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AUSTRALIA NEEDS AN INDUSTRY POLICY

The purpose of this web page is to alert Australians to a well disguised fact: Australia,
per head of population the wealthiest nation on earth at the beginning of the 20th
century is no longer anywhere near the richest, and indeed is headed for third world
poverty. Due, in large measure, to the policies our governments have been following.

Does it surprise you that Australia's two major political parties have no industry policy
worthy of the name? As the governors of this country for more than half a century,
wouldn't you expect that by now they would have reached some bipartisan agreement on
something as important as the source of the nation's prosperity?

Industry, be it agriculture, mining, manufacturing, tourism, or service provision, is the

way a country earns its wealth.

Last Chance for the Lucky Country

"At the turn of the century there was nothing that Australians could not afford. Per
head, we were the richest people on Earth. Our life expectancy was the longest in
the world."

So runs the introduction to a 1987 film series produced by Film Australia and entitled
"Last Chance for the Lucky Country" (ISBN 0642 13106 6). It seems that Australia had
the highest or close to the highest standard of living right up until about 1960. But the
introduction continues:

"Today, our rank has dropped. 16 countries lead us in wealth. After Mexico and
Brazil we are, per head, the largest debtor nation on Earth."

That was in 1987. By the end of 1997 our standard of living had dropped below 23rd, we
were further in debt, and the value of our dollar had dropped to a near-record low.

"But aren't we are better off than ever before?”

Some are, to be sure. Our rich have never been so wealthy, relative to middle class
Australians. The whole world has developed even in the last 10 years, offering more and
better household gadgets, cars, communications, and medicines. But the countries with a
higher standard of living now have more than we do. Our governments have been
maintaining an illusion of wealth, getting money to spend by selling off assets developed
by earlier generations, and wooing foreign investors long after our need for them has
waned, thereby placing us further in debt.

Looking closely, you can spot some of the indicators of our national decline:
Houses built for average Australians today are smaller than those of the 1960s. Large
families that were once supported by one wage earner now require two for a smaller
family. Unemployment that was once as low as 3% is now around 3 times higher,
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depending on whose figures you believe. An Australian dollar that was once worth 2
USA dollars was worth 67 USA cents by the end of 1997, and falling. Ordinary wage
earners now pay rates of income tax once reserved for the rich. Newspaper reports quote
Asians as saying that our cities are dirty, our universities not particularly good.
Americans warn visitors to our cities of the dangers from crime. And, according to the
latest edition of Janes World Armies (a globally respected military journal) we skimp on
defence.

Australia is not alone

The world abounds with poor countries that were once prosperous.

In the 1920s Argentina could compete with Australia for the title of richest country on
Earth. By 1950, only 30 years later, it had become a "developing country" and its
citizens tasted poverty and despair.
Before World War 2, Britain was Europe's richest country: it is now one of the poorest.
Centuries ago Portugal and Spain were the great explorers of the world, but by 1945 were
regarded as "developing countries".

Is it not possible that the same fate could befall Australia?

For a forthright description of the difficulties faced by countries on the verge of

prosperity, see Malaysian Prime Minister Dr. Mahathir's famous speech.

Australians have invented some great products

During its period of prosperity Australians invented some great products, many of which
were manufactured here, providing jobs for our workforce. We can recall with some
pride our world firsts: the rotary motor mower (Victa), the Hills clothes hoist, the pop-
top drink can, wine casks, brick veneer building construction, reinforced concrete, the
self erecting crane, the marine torpedo (sold to the British Admiralty around the turn of
the century for 100,000 pounds), a winged yacht keel (part of the America's Cup winning
combination), pedal powered wireless, the flying doctor service, mobile police radio, the
refrigerator, and so on.

Increasingly though, in modern times, Australia has failed to grasp the wealth that
could be made from manufacturing, by failing to commercialise its inventions.

Manufacturing opportunities lost

Typical of Australia's failure to capitalise on its industrial opportunities is the story

of the atomic absorption spectrophotometer. A scientific measuring instrument for
chemical analysis, the atomic absorption spectrophotometer was developed by Australia's
C.S.I.R.O. and has been used all around the world for 30 years. A factory employing 400
people was set up to manufacture these instruments in Melbourne. . . but it is now
entirely owned by the USA giant Varian Corporation. Australia no longer has an interest
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in its manufacture.

Lack of a sensible industry policy is why Australia never developed a processing

industry to quadruple the value of its wool clip. We had our C.S.I.R.O. hard at work
improving wool's properties, making it fireproof and easy to wash etc. but abandoned to
foreigners the conversion of our raw material into usable products. Australia developed
the world's most efficient spinning method - self twist yarn - now used throughout the
world to spin not only wool, but also synthetics such as acrylic. But we failed to use this
invention ourselves to process our major product, and today receive mere peanuts for our
wool. Products of rural industry are no longer in great demand. In 1987 Australia had to
export twice the quantity of raw materials to receive an income equivalent to that we
received in 1954.

"Stay with wool and mining. Leave computers to others." was the advice given by a
committee Australia set up to answer the question "should we stay in digital computer
technology?" This was at a time when Australia was only the third nation in the world to
produce a digital computer, and its politicians were getting nervous about being up with
the leaders. The committee consisted of two people from Britain and one engineer from
Australia.

In 1955 Australia made a transistor radio. But we took the advice of another committee
which decided we should stick with vacuum tubes. Within a few years vacuum tubes
were obsolete and we lost our electronics industry.

We should not be asking competitors to make decisions for us. Remember this next
time you hear an American accent telling us how to run our economy.

Short sighted reports by committees are not unusual. The 1980 Myers report concluded:
"The ability of the government or people of a small country such as Australia, to
influence the development of new technologies and their use in the world, is probably
extremely limited."

"A small population is no excuse." says Helen Hughes, Professor of Economics at the
Australian National University. "Countries with a smaller population such as Sweden,
Denmark, Norway, and Switzerland, and a country with a similar population like the
Netherlands, have done much better and have higher incomes, by and large, than we do."

During World War 2 Australia developed an aircraft manufacturing industry, and by the
1960s was building the Mirage jet fighter. But by 1985 our aircraft industry was not even
given an order for the air force training plane it was developing. Instead, our government
bought the Swiss made Pilatus, a plane which did not even meet the original brief for a
side by side trainer. In a world where air travel and the requirement for aircraft has
become commonplace, our governments do not even support the building of a
training plane.

Meanwhile, smaller Sweden with half our population, builds and sells its own SAAB
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jet fighter that can take off and land on ordinary highways. The same country's
Volvo car corporation exports to the world and at times pulls in 10% of Sweden's
GNP . . . whilst we allow any profits from car making in Australia to be spirited
away by foreign owned multinationals. And our "developing" neighbour, Indonesia,
now makes its own military and passenger aircraft.

Profits for foreigners

Debts and taxes for Australians

Of course, not all products are high technology ones. Like people anywhere, Australians
need their bread, biscuits, lollies and drinks, some banking services, a bit of insurance, a
few medicines, and so on. All these things are made or provided in Australia, by and
large as a result of the efforts of Australian workers. But who controls those workers?
Who, as owners, get most of the profits?

According to AUSTRADE, this is how much of our enterprise has been transferred
to foreign interests:

Processed Food 95%,

Motor Vehicles 100%,
Pharmaceuticals 100%,
Confectionery & Beverages 84%,
Manufacturing 57%,
Building Materials 88%,
Mining 97%,
Electrical 98%,
Banking 86%,
Chemicals 98%,
Insurance 82%,
Hotels 75%,
Oil/Gas 92%.

Foreigners and multinationals own most of Australia's industry! They invest here in
the hope of making profits, and, not being dills nor inexperienced, that is exactly what
they do. When they take their profits home, as they eventually do, they contribute to
Australia's current account deficit.

The current account deficit is simply a measure of how much more wealth has gone out
of the country than has come in during a particular time period. It is therefore a measure
of Australia's increase in debt.

Yet Australia's current account deficit is not a consequence of too many imports. Our
imports and exports are roughly in balance. Our deficit overall comes from the large
interest and dividend repayments (net income category) to foreign lenders - both by
our governments and private companies and individuals.
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We are living in an occupied country!

Multinationals have availed themselves well (for their own gain) of policies designed to
help Australians . . . tariffs for instance. They use slippery accounting methods designed
to minimise their declared profits (and hence taxes) in Australia whilst transferring wealth
by stealth to parent or sister firms overseas. The process of transfer pricing is indeed the
bane of tax-payers, governments and the tax office alike.

Sensing public uneasiness with the level of foreign ownership of Australia, our
government several years ago established the Foreign Investment Review Board. But
Australia's Foreign Investment Review Board really exists just to rubber stamp and
make people feel as if there is some monitoring going on of foreign investment. The
Board does attempt to keep foreigners out of bulk purchase of residential property, but
other than that they have rejected very few foreign investments.

Meanwhile, somehow, the debts must be paid, and so the Australian government
continually searches for new ways of extracting more tax from the only source that can
not escape it - the Australian people.

Who is to blame?

If you feel, as I do, that something is seriously wrong with the way Australia's industry
policy is being managed, then some obvious questions are: "Who is responsible?" "How
can we fix the problems?"

Culprits suggested from time to time have included Australian businessmen and
entrepreneurs; the banking system; foreign investors and multinationals; trade unions;
universities and training institutions; state and federal governments.

I lay the blame squarely with Australia's federal governments for the simple reason
that, as the alleged representatives of the Australian people, they are the only ones in
a position to co-ordinate all of the above. If the Australian people can not rely on
their federal government to control the economy of the country in their interests
then they can rely on nobody. Free market forces can't be relied on, as they are
motivated primarily by greed rather than by considerations of what may be best for
the people. Same for the banks, same for foreign investors.

The question of why Australian government has been so inept is an interesting one
deserving a web page of its own. For now, I will continue to explore the question "How
can we fix the problems?" related to industry policy, but do so in the knowledge that
identifying the answers related to industry policy is futile unless and until the
fundamental problems with the Australian federal government are fixed.

Is tariff protection the answer?

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A tariff is nothing more than a selective tax placed on a particular

imported good. It makes the imported good more expensive, and in
doing so enables the domestic producers of that good to sell their
product at a higher price than they otherwise could.

Older Australians remember that back in the 1950s when the nation was still
prosperous, Australian industry was strongly protected by tariffs. Several of
Australia's minor political parties (One Nation, Australia First, and others) attract some
support by advocating a return to tariff protection. They recall not only Australia's past,
but the success of Japan since World War 2. Japan has been strongly protectionist of its
industries when it thought advantageous, although not so much with tariffs as with other
non-tariff barriers.

Opponents of tariff protection claim it breeds lazy, inefficient industries. This is

undoubtedly true when a tariff is left in place for a prolonged time, without monitoring its
level, value, and cost. Opponents of tariff protection claim tariffs increase the costs of
business resources and so disadvantage non protected industries, making them less
competitive internationally. The same could be said of most taxes. Opponents also point
to international treaties (such as GATT) that Australia governments have signed
(foolishly some would claim, and without reference to Australian citizens) which make a
return to widespread tariff protection difficult if not impossible.

Economics literature suggests that in most cases a subsidy to industry is preferable

to a tariff. Sweden has developed its own defence aircraft directly through government
subsidies to defence industries. Opponents of tariff protection will sometimes admit that
there is a good case for trade protection (subsidies) for defence industries as long as this
is restricted to national defence, and is not wasted. Support for maintaining a
manufacturing base in case of war is common.

Ironically, it is tariff protection that encourages foreign investment in an attempt by

foreigners to jump trade barriers; the higher the tariff the more likely foreign
investment becomes. Those who oppose uncontrolled foreign investment in Australia
(as I do) must keep this irony in mind.

So what is the answer? My belief is that our government

should be prepared to use a wide range of protective measures
(tariffs, subsidies, quotas, inspection of imports, a tax on
payments going out of the country, and anything else that will
work) in a carefully controlled way to foster carefully selected
industries to achieve specific objectives. Of the measures suggested, the
one having most appeal to me is a subsidy, which can be directed to companies that are
substantially Australian owned, and even to particular products if appropriate. In giving a
subsidy to industry the government is in any case only returning some of the costs
government itself imposes on industry in the form of taxes, excise duties, and compliance
costs caused by government legislation and regulation.
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Specific objectives might be to reduce temporary high unemployment; to establish a new

industry that could benefit the economy; to retain a strategic industry that might
otherwise be lost to cheaper imports (temporarily cheaper that is, considering only the
dollar costs without the social ones). Australia's steel industry comes to mind. How is it
that our biggest steel maker, BHP, is reducing steel making in Australia whilst Japan, with
a higher wage structure than ours and using our raw materials, can continue?

Carefully selected industries would be only strategic ones or ones likely to be at least
economically viable in the long term, and preferably the most profitable; they would
include industries where we would appear to have some natural advantage (the steel
industry comes to mind again); they would NOT include industries dominated in
Australia by multinationals (which would not be here unless they were, perhaps
secretly, making a profit already).

Careful control of protective measures would include continual

monitoring of the costs and results of the protection, adjustment of the
rate as appropriate, and perhaps eventual removal of the protection.
All this would best be done not by politicians, but by independent,
patriotic Australian analysts having skills in industry and economics,
free from lobbying by vested interests.

Most of the problems with tariffs arise because they are not
set sensibly. They are set by politicians of doubtful loyalty and
knowledge of technology, influenced by lobbyists for vested interests,
namely businesses seeking assistance. A cynic might ask how can
tariffs be set sensibly. Governments such as Australia's almost seem
to demand that special interests influence them to get what they want
at the price of society. The same is as true for subsidies as it is
for tariffs.

Which is why I stated above that identifying the answers related to

industry policy is futile unless and until the fundamental
problems with the Australian federal government are fixed.

Is foreign investment good for Australia?

I think the answer is "yes" if proposed investments are examined on a case by case basis,
and only those which clearly benefit Australia are accepted. There are certainly win-win
situations in which both the investor and the host country can benefit.
But the answer is "no" to uncontrolled foreign investment, which in so many
individual cases costs Australia more in the long run than any offsetting gain.

Malaysia's Dr. Mahathir has helped his country develop into one of
Asia's so called "tiger economies" by encouraging foreign investment,
but said in his famous speech after the Asian economic crash of late
1997: ". . . you should also appreciate that we of South East
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Asia at least, are now very scared about foreign capital. We

thought they were helping to prosper us. We conducted roadshows to
encourage them to invest in our share and financial markets. We will
continue to do so. But we will have to be more circumspect."

In a stinging indictment of uncontrolled free trade and free market forces, he said:
"I mention all these because society must be protected from
unscrupulous profiteers. I know I am taking a big risk to
suggest it, but I am saying that currency trading is
unnecessary, unproductive and immoral. It should be stopped.
It should be made illegal. We don't need currency trading. We
need to buy money only when we want to finance real trade.
Otherwise we should not buy or sell currencies as we sell
commodities."

The full text of Dr. Mahathir's speech is well worth reading.

Unscrupulous Profiteers

" . . .society must be protected from unscrupulous profiteers" says Prime Minister
Mahathir, after describing several instances in which America has used government
legislation to halt free enterprise practises that were seen to be against the interests of its
society as a whole.

To me, this seems to be an important point often overlooked, and hardly ever mentioned,
by Australia's supporters of free trade, MAI (Multinational Agreement on Investment),
and economic rationalism. If those supporters choose to disregard David Kidd and Dr.
Mahathir, they would probably also disregard the results of NAFTA, the North
American Free Trade Agreement, as described in a letter signed by hundreds of
dismayed citizens groups in the countries concerned. They would have to disregard the
Pope of the Roman Catholic Church too, who in January 1998 warned Cubans against
"the blind market forces" of global capitalism. "The wealthy grow ever
wealthier, while the poor grow ever poorer" the Pope declared, to
explosive applause in the Plaza of the Revolution. The Pope was speaking at the climax
of a five-day visit to Cuba.

The free enterprise system provides great incentive to innovate and to

work, leading to vigorous economies far more successful than others
that the world has experimented with. But it also provides
opportunities for the unscrupulous to enrich themselves without
offering any benefit to society in return. In my view, eternal
vigilance and decisive intervention is required of the
Australian federal government if the excesses of profiteers are
to be restrained so that the people of Australia may prosper. I
don't believe it's been happening !
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It goes without saying that I opposed any Australian involvement in the MAI, that
proposed Multinational Agreement on Investment which would have ended any chance
Australia may have of controlling its own industry policy. One of our politicians actively
led the successful campaign against it, a position vindicated by the final report of the
Australian Joint Standing Committee on Treaties after MAI negotiations had been
abandoned - The MAI research by GWB provides more details.

Who was the one politician? Why, the same one all major political parties combined to
oppose, the one ridiculed consistently by the mass media, Pauline Hanson. Does that
suggest anything to you about the trustworthiness of the major political parties and mass
media?

How money is created in Australia:

Simply explaining how the Australian monetary system could better serve
Australia's people.

We have all heard it said that "money is the root of all evil" and probably thought that
was a bit of an exaggeration. But when we understand how money is created in the
modern world we can then understand the main cause of many major problems:
ever increasing taxation; pensions disappearing; inequitable distribution of wealth;
inflation; national debt; currency crises and devaluations; recessions; depressions; and
even the failure of government in a democracy to govern in the interest of its electors.
Money was invented to be a tool for facilitating trade,
but has now become a tool used by the rich to govern
the world. If you have any doubt about that, please read on

National Debt:

We've all heard of the Third World's debt crisis, of hopelessly poor
nations unable to pay their debts, and of the human suffering and
environmental consequences of their desperate predicament. But did
you know that powerhouse of the world economy, the United
States of America, is also in debt... to the extent of nearly
US$20,000 for every man, woman and child in the entire USA?
Or that after Mexico and Brazil Australia is, per head, the largest
debtor nation on Earth?

According to figures obtained in mid 2001 from the CIA Factbook, these
are the external debts of a few countries, a lot of them from the "First
World":

Australia US$222 billion, Austria US$32 billion, Canada US$253 billion,

China US$159 billion, France US$117 billion, Hong Kong US$48 billion,
Israel US$18 billion, Italy US$45 billion, New Zealand US$53 billion,
Russia US$199 billion, South Africa US$25 billion, Sweden US$66
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billion, United Arab Emirates US$15 billion, United States of America

US$862 billion.

The Factbook's figures vary from being a couple to several years old, but if so many
countries, from the richest to the poorest, are all in debt the question needs to be asked...
to whom is the money owed? The answer, apparently, is to private banks.

Banks are happy to make loans available because of the interest they earn from them, but
how do they come to have so much money to lend? More even than the world's
richest countries? The way the banks amass all that money to lend is the story of
this page, because they do it not only in Australia, but in countries all around the world,
and they are accused by many of using that money to bribe and blackmail
politicians, political parties, bureaucrats, media, experts, and others so that
indirectly they are able to govern the world.
To find out how, read on...

Definition of Money:

Money according to the Macquarie dictionary is "coins or certificates (such as banknotes

etc.) generally accepted in payment of debts and transactions, or any article or substance
similarly used". In the early days of Sydney, Australia, rum was frequently used as a
form of money. In the modern world credit cards and cheques are generally accepted in
payment of debts and transactions, so credit is a form of money.

Coins and Banknotes

In Australia, coins are made by the Commonwealth Government at its Royal Mint in
Canberra and banknotes are printed in Melbourne by Note Printing Australia, a wholly
owned subsidiary of the Reserve Bank of Australia which in turn is wholly owned by the
Commonwealth Government. So it is fair to say that coins and banknotes are
manufactured by the government. Provided the quantities made result in a total money
supply in balance with the goods and services being generated throughout the country the
manufacture of coins and banknotes will not cause inflation nor a shortage of money.

But statistics like those prepared by the Reserve Bank show that only about 5% of
all money in Australia exists as coins and banknotes. So where does the other 95%
of money come from?

Banks Create Money by “Creating Credit”:

Credit that can be accessed by credit card, overdraft cheque or bank loan represents
nothing more than a bank's promise to pay. It does not mean that the bank owns
enough real money with which to pay, nor does it mean that the bank's customers have
deposited sufficient money with it for the express purpose of loaning out. To honour its
promise to pay the bank relies on two factors: First that the credit created will spend most
of its life as deposits in bank accounts where it can exist as nothing more than numbers in
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bank computers. Second, that whenever payment in cash is demanded, the bank can pay
with money deposited with it for safekeeping by its customers. No depositor ever sees a
statement telling him that part of his deposit is unavailable because it has been loaned to a
borrower, however banks have been known to go broke occasionally even in Australia,
leaving their trusting customers in the lurch!

When someone borrows from a bank, perhaps taking out a

housing loan, the bank records in the borrower's account the
debt that must be repaid with interest, and in return provides
a bank cheque to the borrower or direct to whoever he is
purchasing the house from. The bank cheque is bank created
credit, not backed up by the bank's own money nor anyone
else's. The banks are permitted by governments to create
credit like this up to as much as 15 times the total amount of
money they hold in "deposits". Furthermore, "deposits" are
considered to be not only banknotes and coins, but cheques
and account balances representing credit created previously,
so banks are able to build a mountain of credit based on
earlier credit until it amounts to 95% of all money!

It is worth stressing that when a bank makes a loan, it never loans any of the bank
depositors' money. No depositor ever sees a statement telling him that part of his deposit
is unavailable because it has been loaned to a borrower. Bank loans are of bank
created credit only.

Eventually the house seller will present the bank cheque for payment, probably at
another bank where it will be credited to the seller's account. But even at this stage the
created credit still exists only as numbers that the banks' computers can swap amongst
themselves, and on average that is where 95% of it will stay for the life of the loan,
because, remember, only about 5% of all money is cash.

So banks can and do increase the money supply by creating money out of nothing,
as credit. By so doing their influence over the total amount of money circulating in
the community is many times greater than that of the government manufacturing
banknotes and coins. And so it is that the privately owned banks can cause and
control inflation. Remember that next time you hear some scaremonger predicting
ruinous inflation caused by the government printing money.

In time, the credit created by the loan is extinguished as the loan is repaid, so at the end
of the loan the temporarily created credit will have disappeared, except for leaving the
bank richer by the amount of interest paid. Would now be a good time to
remember that the interest amount is often greater than the
original amount of the loan?

To expand its business, the banking industry normally seeks to

continually increase the overall level of debt, and just loves big
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spending business and government customers. But it is worth

noticing that banks can at any time decrease the supply of
money circulating in the community by refusing to issue new
loans as existing ones are repaid... thereby causing recessions
and depressions.

In Other Words:

The previous section is the most misunderstood part of this story, so it is worth repeating
several times in different words. Click here to find similar things being said in different
ways by a variety of commentators. Or see The Fatal Trap In The Global Economy by
Graham Ferguson and Michael Bond. And if you are wondering why you don't hear
these things on TV, on radio, at school, or in newspapers, here is an explanation of why
from Canada, which is plagued by the same problems.

Bankers Depression of the 1930s:

Older Australians all know about the Great Depression and the extremely hard times it
brought about; but what of its causes?

In 1930, Australia did not lack industrial capacity, fertile farmland, or skilled,
industrious and willing workers, residing in both the city and country. Already,
extensive systems of reasonably efficient transport and communications were in place.
War had not ravaged the cities or countryside, nor had famine devastated the land and its
population. There remained plenty of development work to be done. The one thing that
industry and commerce lacked was a sufficient supply of money.

In the early 1930s, Bankers, who were the only source of new money or credit,
deliberately refused loans to industry, commerce and agriculture. However,
payment on outstanding loans was still demanded, which led to a rapid decrease in
the circulation of real money. By a curious co-incidence, the same thing was happening
in America and elsewhere.

This caused a complete standstill; jobs could not be done, goods and services could not
be purchased. This placed Australia in the Great Depression of the 1930s, and
moreover, placed extensive numbers of mortgaged businesses, private dwellings and
farms into the hands of Banks. The same happens on a smaller scale every time we
have a recession.

Australia suffered more in the 1930s than any other country with the exception of Canada
and Germany. We had an unemployment rate that reached 30% and was 20% for a long
period of time. National income fell by almost half. Capital dried up completely.
Commodity prices fell by two thirds.

Bankers Quickly Created the Money for War:

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Almost overnight, the same Bankers who had no money for housing, food and
clothing, suddenly had millions to lend for Army barracks, uniforms, rations and
weaponry. This was a remarkable reversal in policy by the Bankers. They simply began
pumping millions upon millions of dollars back into the economy when war was
imminent. The Great Depression ended because of the war!

Wars create huge debts to the Bankers who are able to expand the money supply
and lend more money out. Big banks that have traditionally been owned exclusively by
a few collaborating families, can change the course of history and have done so for much
of this century.

Competing Banks Co-operate:

Various mechanisms exist to enable individual banks to co-operate with each other
to make the banking industry work by exchanging debts, payments, information, etc.
One such is the Australian Payments Clearing Association, a public company owned
by the banks, building societies and credit unions. It has been in existence since February
1992 and has specific accountability for key parts of the Australian payments system,
particularly payments clearing operations.

If you have wondered how the independent banks manage to raise and lower their
interest rates all at about the same time, the answer lies with the Reserve Bank of
Australia which is not a government department but is wholly owned by the
Commonwealth. The Reserve Bank Board makes decisions about interest rates
independently of the political process – that is, it does not accept instruction from the
Government of the day on interest rates. In the USA the Federal Reserve Bank posed
as a government agency until a US appeal court ruled that the Federal Reserve is
privately owned.

Numerous banking associations and institutes exist throughout the world to cater for
the mutual interests of bankers. One is the Australian Bankers' Association, the
national organisation of licensed banks in Australia whose mission is "to further the
interests of Members . . .".

And internationally, Australia is a member of the International Monetary Fund which

was created to promote international monetary cooperation. Its activities include
Surveillance, Lending, and Debt Relief for heavily indebted poor countries in exchange
for the ability to prescribe macroeconomic adjustment and structural and social policy
reforms in those poor countries.

So quite apart from family connections, religious loyalties and

secret societies, there exist many recognized bodies fostering
contact, co-operation, and perhaps collusion between
supposedly competing banks. Whether this ever results in a
conspiracy is left for the reader to decide.
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Banks (try to) Buy Respectability:

A minor scandal erupted in Australia during the year 1999 when it was revealed that
influential radio talkback presenter, John Laws, had accepted payment of half a million
dollars from the Australian Bankers' Association for more favourable on-air comments
about the banks. The parties involved appeared to regard the deal as a normal
commercial arrangement.

Impossibility of paying off all debt:

Some simple arithmetic will quickly convince you that if 95% of a nation's money exists
as bank created credit owing a bit over 5% interest, the remaining 5% of "real" money
will be insufficient to pay even the interest! Consequently, interest is continually
compounded as a debt. This is a mathematical certainty. The whole economy then
slaves away at the impossible task of trying to repay the ever increasing debt to the
banking system. Lucky individual borrowers will sometimes pay off their debts to the
banks, using in the process so much of the available money as to ensure that others never
can.

Under Australia's present monetary system, at any point in time the capitalised value of
debt and interest will always exceed the money supply. At the end of May 1998 in
Australia, the total value of debt and interest as a result of lending by banks was
$518,498m, while the money supply was $404,109m. There's a fuller discussion of this
matter in Manufacturing Money by Mark Mansfield B.Ec.

The Result:

Profits for the banks, Debts and taxes for the people:

Whilst the banks profit by creating credit, what

happens to the borrowers?
In the case of the Australian government its debt reached such a size that it could
not pay off the loans as they fell due, and has to borrow more just to pay its interest
bill ! By 1993/4 Australian governments were responsible for 46% of Australia's total
external debt which itself is now US$222 billion according to the CIA Factbook.

This is why the government, desperate for money to pay the banks, increasingly
taxes the people who can not escape it; why it sells commonwealth assets and
enterprises previously owned by the people; why it bleats that it can no longer pay old
age pensions to people it has been taxing for that very purpose since the 1940s; and why
it continues to attract foreign investment long after our need for it has passed. A formula
for leading Australia inexorably into the clutches of the International Monetary
Fund !
 15

By 2005 the government had paid off most of its debt to the banks, aided by sales of our
publicly owned assets, its new tax, a booming world economic climate, and theft by
inflation... but left the privately owed external debt untouched.

Australia has already started taking the IMF's Four Steps to Damnation.

If you have retained your sense of humour this far and would like to join a group of
Australians who are sick of banks, why not visit the Sick of Banks website and
register your support?

Better Alternatives:

The good news is that the problems caused by Australia's

present money creation system can all be overcome: better
alternatives exist. Another matter entirely is how to get
Australian governments to implement the required changes, or
even to comprehensively discuss them.

Some approaches that have merit are listed below:

Government Issued, Debt Free Credit: Most problems would be overcome if the
government simply issued credit, like it does with banknotes and coins, debt free.
Especially when the government itself is the borrower. It already has the constitutional
power to do so. Why it should have transferred this lucrative right to privately owned
banks is difficult to understand unless things like bribery and blackmail are considered.
Conspiracy theorists point out that two American Presidents, Abraham Lincoln and John
Kennedy were both assassinated whilst they were attempting monetary reform.

Nationalising the Banks - bringing them under government ownership and control -
appeals because amongst other things it could result in banking profits being shared by all
the people. In 1947 Prime Minister Ben Chifley and his Australian Labor Party
Government attempted to nationalise Australia's banking system, but the proposal was
vetoed by the Privy Council. Chifley's idea was to harness credit-creation to national
economic development. Opponents point out that government has made such a mess of
so many things it has undertaken that it simply can not be trusted with something as
important as running banks. For example, in Australia's banking crisis of 1989-1992, the
IMF estimates the cost of rescuing state-owned banks to be nearly 2% of GDP. What the
IMF didn't estimate is the percentage of GDP we pay every year, in interest on credit
created by private banks.

Islamic Banking is designed around the religious beliefs of Muslims, but can be used by
anyone. Paying and charging of interest is prohibited! Use of paper money is also illegal
according to Islamic law, so another Islamic initiative is a return to the use of coins made
of precious metal. The gold Islamic Dinar is now minted in four countries and is on its
way to becoming the currency of millions of Muslim peoples. And it could once again
become the currency of all people who are tired of being cheated.
 16

Impex Banking is just one of a collection of reform measures proposed by Economic

Reform Australia, a non-profit and non-party organisation concerned primarily with
sustainable development and with economic and financial reform.

For lots more detail about alternatives and an agenda for implementing them, see David
Keane's page Solutions for Australia's Banking and Financial Management.

Some Success Stories:

The Saracen Empire forbade interest on money 1,000 years ago and at that time its
wealth outshone even Saxon Europe.

Mandarin China issued its own money, interest and debt free, and historians and
collectors of art today consider those centuries to be China's time of greatest wealth,
culture, and peace.

Germany financed its entire government and war operation from 1935 to 1945 without
gold and without debt, and it took the whole Capitalist and Communist world to destroy
the German power over Europe and bring Europe back under the heel of the bankers.

A little place that has escaped the clutches of the banks by issuing its own interest-free
money is the little island of Guernsey. By controlling its own money supply from 1816
onwards, Guernsey was able to avoid the century old trap of borrowing when it didn't
have to. The island has had a stable and prosperous economy for over one hundred and
fifty years. Guernsey's income tax is only a "flat" 20%. It has no public debt, no GST, no
VAT, no inheritance tax, no capital gains tax, and almost no inflation.

American colonies issued debt-free and interest-free money as colonial scrip in the
1700's and their wealth soon rivaled that of England, provoking restrictions from the
English Parliament which in turn led to the Revolutionary War. The basic cause of the
revolt of the American colonies against the British Government was the fact that the
British did not like the colonists creating their own money and enjoying comparative
prosperity compared with conditions in Britain.

American President Abraham Lincoln printed 400 million dollars worth of interest and
debt free Greenbacks in 1863 to successfully finance the Civil War, only after being
asked to pay 24% to 36% interest by the banks. He was later assassinated, allegedly by
an agent of the Rothschild Bank.

Australia's own government established Commonwealth Bank achieved some

impressive successes while it was "the peoples' bank", before being crippled by later
government decisions and eventually sold. At a time when private banks were
demanding 6% interest for loans, the Commonwealth Bank financed Australia's First
World War effort from 1914 to 1919 with a loan of $700,000,000 at an interest rate of a
fraction of 1%, thus saving Australians some $12 million in bank charges. In 1916 it
made funds available in London to purchase 15 cargo steamers to support Australia's
 17

growing export trade. Until 1924 the benefits conferred upon the people of Australia by
their Bank flowed steadily on. It financed jam and fruit pools to the extent of $3 million,
it found $8 million for Australian homes, while to local government bodies, for
construction of roads, tramways, harbours, gasworks, electric power plants, etc., it lent
$18.72 million. It paid $6.194 million to the Commonwealth Government between
December, 1920 and June, 1923 - the profits of its Note Issue Department while by 1924
it had made on its other business a profit of $9 million, available for redemption of debt.
The bank's independently-minded Governor, Sir Denison Miller, used the bank’s credit
power after the First World War to save Australians from the depression conditions being
imposed in other countries. The Commonwealth became the first Australian Bank to to
open an agency in New York, established mainly for public loans via the New York
market. By 1931 amalgamations with other banks made the Commonwealth Bank the
largest savings institution in Australia, capturing 60% of the nations savings.

The Commonwealth Bank was unable to save Australia from the depression of the 1930s
because it had been effectively strangled in June, 1924, when the Bruce-Page
Government brought in a Bill to amend the Commonwealth Bank Act by taking the
control of the Commonwealth Bank out of the hands of its Governor, and placing it in the
hands of a directorate consisting of the Governor of the Bank, the Secretary of the
Treasury, and six persons actively engaged in agriculture, commerce, finance, and
industry, to be appointed by the Governor-General (which in practice meant the Bruce-
Page Government). The effect of the Bill was to place the Bank absolutely under the
control of a body of men who might be bitterly opposed to any competition with
private banking.

Such history of money does not even appear in the textbooks of public schools today.

We are not alone!

Take a look at some of the websites exposing similar problems in the USA. A
proposal for solving the problems is presented in the People For Mathematically
Perfected Economy USA website.

Conclusion:

"At the turn of the century there was nothing that

Australians could not afford. Per head, we were the
richest people on Earth. Our life expectancy was the
longest in the world."

So runs the introduction to a 1987 film series produced by Film Australia and entitled
"Last Chance for the Lucky Country" (ISBN 0642 13106 6). It seems that Australia had
the highest or close to the highest standard of living right up until about 1960. But the
introduction continues:
 18

"Today, our rank has dropped. 16 countries lead us in wealth. After Mexico and
Brazil we are, per head, the largest debtor nation on Earth."

That was in 1987. By the end of 1997 our standard of living had dropped below 23rd, we
were further in debt, and the value of our dollar had dropped to a near-record low. By
2001 our dollar had set a series of new record lows, and although it has appeared to
recover somewhat since, that is mainly when compared with the USA dollar, which itself
is beset by many of the same problems.

How money is created in Australia:

Explained by several commentators, dispelling myths and pointing out problems
with the system.

In our related page Money Creation in Australia, a detailed explanation is given of how
privately owned banks create 95% of Australia's money as credit, virtually out of thin air,
and then get people to pay them interest on it. This comes as quite a shock to those who
previously believed banks merely lent out money deposited with them for safekeeping by
their customers, so here we present more evidence in different words.

In an article called "Manufacturing Money", Mark Mansfield B.Ec. wrote:

"Information about money is not a state secret. The following statistics are readily
available from the Reserve Bank of Australia's monthly Bulletin.

"When the Federal Coalition was elected in March 1996, Australia's money supply was
$345,479m. By March 1998, it had grown by $55,968m to $401,447m or $22,302 per
Australian. In other words, there is now $3,110 more money per Australian in the
economy than there was two years ago. I guess Treasurer Costello has been a pretty good
treasurer if we are all now $3100 each richer, than we were under Keating? But if, as
Treasurer Costello says it would be lunacy for the government to print money, where did
all this new money come from?

"Well, some of the money was printed. In March 1996 there was $18,691m in notes and
coins in circulation. By March 1998 it had grown by $2,140m or $120 per Australian to
$20831m. Notes and coin in circulation though represent only 5.2% of the total money
supply or $1,157 per Australian.

"The vast bulk of the money supply is held as deposits in accounts with banks and other
financial institutions. Ninety-six per cent of the growth in the money supply in the two
years from March 1996 occurred in financial institution deposits as a result of the
financial institutions themselves growing the money supply.

"Banks grow the money supply every time they claim to lend
money. I say claim to lend money, because banks do not really
lend money. When money is borrowed from a bank, the bank
 19

actually creates new money or credit out of nothing. It credits

a loan account it has set up on its books with a deposit which
can be drawn upon by the borrower. As banks must pay out
deposits on demand this is a liability for the bank which is
entered in the debit side of its ledger. On the credit side of the
ledger, because the bank charges interest on this created
money, this is an asset for the bank earning it income.

"Everyone sub-consciously knows banks do not lend money.

When you draw on your savings account, the bank doesn't tell
you you can't do this because it has lent the money to
somebody else. You would be pretty irate if this happened
because it would amount to theft."

In a Nemesis Magazine article entitled The People Vs The Banks, George Dimitriou
writes:

"out of a work force of some 10 million, only 90,000 people, or a minute fraction of the
populace, become aware of what the 'mainstream media' can not or refuses to publish.
The rest of the populace essentially end up ignorant, or to use the more common term -
brainwashed. In the simplest of terms, all the above can be stated thus:

"'The populace is too ignorant and stupid to know any better, and
advantage is taken of this by those in power - who thus do as they
damn well please.'

"This resounding fact needs to be continuously kept in mind, for throughout this article
the reader will no doubt be asking him or herself as to how the state of affairs presented
could possibly be the case. In this regard it is worth keeping in mind that the majority
rule, and in this case we have some 18 million, 910 thousand ignorant people in Australia
that constitute that majority. To those who will spend a moment in pondering over the
significance of these figures, they will realise with a bang why it is that the great
deception will go on....and on....and on.

"What Is The Great Deception?

"The great deception that is currently strangling the Western world,

and thus every man woman and child, is the over abundance of credit,
or much more specifically, the creation of money 'out of thin air'. It
remains as an insidious truth that the vast majority of people remain
blissfully unaware of the fact that when banks lend money, they in fact
create most of it with the scribble of a pen at no cost to themselves.
Adding to this already heinous fraud, they then add an inordinate
interest charge for the use of that money - money which for all intents
and purposes does not physically exist. Sir Josiah Stamp, director
 20

of the Bank of England during the years 1928-1941, stated

thus in regard to 'banking':

"'The modern banking system manufactures money out of

nothing. The process is perhaps the most astounding piece of
sleight of hand that was ever invented. Banking was conceived
in iniquity and born in sin. Bankers own the Earth. Take it away
from them, but leave them the power to create money, and
with the flick of the pen they will create enough money to buy
it back again...Take this great power away from them and all
great fortunes like mine will disappear, and they ought to
disappear, for then this would be a better and happier world to
live in. But if you want to continue to be slaves of the banks
and pay the cost of your own slavery, then let bankers
continue to create money and control credit'."

The Australian Institute of Economic Democracy once stated:

• Banks do not lend money deposited with them.

• Every bank loan or overdraft is a creation of entirely new
money (Credit) and is a clear addition to the amount of
money in the community.
• Practically all the money in the community begins its life
as an interest-bearing debt to the banks.

Garry Bell of the Institute of Education, University of Melbourne put it this way:

"Banks now acquired a unique role in the creation of money.

When one individual Tony, borrowed from another individual
George, there was no change in the money supply. Tony had
more, George had less. But if Tony successfully approached
George's bank for a loan, Tony had more purchasing power,
George had no less and the total money supply rose. From an
initial deposit base of cash, banks were able to expand the
money supply many times over through lending provided
depositors were confident about the security of their
deposits."

John Hermann wrote in "Reflections on the Mystery of Money":

"It is not difficult to find evidence of the confusion and obfuscation

surrounding the money issue. A former leader of the National Party in
Australia has been quoted as informing his constituents that "banks do
not create money". On the other hand many economic reformers have
taken the trouble to assemble long lists of quotations from
distinguished personalities, including people at the top of the banking
 21

profession, in support of the proposition that banks do create money.

Recent college economics textbooks, particularly within the USA,
provide descriptions of money creation by the banking system via the
"money multiplier" mechanism, and even of "fractional reserve deposit
expansion". However, one can also find other economics textbooks
which avoid the entire issue of the creation of money like the plague.
The confusion and the contradictions appear at almost every level. An
excellent little book by Australian reformer Ed Burgi (Money Creation:
The Great Confidence Trick) has reproduced a recent letter from the
secretary of the Reserve Bank of Australia, who absolutely denies that
banks create money. Ed also possesses an official letter originating
from the economics department of the Reserve Bank of New Zealand
which states unequivocally that the commercial banks create around
97 per cent of M3!”

Frederick Soddy, M.A., F.R.S., Nobel Prize Winner in 1921

wrote:

"The most sinister and anti-social feature about bank-deposit money is

that it has no existence. The banks owe the public for a total amount of
money which does not exist. In buying and selling, implemented by
cheque transactions, there is a mere change in the party to the whom
the money is owed by the banks. As the one depositor's account is
debited, the other is credited and the banks can go on owing for it all
the time.

"The whole profit of the issuance of money has provided the capital of
the great banking business as it exists today. Starting with nothing
whatever of their own, they have got the whole world into their debt
irredeemably, by a trick.

"This money comes into existence every time the banks 'lend' and
disappears every time the debt is repaid to them. So that if industry
tries to repay, the money of the nation disappears."

New Internationalist Magazine says, in its article The Truth

About Banks:

"Most of the new money in the world is not created by

governments, it is made by banks. In Britain, for example, only
3% of new money is produced by the government (in the form
of new coins and notes); the other 97% is created by banks,
when they make various kinds of loans. Banks need people to
be in debt in order to make their huge profits."
 22

Legendary Australian, R.M. Williams, when asked what

message he would like to deliver to modern Australia said on
his 90th birthday:

"Oh, alright. Rewrite the Banking Act to give the federal

Treasurer power to control the nation's money; reform the
monetary system; limit the International Monetary Fund's
powers; resurrect the rural credits department; make foreign
companies pay tax in Australia; allow gold producers to sell
overseas and give people back control over their own money."

You can read why in THE REAL REASON BEHIND OUR FINANCIAL MESS on
the 2012 Unlimited website.

The Fatal Trap In The Global Economy

By Graham Ferguson and Michael Bond (Revised 4 April 2002)

FALSE BELIEFS ABOUT WHERE MONEY COMES FROM

Over the last 30 years, the global economy has led almost every country on Earth into
escalating and irretrievable national debt. The global economy has unnecessarily inflicted
unthinkable amounts of damage upon the human race and our planet in the process.

In 1971 the ‘New World Order’ began, when changes were

made to the US national currency. In 1971 the US Federal
Reserve Bank severed the link between its national currency
and gold. Since 1971, US currency has been created by a new
method, namely through bank loans. This new kind of US
currency began destabilising other national currencies, forcing
them to ‘float’ their currencies, that is, change to the US
designed ‘globalised’ currency system

After the currencies were changed the illusion persisted that

hard work and productivity still created money. This illusion is
created because workers receive money in exchange for their
labour or productivity. Money comes into our existence
through our productivity, and thus it is easy to assume that is
how money is created everywhere. Nothing is further from the
truth. The reality is that hard work and productivity no longer
have any direct link at all to creating money. Because of the
way money is now created, money can no longer reflect the
productivity of any industry or country.

This new ‘global economy’ is still trading on society’s goodwill

towards the old type of currency systems that no longer
 23

operate. Most people still think a dollar is a dollar, but the shift
into the new economy that world governments have embraced
since 1971 has turned national currencies into national death
warrants.

HOW MONEY IS CREATED INTO CIRCULATION

Money now represents bank debt, not national wealth. When a

country ‘globalises’ its economy as Australia did in December
1983, all new money that comes into circulation now does so
as a debt to a bank. Money no longer comes into existence as
the result of labour, production of goods or by mining gold. Nor
does money come into circulation by banks lending out their
customer’s deposits. These are commonly believed but
dangerous misconceptions. In the new global economy, money
is now created only through bank loans. Now labour and
production merely redistribute the money that is created by
banks.

When banks grant a loan and a borrower’s account is credited

with an amount of money, that currency is created in the same
instant. It is suddenly brought into being from nothing. The
money did not exist before the moment the loan was granted.
When that borrowed money is spent, it is then ‘in circulation’.

HOW MONEY IS REMOVED FROM CIRCULATION

When a debt is repaid, the loan and the dollars, euros, yen, etc
that the loan created, all cease to exist. They are cancelled
out. Other loans create more currency by the same process to
replace it, and so on. The repaid money is not in the bank. It is
no longer anywhere and it is certainly not in circulation. All
debt repayments reduce the money in circulation by that
amount.

In ‘good times’, as people pay off their debts, they are in fact
drying up the amount of money flowing around in circulation.
This creates a shortage of money and thus everyone in society
must have less of it. Everybody tries to understand how they
can be working so hard yet have so little cash in their pocket,
and businesses lay off workers or go bankrupt.

The only way to replace currency in the present global

economy is to take out another loan. This is why governments
now “borrow their way out of debt”. As there is no other
source of money, a country’s overall ‘debt’ must always remain
 24

unpayable and must continually grow as the economy ‘grows’.

This is why national debts have escalated in the last three
decades.

THE FATAL TRAP - DEBT IMPLIES INTEREST THAT IS

UNPAYABLE

The global economy has a designer-flaw built into it. Interest is

the planned spanner in the works that sabotages the global
economy by ensuring there can never be enough money in
circulation for everyone to have sufficient. When each loan is
repaid and disappears, it leaves a residual deficit of interest
that accumulated from the loan.

This is the key point to understand. In order to pay that

interest more currency must be found than, by definition, can
ever possibly exist. Not enough money exists to pay off the
interest after the debt itself has been cancelled out. The only
way to get more money to pay the interest is to borrow more
through another loan.

By the end of the second loan, the first loan’s interest has
been paid off, but now there is not enough left to even pay off
the second loan, let alone pay its interest. A third loan must be
made, and as this cycle is repeated, the amount of residual
debt created by interest mounts up to impossible levels. It is
as simple as 100 – 110 = –10. For every ten steps the economy
now goes forward, it must take eleven steps backwards in the
form of national debt.

A single loan never creates enough currency to enable it to be

paid back with interest. No loan on Earth ever creates enough
currency to pay back its capital and interest. All loans on Earth
have created a global economy that can never have enough
currency in existence to pay out the loans. This is by design,
since 1971. The global economy is a pyramid sale, a planned
time bomb, designed to reduce the world and the human race
into a global catastrophe. The ‘global economy’ makes it
inevitable that every national debt must eventually become
large enough to cause national bankruptcy.

IN THE GLOBAL ECONOMY, ‘CREDIT’ NOW REALLY MEANS

‘DEBT’
 25

In the new global economy the word ‘credit’ has taken on a

new and deceptive meaning. Most of society thinks of ‘credit’
in the old way. Consider making a purchase from a shopkeeper
using two different methods of ‘credit’.

In the first way, the shopkeeper gives you $100 worth of goods
on credit. A year later you pay the shopkeeper $100, plus $10
interest and you are even. In the second way you get $100 of
‘credit’ from a bank (say by using a MasterCard), which you
use to buy $100 worth of goods from the shopkeeper. A year
later you pay back the bank $100, plus $10 interest and you
are even.

The two methods of payment seem identical at first but there

is a huge difference. When you get credit from a shopkeeper
and you pay off the debt, the $110 of cash is still circulating in
town. However, when you get credit from a bank and you pay
the bank back the debt, only $90 of cash is left circulating in
town. The $10 of interest had to come from the $100 that the
MasterCard generated. There is nowhere else it could come
from. The globalised economy is like a sleight of hand card
trick.

The shopkeeper method of credit is real credit, that is, an

extension of goods. The bank kind of ‘credit’ only represents
an extension of a debt. Most people still think modern bank
‘credit’ is like the shopkeeper credit.

When the world changed over to the ‘debt money’ economy, it

became impossible for wealth to accumulate as it could in the
old economy, because now the money keeps disappearing from
circulation as it is used. Wherever you see the word ‘credit’
concerning banks or finance, it can accurately be replaced by
the word ‘debt’.

INTEREST IMPLIES COMPETITION

In the current economic system, which is based upon the

principle of ‘not ever enough to go around’, the players are
forced to compete by grasping at the dollars that are left. The
cruellest, meanest, most selfish and most dishonest players
get the available money while the more decent members of
society are eliminated altogether.

The surviving players who provide products and services to the

marketplace are not the ‘best of the best’ sorted through
 26

competition in excellence. They are merely the players that

fight hardest and dirtiest to get the insufficient dollars
available. Consumer choices, prices and quality of goods are
dictated by how much is left for actually making the product
after the research and marketing wars are over.

The sociological effect of the Western run economy dictates

that there be competition between every facet of society. The
new way of creating money forces members of society into
conflict and competition with each other against our better
natures and judgement. This keeps society divided and unable
to unite effectively on any issue.

When society is structured around the rule that there can

never be enough to go around for everyone, its citizens live in
an ongoing terror of not having enough personally. As a result,
society seems to mostly consist of citizen against citizen. After
a while people in a society like this would have no choice but
to be convinced it was human nature to be viciously cruel and
competitive. Most of the human conflict and environmental
devastation in our modern world would disappear if the global
economy ran to a policy, which made financially possible that
which is physically possible.

INTEREST IMPLIES CONTINUAL ‘GROWTH’

In order for the global economy to stay viable it must

continually expand. It was a necessity to ‘develop’ third world
countries so that the markets of the first world countries could
survive via economic expansion. Third world ‘development’ is
simply the transferal of the unrepayable interest debt from the
first to the third world, to benefit the first world at the
expense of the third.

The third world ‘development loans’ were used to generate

enough currency globally, to allow the first world to pay off its
debts and interest. After the third world countries’
environments and lifestyles have been irreparably ravaged,
instead of prosperity they are left with unmanageable debts
that can never be repaid.

WHO OWNS OUR MONEY?

It often comes as a surprise to learn that national governments

do not own ‘national’ currencies. Even Federal Reserve Banks
are privately owned corporations (despite their misleading
 27

names). Due to the changes that were introduced into the new
global economy, multinational banks actually own and control
‘national’ currency now.

The person with whom legal custody of a commodity resides

can be termed its owner. Before 1971, money represented an
existing commodity, namely a chunk of gold stored in a bank.

All the money now brought into existence is borrowed by an

individual, an industry or a nation from a bank somewhere. It
was not given nor earned anywhere, it was loaned and it must
be given back one day. Thus, whoever holds this borrowed
money, only holds it in trust. Nobody really ‘owns’ money as
they used to, and still think they do.

The bank that created the money against a debt is the ultimate
owner of it, because a contract says the money must
eventually be given back to that bank, which only ‘loaned’ it in
the first place. You cannot lend what you do not own.
Ironically, the banks only ‘own’ money while you hold it,
because once the bank gets ‘their’ money back it vanishes.

PLANNED SCARCITY – GOING WITHOUT IN THE MIDST

OF PLENTY

At the end of each cycle of production, our present economy

guarantees that there will always be more goods produced
than can ever be sold. Governments regularly make up the
inevitable shortfall of income to multinational industries as
grants, bribes, subsidies, tax breaks and free infrastructure.

This extra funding for multinational industries artificially gives

them the appearance of being profitable because they can
afford to sell their goods for less than the goods really cost to
produce. Nationally owned businesses cannot compete with
multinationals on such a non-level playing field. If
multinational industries worked to the same rules as the
national businesses that are taxed to support them, the
multinationals would go bankrupt. Global fishing and forestry
industries illustrate this point well.

It usually comes as a surprise to realize that prosperity causes

recession. In ‘prosperous’ times when society reduces its debt
by paying off its loans, the amount of money in circulation
dries up as a result. Shops may be over stocked with goods
 28

and people may want to buy them but they do not have money
to do so. There may be many who want to employ people or
become employed but without enough currency in circulation -
nothing moves. The only way out of recession is to borrow
more debt-dollars to circulate, which increases national debt
further.

More than half the world goes without because of insufficient

currency in circulation. ‘Debt created’ national currency
restricts a population’s ability to produce enough for
themselves, even if there is a desperate national need for
products or services.

EXPORTING ONLY MAKES DEBT GROW LARGER

In many people’s minds the key to reducing national debt is to

increase exports over imports, thus making a net profit to pay
off debt. There are two flaws in this dangerous notion.

Firstly, if virtually every country on Earth is in debt, as they

are, then how can trade ever balance the global economy? One
nation’s profit is another nation’s loss. A group of bankrupts
cannot balance their books by trading amongst themselves.

Secondly, imbalance of trade did not create national debt so it

cannot solve national debt. National debt is created by the
planned and unnecessary shortage of currency in circulation.
Trade imbalances appear to be the cause of national debt, only
because the shortfall created by interest payments always
ensures that nations appear to have a negative trade balance
long-term. This is why so much global trade produces so much
global debt. The debt-dollar economy guts trade of the ability
to ever create overall profit.

Blaming national debt on balance of trade keeps society

focused upon the red herring of ‘salvation through export’,
and conveniently keeps society ignorant and looking elsewhere
from, the real cause of their social poverty and environmental
destruction. As export industries borrow more money to
expand, they are, in reality, further strangling the very people
they claim to be saving.

Over 50% of global export trade is reciprocal where exactly the

same goods are exchanged between countries. How can a can
of tomatoes be cheaper if we unnecessarily ship it across the
world before putting it on the supermarket shelf? In the
 29

modern global economy, creating new export markets is simply

a dishonest front for creating more loans. Exporting is not
about making people’s lives better, nor about balancing
national debt. How can exporting, a system that creates more
debt, ever be expected to get us out of debt?

THE GLOBAL ECONOMY DESTROYS THE ENVIRONMENT

The present global environmental destruction is directly

related to the debt-dollar financial system. For over half a
century scientists and research bodies worldwide have been
warning of impending environmental disaster, and we are now
beginning to suffer from the disasters we were warned about.
Human society and Earth’s biosphere are suffering from our
monetary system. We usually dare not take into account the
damage we inflict on society or the environment as we fight to
survive in a rigged economy.

During the decade of the 1990’s, debt-dollars demanded that

the global economy grew at about 4.3% per year. At a growth
rate of just 4% per year, in 100 years the global economy
would be 50 times larger than today, and Earth is already
falling apart from the demands of the present sized economy.

Watchdog and protest groups from local organizations right

through to the international bodies such as Greenpeace
continually petition socialist and conservative Governments to
impose restrictions on waste discharge from government and
corporate industry. They appeal for a curb on greenhouse gas
emissions into the atmosphere and the dumping of toxins into
waterways. On a daily basis naïve protesters fight the endless
symptoms rather than address the root cause of all the
problems: the new global economy.

Human greed is sold back to the protestors as being the

underlying cause of the problems, but the problems caused by
economic scarcity are really the underlying cause of the human
fear and greed. In reality, the global environment is being
raped by a world population that is crippled financially by
nothing other than the new global method of creating money.

The cost of curbing and cleaning up greenhouse gas emissions

and other industrial pollutants is financially impossible in the
present global economy. The ability to clean up the
environment, and the desire of society to do so are evident,
 30

but the scarcity of dollars means environmental care is an

economic impossibility.

SOCIAL CONTROL THROUGH ‘NATIONAL CURRENCY’

Creating money as a debt and thus as a rare commodity for which we

must compete, has spawned a society that sees money as humanity’s
most essential commodity. People’s first waking thought and daily
preoccupation are now largely focused upon money as the most
important consideration. The Western lifestyle has become obsessed
with money as though money is the single key to all opportunity and
happiness in life.

Banks can create financial expansion or contraction with a mere flick of

the interest rates. As such, the banks control our economic, social and
environmental fate. We may pay taxes to the Government, but it is the
global financiers that dictate our future. For example, if citizens
complain too much about the environment, the banks can ‘punish’ a
nation. Keeping money supply low for a while will usually shift public
concern from the environment to personal survival.

This subtle switch in creation and ownership of money is a new feature

of the global economy. Before 1971 society could indeed create and
own its own wealth. This new method of currency creation, which
started in 1971 is a bid by banks to stealthfully take ownership of
everything on Earth. It is currently only a matter of time before that is
the case.

NATIONAL GOVERNMENT COMPROMISED BY THE GLOBAL

ECONOMY

There can never be a workable political system while the

present way of creating money remains. Now Governments
must find ever more stringent ways to finance their
responsibilities. Governments are forced to shed control of
national property and services to multinationals, and sell the
idea to the public as ‘privatization’. At the same time they
must find new ways to raise their tax revenue from society.
Governments bleat the “shortage of funds” excuse regularly
when it comes to social issues or the environment. This implies
to society that the problem is something to be solved by
higher taxation, when the real problem is the monetary
system.
 31

There is no value in making changes to a form of Government

that finds itself crippled by the present money system.
Changes to capitalism and politics can be made ad nauseam
but there will never be any positive effect socially or
environmentally until the destructive nature of our money
system is changed. It is time to ask, “Who do our politicians
really work for?” We can see whom they obey and favour.
People need to begin demanding answers to questions like,

“Why do needed resources stand idle just because there is

insufficient money to make use of them?”

“Why does so much human endeavour and output produce so

much scarcity?”

“Why is the problem of national debt never seriously pursued

or researched by national governments?”

WHAT THE ‘DEBT-DOLLAR’ ECONOMY IS REALLY DOING

Before the 1971 change over to a debt based currency system

there was real wealth in existence held by private citizens.
Since 1971 the ‘debt-dollar’ principle of creating currency has
been mining this old-world wealth held by citizens and
transferring it to banks. The deficit of currency in the new
global economy is partly made up by feeding society’s pre-
1971 wealth into the black hole of the faulty economy.

Debt-dollars are steadily sending nationally owned businesses

bankrupt. People and governments will continually be forced
to ‘sell the farm’ until there are no farms left to sell. The
present economy demands this. The present multinational
agenda is to gain ownership of the entire Earth via the fatal
trap in the new global economy. This is now taking place.

The US led global economy is the real face of global terrorism.

Events like September 11, 2001 are merely desperate
responses to that terrorism by nations that are themselves
being terrorised by the faulty global economy. Note that the
‘Twin Towers’ of the World Trade Centre were a primary target
on September 11. If society better understood the new ‘debt-
based’ money system our Federal politicians keep us trapped
within, the entire country would throw them all out of office
and try them for treason.

THE WAY FORWARD

 32

If countries closed their borders to foreign finance and

unnecessary foreign trade, and developed workable currencies
and essential industries within their borders, they would soon
have more goods available at a fraction of the price and at a
fraction of the cost to the environment. It is a country’s
participation in the intentionally flawed global economy, which
guarantees that the more a country produces, the more that
country will be milked dry of the wealth of its production.

At present there is no shortage of any resource other than

money, yet money is the only commodity over which we should
have full and absolute control. Not only is this artificially
induced dilemma redundant and repugnant in this age of
plenty, it runs counter to most of humanity’s yearning for a
sustainable social and environmental world infrastructure.

It is easy to create a currency that works in the real world, and

which does not vanish out of existence with use. Alternative
currencies like the LETS money systems are a good illustration
of this. (See www.lets-linkup.com) Under such currency
systems, money could stay permanently in circulation as
wealth to grow in the local community and the nation. The
present debt-based money system of the global economy is
the wellspring from which most social and environmental
calamities pour forth. Using an alternative currency is one of
the most powerful ways you can improve your life, your
community and your environment. Positive changes can never
occur until the fault in globalised ‘national’ currencies is
remedied.

From this point on, human civilization as we know it cannot

continue unless it switches from the artificially aggressive
economy of debt-dollars, and begins using currencies that
work in the real world. There is no limit to the ways this can be
done. There are many good ways to live and work that do not
even have to involve money. Now is the time for communities
to unite in resisting and rejecting the destructive national
currencies we have been tricked into using. Now is a time for
courage, resistance and action. Now is not a time, however, for
gratuitous faultfinding, judgement or violence. These are the
ways of the debt-dollar mentality with its scarcity-induced
terrorism of the human race.

The way forward from here is by turning away from

competitive lifestyles, and by honestly participating in our own
lives, our communities and local environments. Now is a time
 33

for experimenting with different kinds of good lifestyles that

are less dependant or independent from the global economy.

Communities should begin demanding that their governments

address the fault in national currencies, and provide their
nations with a realistic currency that works. If governments
will not do that, then communities should create and trade in
realistic local currencies, which are independent of the flawed
national currencies. Governments have no right to tax local
currency commerce, until they have remedied the socially and
environmentally damaging flaw of currency shortage, which is
now inherent in national currencies.

A file copy of this document is available FREE from www.eveoftheapoc.com.au

This article may be copied and circulated by email or any other means.

Graham Ferguson is an editor of Nimbin News and an agitator for economic and social reform. He is also an
artist and animal trainer living in the Nimbin area, Australia. Graham can be contacted at
nimnewmag25@hotmail.com

Michael Bond is based in the Byron Bay area, Australia and is an activist for social and environmental
reform. His recently published book Eve of the Apocalypse expands greatly on a variety of topics like the
above.

FREE DOWNLOADS are available from the website www.eveoftheapoc.com.au including an overview of the
book Eve of the Apocalypse.

Michael can be contacted by email at michael@eveoftheapoc.com.au , or in Australia ph 0417 677405.

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