Sent: Tuesday, November 19, 2002 11:14 PM
Subject: Re: [CEN-TAPEDE] What part of a bed and breakfast can be
deducted?
Can you comment on this? Found while browsing
the net.
thanks Bo.
Subject: Australian Monetary System
Money Creation in Australia
Date: Tuesday, November 19, 2002 8:45 PM
Australian Monetary System : Money Creation
in Australia
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 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 someone's promise
to pay. Credit money exists only as numbers in bank computers.
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 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:
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 recognised 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.
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 has reached such a size that it can not
pay off the loans as they fall 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 !
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.
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 script in the
1700's and their wealth soon rivaled that of England, provoking restrictions
from 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 colonists were 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 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:
"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 will keep going that way unless someone has the courage to reform
Australia's monetary system so that money is created without it becoming an
interest-bearing debt to banks.
Share your
thoughts on this matter now, at Nugget Forum.
See also:
Various Views on Money Creation
See also:
Manufacturing Money
See also:
Understanding How Money is Created
See also:
Australia Needs An Industry Policy
--------------------------------------------------------------------------
Published 2001 by David Kidd (
man@dkd.net),
Maryborough, Queensland 4650, Australia
----- Original Message -----
Sent: Wednesday, November 20, 2002 9:48 AM
Subject: [CEN-TAPEDE] What part of a bed and breakfast can be
deducted?
David,
Nice to be receiving your questions and answers again.
Hope you are well.
All is fine at the CXXXXXX estate.
A brief question to which you may give me the long or the short answer
...
How are " BED and BREAKFAST"s
taxed ? If all of the building is accessible by guests except the
owners' private quarters, can it all be deducted?
