by Ellen Brown
The Web of Debt Blog→
June 9, 2009 Ukiah, Mendocino County, North California
The Constitution states, “Congress shall have the power to coin money and regulate the value thereof.” This power has been abdicated to private bankers. Today, 99.99% of our money is created by private banks when they make loans. This includes the Federal Reserve, a private banking corporation, which orders Federal Reserve Notes to be printed, and then lends them to the U.S. government. Only coins are actually created by the government itself. Coins compose only about 1-10,000th of the M3 money supply, and Federal Reserve Notes compose about 3% of it. All of the rest is created by banks as loans, something they do by simply writing numbers into accounts.
Congress could take back the power to create the national money supply by:
(a) Nationalizing the Federal Reserve.
(b) Reviving the Reconstruction Finance Corporation, a government-owned lending facility used by Roosevelt to fund the New Deal. Rather than merely recycling borrowed money as Roosevelt did, however, the RFC could actually create credit on its books, in the same way that banks do it today, by fanning its capital base into many times that sum in loans. Assuming $300 billion is left of the TARP money approved by Congress last fall, this money could be deposited into the RFC and leveraged into $3 trillion in loans. That’s based on a 10% reserve requirement. If the money were counted as capital, at an 8% capital requirement it could be leveraged into 12.5 times the original sum. That would be enough to fund not only President Obama’s stimulus package but many other programs that are desperately short of funding now.
See also Money As Debt – How It Works (video)→