Brussels wants the keys to the national
treasuries of the 17 Euro-countries. Only this way can they save the Euro, they
say. The ESM-treaty has already been signed. If the national parliamentarians
ratify it, it will be the end of our sovereign democracies. Do we want that? Is
there an alternative?
For those who
know how the money system works, the logical solution to today's problems are
fairly simple. A bank reform. On TV, at least in the Netherlands, the subject is
still taboo ,
but if you want to know how it works, you can find an explanation here. (And if
you already know all this, you can scroll immediately to 2. bank reform.)
Today's money system
World wide bankers now have a money system, which is based on making money
out of thin air. Nearly all money in bank accounts consists of thin air. There
is only a tiny little fraction of real money in circulation. How is that?
Banking is bookkeeping
Each time a banker supplies a loan he does not hand out money, but just a
balance. The loan consists of nothing else but numbers in the banker's books.
Let's say you want a loan from your bank, the “Hard Up Bank”. On one side of the
ledger the banker writes that you owe him 250,000 Euros and on the other side
that he owes you 250,000 Euros. You see the amount appear in your account. You
can spend it. Buy a little home? Okay, buy a little home.
Say you write a cheque to the seller of the house. He will bring that cheque
to his bank, the "Red Shield Bank". That bank now wants to exchange the cheque
at your bank, that is to say, against real money. Red Shield knows how his
colleague has juggled the numbers from his hat and won't put up with thin air.
So now “Hard Up
Bank” will have to come up with real money. However, in practice, this is not
necessary most of the time, because Red Shield also supplies loans continually.
Part of these loans will be spent with customers of Hard Up Bank. So, what
happens is that Red Shield exchanges his claim of 250,000 Euros on Hard Up Bank
against a claim of 250,000 Euros of Hard Up Bank on Red Shield.
Interest on thin air
This way banks can bring into circulation more loans all the time. One can of
thin air is exchanged against another one and the customers don't notice how
they are fooled. For, on this thin air, interest has to be paid.
Just for amusement an example where banks create millions without the need of
a single cent of real money. In reality it is a bit more complex, but still.
We assume there are 3 banks which respectively serve 20%, 30% and 50% of the
population. We suppose all three have the same type of customers, who have the
same needs for loans and expenses. It is demonstrated that all payments the
banks must execute at the moment the borrowers spend their loan are
counterbalanced by the reception of these payments.
The borrowers at the first bank spend 20% of their loans with customers of
their own bank, 30% with customers of Bank 30% and 50% with customers of Bank
50%. And so on. When we add all the amounts from the loans together, each bank
has received as much as he created. Voilà, 100 million Euros created as balances in bank
accounts without the need of one cent of real money.
When you ask bankers if they create money out of thin air, they generally
reply that they only supply loans as far as they have balances in front of them.
However, those balances increase automatically by the loans they supply all
All payments proceed in the same way. When you make a payment to someone at
another bank, then your banker must pay it to the other bank. But still the same
day there will also be payments made by customers of other banks to customers at
your bank. All these interbank payments are simply crossed out against each
What the banks finally pay to each other are the little differences between
incoming and outgoing packets of payments. To facilitate these payments all
banks have an account at the central bank. The amounts in these accounts are
considered to be real money. (If they wished the banks could claim the entire
amount in bank notes, as the central bank is authorized to print them.)
At the central bank the rule goes that banks must have a positive balance at
the end of the day. When a banker is short of money, because he received a bit
less than he paid out, he will borrow for the night from his colleague, who then
has received a little more than he paid out. And when the colleagues don't trust
each other, like during the credit crisis in 2008 and now again since a few
months ago, the banker can borrow from the central bank for a quarter of a percent
Bankers among each other
have agreed upon rules among themselves about the required capital in relation to the
calculated risks, like those of the outstanding loans. That capital is only a
fraction of these risks, but in this way the creation of money out of thin air is
tempered somewhat and banks get more in line with each other with the supply of
loans. This increases the mutual confidence in lending money to each other, so that
all of them can optimize their possibilities for benefits.
So, first of all, bankers are bankers among each other. When the customers of
big Dutch banks were angry about the grab-culture at their bank and massively
took their money to Triodos Bank (a kind of green bank), the big banks were
short of that money. Fortunately for them, Triodos was not the meanest bank and
ended up lending the
money back to those same Dutch banks. (Sorry folks, ethical banks simply don't exist,
sympathetic looking banks do. But with such a money system, you can't expect
otherwise, can you?)
But as soon as dark clouds show up at the horizon and severe losses threaten
the banks, the mutual confidence is immediately gone. Then each banker tries
to keep up his own trousers. Each of them tries to increase his cash reserves
and lower his risks. As a result, over the period of months, the industry hardly gets any
loans anymore and the waves of dismissals and failures start to ravage the
country again. And if the bad weather stays, it can even last for years.
Wonderful, isn't it, such a banking system?
Amounts move from account to account
Back to the sold house. The seller now disposes of 250,000 Euros of thin air,
he will spend on his turn. This way, this so-called money goes from one account
to the next. So even if you have never contracted a loan, in your account there
is only thin air you received for your work or for goods you sold. If, for
example, you are at the ING-bank, this bank only has 3 cents of real money for
each Euro you have as a balance in your account.
All the time less money in your pockets
In fact, with thin air they multiplied the 3 cents by 33. This means that
when you deposit a banknote of 100 Euros in your account at ING, they lend out
3300 euros. To put it an other way, for each Euro we don't keep in our pocket, the
banks collect a multiple of interest.
you do understand now too, why the bankers seduce us to make our payments electronically as
much as possible. Credit cards, bank cards, fuel cards, prepaid, chip and public
transportation cards, it all serves just one goal: to make sure we need the least
possible amount of cash money in our pockets.
However, this has also a reverse side. The cash reserves (the bank notes and the
exchangeable balance at the central bank) do not only serve to give cash to
the customers and to pay the little differences between incoming and outgoing
payments, they are also the first reserves to absorb losses. But since the
income at lower cash reserve percentages increases disproportionally, the
temptation to take more risks is big. This way, with our modern plastic money we
contribute to the reckless loan behavior of our bankers.
Let us see what happens when we bring a bank note of 100 Euros to our bank
and deposit it in our account. At 3% of cash reserves the bank only has 3 cents
for each Euro in your account.
In the right column you see that the revenues rise disproportionally when the
cash reserve percentage lowers. And - the other way round - if you want to go
back from 3% to 4% with the same amount of cash reserves, you need to get rid of
1/4 of the outstanding loans...
All amounts are temporary
At agreed moments you will have to pay back the balance you received from
Hard Up Bank. From the pool of all "money" in circulation you have to earn
enough to pay the installments. Then Hard Up Bank writes in his book that the
amount you owe him is decreased and he decreases the amount he owes you. You see
the amount disappear from your account. In this way the created balances disappear
out of circulation again. That is a decrease of the "money" in the country.
The interest you pay does not disappear from circulation. With it the banker
pays all his costs (like interest, insurances, staff, maintenance, invoices of
the companies that supply E-banking etc.) and the capital is extended
to allow him to lend out still more next time.
“Money mass” must grow
The classic risk for the bankers is that borrowers don't pay back their
loans or only pay back partially. And when the pawn appears to be insufficient,
he will stay with problems in his book keeping, meaning with amounts that sooner
or later he will have to book as losses.
To minimize the risk of defaults of payment the banks take care that more and
more loans are brought into circulation. For the more "money" is added
to what is in
circulation, the less each unit becomes worth. That is what is well known as inflation. The
amount the borrower must pay back is set. And because this amount over the
course of the loan becomes worth less, he can earn it more easily. If he must
pay 6% of interest and the inflation is 2%, the load of the interest is 1/3
In this way the number of defaults of payments is considerably reduced.
By the way, the advantage for the borrowers exactly equals the loss of value
that the users of the money experience. In fact, as users, they pay a part of
the interest too.
Working harder all the time
is this same inflation that causes we must work harder all the time. Each time
more "money" comes into circulation, we must try to earn more, if we don't want
to get poorer.
Of course a central banker will never tell us that the growth of money is a need
for the bankers. The official pretext is that inflation leads to more economic
And that, in turn, is the origin of the wide spread belief that an economy
must grow to be sound. A very dangerous fairytale. Eternal economic growth is
impossible on a finite Earth. And the longer we continue on this path, the more we destroy.
What we can say is that a money system that needs a growing mass of money to
function, is not suited for a sustainable society.
Our government disposes of "money" by levying taxes. With these taxes different things
can be financed that are important for all of us together, like for instance
dikes, roads, bridges, schools, hospitals, police, army and so on. It regularly happens that the government spends money before the corresponding taxes
have been levied. In today's system the government must then borrow money and
pay interest on it. That is the well known state debt or public debt. We may be accustomed to
it, but in fact it is something weird. Within the community people execute tasks
for the community, everyone is paid for his contribution and subsequently there
is a debt left over. And on that debt, all of us pay interest via extra taxes.
Money creation by privately led banks
This is exclusively caused by the fact that parliamentarians in the past have
ceded the creation of money to private bankers. This happened at a time that
people valued the fairytale that said only bankers could keep the monetary household in
good shape. If the government would bring the money into circulation, that would
surely lead to a disaster!
Democracy without money
The result is that we still pretend to live in democracy, while one of the
major attributes of society, the creation of money, is in the hands of private
bankers. De Nederlandse Bank N.V. (the Dutch central bank) is ruled by private
persons and is independent from the government. Before, they also independently
set the interest rate "in the interest of the economy", as they called it. Now,
this is done by the European Central Bank (ECB), where the 17 independent
central banks of the eurozone are the owners and managers.
One interest rate for all
The ECB has engaged the impossible challenge to set one interest rate for the
17 different countries, with totally different economies, which have very
different potential for productivity. Of course, it is completely impossible to
determine an interest rate that has the optimal effect for all countries. A
change of interest rate can only be beneficial for one or some countries. The
other countries bear the consequences.
The euro, the most expensive money experiment ever
The euro will probably be remembered as the most expensive money experiment
ever. Since the start of the project in 1970, it was already known that the
experiment was doomed to fail, but bankers and hard headed politicians pushed
for the common currency anyway. The point is that a common currency can only
work in an economically homogeneous area.
  
Here is why.
When consumers, in countries with fewer possibilities for productivity, prefer
cheaper and better products from abroad, the exterior debt will increase. At the
same time the country's own productivity will decrease. A country disposing of
its own money can then devaluate it. That makes the imported products
more expensive for its own population and the export products cheaper for
foreign purchasers. The debt will decrease and the productivity increase again.
Devaluations were very common before the Euro started. The Euro works like a fixed
exchange rate. Less productive countries are trapped like rats. They will
never be able to get out of debts again. That is why the chosen method of
loading still more debts on these countries is a strange and ill one.
Euro coupled with EU-membership
The bankers have succesfully lobbied for the rule that we can't leave the euro without leaving the EU.
Well, that kills two flies with one blow.
More and more people become aware that the EU is much less democratic and
social than the citizens in Europe want. Although it was that way right from the
beginning, many are finding out only now that the European Parliament is a mockery and
not a real parliament with democratic power. Also, more and more people are finding out
the European Commission (EC) and the ECB draw all power towards them. By the
way, for the EC and the ECB the ESM-treaty  will be the breakthrough that puts
all national parliaments off the side. For them the ratification of this treaty
seems to be a piece of cake, as most parliamentarians are still sleeping or
cannot believe it. (Or are they accomplices?)
The European Union has the free market economy as laid down principle.
Meanwhile, almost everyone has understood that the deregulating of banks,
the privatization of infrastructures and the abolishment of governmental tasks lead
to a harsh society harassed by crises. Those principles are outdated. The
partisans of these principles will only succeed by imposing them by violence. Greece won't
be the last victim.
The EC and the ECB now cooperate with the IMF to crush countries with too
high debts under still higher debts. The scenario to seize power has been
applied by the IMF many times over the past fifty years. That scenario goes like this:
maneuver a country into difficulties, and as soon as is gets into debt, crush
it under gigantic loans in a such way it cannot even pay the interest. Subsequently
keep the country under guardianship and make sure the government gets completely weakened by
imposing ever more spending cuts. Let the population bleed, then it will be
content more quickly when they get some air. And as soon as things are severely
disorganized, let foreign investors buy the country's wealth and introduce an
absolute free market economy.
Anyone who thinks it over for a minute sees that with the scenario of the emergency
funds all Euro countries end up in debt. This too has already been anticipated in
this criminal scenario. The massive loans first serve as a pretext to impose a
guardianship. As soon as this is accomplished, they can declare the country will never
be able to pay back its loans. And with these broken loans they can maneuver
their next victims into debt; these are the governments that warranted these
loans. They will have to cut spending to pay for the losses. And for all
countries the same refrain will be repeated over and over again, that governments
must cut spending, cut spending, cut spending. Until hardly anything is left
of the role and function of the national governments and Brussels can take
control. Of course this will be accompanied by enormous social unrest. You can
read the rest in Naomie Klein's book, The Shock Doctrine.
2. The bank reform
The solution is simple. In stead of pouring dozens of billions more into a
Euro that is doomed to disappear sooner or later and in stead of letting us
prescribe cuts in public spending by the undemocratic European Commission and
the ECB, we can introduce state money, also called public money. (This is NOT
the same thing as the money we used to have before the Euro! That would not
solve our problems!)
Technically this can be done rather simply. In stead of today's central bank,
a new central bank will be established, that is to say, a central bank of the
state. It will fall under the responsibility of the Ministry of Finance and be
controlled by the Parliament. A commission of well formed people will watch over
the long term interests of the money system.
This state bank will be the only bank authorized to create money. All loans
will be supplied in state money, be it in electronic form or in cash. It will be
prohibited for commercial banks and financial institutions to create balances
out of thin air. All new balances must be fully backed by state money. Today's
banks stay responsible for the loans in Euros they have outstanding at the
moment of the reform. As far as they wish, they can become middlemen between the
state bank and the public for the supply of loans and they can manage the
customers' accounts in name of the state bank. In this case nothing changes for
the public in their existing accounts. The balances in Euros will be transformed
1:1 to state money. As middlemen the banks don't receive interest but a
fee for their services.
Emission of state money
The emission of state money delivers a comparable amount of Euros. These can
be kept by the state bank for the payment of debts and also as enormous
strategic reserve. I think it is not unthinkable that at some point of time
the new state money will be attacked on the exchange markets. We would be about
the only country in the world with its own state money and the mighty private
bankers will not gratefully accept that.
No spending cuts
The motive for today's spending cuts are the gigantic loans that the IMF, the
EC and the ECB have mischievously loaded on Greece, while the country was
already struggling with severe debts. It was foreseeable that after the seizure
of power of the IMF, the EC and the ECB the loans would be declared
unrecoverable and that the losses would be loaded on the eurocitizens in other
Not so long ago the rescue funds EFSF had a lending capacity of 440 billion
Euros. That was an average of 1320 Euros per eurocitizen. On 27 October 2011
250 billions were left, when the heads of state of the euro-countries made one
billions) out of it, thanks to a bookkeeping trick. (Yes indeed, the thin air
formula.) Of course we are now guarantors for these 1,000 billion Euros, or to
put it otherwise, an average of 3,300 Euros for each and every eurocitizen. When
the following emergency funds, the ESM, will get ratified by the national
parliaments, an additional obligation comes on top of it of 700 billion Euros
(2,100 Euros per euro-citizen). Subsequently, this ESM funds can be raised
indefinitely without the approval of the national parliaments.
So the motive for the spending cuts doesn't lay in the national situations of
the euro-countries. Of course, each country has its particular problems that ask
for appropriate measures, but that does not necessarily mean we would have to
give up our government and our social, cultural and other achievements.
Let us end the Euro, end the EU and end the spending
can save money during your entire life for your pension, but what you can do
with it greatly depends on the situation at that moment. Already before 1980 it
was obvious that around 2015 a huge grey wave would arrive of people of 65
years and older, that would be faced by an ever decreasing portion of working
people. Pension funds have made the premium payers believe, they would receive a
value guaranteed pension, something they should never have promised with this
The last generation of pension receivers, by the favorable relation between a
big working population and relatively few pensioned people, could be paid directly
out of the collected premiums from the working people. That time is over.
Pension funds often have a portion of the paid in premiums invested in state
obligations. So in fact, part of the pensions is already paid by the government
with our tax money. Another part of the pensions comes from the income from
foreign investments. To say it otherwise, from the profits of companies elsewhere in the world. To say it still otherwise, from the fact that workers elsewhere in the world execute part of their work to pay our pensions. So, a kind of
Personally I would rather prefer we take care of ourselves and our elderly. In
my opinion we have enough room for that, when, progressively we direct our
economy towards sustainability and cooperation, in stead of competition and
Exactly like today, each year, the government defines a budget, in
which spending equal taxes. Today the state must borrow at interest when
there are shortages - the famous public debt. In the new situation the state
bank advances the money, free of interest, thus taxes stay lower.
The state bank has the exclusive right to create money. It supplies
the necessary money for the loans in the country. A part of the interest
serves to compensate loans that can' t be paid back. The rest is transferred
to the state's treasury, allowing another tax reduction.
Banks are no longer allowed to create money in the form of balances
not backed by real mney. They may operate as middlemen for loans from the
statebank to the public. For this, they receive commissions, no interest.
They may also collect funds of existing money and lend it out at interest.
Cheaper money system
The state money system can function much less expensively than the private
money system we now have. In the first place all interest goes to the Treasury
for the benefit of the population. Also, the interest can stay lower, because
the state bank does not need to make benefits. (No fat salaries for financial
boys, no bonuses, no expensive building up of capital.)
The state bank does not need a separate capital, because all money belongs to
the community. In fact we, together, guarantee the value of our money. Defaults
of payment can be treated the same way as tax debts.
At the moment all money in circulation consists of loans that must be
replaced by new ones all the time. However, the state bank can decide to leave a
part of all money in circulation permanently, to lower the need for loans. (This
should be accompanied by appropriate fiscal measures.) In the new system the
government can very easily create a portion of permanent money by spending an
amount of money (=bring money into circulation) without levying the corresponding
The state money system, by itself, has no need for inflation. It can even
continue to work perfectly in times of deflation. Borrowers will no longer know
the relative advantage of the decrease of value of the installments. By
contrast, the cost of interest can always be lower and for democratically wished
investments that can even stay nil. (And if a low interest rate causes trouble
in the international context, the cost of interest can be partly or completely
Today's state debt comes from state expenses for which no taxes have/had been
levied in advance. This state debt can be ended in the shortest possible way
with newly created state money. That stops the interest payments. After that,
the concept of state debt can go into the waste bin, because the state, when
needed can simply use its own bank. For budget excesses the allowed cases and
limits can be described, as well as conditions for exceptions, for which we can
think of a requirement of 2/3 chamber majority. The rules can be anchored within
The decreased influence of bankers on the shaping of the society will open
more room for democratic influence. That offers the possibility to engage in a
transition towards a sustainable society. Information, involvement and dictate
by citizens will be of high importance to succeed. I think this may need
improved democratic structures.
The European Union, daily, offers a lot of ease in the international trade.
But isn't the price getting too high? Do we want to exchange our sovereign
democracies against the dictatorial rule of the European Commission that wants
to cut to the bone all achievements and transform the whole society into a
financial playground? Personally, I think these eases are paid way too dear
The cooperation with European partners will not stop when we step out of the
EU. Real cooperation is based on trade, industry and tourism and on everything
that serves mutual interest.