By: David Deschesne,

Editor/Publisher, Fort Fairfield Journal, Jan 16, 2008, p. 3

All U.S. currency in circulation today has been borrowed into circulation, is accruing interest daily and is all due back to the banks at some point in the future. When purchasing a product or service with “cash” you are really using bits and pieces of other people’s bank loans to pay your bill. It is their borrowed money you are using and the product purchased then defaults to collateral on the collective debts of society.

That’s a pretty hard concept for some people to understand, so I’ll use a brief allegory to illustrate:

ABC Auto is a brand new car dealership, they just opened their doors and spent all of their existing money to go into business. They have no money in their checking account as they start on opening day.

Sarah is a secretary at ABC Auto. She is hoping they sell a car by the end of the week so they’ll have money to pay her.

Along comes Jack who purchases a shiny new sports car from ABC Auto. He got a deal for $20,000. Now, Jack didn’t have the cash to pay for the car so he went to a bank and borrowed the money. Under modern banking practices, the bank accepted Jack’s promissory note for value as if it were “money” and exchanged it for a loan of book entries denominated in Federal Reserve Notes (a note is evidence of debt). He promptly took those newly-created Federal Reserve Notes to ABC Auto, bought the car and drove off.

ABC Auto now has $20,000 in its checking account and at the end of the week begins to pay its payroll and bills.

Sarah receives her $300 paycheck which is derived entirely from Jack’s borrowed money. She then goes shopping for groceries and spends $100 of it on food, then pays $100.00 on her house mortgage and saves the rest for gasoline and other necessities.

The grocery store then uses some of Sarah’s money, which was derived from Jack’s bank loan, to pay its employees, bills, taxes, etc. In effect, Jack’s borrowed money is now being filtered down through society to pay literally hundreds of people and businesses as it circulates. The problem is, it’s all accruing interest and it’s all owed back to the bank he borrowed it from.

Looking at Sarah’s mortgage payment, it was Jack’s borrowed money that Sarah applied to it, so that much of the debt has been shifted onto Jack. If logically continued to its end, Sarah’s mortgage will be ultimately paid by bits and pieces of literally hundreds, if not thousands of other people’s bank loans over the life of the loan. It’s like paying one credit card with many other credit cards from other people. While your card may be paid off, the debt has been transferred to all the other card holders. The cumulative debt never goes away, it’s merely transferred to others.

Working the equation the other way, Jack needs to earn some money to pay back his bank loan (actually banks call it “discharge” - there’s no way to actually pay a loan back in a debt money system).

Jack works as a professor at the local college. His salary is derived from tuitions that have as their foundation a multitude of student loans. Jack’s paycheck is then funded by money borrowed from the banks by his students. When he makes payments on his car, it’s the money derived from those student loans that discharges it, so the debt for his car is transferred onto the collective backs of his students. The students then work and earn other people’s borrowed money to discharge their student loans.

Since all old loans are discharged by new loans and banks are the only ones authorized to create said money, the debts of society are never actually paid. We are merely transferring them from one to another. All the cash in all the cash drawers in the United States, all the money on deposit in checking and savings accounts, all the money invested in 401K accounts, the stock market, Social Security, etc. is literally bits and pieces of millions of people’s bank loans and is all owed back to the banks. While it remains in circulation, it is accruing interest - interest that can only be paid/discharged with new loans of freshly created borrowed money.

Like paying one credit card with another, the collective debt of society never goes away, it just gets rolled over to the next generation.

Under this method of money creation, every school building, house, road, car, computer, indeed, our advanced and elevated lifestyle was built up and progressed entirely on borrowed money - those loans are now coming due and there aren’t enough people currently in the workplace to pay them.