Professor Keen, The 11th Marble, Debt Based Money And Fractional Reserve Banking

I like Steve Keen and am working to merge his economic theories with those of us who want to issue a debt free currency. That would save taxpayers 500 billion  dollars a year in interest payments on government debt as we would have none. In fact I would favor an Amendment making government debt at the federal, state and local levels illegal. I am writing this in response to a video in which Dr Keen claims to disprove the idea of the 11th marble. In it he says traditionalists argue that if you borrow ten dollars and are required to pay a dollar in interest at the end of the year, the bankers did not create sufficient money to pay both the principal and the interest. They created ten marbles but not the eleventh.

In his video Keen uses an example of a bank which loans out cash that it printed itself as banks did in the 19th century. The bank has cash in its vaults which it loans  to its customers. This is not the 19th century so let’s add some realism in stages.

In the modern world banks do not lend cash. A businesswoman takes a $10,000 loan and agrees to repay $11,000 in a year. The bank creates $10,000 in checking account money.  This adds $10,000  to the money supply. One year later if she does not renew the loan, she pays the bank $11,000. Please note that the bank pockets $1,000 in interest to their profits. But the $10,000 principal vanishes and reduces the total money supply by that amount.

Suppose a local bank wants to expand its business and starts loaning out money to a neighborhood some distance away with no box stores and lots of small businesses. They get one businessman to take a $10,000 loan. Suppose they get other businessman and women in that neighborhood to take out loans over a period of ten months. At one loan a month a total of  $110,000 will be out on loan plus $11,000 in interest due. The first man to take a loan shows up to pay it off. He tells the branch manager that he had some local TV reporters in his neighborhood interviewing the workers whose call center had been suddenly closed that morning. It seems that the federal government had trained workers in Asia to speak English well enough so that another American company had just sent 150 jobs overseas. Half of the people who lost their jobs lived in the neighborhood. The man who paid the loan said he was glad he did because it looked bad for the local businesses. The branch manager called the businesswoman he had made a loan to the day before. She gladly returned the loan as there was no point in remodeling her restaurant.

The federal government will pick up the slack by running an even bigger deficit to make up for all the manufacturing and service jobs they sent overseas. The 1.6 trillion dollar deficit will have to grow even more. Interest on the federal debt will have to go beyond 500 billion dollars a year. The local and state governments will have to raise taxes and lay off workers.

Over the next year that local bank will have to collect as much as it can from that $90,000 in loans and $9,000 in interest. When that $99,000 is paid back, the total money supply is cut by $90,000 and the bank adds $9,000 to its profits for having created money out of nothing. Thus we can see that fractional reserve banking is designed to transfer money from the 99.9% to the 0.1%. And the 99.9% would be far better off if the Treasury just issued a non-interest bearing currency.

That Keynesian nonsense about the government picking up the slack in the economy by borrowing money only increases the burden on taxpayers to pay interest on money the  0.1% created out of nothing. Keynesianism far from rescuing the working and middle classes from high unemployment would seem to have been designed to take wealth from those who do the work and give it to the idle rich.

In fact is is fractional reserve banking that created Depressions, recessions and inflations according to Hyman Minsky who us idolized by Professor Keen. Minsky and the Austrian School agree that a fractional reserve banking system creates a bias in favor of bad investments because loans create money which adds to demand for things like housing. People might want housing but not at the inflated price level that those easy loans artificially created. These Bubbles  always collapse creating recessions in which government runs huge deficits and privately held debts are cancelled through business closures, job losses, home foreclosures and stock margin calls.

I think is is far better that we make government debts illegal so there is no transfer from the 99.9% to the 0.1%  for  money they created out of nothing. That we never have Bubbles induced by unwarranted borrowing at subsidized low interest rates that punish savers. Because there would be no government debts we would have no unpayable Debt Bombs. If you count federal, state and local debt plus all the housing guaranteed loans, Americans owe way more than 20 trillion dollars in government debts which can never be repaid and should never have even existed.

Please consider these undeniable facts:  The Traitors in our government who created and profited from those Bubbles  in the stock and housing markets with money they created from nothing are the ones who sent 12 million jobs overseas. Those same Traitors got America into wars costing tens of trillions of dollars and taking far too many lives of Americans and those we were duped into calling enemies.

Let’s eliminate fractional reserve banking and  government deficits, issue sovereign currencies that require no interest to be paid, and make government debt illegal before we talk again of the 11th marble.

Notes: Translating Zero Hedge: Your Wages Will Be Cut In Half

Will A Mutiny In The Gulf Lead To An American Military Coup?

Video: Jews And The African Slave Trade. It Did Not End In 1832

Holy Holohoax. My Government Wouldn’t Lie To Me.

About horse237

I have decided to share two of the visions I had as a child. When I was eight, I had a vision of a future war that killed 99.5% of the world's population. When I was 16 and living in the projects, I had a vision of my future. I was to live in complete obscurity until it came time to stop WW III. When I was about ten, I had read a bio of Nikita Khrushchev which said he survived Stalin by playing the bumbling fool an old Russian peasant trick. I decided to do the same as I had already learned that we did not live in a democracy. The other vision I had when I was in third grade was of the Mind of God and how it interacted in the creation of the world we see. I believe you and I were born at this time precisely so we would have an opportunity to stop this war. As for my personal info, I grew up on military bases and in housing projects. My legs atrophied from starvation as a child. My second step-father died in prison. I used to have to rub my skin to simulate human contact. They did not feed me when I was a child. I do not fight in their wars as an adult.
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11 Responses to Professor Keen, The 11th Marble, Debt Based Money And Fractional Reserve Banking

  1. Government for Americans is not really defined in the historical documents as “Jewish” {Jesus Hating} BANKERS {Class A Sockholders-Fed} …defrauding the Braindeadgoy.

    When you are able to find a {1924) or before..copy of Mackeys’ Encyclopedia of Freemasonry…see

    Adoram {Hadoram} – Adoramite Freemasonry.

    Knowing the source of Bad Faith helps in understanding why Jesus said to Know the Truth…

    No One on Earth has to be a “Jewish”, and ipso facto a Mason, “Proselyte” to Talmudic Judaism

    Stupid will never Change True, and you can share that gem With Deanna Spingola…Where did Hansel & Gretel live….?

    Violating the First Commandment ensures debt bondage to the MONEY CHANGERS & Pharisees the cult leaders of the Stool Sculputre deity cult….Talmudic Judaism.

  2. Been there.. done that says:

    AC…I think I got that…..I think.
    Kinda like synagogue=sin against God?
    Or “white man speak with forked tongue”..referring to how the joos screwed the
    American Indians over, just like they do with everybody else?

  3. Snakey says:

    I have to admit that prior to watching the video Money as Debt I had no idea how the banking system worked. I, like millions of others, was under the impression that banks lent from their reserves (deposits and profits). After discovering that money is created out of thin air via fractional reserve banking (promissory notes, negotiable instruments etc) I realise that prior to that I was totally ignorant about money. I just took it for granted that money somehow “existed” in some form of honest manner. I was clearly wrong on that score.

    Thank you for taking the time on your blog to keep reiterating to people that debt based money is what keeps us all enslaved. It really is worth keeping on at people about this fact. Until we get rid of debt based usurious banking systems we will always be kept under control by the 0.1% psychopathic minority. If I had known in my 20s what I know now in my 40s I would not have applied for a mortgage back then (dead pledge). I don’t have that house now so it makes no difference to my current circumstances but knowing that the bank actually created the money out of thin air (as a book keeping entry) so that they could charge me interest on it really makes me angry but at least I know now never to get a loan or a mortgage from those shysters ever again. I am sure millions of others are also now aware of the evil of the usury scam. By keeping people in ignorance about the scam, of course, is the only way to keep the scam going. Caveat Emptor.

    “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.” Frederic Bastiat – 1801 – 1850 Political Economist.

  4. GrayStroke says:

    I would like to share this for those that are aware of the synagogue of satan and who they are:

    Thank you keep up the good work….

  5. Pingback: “The End Game: 2012 And 2013 Will Usher In The End” – The Scariest Presentation Ever? « CITIZEN.BLOGGER.1984+ GUNNY.G BLOG.EMAIL

  6. ac says:

    Your example misses one key point: When the bank “loans” (creates in an account) the 10K for Sally, it has to borrow at a cost the 1K “reserve” to be held against the principle. When Sally repays in one year the 11K, 10 of that vanishes (as you said) but of the 1K in profit, a portion (say 10% or $100 has to be repaid by the bank to whomever it borrowed from along with the 1K that it borrowed to hold on reserve). So, effectively, the bank makes $900 on the loan.
    The 1K that the bank needed to borrow at wholesale, may itself have been leveraged into existence. It’s a house of cards.

    Now, say the bank thought Sally was good for the money and sold her loan as an asset to a broker who then used it as leverage to borrow 90K? And say someone then insured that broker against a 90K loss? And say that same someone then sold that insurance (“bet”) on the broker to someone else who would collect in the event that the broker goes bust?

    Mamma mia. What a shitfest.

    • horse237 says:

      There is a limit to how deep you can go into an explanation as most people cannot understand what I say. I think you are over estimating how much interest the banks are currently paying.

  7. Pingback: Kommentierte Bilderberg-2012 Teilnehmerliste « exildeutsch

  8. Pingback: Eddie Reborn Into A World With Debt Cancellation | Video Rebel's Blog

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