Byron C. Dale - author of Modern Money Secrets

You must understand that every penny, every dollar that we have in circulation is created as an interest bearing debt. And if you don’t understand that, and I mean really understand that, you’ll never understand what the problem is with our society. You’ll never understand why we have a monetary crisis, or anything else about money.

The ASP believes that Australia deserves an “honest money system”. This means a system that is based on fairness, transparency and benefits all the people of Australia. We believe that there is a place for banks in our society (since they perform a vital function) – but that they too should operate transparently within this “honest money system”.

Our Monetary Policy as below, is followed by a "Monetary Foundation" section that sets out the background and reasoning used during the drafting.

• Australia should have a fair, transparent, accountable and honest money system.
• Bank activities should be limited to that of banking (i.e. providing financial services and being intermediaries between lenders and borrowers) – and should not extend to the creation of money (as is the current practice). Consequently, fractional reserve banking and the monetisation of debt should be eliminated and made illegal.
• The Australian Treasury should rightfully reclaim from banks its sovereign and sole prerogative to create money - for the benefit of the Australian people.
• The Australian Treasury should rightfully reclaim from the RBA its sovereign and sole prerogative to set the monetary policy of the nation.
• All money created by the Australian Treasury should be spent into circulation (without any debt or interest attached), lent into the market via the RBA, or utilised to redeem the national debt.
  
  
  • All money that is spent into circulation should be allocated to infrastructure, and such infrastructure should belong to the people of Australia and managed for their general benefit.
  • All money that is lent into circulation should be strictly for the purpose of providing short term liquidity to the market.
  • All money that is utilised to redeem the national debt should be applied in a manner to cause neither monetary inflation nor monetary deflation.
• The Australian Treasury should pursue a stable monetary policy to preserve the value of the national currency, to maintain the nation’s money supply relative to the size of the Australian population, and to neither cause price inflation nor price deflation.

• There should be constitutional and legal sanction if the government does not meet the measures of a stable monetary policy.
• The Commonwealth should no longer borrow money from any party, and all future budget deficits should be forbidden. The Australian Treasury should operate on a cash accounting basis only.
• The RBA should be restructured as a government department responsible to the Australian Treasury, and its current duties (apart from monetary policy) should remain intact, i.e. being responsible for printing/issuing the paper currency and coins, payment and settlement systems, and netting contracts.
• That gold and silver coin should be accepted as legal tender – concurrent with that of the national currency. Individuals should be free to choose whichever form of legal tender (i.e. Australian dollar, or gold and silver) for their commercial and personal transactions.
• That a limited period of grace should be provided to banks and the RBA to enable them to adjust their systems and business practices for the elimination of both fractional reserve banking and the monetisation of debt.

Ayn Rand

So you think that money is the root of all evil. Have you ever asked what is the root of all money?

Stephen Zarlenga - Speech at the US Treasury (4 Dec 2003)

So both Aristotle and Plato noted the paramount principle - that the nature of money is a fiat of the law, an invention or creation of mankind.

Foundation of Monetary Policy

Rationale behind the ASP Monetary Policy

Detailed below are some of the supporting arguments that we have utilised in the drafting of the ASP Monetary Policy. The actual number of books, articles, videos, Congressional Hearings etc. used in our research is voluminous – so we have included only a few for the sake of easy reading.

Australian Constitution

The two sections of the Australian Constitution that deal specifically with money and banking are given below. These sections have not been copied verbatim, but are rephrased so as to make it easier to understand the intent of our founding fathers.

S51 – The Parliament shall have power to make laws with respect to:

• The national currency, coins and legal tender.
• Banking, except for State Banks (i.e. banks which are managed solely by the government within the physical bounds of the State).
• State Banks that operate beyond the physical bounds of the State.
• The incorporation of banks.
• The issue of paper money.

S115 – The various States are not allowed to coin any money. The various States can only make gold and silver coins legal tender.

Current banking perceptions

Banks enjoy telling us that they only lend out the money of their depositors (i.e. they act as intermediaries between lenders and borrowers). This has only a single grain of truth in it – and for the most part it is a deception and obfuscation.

The Reserve Bank of Australia states on its web site that it issues the “nation’s currency”. From these two previous statements, most Australians get a warm feeling and believe that everything is as it should be. Not so fast - this is merely a play on words to deceive.

First, a quick lesson in history and finance…..

The creation of money

The current perception around money is that the RBA creates all the Australian dollars that exist and thereafter people and companies earn this money and subsequently deposit it at the various banks. These banks then lend out these deposits to other people or companies. Wrong!

Let’s quickly break this age-old perception with a few quotes from some eminent people:

Sir Josiah Stamp (President of the Bank of England 1928 - 1941, and the second richest man in Britain in the 1920s)

Graham Towers (Governor of the Bank of Canada from 1935 to 1955)

“Banks create money….The manufacturing process to make money consists of making an entry in a book. That is all……Each and every time a bank makes a loan …..new bank credit is created - brand new money.”

John Kenneth Galbraith (Former Professor of Economics at Harvard)

“The process by which banks create money is so simple that the mind is repelled….When a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.”

Robert B Anderson, Secretary of the Treasury under Eisenhower, in an interview reported in the August 31, 1959 issue of U.S. News and World Report

“Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities….The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they ‘create’ it.”

Reserve Bank of Australia

The role of the RBA (which is wholly owned by the Commonwealth, but is not a government department) is that:

“It conducts monetary policy, works to maintain a strong financial system and issues the nation’s currency.”

But now we seem to have two conflicting views. However, read carefully – the RBA issues the “national currency” while banks actually create “money”. To clarify, let’s look at the following quote:

A Primer on Money: Statement by the Committee on Banking and Currency, House of Representatives, 88th Congress, 5 August 1964, page 44:

“When someone goes to the bank and asks for currency – “cash” – in exchange for a cheque, the bank gives him the currency and reduces his chequeing account by the amount of the cheque. Than as the bank needs “cash” itself to meet its depositors’ demands, it gets the cash from the Federal Reserve by having its deposit reduced.”

So – banks create money, and then when they need “cash” (i.e. paper currency and coins) they go to the RBA and exchange a digital balance in a computer for some “national currency” (i.e. hard cash).

Irredeemable Debt

What all of this means is that for our money (i.e. an Australian dollar) to exist – someone (i.e. you, me, the government, a company etc.) has to go into debt to get that dollar, since banks will only “lend” you the money that they have just created. They do not give it away, nor do they introduce it into the economy for the benefit of the people. This process is called Monetisation of Debt. Effectively we as Australians “rent” our money and national currency from private banks.

Collectively, we can NEVER pay off our debts to the banks. This is mathematically impossible. “How is that?” you may ask: Well, after 1 year the debt has increased via interest, but the amount of currency (i.e. that one dollar bill) still remains as a one dollar bill. This means perpetual debt.

Our monetary system has made us debt slaves. We ARE debt slaves. Collectively, we can never get out of debt. This is dishonest and a fraud. Would you ever borrow money if you knew that you could NEVER repay the debt, but only go further and further into debt?

Monetary Role of Government

Abraham Lincoln sums up exactly what role the Australian government should play regarding monetary policy and money creation. We could not have said it better. This is our creed:

Abraham Lincoln Senate document 23, Page 91. 1865

"The government should create issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."

Why the establishment hates this Policy

The ASP has no delusions that adopting a policy based on honest money will raise the ire of the establishment. So what will be their real objections, and not their PR spin for public consumption? Below is a published quote from those with vested interests - setting out precisely what they hated about America issuing its own money for the benefit of its people. Read carefully and be amazed.

Hazard Circular - London Times 1865.

“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”

Yes, you got it – if our government issues its own money we will:

• Pay off all our debts,
• Have all the money we need for infrastructure and industry,
• Be prosperous, and
• Have qualified and intelligent people flock to our shores.

Implementing an Honest Money Policy

There is always a gap between what constitutes policy, and actually implementing that policy. In the case of implementing our Monetary Policy, let us again examine history to see how difficult it would be to implement our policy.

In 1963, President Kennedy not only attempted, but succeeded, in reclaiming the right of the US Government to issue its own money, which he then spent into circulation. On 4th June 1963 he signed Executive Order 11110 – that directed the US Treasury to issue a new US currency. This new US currency was to be backed by a precious metal – silver.

That Executive Order is a simple document containing only 2 paragraphs. That is all that was required. Actually, only the first paragraph was really needed – and it states:

(a)…..The authority vested in the President by paragraph (b) of section 43 of the Act of May 12, 1933 as amended (31 U.S.C. 821 (b)), to issue silver certificates against silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption.

In that single paragraph President Kennedy achieved the following:

• Allowed the US Treasury to issue “silver certificates” (i.e. paper US dollar bills) back by silver, and
• Allowed the US Treasury to mint a silver coin having the value of a US dollar.

Following President Kennedy’s assassination, Lyndon B Johnson immediately stopped the US Treasury from issuing any additional US notes, and today Executive Order 11110 still stands as being in force – but totally ignored. What a tragedy.

The ASP believes that any Australian government that truly believes in an honest money system - can break the shackles of debt servitude and bring prosperity to all Australians using the same legislative brevity as did President Kennedy. The Australian Constitution allows Parliament to make laws regarding “currency, coinage and legal tender” (Section 51 - 12), and “banking” (Section 51 -13). Consequently, there is no legal impediment to bringing prosperity to Australia.

Role of gold and silver

The ASP recognises that all modern national currencies are fiat, and that gold and silver has historically been used to stabilise currencies and more importantly, to keep politicians honest (by restricting their ability to inflate, and hence debase the national currency).

To place the importance of gold into perspective, note the following:

JP Morgan, testifying to the Pujo Committee, 1913.

“Gold and silver are money. Everything else is credit”.

Section 115 of the Australian Constitution allows all States to make gold and silver coins “legal tender”. Not only is there historical justification for having gold and silver as legal tender, but its open and widespread use by ordinary citizens will act as a sanction on the government should they abuse their right to “create money and spend it into circulation”.

This sanction by the electors can then be expressed every single day (and not only once on election day) and is therefore the most potent form of “democracy” - since people will be free to select whichever form of legal tender they have confidence in (i.e. paper currency or gold and silver). See a current example of this here.

Counter arguments

Below is a common argument used by opponents to an honest money system. It is well worth the time to cover this argument and show how quickly one can dispense with it.

“The ASP Monetary Policy will cause inflation”

Monetary inflation (increase in the money supply):

Under the ASP Monetary Policy, the Treasury will create $100 and this will increase monetary inflation by $100 (but without any debt). Under the current monetary system, a bank will lend to the Treasury $100 and this will also increase monetary inflation by $100 (but with an attached debt). So far the race is even.

Price inflation (increase in the price of goods, services and assets):

If the $100 under the ASP scenario is used to fund a new hospital, then no funds have to be returned and no interest has to be repaid. Consequently the cost base of the hospital is low. However, if the $100 obtained from the bank is used to fund the hospital, then the hospital has to pay back the $100 with interest. Consequently, the cost base of the hospital is higher and has to be covered by higher charges (i.e. higher hospital prices).

Even a high school graduate will correctly conclude that the ASP Monetary Policy will result in lower price inflation compared to the current banking scenario.

Conclusion – the ASP Monetary Policy is far superior.