DEAR ALL,

I do wonder how many of you know how the banking system really works, and if you did know you would perhaps be suprised, and even alarmed to some extent. As we have seen in the news it was pleasing to hear that a huge amount of debt may be written off for specific Third World countries. However, some people are still under the illusion that this loaned money belongs to depositors. This is false. Banks create MONEY OUT OF NOTHING THROUGH WHAT IS TERMED FRACTIONAL RESERVE BANKING. If the legal authority is there any amount of loaned finance can be wiped off, and the banks would still be able to make up the lost amount by simply producing more of it. How do they do this?

The answer is as follows. A certain amount of "real" money is kept in reserve. Based on this banks can create new money as loans, or credit to their customers by simply writing down the amounts onto paper, and computer. In other words, it is produced "out of thin air" as already mentioned. It is as simple as that. Ofcourse, the banks create super-normal profit from all this, and now, virtually the entire money supply is created in this way!!!

On the other hand, the governments create "real" money as coins, and paper. Yet, it only makes up a virtually non-existent percentage of the worlds entire money supply. Remember banks unlike democratically elected governments are private businesses for private gain. It has been argued that the former are counterfeiting the "real" national currencies of the world via fractional reserve banking.

Radical monetary reformers believe that it is possible to have loans, or credit created without interest. This could be undertaken by an independant public authority. Ofcourse, the banks would not allow this, and would fight tooth, and nail via the courts if any country were to introduce legislation of this kind. The only way forward is to get the top rich countries to agree together in the simultaneous implementation of this reform. This would give little room for banks to legally challenge the elected authorities. The same approach ofcourse can be used to properly regulate the Multi-National Corporations.

For more info there are a number of groups concerned with the above. If you key in the words monetary reform you should find references to "organisations" such as Prosperity, Global Justice Movement, Forum for Stable Currencies, Social Credit, etcetera. Michael Rowbottom a noted author of two books on monetary reform is worth enquiring about.

I, myself, am concerned with the research, and development of Transfinancial Economics, or Non-Taxation Monetary Reform which includes Interest-Free Monetary Reform as being of secondary importance because its social, economic, and political implications are much more limited. Reference to my work can be found elsewhere on this website.

PS. In Canada and possibly elsewhere it now appears that banks do not legally have to have a reserve of "real" money in order to create new funds.............