What do you mean by "Money is a System of Power?"

Money is one of the most extraordinary of human inventions. As a means of exchange it makes modern commerce possible and is one of the most beneficial of institutions. As an instrument of power it can support the most insidious  and destructive of tyrannies, particularly when the processes of its creation and extinction are hidden from public view and shielded from public accountability.

Money, a mere number of no inherent substance, utility, or worth created from nothing with an accounting entry when a bank creates a loan, shapes the boom and bust cycles of economic life. Its international flows determine the fate of nations. Individuals who have it in large supply enjoy lives of grand opulence in the midst of scarcity. Those who lack it face death by starvation in the midst of plenty. 

The Crucial Distinction between Wealth and Power

The idea that money is wealth is an illusion—as is the idea that those who are making money are creating wealth. Money has value only because we by social convention we accept it as a claim against real wealth, things of real intrinsic value. Money created from nothing unrelated to the creation of anything of real value is phantom wealth.

Money is more accurately understood as a power chit and the money system is best understood as a system for allocating power. The manner of allocation may contribute to the creation of real wealth—but it can just as well contribute to the expropriation, or even the destruction, of real wealth as the Wall Street money system demonstrates.

The defining purpose of a healthy real wealth money system is to create and allocate money in ways that facilitate the production and exchange of real wealth. The power inherent in any system that controls the creation and allocation of money is, however, the power to control the economy and the society. Therefore, it is essential that its processes be visible and publicly accountable. It otherwise creates an irresistible temptation to extreme abuse.

The Source of Wall Street Power

In our current system, as noted above, new money is created with an accounting entry every time a private bank issues a loan at interest. This is a key to Wall Street power and profitability as it places decisions regarding when money will be issued, how much, and to whom in the hands of private bankers for whom private profit is the only consideration.

A private banker somewhere is collecting interest, a private tax, on virtually every dollar in circulation. This arrangement makes banking a highly profitable business, assures a continuous concentration of wealth, and creates pressure for the economy to grow to create sufficient demand for new loans to create the money needed to pay the interest on previous loans.

Furthermore, just as money is created when a loan is issued, it is extinguished when the loan is repaid, introducing a source of enormous economic instability. If banks stop lending, due either to their own insolvency or to a management decision, the money supply dries up and the economy crashes---placing enormous pressure on  government to step in with a tax payer bailout. It is an insidious arrangement in which banks keep the profits and tax payers bear the loses.

Wall Street's Freedom from Accountability

Financial system reforms introduced in response to the Great Depression limited financial speculation and supported the creation of a well regulated and accountable system of local banks, savings and loans, and credit unions that functioned as a kind of public utility to serve community interests. This system helped to build the U.S. middle class and make the United States the most prosperous of nations. Eventually, however, Wall Street interests mobilized to remove the limitations on their power. In the name of market freedom they advanced an agenda of deregulation, privatization, and tax relief for the very rich that unleashed a massive consolidation of private wealth and corporate power beyond the reach of public accountability. 

As Wall Street institutions consolidated their control over the economy, they became  increasingly proficient in creating phantom wealth, money created from nothing unrelated to the production of anything of real value to increase the unearned claims of a privileged class to the real wealth of the larger society---a form of theft. They in effect organized themselves into a powerful criminal syndicate engaged in counterfeiting, usury, accounting fraud, loan sharking, corporate asset stripping, insurance scams, bogus securities ratings, extortion, and other legal and illegal criminal activities. The production of useful goods and services became purely an incidental byproduct of Wall Street's core purpose of enriching itself.  

Don't Fix It: Replace It

Attempts to restore Wall Street banks to their normal function with trillions of dollars in taxpayer bailout money are badly misguided. The Wall Street private money monopoly needs to be shut down and replaced with a new system of money creation and allocation managed as a public utility and designed to serve the exchange needs of the Main Street real wealth economy. 

The work of replacing the current Wall Street phantom wealth money system with a Main Street real wealth money system has three essential elements:

1. Replace the system of debt money created and managed by private banks for private profit with a system of predominantly debt free money created and managed by the Federal Government. 
2. Take failed Wall Street banks into receivership, break them up and spin off their local branches into locally owned community banks, mutual savings and loan associations, and credit unions to serve their communities under a strict system of state and federal regulation as public utilities. 
3. Eliminate the institutions of the shadow banking system that serve no useful productive function through imposition of regulations and taxes that render them unprofitable.