Where Did Our Private Money System Come From?

By Sue Peters

Sue Peters has been a long-time resident of Manhattan. She worked for 37 years in computer technology, designing data systems. Her longest job was as an associate VP for a Wall St. bank, where she learned about the monetary system by designing accounting systems.

Sue is a member of the American Monetary Institute (AMI). In 2002, the founder of AMI, Stephen Zarlenga, published an influential book, The Lost Science of Money, detailing the history of money in our world. In 2011, Representative Dennis Kucinich, working with the AMI, introduced a monetary reform act into congressional committee, the NEED ACT, HR 2990.

Our entire economy is dependent on private commercial banks to create our money.  Repeat slowly:  whenever a commercial bank signs a loan contract with a borrower, the private bank has a legal right to CREATE the loan principal as a deposit in the borrower’s account, charge interest on it, and take the loan collateral if the borrower defaults!  

This private money creation causes:

(1)  depression:  When a borrower pays off his loan principal, the bank erases (“extinguishes”) the principal amount from its bookkeeping.  This means it no longer exists.  The money supply of the country is less.  During the Great Depression of the 1930’s, so many banks failed (which meant their money was “extinguished”) that there was hardly any money circulating.  Hunger, starvation, poverty, unemployment was everywhere.

(2) inflation:  When the banks create too many loans, there is too much money circulating, compared to the available goods and services.  Prices rise.

(3) concentration of wealth:  Since the banks decide who will get loans, they decide the people and corporations that will be empowered.  Look around and see who the private bankers support:  weapons manufacturers, multinational corporations, speculators in the stock, bond, and other financial markets.

Where did this corrupting system come from?  The following history comes from the book, The Lost Science of Money:  The Mythology of Money – the Story of Power, by Stephen Zarlenga.  The author researched the history of money for 11 years, going to source materials in many libraries.  Since the history of money has always been a struggle between public versus private control of a society, private forces have always hidden behind a wall of secrecy, false narrative, and manipulation of written history.  Here are some researched facts from the book:

  • For most of Western history, the power of money creation was found in government authority, whether the Roman Republic, the Byzantine Emperor in Constantinople, or Europe’s Kings.  The money was created as an asset to the society.  
  • Author Zarlenga goes back to Aristotle for the legal definition of  money:  “Money exists not by nature but by law.” (Ethics, 1133)  To Aristotle, money isn’t a commodity that comes out of a mine or a farm.  It comes from the law.  Zarlenga’s historical research showed that when a society used government fiat money, the distribution of wealth to all members of the society tended to be more just.  In other words, the problem is not fiat money, but privately issued fiat money.
  • Since English money was kept scarce in our American colonies, the colonial  legislatures began to issue fiat paper currency as a means of exchange.  Through experience, the legislatures learned what amount of public money would bring price stability.  The paper currency circulated and was accepted back for taxes.  To protect their public money system, the colonists would not allow any private banks in the colonies.
  • This principle of government-issued money is firmly anchored in our U.S. Constitution. The U.S. Constitution, Article I, Section 8, Clause 5:  “The Congress shall have Power . . . To coin Money, regulate the Value thereof, and of foreign Coin. . .”  When the Constitution was written, lowercase ‘coin’ meant to create  both coin and paper currency.  
  • The control of a nation’s money supply was first accomplished in 1694 when  financiers created the private Bank of England.  (The name hid the private ownership.) By bribing Parliament with a loan of gold to wage war (the beginning of the national debt), the Bank of England got a charter with the power to create private money and loan it out at interest.  The government accepted it for taxes and paid expenses with it!  Over time, the private banks became the sole issuer of the nation’s money supply.
  • So begins the ugly secret of private bank money funding wars and growing national debt.  This is also the ugly history of the U.S. Federal Reserve monetary system, which began operating in November 1914, just in time for World War I.  The bank money funded  the war and the U.S. national debt increased from $1 billion in November 1916 to $27 billion at the end of the war.  

SOURCE:  Peters, Susan. “DEBT DRIVES WAR AND WAR DRIVES DEBT: The Powers of Bank Credit Creation during World War I.” Valatie, New York: American Monetary Institute, 2019.

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