 7 billion. The estimated carrying capacity of the Earth, given our present standard of living, is about 5 billion.27 By definition, we have been in population overshoot since the 1980s. Even if our growth-based world can be transformed into a sustainable steady state with full reserve banking and ecological economics, it is often thought that global population growth cannot be reined in. That is, until we observe the economic differential at work. Developed countries have achieved lower birth-rates due to improvements in standards of living, including modern healthcare, education and access to birth control, such that most now have stable or even falling populations. While developing countries appear unable to escape population growth. Unfortunately, the fractional reserve banking system extracts billions of dollars of wealth from developing countries every year. World Bank figures reveal that the total external debt of developing countries climbed from US$580 billion dollars in 1980, to about US$2,400 billion dollars in 2002, when debt service payments were 9 times the official development assistance.28
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This has entrenched poverty and high birth-rates, for which the only solution is to raise standards of living, not by adding to indebtedness with further dubious loans, but by removing the affliction of debt through monetary reform. For this to successfully reduce global population overshoot, it would be necessary to simultaneously moderate and rebalance resource consumption worldwide a dire challenge, but full reserve banking allows and promotes these outcomes. How does full reserve banking reform the system? With full reserve banking, a reliable full reserve (100%) is retained in customer Transaction Accounts, while money for loans or investments comes from customer term Investment Accounts.29 Borrowers incur real money capped interest30 or fees, while term account investors earn a percentage. Private banks do not create public money as debt. Instead, money is created without debt by a government authority, issued into a government account, and spent into the economy. The issuing authoritys governing principle is that the money supply in circulation should be sufficient for balanced trade while being neither inflationary nor deflationary.31 The elimination of constantly expanding interest-bearing debt removes the engine of unsustainable perpetual growth,32 allowing a steady state economy to evolve making human survival feasible on our finite planet Earth. Income equality is determined by individual merit, instead of being constantly eroded by the transfer of wealth via hidden interest and government taxes to repay debt.33 34 With full reserve banking, governments can reduce or end most income taxes. Whatever is physically possible and socially desirable is financially affordable within the governments publicly accountable money supply. The full reserve system is also known as 100% reserve banking. It has been proposed by a succession of leading economists, politicians and academics since the Great Depression of the 1930s.35 Another avenue of reform would be to divorce the payment system from risky lending activity - that is to prevent fractional reserve banking (for example, as proposed by Fisher, 1936, Friedman, 1960, Tobin, 1987 and more recently by Kay, 2009). Mervyn King, Governor, Bank of England, from a speech to the Second Bagehot Lecture Buttonwood Gathering, New York City, October 2010.36 I really think we could do a whole lot for the economy if we would just move away from fractional reserve banking and go back in the direction of 100% reserve requirements. Herman Daly, former Senior Economist, World Bank.37 38 Campaigns for full reserve banking reform are gradually making inroads into mainstream thinking. In the UK,39 the Positive Money campaign has prepared draft legislation and gained the support of dozens of MPs. At the same time, US40 Congressman Dennis Kucinich, in association with the American Money Institute, is advancing a landmark bill that would end the private monopoly of the US Federal Reserve (misleadingly named in 1913), restoring the role of issuing money to the US government, as authorised in Article 1, Section 8, of the US Constitution.41
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So theres a reform plan, but whats the reality? Neoclassical economists, and their corporate affiliates, rooted in the fractional reserve ethos of perpetual economic growth, will continue to extend and pretend, no matter how illogical that seems. Governments, while bailing out the financial elite, have expanded bank funds in a bid to stimulate more debt-based growth, seriously compounding public debt instead of bailing out the public.42 Our country is now taking so steady a course as to show by what road it will pass to destruction, to wit: by consolidation of power first, and then corruption, its necessary consequence. Thomas Jefferson.43 Bailouts are insufficient and nearing political limits. The banks, hoarding bailouts and free 'QE' money obtained at zero interest, will simply starve the global economy into debt-deflation,44 45 with high oil prices, rising public debt, fiscal austerity, shrinking incomes and rising unemployment. This is what the collapse of the fractional reserve pyramid and the end of growth, looks like. Injustice occupies our monetary system, and people everywhere are discovering that the rule of law does not apply to racketeering banksters. Puppet governments are scaremongering to ramp up their Orwellian police state reforms, but repression of the peoples voice will fail, because the idea of economic democracy is in-born. Only people en masse can restore money to its intended place in society, fully as a medium of exchange, serving the public. But the impasse will continue until a critical mass of public awareness, bled by austerity, culminates in a game-ending crisis. Inevitably, hopelessly indebted nations will be forced to phase in monetary reforms, issuing debt-free money directly into their economies. By doing so, they will retire public and private debt, reduce taxes, create jobs, boost income equality, and inject funds into public improvements and clean energy. We cannot avoid a tense transition away from debt-money, and we cannot avoid more serious climate change impacts, and the burden of population growth, for many decades. But at least this best case scenario contains hope. Our global crisis has been destined by our facilitation of excess. We have been destroying our world by systematically converting our natural and human capital into monetary wealth, which has been transferred into ever fewer hands by the private banking system. The greater tragedy is that we struggle to imagine the better world that we could have created instead with the real wealth of thriving biodiversity and social justice a world that, so far, has been stolen by greed. Ultimately, monetary reform seeks to evolve our definition of wealth, by maturing our humanistic and ecological values. This is our evolutionary test. We are locked into an economy of extinction. We will either hasten the destruction of life, or we will educate ourselves and act to create a living economy. In the end, silence is not an option. Our lives begin to end the day we become silent about things that matter. Martin Luther King Jr.
7

Federal Reserve Bank of New York, Reserve Requirements and Money Creation, Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045, USA. http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html (Removed from Internet) http://en.wikipedia.org/wiki/Money_multiplier Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+ $90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.
2

Mervyn King, Governor of the Bank of England. Source: Speech in New York (2010, October 25). http://www.bankofengland.co.uk/publications/speeches/2010/speech455.pdf Of all the many ways to organizing banking, the worst is the one we have today. Change is, I believe, inevitable. The question is only whether we can think our way through to a better outcome before the next generation is damaged by a future and bigger crisis.
3

Geraldine Perry. (2011, March 12). Memo to Congress: Show us the M-O-N-E-Y! (Part 3, Conclusion). http://www.thepeoplesvoice.org/TPV3/Voices.php/2011/03/12/memo-to-congress-show-us-the-m-o-n-e-y-p Without question, our debt-based fractional reserve system is the primary underlying reason for the kind of extreme income inequality and widespread unnecessary poverty that we see today something foreseen by many of our founding fathers, including William McClay, John Taylor, James Madison and Thomas Jefferson.
4

Brian Leslie. (2008). Money Myths Exposing The Truth About Money Creation. Brian Leslie, Editor, Sustainable Economics, 12 Queens Road, Tunbridge Wells, Kent, TN4 9LU, UK. http://moneymyths.org.uk/ It has been estimated that, on average, almost half the price of everything is due to the hidden interest charges.
5

Paul Grignon. Money As Debt. http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html Thus the total interest burden in the system has increased necessitating increased economic activity (growth imperative) to pay it. And... the debt becomes perpetual. It can never be paid off without re-borrowing.
6

Steven Sorrell. (2010, June 18). Energy, Economic Growth and Environmental Sustainability: Five Propositions. Sussex Energy Group, SPRUScience and Technology Policy Research, University of Sussex, Sussex House, Brighton, BN1 9QE, UK. http://www.mdpi.com/2071-1050/2/6/1784/pdf A crucial consequence of this system is that most of the money in circulation only exists because either businesses or individuals have gone into debt and are paying interest on their loans. While individual loans may be repaid, the debt in aggregate can never be repaid because this would remove more than 90% of the money supply from circulation. The health of the economy is therefore entirely dependent upon the continued willingness of businesses and consumers to take out loans for either investment or consumption. Any reduction in borrowing therefore threatens to tip economies into recession. ...As a result, the only way that firms can make profits and borrowers can repay their loans in aggregate is if the volume of new borrowing exceeds the amount that is being withdrawn through both principal repayments and additions to bank capital. In other words, total debt must increase. ...One implication of this system is that economic growth depends upon ever increasing debts to banks, making the economy vulnerable to recession.
7

Herman E. Daly. (1996). Beyond Growth: The Economics of Sustainable Development, p215, Beacon Press, 25 Beacon Street Boston, MA 02108, US. Online quote by Wayne Ellwood, Natures Bottom Line, New Internationalist Magazine. http://www.newint.org/features/2010/07/01/natures-bottom-line/
8

Herman Daly. (2009, October 9). Herman Daly Festschrift: Restructuring Taxes to Create an Honest Market. The Encyclopedia of Earth. http://www.eoearth.org/article/Herman_Daly_Festschrift:_Restructuring_taxes_to_create_an_honest_market The roots of our current dilemma lie in the enormous growth of the human enterprise over the last century. Since 1900, the world economy has expanded 20-fold and world population has increased fourfold.
9

History of central banking in the United States: Reference. http://www.thefullwiki.org/History_of_central_banking_in_the_United_States

10

Michael D. Bordo. (2007, December 1). A Brief History of Central Banks. Federal Reserve Bank of Cleveland, P.O. Box 6387, Cleveland, Ohio 44101-1387, US. http://www.clevelandfed.org/research/commentary/2007/12.cfm
11

Famous Quotations on Banking. Presidents. The Money Masters: How Banks Create 90% of the Worlds Money. http://www.themoneymasters.com/the-money-masters/famous-quotations-on-banking/

12

History of the Federal Reserve System.

http://en.wikipedia.org/wiki/History_of_the_Federal_Reserve_System
13

J. Bradford De Long. (1992, August). J.P. Morgan And His Money Trust. Harvard University. http://www.j-bradford-delong.net/pdf_files/morgan_wwq.pdf
14

Michael D. Bordo. (2007, December 1). A Brief History of Central Banks. Federal Reserve Bank of Cleveland, P.O. Box 6387, Cleveland, Ohio 44101-1387, US. http://www.clevelandfed.org/research/commentary/2007/12.cfm
15

Charles August Linbergh.

http://en.wikipedia.org/wiki/Charles_August_Lindbergh
16

Central Bank. History. Wikipedia. http://en.wikipedia.org/wiki/Central_bank By 1935, the only significant independent nation that did not possess a central bank was Brazil.
17

Editors: Philipp Schepelmann, Yanne Goosens, Arttu Makipaa. (2010). Towards Sustainable Development. Alternatives to GDP for measuring progress. Wuppertal Institute for Climate, Environment and Energy, Dppersberg 19, 42103 Wuppertal, Germany. http://www.wupperinst.org/uploads/tx_wibeitrag/ws42.pdf
18

Editors: Philipp Schepelmann, Yanne Goosens, Arttu Makipaa. (2010). Towards Sustainable Development. Alternatives to GDP for measuring progress. Wuppertal Institute for Climate, Environment and Energy, Dppersberg 19, 42103 Wuppertal, Germany. http://www.wupperinst.org/uploads/tx_wibeitrag/ws42.pdf Already, in 1934, while advocating its use, he had warned that the welfare of a nation can scarcely be inferred from measurements of national income.
19

Ron Colman. (1999). Measuring Genuine Progress. Maritime Centre of Excellence for Womens Health. PO Box 3070, Halifax, Nova Scotia, B3J 3G9 Canada. http://www.acewh.dal.ca/eng/reports/colman-measuring.pdf The GDP does not distinguish economic activities that bring benefit from those that cause harm. In fact, more crime, pollution, gambling, sickness, divorce, accidents and war all make the economy grow.
20

Global Footprint Network. (2010, October 13). Calculation Methodology for the National Footprint Accounts, 2010 Edition, Global Footprint Network, Headquarters, 312 Clay Street, Suite 300, Oakland, CA 94607-3510, USA. http://www.footprintnetwork.org/images/uploads/National_Footprint_Accounts_Method_Paper_2010.pdf In 1961, the first year for which the National Footprint Accounts are available, humanitys Ecological Footprint was approximately half of what the biosphere could supplyhumanity was living off the planets annual ecological interest, not drawing down its principal (Figure 5). According to the 2010 Edition of the National Footprint Accounts, human demand first exceeded the planets biocapacity in mid 1970s. Since 1961, overall humanitys Footprint has more than doubled and overshoot has continued to increase, reaching 51% in 2007. Population Institute, 107 2nd St, NE, Washington DC 20002, USA. http://www.populationinstitute.org/programs/sustainability/ The Global Footprint Network estimates that in the early 1960s, the human species consumed about 50% of the Earth's natural resource capacity. By the mid 1980s, the scale of human activity on the planet reached 100% of the Earth's capacity, and was trending steadily upward. Now, because of continued high global population growth rates and higher consumption patterns, the total anthropogenic (human species) demand on our planet is approximately 140% of its long term capacity.
21

Herman E. Daly, Jr. John B. Cobb. (1999). For The Common Good. Journal of Business Administration and Policy Analysis, The Vancouver Institute, University of British Columbia, Vancouver, Canada. http://www.questia.com/googleScholar.qst?docId=5001899789 Further growth beyond this scale is overwhelmingly likely to increase costs more rapidly than it increases benefits, thus ushering in a new era of "uneconomic growth" that impoverishes rather than enriches.
22

Thomas W. Zeiler. (2010, July 17). Nixon Shocks the Trade System. University of Colorado at Boulder. Instituto de Ciencias Sociais, University of Lisbon. http://history.uwo.ca/trade-and-conflict/files/zeiler.pdf
23

Peter Souleles B. Com. LLB. (2011, April 7). Johnny Appleseed and Senator Danforth. http://www.gold-eagle.com/editorials_08/souleles040711.html "I have never seen more senators express discontent with their jobs. ... I think the major cause is that, deep down in our hearts, we have been accomplices to doing something terrible and unforgivable to this wonderful country. Deep down in our hearts, we know that we have bankrupted America and that we have given our children a legacy of bankruptcy. ... We have defrauded our country to get ourselves elected." The above words were spoken by Senator John Danforth back in 1992 and may be interpreted either as a lament or as a confession. In any case they are a statement of an irrefutable truth which applies both across time and place.

24

John Collins Rudolf. (2010, November 14). Is Peak Oil Behind Us. New York Times, 620 Eighth Avenue, New York, NY 10018, USA. http://green.blogs.nytimes.com/2010/11/14/is-peak-oil-behind-us/?partner=rss&emc=rss According to a projection in the agencys latest annual report, released last week, production of conventional crude oil the black liquid stuff that rigs pump out of the ground probably topped out for good in 2006, at about 70 million barrels a day.
25

The Oil Drum. (2009 March 17). World Oil Production Peaked in 2008. http://www.theoildrum.com/node/5177 World oil production peaked in 2008 at 81.73 million barrels/day.
26

Sustainable World Initiative. The Population Institute, 107 2nd St, NE Washington, DC 20002, USA. http://www.populationinstitute.org/programs/sustainability/ The Global Footprint Network estimates that in the early 1960s, the human species consumed about 50% of the Earth's natural resource capacity. By the mid 1980s, the scale of human activity on the planet reached 100% of the Earth's capacity, and was trending steadily upward. Now, because of continued high global population growth rates and higher consumption patterns, the total anthropogenic (human species) demand on our planet is approximately 140% of its long term capacity.
27

Paul Gilding. (2011, July 7). The Great Disruption (quoted). http://bpicampus.com/2011/07/07/morning-feature-the-great-disruption-part-i-the-crash/ Our current population is about 7 billion. Our current 1.4 Earths footprint works out to 7/5ths of the earths annual yield. At our present lifestyles the earth could support 5 billion.
28

Eric Toussaint. Transfers from the Periphery to the Centre, from Labour to Capital. Committee for the Abolition of Third World Debt. 345, av. de l'Observatoire 4000 Lige, Belgique. http://www.cadtm.org/IMG/pdf/TransferSouthNorthEricT_7jan04.pdf In 1980, according to the World Bank, the developing countries' total external debt came to about 580 billion dollars. Twenty years later, at the end of 2002, it came to about 2,400 billion dollars, a fourfold increase. In 2002, the countries of the Periphery repaid almost 9 times what they received in ODA!
29

Part 5. Establishment and Operation of Accounts. Positive Money UK. 205 Davina House, 137-149 Goswell Road, London, EC1V 7ET, UK. http://www.positivemoney.org.uk/draft-legislation/part-5-establishment-and-operation-of-accounts/
30

H. R. 2990, National Emergency Employment Defense Act of 2011, (NEED Act). American Money Institute, P.O. Box 601, Valatie, NY 12184, USA. http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf SEC. 502. INTEREST RATE CEILINGS. (a) Limit on Amount of Financing Fees- The total amount of interest charged by a financial institution on any extension of loans (other than a mortgage) to any individual borrower through amortization, including all fees and service charges, shall not exceed the total amount of the loan extended. (b) Limit on Rate- The annual percentage rate applicable to any loan of money may not exceed 8 percent on unpaid balances, inclusive of all charges.
31

H. R. 2990, National Emergency Employment Defense Act of 2011, (NEED Act). American Money Institute, P.O. Box 601, Valatie, NY 12184, USA. http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf The Monetary Authority shall pursue a monetary policy based on the governing principle that the supply of money in circulation should not become inflationary nor deflationary in and of itself, but will be sufficient to allow goods and services to move freely in trade in a balanced manner.
32

Steven Sorrell. (2010, June 18). Energy, Economic Growth and Environmental Sustainability: Five Propositions. Sussex Energy Group, SPRUScience and Technology Policy Research, University of Sussex, Sussex House, Brighton, BN1 9QE, UK. [Debt-growth impetus is removed when money supply is balanced, as described here.] http://www.mdpi.com/2071-1050/2/6/1784/pdf A crucial consequence of this system is that most of the money in circulation only exists because either businesses or individuals have gone into debt and are paying interest on their loans. While individual loans may be repaid, the debt in aggregate can never be repaid because this would remove more than 90% of the money supply from circulation. The health of the economy is therefore entirely dependent upon the continued willingness of businesses and consumers to take out loans for either investment or consumption. Any reduction in borrowing therefore threatens to tip economies into recession. As a result, the only way that firms can make profits and borrowers can repay their loans in aggregate is if the volume of new borrowing exceeds the amount that is being withdrawn through both principal repayments and additions to bank capital. In other words, total debt must increase.
33

Geraldine Perry. (2011, March 12). Memo to Congress: Show us the M-O-N-E-Y! (Part 3, Conclusion). http://www.thepeoplesvoice.org/TPV3/Voices.php/2011/03/12/memo-to-congress-show-us-the-m-o-n-e-y-p Without question, our debt-based fractional reserve system is the primary underlying reason for the kind of extreme income inequality and widespread unnecessary poverty that we see today something foreseen by many of our founding fathers, including William McClay, John Taylor, James Madison and Thomas Jefferson.

34

Brian Leslie. (2008). Money Myths Exposing The Truth About Money Creation. Brian Leslie, Editor, Sustainable Economics, 12 Queens Road, Tunbridge Wells, Kent, TN4 9LU, UK. http://moneymyths.org.uk/ It has been estimated that, on average, almost half the price of everything is due to the hidden interest charges.
35

Proposals, fullreservebanking.com: 1933, 1935, 1939, 1948, 1960, 1987, 2000, 2009, 2010 (Sept 21, 2011). http://fullreservebanking.com/proposals.htm
36

Mervyn King, Governor of the Bank of England. Source: Speech in New York (2010, October 25). http://www.bankofengland.co.uk/publications/speeches/2010/speech455.pdf Another avenue of reform is some form of functional separation. The Volcker Rule is one example. Another, more fundamental, example would be to divorce the payment system from risky lending activity that is to prevent fractional reserve banking (for example, as proposed by Fisher, 1936, Friedman, 1960, Tobin, 1987 and more recently by Kay, 2009).
37

Herman E. Daly on Full Reserve Banking. Vimeo. Herman Daly, former Senior Economist at the World Bank, endorses full reserve banking during an interview for the forthcoming documentary Critical Mass. http://vimeo.com/23218832
38

Herman E. Daly. (2008, January 10). The Crisis. steadystate.org http://steadystate.org/wp-content/uploads/Daly_the_crisis.pdf I would not advocate a return to commodity money, but would certainly advocate 100% reserve requirements for banks (approached gradually), as well as an end to the practice of buying stocks on the margin. All banks should be financial intermediaries that lend depositors money, not engines for creating money out of nothing and lending it at interest. If every dollar invested represented a dollar previously saved we would restore the classical economists balance between investment and abstinence.
39

Positive Money UK, 205 Davina House, 137-149 Goswell Road, London, EC1V 7ET, UK. http://www.positivemoney.org.uk/
40

American Money Institute. (2011, September 21). HR 2990 IH NEED Act, American Money Institute, PO Box 601, Valatie, NY 12184, USA. http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf http://www.monetary.org/
41

H. R. 2990, National Emergency Employment Defense Act of 2011, (NEED Act). American Money Institute, P.O. Box 601, Valatie, NY 12184, USA. http://www.monetary.org/wp-content/uploads/2011/10/HR-2990.pdf The authority to create money is a sovereign power vested in the Congress under Article I, Section 8 of the Constitution.
42

George Manbiot. (2011, October 10). Its all in our interests to understand how to stop another Great Depression. This is based on seminar presented by Professor Steve Keen, at Oxford, October 2011. See next reference. http://www.guardian.co.uk/commentisfree/2011/oct/10/stop-another-great-depression-debt President Obama justified the bank bailout on the grounds that "a dollar of capital in a bank can actually result in eight or 10 dollars of loans to families and businesses. So that's a multiplier effect." But the money multiplier didn't happen. The $1.3 trillion that Bernanke injected scarcely raised the amount of money in circulation: the 110% increase in M0 money led not to the 800% or 1,000% increase in M1 money that Obama predicted, but a rise of just 20%. The bail-outs failed because M0 was not the cause of the crisis. The money would have achieved far more had it simply been given to the public. But, as Angela Merkel and Nicolas Sarkozy demonstrated over the weekend, governments have learnt nothing from this failure, and seek only to repeat it.
43

Brainy Quote. Corruption Quotes, p3. http://www.brainyquote.com/quotes/keywords/corruption_3.html

44

Professor Steve Keen. (2011, October 4). Debunking Economics, Chapters 12-18. http://www.debtdeflation.com/blogs/
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Darryl Robert Schoon. (2010, March 3). Will The US Devalue The Dollar. Editorial, gold-eagle.com http://www.gold-eagle.com/editorials_08/schoon030310.html Global demand is again falling as credit contracts, a sign that debt-driven deflation is back but, today, there is an additional danger as well. Since 1971, because of the US default on its gold obligations, money no longer possesses intrinsic value and the consequences will soon become apparent. Deflationary depressions and a collapse in the value of fiat money have happened before but never simultaneously. Soon, they will. We are in what Stephen Roach, Chairman of Morgan Stanley Asia, calls the end-game, the resolution of past monetary excesses and imbalances, excesses and imbalances that reached never-before-seen heights in the last decade. The long awaited day of reckoning has arrived.