Hi Folks,

The Minister of Finance’s request for suggestions to improve Canada ’s financial system, has generated much dialogue on and off the Internet.  By the way, the e-mail address for submission of suggestions on how to improve the financial system is, finlegis(Replace this parenthesis with the @ sign)fin.gc.ca

Some of this dialogue has come to my attention and there appears to be some confusion as to what is meant by debt-currency and how interest impacts and is related to, debt-currency.

It appears that everyone is aware of the fact that Canada , and most other countries on earth (with the possible exception of Iran and possible China ), suffers under a debt-currency monetary system.

The term debt-currency, the type of money we have in Canada , means that the money supply is borrowed, thus creating a debt or legal obligation to repay the money under certain terms and conditions as outlined in the contractual obligation executed by the lender and borrower.

That is precisely and the ONLY reason why the money is referred to as debt money or debt-currency.  Interest has absolutely nothing to do with the fact that our currency is referred to as debt-currency or why it must be paid back to the lender.

The interesting thing to note though, is that money can either be debt-currency or debt-free-currency, and the difference and the impact on the people who use the money is huge.

In the case of debt-currency 100% of the money supply, as in Canada , is borrowed into circulation, either by government, corporations or individual men and women.  This money comes with a legal obligation to repay it.

Therefore, immediately upon spending the borrowed money (debt-currency), the borrower has to commence an ongoing series of activities designed to reacquire the money, or that of others, with which to meet the obligation to repay the so-called loan, which is in fact, the licensed activity by the banks of actually issuing credit.  The thing to remember here, is that the credit the banks issue, is your credit.

Now there is an alternative to this debt-currency system and that is, obviously, debt-free-currency.

Why would anyone want debt-free-currency?  Well, because money is supposed to be a tool.  We are told that money is simply a medium of exchange, which enables the people to freely exchange their goods and services.

Well, the use of the term “freely” exchange their goods and services is a misnomer because, since the people have to borrow the money to do so, then neither the money, nor the activity is free.

The other reason we are convinced to use money is that it is a store of value.  Well, it is not, it is simply painted up pieces of paper and as in anything else that is paper or written on paper, it exists only on paper and in the minds of men.

Money has no real value, and it should not have, because it is supposed to be a tool for the people;  A means of exchanging their goods and services.

All wealth is created by the labour of mankind when attached to the natural resources surrounding them.  Money creates absolutely nothing.

Money is supposed to be a medium of exchanging that wealth, but it begs the question, why do we have to borrow it, why is it not provided to us freely, by the government for example.

Surprisingly, the federal government has indeed been given that power and authority by subsections 91((14), (15) and (20) (plus others) of the Constitution Act, 1982, but the government has given that power to the privately owned banks, which explains why we have to borrow our money thus making it debt-currency.

This places a terrible burden on the people and at the same time reaps much profit for the bankers.

When the money is paid back (returned) to the banks it may well be cancelled, I am not certain what actually happens to it, but much of it is never returned to the banks in satisfaction of the debt, because much of it is used to pay interest to the banks for the use of our own credit.

Remember, that the banks do not create money per se, the banks actually issue credit – the people’s credit.  They are licensed to do so and they are the only ones who can create money in our country at the present time.  I actually believe that the government cannot exercise its constitutional powers to create money since they have forfeited that power in favour of the banks.

However, that is not important in understanding the difference between debt-currency and debt-free-currency and what part interest plays in our monetary system.

The difference between debt-currency and debt-free-currency then, is simply that in the former instance, money is borrowed with the obligation of repaying it, while in the latter case, it is simply provided free of any obligation to the people, other than to spend it and if it is not spent, then it should be returned to source.

Under such a system of debt-free-money the only real purpose of money is to be spent and when it is not being spent it is not to be stored up in bank accounts and such, it should be returned to source for cancellation.  If and when we need more, we simply go to the bank and get some, after all it is issued based on our gilt-edged credit!

Why should the latter (debt-free-currency) be a benefit to the people and the former (debt-currency) be a burden?  Well, if you cannot see why, then I am unable to explain it better than I already have so I will not attempt a further explanation.

I will, however, explain what the impact of interest is on we the people and why it creates a mathematical impossibility which in itself, is illegal – the law cannot create an obligation to do the impossible!

The first question to ask, is “where does the interest come from”.

We all know that when we borrow money from the banks, the banks oblige us to pay them interest on that money (remember, banks issue credit, your credit, but it spends just like money so it is referred to as money).

But where does that interest come from?

Now, think about this before you read on and see if you can see why this present monetary system in Canada creates a mathematical impossibility for the people.  The interest must come from the money (debt-currency) that is borrowed from the banks!

Now think!!

Therefore, as we use some of our borrowed money to pay the interest, it immediately, even after the very first interest payment, leaves us with a shortage of cash with which to repay our debt obligations related to the borrowed money.

For example if the country has $1,000,000,000.00 in circulation, 100% of which has to be borrowed from the banks, the only source of money in the country, after the first interest payment, and let’s say interest is only .0000002% (an unrealistic proposition since interest is always 1% or much more), the first interest payment will be only $2.00.

Even with such a relatively small amount of interest, we now have the mathematical impossibility of repaying the entire debt and the banks can do whatever it is that their contract with us permits them to do, usually seizing some, or all, of our material wealth.

There you have it, the difference between debt-currency and debt-free-currency, the impact of interest and the impact of both on the people of this nation, since both make up the present monetary system in Canada, as well as most major countries on this planet.

This may be the reason that the Minister of Finance, James Flarherty has asked for suggestions to improve the financial system of this nation.

Maybe that it is why we should all give him our suggestions.

I would hope that your suggestion would be more realistic when birthed from the knowledge contained in this treatise.

I would like to conclude by quoting some of the members of the House of Commons Standing Committee on Banking and Commerce contained in the minutes of their March and May meetings of 1939.  Graham Towers was the Governor of the Bank of Canada at that time.

“It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer and the other helps the people”, and;

“It is the people who constitute the basis of government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency, instead of the bankers  receiving the benefit of the people’s credit in interest bearing bonds?”, and

“Income taxes pay the interest to the bondholders”.

The following involves some intense grilling of Mr. Towers (also taken from the aforementioned minutes):

Q. But there is no question about it that banks create the medium of exchange?

Mr. Towers: That is right. That is what they are for... That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)

The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)

Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)

Broadly speaking, all new money comes out of a Bank in the form of loans.

As loans are debts, then under the present system all money is debt. (p. 459)

Q. When $1,000,000 worth of bonds is presented (by the government) to the bank, a million dollars of new money or the equivalent is created?

Mr. Towers: Yes.

Q. Is it a fact that a million dollars of new money is created?

Mr. Towers: That is right.

Q. Now, the same thing holds true when the municipality or the province goes to the bank?

Mr. Towers: Or an individual borrower.

Q. Or when a private person goes to a bank?

Mr. Towers: Yes.
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Love & Peace of I,

Authored by: Wally

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