Freedom Force International

The Issues

MONEY AS DEBT
An instructional video that gets a flunking grade

An analysis by G. Edward Griffin, 2007 June 7

Money As Debt is a well-produced instructional video explaining the inequities in the present world's banking system. In many respects it does an excellent job, but it misses the mark in several important areas. For example, it perpetuates the myth that interest can never be paid back in its entirety because banks do not create enough money to cover the principle plus the interest. I dealt with this myth on page 191 of my book, The Creature from Jekyll Island, as follows:

WHO CREATES THE MONEY TO PAY THE INTEREST?
One of the most perplexing questions associated with this process is "Where does the money come from to pay the interest?" If you borrow $10,000 from a bank at 9%, you owe $10,900. But the bank only manufactures $10,000 for the loan. It would seem, therefore, that there is no way that you - and all others with similar loans - can possibly pay off your indebtedness. The amount of money put into circulation just isn't enough to cover the total debt, including interest. This has led some to the conclusion that it is necessary for you to borrow the $900 for the interest, and that, in turn, leads to still more interest. The assumption is that, the more we borrow, the more we have to borrow, and that debt based on fiat money is a never-ending spiral leading inexorably to more and more debt.

This is a partial truth. It is true that there is not enough money created to include the interest, but it is a fallacy that the only way to pay it back is to borrow still more. The assumption fails to take into account the exchange value of labor. Let us assume that you pay back your $10,000 loan at the rate of approximately $900 per month and that about $80 of that represents interest. You realize you are hard pressed to make your payments so you decide to take on a part-time job. The bank, on the other hand, is now making $80 profit each month on your loan. Since this amount is classified as "interest," it is not extinguished as is the larger portion which is a return of the loan itself. So this remains as spendable money in the account of the bank. The decision then is made to have the bank's floors waxed once a week. You respond to the ad in the paper and are hired at $80 per month to do the job. The result is that you earn the money to pay the interest on your loan, and - this is the point -the money you receive is the same money that you previously had paid. As long as you perform labor for the bank each month, the same dollars go into the bank as interest, then out the revolving door as your wages, and then back into the bank as loan repayment.

It is not necessary that you work directly for the bank. No matter where you earn the money, its origin was a bank, and its ultimate destination is a bank. The loop through which it travels can be large or small, but the fact remains all interest is paid eventually by human effort. And the significance of that fact is even more startling than the assumption that not enough money is created to pay back the interest. It is that the total of this human effort ultimately is for the benefit of those who create fiat money. It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.

It is dissapointing that the producers of this program perpetuated the "no-interest-money" myth but it was even more dissapointing to see them jump on the fiat-money bandwagon as a so-called solution to the banking problem. Yes, they actually propose that the solution to fiat money created out of nothing by the banks is to have fiat money created out of nothing by the government, as though politicians are any more trustworthy than bankers.

One of the primary references cited for this video is another video documentary entitled The Money Masters, written and produced by Bill Still. Still has been a leading advocate of government fiat money, so it is clear where this non-solution came from. If you are interested in my in depth analysis of this concept and of Still's work in particular, see: Meet Bill Still, Fiat-Money Advocate.

Printer Friendly