Deep History and Background.

It was sometime in the late ‘60s when my Dad was visiting his Long Island manufacturing plant where I was working on the production line as a Union 1087 Glazier making window sash and assembling the finished product before they went out to the ‘stock’ yard portion of the factory for shipping.

Over the loudspeaker – “Joey Bong, report to Mike Zinna” (the GM at the plant).

“Your dad wants to see you before he leaves for the airport in about an hour.”

This conversation was in the ‘2 X 4’ ‘absolute doubting, denial, if not rejection’ phase of my money-education. It was at least a year before I started learning about money.

Dad’s accountant Bernie Robbins was with him in the office. They were not talking business, but the money system, which Bernie seemed to know. I was listening. My dad was complaining, and Bernie was explaining ‘stuff’. Bernie left for his long drive back to Manhattan and dad asked me to stick around for a chat before my uncle drove him to LaGuardia.

I had punched out, and was now thinking about that $3.75 and possible overtime pay I was losing here. Soon he was explaining that Bernie had bankers as clients, and why it was unacceptable and unfair to Americans that those in Congress don’t understand something as important as the money system, and how the bankers have tricked the politicos into accepting their ‘wisdom’ on the workings of money and banking. He said Bernie agreed.

At some point, after explaining that only Wright Patman and maybe a couple of others seemed to grasp the underlying themes, I asked . . .

“Well, how do they do it?”

“Do what?”

“How do the bankers keep their money ‘wisdom’ secret, and keep the trick going in a way that becomes un-knowable to some otherwise pretty damn smart people?”

Obviously, I thought him wrong. He didn’t skip a beat. He smiled.

Double-entry bookkeeping. That’s their magic.”

I had exactly zero idea what he was talking about, and it took me many years before I could return to that conversation with the slightest bit of understanding of the relevant ‘mechanics’ involved, and its importance to Peace, Social Justice and a clean environment – my issues.

Also many decades before I made the “Why Monetary Reform Must Become Your Number One Issue” YouTube video.


Suffice to say today, as with just about every one of the ‘absolutely impossible’ truths my dad uttered – he was right. I don’t know if he had discovered the works of Frederick Soddy at that time, as I did not for at least several years later.

From the preface of Soddy’s The Role of Money – What It Should Be, Contrasted with What It Has Become:

It was recognized in Athens and Sparta ten centuries before the birth of Christ that one of the most vital prerogatives of the State was the sole right to issue money. How curious that the unique quality of this prerogative is only now being re-discovered. The “money-power” which has been able to overshadow ostensibly responsible government, is not the power of the merely ultra-rich, but is nothing more nor less than a new technique designed to create and destroy money by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of the community or the real role that money ought to perform therein. (my emphasis)

Those are the same bank ledgers where we all go as reformers to discuss whether money exists, or not, by conforming to those double-entry bookkeeping (accounting) Rules of the day.

Sooooo, this blog is actually all about my postulations of well over a month ago when I opined on a tenet of accepted monetary understanding of whether the actual ‘money supply’ WAS formulaically a relationship between money borrowed (principal) and money repaid to the bank, or not.

It was noted correctly that the formula,

Money equals Principal created minus Principal repaid

is an accepted maxim even among monetary reformers for over a century. This was a perfectly correct observation. Not so much about the actual money supply, but about how we ‘count’ our money according to the techniques of banker-borne double-entry bookkeeping (DEB).

Very importantly, Soddy also observed that the bankers determine the definitions and the accounting rules by which we ‘count our money’. Doing so establishes the very basis for the correctness of Mari’s accepted way of ‘counting’ our money, and in determining our ‘money-supply’.

Yet, I say it’s all hogwash, and that I do hope that understanding the hogwash might serve as a warning to everything we think we know about our money system. It’s unnecessarily complicated. At some point, Soddy observed that “it’s not a system, it’s a confidence trick.” Does the DEB really destroy the money, or merely provide the accounting façade required for the bankers to issue even more debt in order for our citizens to achieve some small portion of the prosperity that is otherwise certain from within our available economic resources? You decide.

What Soddy observed was that these (accounting) techniques govern, “without the slightest concern for the interests of the community or the real role that money ought to perform therein.”

The above formula is grounded in the double-entry bookkeeping (DEB) techniques of modern money accounting, and well constructed, may I say. It is hard to emphasize here how much I do agree with this sound observation, despite the fact that I also continue to say it’s all ‘wrong’, about the money.

On Capitalism – as We Know It

May I go for the jugular here? The bankers use DEB to perpetuate their profit-driven, debt-based money system …… to keep the citizenry of all nations indebted to their (unlawful) high privilege of money issuance, and of ‘capitalizing’ their development of all national economies.

And that, ladies and gentlemen, is, according to Minsky, the problem of capitalism.

Everyone knows I agree with Minsky.

We can end the essence of Capitalism’s complete control of all ‘commerce’ on this Mother Earth simply by changing to the system of Public Money issuance used in Sparta a while back, and thus adopting a ‘new kind of money’ system of issuance and use, and in adopting concurrent modern accounting norms that do not destroy our money, money which will be and must be persevered as circulating ‘financial capital’ when borrowers make principal repayments on their loans.

Yes! It’s the accounting system, stupid!

Governmental control and benefit from money issuance is an actual ‘state right’ that must be reserved and restored to its historic Athenian and Spartan wisdom. Public Money. Period.

No, money is not destroyed when principal is repaid, but the DEB-based accounting for our money, plus the banking systems definitions of what counts as money, removes that principal balance from what we agree to ‘count as money’. From your checking account, into the ether. Because, legally, by Rule, they can.

A DEB System Not Cast in Stone

Notably, banks and bankers (and their accountants) change both Accounting Rules and Laws regarding those Rules, whenever necessary to either enhance their private prosperity (profit) or to preserve their existence. This has never been more evident than in the Global Financial Crisis of 2008. The skinny on the escape of finance from the GFC was that the QE of the world’s central banks ‘intelligently saved the day’ . Indeed QE did serve a liquidity-enhancing, confidence-building, role. But the saving grace of finance as we know it was not QE at all, but the change to the laws and regulations regarding ‘Mark-to-Market Accounting’ (M2MA), which was poised to purge all of what we would call modern ‘international financial capitalism’ into absolute and certain insolvency. The Rule change permitted the banks to mark the value of their asset holdings NOT to the its devalued ‘present-day-market-value’, but back into its original book value.

Dah Dah !!

Thus, saving international finance capitalism as we know it for another day.

So, Athenia and Sparta. Coins, etc.

Did repayment of drachma-based coins that were borrowed by merchants reduce the money supply(?), or did the repayment enable recirculation of that ‘money’?

If you borrowed $10 from the bank, in silver dollars, and repaid it all to the bank, would it reduce the money supply?

If you borrowed $100 in Greenbacks, and repaid it all to the bank, would that money continue to recirculate in the economy?

The answer is always, of course.

This is because they are all money at issuance, and not based on “a new technique designed to create and destroy money by adding and withdrawing figures in bank ledgers”.

And today, if you borrow $100K to build a new house and pay out every penny to the carpenters, plumbers, electricians and backhoe operators, does that money continue to circulate as the ‘actual’ money supply in the economy? Forever ? Of course, it does. How could it not ?

But those bank ledgers are manipulated, in service not to the community whose money it is, but to the capital-ists in control of the Planet, through accepted norms of double-entry booking.

Nothing more or less. My dad was right. Gotta have a new kind of money!

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Lucille Eckrich
2 years ago

Hi Joe. Thanks for the blog post. Sorry I didn’t read it before now, as I’ve never learned DEB and don’t get it. If you can suggest a good resource to help one get it, please do. Your ending surprised me a bit. You ask: “if you borrow $100K to build a new house and pay out every penny to the carpenters, plumbers, electricians and backhoe operators, does that money continue to circulate as the ‘actual’ money supply in the economy? Forever ? Of course, it does. How could it not? How could it not? Here’s how (in our FRB… Read more »

Paul Lebow
Paul Lebow
2 years ago

Lucille – I can see Joe’s point except that under the current way banks account for money, the money the carpenter receives from you will eventually be spent to purchase a product or service that you might provide. You would use the proceeds of that sale to pay down your mortgage, so in the aggregate I think I agree with you.