Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme Called Fractional Reserve Banking

Bernie Madoff showed us how it was done, but his Ponzi scheme was small compared to one that has been perpetrated for hundreds of years by the banking system itself. What distinguishes the legal scheme known as “fractional reserve” lending from the illegal schemes of Madoff and his ilk is that the bankers’ scheme is protected by government charter and backstopped with government funds. The sheer size of the bailout efforts today, however, indicates that the banking scheme has reached its mathematical limits and needs to be superseded by something more sustainable.

Read more:   http://www.webofdebt.com/articles/ponzi.php

37 Responses

  1. I actualy think the bankers are aware of the inevitable collapse of this Ponzi Scheme and had a plan to “contain” it into a eternal debt system making us all debt slaves without a change to escape. but they didn¨t succede in carry it out in time..

    Money has become more and more digital. Physical money is used less and less. The pieces of papers are disappearing just as gold once did. In Sweden (my home country) the central bank is proposing a fee on transaction made by physical money.
    The final goal has been to get rid of all physical money. And this is what I think is the bankers wet dream.
    Why? Because there can´t be any bankrun on the whole banking system. If people start miss trusting one bank and withdraw their money they will only be able to transfer this digital money to another digital account on another bank – it would not be possible to have a bank run on the whole banking system. And since the banking system is a cartel with the central banks (with BIS at the top) the whole system would never be endangered -money could be transfered within the system back to the bank exposed to a bank run.. The banks would not need to have vaults filled with gold or phony papers. The bank system would be closed and there would be no “exit” for the “money” – it would be permanently stuck in the virtual matrix locking up our belief system.

    If the bankers are able to fulfill their wet dream they will have total control – people will not longer “only” be debt slaves to these bankers. Every transaction will leave digital footprints telling what you do, where you are, what you buy – and if you don’t behave they will just cut of your account. It’s much harder to obtain physical stuff such as gold or even the pieces of paper we call money then just cut down a digital account.

  2. Ellen,

    I just read your article on infowars.com It’s good to see you getting your proper notice.

    • Thanks Warren! Interesting how all the controversy is among the money reformers themselves. Reminds me of the alternative health care movement and the Democats! Best, Ellen

  3. Since the article by Ellen acknowledges that the fraudulant nature of our banking industry is primarily due to Government involvement, what exactly is the logic of fully socializing the industry? Why not stoping the special benefits to banks, and start to treat them like any other business in a free market?

    Let me put it another way,
    If the shoe industry or food industry becomes corrupt and fraudulant with the help of Government, do we then ask for more government? Do we then ask to socialize the shoe industry?

    I see no difference between the shoe industry or the banking industry or any other industry for that matter. Either freedom works or it doesn’t. There is no reason to believe that the same economics that work for the shoe industry are some how not applicable to a different industry.

    Why not advocate to remove the special benefits that banks have, and to remove Government control from Banking. Let Government do it’s only proper job of protecting our propery rights, i.e., anti-theft, anti-fraud, anti-coercion, etc…

  4. Ellen
    Think your right and hoping they wont succeed.

    Dan
    Because money isn’t supposed to be a commodity by itself. Money shouldn’t have any other qualities than being a medium of exchange. Letting private hands get this possibility is the same as letting someone playing Monopoly and produce their own money under the table while the rest of the players are forced only to use the money circulating in the game. Money should be neutral and not favoring those creating it. Companies don’t create money as banks do, they compete over the existing money – big difference.

    Aristoteles was right and Adam Smith was wrong. Read
    “The War of Private Vs Public Control of
    Society’s Money Power
    The Order of Battle: Adam Smith vs Aristotle ”
    http://www.monetary.org/bromsgrovetalk04.htm

  5. Michael,

    “money isn’t suppose to be a commodoity by itself” – I don’t agree with that assetion based on the economics of “money”. See either “What has Governement done with our money” or “The Mystery of Banking” By Murray N. Rothbard. first 1 or 2 chapters should give the basics about the history and economics behind “money”. (www.mises.com should have these books in .pdf)

    If Fractional Reserve banking is treated as it ought to be – Fraud!, then banks seize to create money. The money creation process is only the result of the “fractional reserve” system, which exists due to Government not treating this practice for what it is.

    If banks are treated as any other business in the free market, then banks would have one of two functions:
    Deposit banking – store your money for safe keeping for a fee (as any storage wearhouse)

    Loan banking – put your money in for a fixed period of time for the purpose of a “loan” and earn interest. your money is not used as “reserve”. No money is created. you lend out your money for some time as an “investment”, and earn interest.

  6. Correct! That´s functions banks perhaps ought to be able to have. But creating money ought to be a privileged for the state. Private bank should not be allowed to create new money in the same way as a shoe factory (as in your example) creates new shoes – big difference.

  7. Michael,

    The service that a bank would provide in a free market is what I had stated above. certainly not to create money. But no one should be trusted with the privilege of creating money, including the state. Like I’ve stated before, the Government is one of the primary benefitieries of the current money creation process of the banks. Government always looks for ways to spend without direct taxation. Government counterfeiting is no better then private counterfeiting.

    You either have to go to a “hard” money like gold under the control of Government, as directed by our Constitution, so it is at least difficult for the Government to increase the money supply, but then the problem is that Government always finds a way to get off it due to emergencies, and we are back to square one.
    My preffered method, is to take money out of the hand of Government or any monopoly, and have the free market provide that service just as any other commodoity provided by the market. It is really a misunderstanding of the function of money that leads you and many people to believe that moeny is somehow speciall and cannot be provided by the market. This is unfortuante because, only the market can protect your from any form of “legalized” counterfeiting.

    I strongly recommend to you the following link to get a better understanding of the function of money and how it is formed:

    http://mises.org/money.asp

  8. Leave the creation of money up to the free market? You are proposing that we have competing dollar bills? I could want to spend YEROX dollars, but you might demand payment in PEMAX? What? The Ayn Rand crowd has now jumped off the hot air baloon. That is the craziest thing I have heard since Dolly Pardon auditioned to play Sweet Polly Oliver.

  9. I love your site! Very cool. Thanks!

  10. Dan

    And I suggest you read:
    Aristoteles was right and Adam Smith was wrong. Read
    “The War of Private Vs Public Control of
    Society’s Money Power
    The Order of Battle: Adam Smith vs Aristotle ”
    http://www.monetary.org/bromsgrovetalk04.htm

    Where Stephen Zarlenga empirically show that you are wrong. Money should represent labor and the created assets of labor. The idea that money can work and create wealth by itself is the source of this parasitic system. As long as money can create money (hence as long as money is seen as a commodity) someone can make money from nothing and ride on others labor.

    Gold has always been manipulated by the same bankers that manipulates the banking system today. By controlling the supply and demand of gold they also controlled the money supply. So that road leads no where.

  11. Michael,

    That article perpetuates a false dichotomy: public vs. private, where it fails to explain (perhaps Zarienga doesn’t understand this point) that the “private” does not mean a free market system. For all of the “private” issuers of money were also achieved by either some form of “legal” coercive (similar to our modern Fed), or by fraudulent means where the public was uninformed or unaware of the practice until it was caught. In either case, the “private” is not a result of a free market. Not making that distinction is either a result of ignorance or intentional deception. Therefore, most of his claims are simply false because they are based on wrong assumptions.

    This whole “Usury” claim is simply wrong! It is an ancient myth that stems from a misunderstanding about the nature of credit and “time preference”. Once you understand the concept of “time preference” in economics, the fallacy will be exposed.

    Adam Smith was great but he was not the father of economics and he certainly didn’t know everything about money. “The theory Money and Credit” by Ludwig Von Mises is probably the most accurate representation and theory about Money.

    I appreciate the conversation, but All I can tell you is that the whole article is one distortion of many things put together not based on any real or accurate economics. The thing is, I am already familiar with much of your claims because many of them are based on known fallacies.
    Read the book I recommended to you. It is only one out of many. It’s an easy read, you have nothing to loose.

  12. Well, as I already pointed out Mises is built on Platonic model building, hence: not very realistic ideas “perfect information”, “free market”, “voluntary cooperations”, “governments inherent evilness”, “greed, selfishness don’t interfere with voluntary cooperations” etc. All that is assumptions and not “science”.

    Yes, I accept that economic is not a science but a belief system. For me economics is a part of the other social sciences (or should be at least). The good thing with social science is that it’s not stucked with rigid ideas but accept that humans are more then the total of his/hers parts – human activity can’t be reduced by the reductionist models that natural science use. I agree that there are good thoughts in Mises approach (as in anarchy , Mises left wing cousin) but by building an ideal world not dealing with contradictions and empirical evidents leads to a closed religious thinking. Not pretending they exist is very bothering in my point of view.

    How the economic belief system is built should be a part of a democratic process where people are able to change the rules and the social contract under pragmatic and democratic forms. By stating that economic is a ruled by “natural laws” and that we shouldn’t interfere with “nature” we close this democratic doors and let the same group as before rule behind those closed doors.

  13. Dan

    I think the big flaw in private banking is that it essentially takes us back to where all this started: Goldsmiths. Thought out rationally 1 of 2 things will happen.

    1.Gold will be locked into vaults and receipts issued which will be used as money this would very quickly lead to fractional reserve banking without some sort of oversight such as that of a government. To believe that savvy investors can investigate and sniff out fraudulent banks (most likely cartels) is extremely naive. The banks that were caught being deceitful would only serve to cast doubts on other banks undermining the whole system.

    2) A system based on gold only would be very hard logistically and so silver would be a necessity adding to the likelihood of #1 due to the problems associated with carrying around large amounts of precious metals.

    No matter how you slice it government oversight is necessary much the same way as the fda is necessary in our present day and age. Believing that drug companies would test drugs responsibly without the fda is naive. They would also not release untested drugs under their banner name brand but would use shell companies that are expendable as a way to strengthen competition and the bottom line and the same holds true for banking. The most dishonest would be the most competitive. Bad money drives out good after all. If free markets worked perfectly then institutions such as fda and many others would never of had a demand and come into existence in the first place. They did not come from the sheer will of governments in the first place they fill a real demand in a free market or they would not exist now like many institutions.

    There are definitely ways to implement a Governmental monetary system without the pitfalls of the past with only a minimum of new ground rules. One being transparency along with a more direct democratic control and also a severe punishment and reward system. Transparency could be easily obtained in our digital age. Direct democratic control through state representatives would decentralize power and minimum jail-times for what would be the second highest office would deter corruption while rewards would incentivize honesty.

  14. We need to treat economics like engineering, not religion or science. Speaking as a physicist, economics is clearly not a science in any way. Since Reagan, it has been a religion masquerading as a science. Why there is a Nobel prize for economics is sublimely ridiculous.
    At this moment in time, our efforts need to be focused on engineering an economic system that assigns monetary values to things that actually have value. You know… things like life, natural resources, clean water and air. Natural valuables. Our money supply and “natural valuables” should be controlled entirely by the public, not by the greedy and sociopathic “free market” believers that we have had to bear for 3 decades.
    I am actually relieved by the widespread acceptance today that the “free market” was no more that another greedy fundamentalist religion.

  15. I agree!
    The funny thing is that there is no Nobel-prize in economics. The so called Nobel-prize is given by the Swedish central bank and not by the Nobel prize comity. It´s not a part of the Nobel prize. So the “Nobel prize” in economics is a fake like the rest of this so called science.

  16. Article on why economics is not scientific and why neoliberal economics rests on false assumptions.

    http://www.taxresearch.org.uk/Blog/2008/12/22/is-economics-a-science/

    The issue of what kind of economic system we should have is a political decision. It is based on value judgments and therefore cannot possibly be scientific. In Adam Smith’s time they used the phrase political economy to describe the discipline implicitly acknowledging that power relations were involved.

  17. I see everyone here debating each other while the fat cats get richer. I myself am not a gold bug. I think Austrian Economics is insane, but I would rather work with someone who thinks that that form of economic system makes sense but is willing to try and cooperate with a range of other economic systems to try and dethrone the current system then debate endlessly and do nothing in the end.

    Here is my take for what it is worth, the problem is not that in the current system money is created from nothing, the problem is that the money created from nothing is then unfairly distributed. If everyone tomorrow had 10% more money then the price of every thing would go up, but on the flip side exchange of goods and services would be made easier, helping everyone.

    There are three great flaws in the current system.

    1. The government “borrows” money that it could have printed itself, interest free. This problem will probably be the last to be solved by any replacement of the current system. In essence the IRS is totally unnecessary.

    2. Banks make loans for which there is no money created to cover the interest, making everyone follow a rat race that has losers that the banks can use to buy up assets when the economy falters.

    3. Banks keep the principal on the loan, when the flow of work involved would indicate that they should not by all rights be able to keep any of it.

    There needs to be a conference of new economic systems representing all of the different ideas in how to bring about a new economy. At the conference new ideas can be presented and relationships forged. For instance, I am not a person who thinks there should be a gold standard. On the other hand I have no problems with the idea of using gold for long term investment. So say I talk with the Free Iroquois Bank and ask them to give me a loan to start a bank on my model and I will in that bank have the option in my bank to convert whatever money is in a deposit account at my bank to gold reserves at the Free Iroquois Bank. We both benefit. There are all sorts of synergistic possibilities that are possible.

    — NPC

  18. Surely you don’t agree with this, Ellen:

    “2. Banks make loans for which there is no money created to cover the interest, making everyone follow a rat race that has losers that the banks can use to buy up assets when the economy falters.”

    Of course, money is created to pay the interest. It is reciprocal economic activity, where the banks pay for the goods and services being delivered to them by the community, including the salaries and wages to their employees, and dividends to their stockholders. With that money the community pays interest back to the banks for the services being delivered to them by the banks.

    Why would you think that doesn’t occur?

    Brock

  19. Brock, I suggest the answer is that it is not that banks do not distribute their profits into the greater community as you suggest, which I do not disagree to in any part (or I suggest Ellen would either), the question is how much money the banks create from nothing and how much they expect back for these loans.

    The logic is fairly simple.

    1. Banks and the Fed are the only two institutions which create money from nothing in the current economy (sans some minimal contribution from the Federal Gov. in the form of pennies, dimes, nickels and quarters, as well as other “sources” such as gold, all of which are either negligible when compared to the greater economy or not really used by the public for day to day spending, such as gold, silver, etc.).

    2. Banks and the Fed expect to get paid back interest on these loans created from nothing.

    1 + 2 implies statement 2 from my original post, unless through some miracle the interest banks give to depositors matched to some degree the interest expected back to them, which it does not.

    In fact, if you read Ellen’s book statements like number 2. are all throughout her book, so whether my original statement is right or wrong, it is definitely a position that her book advocates, and would seem to indicate you did not read her book.

    — NPC

  20. Principal that is repaid is not money that is ‘destroyed’. Instead that money goes into an ‘unlent reserves’ account at the bank.

    Well worth the time is Australian Prof Steve Keen’s article on the creation of endogenous money in a credit economy. endogenous money creation

    You can set up the equation system on a spread sheet and use simple backward differences. I modeled 30 years in 500 time steps (500 steps are as easy as 10).

    A growing economy does require the bank to reloan its reserves back in. The problem is that when there is a shock, the banks hoard their reserves, which results in a deflation where the money does disappear.
    Irving Fisher wrote about this in 1934. Thus the banks have the power to hoard the money when the economy needs a continuous flow.

    I would conclude that the private banks have too much control over the money power. Congress needs to regain control of the money power if we are to live in a democratic society.

  21. Interesting to know the name of the account that banks use for repaid principal. I like Steve Keen, he is not one of the economic zombies that populate the landscape.

    If banks had to put the money in the unlent reserves account into all of the deposit accounts at the bank (pick your own scheme for how this should be accomplished) then the bank could not hoard and the tendency of people to want to just survive and pay off debts would be a self-correcting part of the economy. Just an idea.

    — NPC

  22. Brock, I suggest the answer is that it is not that banks do not distribute their profits into the greater community as you suggest, which I do not disagree to in any part (or I suggest Ellen would either)…
    ————————————————————
    ————————————————————-

    Except that she denies this every time she states that the banks when they lend create the principal of loans but do not create the money to pay the interest. In doing so she keeps repeating something that is factually incorrect.

    1. Banks and the Fed are the only two institutions which create money from nothing in the current economy (sans some minimal contribution from the Federal Gov. in the form of pennies, dimes, nickels and quarters, as well as other “sources” such as gold, all of which are either negligible when compared to the greater economy or not really used by the public for day to day spending, such as gold, silver, etc.).
    ————————————————————-

    Actually, it’s all bank credit. Coinage is also bank credit except the Fed credits the full face value of coinage to the United States government when it is ordered by the Fed and delivered by the government to the Fed. When Federal Reserve Notes are delivered the Fed credits the government only with the “cost of printing.” In neither case does the government spend the coinage or notes into circulation. All of it is delivered to the Fed when ordered by the Fed so the banking system has the capability of redeeming bank deposits in legal tender when demanded by depositors.

    2. Banks and the Fed expect to get paid back interest on these loans created from nothing.
    ————————————————————-

    “From nothing” derives from the old Latin legal term, “ex nihilo.” It simply means that it is something created through contract. Of course, the banking system expects to be paid for the services they provide. “Interest” is merely the name for that service charge.

    1 + 2 implies statement 2 from my original post, unless through some miracle the interest banks give to depositors matched to some degree the interest expected back to them, which it does not.
    ————————————————————-

    Banks do in fact pay interest on some deposits. They also pay ordinary business expenses, plus salaries and wages to their employees. They also pay dividends to their stockholders. All of that money is more than enough to pay interest back to the banks. It is reciprocal economic activity, in which the banks pay for the goods and services being delivered to them, and the community pays for the services being supplied by the banks to the community. It simply could not be otherwise.

    In fact, if you read Ellen’s book statements like number 2. are all throughout her book, so whether my original statement is right or wrong, it is definitely a position that her book advocates, and would seem to indicate you did not read her book.
    ————————————————————-

    What it actually indicates is that you do not understand your own argument.

    Brock

  23. Principal that is repaid is not money that is ‘destroyed’. Instead that money goes into an ‘unlent reserves’ account at the bank.
    ——————————————————

    I’m not aware of any bank that has an “unlent reserves” account. Reserves are not lent when banks extend loans. The purpose of reserves is to have central bank credit available to individual bankers to meet demands for redemption by depositors. Most notably this occurs through clearing operations, when deposits are transferred from one bank to another. When that happens reserves are transferred from bank to bank. Banks do not need reserves if there is perfect coordination between banks. In that case every bank would be receiving exactly one dollar from some other bank for every dollar it is losing to some other bank, with the result netting to zero. Banks attempt but of course will never achieve perfect coordination. But the attempt is what makes them a natural monopoly. Reserves are what bridge the imperfection. The appropriate theorem (in place of the fallacy that banks lend reserves) is that loans create deposits; the repayment of loans cancel deposits.

    Brock

  24. Brock said:

    “Except that she denies this every time she states that the banks when they lend create the principal of loans but do not create the money to pay the interest. In doing so she keeps repeating something that is factually incorrect.”

    You have not shown that it is factually incorrect, Brock. You keep repeating the claim that it is incorrect, but you have not presented any convincing evidence to that effect.

    Certainly the banks and their shareholders spend back into the community some of their profits from interest. But much if not most of it (depending on the size and profitability of the bank) leaves the “community” and is added to all kinds of asset accounts outside the community, or the state, or even the nation.

    Now, if the only stockholders of the bank were members of that community, and did most of their business and investing in that community, then you might have a point. But that is clearly not the case with most banks.

    Conversely, it IS the case with the Common Good Banks, which is why I find that idea so appealing.

    Jere

  25. You have not shown that it is factually incorrect, Brock. You keep repeating the claim that it is incorrect, but you have not presented any convincing evidence to that effect.
    ——————————————————-

    You will have to supply evidence that banks behave differently than other firms. As a general matter, in a normally growing economy, firms are spending MORE than they are receiving back through sales, yet are booking a profit through the rules and conventions of double entry accounting. Only in a contracting economy do firms spend LESS than they are receiving back through sales. In such a situation, firms are booking a loss through the rules and conventions of double entry accounting.

    Not only will you have to supply evidence that banks behave differently than other firms, you will have to explain what conceivable reason they would do so. For spending more than receipts is what enables them to make profits according to the rules and conventions of double entry accounting. If they did NOT spend MORE THAN ENOUGH for the community to pay interest back to them, they could not book profits. As a general matter, no firm could book profits if it did not spend MORE THAN ENOUGH into the community for the community to spend sufficiently on its goods and services for it to book a profit.

    Certainly the banks and their shareholders spend back into the community some of their profits from interest. But much if not most of it (depending on the size and profitability of the bank) leaves the “community” and is added to all kinds of asset accounts outside the community, or the state, or even the nation.
    ——————————————————-

    While this conceivably could the case for a particular community or nation, it certain cannot be case for the world as a whole. One nation’s deficit in this regard must by necessity be another nation’s surplus. So as a universal statement it must be utterly fallacious. But to the extent it may be true for particular communities and nations, the Populist case for local control of financial institutions is strengthened.

    Brock

  26. I’m not aware of any bank that has an “unlent reserves” account.

    A line of credit would be an example of an unlent reserves account. By repaying the loan principal, the borrower replenishes the line of credit.

  27. Warren Raftshol, on February 24th, 2009 at 2:26 am Said:

    I’m not aware of any bank that has an “unlent reserves” account.

    A line of credit would be an example of an unlent reserves account. By repaying the loan principal, the borrower replenishes the line of credit.
    ——————————————————-

    By definition–and we must use standard definitions–a line of credit is a line of credit. It has nothing to do with reserves as reserves are ordinarily defined. You simply do not have the privilege of conjuring up definitions for words that are defined in ordinary dictionaries. We have to be speaking a common language.

    To repeat, I am not aware of any bank that has an “unlent reserves” account. It is an impossibility and contradiction in terms because banks do not lend from their reserves. They lend from their ability to credit deposit accounts. The theorem is that loans create deposits and the repayment of loans cancel deposits.

    By standard definition, reserves are cash in a bank’s till and vault, plus the bank’s balance on deposit at the “clearing” or “reserve” bank. Their sole purpose is to enable the bank to redeem its customers’ deposits when and if demanded. Ordinarily that is accomplished through the bank’s clearing operations with other banks. When customer deposits are transferred to some other bank, the bank must redeem them by transferring reserves to that other bank.

    Brock

  28. Brock,

    For ‘unlent reserves’ I would refer you to Australian professor Steve Keen’s paper entitled Keyne’s ‘revolving fund of finance’ and transactions in the Circuit available at The process of endogenous money creation

    While ‘unlent reserves’ are neither a bank asset nor a bank liability, it is a useful conceptual alternative to the idea that money is destroyed by the repayment of loan principal.

    A ‘line of credit’ is a contractual obligation between a firm and a bank that allows the firm to expand its loan as needed.

    During recessions and depressions, such as now, banks hoard cash by
    curtailing or otherwise cutting back on lines of credit. This bank hoarding is the cause of the deflation and price level decline that characterizes depressions.

    For the above reasons. I support Ellen’s ‘democratic money’ and feel that the money power is too important to be monopolized by banksters.

  29. Brock,

    To clear things up some. Let M_C be the amount of money that a bank (or all banks) are contractually owed, from, say, the interest and principal on a specific loan (all loans), as this whole thread of replies seems to revolve around this subject. Let M be the amount of money the bank creates from nothing for the same loan. That being the case:

    M_C > M

    for any loan except when the interest is less then or equal to 0. The math is quite clear on the matter.

    M_C = (1 + i) M > M if i > 0.

    where i is the interest.

    So if all banks make loans in this way (and they do), then it is impossible mathematically for those who have to service the collective debts from all the loans to pay them back. This is simple logic and an application of the definition of how banks make loans. Nothing more.

    Now, I do not like the fact that banks get to keep the principal on a loan as their profit, as it is dishonest since they created the money from nothing, but even worse in many ways is that they are engaged in a Ponzi scheme based on the interest, as the number of loans has to be increased indefinitely just so that the impossible contract obligation of M_C > M is maintained for some time. That we continue to allow banks to do this is amazing.

    — NPC

  30. To clear things up some. Let M_C be the amount of money that a bank (or all banks) are contractually owed, from, say, the interest and principal on a specific loan (all loans), as this whole thread of replies seems to revolve around this subject. Let M be the amount of money the bank creates from nothing for the same loan. That being the case:

    M_C > M

    for any loan except when the interest is less then or equal to 0. The math is quite clear on the matter.

    M_C = (1 + i) M > M if i > 0.

    where i is the interest.

    So if all banks make loans in this way (and they do), then it is impossible mathematically for those who have to service the collective debts from all the loans to pay them back.
    ——————————————————–
    ———————————————————

    But you’ve left out of your equation the money the banks are spending into circulation in paying their expenses, including their salaries and wages, plus dividends to their stockholders. The money the banks are thereby spending is more than enough to pay interest back to the banks. It is reciprocal economic activity, in which the community is paying for the the financial services being supplied to them by the banks, and the banks are paying for the goods and services being delivered to them by the community.

    Brock

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