John Woodward 

Australian Federation Party candidate for Wide Bay

What is Money?

Modern money, whether it comes in the form of Australian dollars, British pounds sterling, European euros, US, Canadian, New Zealand dollars, Japanese yen, Swiss francs, South African rands, Indian rupees, Chinese yuan, Russian roubles or any of the other world currencies, all comes in two forms.

Money Jargon

The first of these forms is cash – notes and coins. This is called ‘M0’ or ‘narrow-money’ in economics jargon.

The second form is non-cash money, bank or building society accounts, credit card accounts and the like. These various forms of ‘near-money’ (as economics text books sometimes call them) have various ‘M’ labels according to their ease of use (M1, M2, M3, etc.).

All this cash and non-cash money, called ‘broad money’ in economics jargon, is lumped together as ‘M4’, which is generally reckoned to be the total money supply within an economy.

Oiling the Wheels of the Economy

Money works rather like the oil in a car engine. It enables all the pistons, cogs and gears to work, although it does not actually produce any power itself. Nor indeed is it created by the workings of the engine. It has to be deliberately poured in – not too much nor too little – and the bigger the engine, the more is needed.

Cash

Cash is created by the government by printing bank-notes and casting coins. The face value of the notes and coins is worth many times the cost of production. The profit from this process known as seigniorage is income for the government and a direct reduction of the need for taxation. This sounds very good, but the problem is, cash makes up less than 2% of our money supply.

Money Created Out of Nothing

The vast majority of money in Australia today exists as a balance in a bank, building society, credit card or similar account. In Australia this ‘non-cash money’ is more than 98% of the total money supply. This money is not created by the government. It is actually created by the private banking system out of thin air.

Just in case you read that last sentence and thought that it could not possibly mean what you thought it meant, that the private banking system literally creates more than 98% of the Australian economy’s money supply out of nothing, let it here be repeated in bold letters:

The private banking system creates more than 98% of the Australian money supply out of nothing (i.e. thin air, zilch, zero, nil, naught).

There are serious laws against counterfeiting notes and coins, and people who are caught doing so rightly face a lengthy spell in jail. Creating money out of nothing and using it to acquire the efforts of those in agriculture, industry or services who provide their fellow citizens with real wealth has long been recognised as being tantamount to theft, yet the private banks are allowed to create non-cash money, which can be exchanged for cash. Nor is it a small amount; 98% is very nearly the whole of the Australian money supply.

This shocking fact is a well kept secret. To most people economics is a mystery and this is no accident. This is what John Kenneth Galbraith, former Professor of Economics at Harvard, said in his (1975) book “Money: Whence it came, where it went’”:-

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.”

Problems

Allowing private banks to create money out of nothing for private gain is obviously going to cause a heap of problems. The private banks make vast profits while the rest of the Australian economy struggles to make ends meet. If all of the profits from this private bank money creation was spent back into the economy, some of the damage would be mitigated; however, this is sadly not the case. Our private banks are controlled by international banks and although our domestic private banks are quite capable of creating all the money necessary for our economy and there is absolutely no need for foreign investment, this is not what happens in practice. How many times have we heard about businesses having to go offshore to obtain venture capital? The simple answer is that the international bankers who control our banks want to get in on the action.

Simple Solution

The Australian people need to reintroduce the concept of the ‘People’s Bank’. The Australian people need to be educated about the money system and we need to abolish, the private banking system’s power to create money for private profit and to give to a democratically elected people’s government the role of creating the money supply for our economy for the benefit of all Australians.

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“All that is necessary for the triumph of evil is that good people do nothing.”

Edmund Burke.

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