courtfool.info
The court fool reveals
secrets behind world events
list of articles
StartListOfArticles

The secrets behind money The secrets behind money:

The bankers and the euro
We have free capital movements now. You can leave your barrier open!

The bankers and the euro The bankers and the euro

The bankers hat

The magic of bankers The magic of bankers

Always growing debts

The cancer of bankers The cancer of bankers

sign a loan
If you just sign here, I will give you a balance of $ 1,000 and you will owe me $ 1,000 plus interest.

The banking system in short The banking system in short

exchanging mutual claims
With just a tiny little bit of money bankers can pay each other millions...

Secrets of money, interest and inflation Secrets of money, interest and inflation

Debit, credit, banco! Debit, credit, banco!

Canadas_National_Debt_1940_1987
Politicians give billions away to private bankers...

A tale of two monetary systems A tale of two monetary systems

falling banknotes

Private banks or a bank of the government Private banks or a bank of the government. A comparaison.

From state debt to state money From state debt to state money

Towards a sound economy Towards a sound economy

Bank crisis? Reform!

Bank crisis? Reform! Bank crisis? Reform!

Wall_Street_Bull

the Derivative Scam Banking explained:
the Derivative Scam



The secrets behind the euro The secrets behind the euro:

The madness of the euro

The madness of the euro The madness of the euro

heavy euro

Out of the euro, and then? Out of the euro, and then?

hungry euro

ESM, the new European dictator! ESM, the new European dictator!

YouTube: The new European dictator

ESM robs the Treasuries in 3'51'' ESM robs the Treasuries in 3'51''

Keep quiet! We build Europe!
Keep quiet! We build Europe!"

ESM, a coup d'état in 17 countries! ESM, a coup d'état in 17 countries!

Zeus rapes Europa

Zeus rapes Europa Zeus rapes Europa

Goldman Sachs captures Europe

How the Goldman Vampire Squid Just Captured Europe ESM: How the Goldman Vampire Squid Just Captured Europe

NATO rescues euro in Libya

NATO rescues euro in Libya NATO rescues euro in Libya

Obama and Sarkozy in Libya
Obama and Sarkozy in Libya

Hillary Clinton's emails about Libya Hillary Clinton's emails about Libya

Euromania

EUROMANIA by Peter Vlemmix EUROMANIA by Peter Vlemmix

Ascensao_e_queda_do_euro

Autores:
Rudo de Ruijter
Yannis Varoufakis
Costas Lapavitsas
James K. Galbraith
Gerard Dunénil
Michael Hudson
Ed Dolan
Jacques Nikonoff
Jean-Claude Paye
Eugénio Rosa
Jorge Figueiredo

The secrets behind democracies The secrets behind democracies:

Power to the people

The road to democracy The road to democracy

Chicken_parliament

The chicken-parliament The chicken-parliament


The bizarre Dutch referendum

The bizarre Dutch referendum The bizarre Dutch referendum

Rutte versus Erdogan 11 March 2017
Burada patron değil, Erdogan değilim !

Rutte versus Erdogan 11 March 2017 Dutch prime minister prevents Turkish ministers from attending a pro-Erdogan meeting


secrets behind the war in Iraq The secrets behind the war in Iraq:

dollar_bill

Cost, abuse and danger of the dollar Cost, abuse and danger of the dollar

Iraq_Memorial

Iraq Memorial Iraq Memorial


The secrets behind the war in Afghanistan The secrets behind the war in Afghanistan:

Pipelines_to_9_11 / WTC

Pipelines to 9/11 Pipelines to 9/11


The secrets behind the accusations against IranThe secrets behind the accusations against Iran:

Raid on the nuclear fuel market

Raid on Nuclear Fuel Market Raid on Nuclear Fuel Market

Wipe Israel from the map? Wipe Israel from the map?


Farewell to growthFarewell to growth:

outlook_population

World Energy and Population World Energy and Population

World_Energy_Imports_Exports

Turning-point of humanity Energy crisis:
Turning-point of humanity




Facts and lies about the climateFacts and lies about the climate:

Climate Conference Paris 2015

Climate Conference Paris 2015 Climate Conference Paris 2015

The clockwork of the Earth and Sun

The clockwork of the Earth and Sun 1: The clockwork of the Earth and Sun

The activity of the Sun

The activity of the Sun 2: The activity of the Sun

CO2: scare, claims and fraud...

CO2: scare, claims and fraud... 3: CO2: scare, claims and fraud...

Uncover secrets Uncover secrets:

Sleepwalking

Wake up citizens? Wake up citizens?


HumorHumor:

Protest in Draguignan
There are alternatives to capitalism...

Protest in Draguignan Protest in Draguignan

Cartoons

More cartoons Click here fore many more original cartoons...


Treaties Treaties:


Treaty establishing the European Union (EU) Treaty establishing the European Union (EU)

Treaty on the Functioning of the European Union (TFEU) Treaty on the Functioning of the European Union (TFEU)

Statutes ECB Statutes ECB

Amendment article 136 TFEU Amendment article 136 TFEU

First version of the ESM First version of the Treaty establishing the European Stability Mechanism (ESM)(not ratified)

ESM Treaty establishing the European Stability Mechanism (ESM)

TSCG Treaty on Stability, Coordination and Governance in the economic and monetary union (TSCG)

Vienna Convention 1969 Vienna Convention on the Law of Treaties 1969

Websites having published articles of the court fool Do you want to know who has published articles from the court fool? World wide, over 500 sites...

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Rahasia Uang, Bunga dan Inflasi

oleh Rudo de Ruijter,
Peneliti Independen,
September 2007, diperbarui 29 Desember 2012

Uang memainkan peran besar dalam hidup kita. Dalam masyarakat juga, hampir semuanya ditentukan oleh uang. Sungguh aneh, yang hanya sedikit orang yang tahu trik juggling, dimana uang berasal dan menghilang lagi. Kebanyakan orang melihat, uang yang menjadi bernilai kurang sepanjang waktu, tetapi mereka tidak tahu, bahwa ini disebabkan, di tempat pertama, berdasarkan sistem uang itu sendiri. Juga mengejar abadi bagi pertumbuhan ekonomi dan tekanan kerja selalu meningkat di negara-negara industri, disebabkan oleh sistem uang. Uang juga dapat berfungsi untuk penindasan, misalnya negara-negara Dunia Ketiga, atau menjadi motif untuk perang, seperti yang melawan Irak. Apakah Anda ingin mengambil tur kecil di belakang layar? Selamat datang di sirkus dari uang-akrobat!

Content:

  1. Making money
  2. Permanent inflation
  3. Central banks need inflation
  4. Caprices of the money stock
  5. The war against Iraq
  6. Oppression of the Third World
  7. China’s weapon
  8. Inflation and economic growth
  9. Further growth or a sustainable society?

 

1. Membuat Uang

Exchanges, a primary need

Bursa, kebutuhan primer Orang-orang membutuhkan produk dan layanan masing-masing. Mereka menggunakan uang untuk bertukar mereka di antara satu sama lain. Tentu saja, akan lebih baik jika uang yang tersedia media yang jujur pertukaran. Tapi ini tidak terjadi. Uang kehilangan nilai sepanjang waktu.

Uang bukan milik negara

Kebanyakan orang percaya, uang yang dibuat oleh negara. Namun, sebagian besar pemerintah memiliki sedikit atau tidak ada suara dalam pasokan uang negara mereka. Bankir telah mengambil alih kekuasaan ini. Mereka telah mengubah media pertukaran menjadi cara yang menguntungkan dari pajak penduduk dengan mengumpulkan bunga. Bankir permanen mengumpulkan bunga hampir semua uang di dunia.

Uang diciptakan oleh bank-bank komersial

Duniabankirlebarsekarang telah memiliki sistemuang, yang didasarkan padamembuat uangdari udara tipis. Hampirsemua uangdirekening bankterdiri dariudara tipis. Hanya adasebagiankecil kecildariuang riilberedar. Bagaimanaitu?

Perbankan adalah pembukuan

Setiap kali seorang bankir memasok pinjaman dia tidak memberikan uang, tetapi hanya keseimbangan. Pinjaman ini terdiri dari apa-apa kecuali nomor dalam buku bankir. Katakanlah Anda ingin pinjaman dari bank Anda, “Sulit Up Bank”. Di satu sisi buku besar bankir menulis bahwa Anda berutang padanya 250.000 Euro dan di sisi lain bahwa ia berutang Anda 250.000 Euro. Anda melihat jumlah muncul di akun Anda. Anda dapat menghabiskan waktu. Membeli rumah kecil? Oke, membeli rumah kecil.

Katakanlah Anda menulis cek kepada penjual rumah. Dia akan membawa cek ke bank-nya, “Perisai Merah Bank”. Bank yang sekarang ingin bertukar cek di bank Anda, yang mengatakan, terhadap uang riil. Red Perisai tahu bagaimana rekannya telah juggled nomor dari topi dan tidak akan tahan dengan udara tipis.

Jadi sekarang ”KesulitanBank” akanharus datang dengan uang sungguhan. Namun, dalam praktiknya, hal ini tidak diperlukan sebagian besar waktu, karena RedShield juga memasok pinjaman terus. Bagian dari pinjaman iniakan digunakan dengan pelanggan HardUpBank. Jadi, apa yang terjadi adalah bahwa Red Perisai pertukaran klaimnya 250.000 Euro HardUpBank terhadap klaim dari 250.000 Euro HardUpBank di RedShield.

exchanging

Pembayaran antar bank

Semua pembayaran melanjutkan dengan cara yang sama. Ketika Anda melakukan pembayaran kepada seseorang di bank lain, maka bankir Anda harus membayar ke bank lain. Tapi tetap hari yang sama juga akan ada pembayaran yang dilakukan oleh nasabah bank lain untuk pelanggan di bank Anda. Semua pembayaran antar bank ini hanya dicoret terhadap satu sama lain.

Apa bank-bank akhirnya membayar satu sama lain adalah perbedaan kecil antara paket masuk dan keluar dari pembayaran. Untuk memfasilitasi pembayaran ini semua bank memiliki account di bank sentral. Jumlah dalam rekening tersebut dianggap uang riil. (Jika mereka ingin bank bisa mengklaim seluruh jumlah dalam catatan bank, karena bank sentral berwenang untuk mencetaknya.)

Pada bank sentral aturan berlanjut bahwa bank harus memiliki keseimbangan positif pada akhir hari. Ketika bankir adalah kekurangan uang, karena ia menerima sedikit kurang dari dia membayar, dia akan meminjam untuk malam dari rekannya, yang kemudian telah menerima sedikit lebih dari dia dibayar. Dan ketika rekan-rekan tidak percaya satu sama lain, seperti selama krisis kredit di tahun 2008 dan sekarang lagi sejak beberapa bulan yang lalu, bankir dapat meminjam dari bank sentral untuk seperempat persen lebih. (Lihat juga: Dari utang negara untuk menyatakan uang)

Pinjaman “merry-go-round”

Bank membuat lebih banyak uang, tetapi mereka tidak ajaib menciptakan lebih banyak barang untuk membeli. Ketika orang memiliki lebih banyak uang, namun masih ada jumlah yang sama dari hal-hal untuk membeli, harga hanya akan naik. Setiap unit uang menjadi bernilai kurang. Itulah yang disebut inflasi.

Jadi, ketika bank menempatkan lebih banyak uangke dalam sirkulasi, nilaidari setiap unituang turun. Dan itu juga berlaku untuk bunga yang mere kakumpulkan. Ketika mereka mengeluarkan pinjaman 10 kalilebih banyak dan mengembang persediaan uang sebesar 10 kali, bunga yang mere kakumpulkan bernilai 10 kali lebih sedikit juga.

Kompetisi menjamin inflasi

Sebagian besar negara hanya memiliki satu mata uang resmi, namun beberapa bank komersial mengeluarkan uang. Dan meskipun bank-bank bersama-sama tidak mendapatkan jauh lebih kaya dari menggembungkan uang-saham, mereka masih melakukannya. Alasan yang jelas untuk ini adalah kompetisi di antara mereka. Meskipun persaingan terdengar sehat, ketika kita berbicara tentang perusahaan normal, persaingan antar bank berarti pinjaman sebagai uang sebanyak mungkin dan dengan demikian maksimum inflasi..

Untuk setiap persaingan bank yang hanya pertempuran untuk mengumpulkan lebih banyak bunga dan untuk meningkatkan pangsa pasar dan keuntungan. Bank dengan hasil terbaik akan tumbuh lebih cepat dari yang lain dan, dalam jangka panjang, akan bisa makan pesaingnya.

Kesenjangan antara kaya dan miskin

Tidak semua orang dapat meminjam uang yang ia inginkan. Ketika meminjamkan uang, bank menuntut jaminan mereka bisa merebut jika peminjam default pada pembayaran nya. Orang dengan agunan yang cukup dapat memperoleh pinjaman dan investasi dengan mudah. Perusahaan-perusahaan besar bahkan membayar lebih sedikit bunga. Permintaan jaminan bekerja sebagai pelebaran terus-menerus kesenjangan antara kaya dan miskin.

Untuk masyarakat ini adalah bahaya menjulang permanen. Sebagai bank, bukan pemerintah memutuskan tentang pinjaman, pemerintah hanya dapat mencoba untuk menutupi celah-celah sosial, tetapi tidak akan mampu menyembuhkan atau mencegah mereka.

Pinjaman untuk investasi dan konsumsi

Efek dari pinjaman semua peminjam tahu terlalu baik, adalah bahwa jumlah yang harus dibayar kembali dengan bunga. Pengusaha meminjam uang untuk investasi harus menghasilkan pendapatan tambahan untuk membayar bunga ini. Pinjaman untuk investasi tidak hanya sapi tunai untuk bankir, tetapi juga dapat berkontribusi untuk kegiatan lebih ekonomis. Membuat pinjaman yang tersedia untuk investasi akan menjadi peran yang berguna bank bagi masyarakat.

Sebaliknya, pinjaman untuk belanja konsumen biasanya tidak memberikan kontribusi konsumsi yang lebih banyak. Memang benar, bahwa berkat kredit konsumen, pembelian sebuah artikel terjadi sebelumnya. Namun, keunggulan ini diimbangi dengan jangka waktu yang lebih daya beli menurun dari konsumen. Konsumen tidak hanya harus mendapatkan uang untuk membeli, tetapi juga untuk kepentingan. Oleh karena itu ia akan membeli barang konsumsi murah dengan upahnya. Ketika konsumen membayar bunga ke bank, hanya sebagian dari uang ini akan menjadi upah karyawan bank dan hanya sebagian dari upah tersebut akan dibelanjakan untuk barang-barang konsumen. Jadi, kredit untuk barang-barang konsumen lebih mengarah pada penurunan jumlah pembelian barang-barang konsumsi.

Kemana uang itu pergi?

Setelah peminjam telah menghabiskan uang pinjamannya, menjadi agak tak terduga bagaimana pemegang berturut-turut akan menggunakan uang ini. Orang mungkin memperoleh uang yang dipinjam dengan menjual mobil kepada peminjam. Penjual kemudian dapat membayar uang sebagai upah. Pencari nafkah maka mungkin menggunakan uang untuk membayar uang sewa. Bahkan, segera setelah uang masuk ke dalam taman bermain besar transaksi antara orang-orang, dapat melayani untuk semua tujuan kita menggunakan uang untuk.

Selama masa pinjaman, uang ditransfer dari bank ke bank setiap kali ketika pemegang rekening melakukan pembayaran kepada pemegang rekening bank lain. Untuk tujuan ini bank sentral terus account untuk masing-masing bank dan mengeksekusi transfer ini.

Kadang-kadang lebih praktis untuk menggunakan uang kertas dan koin. Di bank atau mesin teller otomatis yang bisa mengambil uang dari rekeningnya. Ketika dihabiskan, penerima akan membawanya ke banknya, melakukan deposit, dan akan melihat jumlah muncul pada akunnya. Uang dapat berbentuk uang tunai atau nomor dalam rekening bank. Untuk pembayaran, tidak peduli yang membentuk dibutuhkan.

Mana uang berakhir?

Uang berakhir ketika peminjam membayar kembali pokok pinjaman ke bank. Pada saat itu bank transfer uang dari rekening deposito peminjam ke rekening peminjam kredit. Akun kredit akan menunjukkan, bahwa utang peminjam telah berkurang. Uang muncul dengan menempatkan angka di rekening peminjam dan lenyap dengan mengurangi angka-angka ini.

Peminjam juga harus membayar bunga kepada bank. Bunga tidak merupakan bagian dari uang bank diciptakan untuk peminjam ini. Peminjam harus mendapatkannya juga dari uang beredar. (Per definisi, uang itu adalah kolam renang dari seluruh pembiayaan dalam negeri pada saat itu.) Bunga bankir mendapat tidak hilang. Dia menghabiskan itu. Jadi, itu tetap beredar.

Jadi, masa uang berakhir, pada saat kredit berakhir. Dan jika semua pinjamanakan dibayar kembali, tidak akan adauang yang tersisa. Namun, untuk saat ini, ada lautan uang dan semua uang ini bank mengumpulkan bunga.

Non–bankir terhadap bankir

Dalam masyarakat uang masuk putaran. Uang datang dengan cara Anda ketika Anda memproduksi atau melakukan hal-hal yang orang lain inginkan. Uang gulungan sebaliknya, ketika Anda membeli sesuatu atau membuat orang bekerja untuk Anda. Akhirnya, Anda dapat menghemat uang untuk nanti. Bankir melakukannya secara berbeda. Mereka hanya dan secara permanen mengambil uang dari orang lain dan menghabiskannya. Hal ini didasarkan pada prinsip, bahwa uang itu adalah milik mereka, karena mereka menciptakannya. Jadi bankir merasa logis, bahwa mereka berhak untuk mengumpulkan uang sewa. Memang, di beberapa negara retribusi ini disebut “rente”. (Dalam bahasa Inggris “bunga”.) Dan meskipun semua orang menggunakan uang, bank selalu mengambil pungutan ini dari pengguna pertama, peminjam. Sebentar lagi kita akan melihat bagaimana bank membuat pengguna lain membayar terlalu.

Bank tidak dapat dianggap sebagai perusahaan komersial biasa. Mereka telah menyatakan diri pemilik semua uang dan mereka membuat membayar penduduk untuk menyewa itu.

Waktu habis

Hampir semua uang bersifat sementara. Pinjaman Akhir telah diganti oleh pinjaman baru untuk menjaga uang yang beredar. Pinjaman mulai dari saat-saat yang berbeda dan memiliki daya tahan yang berbeda. Sering peminjam membayar kembali sebagian dari pinjamannya setiap bulan. Artinya, bahwa setiap jumlah yang beredar memiliki sendiri “time-out” tanggal, yang merupakan tanggal diramalkan peminjam harus membayar kembali.

Jumlah total uang yang beredar menentukan berapa banyak uang yang kita buang untuk transaksi dan, dalam jangka panjang, ia menetapkan harga-tingkat keseluruhan produk dan jasa.

Transaksi

Selama uang seumur hidup adalah media untuk transaksi. Sebuah transaksi terjadi ketika dua pihak menemukan hal menarik. “A” menemukan uang yang akan lebih menarik dan “B” menemukan mobil bekas ia membeli lebih menarik. Pertukaran terjadi. Sekarang “A” memiliki uang dan “B” memiliki mobil dan keduanya merasa puas.

Transaksi mungkin termasuk pembayaran untuk nilai tambah. Ketika tukang roti membuat roti, ia menambahkan karyanya ke tepung, susu dan ragi. Pekerjaan yang dia lakukan merupakan nilai tambah. Ketika dia menjual roti transaksi bukan hanya pertukaran properti, tapi juga meliputi pembayaran untuk nilai tambah.

Dengan sendirinya, jumlah total transaksi di suatu negara tidak memberikan indikasi tentang nilai tambah, maupun tentang nilai barang dan jasa yang diproduksi di suatu negara.

2. Permanent inflation

US inflation 1940 1999
Click for enlargement

Price inflation makes us lose value on the money we detain. It can fluctuate a lot over time. Many economic theories offer explanations about the causes. However, these theories rather explain increasing and lowering prices among products and services. They do not explain why inflation is permanent. The permanent inflation has a different cause. We’ll take a quick tour through different types of inflation. But, to start with, we will eliminate the confusion between the Consumer Price Index and price inflation.

Consumer Price Index and Price Inflation

Price inflation leads to dissatisfaction of the population. That is why a lot of countries use a Consumer Price Index, which shows more pleasant figures. [1], [2], [3] So, when politicians or officials use the word “inflation”, they most often mean the changes in the Consumer Price Index.

The index is based on a yearly price comparison of a basket of products, that an “average” household would need. The content of the basket varies from country to country and so do the rules to calculate the index. One country may include the cost of food, fuel and housing; another country may leave these costs out. [4], [5] Some countries publish the categories of products they have in the basket [6], but the exact products usually remain secret. Nevertheless, some statistics bureaus disclose some tricks they use to obtain flattering indexes. For instance, they change the content of the basket periodically. Products that rise in price too much are taken out and replaced by cheaper ones. Or, when the price of a product remains stable, but quality improves, they count the quality improvement as a price reduction. So, for the computer in the basket, the Dutch Central Bureau for Statistics (CBS) counts a 64 percent price reduction between 1998 and 2003! And down goes the index! [7]

So, the content of the basket is adjusted periodically. The justification is: "when prices rise, households adjust their purchases too." And what does this policy means for the index? Well, since the defined household cannot spend more than it earns, the price-increase of the CPI-basket is automatically limited to the increase in earnings. The defined household cannot pay higher prices.

Unless indicated otherwise, in this article the expression “price inflation” refers to the real increase in prices in all transactions and not to some CPI. And in this article “inflation” means, in the first place, the increase of the money stock. More about that in a moment.

Cost-push theory

The cost-push theory says, that increasing costs are responsible for price inflation, like higher wages, increase in price of imported raw materials or increase of taxes on consumption. [8]

Demand-pull theory

The demand-pull theory says, price inflation appears when demand exceeds the offer. [9] Increased demand can be caused by export activities, tax reductions or growth of the money supply. Fluctuations in demand can also occur, when consumers save more money and, after some time, start spending it again.

Self-fulfilling expectations

The expectations for price inflation also affect real price inflation. Manufacturers and traders generally have pricelists, which are valid for six months or a year. They have to include a percentage for expected inflation. This immediately increases the prices, and thus contributes to the real inflation. The same goes for bankers. When they issue loans, they foresee that the interest they get in return over time will be lowered by inflation, thus they calculate an extra margin. Extra cost of interest contributes to the real inflation.

Increase of the money stock

If demand-pull and cost-push inflations would take place without expansion of the money-stock, some prices would rise and others would lower. However, we rather see some prices rise faster than others, but rarely prices that lower. This is because, over time, the money stock increases by more and more outstanding loans. This is called the monetary inflation.

Monetary inflation

Of course it affects the prices in transactions, however, never evenly. Practically, when more money becomes available, this extra money creates room for price increases in each successive transaction it goes through. We may presume, that when other inflationary factors are at work somewhere, for instance high demand, the extra money will lead to extra price increases there.

The monetary inflation is the cause of the permanent overall price increases we notice in the long run. It is the only inflation that counts over years and decades.

Inflation, in the first place, refers to inflating the money stock. This leads to the increase of average prices. Today we also use the word "inflation" for the increase of prices. Keep in mind, when the money stock grows and, simultaneously, productivity grows, it may happen, that the average prices don't increase or increase less quickly. The available money is spread out among a greater number of products and services and this helps keep prices down.

3. Central banks need inflation

It may seem, that inflation keeps itself going rather naturally. When prices rise during the lifetime of loans, new loans must finance more expensive things and thus have to be higher. At any time the cause of inflation would be the inflation itself. However, it is not some  “perpetuum mobile” that is responsible for inflation, but a clear and openly admitted policy of central bankers [10], [11]. Inflation is a component of our banking system.

As exposed earlier, competition among commercial banks assures, that they will issue the maximum amount of loans. Hence, to higher or lower inflation the central bank only needs to loosen or tighten the issuance of loans.

The best known way of central banks to steer inflation is changing the interest rate. It is meant to influence potential borrowers. In the words of the Dutch Central Bank (DNB): “The interest works like the acceleration and the break pedal of the economy. By an increase of the interest rate, prices will lower, or at least rise less quickly. By a decrease in the interest rate prices will rise faster.” [12]

A way to explain it is, that when the interest rate becomes higher, people will borrow less. And when less ending loans are replaced by new loans, there will be less money in the country. Over time, you can buy more with each unit of money. Prices lower. But mind, what DNB added: “or at least rise less quickly.” Here the central bank has no intention to see the prices lower. In this case, apparently, the money stock is still allowed to grow, but just a bit slower.

When the central bank lowers the interest rate, the reason is straightforward: let there be more loans and let the speed of growth of the money stock increase. Of course, the interest rates also work on savings. When interest on savings is low, more people will prefer spending their money.

A central bank does not set the interest rates that commercial banks use for their customers. It only sends a signal to the commercial banks by changing the interest rates that apply between the banks and the central bank. Banks are not obliged to adapt the rates for their customers then, but they always do. [13]

Central banks cannot steer the inflation on specific prices, like the prices of bread, bicycles or machines. They rather steer the monetary inflation, the increase of the total volume of loans. The extra money never spreads evenly through the economy. It rather increases the effects of other factors, like rising cost or rising demand.

When the economy cannot absorb the inflation anymore and the money does not spread sufficiently, bubbles occur. Then, bigger and bigger masses of money go round in for instance the stock markets or the real estate market, where money is earned by the forcing up of prices. Enterprises too are more and more often bought and sold as if they were financial toys.

Although central banks admit that inflation is part of their policy, they rather put forward economic reasons. They sound plausible most of the times and are richly provided with comments by economists and journalists. However, most of them forget, that, in the first place, central banks need inflation themselves.

Inflation: Central banks need income

Central banks have obtained the power to control the volume of the money stock, to set inflation and interest, and to dictate rules for financial institutions. With this power they can influence the economy. They have obtained laws to hold this power. If they would depend on others for their income, their power might quickly erode again. That is why they collect their own income. [14], [15]

Issuance of real money

A permanent flow of income is formed by lending out the real money to the banks. Banks need real money to pay each other and they also need some for their customers, when the latter want to dispose of bank notes. When I say central banks lend out the real money, this is not exactly true. In fact the banks sell securities to the central bank, while promising to buy them back at an agreed date at an agreed (higher) price. (This is called a repo-transaction.) The price difference is like an interest the banks pay to the central bank. When banks sell securities to the central bank, the central bank creates the corresponding amount of money in their central bank account. banks can exchange these amounts for bank notes, as the central bank has the right to print them.

Monetary operations

An other source of income is borrowing money when the interest is low and lending it out when interest is high. As monetary operation the purpose is as follows. When interest at commercial banks lowers too much, (low demand), the central bank borrows large volumes of money from the banks. This way there will be less money left in circulation. Therefore demand for loans will increase again and interest at commercial banks will go up again. In other times, when interest at commercial banks gets too high, the central bank lends out money to banks, so they can supply more loans to their customers and finally the interest lowers again. [16] The bigger the differences in interest between the borrowing and lending of money, the higher the benefits for the central bank.

To get income from these operations, inflation is essential. Without inflation, interest rates would stay rather low. [17] There would be hardly any difference between high and low interest. Related to this trade, central banks also expand their balance sheet. They buy more securities (lend out more money) than they sell.

Many central banks say, they want to keep inflation around 2 percent. With this they mean an increase of 2 percent of the Consumer Price Index of their country [11], not the real inflation of the money stock, which normally is a lot higher. [3]

Inflation: make the population pay for the use of money

Inflation is not only a necessity for central banks’ income, but also a means to exercise power over the users of money. By monetary inflation the population pays – even against its will - for the use of money. Banks collect interest from the borrowers. This way only the borrowers seem to pay for the created money. But let’s see how it works when there is inflation.

By inflation, the borrower has the advantage that his payments to the bank represent less worth over time. These payments concern interest and pay-back of the principal. The interest forms income for the bank. We may be sure, that the bank has foreseen the inflation and has counted a bit more interest in advance. So, for the interest, inflation does not deliver an advantage for the borrower. However, for the principal, this is different. The bank only needs its nominal amount to be paid back, for, with the payback, only the typed numbers, with which the loan started, have to be lowered to zero. The devaluation of the amounts to pay back for the principal certainly is an advantage for the borrower.

The borrower’s advantage on principal payments can be calculated separately for each instalment. And when we also calculate the inflation supported by the following users of the money created by this loan, the totals will appear to be roughly the same.

 

Total transactions with 'money' from loan
Click for enlargement

In this example the red line shows the total amount of transactions made with the money of the loan during the lifetime of the principal. The loss of value from inflation is dissimulated in the 60 transactions. When the inflation is 2 percent, this is  in average 0.167 % per transaction. The loss of value for the users of the money equals the advantage for the borrower.

Simply put: if the borrowers must pay 6 percent of interest (on the principal) and has 2 percent advantage from the inflation (on the principal), his advantage equals 2/6 of the interest. [18] The users of the money lose an equal amount from inflation. The banks don’t lose. They have foreseen the inflation and have count a bit more interest in advance.

In other words, this is what the inflation policy of central bankers does: shift a part of the interest burden from the borrowers to the users. This way the users pay interest for the use of the money!

From the above some people may be tempted to conclude that borrowing is always advantageous, since a part of the burden of the interest is taken off the borrower' s shoulder and shifted to the users of the money. However, the borrower pays the interest which includes the foreseen inflation. He bears the risk that his income does not suffisciently keep pace with the inflation, or inflation becomes less than expected.

“Money mass” must grow

The classic risk for the banker 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. 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. In this way the number of defaults of payments is considerably reduced.

Manipulating inflation and interest

Manipulation inflation interest

With the authority to set inflation and interest the central bankers have the power. They can make us save more, invest more, consume more, speculate more and always work harder.

As shown above, inflation is interest the users of money have to pay. Inflation pushes the population to work harder and to compete to obtain some of the extra money put into circulation and make up for the loss of value of the money they detain.

Inflation also pushes people not to keep money in their pocket or under their mattress, but to spend it or else bring it to the banks for some interest. This way most of the money remains available for the banks.

When interest is high, people will save more. When interest is low, people will rather spend, borrow and invest more.

What we think interesting to do at a particular time, largely depends on what the central bank wants us to do.

4. Caprices of the money stock

As mentioned above, the stock of money society disposes of is the total amount of outstanding loans. By itself this is very strange. For what should be the relation between the outstanding loans and the need for money in society? What does the need of borrowers and their capacity to pay back have to do with the need of money of the rest of society? If you buy a house tomorrow, and, with your loan, bring into existence money for twenty years, that does not have anything to do with the need of the economy in ten or fifteen years, does it?

In fact, society disposes of a hazardous money stock, brought about by issued loans in the past, and the part that still has to be paid back. Each day parts are paid back and new loans are contracted. Because of the gigantic volume of the money stock the population hardly notices the variations. In theory, central banks could centralize all information about outstanding loans and know exactly how much money will be left from the loans tomorrow, in two days or in ten days. With monetary operations they could keep the money stock rather stable. However, as mentioned above, this is not the policy of central banks. They only make the money stock grow.

There are theories that say, that without inflation the economy could not be steered. One of the key arguments is, that when the money stock does not increase, wages cannot be lowered when needed by economic adversity. “The paid out wages would have to be lowered and employees would never accept that.” And “when the money stock increases, cuts in wages can be hidden by letting the wages rise less quickly than the inflation.” So, the proponents of this theory understand, that inflation is bamboozlement of the people and argue, that it cannot work otherwise. Yet, their theory does not hold true. For, with a stable money stock, some prices would rise, while others would lower. People’s acceptance of variations in wages would be very different from today’s situation, where, since decades, prices only rise. Besides, with a stabe money stock, it is even possible to maintain the paid out wages stable during economic adversity, if during economic prosperity the extra income is formed by shares in profits and tax-reductions.

Today's money system does not start from a quantity of money that would fit the needs of the economy. Today’s system only assures, that banks collect interest over all existing money, that the competition among them causes maximum monetary inflation and that central banks secure their income and power. The stimulation of the economy consists of nothing else than a little more or a little less interest and inflation. For the rest the economy must deal with the money that happens to be there at a particular moment.

5. The war against Iraq

Money is expressed in currencies. Each country has an official currency. In the US it is the dollar. The dollar is also used a lot outside the US. Since 1973 the quantity of dollars outside the US increases faster all the time. Half of its imports are paid with dollars, for which the US does not deliver anything in return. Those dollars stay abroad indefinitely. This way the US buys each minute for 1.25 million dollars of goods and services from other countries, for which the other countries don’t get anything in return. The amounts are simply added to the foreign debt. This debt is so high now, the US can not redeem it any more. So the US is bankrupt. One of the main reasons why the whole world still wants dollars, is because almost all gas and oil on the globe has to be paid in dollars. This way, the US has also the advantage that it can always dispose freely of these gas and oil reserves. For the US can always create as many dollars as it wants to pay for it. So, to maintain world's demand for dollars and to dispose freely of the gas and oil reserves, the US tries to make sure, that OPEC-countries keep selling their oil in dollars. However, Iraq, that disposes of the second largest oil reserves in the world, switched to the euro on 6 November 2000. [19] Although the US sought a way to re-establish its influence in Iraq for many years, the war became inevitable because of this switch to the euro. The dollar sank away and in July 2002 the situation got that serious, that the IMF warned that the dollar might collapse. [20] A few days later the plans for an attack were discussed at Downing Street. [21] One month later Cheney proclaimed it was sure now, that Iraq had weapons of mass destruction. [22] With this pretext the US invaded Iraq on March 19, 2003. The US switched back the oil trade into dollars on June 5, 2003. [23] So now, at least financially, the US disposes freely of the Iraqi oil reserves again. (And while from Bagdad journalists report about the war, from Basra the oil is exported in dollars.) Since spring 2003 Iran too switched to the euro and since 8 June 2006 Russia sells its gas and oil in roubles. (You can read more explanations and details in “Cost, abuse and danger of the dollar” [24] Note: behind the conflict of the US with Iran there is more than a currency-conflict. Behind the scenes it is also about the forming of a cartel on the world market of nuclear fuel. You can read more about this in “Raid on nuclear fuel market.” [25] )

6. Oppression of Third World countries

The advantage of free imports (1.25 million dollars per minute) only applies, when the dollars stay abroad permanently. If other countries would use them to buy goods and services from the US, then there is no advantage. But since 30 years the US imports more than it exports. As no other it masters the art of keeping the dollars abroad.

For instance, the World bank and the IMF supply loans in dollars to Third World countries since the 1960’s. The policy is to supply as many loans as possible, so these countries will never be able to pay them back. [26] This way they are eternally stuck with loans and growing interest charges. So, the so-called "help" to developing countries is nothing else than oppression. And the trumpeted debt relief by industrialised countries hardly presented 1 percent. [27]

7. China’s weapon

The Chinese government does not want free trade with dollars in its country. The dollars earned by Chinese exporters are exchanged against local money by the Chinese Central Bank. The Chinese Central Bank has an enormous stock of dollars. In March 2007 about 1,000 billion dollars. [28] In fact this constitutes a fairly effective weapon against eventual aggression from the US. When China wants, it can offer loads of dollars on the exchange markets and push the dollar rate down, or even make the dollar collapse at once. [29]

8. Inflation and economic growth

Our monetary system, ruled by banks, interest and inflation, already existed when we were born. It is part of our “natural” surrounding. That is why it is hard to see which influence it has on our life and on society. Everything we could say about it, can easily be judged as normal. We don’t know better. The effects of the system are everywhere, even in our way of thinking and in our convictions.

So we find it self-evident, that the economy can only be sound when it grows. The concept of “economic growth” has been canonized by economists, politicians and everyone who understands or assumes he understands society. In Western Europe and North America we strived with success for economic growth since the start of the industrial revolution. The system has proven itself.

It is not an accident, that our money-system is based on eternal inflation and our economy on eternal growth. Some clever bankers conceived the system this way at the beginning of the past century. [30] Interest and inflation would form a permanent income for the banks, as counterpart of simply juggling money out of their hats. The loans would lead to more economic activity. Governments and the population would come and beg for more loans. It fit perfectly in the developments of the industrial area. Mechanization, mining, extensive farming, colonial resources, scaling up, competition among nations, wars and reconstructions, the explosive growth of the populations, workers from abroad, women at work, the development of the services sector, the boom in computer technology, it all led to economic growth. Economic growth was synonym for prosperity. Today, in Western Europe, we still talk in terms of economic growth. By the flattening of the population growth this can now only be obtained by an ever increasing working pressure per employee. The roads of economic growth and prosperity part.

Inflation works like the carrot in front of the nose of the donkey. Everybody starts to run harder to obtain some of the extra money that has been put into circulation. And while running, nobody escapes from the payment for the use of money. Thanks to the inflation everybody participates in paying the interest to the banks. And if, by all of us running harder, we grow wealthier, we can almost be sure that the interest will be raised. In banking jargon it then says, that the economy is overheated and has to slow down. Until we must run harder again.

World wide expansion

Private or public, they are all independent
Click to enlarge

Meanwhile the banks have made themselves conspicuous. With their juggling trick they conquered the world. Everywhere banks have taken the power over money and make the population pay interest and inflation. Every-where, except in China, central banks have obtained special laws, to set – independently from the will of the local government – the level of interest and inflation. After Western Europe and Northern America other countries are now developing their economy. For the banks this means new governments and populations, who want money from the hat.

In fact it does not make a lot of difference if central banks are private or state banks. Nearly everywhere they have obtained a special statute, that grants them a high level of independence from the local government. Together with the commercial banks, they determine how many loans are issued, how much money society disposes of and how much the population has to pay.

 

9. Further growth or a sustainable society?

population growth

The policy of most central banks is based on permanent growth of the money stock. In Western Europe and North America this growth of money accompanied the growth of the economy and the growth of the population. Meanwhile the world has changed a lot. The explosive expansion of the population and the expansion of economic activities have tremendously increased the pressure on the environment. Fertile areas have been taken over by humans. Forests have changed into farm land and cities. Many species have been exterminated. Most of the fish from oceans and seas has been plundered. By the fast growing world population the pollution of soils, water and air still increases. In many places there are food and drinking water shortages. The climate is changing. The prognoses indicate, that with the current trends the population of the world will continue to grow fast and will even still double. The lines in the graphic have been drawn as if this is possible…

Limits to growth

The earth does not grow along with the expansion of our economies and the populations. For the first time in human history we encounter the limits. Of course we have no idea what to do. Church and state always used to preach growth. Bankers too like growth. Limits to the world population? No one in power dares to burn his fingers on that subject.

Where is that limit? That depends on what we want as humanity. If we want to reach the highest possible quality of life – for our children and grandchildren -, we should not burden the earth more than strictly necessary. We should strive for a smaller population. That would also take away the principle reason for conflicts and wars.

Today’s policy is completely opposite to the needs of a peaceful and sustainable society. The money system plays a key role. Reforms are necessary. The longer we wait, the more difficult it will become in the future.

 

Notes and references

[1] http://www.mw.ua/2000/2020/52764 

[2] “… the reference value (4.5%) of m3 growth on an annual basis. This reference value for monetary growth is based on a potential economic growth of 2.0% to 2,5%, an inflation of less than 2.0% in the medium term and a long-term decline of the velocity of money by 0.5% to 1.0%, per annum.” http://www.dnb.nl/dnb/home/ file/ar03_tcm47-146939.pdf

[3] “In 2003, the money supply (m3) in the euro area grew at a rate of 8.0%, well above the official reference value of 4.5%.” http://www.dnb.nl/dnb/home/file/ ar03_tcm47-146939.pdf

[4] http://bigpicture.typepad.com/comments/ 2005/09/the_history_of_.html

[5] http://www.goldandsilverexchange.info/ consumer-price-index.html 

[6] http://www.cbs.nl/en-GB/menu/themas/prijzen/publicaties/ artikelen/archief/2005/ consumer-price-index-art.htm

[7] http://www.cbs.nl/NR/rdonlyres/ AB3F1E9D-EFED-4FD9-9393-E59F762D5C9B/0/2007gevoelsinflatieart.pdf

[8] http://www.tutor2u.net/economics/ revision-notes/a2-macro-causes-of-inflation.html

[9] http://www.britannica.com/eb/ article-3512/inflation

[10] http://www.dnb.nl/dnb/home/ rente_en_inflatie/algemeen/nl/46-150027.html

[11] "Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%." http://www.ecb.int/mopo/strategy/ pricestab/html/index.en.html

[12] http://www.dnb.nl/dnb/home/ rente_en_inflatie/algemeen/nl/46-150027.html

[13] http://www.cbc.ca/news/ background/economy

[14] http://www.bis.org/speeches/sp050218.htm

[15] http://financial-dictionary.thefreedictionary.com/facility

[16] http://news.bbc.co.uk/2/hi/business/6938425.stm

[17] http://www.house.gov/jec/fed/05-19-03.pdf

[18] The real advantage depends on each specific loan amortization schedule. It is worth comparing.

[19] Iraqi oil in euros: http://www.un.org/ Depts/oip/ background/oilexports.html 

[20] IMF warning over dollar collapse: http://news.bbc.co.uk/1/hi/ business/2097064.stm 

[21] Downing Street Memo: http://www.timesonline.co.uk/tol/ news/uk/article387374.ece

[22] Cheney: http://english.aljazeera.net/News/archive/archive?ArchiveId=2480

[23] How can the dollar collapse in Iran?  http://www.raisethehammer.org/index.asp?id=252  (See Iraq)

[24] “Cost, abuse and danger of the dollar.” http://www.courtfool.info/ en_Cost_abuse_and_danger_of_the_dollar.htm

[25] “Raid on nuclear fuel market.” http://www.courtfool.info/ en_Raid_on_Nuclear_Fuel_Market.htm

[26] http://www.cadtm.org/spip.php?article2211

[27] http://www.aidc.org.za/?q=book/view/40

[28] http://news.xinhuanet.com/english/2007-05/11/content_6083732.htm 

[29] http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

[30] G. Edward Griffin, The Creature of Jekyll Island

 

Further reading about particularities of the central bank of the US, the Federal Reserve:

“Meet the system”  MeetTheSystem.org

September 2007

 

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