“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it rains.” - Mark Twain
Virtually every country in the world functions (or attempts to)
under some variation of the Private Debt Money System (PDMS).
To put it simply, under this system, the private banks have been
given license to “create” money out of nothing, lend it to
individuals, large and small businesses and governments and charge all
borrowers interest for the privilege. Banks do not lend out depositors
money and they do not lend out their own money (profits). They simply
“create” a book entry (deposit), either manually or electronically in
the borrowers account for the amount of the loan.
Here is how it works.
All money in existence today is created as a debt owed by a
borrower to a lender (bank). This money flows into the economy and remains
in circulation until it is eventually paid back to the lending
institution. However, when the principal
is due to be paid back, interest must also be paid back. The flaw
in this system is that more money must be paid back than was originally
created when the loan was made. As an example, if an individual borrowers
$1000 at 10% repayable in one year, the bank creates a “deposit” of
$1000 and credits the borrowers account. The borrower then spends
the money for his required purpose and thus begins the trail of these
“funds” circulating throughout the economy until one year later when
it must be paid back. In one year, the borrower must pay back $1000, but
he must also pay back another $100 in interest. This means that the total
amount of money circulating in the economy is reduced by an additional
$100.(All payments of principal and interest are taken out of the economy
forever and the only way new money goes back into the economy is when a
borrower takes out a new loan.) Because
all money is created as a debt, the money circulating in the economy would
eventually be reduced to zero as the existing loans are repaid along with
the interest owing. In fact, a large number of loans could not be paid
back because, as you realize, there is not enough money in existence to
repay all the outstanding principal plus the interest owing. Of course,
the supply of money is not being reduced to zero because new deposits
(money) are being created in the form of new loans (debt) on a daily
To follow the illustration, new money is created by the banks in the form of loans to individuals and governments. The new money flows into the economy (circulating) and eventually is extracted in the form of payments of principal and interest (usury) back to the banks. Because more money must be paid back than was originally created, a shortage of money will constantly exist and that shortage will fluctuate with the amount and rate of flow of new money into and out of the economy. This varying shortage leads to either more borrowing to cover the repayment of interest owed or to the confiscation of the collateral (wealth) pledged to secure the loan(s). This unpayable usury causes debt to grow exponentially causing more of a shortage of money in the economy and the banks come out the winner every time as they confiscate more and more wealth from those who are the true creators….the people.
The banks use the rate of interest and their own lending policies to control the rate of flow of new money into and out of the economy. They can literally control the economy of any country and even the world with this power. With this power, the banks can create economic booms, recessions and even depressions with the stroke of a pen or a simple keyboard entry.
“Whoever controls the volume of money in any country is absolute master of all industry and commerce.” - U.S. President James A. Garfield
A prime example of this is the market crash of 1929 and the resulting depression. Just prior to the market crash, the economy was thriving. However, the banks made drastic changes in their lending policies by refusing new loans to stable and growing businesses. At the same time they demanded payment on existing loans so that money was quickly taken out of circulation and was not replaced. Canada was put in a “depression” and in deep trouble. There were plenty of goods for sale, jobs to be done but very little money. Workers were laid off and the banks took possession of tens of thousands of homes, farms and businesses through foreclosure. This “cycle” of boom and bust continues today through the same monetary manipulation by the private banking industry. A close examination of the past 89 years would show that through all of the recessions, depressions, untold personal and corporate bankruptcies, wars and human suffering, only one industry has consistently shown growth, and phenomenal growth at that…and that is the banking industry. And so they should because if you own the golden goose that lays the golden eggs, you can’t help but accumulate enormous wealth.
“Permit me to issue and control the money of a nation and I care not who makes its laws.” - Mayer Amschel Rothschild
So how did this all start here in Canada?
To begin, we must travel back to 1867, the year Canada “confederated”. Under the new “Constitution”, the British North America Act, the federal parliament had the EXCLUSIVE authority over “currency and coinage” (Section 91.14). That is, the government can set up its own mechanism for providing an adequate supply of money (credit), interest free, for the functioning of the Canadian economy and for the benefit of the people, all without creating debt.
Unfortunately, in 1913, the Federal Parliament literally gave this
authority away (unlawfully) to the private banks when the Bank Act was passed into law.
(The banking industry had convinced our MP’s that they would put an end
to recessions and depressions and guarantee prosperity for everyone.) The
federal government legislated away its greatest tool for bringing wealth
and prosperity to Canada and all Canadians. What most Canadians do not
know is that the federal government has no authority to delegate any of
its powers to anyone (See Federal Invasion).
The bankers knew very well that this would bring them untold wealth, power
and control and, at the same time, financially enslave all levels of
government, business and individuals. The bankers were also aware of the
fact that a system of servicing this debt had to be put in place. This was
accomplished in 1917 when the federal government passed The War Income Tax
Act which, was supposed to be temporary. Just long enough to pay off the
war debt, which was accomplished in 1924. Of course, we all know it is
still around but most don’t understand how it remains legal. This would be the mechanism for the banks to
begin building their
wealth and drive the people and the country into more and more debt. Tragically, this
single act by a Canadian government has brought us to where we are today,
trillions of dollars in debt (public and private) and still climbing. In
1914, the interest owing on the federal debt amounted to $1.64 per person.
In 1964, it was $50.52 per person and in 1993, it was $1,513.00 per person.
According to the Federal government’s own Annual Financial Report
for 1999-2000 (http://www.fin.gc.ca/afr/2000/afr00_3e.html), the
debt servicing costs alone on the federal debt take up 27% of the federal
budget. Remember, these figures do not include any payment of principal to
the approximately $570 billion of federal debt or about $18,400 per
person or $73,600 per family of four. (Anybody got some spare cash??)
The 1993 Report of the Auditor General (Section 5.43, exhibit 5.3) shows, graphically, how our federal debt has skyrocketed in comparison to the annual GDP. In that same report (Section 5.41), the Auditor General stated, “From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion dollars. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous shortfalls.” In other words, 91% of the debt consisted of interest charges and only 9% represented actual spending on goods and services. This would not have happened if our elected representatives had not given away its exclusive authority to create the nation’s money interest free.
Again, remember that under this type of monetary system, THESE DEBTS CAN NEVER BE PAID OFF!! (See Billions For Bankers - Debts For The People.) It is mathematically impossible!
In order for this monetary system to continue to exist as it is, the ongoing creation of new money (debt) must also continue. Borrowers must be enticed to take out new loans (deposits created by the banks out of nothing) so that the supply of money in the economy remains adequate and the system continues to function. Banks will offer lower interest rates, zero interest grace periods and even cash rebates to lure people to take out new loans for purchases. So, when you see rates as low as they are presently, you can surmise that the amount of money in the economy is being reduced at an increasing rate as old debt is being paid off and the banks are attempting to replace it with new money (loans). At some point, the creation of new money through more borrowing will no longer be possible because people, small and large businesses and governments will no longer be able to finance any more debt because the costs will simply be too high for anyone. We will all realize that these debts cannot ever be paid back. Quite simply, we are heading for a global economic meltdown as this debt money system will ultimately implode!
The only answer to this root cause of most, if not all, of our financial woes is to rescind the Bank Act and the federal parliament reclaim its exclusive authority to create the nation’s money debt free and interest free. A system must be put in place, which will benefit all Canadians and not the private banks. One such system is the Public Credit Money System.
“If the people understood the banking system today, there would be a revolt in the streets tomorrow.” - Henry Ford
This page was last updated on 06/27/05.