American Civics Research Library

Bank Loans, Credit Cards and Counterfeit Money:

The Fraud of Contracts

©2006  David Deschesne, All rights reserved.  This text may be reproduced in its entirety and distributed electronically, or in print for educational purposes only.

By:  David Deschesne, Editor, Fort Fairfield Journal

FORT FAIRFIELD JOURNAL, July 19, 2006, p. 2

  A common misconception, which has been sold to the American People, is that banks loan either their own money, or their depositors’ money.  Nothing, however, could be further from the truth.  Banks, as well as Credit Card companies (they are banks, too) don’t loan any pre-existing money at all.  They loan fresh new money, as needed.

   Like a counterfeiter, banks manufacture money as needed.  The difference is, that they don’t crank up a printing press and print out the new money; they have a much more efficient way of doing it.  They simply enter digits into a computer and let electronics do the work. 

    All borrowers today fund their own loans with their own property - their signature.  Since the bank doesn’t disclose this term in the contract, the contract is fraudulently conceived. 

    Suppose you had some Russian Rubles. You can not take those Rubles to a grocery store and purchase your food because they is not a recognizable form of money. You must first go to a bank and exchange them for American dollars. When you go to the bank, you set the Rubles on the counter and the clerk sets dollars on the counter. Both of you swap currencies at the value the two were determined to be to each other. There is an even exchange and the bank does not require you to pay back those dollars, because they received rubles in exchange for them. You can then take those dollars to the grocery store and, because they are a recognizable form of money here in the United States, purchase your food.

    The same thing happens when you "borrow" money. You sign a promissory note that becomes a negotiable instrument at the time it is signed.¹   “All instruments are like money in that they represent a right to payment and are transferred in the ordinary course of business from one party to another.”² The bank then accepts that promissory note, a.k.a. negotiable instrument, for a certain value as an asset on their books. They then create brand new "money" in the form of a bank check/bank credits, the amount of which is governed by the Reserve Requirements established by the Federal Reserve Bank This bank check has no actual “money” in its account because the bank never loans its own money or its depositors'.

   It is because of this slight of hand, that the banks perpetrate on unwitting "borrowers," that most never realize that, since the banks never loaned any of their own money, they are never “damaged” as a result of non-payment.

   “...suppose that a bank buys part of a new issue of municipal bonds.  The bank's cashier draws a check to pay for the bonds - a check addressed to himself , and calling on himself to pay money to the order of the city which sold the bonds.  This check goes to increase the city's bank balance, just as much as if the bonds had been bought by a private citizen.  But the check does not come out of any private balance with the bank...The check with which the bank pays for the bonds immediately becomes a deposit liability of the bank...This leaves the bank's books in perfect balance because at the same moment the bonds became an asset.  An extra deposit has been ‘created.’  The same thing happens when the bank makes a loan, or buys stationary.”³

   The Federal government does NOT control our money.  “The power to issue or destroy money is a fateful one.  Private, profit-seeking institutions, the commercial banks, possess this power.”⁴

   The Federal Reserve is not owned or a part of the Federal government.  “Legally, the Federal Reserve banks are owned by the member banks.”⁵

   Indeed, in the 1960’s, banks could create $5.00 for every $1.00 they had in reserves.⁶

    Today, the reserve requirement is about 10 percent.  That means that for every ten dollars in existence, nearly nine more can be created out of nothing.  The bank is able to issue a check/“loan” for nine dollars out of every ten on hand.  Once that nine dollars gets deposited, it will have $19 where it only had $10 to start with.  Poof!  Money is created from nothing. 

   “It is through this process of lending the free reserves, that money is created.”⁷

  Senator Thomas H. Benton was vehemently opposed to this form of paper money system as early as the 1830s, when he wrote:  “It was a reproach to the federal government to be unable to correct this state of things - to see the currency of the constitution driven out of circulation, and out of the country; and substituted by depreciated paper; and the very evil produced which it was a main object of the constitution to prevent. The framers of that instrument were hard-money men. They had seen the evils of paper money, and intended to guard their posterity against what they themselves had suffered. They had done so, as they believed, in the prohibition upon the States to issue bills of credit; and in the prohibition upon the States to make any thing but gold and silver coin a tender in discharge of debts.”⁸

Notes:

1.  UCC §3-104

2.  Fundamentals of American Law, ©1996 NYU School of Law, p. 379.

3. Money, Debt and Economic Activity, ©1948 Albert Gailord Hart (professor of Economics, Columbia University), p. 65

4.  Economics:  Theory and Practice, 3rd Ed. ©1965 Melville J. Ulmer, p. 253

5.  ibid, p. 241

6.  ibid, p.247

7.  Economics: The Science of Common Sense, ©1992 South-Western Publishing Co., p. 131.

8.  Thirty Years in the U.S. Senate, 1856 Sen. Thomas H. Benton, Vol. II, p. 43.

 *** Radio Program ***

This teaching was originally produced and aired as a 30 minute radio program on WEGP Radio, 1390AM, Presque Isle.  For a free CD copy of this broadcast, send a self-addressed stamped envelope with your request to:  David Deschesne, P.O. Box 1310, Presque Isle, Maine 04769

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