Creature From Jekyll Island by G. Edward

Fisher, 100% Money (New York: Adelphi, 1936), p. xxii.

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country, regardless of public utterances to the contrary. Here is the bottom line from the System's own publications. The Federal Reserve Bank of Philadelphia says: 'A large and growing number of analysts, on the other hand, now regard the national debt as something useful, if not an actual blessing.... [They believe] the national debt need not be reduced at all.'1

The Federal Reserve Bank of Chicago adds: 'Debt—public and private—is here to stay. It plays an essential role in economic processes.. .. What is required is not the abolition of debt, but its prudent use and intelligent management.'2

WHAT'S WRONG WITH A LITTLE DEBT?

There is a kind of fascinating appeal to this theory. It gives those who expound it an aura of intellectualism, the appearance of being able to grasp a complex economic principle that is beyond the comprehension of mere mortals. And, for the less academically minded, it offers the comfort of at least sounding moderate. After all, what's wrong with a little debt, prudently used and intelligently managed?

The answer is nothing, provided the debt is based on an honest transaction. There is plenty wrong with it if it is based upon fraud.

An honest transaction is one in which a borrower pays an

agreed upon sum in return for the temporary use of a lender's asset.

That asset could be anything of tangible value. If it were an automobile, for example, then the borrower would pay 'rent.' If it is money, then the rent is called 'interest.' Either way, the concept is the same.

When we go to a lender—either a bank or a private party—and receive a loan of money, we are willing to pay interest on the loan in recognition of the fact that the money we are borrowing is an asset which we want to use. It seems only fair to pay a rental fee for that asset to the person who owns it. It is not easy to acquire an automobile, and it is not easy to acquire money— real money, that is. If the money we are borrowing was earned by someone's labor and talent, they are fully entitled to receive interest on it. But what are we to think of money that is created by the mere stroke of a pen or the click of a computer key? Why should anyone collect a rental fee on that?

1- The National Debt, Federal Reserve Bank of Philadelphia, pp. 2,11.

• Two Faces of Debt, Federal Reserve Bank of Chicago, p. 33.

190 THE CREATURE FROM JEKYLL ISLAND

When banks place credits into your checking account, they are merely pretending to lend you money. In reality, they have nothing to lend. Even the money that non-indebted depositors have placed with them was originally created out of nothing in response to someone else's loan. So what entitles the banks to collect rent on nothing? It is immaterial that men everywhere are forced by law to accept these nothing certificates in exchange for real goods and services. We are talking here, not about what is legal, but what is moral. As Thomas Jefferson observed at the time of his protracted battle against central banking in the United States, 'No one has a natural right to the trade of money lender, but he who has money to lend.'1

THIRD REASON TO ABOLISH THE SYSTEM

Centuries ago, usury was defined as any interest charged for a loan. Modern usage has redefined it as excessive interest. Certainly, any amount of interest charged for a pretended loan is excessive. The dictionary, therefore, needs a new definition. Usury: The charging of any interest on a loan of fiat money.

Let us, therefore, look at debt and interest in this light. Thomas Edison summed up the immorality of the system when he said: People who will not turn a shovel full of dirt on the project nor contribute a pound of materials will collect more money...than will the people who will supply all the materials and do all the work.

Is that an exaggeration? Let us consider the purchase of a $100,000 home in which $30,000 represents the cost of the land, architect's fee, sales commissions, building permits, and that sort of thing and $70,000 is the cost of labor and building materials. If the home buyer puts up $30,000 as a down payment, then $70,000 must be borrowed. If the loan is issued at 11% over a 30-year period, the amount of interest paid will be $167,806. That means the amount paid to those who loan the money is about 2 1/2 times greater than 1. The Writings of Thomas Jefferson, Library Edition (Washington: Jefferson Memorial Association, 1903), Vol XIII, p. 277-78.

2. As quoted by Brian L. Bex, The Hidden Hand (Spencer, Indiana: Owen Litho, 1975), p. 161. Unfortunately, Edison did not understand the whole problem. He was correctly opposed to paying interest to banks for their fiat money, but he was not opposed to government fiat money. It was only the interest to which he objected. He did not see the larger picture of how fiat money, even when issued solely by the government and without interest, has always been destructive of the economy through the creation of inflation, booms, and busts.

THE MANDRAKE MECHANISM 191

paid to those who provide all the labor and all the materials. It is true that this figure represents the time-value of that money over thirty years and easily could be justified on the basis that a lender deserves to be compensated for surrendering the use of his capital for half a lifetime. But that assumes the lender actually had something to surrender, that he had earned the capital, saved it, and then loaned it for construction of someone else's house. What are we to think, however, about a lender who did nothing to earn the money, had not saved it, and, in fact, simply created it out of thin air? What is the time-value of nothing?

As we have already shown, every dollar that exists today, either in the form of currency, checkbook money, or even credit card money—in other words, our entire money supply—exists only because it was borrowed by someone; perhaps not you, but someone.

That means all the American dollars in the entire world are earning daily and compounded interest for the banks which created them. A portion of every business venture, every investment, every profit, every transaction which involves money—and that even includes losses and the payment of taxes—a portion of all that is earmarked as payment to a bank. And what did the banks do to earn this