From the March 2007 Idaho Observer:

The Creditory System

by Hari Heath

We believe that we live in a capitalist system. But for a system to be capitalist there must be capital. The "capital" in our current world is not actual accumulated "wealth" reinvested in enterprises. It is a fiction of numbers, made "real" by restructuring our belief systems about money.

We live in the age of the virtual dollar—a dollar born from the debt-lending process. Every "dollar" currently in circulation exists because the Federal Reserve System issued that "dollar" into existence by a "lending" process.

Chairman of the Federal Reserve Board, Marriner Eccles testified before the House Banking and Currency Committee September 30, 1941. He was asked by Congressman Patman, "Mr. Eccles, how did you get the money to buy those two billions of government securities?" Eccles replied, "We created it."

Patman asked, "out of what?" Eccles answered, "out of the right to issue credit-money." Patman then asked, "And there is nothing behind it, is there, except our government’s credit?" Eccles responded, "That is what our money system is. If there were no debts in our money system, there wouldn’t be any money."


Can we truly say "capital" is invested when all of the economic units we use as a measure of wealth were created from nothing through a lending process?

G. Edward Griffin explained it this way in his book, The Creature from Jekyll Island: "It is difficult for Americans to come to grips with the fact that their total money supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, there would be no money left in existence."

Robert Hemphill, a credit manager of the Federal Reserve Bank in Atlanta, described the situation in the foreword to Irving Fisher’s book, 100% Money: "If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible—but there it is."

The seeming purpose of our virtual dollar is to create a circulating medium of exchange appearing as a value to balance our productivity and bestow prosperity on the favored. But an unspoken component of this structure is to place everyone in a perpetual state of feudal obligation and indebtedness, subjecting all productivity and property to virtual value and give the spoils of the carnage to the lenders. It is a creditory system.

The ravages of credit

How far has the creditory system sunk its fangs into the neck of the American people? Here are some staggering facts:

  • Consumer Debt exceeds the National Debt.
  • There are more than one billion credit cards in circulation today in the United States, including 600 million retail cards, 320 million bank cards, 140 million oil cards, and 30 million travel and entertainment cards.
  • The typical family spends more than 90 percent of its disposable income servicing debt.
  • Three out of five U.S. households have an average credit card balance of more than $11,000. Paying only minimum payments at 24 percent interest, it would take 22 years to pay it off—and you would pay over $47,000 in interest.
  • Average credit card debt among all American households is $8,400.
  • 1.6 million U.S. households—one of every 73 — filed for bankruptcy in 2003.
  • Roughly 24 percent of personal expenditures in this country are made with credit and debit cards.
  • Average per household debt in the U.S., not counting mortgage debt, is about $14,500 — especially noteworthy because, before the 1930s, most middle and working class people had no major debts. Banks would not lend to them; they rented their homes and if they did own a house, it was paid for as it was being built.
  • A typical credit card purchase ends up costing 112 percent more than if cash were used.
  • A $1,000 charge on an average credit card will take almost 22 years to pay, and will cost more than $2,300 in interest ($3,300 total) — if only 2 percent minimum payments are made.
  • 40 percent of American families annually spend more than they earn.
  • About 60 percent of active credit card accounts are not paid off monthly.
  • Average card debt among people who have at least one card is $9,205 — triple what it was in 1990. A typical American family today pays about $1,200 annually in credit card interest.
  • The average interest rate on credit cards is 18.9 percent.
  • In 2002, the credit card industry took in $43 billion in card fees. The personal savings rate in the United States has dropped from 8 percent in the 1980s to less than 2 percent since 2000.

There are two sides to the equation. These "facts" reflect not only the carnage of the creditory system, but the average person’s willingness to jump into the meat grinder.

A promise to pay

With a "promise to pay" the great abundance of the new American Dream is available to anyone who will keep up with their "promise to pay." Such a financially elevated lifestyle saves us from the toils of natural living. We are no longer limited to the benefits of our personal productivity. Personally and nationally, our "balance of payments" determines the luxury of our lifestyle. But can we really afford the lifestyle? Are we better off to live according to what we can get now and pay for later or would we be better served by having only what we can pay for today? The creditory system does not encourage the latter.

Unlike wild mice who fend for themselves, seeking whatever food and nesting materials the resources of nature have to offer, domesticated mice are given enough cheese and a cage to live in. Their domesticated condition often results in a bloated existence, interrupted only by the occasional jaunt on the treadmill. Whether we like to admit it or not, most of us fit the domesticated description better than the wild one

While our personal world has been afflicted by the creditory system, it does not stop there. The Breton Woods agreement laid the foundations for the International Monetary Fund, the World Bank and other "lenders." The creditory system then expanded its operation globally. It traded its "resources"—financial credits created from "the right to issue credit-money"—for the "right" to collateralize the resources of the "developing world." From the vacuous void of creditory commerce, the resources and productivity of our planet have been largely reduced to their possession.

John Perkins, in his book Confessions of an Economic Hit Man, describes how this occurs:

"Economic hit men are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization."

The oxymoron of our times

It is understandable that Americans could be confused about what political and economic system we live under. We are misinformed and lied to so often that we just don’t know. We have been taught to fear and despise China as a communist threat. Simultaneously, our political leaders and the media perpetually preach the benefits of capitalism.

In reality, our personal and real property has been converted to a system of public rents; mandatory public education is institutionalized and geared towards the instruments of production; a graduated income tax and central bank are nearing their first century of operation and the other planks of the Communist Manifesto are fully implemented in the good ol’ USA. Isn’t communism grand?

Meanwhile the most clear and present threat from China is their capitalism. Made in China is the most published modern phrase. By investing the proceeds of their national productivity they have become the kings of capitalism and are now the primary source of goods worldwide. It is not their pretended politics of communism that we should be concerned about. We already have that here. We have been outsourced, out produced and our intellectual property is infringed, duplicated and returned to our shores by the containership load.

Capital is capital

So how can we pretend to be capitalist with an economy based on a zero-value accounting unit?

The answer may be a matter of definition and may also be the answer for how to terminate the ravages of the "capitalist" creditory system. The other definition of capital is a crime, which is punishable by death. Our system is "capitalist" only because the crimes it commits are punishable by death.

If "we" actually were in control of "our" government, and "we" directed our public servants to fully prosecute the Federal Reserve operators and their co-conspirators (including many public servants), their "capital" crimes may see them and their system decapitated. Considering that the perpetrators of the creditory "capitalist" system have been the primary instigators of nearly every war since the First World War, and that murder-for-profit is a capital crime, such a scenario is not unrealistic.

Reversing the process

It is obvious that our entire political system, from the president down to our local sewer board, is creditory in nature. They are not going to fix the problem that feeds them. It is therefore unlikely that anything short of violent revolution or collapse of the system itself will ever bring it down.

A peaceful alternative is possible if enough people will endeavor to understand money, its forms and origins—and then do something about it. To reverse the process we must understand how we came under the power of the creditors.

G. Edward Griffin has defined the four kinds of money and his model serves well to illustrate how we got here and how we can reverse the process. The lawful, actual dollar, authorized by the Constitution and defined by Congress, is a specific form and amount of silver minted as a coin—a commodity. Griffin calls this and other forms of specie, commodity money—the first form of money. The second form is receipt money, such as notes "payable to bearer on demand." Receipt money remains as such, until more notes are printed and issued than there is commodity money to redeem them with. This creates a condition that is referred to as fractional money—only a fraction of the notes can be paid, even though they say "payable to bearer on demand." The fractional money scheme fraudulently creates wealth for the issuers, but can only continue until the note holders discover the trick, as happened in American history during March of 1933, when the people made a run on the banks.

When demands for payment exceed the amount of commodity money that can fulfill the demand, the currency system must either collapse or be converted to a fiat money system—money of no intrinsic or redeemable value that exists as "money" by an official declaration.

Fiat money, the fourth form of money, is the basis of the creditory system—it allows a virtually unlimited "right to issue credit-money."

Never allowing a nation to go beyond commodity and receipt money insures a stable and prosperous economy. Within 20 years of the creation of the Federal Reserve, its fractional money scheme collapsed and was replaced, by a complicit FDR and the Congress, with the present fiat money scheme. History has shown that fractional money inevitably leads to fiat money and from there to wretchedness and ruin under the grip of the creditory masters.

Creditor now has a new meaning. They have forward focused, narrow set eyes, fangs or hooked beaks and a tendency to choke or bleed their victims to death. They feast on the spoils of their prey. Their crimes are of a "capital" nature. Welcome to the creditory system. As a nation and as individuals, we have a choice: Get used to it or get out.

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Hari Heath

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