The people of Switzerland are to vote in a binding referendum this Sunday on a most fundamental question: what is money?
Is it gold? Unchangeable, un-fakable, a hard representation of reality? Is it an apple that grows on trees? Is it a plastic apple that does not even need to grow but can be willed at whim? Or is it all three?
That question is to be answered by the Swiss people, but regardless of the results, June 10th may well go down in history as the day the question of money was brought to the forefront of global politics more than a century after the US constitution was breached by the executive ignoring Article I, Section 10, which still stands and says: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”
That was never really abided, in practice. States have, since ancient times, effectively printed fake money by devaluing their currency in one way or another, but in modern times that has reached a very different proportion.
To understand money is somewhat simple (after reading many papers). You have one dollar, you have one apple. In this simple scenario we’ll say one dollar is an apple. Let’s take two scenarios to make a point.
Someone creates a fake dollar that looks exactly like the real one. There is still just one apple, so that is now worth two dollars. Which means the one dollar is now really 50 cent.
Let’s go back to the just one dollar in the entire system, but the tree has now grown another legit apple, so we have two apples. Two apples are now worth one dollar, which effectively means that 50 cent is now worth one dollar.
What we have presented here in the first scenario is inflation, in the second scenario is deflation. In the first scenario, money changes, in the second scenario, production changes.
Our financial system currently is inflationary. Production of course continues to grow, but new money continues to grow at an even higher rate. In Switzerland, “around 85 percent of the money currently in circulation in Switzerland is thought to be electronic money created by domestic banks.”
If money is an apple, then who gets the apple? Money of course doesn’t just come into existence. Someone creates it, and thus that someone is worth however much money he creates.
As can be seen above, the one who creates it, by far, is commercial banks. We won’t go into detail regarding the process as we have previously described it, but simply said when they loan money, they temporarily create money, when the balance of the loan is paid back that temporary money in effect vanishes, but on top, permanent money is created through interest requirements, or usury.
That word is as ancient as the bible, and as relevant as the 21st century, for when you take out say a mortgage over 25 years for the sum of say $100,000, you usually have to pay back in total over the lifetime of the mortgage $200,000, $100,000 for the balance which gets burned, plus $100,000 in interest that becomes permanent money.
The rise of cryptos and this referendum has forced Central Bank officials to clarify just how the financial system works exactly. We have spent time reading and understanding their clarifications, and it all sounds reasonable, except for the role interest plays in all this.
In the example we gave, we spoke of $100,000, but that’s not even pocket change. If we take the entire system, we would be speaking of trillions. That is trillions of new money being demanded and created in an almost ponzi like scheme that can only keep on running by the printing of new money until you should think the music at some point ends.
For months now we have been asking for clarification by central bankers on the matter of interest and what role it plays in the financial system. The only non-answer has been by the FED, which found the topic so explosive they broke rank with other central bankers who are very much against the referendum, to come out and say they are in favor. They say:
“There is a political economy issue with these payments since, as of today, they are paid only to the few financial intermediaries that have access to central bank electronic money.
The general public might not consider such large payments equitable or beneficial, and there is a high risk that it will trigger political controversies that have the potential to affect central bank independence (see Berentsen and Waller, 2014).
Central bank electronic money is an elegant way of avoiding possible political upheavals with regard to these interest payments, by allowing the whole population to have access to these interest payments and not just a small group of commercial banks.”
We find it highly distasteful that Central Bank officials, who are in effect public servants and accountable to the public, will not inform the public on what role interest plays in the financial system where money creation is concerned.
The only reason they don’t, we should think, is because the public would find the facts even more distasteful than this secrecy. In effect, you would think they can’t, because if they could, they would have clarified by now.
Which leaves us no choice. If we had the right to vote in this referendum, we would vote Yes to sovereign money. The fat bankers can cry doom all they like, but the way it would work, you would think, would be by in effect turning this 85% commercial bank printed money into sovereign money and from then on prohibiting any further money printing by commercial banks.
The economy would have no real shock, you would think. Whatever is currently money, would still be money. It would thus only affect future money printing. Wages would once more have a real purchasing power. Bubbles would slowly deflate. Constant crises due to ponzi like games of money printing would be avoided, productivity would go to the producers, and banks would no longer be the payment system, so they can crash and no one would care.
The only thing to not like here is that central banks would be performing the role they told us central banks perform, which is deciding how much money is in circulation.
Now that we’ve all found out they all lied, they all are saying what they lied to us about as being the system they taught in textbooks, is actually a bad system and we should all just like this new one where wages have not grown in real terms since the 70s.
But amidst this silence, we can only default to say there is a reason why our ancients found usury vile. We may have forgotten it, but our books have not, nor our experience so far where all our production is being sucked up by just 500 men who dare publicly say they have so much money, they do not even know what to do with it.
Money presumably taken from this creation of money. Making it fake money. The lot of it. Vote Yes.