Credit to JustMoney.com for the image, editing and posting.
A thriving economy requires that credit flow freely for productive use. But today, a handful of giant banks diverts that flow into an exponentially-growing self-feeding pool of digital profits for themselves. Rather than allowing the free exchange of labor and materials for production, our system of banking and credit has acted as a tourniquet on production and a drain on resources.
Yet we cannot do without the functions banks perform; and one of these is the creation of “money” as dollar-denominated bank credit when they make loans. This advance of credit has taken the form of “fractional reserve” lending, which has been heavily criticized. But historically, it is this sort of credit created on the books of banks that has allowed the wheels of industry to turn. Employers need credit at each stage of production before they have finished products that can be sold on the market, and banks need to be able to create credit as needed to respond to this demand. Without the advance of credit, there will be no products or services to sell; and without products to sell, workers and suppliers cannot get paid.
Bank-created deposits are not actually “unbacked fiat” simply issued by banks. They can be created only when there is a borrower. In effect, the bank has monetized the borrower’s promise to repay, turning his promise to pay tomorrow into money that can be spent today — spent on the workers and materials necessary to create the products and services that will be sold to repay the loans. As Benjamin Franklin wrote, “many that understand Business very well, but have not a Stock sufficient of their own, will be encouraged to borrow Money; to trade with, when they have it at a moderate interest.”
If banks have an unfair edge in this game, it is because they have managed to get private control of the credit spigots. They have often used this control not to serve business, industry, and society’s needs but for their private advantage. They can turn credit on and off at will, direct it at very low interest to their cronies, or use it for their own speculative ventures; and they collect the interest as middlemen. This is not just a modest service fee covering costs. Interest has been calculated to compose a third of everything we buy.
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Filed under: Ellen Brown Articles/Commentary | Tagged: business, economics, FINANCE, money |
WEB OF DEBT BLOG 
“U.S. Money vs. Corporation Currency” by Alfred Owen Crozier (1912) is essential historical reading on this infinitely important topic:
See: https://archive.org/details/usmoneyvscorporation_1906_librivox
Ellen Brown:
Re: http://www.theamericaparty.org
This is the type of information which should be made available to the new political party. They will want to differentiate themselves from the establishment-owned, two major political parties and, until they are owned by the establishment themselves, they will most likely endorse ideas that are actually good for the country.
Bill Madden
There is a vital material distinction to be made (and not made or acknowledged generally) between loans written (and money created) to fund the creation of tangible goods and actual material services, and loans written to bid up the prices of assets already created. Michael Hudson says that 95% of loans in the U.S. today are written (and money created) for the latter process — speculation. This is the fundamental cause of the inflation that makes a loaf of bread that cost 5 cents in 1913 cost 5 dollars today.
I want to draw to your attention a little known book that makes this distinction in particularly revealing ways, Col. Elisha Ely Garrison, Roosevelt, Wilson and the Federal Reserve Law (Boston, Christopher Publishing, 1931). An expert on accounting — Principles of Business Accounting (Doubleday, 1925 and earlier); The Riddle of Economics (Macmillan 1932) — Garrison was an activist-advisor involved with discussion leading to the new banking legislation which resulted (in finance-banker sabotaged form) in the Federal Reserve Act of 1913. He recounts his interaction as an advisor-consultant in this pursuit with Theodore Roosevelt (a friend — Garrison was a Rough Rider and a Yale grad), Woodrow Wilson, Paul Warburg, Robert La Follette (whom he views askance), and John L. Commons (a close ally and fellow advocate) and several other academic economists — also Sen. Robert Owen; both Amos and Gifford Pinchot (whom he presents negatively); Fremont Older and Hiram Johnson. His activism resulted in bank attacks on his business’s credit and journals publishing his writings etc. [e.g. 238 ff., 281 ff.].
A word to the wise. Thanks for your work.
Jim Powell
MacArthur Fellow