Inflation a feature of a great iniquity

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Inflation a feature of a great iniquity

Civilization = man + dust + time    (Malik bin Nabi)

No money!

 “Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back.” Sir Josiah Stamp, former President, Bank of England”

O you who believe! Observe your duty to Allah, and give up what remained (due to you) from usury, if you are (in truth) believers * and if you do not, then be warned of war (against you) from Allah and His messenger * and if you repent, then you have your principal (without interest), wrong not, and you shall not be wronged.        Quran (2:278-279)

People may believe in anything they choose, worship any false earthly deity, and commit many heinous crimes. While they may suffer some consequences of their actions in this life, they may not be brought to full accountability until Judgment Day. With the exception of committing usury, which God has warned them of no less than outright war from him in this life! This is probably because usury is the surest tool for enslaving human beings and assuming complete control over their lives.

Let’s explore some of the causes of this extraordinary and devastating war.

Let us start from the beginning:

The British formal and informal empire

Britain modelled its post-Waterloo (battle with the French) empire on an extremely sophisticated marriage between the following:

* Top bankers and financiers of the City of London,

* Government cabinet ministers,

* Heads of key industrial companies deemed strategic to the national interest, and

* The heads of the espionage services.

Rather than the traditional service to provide data from agents of espionage in foreign capitals, Britain’s Secret Intelligence Service head was himself part of a secret, freemasonic-like network which wove together the immense powers of British banking, shipping, large industry, and government. Because it was secret, it wielded immense power over credulous or unsuspecting foreign economies. In the Free Trade era after 1846, this covert marriage of private commercial power with government was the secret of British hegemony. British foreign policy was based on the cultivation, not of good neighbourly relations with allies, but rather of calculated “interests,” which dictated shifting alliances or national allies, abruptly, if required.

Alternating between formal and informal empire

The most striking fact about British history in the nineteenth century, is that it is the history of an expanding society. The exports of capital and manufactures, the migration of citizens, the dissemination of the English language, ideas and constitutional forms.

The British imperialism, perhaps, may be defined as a sufficient political function of the process of integrating new regions into the expanding economy; its character is largely decided by the various and changing relationships between the political and economic elements of expansion in any particular region and time. Two qualifications must be made.

First, imperialism may be only indirectly connected with economic integration in that it sometimes extends beyond areas of economic development, but acts for their strategic protection.

Secondly, although imperialism is a function of economic expansion, it is not a necessary function. Whether imperialist phenomena show themselves or not, is determined not only by the factors of economic expansion, but equally by the political and social organization of the regions brought into the orbit of the expansive society, and also by the world situation in general.

It is only when the polities of these new regions fail to provide satisfactory conditions for commercial or strategic integration and when their relative weakness allows, that power is used imperialistically to adjust those conditions. Economic expansion will tend to flow into the regions of maximum opportunity, but maximum opportunity depends as much upon political considerations of security as upon questions of profit. Consequently, in any particular region, if economic opportunity seems large but political security small, then full absorption into the extending economy tends to be frustrated until power is exerted upon the state in question. Conversely, in proportion as satisfactory political frameworks are brought into being in this way, the frequency of imperialist intervention lessens and imperialist control is correspondingly relaxed. It may be suggested that this willingness to limit the use of paramount power to establishing security for trade is the distinctive feature of the British imperialism of free trade in the nineteenth century, in contrast to the mercantilist use of power to obtain commercial supremacy and monopoly through political possession.

The phasing of British expansion or imperialism is not likely to be chronological. Not all regions will reach the same level of economic integration at any one time; neither will all regions need the same type of political control at any one time. As the British industrial revolution grew, so new markets and sources of supply were linked to it at different times, and the degree of imperialist action accompanying that process varied accordingly. Thus mercantilist techniques of formal empire were being employed to develop India in the mid-Victorian age at the same time as informal techniques of free trade were being used in Latin America for the same purpose.

From this vantage point the many-sided expansion of British industrial society can be viewed as a whole of which both the formal and informal empires are only parts. Both of them then appear as variable political functions of the extending pattern of overseas trade, investment, migration and culture. The formal and informal empire are essentially interconnected and to some extent interchangeable and flexible.

British policy followed the principle of extending control informally if possible and formally if necessary, but British interests were steadily safeguarded and extended. The usual summing up of the policy of the free trade empire as ‘trade not rule’ should read ‘trade with informal control if possible; trade with rule when necessary’.  It is only when and where informal political means failed to provide the framework of security for British enterprise, that the question of establishing formal empire arose.

One of the main tools of establishing the informal empire was establishing the central banking system. Thus, with the development of a monetary system based on a central bank that monopolizes the issuance of cash as loans and sets the price of its time lease to its borrower “interest or usury” and is followed by “commercial” banks to spread that money into society, this system that was developed in Britain, was established in the British Empire through the creation of about 80 Central Banks in its spheres of influence.

The American Gods of money

The United States inherited (or cooperated with!) the British Empire (based on money creation and lending it at interest) in developing a remarkable strategy that concentrated power through the mastery of local & global finance based on the central local and global banking system, backed by military expedience.

Power, together with control over the nation’s economy, was being ruthlessly centralized in the hands of the wealthy few, every bit as much as it had been in the days of Imperial Rome: Some 60 families—names like Rockefeller, Morgan, Dodge, Mellon, Pratt, Harkness, Whitney, Duke, Harriman, Carnegie, Vanderbilt, DuPont, Guggenheim, Astor, Lehman, Warburg, Taft, Huntington, Baruch and Rosenwald— formed a close network of plutocratic wealth that manipulated, bribed, and bullied its way to control the destiny of the United States and the whole world.

A statement from the 1970s attributed to then-U.S. Secretary of State Henry Kissinger, a protégé of the powerful Rockefeller circles, in which he declared, “If you control the oil, you control entire nations; if you control the food, you control the people; if you control the money, you control the entire world.”

This strategy has run into serious troubles, devastating Americans (and before it Britain) as much as the intended subjects of an American Century.

They operated in absolute secrecy, lest the general public would understand how the created banks’ money manipulated political decisions behind the scenes, including decisions to go to war or to keep the peace. These forces defined the 20th Century and are threatening various disasters for large human populations at the beginning of the 21st Century, and yet remain largely unidentified in the mind of the public. Central to the story are the consequences of the legislation that established the Federal Reserve in 1913, placing it under the control of private bankers.

When the dominant role of the City of London over the terms of world trade was being lost to the United States in the two great wars of the 20th Century, America was to be an empire in much the same way that Great Britain had been an Empire during its high days, with one significant difference. America’s economic imperialism would disguise itself under the rhetorical cover of ‘spreading free enterprise,’ and supporting ‘national self-determination’ and ‘democracy.’ The term ‘empire’ was to be scrupulously avoided.”

Paired with the propaganda mechanism, was the construction of new International Financial Institutions after the Second World War, where the IMF become the global financial ‘policeman,’ under the control of America and, to a lesser degree, Britain. This was used to enforce the payment of usurious debts through imposition of the most draconian austerity in history. ‘Free trade’ and a ‘level playing field’ continued to be the rallying cry of the strongest, most advanced economies, seeking to open up less developed markets for their goods.

America’s most talented minds were increasingly drawn to Wall Street with its far greater executive compensation, the nation’s industrial base entered a terminal decline. Neglect with this decline in industrial, educational and scientific competitiveness made inevitable the off-shoring of American industry. But this story needs some elaboration.

Inflation destroyed most of the USD value

The value of the US dollar has lost more than 96% of its purchasing power since the creation of the Federal Reserve in 1913. Consumer prices have gone up more than 24 times since 1913, meaning that a $1 bill from 1913 would have less than 4 cents of its origina purchasing power today. This dramatic decline in the value of a dollar has been due to inflation. A dollar in 1913 had the same buying power as $26 in 2020.

Also, according to data presented by Finbold, the U.S. dollar has depreciated six fold over the past 50 years. By 2022, the value of a dollar in 1972 has dropped by an incredible 86%, to $0.14.

Modern money inflationary features

  • Lending money at interest is the main reason for inflation.
  • Inflation is an intrinsic character of modern fiat money because it is freely issued.
  • Fractional reserve banking magnifies the problem of inflationary.
  • Interest increases the cost of goods that is inflationary.
  • Inflation Exporting is an intended feature.
  • Banking money or horizontal money creation is necessarily inflationary

Interest is the root cause of inflation

Money is a measure of value used as merchants use kilograms and architects use meters. We seldom question the way it works and why in contrast to the meters and kilograms it is not a constant measure but varies, almost daily. We need to exposes the reason for the constant change in one of our most important measures. Why money not only “makes the world go round” but also wrecks the world in the process. The huge debt accumulated by every nation, rich and poor, unemployment, environmental degradation, the arms build-up and proliferation of nuclear power plants, are related to a mechanism which keeps money in circulation: interest and compound interest.

This is an invisible wrecking machine in all so-called free-market economies. Transforming this mechanism into a more adequate way of keeping money in circulation is not as difficult as it may seem, but it will be faced with fierce resistance and war.

We will try to explain the complex issues involved in the process as simply as possible in ordr to help developing a sustainable economy.

Inflation export

The US, being the issuer of the global reserve currency, can print dollars or issue bonds anytime, and use them to buy assets and services the world over. The cost of printing the dollar is trivial in comparison with the value of the products that can be bought with those dollars. The US can import at virtually no cost, and thus export its inflation to other countries.

The U.S. “exports” its inflation means that they are flooding the world with dollars. To the extent the dollars are held as reserves by other countries (e.g., China, Japan …etc.) those countries are holding assets that are worthless, as the dollar drops in value.

Problems caused by interest bearing money

As seen, interest is a major vehicle to confiscate wealth from the multitude to the elite that raises the cost of everything and the main causes of inflation. It prevents society from devoting some of its members to deal with vital tasks that cannot be sold as commodities, such as culture, education, literature and other humanities.

  • Increasing monetary content while not increasing production of sellable goods necessarily leading to so-called inflation and lower purchasing power of money.
    • As banks finance more service activities (such as sports, tourism, art, entertainment, media … etc.) compared to productive activities (such as mining, agriculture, industry, fishing, livestock and sheep … etc.), inflation increases and money purchasing power declines; as the same goods are chased by more money in circulation.
    • The interests raise the cost of everything and thus it is the major cause of inflation.
    • Financing the big businessmen activities (who are usually of older age and usually prefer trading in goods and assets rather than engaging in productive activities) through bank loans is inflationary.
    • The confusion in the economy due to inflation is caused by using the same name to the currency unit of account during the stages of its decay in value. 
    • If we continue to assign the variable and depreciating currency unit its nominal value, despite the decrease in its purchasing power (say 1% per month), this spoils the exchange process, and obliges the seller to reduce the grace period between the sale and the actual receipt of the price. Which leads to the cancellation of credit completely and the avoiding of installments and forward sales, which spoils long-term contractual relationships. This in practice would paralyze the economy.
    • This leads to the so called economic cycle of inflation/deflation as explained in the following diagram:

The bank money and inflation/deflation (so called economic cycles) cycles

The evil magic of compound interest

Based on interest and compound interest, our money doubles at regular intervals, i.e., it follows an exponential growth pattern. This explains why we are in trouble with our monetary system today. Interest, in fact, acts like cancer in our social structure.

The time periods needed for money content in the economy to double at compound interest rates:

  • At 3% interest, 24 years;
  • At 6% interest, 12 years;
  • At 12% interest, 6 years.

Even at 1% compound interest, we have an exponential growth curve, with a doubling time of 72 years.

A Persian emperor was so enchanted with a new chess game that he wanted to fulfil any wish the inventor of the game had. This clever mathematician decided to ask for one seed of grain on the first square of the chess board doubling the amounts on each of the following squares. The emperor, at first happy about such modesty, was soon to discover that the total yield of his entire empire would not be sufficient to fulfil the “modest” wish. The amount needed on the 64th square of the chess board equals 440 times the yield the yield of his empire. Therefore, it is difficult for human beings to understand the full impact of the exponential growth pattern in the physical realm.

A similar analogy, directly related to the topic, is that one penny invested 2000 years ago at 4% interest would have bought in the year 1750 one ball of gold equal to the weight of the earth. In 1990, however, it would buy 8,190 balls of gold. At 5 % interest it would have bought one ball of gold by the year 1466. By 1990, it would buy 2,200 billion balls of gold equal to the weight of the earth. The example shows the enormous difference 1 % makes. It also proves that the continual payment of interest and compound interest is arithmetically, as well as practically, impossible. The economic necessity and the mathematical impossibility create a contradiction which – in order to be resolved – has led to innumerable feuds, wars and revolutions in the past and present.

Interest is included in every price we pay. The exact amount varies according to the labor versus capital costs of the goods and services we buy. According to Margrit Kennedy, The capital share in garbage collection amounts to 12 % because here the share of capital costs is relatively low and the share of physical labor is particularly high. This changes in the provision of drinking water to 38 %, and up to 77% in social housing. On the average we pay about 40% interest in all the prices of our goods and services.

There are indeed huge differences as to who profits and who pays in the money bearing interest. According to a study by Margrit Kennedy in Germany, 80% of the population pay more than they receive, 10% receive slightly more than they pay, and the remaining 10% receive about twice as much interest as they pay. This illustrates why the rich get richer and the poor get poorer.

In other words, within the present monetary system there is an operation of a hidden redistribution mechanism which constantly transfers money from those who have less money than they need to those who have more money than they need.

This can be seen clearly today. Within the modern monetary system, large amounts of money concentrate in the hands of ever fewer individuals and multi-national corporations. The poor Countries will never be able to get out of debt in the current system, as they have to pay back several times the amount of what has been loaned to them.

The interest and compound interest mechanism not only creates an impetus for pathological economic growth but it works against the basic rights of the individual in most countries.

Capitalism in the limit is Communism!

  • The Knights Templar learned the art of banking, from the Islamic Empire in the East during the Crusades (historical evidence requires study and documentation).
  • In the era of modern civilization, the realization of the need to control all human beings has evolved with the development of trade, communications.
  • The modern system of fiat money has also evolved and developed in the era of science.
  • The realization of the possibility of using centrally issued money and interest to concentrate wealth and ownership of the means of production and service became widespread, so that the Swiss-American economist Murray Rothbard called the central bank system the “monopolist” or the monopoly maker and hence the definition of capitalism as ever concentration of ownership and control of wealth in the hands of a “diminishing” few.
  • The realization of the possibility of using fiat money (issued out of nothing as debts) in an increasingly interconnected world to fully control human beings, their wealth and their manpower.
  • The monetary system based on a central bank that monopolizes the issuance of cash (as loans and sets the price of its time lease to its borrower “interest” i.e. usury) with “commercial” banks to spread that money in the society, was deployed in Britain and then the British Empire
  • This meant transforming the human community into something similar to Roman servitude Empire, composed of the governing elites and serfs who work for their daily providence.
  • Those involved in the project to control humanity using fiat money do not like the commandments of God. They are hostile to the human community based on family, tribe, and morals. Indeed, some thinkers of the ancient Roman Church wanted to outlaw sex because it makes the church’s subjects difficult to control! Thus, the kings and clergy agreed to cooperate to control the masses. Hence, the fragmentation and control project of human societies is developed.
  • With the development of the means of control in the age of science and industry, sociologists like Max Weber began talking about an iron cage for humans.
  • Intellectuals of the New Roman Empire (America as some think) realized that a scientific and experimentally tried complex system should be developed to enable a few to control the multitude.
  • Marx and Engels “Germans!” were adopted by an English aristocrat to formulate communist ideas in a scientific form. This manifesto was printed and promoted in the academic and media circles.
  • Communism, in fact, meant concentrating the decision on national wealth in the hands of a few in the Communist Party’s Executive Committee. It is the kind of a fully developed capitalism where wealth is concentrated in the hands of a decreasing few.
  • According to the experimental empiricism, communism had to be tested in a society to develop the mechanisms of control. So, Tsarist Russia (and China for that matter) was chosen to apply communism in it after the overthrow of the Tsarist Empire for historical reasons that made the Roman West despise the Russian East, perhaps since the days of the Viking.
  • The Anarchist Jew Leon Trotsky, who was residing in America, was funded by a famous American banker linked to England to ignite the Bolshevik revolution in Russia. Thus, capitalism manufactured communism perhaps as an empirical system. The rest is history.

The new world order based on centrally issued money

  • The main tool of exploitation and control became the fiat money system.
  • Such system was served by a host of global interconnected institutions (Central and commercial banks – credit unions – saving and loan institutions – insurance companies – funds of all sorts …etc.) all privately owned by the western elite.
  • That maize of companies were interacting in virtual markets (Capital, commodity, money, and derivatives … etc. market) complete with safe havens for anyone with anything to hide.
  • Such complicated fiat money system is the western army of monetary and financial exploitation and control, and also the means of waging monetary and financial attacks and wars against “rouge” states.
  • The economists, financiers and bankers were indoctrinated as follows:
  • Economy is an exact science.
  • The global banking system together with the affiliated banks led by the local central bank are the ones that should be entrusted with the monetary policy as they are impartial in practicing the rigorous monetary policy.
  • The elected politicians should not interfere in the works of the banks as they are bent on following unsound monetary policy aimed at causing them to be reelected.
  • We ended up with two heads in every so called sovereign country, the elected politicians responsible before the people and the unelected local banking officials headed by the governor of the national central bank responsible before a foreign (privately owned) body in Switzerland with the expected disputes and clashes.
  • The global financial elite is bent to achieve total global control through moving to cashless societies so that all dealings between people is done electronically using the internet.
  • Their ultimate weapon could be currency attacks and wars to subdue “rouge” nations.

Global financial order

America flooded the world with a torrent of printed Dollars (or later, just computer screen dollars) and used them to acquire assets, wealth, goods and services from everyone. It also waged continuous wars against all who objected to this strange situation, war paid for by everyone else either in cash or through depreciation of their dollar reserves as dollar flooding is continuing! In the era of science and technology, America has developed a strange and complex system:  

  • Institutions that impose the financial legal and administrative system (World Bank, IMF and WTO, etc.).
  • Scientists constructing the system’s foundations masquerading as exact scientific theories taught in universities which mathematicians have become its master priests who won most of the Nobel Prizes in economics since its establishment.
  • Scholars who are taught this science as an exact science, have become the leaders of thoughts and the system maintainers in their countries.
  • Media outlets crowded with experts promoting the system among the public as a means of development, progress and catching up with the West.
  • A cunning imperial policy to place power in the hands of corrupt groups that blindly apply the system.
  • A massive military machine to terrorize and discipline all noncompliant, maintain this exhaustive system:

World government

These days, however, the US Federal Reserve System (the central bank of the US), the Bank of England, the Bank of Japan, the European Central Bank and many other central banks in the Western world switched their printing presses to full power in what they call ‘quantitative easing’ which is one of the main causes of global inflation.

It is clear that a new structure is being built to gradually replace nation states with what they call a world government supported by the structure of central banks. The structure is in the form of a pyramid. At the top is the US Federal Reserve System, which issues dollars that acquired the status of a global currency at the end of WW2 at the Bretton Woods Conference.

At the base of the pyramid are the vast majority of the other central banks in the world, which are such in name only. In practice, they are ‘currency boards’ that issue national currencies by purchasing US dollars or other reserve currencies. This entire network of central banks is presided over by the US Federal Reserve System and the Bank for International Settlements (BIS) in Basel. The BIS is a kind of private club for central banks that was established back in 1930.

The central banks (and commercial banks for that matter) in USA, Europe and even in Turkey are totally or partially privately owned institutions by the elites (mostly un-identified), run and managed for profit and (off course) influence & control. They issue money and credit from nothing with little (or sometimes no) interference from the responsible government institutions or elected government officials who are kept in the dark as not trust worthy or not competent enough to comprehend the monetary/rocket sciences, as they only worry about being reelected even at the expense taking harmful decisions to the economy and the monetary system. Whereas the private bankers claim they act according to rigorous scientific rules for public benefit!

The Turkish government has embarked on a mission to reform the banking system and decrease the interest rate to near zero against local and foreign resistance that will have a far reaching effect on the Turkish economy. In this context, the future of Turkey, the Islamic world and even the entire humanity might be exposed to an unprecedented dangerous wars.

Most people see inflation as an integral part of any money system, almost “natural,” since there is no capitalist country in the world with a free market economy without inflation. 

It is inconceivable to try to find a solution to the problems of inflation and other modern-monetary-induced problem without understanding the nature of the monetary system itself and the Central Banking system as briefed above and in the attached appendices.

Hence, it becomes necessary to understand the fiat money (money issued by decrees) and the global monetary system & finance designs to assume total global control, in the endeavor to plan and structure an independent economy and hedge against extractive, exploitive and destructive schemes and also resolve the inflation among many other problems.

Economy without ethics

Ideology is a system of concepts and views which serves to make sense of the world while obscuring the social interests that are expressed therein, and by its completeness and relative internal consistency tends to form a closed system and maintain itself in the face of contradictory or inconsistent experience. 

Every economic decision has a moral basis and moral consequence. An ethical approach to economics needs a stronger basis for ethical judgments than an understanding of the empirical consequences of our actions.

Capitalism is defined by some analysts as the “war of all against all”! Since achieving profit by all means is the aim, you find many crimes and vices as normal activities in financial capitalism, e.g.: market rigging – betraying confidence – bribing politicians – arms & narcotics trading – kickbacks – bribery – fraudulent invoicing – conflict of interest – mispricing … etc.

The Global challenge facing humanity is how to fix or pacify this deadly global system?

General Fiscal and monetary Recommendations

  • Reducing interest rate on loans (or at least to activities of government development plans) to zero (like USA & Japan).
  • Financing national development and reconstruction plan by direct government spending through budget deficit, may be adjusted once projects are handed over to public domain as additions to national wealth, leaving the injected interest free budget deficit to circulate in the economy to produce wealth and jobs.
  • Reduce credit financing to non-productive activities such as media and entertainment to combat inflation.
  • Rationalize government spending, and reduce non-productive spending.
  • Apply smart controls to limit non-productive speculative investment to avoid bleeding of wealth from small to big, and from local to foreign speculators (casino capitalism).
  • Banks should be restructured to become like mutual funds that contribute to different projects as partners rather than loans, in order to make financial returns consistent with real investment gains.
  • A tax policy should be developed to encourage partnership in projects, rather than borrowing and loans.
  • Utilize financial markets to finance and capitalize new and existing productive projects.
  • Never say that there is not enough funding or investment for a particular project in local currency, but say that there is no political will to direct or allocate some of the community’s energies to a particular area. The lack of local currency liquidity in a particular production area is not due to a lack of funding, as the local government can simply issue it, but because of lack of channelling of enough national energy or credit in this required area, in order to maintain a certain social structure, a certain distribution of wealth or to deprive the nation of a certain important activity.
  • The central bank can monitor stagnant bank deposits in bank accounts, as they are more than the need for national savings or capacity to invest, and use open market operations to absorb it to avoid inflation.
  • Bank interests and economic rents are a drain on national productive capacity through the finance, insurance (especially foreign reinsurance companies) and real estate sector (FIRE). These sectors should be put to real national interest.
  • No country needs foreign loans to cover expenses in local currency. Because it can issue any amounts for local credit on computer screens in the central bank and commercial banks to satisfy such needs. Because foreign loans, once converted into the national currency, only lead to pumping economic benefits and rents out of the country, and also contribute to inflation.
  • Sound governments should prevent bankers from converting the economic surplus into interest payments. This also leads to inflation.
  • All Western banks, including central banks, are privately owned by Western elites, run by the banking elite (mostly Jews) and managed like any other private company with the aim of making profits and achieving control for their owners.
  • The commercial banking system is a closed clan, accepting new entrants and training them in the basics of the system.
  • Most bank employees (and economists for that matter) have been indoctrinated with this system. They firmly believe that they reflect sound banking systems while they are just hired hands and not even members of the international banking cartel at all.
  • Commercial banks (as they stand) are institutions that drain economic rents from society in the form of bank interests. They act as monopolistic institutions that establish these monopolies in all sectors of the economy, whether they realize it or not.
  • Commercial and central banks are not really responsible or subordinated to anyone in the country. They follow the laws and regulations set by the Bank for International Settlements in Switzerland (Basel I, II and III …), which are owned and managed by the global Western banking cartel. These rules claim to guarantee a sound professional practice, but are in fact designed in a complex way to achieve monetary and financial surveillance and control of the economy& politics, and if necessary, squeeze the national economy in a strait jacket and integrate developing countries and emerging markets into the international monetary system they run. It is backed by a full arsenal of domestic laws and international agreements to enable it to enforce its regulations and punish violators.
  • Natural monopolies, such as transport, communications, natural resources and basic services such as education and medical care should remain in the public domain, or at least limits should be set on their prices and the export of their profits.
  • It is useful to develop new indicators to measure the detailed national economic performance and development to replace GDP to give a more realistic picture of the economy.
  • National governments should rehabilitate civil servants responsible for fiscal and monetary policy who have been indoctrinated with the neoliberal policy, to master a more protective and independent policy, as America did after the civil war, giving grants to study protectionist policies as an alternative to British free trade policies.
  • Strict controls should be placed on the circulation of the national currency, as in China.
  • Never borrow foreign currency to meet local expenditures. Local banks can always create any amount of computer screen local credit, without pumping economic rents out of the country.
  • Never borrow in foreign currency to meet expenses in projects whose income is in local currency.
  • Never allow borrowing loans at variable interest.
  • Never allow speculations on the local currency and local assets using computer screen created credit or otherwise.
  • Never give up the National Authority to create national money and issue credit as an institutional public facility. It should not be left in the hands of private local or foreign banks to drain interest (economic rents) and buying assets through issuing credit on computer screens or by speculating on currencies. For this, the CIA constantly monitors US financial markets.
  • The economic rents of land and real estate, and the increase in asset prices should be considered as parasitic income. The government should tax their sources.
  • A tax of no more than 0.3% should be imposed on all secondary capital market transactions, which would generate a large income and prevent speculative attacks on local currency and securities. A similar tax has already been imposed in about 40 countries in 2011.
  • Strict monitoring and controls should be imposed on the activities of major speculators, especially short selling (i.e., selling currency or securities they do not own) or betting on national currency and securities.
  • Strict monitoring and controls should be imposed on foreigners buying major national assets, monitoring loans from national banks for foreigners or unreliable entities, not allowing them to speculate on local currency and buy assets using electronic financing.
  • The movement and use of securities and bonds should be monitored (some institutions allow for short-term lending to speculators).
  • Government deficit spending (the calculated increase in the monetary base by issuing currency) does not automatically and inevitably lead to inflation as long as there are still undeveloped energies in the economy.
  • Excessive spending leads to inflation; because if actual demand exceeds the potential of the real economy to expand to meet it, this will result in inflationary pressures.
  • Companies tend to respond to growing demand by increasing production rather than increasing prices as long as they can.

Topics presented in the appendices

Appendix 1 – Corrupting of the natural monetary system

Notes on dealing with Western deception

  • Use the Qur’an / Islamic grand narrative of life.
  • Adopt a comprehensive holistic multi-disciplinary system approach to study complex composite systems.
  • Acquire the interest and ability to analyze the complex systems & to compound the scattered parts to show the whole that contains them[1].
  • Be prudent and never underestimate the deceit of others.
  • Be skeptical and careful not to fall into the designs of the western elite and their global institutions for global domination.
  • Differentiate between the racist ruling elite and the bewildered, deceived & controlled Western masses.
  • Differentiate between the crazy elite project for global domination on the one hand, and the useful contributions of Western civilization to human life on the other hand.

Historical evolution of money in human societies

  •  Commodity barter trading.
  •  The matter evolved into the use of some durable goods or materials as money to conduct exchanges and measure value.
  •  It evolved into the use of metals as money.
  • The rulers and others imitated and forged it in order to obtain a percentage of the society’s production without their contribution or effort in production.
  • Gold and silver coins appeared, and their features are: ability to be molded with the required weight, size and shape – ability to preserve for unlimited periods, resistance to acids and alkalis – difficulty of counterfeiting them to distinguish their natural qualities – relative stability of the quantity supplied from them, and the proportion of the increase in the quantity discovered from them with the increase in global production of gold and silver coins. Commodities and overpopulation – their inherent intrinsic value and relative scarcity.

Gold and silver as money and nothing else

Islam recognized gold and silver as money without any other, and some scholars even went to the fact that God created them to perform the function of money. The Islamic system is characterized by being easy and abstaining, which leads in uncomplicated ways to open the doors of goodness for humanity. The economic system in Islam is summarized as follows:

  •  An exchange tool:
    • God made people love gold and silver.
    • It is forbidden to hoard gold and silver.
    • It is forbidden to use them as utensils or any use other than money.
    • It is forbidden to adorn yourself with them except for women.
    • The imposition of zakat on the one who saves them.
    • It is forbidden to trade in them, e.g. selling gold for more gold.
    • It is forbidden to cheat in both of them.
  •  Concerning the transactions:
    • Prohibit usury.
    • Commending spending, i.e. accelerating the circulation of money in society.
    • Urging humans to work.

Western material civilization corruption of the natural monetary system

Western materialist civilization corrupted the natural monetary system as follows:

  • Control the sources of precious metals.
  • Trading in money.
  • Justification and legalization of usury.
  • Issuing paper (fiat) money, i.e. making money from nothing and lending it at interest.
  • Gradually outlawing dealing with gold and silver, limiting it to paper (fiat) money.
  • Establishing financial markets for trading in money and securities.

The European Renaissance has begun with natural monetary system (gold and silver), as in the Mercantile era. Then money traders deviated from this system. The deviation began slow then accelerated to a complete reversal of the global monetary system in the 20th century.

The capitalist elites imposed a very strange monetary system:

  • Humans deal with each using a means of exchange (money) issued by financial institutions which is fully controlled by the elite.
  • This means of exchange (fiat money) has to be borrowed, that is, people borrow the tool that enables them to deal with each other.
  • Everyone pays a portion of their wealth and effort in exchange for the temporal use of this tool.
  • All money was borrowed, so that if all loans were paid back or recovered by the elite, money would disappear and people would lose the ability to deal together.
  • It is therefore a tool to launch, exchange or restrict the process of producing and exchanging of wealth, goods and services.

The foundations for the corruption of the natural system in the West

European economics was introduced by a group of French Enlightenment philosophers, who applied “Newton’s” idea of the mechanical universe on the social process of production and distribution of goods, services and commercial activity. They also developed the following ideas:

  • Business activity aims at producing wealth. If left alone without interference from the government, he will increase the wealth of nations.
  • The aim of the merchants is to achieve personal benefit, but in seeking and achieving it, everyone benefits.
  • Trade increases the productivity of workers, while government intervention spoils the process of increasing wealth and increasing the productivity of workers.
  • And they considered that the government should leave individuals alone to work for their personal benefits in what is known as the principle of (let them work).

Economics is defined as the process of analyzing the activity of production and distribution of goods, a process that must be conducted in isolation from any human, dogmatic or moral knowledge, as a completely independent process and activity. The purpose and meaning of human life in economic thought is productive work and the distribution of goods and services. There is really no economy without the principle of separating economic behavior from any other behavior. The western materialistic civilization has taken the following steps to corrupt the natural (Islamic) monetary system:

  • Controlling the precious metal.
    • Trading in money.
    • Justification and institutionalization of usury.
    • Issuing paper money, i.e. creating money from nothing.
    • Outlawing dealing in gold and silver and limiting dealings to paper money issued centrally.
    • Establishment of financial markets for trading in money and securities.

The European Renaissance began with the same principles as the natural monetary system based on gold and silver. The precious metal had a great place in commercial thought (mercantile), where it was considered the mainstay of wealth, and that its accumulation was the most suitable means of preserving wealth at the national level, increasing trade and activating transactions. Then the money changers and currency dealers quickly deviated from this system, using propaganda and semi-scientific means. The deviation started slowly and then accelerated until it ended in a complete revolution of the global monetary system in the twentieth century.

The deviation went through the following stages:

  • Imposing control over the entry and exit of the precious metal from and to each country, as trade does not drain the balance of the precious metal and constantly increases it. And manipulating prices so that exports to each country are greater than imports from it. This system was widespread in the nineteenth century, which was the golden era of colonialism and colonial wars, and a precursor to the bloody global wars of the twentieth century. These restrictions made gold lose its freedom of movement between countries as a prerequisite for its success in its natural function as a global currency.
  • Trading in money and analyzing usury. The basic condition of natural money is that it cannot be sold, bought, rented or generating additional value by its mere possession as interest under any name. Deviance began in the Renaissance with the increase of deviation of the church. Opinions in favor of usury spread, and its name was changed to “interest” as a neutral name that is not hated. With the increase in wealth, those with surplus gold and silver resorted to depositing their precious metal with the money changers when going to the market or traveling, most of whom were Jews, in return for receipts and fees commensurate with the value of the deposit and the period of storage. With the increase in wealth, the volume of trade and economic activity, such deposits with the money changers increased. The money changers discovered that most of the deposits always remained with them, so they thought of lending them at interest to increase their profits. They printed decorated receipts to be more attractive and to gain the confidence of depositors. Then they waived storage fees in light of the profits of lending those deposits to encourage depositors. With the increase in profits and competition between the money changers, they began to pay interest to depositors so that they themselves benefit from the interest difference between lending and depositing.
  • With the increase in this activity, the money changers turned into large banks (Bank of Venice 1157 – Bank of Barcelona 1401 – Bank of Amsterdam 1690…). Bank receipts turned into bearer bonds and were the beginning of the creation of money and quasi-money “that is, bank credit”. With the advent of the eighteenth century, usurious transactions became the norm in the western economic system. The system was then supported with manufactured make belief scientific theories and complicated calculations that determine the interest rate were developed. And With the advent of the nineteenth century, using of the method of the carrot and stick, mere talk of usury became a corruption of economic transactions, a historical luxury and the remnant of blind religious fanaticism. Economic thought became based on usury as a solid basis for economic activity.
  • When paper money appeared, it represented a real indebtedness, exactly equal to the gold money deposited with the teller. And with the persistence of banks in printing those receipts. Many banks were exposed to the risk of bankruptcy in times of economic crisis due to the waves of running to convert those receipts into gold. Gold reserve was never enough to convert them all. Governments intervened to regulate the process of issuing paper money, determine the percentage of the golden cover. It appointed a private bank (that was theoretically subject to government supervision, which evolved to become the Central Bank) to regulate and supervise other banks. Such supervisor central bank specified the reserve that commercial banks must keep with the central bank as a percentage of the issued loans. As a result of this created money (i.e. quasi-money or bank loans) the general level of prices was increasing. The commercial banks were the only beneficiaries of this process without any risks, with the public bearing the risks of participating in the production process.
  • Outlawing dealing with gold.

With the beginning of the nineteenth century, gold began to be withdrawn from economic activity. The bank bonds were first convertible into gold once they were presented to the bank. With the ease of dealing with it and the increased confidence of dealers in this possibility of cashing their bonds, the need to mint gold coins decreased, and the banks were satisfied with keeping gold reserves in the form of bullion whose weight is equal to the value of the reserve. The system of gold coins (Gold Specie Standard) was transformed into the system of gold bullion standard. The percentage of gold reserves to issued paper money continued to drop until it became less than 10% in some cases.

With the outbreak of World War I, people rushed to exchange their paper money for gold, but this was no longer possible because the paper money issued by the banks was many times what they had of gold. Thus, legislations were issued prohibiting the public from acquiring gold (converting their property from it to paper dollars or getting confiscated), suspension of the gold coin system so that paper money had a general power at the national level only, while the use of the gold bullion system was limited to international transactions with severe restrictions on the transfer of gold outside the country. Paper money was then seen as an expression of the national currency, guaranteed by the government.

By 1934, the money of almost all countries became cut from any link to gold except for the United States, which maintained the convertibility of the dollar into gold at 35 dollars an ounce. This necessitated the development of special tables to determine the exchange rates of some currencies, which constantly fluctuated according to the development of economic activity and the quantities of paper money printed, especially during the two world wars, which had a significant inflationary impact.

Human sciences’ technology

There are the western “formal Empire” technical army vs. its “informal Empire” technical army:

  • The first army produced, satellites, planes, missiles, tanks, computers, mobile phones, surveillance equipment…etc.
  • The second army produced schemes for political control and economic drainage, social engineering, social & political fragmentation, cultural distraction, etc.

The intelligent and brightest staff both armies of the western empire. It is safe to assume that what they produced in both fields should be just as sophisticated. As we have often seen, they are very keen not to disclose the secrets of the achievements of the formal empire’s army. It is imperative that they guard the achievements of the informal empire’s army in the fields of social sciences with even more keenness, because this saves them having to go to war.

Unless our people take extra care, we might fall prey to the designs of the second army.

Are our people in the academia up to the challenge?

In the context of drawing a real national cultural, media, social, economic or political policy aimed at national independent development, we need to develop what may be called “the technology of human sciences”.

In the running up to German unification, the famous German banker and economist Alfred Herrhausen was assassinated by a parked-car bomb in 1989 despite strict security protection.

About 15 years ago, nearly a whole team of Turkish engineers working to crack the F16 plane software secret code were dead in a make-believe suicide!

Yes indeed, even bankers and economists and perhaps social scientists, in some cases, are assassinated!

Persistent efforts to establish a global government, constructing the puzzle

  • The historical Roman / Jewish origin of the ideas of domination and the dissemination of vice among human beings as given in the Western literature (the cult of the king or the emperor – the Jews as a chosen people – the cooperation of the Romans and the Jews in the taking over of Christianity – Establishment of an institution to define faith and control the believers i.e. the church).
  • The evolution of the idea of ​​public control in Western Roman thought. The evolution of the Roman elite and its evolving alignments {the families of the Roman Emperor elites, especially the Gulliv family, which dominated western Europe or allied with the pope after the fall of Eastern Europe and Constantinople, Traders and bankers in Venice as the centre of trade with the Muslim world – the Viking or the Normans elite, who have a pervasive atheist nature, lust for wealth and control who controlled northern Europe – an atheist Jewish elite, as functional groups who adore gold, and are characterized with a kind of rebellion against God and a tendency to abuse and corrupt others. – Individuals who joined service teams who are fully prepared to do anything dishonest for material benefits.
  • The development of the modern fiat monetary system (with the gradual withdrawal of gold from circulation) and the realization of what can be achieved by controlling fiat money (controlling sovereigns with sovereign debt – controlling people and societies by issuing money as loans) and establishing banks and central banks as tools to concentrate wealth in the hands of a few and form monopolies.
  • Allied European Jewish families control the issuance of fiat money (perhaps as a functional group) and extend their control to America.
  • Realizing that for the sustainability of elite control, the public must be deprived of wealth to ensure that they cannot revolt, and plan to weaken the protections of societies, groups, tribes and families and spread vice to ensure stability of this feudal unethical system of control.
  • Fighting heavenly religions because they call for one God for all, one divine origin for man, human brotherhood and supreme God ordained morality, while promoting the animal origin of man.
  • Gradual realization of the similarity between the evolving fate of monetary/financial capitalism over time through increasing concentration of wealth in the hands of a numerically diminishing minority, and communism in which, power (including disposition of natural resources) is confined to a few members of the Communist Party Central Committee. Ancient philosophers, also though of some kind of communism of wealth and women, i.e., the domination of wealth and power by the few, while depriving the multitude of it and of the ability to revolt against such slavery (the elite/Jewish origin of communism).
  • Such realization possibly resulted in efforts to lay the ideological basis for communist thought, centralized control, and class struggle as an alternative to the humanitarian, social, and tribal fraternity (by Marx and Engels who were adopted and supported by British aristocrats) in accordance with the scientific method.
  • Dissemination and promotion of Darwin’s theory, which establishes the bases to deny the divine human origin and call for their claimed animal origin, in order to support the idea of ​​racism and the oligarchic rule of the elites. With the dissemination of planned utopian society ideas, ideas of ethnic and eugenic cleansing to improve the human race.
  • Recognizing the importance of controlling education, media, culture, rewriting history, elevating material science and presenting elites’ ideas in an artificial scientific outfit.
  • The development and dissemination of socialist thoughts as a more acceptable form of communism (the Fabian Society in England).
  • Dismembering old great empires especially the Ottoman Empire through wars (support for the competitors and insurgencies- practicing the policy of balance of power through supporting the strongest enemies …) and igniting the fire of the First World War to eliminate the old empires and the fragmentation of their dominion.
  • To sustain elite control, all social incubators must be weakened or abolished (propagation of individualism – disintegrating family – spreading class struggle to dismantle societies – fighting religions – destroying morality – spreading sexual freedom – disrupting intergenerational transmission of knowledge through free education – rewrite history …).
  • Advocating women’s liberation and feminist movements to remove women from home to be able to indoctrinate younger generations through education, information and cultural institutions, spreading of individualism and sexual freedom to demolish family (promotion of freedom of sex, creating obstacles to marriage and calling for the so-called empowerment of women and children).
  • Dissemination of national ideology and encouraging the idea of ​​self-determination even for tiny countries and city states, and supporting the formation of nation-states out of the fragments of empires (an idea analogous to the fragmentation of the family) so that remaking empires again become almost impossible because each nation-state should enjoy international recognition and build an army to protect the interests of its elite and protect the disintegration. And strengthening the ethnic, race, national identity and national history of the new nations to consolidate and strengthen the bases of nation states.
  • There was a need for practical experiments to master the art of communist application. That was why, American Jewish bankers financed Russian Jews (then Mao in China) to carry out communist revolutions to implement a pilot application in Russia and China, which they regarded as degenerate species anyway.
  • Recognizing the difficulty of imposing a global government on everyone in a short time, and preferring the option of progressive and gradual action using means of encouragement, intimidation and joint action to introduce humanity step by step into global transnational control with the development of innovative means of control and coercion. Some authors call those efforts “Open conspiracy to establish a global government “.
  • Drawing plans to transform America into a socialist system and integrate it with the Soviet Union through tax-exempt charitable organizations (Carnegie, Rockefeller …).
  • The establishment of the league of nation as a primary institution for the synthesis of new binding system for the emerging nation states and establishing institutions for world governance as a prelude to a global government.
  • Rebuilding Nazi Germany and igniting the Second World War to completely eliminate the old imperial and powers aspiring to re-establishing empires, and creating a new type of struggle between capitalism and communism in order to pave the way for a new order as a compromise between the two parties.
  • Evolution of control plans with scientific discoveries, especially the atomic bomb and communications revolution.
  • The creation of financial markets and the formation of financial institutions in Europe and America aiming at acquiring the old major companies owned by the elite of former empires and then dismantling them and offering them up for sale in the major stock exchanges interconnected with the modern means of communications, and hiring professional managers as means of fragmentation and directed management of financial empires (likened to nationalization and public ownership) open to control by the brutal financial institutions through speculation that is similar to traditional piracy.
  • The establishment of the United Nations as a protector of the nation-states resulting from the fragmentation of old empires and as an incubator to establish and develop the institutions of the global government.
  • Targeting Islam and Muslims because of their ideology that resist modifications, demographic increase, revival movements and ideological radiation resulting from the communications revolution.
  • The development of transnational state-of-the-art institutions, newly established or as a result of mergers, to control all human activities, especially media, culture, ethics, education and economy.
  • Developing the idea of ​​global governance, which is the application of transnational control systems under the pretense of better coordination, organization and higher efficiency.
  • The use of functional groups for different functions of public control: politicians, academics, businessmen, clerics, organized religions, journalists, bankers, all facilitated through the power of fiat money issuance that is utilized to employ and enslave people.
  • Developing and constraining the roles of national governments through imposed international agreements to become more like local administrations (privatization to impoverish governments – strengthening NGOs…).
  • Implementation of dozens of military coups against the governments of Africa, Asia, South America and the former Soviet Union to overthrow national governments and replace them with armed governments obedient to global planning and unaware of its existence.
  • Establishing institutions or organizations affiliated with the United Nations that carry out many tasks of national governments, especially the weak ones (the World Bank and its planned projects for geographical/demographic/economic changes – IMF, ICJ, INTERPOL …) and writing their laws and bylaws in isolation from the vast majority of States (this is evidenced by a comparison between government ministries, United Nations organizations, sections and organs and their international affiliated or coordinated organizations).
  • Controlling the economy of countries through financial markets, commodity markets, WTO, speculation, economic sanctions and wars.
  • Attempts to control the culture and national memory of peoples and opposing religious beliefs and commandments through UNESCO, media, entertainment, satellite TV, education and social media.
  • Engineering of international cooperation efforts to pave the way for the global government.
  • The perpetration false flag terrorist acts (especially the events of September 2001) to keep the Moslems nearly at gun point and as justification for the declaration of martial law in developed West countries due to the imbalance in demography, and what amounts to abolishing democracy.
  • Attempts to control food to control human population growth (seed control – genetic engineering …).
  • Persistent attempts to issue a global currency (implicating everybody even governments in debt and engineering financial crises …) and attempts to impose a global tax (carbon tax …).
  • Attempts to abolish circulating money (even paper fiat currencies) to transform the human societies to societies without traditional currencies (Cashless societies) to achieve full control (smart cards – electronic money …)
  •  ……………

The most important evidence of the importance of this study is the Quranic warning (and that of the Prophet) of the existential conspiracy by the Satan and his jinn demon devils against mankind allied with the follower devils of mankind.

Another important evidence is its compatibility with the living reality which results from collecting the scattered parts of contemporary jigsaw puzzle published in the media and books.

The above universal plan is implemented by an alliance of the following Parties:

  • An arrogant, rebellious, Satan against God, overtly the enemy of mankind, who seems to aim to prove that man is not worthy of divine honor and not faithful, and sets out to seduce him to give up the divine trust that God has entrusted him to carry, and that he is worse than Satan.
  • Non believing atheist Jews who rebelled against God, their idea of ​​God is almost pagan, who hate, misguide, allow killing, enslaving and confiscating non-Jews wealth.
  • The descendants of the Roman elite (and others) who believe that they are in conflict with the gods of heaven and may win, and are concerned only with the stability of the rule of the emperor through redefining and controlling religion anf the faithfull (as they did with Christianity).
  • The heads of the institutions of the definition of faith (the church which was founded by the Romans in cooperation with Jews who pretended to follow Christianity …) who look after the faithful of the organized religions devised in order to preserve public order.
  • Descendants of the North men or the Viking (or Normans) who are corrupt atheists who love domination.
  • Wealth hoarder traders who attach no meaning to life without their wealth.

Appendix 2 – The (fiat) modern monetary system


It is inconceivable to try to find a solution to the problem of inflation in the modern monetary system without understanding the nature of this monetary system itself and the Central Banking system that is considered the mechanism designed and employed to put the monetary system into action. . It is also important to study the network of financial markets as a basic tool of finance capitalism.

In the light of the materialistic foundation of contemporary Western civilization and the dominant American empire, the understanding of this usury based, shrewd and strange system (including its characteristics, basis of finance capitalism, central banking system, financial markets, and financial and monetary war tactics) become imperative.

In this regard, some contentions are contemplated:

  • How to understand the bases, mechanisms, methods and determinants of issuing modern fiat money? Who issues it? What are the institutions and operational mechanisms serving and protecting the US dollar as the world’s largest reserve currency (and also the Euro for that matter) as the main instrument of imperial attrition?
  • How to explain that all the countries of the world are in debt including rich countries, especially America? To whom the whole planet earth is indebted?
  • Why that when governments issue national currency that they monopolize, they follow procedures that make them seem as if they borrow that currency? A procedure that causes the emergence of most of the so-called internal public debt? And if the state pays its internal debt, would the national currency disappear?

Money issued by decrees (fiat money) has been the subject of many academic studies. Although it is now the basic tool of exploitation and modern Anglo-American Empire, yet the present global economy is based on it. The best way to devise a way to rectify this unfair system is to spread the public knowledge of its basics among the students, academics and professionals, hoping that this will induce bright people to wisely navigate humanity through the process of righting its wrong.    

Modern money is debt receipts, “trust receipts” or “accounts money” (dollars, pounds, euros…etc.). It is just a measure, like a meter, a kilo and a hectare. The government issues money first by spending it in the society (i.e., through deficit spending) to employ people and increase productivity.  Then it absorbs what is in excess of the society needs through imposing taxes, fees and fines, in order to control inflation (so they claim). People have to look for jobs paid in the local currency to settle their tax liabilities thus creating demand for this currency.

Modern money may be defined as:

“An information system used to spread human effort“.

Money is then an information system that contains the values ​​of people’s commitment to each other and their commitments to society and society’s commitment to them, analogous to bookkeeping. Most of the money circulated today in modern societies has become figures on computer screens, with a small percentage in the form of paper notes or coins.

The percentage of paper and metal money in the United States is less than 1% of the USA total monetary content.

The central banking system

During the days of the empire, Britain established about 80 central banks in its domain of influence that are still running according to the rules that are (original & revised) set in periodic meetings in the headquarter of the Bank of international settlements in Basel, Switzerland that is controlled by the American, British and western central banks.

The central banks control the process of issuing money from nothing into the economy (in a way that make it look as if the government is borrowing it against treasury bonds against interest), decide on the interest rate and on the total money content (supply) in the economy. In turn, the public and private commercial banks relend (rent!) it to public and private companies and individuals against interest as long as they retain it. 

Central banks are key institutions responsible for issuing currency, monitoring private banks and carrying out monetary policy. In terms of their influence on a country’s economy, central banks may surpass all the economic agencies of the executive branch, including ministries of finance (treasuries). Central banks are not a part of the three branches of government (legislative, executive and judicial). Their special status, which makes them independent from the state, is set out in constitutions and special laws. It is claimed and believed that such independence is necessary to pursue a balanced monetary policy and prevent the government from abusing money.

Central banks may have the status of public sector, private or mixed (public-private) organizations. The form of ownership has absolutely no effect on their ‘independence’. The US Federal Reserve System, for example, is a closed corporation. The Bank of England and the Bank of France used to be privately owned, but were later nationalized. The central banks of Japan and Italy are organizations with mixed ownership. Many of them are becoming ‘financial mega-regulators’ that are usurping control over the economy. Some of the events taking place in the world can only be understood in light of the fact that central banks have immunity that protects them from any attempts by the state or the national authorities to control their activities or encroach upon their ‘special’ status. 

The banks and banking system (banks/borrowers/interest)

The banks are institutions to give authorizations or licenses to some individuals (borrowers) to be entrusted by members of the community with goods and services within the limits of the credit value allowed. The Borrower manages the process of directing and using certain assets, goods, efforts and services from the community to establish a specific project, under the bank’s mandate and within the value of his loan or credit against payment checks issued by this borrower.

The Bank is responsible for collecting this credit from the borrower, as cash payments or in the form of asset collaterals allocated by the borrower to ensure compliance with the credit payments to the members of the community, in addition to the interest of the bank.

The bank acts as an accountant and a debt collector. It is supported by all the laws that impose respect of money, checks and credit, as well as the authority of the state represented by law enforcement institutions such as the police, the prosecutor and the courts.

To obtain a bank credit (loan). The Bank assesses the financial solvency of the applicant and the collateral he has to pledge to the bank to obtain the loan (home, farm, factory …).

The borrower becomes a holder of a legal mandate to write checks within the loan’s value and use it to obtain goods and services from the community. Once a seller of a commodity accepts the new money (checks), new money appears in the market, and is traded to complete an unlimited number of transactions until it is recovered by the borrower who first issued it, when he becomes a seller who offers a commodity or service produced in the market, then he pays his loan to the bank, and this money disappears.

If the borrower succeeds in retrieving the money he has issued by exchanging goods and services with the same value plus the interest, he will be able to retain his encumbered property. If he fails, the bank will seize it.

Bank interest

Interest is a “fixed or variable” time rent against temporary borrowing for the means of exchange of goods and services in the community (bank money).

Banks only create borrowed amounts, not enough to pay interest as well. Money for interests comes from other borrowers. For some to pay their interests, others will not even be able to pay off their principle loans and will go bankrupt and lose their collaterals to banks.

There is a continuous need to find more borrowers and bank money, otherwise bankruptcy rates and collateral confiscation will increase. But more bank money means more loans and debt to service the old debt. Only the time interval between loans and interest payment prevent interests from devouring all wealth in the community.

Those who escape bankruptcy are those who are active in marketable commodities, and those capable of achieving capital accumulation without any ethical considerations, and those who are competent in managing their business. The bankrupts are those who deal in unmarketable goods no matter how important, and who do not have the ability to achieve capital accumulation and who are inefficient in managing their business.

The interests raise the cost of everything (which is one of the main causes of inflation), and prevent society from devoting some of its members to deal with vital tasks that cannot be sold as commodities, such as fine culture, education, literature and other humanities.


  • People deal together using a means of exchange (bank money) issued by the financial institutions.
    • This money must be borrowed and then returned to the source as if it its owner, i.e. people borrow the means to enable them to deal together.
    • Financial institutions can encourage, direct, expand or restrict human labor.
    • Everyone pays a percentage of their wealth and effort in exchange for the temporal use of this means of exchange.
    • All bank money was borrowed by someone, so that if the loans were repaid or recovered by the banks, the bank money would disappear and the ability of the people to deal with each other would be reduced (to using only the basic government money as will be shown).

Inflation caused by interest bearing money

  • Increasing monetary content while not increasing production of sellable goods necessarily leads to the so-called inflation and lower purchasing power of money.
    • As banks finance more service activities (such as sports, tourism, art, entertainment, media, security, armed forces, etc.) compared to productive activities (such as mining, agriculture, industry, fishing, livestock and sheep … etc.), inflation increases and money purchasing power declines; as the same goods are chased by more money in circulation.
    • The interests raise the cost of everything and thus cause inflation.
    • Financing the big businessmen activities (who are usually of older age and usually prefer trade in goods, real estate and assets rather than engaging in productive activities) through bank loans is inflationary.
    • The confusion in the economy due to inflation is caused by using the same name to the currency unit of account during the stages of its decay in value. 
    • If we continue to assign the variable and depreciating currency unit its nominal value, despite the decrease in its purchasing power (say 1% per month), this spoils the exchange process, and obliges the seller to reduce the grace period between the sale and the actual receipt of the price. Which may lead to the cancellation of credit completely and avoiding installments and forward sales and spoil long-term contractual relations. This in practice will paralyze the economy.

The bank money and inflation/deflation (so called economic cycles) cycles

Monopoly creation by fiat money and the banking system

Bank credit is a tool to:

  • Launch, increase or restrict the process of production and exchange of wealth and goods.
  • Distribute and direct national product to favor some (elite) by providing credit to them.
  • Stimulate work in specific areas in relation to other areas by providing credit.
  • Exploit the majority in favor of the elite.
  • Transfer wealth from the public to the elite.
  • Increase monetary content without increasing production which results in lower purchasing power of money, equivalent to levying a tax (inflation).
  • Reduce interest rates to stimulate business and borrowing, or increase it to reduce business activity.
  • Monopolize specific assets and activities.
  • Concentrate wealth and pump it continuously from the majority to the elite minority and from the poor to the rich.
  • Create an artificial scarcity of money. Even though money is just a tool to unleash human energy and a means of exchanging goods and services!
  • Interest (usury) encourages fierce competition among members of the community to collect money to pay back the loan and interest.
  • Not injecting money in the right place when issued, as it does not reach the hands of those who need it or those who would put it to best use, but goes to the rich elite and big companies who are trained to use and deal with banks.
  • Create a need for endless growth, so that the continuous stream of installments of loans and accrued interest are paid.

The monetary base or vertical money

  • The government/central bank (monopolizing issuing “basic capital” or basic money) issue the monetary base in the form of government checks to feed different accounts against treasury bonds (government debt securities) deposited with the central bank.
  • This is why the government money is actually debts, but debts that no one intends to repay, because repaying means the disappearance of the currency (or the monetary base) of economy/society.
  • The monetary base consists of bank reserves and cash currency (circulated). The banks’ reserves are bank deposits (from the monetary base) in their accounts at the central bank in addition to the reserve liquidity in their coffers.
  • The monetary base is the “actual” money in the economy, i.e. the net monetary assets in the economy, or monetary content in the economy.
  • Government spending only is what increases net monetary assets, or basic money in the economy. The issuance of this money is called “vertical activity”.
  • Tax collection from the non-government sector is also a “vertical” process leading to a decrease in non-government net monetary assets.
  • Only taxes and government spending change net monetary assets in the economy.
  • The amount of money printed and coined should be in line with the development of society and should be sufficient to meet the need for cash circulation, not more.

The monetary sovereign government

  • The monetary sovereign government is not obligated to convert its currency into gold or any other currency at a predetermined price.
  • Because the sovereign government monopolizes the local currency, the government’s money never runs out. It does not even need to collect tax before spending, or borrow to meet the expenses in the currency it monopolizes.
  • The government must first spend to transfer the currency that it monopolizes its issuance to the hands of the people to enable them to pay taxes and buy government bonds.
  • Government spending is never constrained to the government’s ability to collect revenue; revenue collection here loses its meaning.
  • The relative values ​​of national currencies are determined in the exchange market, which automatically adjusts the effect of any increase in local government spending (apart from the effect of currency manipulation and currency attack by speculators). If government spending increases, domestic monetary content increases, the local currency exchange rate declines, and vice versa, so that trade balance is maintained.

The features of the modern monetary system in a monetary sovereign government

Government funds can never be exhausted

  • In the presence of a flexible exchange rate, government money can never be exhausted. The government’s over-spending could cause prices to rise. But all the constraints on government spending (such as budget control …etc.) are self-imposed by the government and can be eliminated.

Taxes do not provide liquid cash for the government’s treasury

  • Taxes are tools to manage aggregate demand and control financial reserves in the economy by absorbing liquidity, not a means of generating cash receipts to finance government spending.

Government bonds do not fund government spending

  • The monetary sovereign government does not need to tax or borrow or issue and sell government bonds to raise money and generate revenue for domestic spending. But the sale of bonds to banks maintains the stability of the interbank borrowing interest rate required to absorb the banks’ accumulated surpluses that are pushing to lower the interbank interest rates. (As will be seen below).

The hierarchy of money in a monetary sovereign state

  • In every economy there is a hierarchy of money, which is not all of equal power.
  • The money most acceptable in the economy sits at the top of this pyramid. They are government debt securities in “national currency” issued by a formal decree that everyone must accept, and it is used to settle transactions and debts.
  • Debt receipts or personal trusts do not enjoy the same trust and acceptance as government debt or “state money” and cannot be widely used in society to settle transactions.
  • The government spends and taxes in its own currency, which it controls.
  • The government can always pay off any debt in the currency it monopolizes its issuance, and can never go bankrupt or run out of such money, and do not need to borrow in its currency. It also sets the interest rate against borrowing its currency.

The hierarchy of money in a country operating under the gold standard

  • The Government undertakes to convert its currency into gold on demand.
  • That is why the gold reserve in this case is at the top of the hierarchy, not the national currency.
  • If the government spends much of its own currency, it may not be able to convert all that it may be required to convert from its currency to gold as promised.
  • Hence, governments operating under the gold standard do not have a sovereign currency.

The hierarchy of money in a country whose currency is pegged to another currency

  • The State that establishes the exchange rate of its currency as a percentage of the currency of another State shall protect its reserves of that other currency. It may go bankrupt if it fail to convert its currency to the other currency on demand. This requires the realization of trade surpluses to obtain the other currency and to keep adequate reserves of that currency.
  • The monetary hierarchy here has that foreign currency at its apex.
  • The member countries of the euro zone only use it and do not issue it. That is why they have to borrow it and pay any interest imposed by the bond markets, so their monetary wealth may run out. They therefore lack the political freedom enjoyed by monetary sovereign governments.
  • If a sovereign government renounces its control of its national currency, it also abandons its ability to establish an independent national economic policy and concede that authority to the bond markets.

Commercial bank credit or horizontal money

  • Central banks create government money. Commercial banks create credit.
  • When central banks create money, they finance government spending, capital investment, and public infrastructure to stimulate economy, growth and new investment.
  • When commercial banks create credit in the so-called horizontal activity, they lend it against mortgages, capital or assets that already exist, not necessarily to create new assets.
  • Loans, bank deposits or bank money do not increase or decrease net non-governmental monetary assets (monetary base) – the net result is always zero. This bank money is always created along with a corresponding liability. Meaning that the result is neither an increase nor decrease in net cash assets.
  • The activity in this credit market is based on the base money or the monetary base lever.
  • Monetary assets in the non-government sector and bank deposit accounts are claims on the principal base capital. Where it is assumed that it can be converted into a principal capital at the due date. Sometimes referred to as “bank money”, “credit money” or “cash deposit”.

The mechanism of loans and deposits

  • The process of creating this “horizontal” bank money is through the mechanism of loans/deposits within the commercial banking system, without the direct participation of the Central Bank. Horizontal activity can neither increase nor decrease net monetary assets (monetary base). The net is always zero.
  • When a loan is issued on the basis of a newly deposited deposit, the borrower usually transfers money to another person (possibly for a purchase). The borrower’s account is debited and the seller account is credited with the same amount. The deposit becomes a receivable for the recipient, and a liability or obligation to the borrower and his bank. To settle these transactions, the reserves are transferred between the banks, so that the borrower’s bank loses some of its assets that goes to the recipient’s bank. I.e., the net cash assets (monetary base) have neither increased nor decreased – the net result is still zero.
  • When the payment of the loan is made in the deposit account of the borrower (the bank money “disappears”), and the loan contract is updated (possibly implicitly) to reflect that the remaining portion of the loan has also decreased. The net result is zero.
  • When the borrower pays the interest of the bank, the value of his deposit decreases and the value of shareholders’ equity in the bank increases accordingly. (The shareholders’ equity of the Bank may be considered as a deposit in the Bank).
  • When a borrower defaults for any reason, its loan contract (which was ultimately a liability to the borrower and assets of the Bank) is canceled. Both the corresponding assets and liabilities disappear. Here there has also been neither increase nor decrease in total net cash assets – that is, the net result is zero again.

Bank money can only be created through loans

  • All existing bank money was initially issued as a loan from a bank. Money is created in the modern monetary system only when lending. The act of borrowing takes bank money into existence. The repayment of loans makes them vanish.
  • Bank money has a lifetime in circulation and ends with repayment of loans, thus limiting the activity of exchange in the community.
  • The real source of bank money is the borrower in the form of checks signed in his name.
  • Banks do not neither lend their capital, surpluses nor even deposits.
  • Banks can create any amount of money borrowed by clients, because they create it from nothing just through writing any value on the computer screen against the name of the borrower.
  • The bank allows the client/borrower a right on the basic capital that can be liquidated immediately upon request, against the long term right of the bank (on the client/borrower) that also includes interest payments. The net accounting result is neither an increase nor a decrease in the net financial assets. Of course loans/deposits could be used to finance productive investment, which could increase the real assets.

Reserve and capital of banks

  • Banks use “bank reserves” to settle their daily transactions. The bank can obtain reserves by attracting new deposits, or borrowing from the interbank lending market.
  • The reserve does not affect the Bank’s ability to lend. If the bank has clients with a good credit standing, the bank will consistently “create” the loan and the corresponding deposits independently of the current reserve position. The reserve shortfall is then resolved after it occurs from the interbank lending market at the end of the day.
  • The central bank deals with the interbank lending market to maintain the target interest rate. If there is a shortage of reserves in the interbank lending market at the end of the day, the central bank must intervene and provide the necessary reserves, and act as a “lender of last resort”, and if there is surplus it absorbs it to relieve pressure on interest rate to increase or decrease.
  • Reserves requirements is a remnants of the old gold standard system, but are not relevant in the current monetary system because the reserves do not reduce the bank’s risks and do not constitute a reserve that can be withdrawn if there is a run on the bank.
  • Banks are prevented from over-lending by placing conditions on capital requirements, in accordance with the Basel Convention’s regulatory framework! (Is this strictly observed?)
  • The Bank’s capital relates to the Bank’s solvency, i.e. its ability to meet its obligations, while the Bank’s reserves relate to its available liquidity, which changes on a daily basis. A bank with financial leverage can always get liquidity by borrowing more reserves from other banks.

Common misconceptions

  • The wide spread belief that banks receive deposits, and hold part of them as reserves and lend the rest – “that is, loans are from deposits” is incorrect. The reality is that loans create deposits.
  • Banks do not lend their reserves to clients. Reserves are used to settle interbank accounts. There are three things banks can do with surplus reserves: lend them to other banks in the interbank lending market, buy government bonds, or convert them into liquid cash.
  • Contrary to popular belief, too, the problem of shortage of bank reserves is solved after it occurs. The lack of reserve does not restrict banks in providing loans to borrowers, on the contrary. Banks actually lend any good client who shows up even if they have a shortage in their reserves. Any shortage of reserve is treated after it occurs from the interbank lending market at the end of the day, with the central bank as the lender of last resort, if need be.
  • Another common misconception is that government deficit spending leads to an increase in interest rates, which limits the activity of the private sector:
  • The first mistake here is that the government needs to borrow to finance the deficit in domestic spending.
  • The second mistake is that government borrowing takes money from a limited base of “lendable funds” available in the economy.

The reality is that the government spends through the issuance of currency. Therefore, government spending creates pressure to lower interest rates, not to increase them, because it adds reserves to the banking system, and does not take from it.

Fiscal and monetary policies

Central Bank operations

  • Banks need liquid cash reserves to settle their daily operations with clients and other banks and with the central bank due to withdrawals or loans. The source of these reserves is deposits, or borrowing from other banks surplus reserves at the end of the day in the interbank lending market, usually managed by the central bank.
  • The central bank determines the interbank lending rate. If there are no reserves in the banking system as a whole at the end of the day (because of new loans from banks to clients, for example), this puts an immediate pressure to raise the interbank lending rate. In contrast, if banks find too much reserves in the market as a whole, they will try to lend the surplus to the interbank lending market, putting immediate pressure to lower the interbank lending rate.
  • The central bank intervenes to control the interbank lending rate by adding or withdrawing (pumping or absorbing) reserves from/to the system. The central bank does this through:
  • Implementing “open market operations” through buying and selling government bonds.
  • Establish a “corridor” of interest rates, with an interest rate slightly higher than the target rate, that offers unlimited lending to commercial banks, and a little less than the target rate, that allows them to borrow unlimited amounts of money.
  • The Central Bank pays the commercial banks the target rate of interest on all daily savings, which would achieve the same goal without the need to issue debt.

Abba Lerner Principles of sound Monetary System

  • The currency issuance through government spending is used to increase non-government net financial assets, and taxation takes away from non-government net financial assets. 
  • Debt securities are issued by the Treasury to drain cash reserves to achieve the target interest rate of the central bank.

Fiscal policy and monetary policy

We can now define fiscal policy and monetary policy:

  • Fiscal policy is related to government spending and taxation policies. The government controls the macro economy by applying fiscal policy to spending (deficit in the national budget) and absorbing money (taxing).
  • Fiscal policy relates to government programs and plans to reduce unemployment. Tax exemptions are aimed at returning more money to the community so as to increase spending.
  • Fiscal policy changes the volume of non-government net monetary assets (government bonds issued and monetary base) and is implemented by the Treasury.
  • Monetary policy is used by the government to influence the overall level of economic activity, control the supply, circulation and availability of money in an effective manner and control basic interest rates; to achieve economic stability, reduce unemployment, inflation (!), increase growth and control foreign balance-of-payments. Monetary policy is directed exclusively at banks. The central bank usually manages monetary policy on behalf of the government (!).
  • Monetary policy only changes the components of the net non-government monetary assets, i.e. government bonds issued in exchange for the basic money or monetary base.
  • We can also say:
  • The Treasury spends basic money into existence.
  • The Central Bank lends basic cash into existence.

Summary: in the monetary sovereign government

  • The modern monetary system is characterized by the monopoly of the national government to issue money by sovereign decrees.
  • Money in a sovereign government is exchanged at a free exchange rate (by which monetary policy has been liberalized from having to protect foreign exchange reserves).
  • The monetary unit determined by the government has no real value. The government does not have to convert it into gold, as it did under the gold standard, or to any other currency (if begged to another currency). This currency is guaranteed only through its acceptance to settle the taxes and financial claims on the Government.
  • The usual comparison in economics literature between the family budget and the national government budget is a false comparison, as the capacity of government monetary spending here is not in fact limited by its revenues.
  • Statements such as “the government spends taxpayers’ money” or “subsidizes prices” are not true.
  • Taxation absorbs purchasing power from the private sector, but does not provide any additional fiscal capacity for public spending that did not exist before. From an accounting point of view, government deficit (or surplus) is equal to the total non-governmental surpluses (or deficits).
  • Government spending here is the first source of private sector’s money that enables it to pay taxes and achieve and retain some surpluses.
  • Net surpluses of the financial assets of the non-government sector cannot be achieved unless they are preceded by a corresponding government spending in the form of a deficit in the national budget.
  • The government is the only entity that can, by spending money into existence (i.e. budget deficit), provide the non-government sector with net financial assets that cover its net savings so that it can absorb the total private savings and eliminate unemployment.
  • The systematic pursuit of government budget surpluses, contrary to prevailing economic arguments, necessarily results in a decrease in private sector savings.
  • If the government balances the budget, with a current account deficit over the business cycle, the local private sector will suffer a deficit (deducted from its savings) during that cycle. The decline in private savings levels to finance the government surplus, will erode the private sector’s ability to finance its activities and will increase its debt. And ultimately leads to weaker demand through slower real activity.
  • The only way to enable the local private sector to save is for the government sector to spend in the form of a budget deficit until the private savings reach the required level.
  • The government deficit acts to “finance” private savings by ensuring that total expenditure is sufficient to generate the level of production, growth and income that will achieve the required levels of savings.

Monetary balance

Balanced Society

Self-sufficient isolated balanced society

The total monetary content of the national currency will not matter, as long as:

  • Relative pricing of goods and services is balanced.
  • There is social justice in the distribution of wealth.
  • There are enough currency units to encourage everyone to work.
  • All productive and service activities are activated for the benefit of the community.
  • Public or national ownership of industries and basic services.
  • Relative value of money not important.

A balanced society with a balanced exchange

  • Produces and exports what corresponds to what it consumes and imports.
  • Balanced exchange with the others.
  • Fair and just relative evaluation of goods and services, full employment of all, and equitable distribution of wealth are required.

Directing issued money in the balance of society

  • Productive activities are agriculture – industry – hunting – extraction.
  • Non-directly-productive activities are education, health, social welfare, services, security & defence, and their cost is to be met by direct government spending adjusted by taxes.
  • Recreational activities are to be charged directly if taxes are not enough.

Causes of economic imbalance

  • A society that is not productive or does not produce enough.
  • Not all of the available production and service capacities in the community are activated.
  • There is an imbalance in the vertical money content.
  • Unbalanced relative pricing to the detriment of some activities.
  • Industries and basic services are owned by foreigners.
  • Unfair trade agreements with others.
  • Financial war to devalue the national currency.
  • The economy is transformed into a rentier economy that drains its wealth and pumps it abroad.

Sectorial balances

  • The government plays a pivotal role in the economy of the modern money system; it is the currency issuer, the only entity that can spend without generating income, and its economic policies are subject to the democratic process.
  • The government’s cash balance is the inverse of the non-governmental budget. In other words, the government deficit over the year corresponds to non-governmental surpluses, i.e., the increase in net non-governmental financial assets in the same period.
  • There can be no accumulation of net savings of financial assets in the non-government sector without spending a cumulative deficit from the government. Only the Government could provide the non-governmental sector with net cash assets.
  • If the balance of the external sector is zero (i.e., the balance of foreign trade is zero), the government deficit corresponds to the net increase in the financial assets of the domestic private sector.
  • From the accounting view point, there can be no surplus in all sectors simultaneously. At least one sector must have a negative budget.

The myth of government debt

  • The monetary sovereign government in the modern money system is not constrained by revenue. Therefore, the aim of issuing government bonds is not to “borrow to finance the deficit”, but to provide a useful savings pot for the non-government sector as well as to set interest rates in the economy.
  • Government bonds and the so-called “core/basic money” are two sides of one thing:
  • The basic money is a cash government obligation for which interest is not paid.
    • Government bonds are a government liability for which interest is paid. This needs a zero-interest solution.
  • But both are equal and interchangeable unit of calculation, and can replace one another.
  • What is perceived as a “repayment of government debt” occurs continuously at the maturity of any government bonds. It is essentially merely an internal transfer (just accounting entries) from the “securities account” to the “reserve account” in the books of the central bank.

Restriction by revenue and the erroneous comparison to household budget

  • Companies, households, municipalities and governorates are obliged to spend their total income only, like the euro zone countries, because they are not issuers of euros but only users.
  • Countries whose currencies are begged to another currency are also constrained by their income. Therefore, they maintain reserves of the other currencies and have to pay high interest on treasury bonds. Because if the government issued and spent much of its currency in relation to the reserve it is holding, it might not be able to supply enough foreign currency that the public might require to convert and might be unable to meet its obligations and might be forced to devalue its currency.
  • Using household budget similitude to understand the financial considerations of the modern money system is not appropriate. The government here cannot become bankrupt or suffer a liquidity crisis in its own currency.
  • The government always has at its disposal “an unlimited supply of monetary assets in its local currency.” As the sole issuer of its local currency, they can spend as soon as they feed bank accounts, like changing the numbers on the scoreboard in sports.
  • It is reasonable to store real assets or financial assets in foreign currencies. But the establishing of sovereign funds from tax revenues or from local currency financial assets makes no sense. This “investment fund” can be formed in any size as soon as the government wills as the issuer of the currency.
  • Taxes help to reduce the purchasing power of the private sector, while “borrowing” (the issuance of government bonds) is aiming to change interest rates or reduce inflation – both do not aim to “finance expenditure”.

The monetary sovereign government is not monetary constrained

  • If government revenues are not constrained in any way, why borrow? There are voluntary restrictions imposed by governments (reflecting ideological tendencies) that have nothing to do with the basic mechanisms of the banking system in the central monetary system.
  • Although the government is not cash-strapped, it may issue debt instruments to control the effects of its liquidity in the economy (government spending and the purchase of government bonds by the central bank adds liquidity, while taxing and selling government bonds leads to their absorption). These operations affect the daily liquidity of the system, and can lead on any day to a surplus or deficit in the system, depending on whether the flow of money occurs from or to the formal sector in local currency.
  • The central bank aims to maintain the level of interest rates set for its monetary policy.
  • There is therefore no substantial reason for a sovereign government to borrow “to finance” its net domestic currency expenditure.
  • There are residues of voluntary restrictions on government monetary activity corresponding to those that were employed during the gold standard period. Governments therefore issue debt securities through auctions to cover government spending deficits, while this is absolutely not necessary from a financial perspective.
  • Foreigners do not finance domestic spending.

Budget deficit is the norm in a growing economy

  • There is no defect in the government deficit per se. It does not necessarily compete with private sector activity, does not represent a “burden” for future generations and cannot lead to “financial ruin” for the government. The continuing government deficit is the expected rule in the case of economic growth; it adds to the net financial assets (currency and bonds) of the non-government sector, which provides the necessary basis for savings.
  • The government should not “over expand” the liquidity needed to save and grow, so deficits will not be spent beyond potential demand or what the economy can expand to meet. This occurs when the economy is close to the state of full utilization of energy and employment. In such case, as the government continues deficit spending, this will cause inflationary pressures –i.e. an increase in prices in the economy as a whole.
  • Credit can support economic growth for some time. Although this usually results in the liquidation of family assets and resort to borrowing, because it replaces the sustainable government deficit spending by the unsustainable private deficit spending. If debt continues to increase, a point will come where income is simply not enough to serve interest payments.
  • Liquidity crises can never occur with a planned government deficit. The only risk here with this fiscal policy is the inflation that could arise if the government pushed nominal growth rates above the real capacity of the economy to absorb this increase.

The wishes of the private sector for saving

  • The non-government sector usually tends to save, i.e. accumulate net financial assets, by retaining some of its income. This usually occurs in a growing economy. Savings are also affected by the value of current net financial assets and income and other economic and cultural factors.
  • The savings cause leakage in demand and hence unemployment – unless the economy is injected with some monetary assets to balance the leakage.
  • Monetary assets saved in the banking system can be absorbed by issuing government bonds.
  • Accumulation of financial assets in local currency occurs only if the government sector or the foreign sector is managed in deficit.
  • A foreign trade deficit in the case of a strong currency is a manifestation of the desire of the rest of the world to retain some of the currency in question, as with the USD.
  • If the foreign exchange sector is balanced, there is no way for the local private sector to save unless the government budget contains deficit spending to fund the required flow. Without a government deficit, there will be no savings.

Government deficit is not a burden

  • Government deficits are not a burden on the government or on the public (other than the potential inflationary effects that can be remedied); it simply means that the government spends more than the taxes it receives, i.e. issues and injects more basic money into the non-governmental sector than is withdrawn (or destroyed).
  • This government deficit fully corresponds to the surplus or increase in net financial assets in the non-government sector. Otherwise, non-government net financial assets remain constant.
  • With a carefully planned deficit, the government can allow non-government net financial assets to grow sustainably forever, a normal situation in a growing economy.
  • Government spending in productive activities injects non-interest-bearing money into the economy, and its circulation in the economy produces growth.

Deficit in itself does not lead to inflation

  • Government deficit spending (by issuing currency) does not automatically and inevitably lead to inflation.
  • Companies tend to respond to growing demand by increasing production rather than increasing prices as long as they can.
  • The calculated increase in the monetary base does not necessarily lead to price increase as long as there are still undeveloped energies in the economy.
  • Excessive spending leads to inflation; because if actual demand exceeds the potential of the real economy to expand to meet it, this will result in inflationary pressures.

A deficit less than what is needed leads to unemployment

  • When the government cuts spending or overcharges taxes, it reduces the monetary base, which could lead to a reduction in economic performance below the available means, leading to stagnation, unemployment and possibly deflation.
  • This understanding of modern money frees the government from the need to finance the deficit in the public budget by borrowing in local currency, reduces the restrictions on the government, and gives it a greater degree of freedom to achieve full employment and stability of prices, which cannot be achieved under the begged currency system.

Appendix 3 – Finance-based super imperialism

The ideological foundations of capitalism and liberalism

  • The universe is an eternal physical material that does not require the existence of a God, and life has emerged through spontaneous random development.
  • The goal of existence is to stay alive, and to get food through a competitive struggle won by the fittest, strongest and most capable. The production and trading of commodities and services is governed by natural laws.
  • Mechanism in economics and politics means the removal of religion and ethics that are not governed by natural laws.
  • Capitalism means the concentration of means of production and wealth, as well as control of human labour, in a few private hands, to be utilized efficiently to produce and accumulate wealth, generate profit and achieve perpetual growth. Hence, Capitalism also means that the majority of the population does not produce what they consume, in order to force them to work as labourers, and sell goods to them, which necessitate the creation of a culture of consumption for sustained economic growth.
  • Competition and conflict are social values ​​that isolate the weak and those who cannot compete, and rid the society of them.
  • Contemporary human value is defined by his wealth, his production and consumption, and not by his moral values, cultural identity and dignity.
  • Liberalism, the core of capitalism, sees the world as individuals who always seek their selfish interests free from all moral and social constraints. Liberalism also means that unrestrained market forces and mechanisms will lead to optimum utilization of energies and wealth, achieve growth and progress, and that market mechanisms are an ethical code system capable of guiding human behaviour that replace all previous ethical beliefs.

The Three Pillars of the British Empire

Britain (and now America with its UK as a junior partner) built its rule on three essential pillars:

  • dominating world banking and manipulating the world’s largest gold supply guided by the bank of England, as a dominating central bank, especially after the battle of waterloo;
  • controlling the seas and setting the terms of trade; and
  • Controlling world raw materials with oil as the key.

At the turn of the twentieth century with these working, it devised an “informal empire” to loot world wealth and maintain a balance of power on the European continent.

Britain’s “genius” was always able to shift alliances without letting sentiment interfere with its interests. Post-Waterloo, it operated “on an extremely sophisticated marriage between top (London) bankers and financiers, government cabinet ministers,” key industrialists and espionage chiefs. By keeping everything secret, it “wielded immense power over credulous and unsuspecting foreign economies.” By the late 19th century, however, things began to change, and a new strategy was needed. Key to it in the beginning was oil geopolitics as a vital naval supremacy ingredient.

The Anglo-American coordinated policies

After the establishment of the private central bank of America (the Federal Reserve) in 1913, as a result of the working of the bank of England operatives, the British and American banking elite started to coordinate their actions to achieve financial/political control. In 1923, a so-called Dawes Plan (named for US banker Charles Dawes) was adopted. It was the Anglo-American banking community’s way to reassert fiscal control over Germany, assure reparations were paid, and continue the state-sponsored looting. It continued until 1929 when the planned German debt pyramid collapsed, an ensuing banking crisis followed, capital flowed out of the country, its economy crashed, the world headed into depression, and radical political elements gained prominence.

Reichbank president, Hjalmar Schacht, was a key figure. He resigned his post to organize financial support for the man he and Bank of England governor Montagu Norman wanted as chancellor. From 1926, Schacht secretly backed the radical National Socialist German workers party, the NSDAP Nazis. Britain also favored the “Hitler Project,” support for it went right to the top and included figures like Prime Minister Chamberlain and the Prince of Wales (later King Edward VIII in 1936 until his abdication later in the year).

Throughout the period, Wall Street and Washington were comfortable with the Nazis, and a key government official met Hitler in 1922. He came away saying he “was deeply impressed by his personality and thought it likely he would play an important part in German politics.”

By this time, the Anglo-American power struggle was resolved. So, too, the oil wars with the creation of an “enormously powerful Anglo-American oil cartel,” later called the “Seven Sisters.” British and American companies struck a deal. They ended competition, kept existing market shares, and secretly set prices with governments of both countries arranging a Red Line agreement. From then to now, Big Oil ruled the energy world and devised how to deal with “outsiders.”

Later, Heinrich von Papen and Hitler secretly arranged a Nazi takeover and it made Hitler Reichschancellor on January 30, 1933. On August 2, 1934 he seized absolute power as Fuhrer. British interests backed him, Royal Dutch Shell financed him, and the Bank of England “moved with indecent haste to reward” him with a vital line of credit. The rest, as they say, is history, and from it would emerge a new world order.

The Bretton Woods system and the informal American empire

America emerged from WW2 as the world’s most powerful economy, the most powerful industrial and military power not affected by the devastation of the war. It had 65% of the world’s gold reserves. The free trade system allowed it to easily obtain raw materials for industry and provide a global market for its products. US banks and financial institutions replaced London city institutions as the centre for global finance. America had to put in place a system that would retain the possibility of capturing half the wealth of the world, even though it represented only 6.3% of its population.

Former US diplomat, George Kennan advocated the nature of America’s post-WW II foreign policy in his February 1948 “Memo PPS23 as follows:

“….we have 50% of the world’s wealth but only 6.3% of its population. (It makes us) the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships (to let us) maintain this position of disparity without positive detriment to our national society. To do so we will have to dispense with all sentimentality and daydreaming; and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction….

We should dispense with the aspiration to ‘be liked’ or to be regarded as the repository of a high-minded international altruism….We should (stop talking about) unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are hampered by idealistic slogans (ideas and practices), the better.”

Post-war, America was the only dominant nation intact, so it alone had enough foreign exchange to invest substantially abroad. Its commercial strength turned other economies into US satellites and assured America achieved maximum world power. But the Cold War pushes America’s balance-of-payments into deficit. But America’s Payment Deficit Became a Source of Strength, not Weakness.

For both sides, the problem was that Washington’s guns and butter economy (including trillions to Wall Street) creates greater deficits and inflated spending. America’s dominance was maintained, and foreign economies were obliged to finance it. Failure to support the dollar would inflate their own currencies, give US exporters a competitive edge, and ultimately let the world monetary system break down.

  • WW2 was designed as a precursor for a new world order. The United Nations and the Bretton Woods (the seat of the Conference, which decided to set up such organizations in 1944) institutions were established. They were the IMF, the World Bank, and were later joined by the GATT and the World Trade Organization (WTO), to be the tools of the new American empire, founded on credit and finance, and in 1971 based on loans and debt (after Nixon abolished the Bretton Woods agreement). The agreement also set the dollar as the world’s only reserve currency and the only currency that can be converted to gold at $ 35 an ounce, with the rest of the currencies being valued against the dollar. All goods were exchanged in dollars, and half of the global deals were made using the dollar. All countries in the world preferred to keep their dollar reserves in the form of US Treasury bonds for which interest was paid. 
  • The main problem facing Europe, Japan and other countries in the 1950s was to get enough dollars to finance their needs for petroleum, industrial raw materials, and consumer goods. New York became the undisputed World Bank. The American empire became founded on the dollar and military might.
  • To maintain the dollar as the global reserve currency, many regional wars had been waged and the threat of nuclear wars was often used, as well as financial wars and financial credit crises.
  • The decline began in the second half of the 1950s, after a series of regional wars that gradually militarized the American industrial economy at the expense of the civil industrial economy, at a time when the economies of many allied countries such as Germany and Japan recovered and competed with the American industry.
  • In 1958, the United States experienced a trade deficit for the first time since the war because of military expenditures and the growth of the economies of the industrialized countries. This weakened the dollar and other countries preferred gold for the first time since the 1930s.
  • The United States had become a single-commodity-exporting country (i.e. the dollar), whose value was diminishing as it flooded the world markets. US partners began to lose confidence in the ability of the United States to honour its commitments to convert dollars into gold on demand. The French threatened to turn their dollar reserve into gold according to the Bretton Woods Accord.
  • For this reason, Nixon on August 15, 1971 cancelled the dollars to gold exchange at the rate of the Bretton Woods Convention, and it could only be converted into gold in the free market. Since that date, the dollar became supported only by the confidence in the US government and/or the fear of its might.

War to expand and globalize financial markets

After World War II, England became unable to maintain its empire. With the development of communications and computer technology, the world became increasingly linked by submerged communications cables. High-speed computers were developed to handle thousands of data and information. The arts of control and financial exploitation were also developed compared to the high time of the British Empire.

The British elite (in coordination with the American elite) realized that it could maintain its interests & influence by building a network of interconnected financial markets all over the world, trading in companies’ shares, manipulating their values, selling, buying, seizing stocks, and draining local economies of all nations in the process through financial institutions that were being established everywhere and joined into a global network.

The British industry was dominated by a group of old wealthy families of aristocrats who did not realize that the empire was aging. It was imperative to get rid of that elitist structure, in a Darwinian style. This was done using some traders financed by the new financial elite, collecting enough shares to control the largest old companies and then calling for emergency general assembly meetings to get rid of the old elite, dismantle the companies, lay off their workers and sell their assets and offer their inflated shares to the public in the financial markets. Thus, the old aristocratic elite was replaced by the fragmented market forces to facilitate control so that the new financial elite could do whatever they wanted in any economy, money and financial markets without any strong blocs resisting or opposing them.

In America, the economic collapse of 1929 resulted in the concentration of corporate ownership in the elite hands. The Great Depression was a kind of restructuring of the economy. The remaining individual blocs had to be broken and their shares traded in the financial markets. To achieve this end, nearly 3,000 investment funds did the job in 1985 with an open budget from. Big companies’ shares were traded in the financial markets, their assets sold, their workers laid off and their inflated shares sold to the public. This resulted in a global network of sizable interconnected financial markets suitable for the new era of financial capitalism.

As a result, the remaining power of politicians and parliaments was shifted to markets and financial institutions. Politicians became mere poor individuals lobbying those financial institutions to finance their campaign in return for favourable legislations.

Any time the local governments or the political leadership try to control the economy by managing currency exchange, for example, the currency is deliberately attacked by  speculators, as a way of proving the decline of political leadership of human societies and the rise of domination of financial markets led by large global financial institutions and banks.

Ownership Fragmentation and getting rid of old conglomerates was appropriate in many ways:

  • Eliminate the control of aristocratic individual ownership and turn it into a semi-public ownership that is open to trading in the financial markets, in preparation for the globalization of the economy and finance.
  • Development of new industries and demolishing old, outdated ones.
  • Globalization and integration of industry throughout the world to centralize decision making and decentralize production to fragment production, in a manner unrelated to their national origin or operation sites.
  • Achieve a state of liquidity that enables a permanent sale, purchase, fragmentation, consolidation and control of companies’ stocks.
  • Make possible deliberate cycles of booms and busts in the financial markets and inflation/deflation cycles either by moving funds, trading shares & derivatives and/or publication of faked news, financial analysis and rumours to drain local wealth.

USA trade deficit to maintain dominance (exporting inflation)

  • After the decline of the traditional American industrial economy, American policy has shifted from being the world’s major financier to the world’s largest indebted, where policymakers realized that America can keep its prosperity and the dollar leadership of financial markets by forcing industrialized countries to convert their surpluses into Treasury bonds with no maturity date in sight (if they wanted to export to the US market), while always threatening to withhold of the nuclear protection shield.
  • As long as US military dominance continued, by creating a permanent trade deficit in the US budget, the world could be tempted/forced to become dependent on the survival of the dollar system.
  • Dollar surplus countries had only three alternatives: either look for an alternative market to the American market which was not possible, or cause their economy to shrink by doing without the US market, or continue to invest their surpluses in America in the form of US Treasury Bonds.
  • Thus, American policy gradually shifted from America being the world’s major financier to being the most indebted. The US financial institutions in New York (dealing in US bonds and other investment instruments trading in financial surpluses of other countries in the American financial markets) gradually replaced the major industrial centres of the US as the largest US economic activity, even the provision of financing replaced the actual production of wealth. Loans have become the driving power of the US economy.
  • The American economy became a financial economy stuffed with all types of bonds and securities. Financial speculations became a near American art. Concentrating on increasing profits and avoiding risks so that money nearly seized to be a vehicle in the actual productive economy.
  • Thus, industrialized countries with dollar surpluses continued to buy US Treasuries and support the dollar to avoid the collapse of its value and the collapse of exports to America if the dollar collapsed. They continued to support the American consumer market, and ironically, to participate in the destruction of the US productive economy.
  • All these developments put the loans, speculations and financial institutions underlying them at the heart of the global economy, until their interests dominated the interests of other social groups, especially the non-mobile labour forces.
  • The major financial institutions in the West, as well as the ruling elites, have found that the policy of loans and speculation enables them to recover much of their trade and economic deficits.
  • Since the mid-1970s, endless number of financial instruments have been invented. Trade in bonds, derivatives, securities and other financial assets played an important role in international financial markets, which is estimated at any time to be about US $ 800 trillion (about ten times the value of the whole annual global economy).
  • Money became running in closed circles aiming only at generation of profits and busy doubling itself. There is no longer any commitment of capital towards any social system on earth. Money flows freely to and from all countries, not to support social life, on the contrary.
  • Thus, money printing, quantitative easing and loans of such zero cost money creation at interest (i.e. inflation) became an intrinsic feature of the new financial imperial capitalism.

The Economic Strategy of American Empire

 The ‘Dollar Glut’ to finances America’s Global military build-up” meant the following:

  • Surplus US dollars pouring into the rest of the world for yet further financial speculation and corporate takeovers;
  • Global central banks recycling these dollar inflows (into) US Treasury bonds to finance the federal US budget deficit; 
  • The military character of the US payments deficit and the domestic federal budget deficit.

In other words, the global “dollar glut” finances US corporate takeovers, speculative excesses creating bubbles and global economic crises, America’s reckless spending, foreign wars, hundreds of bases worldwide, military build-up, and culture of militarism and belligerence overall at the expense of democratic freedoms, beneficial social change, and human and civil rights were the overall result.

That is, America was forcing foreign central banks to bear the costs of America’s expanding military empire through recycling their dollars into US Treasuries. The US Treasury bills are spent on financing an enormous, hostile military build-up to encircle major dollar-recyclers China, Japan and Arab oil producers, essentially a process by which they finance their own endangerment.

In order to dissipate that global dollar glut and protect the American free lunch at the expense of the rest of humanity, the mortgage pack security crisis of 2008 was designed and precipitated. Moreover, the America and international lending agencies, like the IMF and World Bank, use their dollar claims on indebted nations to enforce Washington Consensus diktats. Independent-minded states face sanctions, isolation, coups or wars if they refuse. Also the IMF promoted debtor nations’ capital flight.

The Treasury-bill standard frees the US economy from doing what American diplomats force on other debtor nations with payments deficits: impose austerity to restore balance in its international payments. Post-WW II, Washington made other countries dependent on America.

In the 1970s, emerging nations proposed a New International Economic Order (NIEO) through the UN Conference on Trade and Development to promote their own trade and other concerns. It originated as a response to America’s aggressive world economic diplomacy.

The “unique ability of the US Government to borrow from foreign central banks rather than from its own citizens (through taxes) was one of the economic miracles of modern times. Without it, the war-induced American prosperity of the 1960s and early 1970s would have ended quickly.

It let America achieve what no earlier empires did – a flexible form of global exploitation that controlled debtor countries by imposing Washington Consensus (diktats). It used the IMF, World Bank and other international lending agencies for its purposes, while the Treasury-bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the US Government. If they didn’t, world economies would face monetary crisis.

A “new form of imperialism” under which America exploits other nations via the central banks (and international lending agencies) rather than via the activities of private corporations seeking profits.

A “Super Imperialism” model “pressed foreign governments to regulate their nations’ trade and investment to serve US national objectives…Washington Consensus (diktats) made aid borrowers more dependent on their creditors, worsened their terms of trade by promoting raw materials exports and grain dependency, and forestalled needed social modernization such as land reform and progressive income and property taxation.

Under a “new state-capitalist form of imperialism,” central banks, not industry, are the vehicle for balance-of-payments exploitation with the dollar as the world’s reserve currency. It’s Super Imperialism because one nation alone gets a Free Lunch right to benefit by getting others to finance its deficits and reckless spending. Other countries may extract their citizens’ wealth, while America extracts theirs through the sale of its Treasury securities.

Running the World Economy in Reverse

In 1969, the US was in recession, interest rates were cut, dollars flowed abroad, and the money supply expanded. In addition, in May 1971, America recorded its first monthly trade deficit that triggered a panic US dollar sell-off.

Things were desperate, gold reserves were one-quarter of official liabilities, and Nixon shocked the world on August 15. He unilaterally imposed a 90 day wage and price freeze, a 10% import surcharge, and suspended dollar convertibility into gold at 35$ an ounce. He also devalued the dollar by 8%. Further deterioration followed with massive capital flight to Europe and Japan. It forced Nixon to act again on February 12, 1973. He announced a further 10% devaluation.

In May 1973, the scheme was to initiate a “colossal assault” on world industrial growth through a 400% increase in oil prices (a decision taken at the Bilderberg meeting at that date). In addition, the resulting petrodollar flood had to be managed. A global oil embargo was the scheme to rocket up its price and create an equally great demand for dollars.

Kissinger’s Yom Kippur war began it when Egypt and Syria invaded Israel on October 6, 1973. It wasn’t by accident as Washington and London carefully orchestrated the conflict while Kissinger controlled Israel’s response. An oil embargo followed, OPEC prices skyrocketed 400% overnight, panic ensued, Arab oil producers were scapegoated, and the key part of the scheme took shape. It was for much of the windfall oil revenue (mainly Saudi, the world’s largest producer) to be recycled into US investments.

Following a Tehran January 1, 1974 meeting, a second price increase doubled the price of oil for even more recycling. The net effect – the worst American and European economic crisis since the 1930s with bankruptcies, unemployment, and in the US, a bonus of stagflation. The fallout brought down most European governments but its effects on developing states were devastating. Henry Kissinger became de facto president throughout the period while his boss battled to survive the “Watergate affair” and lost. Big Oil and major U.S. and London banks profited handsomely.

Other issues were at stake as well, one of which was potentially cheaper nuclear electricity as an alternative energy source. By the early 1970s, it was viewed favorably, and European governments favored building 160 to 200 nuclear plants by 1985. For the first time, America’s nuclear export market was threatened as well as Big Oil’s overall energy dominance. The Anglo-American think tanks and journals launch an awesome propaganda offensive to promote an ecology agenda (strongly anti-nuclear).

A second Malthusian plot was also hatched through a classified Kissinger April 1974 memo. It was a secret project called National Security Study Memorandum 200 (NSSM 200) that called for drastic global population reduction. It reasoned that many developing nations are resource rich and vital to US growth. If Third World populations grow too fast, their domestic demand will as well, and that will pressure price rises for their goods. Curbing population growth was the counter strategy.

Forming monopolies

Banks have been making huge loans to create huge monopolies in every area of the economy to control supply, ensure borrowers’ ability to repay debt and interest and to raise prices without fear of competition. It was also easier to control monopolies than to control the activities of many. These monopolies, in turn, increase the economic and political power and authority of the financial elite.

Ownership is concentrated using complex means that are getting increasingly complex as the importance of the activity increases. These means are as follows:

  • Targeting the markets with financial and market protective constraints so that sales shrink and activity suffers from suffocation.
  • Flooding the markets with competitive products at lower prices.
  • Targeting the sources of raw materials and inputs of the target activity by tightening the financial, logistic and procedural requirements to stifle the activity.
  • Reduce credit available for the targeted activity to precipitate a liquidity crisis
  • After a sufficient period of time, the targeted activities are bombarded with acquisition offers that are difficult to reject under the circumstances, as well as the purchase of institutions that have been bankrupt, by individuals who are armed with unlimited credit.

After concentrating ownership of the targeted activity, production is reduced, and then prices can be raised without fear of competition.

Financial Wars

Strange remarks!
  • Everyone is in debt and need to be leveraged, the only superpower is also the one with the greatest debt! Who is the creditor of the whole globe?
  • In the modern monetary system, money is created only at the moment it is lent. Thus, loan repayments make money vanish.
  • Money lending from nothing (against real collaterals) is a time lease of that money against interest. In modern money central banking system, usury is institutionalized.
  • Everybody is indebted to the issuers of money, i.e. central and commercial banks … Etc.                                                                                                         The current banking system creates an endless streams of debt and loans.
  • All money content in the economy will vanish if all debts and bank loans are repaid.
  • When a financial crisis occurs anywhere, stocks and bonds become worthless. Prices collapse, money loses its buying power and paper wealth simply disappears. The wealth of fiat money created from nothing has no absolute value. This fact is evident when too many people try to use their fiat money at the same time.
  • Incredibly, the entire Western banking system, including the central banks, led by the US Federal Reserve and the bank of England (which issue currency and set interest rates on loans), are privately owned by individuals  of Western elite.
  • Most of the money circulating in the economy is computer screen entries, and the least is traded by hand as paper and metal money.
  • If the banks create large amounts of money, everyone will be able to deal and exchange; otherwise we will lose the ability to deal and exchange with each other. But the more money the banks generate, the more inflation and erosion of money purchasing power takes place, in a strange kind of modern taxes.
  • One would have thought that the mechanism of creating money and its implications would be at the top of the main topics in the curricula of university economy, because of its importance in understanding macro-economic planning and the cycles of inflation and depression in the economy. But unfortunately this is not the case.
  • This is really perplexing. Since national monetary content, at least for now, is linked to national debt. Repayment of national debts will lead to the disappearance of money. Any significant reduction of this monetary content, i.e. debt, would cripple the economy. Therefore, all nations of the world will remain (be forced) to remain drowned in debt; to maintain the existence of money.
  • There had been several attempts over about 150 years in USA before 1913 (six presidents were killed due to them) to establish a private central bank to monopolize money issuance until the Federal Reserve was established by Congress in December 1913.

Global financial and monetary control

The mechanism of financial and monetary control and warfare can be summarized briefly as follows:

  • Make credit available (approved) in specific fields and areas, or call loans or not renewing them.
  • Grant credit only to certain persons, or the not renewing of loans to them.
  • Reduce interest rates to stimulate business and borrowing, or increase them to cripple business.
  • Provide unlimited cash to elite institutions and certain individuals to seize targeted assets.
  • Involve targeted countries and governments in variable interest rate loans to tax and drain economic surpluses.
  • The use of stock exchanges, financial markets and artificial financial crises to suck liquidity from the public in the targeted countries.

Political Economy of Public Debt

  • The fiat money system is a genius tool to expand and maintain imperial power.
  • The currency is issued as a loan made by the central bank from nothing to a government that only has the ability to impose taxes and interest on the public “public debt”.
  • Public debt is an imaginary capital to achieve wealth accumulation.
  • The central bank manages public debt, and is an ally of the state to achieve a dynamic balance of social classes within the state, manage relations between nations, and stockpile reserves as a measure of power between nations. But the independence of central banks is restricted by other countries.
  • Debt is used to integrate developing countries and emerging markets into the international monetary system.
  • With the separation of finance from trade, an artificial payment settlement system has been developed according to which:
  • Future profits capitalizing.
  • Conversion of the claim of future profits into a negotiable asset.

Let me control the issue of the money of any nation,

and it will not concern me then who sets the laws» Amschel  Rothschild

Welcome to the world of finance super empire

Transforming the national economy into a financial economy

  • The investment plan of all banks is the capitalization of economic surplus (property rental, corporate cash flows and net personal income that exceeds basic needs …etc.) to drain them as debt and loan service…
  • International banks consider any national economic surplus (real estate or commercial cash flows, governments’ ability to levy tax and sell public assets … etc.) as a source of income that can be exhausted as interest on loans. They manage foreign loans and investments to absorb economic surpluses as payments and benefits so that the domestic economy becomes interest producing economy as if it were subject to a tax that consumes all.
  • Most commercial bank loans are tied to existing assets, rather than invested in creating new assets. Particularly those whose prices are expected to increase sufficiently to pay interest on their loans; that is why most bank loans lead to an increase in asset prices, i.e. inflation.
  • This continued bleeding to local and foreign creditors and investors forces all countries to sell public assets to balance their budgets.

Global financial order

America flooded the world with a torrent of printed Dollars (or later, just computer screen dollars) and used them to acquire assets, wealth, goods and services from everyone. It also waged continuous wars against all who objected to this strange situation, war paid for by everyone else either in cash or through depreciation of their dollar reserves! In the era of science and technology, America has developed a strange and complex system:

  • Institutions that impose the financial legal and administrative system (World Bank, IMF and WTO, etc.).
  • Scientists constructing the system’s foundations masquerading as exact scientific theories taught in universities which mathematicians have become its master priests who have won most of the Nobel Prizes in economics since its establishment.
  • Scholars who are taught this science as an exact science, have become the leaders of thought and the system maintainers in their countries.
  • Thousands of financial institutions doing the housekeeping of the system.
  • Media outlets crowded with experts promoting the system among the public as a means of development, progress and catching up with the West.
  • A cunning policy to place power in the hands of corrupt groups that blindly apply the system.
  • A massive military machine to terrorize and discipline all noncompliant, maintain this exhaustive system:

Financial markets’ bubbles: The wealth extraction machine (Example)

Wealth concentration through Economic bubbles formation and bursting

American domination of the world through finance

By the end of the twentieth century, the “invasion of nations” in the sense of control over their production assets, employment, natural resources and public institutions, was done through the major financial institutions, where artificial disturbances would be created in the national economy. The term “financial wars” refers to a complex set of speculative attacks involving a mixed chain of currencies, securities, equities, bonds, derivatives, foreign exchange transactions, investment funds and the like. These instruments are used in speculation with the sole objective of acquiring financial wealth and controlling the productive assets of the target countries at devalued prices.

All that is needed to destroy an economy is to use short-term investment funds to acquire financial stocks, currency, corporate stocks and government bonds, and sell them suddenly without warning in the midst of a deliberate flow of carefully prepared press releases and reports expressing lack of confidence in the economic strength of the victim state. This is usually accompanied by downgrading of the rating of the economy by the three major US rating companies which are an important financial war tool. The inevitable result would be that local and private financial institutions, as well as individuals, would rush to dispose of their securities, assets and local currency before their value collapse, leading to an immediate collapse in stock and currency prices, bankruptcy, default, and loss of savings. Only then, the World Bank and the International Monetary Fund would intervene on behalf of Western financial institutions to buy national equities for pennies on the dollar and enforce a package of assistance programs designed to subjugate the entire target economy to international capitalism, such as the case of Southeast Asian crisis that tamed the Asian tigers.

That’s why Goldman Sachs ex-chairman Blankfein said: (I am doing God’s work)!

A jungle of mechanical monsters

  • With the increase in stocks and bonds in the interconnected global financial markets and stock exchanges, the variations in interest rates and exchange rates in different countries, the impact of economic conditions and factors on different countries, the stock exchanges and financial institutions resorted to use computers in speculation.
  • As the number of variables to be considered in speculation and betting increased, the use of complicated programs with ever increasing complexity to advise the speculative institutions on price and time to sell, buy or speculate on the shares to maximize profits increased.
  • Then a new class of scientists joined in, i.e. the mathematicians. Those were able to develop complex mathematical programs and equations that put into account all the needed variables, through which the computer can identify and implement the right decisions of sales and speculation in a fraction of a second to achieve maximum profit.
  • A strange situation emerged, in which mathematicians and non-living computers control huge amounts of funds their daily movement that surpass the world output in a year. Some of these scientists have even been awarded the Nobel Prize in economics because they invented equations to conduct these speculations and make profits all along (such as Myron Schulz and Robert Merton). Economics has become so mathematical that most of the Nobel Prize winners in economics since its inception in 1969 were mathematicians.
  • Merton and Schulz founded the Long Term Capital Management (LTCM) investment & speculation company, claiming through their program to create a massive automatic vacuum cleaner that would suck profits from all the world’s stock exchanges. The company made profits in its first three years, but collapsed after the collapse of Southeast Asia and Russia because its programs did not take into account the collapse of markets.

Mechanisms to return dollars to the issuers at the lowest costs

Printing and issuing more dollars would cause inflation and the depreciation of its value in the hands of everyone. As they persisted in this strange fiat money issuance to seize the wealth of others without limits, piles of paper and electronic dollars accumulated in the coffers of others, in a way that was dangerous. Because if it was not retrieved by any means, they may not need to resort to America to ask for more, and will exchange their money among themselves in their dealings. America will lose the advantage of being the only source of fiat dollars that everyone always needs. Others may prefer to deal with non-Americans in selling and buying; because the dollars of others do not cause additional inflation, while any additional dollars issued by America result in further inflation and Dollar value depreciation. Also, in case of financial war, others may be tempted to get rid of their dollar reserve, causing the collapse of the dollar value. It was necessary to develop mechanisms to recover those dollars from everyone at no charge, or at the lowest cost possible. The solutions were ingenious, originally invented by the British and developed by the Americans:

The first mechanism:

To encircle the central banks of countries that accumulate dollar surpluses so that they cannot buy any productive assets or natural resources in America, or in their areas of influence. Thus, those central banks with dollar surpluses have to use those surpluses to buy low-yielding US Treasury bonds, that is, storing their dollar surpluses with the US government for debt receipts! Thus, this mechanism has restored some dollar surpluses to its source, albeit at some cost.

The second mechanism:

The creation of tax havens that claim secrecy of the accounts, opening the door wide to the spoilers of every race and colour (looting national wealth, selling national assets to Western companies, seizing national loans, trafficking in arms & drugs, smuggling and committing all imaginable criminal activities) to store their loots in those tax havens away from the eyes of governments and justice (and, of course, under the watchful eye of the international powers that created these sanctuaries only to hide the loot and dirty money). Those thieves do not dare to withdraw their loots from their fortified warehouses, or else a cheap bullet fired by an anonymous assassin shall make such money without an owner.

These sanctuaries actually return the money to their exporters after successfully finishing their task of acquiring the assets and wealth of the target parties. Those sanctuaries do not give the looters any interest on their stolen deposits, instead they deduct an annual percentage against their concealment, and perhaps allow the looter some annual pocket money to spend in the west if he is still of some value.

The third mechanism:

The creation of thousands of mutual funds, hedge and speculative funds and financingthem with huge quantities of electronic money on computer screens, launching them to speculate in the target financial markets to absorb maximum profits and pump them through local central banks out of the country according to the international agreements imposed. This, of course, requires changing local laws to tempt and force companies (especially large ones) to list their shares on stock exchanges. Given the sharp disparity between the capabilities and speed of the Western speculative computers and the experience of those in charge, and those used by the local speculators, which they bought from the west anyway, the sure result of this hijacking race is the continuous bleeding of the cash wealth from the inside out, and the return of more dollars to source at no cost.

The fourth mechanism:

The fabrication of corrupt securities (such as mortgage bonds for bankrupt individuals, and bonds for unlisted companies in the stock markets) and concealment of their real values by fraudulent valuations (the three largest financial valuation companies are Americans, necessary tools for the financial empire) and support them using fake insurance policies. Then issue trillions of them and market them all over the world as guaranteed investment opportunities against piles of dollars earned by others for their services, goods and assets. Then expose their real value so that the rest are left holding the bag. This was what exactly happened in the 2008 mortgage backed securities collapse.

The American art of financial wars after the communications revolution

In view of the following:

  • The lifting of restrictions on capital movement due to globalization.
  • The networking of financial markets in all countries of the world.
  • The increased foreign debt in almost all countries.
  • The huge global investment by banks, investment funds and global speculators in stocks, bonds and local currencies.

There has become a new type of war in which the national institutions may be completely eliminated not by destroying them but by shorting their value and/or precipitating an economic collapse by moving billions out of the target country. Without any material damage to local institutions, they are sold for pennies on the dollar.

All what the Western financial elite needed in order to establish the super empire of financial and economic exhaustion has already been established … colonization by deadly bloodless means. This developed mechanism was used to kill the growth of Southeast Asian countries, which used to be called the Asian tigers!

The efforts of the American elite to achieve their interests ranged from military operations to intelligence and propaganda activities aimed at destroying the national fabric of target nations and turning independent countries into open economic zones so that natural resources could be seized under the name of free market.

The human challenge to fix the complex global financial system

The current global monetary system can be summarized as follows:

  • Money (especially the global reserve currency, the USD) issued centrally according to desire and without rules to establish monopolies and the confiscate property and human effort and to launch wars.
  • Credit rating agencies reduce the evaluation of competitors.
  • Market-making institutions inflate or reduce prices of commodities, currencies and securities.
  • Thousands of investment banks, mutual funds and sucking of profits from all financial markets.
  • A network of interconnected and closely coordinated global financial markets (for trading in stocks, bonds, commodities, money, derivatives, futures, securities, currencies etc.).
  • Ultra-high-speed computers (not available for sale to all) equipped with advanced and effective software to perform high-speed speculations to suck profit even before the victims realize what is going on.

The rest of the people are the users and potential victims of this system!

The Global challenge facing humanity is how to fix this deadly global system?

Market makers

Market makers are major financial institutions (e.g. big banks and hedge funds) that control large capital and liquidity in the market. Market makers do not compete with each other at all; they do not buy or sell currencies, commodities or stocks. But they mediate between sellers and buyers of securities of all types, treasury bills and even currencies of different countries and determine the ask price (purchase) and the sale price of those securities and implement the transaction and charge a fee equals the difference between the ask and the sale prices of each security (the spread). Market makers compete with each other to reduce the spread. But higher demand for certain securities increases the spread price. Therefore, market makers also regulate trading in financial markets.

Inter-trade between market makers themselves always take place without a real demand for the sale or purchase of certain securities aims to raise or reduce the price of the target currencies or securities to achieve commercial or political objectives.

Bleak overall picture

  1. Capitalism means ever concentrated wealth & means of production in fewer and fewer hands.
  2. Add automated technology and eternal outsourcing of cheaper labor to item 1, you get unemployment.
  3. Add 1+2 and you get jobless growth or the 1% (then 0.1%, 0.01%, 0.001 %…) society. The unfettered capitalism is eroding the middle class even in EU & USA.
  4. Liberalism by definition doesn’t mean or care about social responsibility.
  5. Capitalism/liberalism and social justice in one sentence is a contradiction.
  6. That is why, capitalism and democracy in one sentence is a contradiction.
  7. The neoliberal trickledown theory is not working.
  8. To tackle this systemic crisis, humanity needs a revised version of individualism, unfettered capitalism, liberalism and neo-liberalism.

Competition within this global system is thus often futile and not possible.

The World Financial Autonomy from Dollarization

It’s an unsustainable system, but for other countries to break away, they’ll have to renounce Chicago School alchemy, the austerity programs it imposes, and advantages it gives America in trade and other relations. It drains other nations’ resources by trapping emerging economies in chronic debt and developed ones into forced buying of US Treasuries. In return, America rules as world debtor, forcing other countries into creditor bondage, and threatens to bring down the global monetary system if enough of them balk.

There is a global need to devise a New International Economic Order, so nations producing economic gains can keep them and not let America use them to reinforce its new kind of centralized global planning based on financialization and a US Treasury securities standard.


  • Stock exchanges and financial markets have always been and will remain the battlegrounds of financial wars, and the loopholes of carrying out currency attacks.
  • Have we ever tried to look at the financial markets, central banks, commercial and financial institutions and investment funds capitalized with unlimited electronic funding and the huge network of superfast computers as well as tax havens as an integrated network, with its interlocking parties fully coordinated to achieve Western economic hegemony and exploitation?
  • Western central banks are private institutions owned by Western elites and managed for profit, which issue (in their periodic meetings in Basel, Switzerland) the laws and regulations of the central and commercial banks of the world (owned in turn privately by their shareholders and also managed for profit). Central banks determine the money content and interest rates and manage the economy independent of the elected governments responsible before their voters, while the central banks are not responsible to any local party.
  • Capitalism in the West was developed from mercantile capitalism to industrial capitalism and then to securities and finance capitalism. The world has experienced wars in all the previous stages. We have witnessed trade wars with strong free trade policy against the defensive protectionist policies. Then there were industrial wars over raw materials, cheap labor, markets and trade routes. After linking financial markets and enforcing the laws and treaties on free movement of capital, we witnessed the bloodless collapse of what was known as the South East Asian tigers, the collapse of the financial market in Kuwait, Argentina crisis, the 2008 mortgage backed security crisis and lastly, the lira crisis in which Turkey suffered a non-fatal injury. Is it possible to prepare an objective study on the current world order and the modern political economy without referring to an explanatory paradigm? The Muslim researcher must arm himself with the Islamic viewpoint especially the Quran (and Hadith) grand narrative of life, and follow a critical approach to view the contemporary materialistic civilization systems and institutions, rather than study them using the western paradigm and its generated analytical tools. The Islamic economy literature should pay adequate attention to the system of fiat money and its nature and alien qualities that are emanating from materialist thoughts.

On the holistic system approach to study complex systems

In order to study the western complex systems, they usually hide the control and exploitive systems as scattered fragments which nevertheless act together in tandem to serve the required end goal. That is why we should see how to: Arrange the scatter/disarranged & Analyze the composite.

The flow charts included in the study are drawn with this in mind.

1 – Arranging the scatter/disarranged.
 Example: The Fiat money and its system of global movement cycle

An account of the development of western financial institutions

  • The emergence of commercial banks
  • The establishment of stock exchanges for trading securities and speculations.
  • The establishment of central banks (bank of banks) and the standardization of money in each country.
  • The establishment of tax havens to evade domestic taxes which do not ask questions about the sources of fiat wealth.
  • The establishment of thousands of investment funds for speculation, hedging etc.
  • Changing the Laws to encourage companies to register in stock exchanges and trade their shares and bonds in them.
  • Linking financial markets worldwide using a global submerged and ocean cable network at a time when the potential uses of that network were not readily obvious.
  • Changing the laws to free the movement of capital all over the world.
  • Financial crises became affecting individuals and economies as they happen.

There are two possible explanations

  1. A natural, gradual and logical development in the era of communications revolution and globalization, every step leading to the next.
  2. The development was guided and planned making use of available new technologies, which resulted in the formation of a system of draining wealth and recycling of the global reserve fiat currency after its use in the seizure of assets, wealth and services from all.

   The following is a chart illustrating a possible form of the second possibility

2 – Analysis of the composite.

Example: China’s transformation into a global workshop in the footsteps of Germany and Japan, with US blessing as a prelude to the post-industrial era using the reserve fiat currency (that, nevertheless, didn’t develop as planned).

Historical events

  • After the Second World War, Germany and Japan were completely destroyed and unconditionally surrendered to the allied forces (mainly the Americans), and were allowed to rebuild their non-military industrial capabilities and even to benefit from the free trade channels of the victors in the distribution of their industrial production all over the world. All this in the presence of the largest American military bases outside America in Germany and Japan up till now. In this context, we recall a book published in 1989 titled “Japan Can Say No (co-authored by Shintaro Ishihara, the then Minister of Transport; and Sony co-founder and Chairman Akio Morita).
  • Nixon was accompanied by a large delegation of US industrialists in his visit to China in 1972 (a long term plan!), where he concluded an agreement with Mao Zedong (known later) to transfer labor-intensive industries to China, and enable the Chinese to distribute their products in America and the world at dirt cheap prices, with a profit-sharing agreement in US favor (I read an article then claiming 91% to 9%).
  • The global consumer and traditional industries were hugely affected by this development. The big international companies had to move their factories to China, while the small ones simply vanished, while the lucky ones became mere traders or distributors of the Chinese products that were impossible to compete with.
  • This resulted in the erosion of the middle class producers, technicians and even some elite business owners and the loss of craftsmanship. (We lived that situation in Egypt)
  • The situation is reminiscent of what some western thinkers called the “post-industrial age”.
  • The situation is also reminiscent of the collective farms that were run in the New World, in the Bengal and elsewhere by labor contracted “Indenture contracts” at conditions that made them worse than slaves.

There are two possible explanations:

  1. A traditional commercial interpretation of competition and the pursuit of mass production and distribution while working to reduce all elements of cost. This is the usual explanation.
  2. A planned development! a possibility that does not put limits to the western elite shrewd planning and desire to control, as illustrated by their history. This benefits also from the unlimited possibilities offered by fiat money (and its recycling institutions) and the reality of their total control over the lines of distribution, transport and communications, the financial markets global network, imposing the global banking system and the dollar as the global reserve currency.

The second interpretation requires putting limits on the ability of states and central banks in the spheres of influence to exchange dollar surpluses with fixed or productive assets or gold bullion. It also requires the creation of periodic global financial crises to drain dollar reserves to prevent a collapse in its value.

The following chart depicts a potential mechanism of the second possibility:

3 – An example of a shrewd/scientific scheme of planning

Design of procedures and mechanisms for individuals and groups acting cooperatively together or competitively with each other to induce them to achieve the required results!

Game theory vs. Mechanism design theory

Game theoryMechanism design theory (A recent well known theory with scientists winning Nobel prize for some decades)
Expect actions of individuals and groups acting Cooperatively together or  competitively with each other and influence them to achieve the required outcome Design mechanisms including individuals and groups working Cooperatively together or competitively with each other to make them unknowingly achieve the required outcome
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