Private Banks Create Money, But Constitutionally?
|June 11, 2014||Posted by Staff under Editorials|
This 2014 excerpt of The Web of Debt Blog, May 19, is by Ellen Brown.
In the nineteenth century, Mississippi, Arkansas, Florida, Kentucky, and Indiana all had their own state-owned banks. Some were extremely successful (Indiana had a monopoly state-owned bank). These banks, too, withstood constitutional challenge at the US Supreme Court level.
Several decades earlier, the states had been colonies that issued their own currencies in the form of paper scrip, typically called “bills of credit”.
After the Civil War, the expanding economy needed a source of expandable currency and credit, and when local governments could not provide it, private banks filled the void. They issued their own “bank notes” equal to many times their gold holdings, effectively running their own private printing presses.
Was that constitutional? No. The Constitution nowhere gives private banks the power to create the national money supply – and today, private banks are where virtually all of our circulating money supply comes from. Congress ostensibly delegated its authority to issue money to the Federal Reserve in 1913; but it did not delegate that authority to private banks, which have only recently admitted that they do not lend their depositors’ money but actually create new money on their books when they make loans.
When enough people understand that private banks rather than governments create our money supply, imposing interest and fees that constitute an enormous unnecessary drain on the economy and the people, we might wake up to a new day in banking, finance, and the return of local economic sovereignty.
Ed. Notes: Not that those in power obey the US Constitution always, but the old document does oblige the federal government to define and enforce weights and measures in the same article that it empowers Congress to coin money. So by that language, the government could set standards by which any currency could attain the status of legal tender. After a while, the competing currencies may get down to one or two — as along national borders — but the possibility of a new competing currency arising would keep the old established currency honest.
That means, issuers of currency — whether government, bank, or a consensual currency club — would have to constantly settle their debts and not issue too much new money. That means, inflation would not occur, and the true cost of living would show up as constantly falling prices.
Once again, it appears that allowing people to both cooperate and compete — rather than merely obey a central bank or government — solves an issue of centralization that some reformers try to address with the coercive power of the state. Let a free and fair market rule!