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Debunking another cornerstone of the Austrian-Keynesian dialectic: do Central Banks really control the Money Supply?

by on November 18, 2012

The notion that Central Banking is the heart of the issue is the main idea behind the “End the Fed movement”. But although we at Real Currencies certainly sympathize with the idea of closing the Fed, we are also quite certain this in itself will not solve our problems. Memehunter takes a close look at who controls the money supply and shows Central Banks only to be a part of the control grid and that the banks themselves do most of the money creation.

By Memehunter for Real Currencies and the Daily Knell

Austrian economists have, since Ludwig von Mises, tended to blame central banking for almost all our economic and societal woes. According to the Daily Bell, a noted Austro-libertarian “alternative” media outlet:

“The boom-bust cyclicality of modern economies can be laid directly at the feet of central banking, with its monetary stimulation, which first expands an economy and then contracts it when the expansion has gone too far. Thus, central banking is responsible for the manifold disasters that have overtaken the Western world in the past century at least.

Wars, industrial collapse, recessions and depressions can all be laid at the feet of central banking and the great families that insist on its ongoing implementation.”

In fact, the “End the Fed” mantra has become so prevalent among Libertarians that they do not even bother to verify the Austrian claim that central banks are truly in control of the money supply. To be fair, the Keynesian school, the mainstream-approved dialectical “opposite” of the Austrian school, also promotes this idea, so much that this meme has permeated both mainstream and “alternative” thinking.

However, authentic truthseekers have a duty to inform themselves and seek confirming evidence before accepting the “central banking dogma” at face value, especially because it is a cornerstone of both the Keynesian and Austrian schools, two elite creations.

I should make it clear at the outset that my goal, with this article, is not to defend the institution of central banking. Rather, my aim is to confront the central banking dogma with facts and empirical evidence, in an effort to establish the truth about the control of our money supply.

Endogenous versus exogenous theories of money creation

According to the mainstream neo-Keynesian economic theory, money creation is an “exogenous” phenomenon (in the sense that it is exogenous to the economy), and the broad money supply is a function of the quantity of “government money” (the “monetary base”) and the money multiplier (the inverse of the reserve ratio) which constrains the amount of credit created by commercial banks. Interestingly, Austrian economists are for the most part in agreement with this statement. While some Austrians denounce the credit expansion generated via fractional-reserve banking, they generally consider “central bank printing” to be the main source of inflation.

On the other hand, several non-mainstream economic schools have suggested an alternative, “endogenous” model of creation, beginning with Knut Wicksell and “renegade” Austrian Joseph Schumpeter. According to this model, loans create deposits and private banks are not reserve-constrained in practice. The endogenous model, which predicts that central banks have little or no control over the broad money supply, is considered to be a “heterodox” economic theory associated with the post-Keynesian school. Offshoots and associated schools include Chartalism (or Modern Monetary Theory), Circuit theory, and Horizontalism.

A few prominent bankers, no doubt based on their practical experience, publicly rejected the exogenous theory. Already in 1969, Alan Holmes, vice-president of the Federal Reserve Bank of New York, ridiculed the exogenous model, noting that it “suffers from a naive assumption that the banking system only expands loans after the system (or market factors) have put reserves in the banking system.” According to Holmes, “in the real world, banks extend credit, creating deposits in the process, and look for the reserves later… the reserves required to be maintained by the banking system are predetermined by the level of deposits existing two weeks earlier.”

Post-Keynesian economist Basil Moore, associated with Horizontalism, was perhaps the first researcher to provide extensive data suggesting that bank lending was not reserve-constrained, leading him to propose instead that loans “cause” deposits which then lead to increased reserves. However, the most convincing debunking of the exogenous theory was unexpectedly provided by neoclassical economists Kydland and Prescott, co-winners of the 2004 Nobel Memorial Prize in Economics. In an article titled “Business Cycles: Real Facts and a Monetary Myth”, published in 1990, they found “no evidence that either the monetary base or M1 leads the cycle, although some economists still believe this monetary myth”. In fact, they observed that “the monetary base lags the cycle slightly” and that the “difference of M2-M1” leads the cycle by “about three quarters”, prompting them to conclude that:

“The fact that the transaction component of real cash balances (M1) moves contemporaneously with the cycle while the much larger nontransaction component (M2) leads the cycle suggests that credit arrangements could play a significant role in future business cycle theory. Introducing money and credit into growth theory in a way that accounts for the cyclical behavior of monetary as well as real aggregates is an important open problem in economics.“

More recently, Carpenter and Demiralp (2010) have shown that “changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending”, concluding that “the textbook treatment of money in the transmission mechanism can be rejected”.

The tail that wags the dog?

According to the available data, it seems that the endogenous model is a clear winner: the evidence strongly suggests that loans are created first by private banks, and that the central bank then adds reserves to match loan creation. The statistics also show that, contrary to the textbook model, it is private banks, rather than central banks, that create most of the additional purchasing power “out of thin air”. Finally, this newly-created purchasing power is achieved by nothing more than double-entry bookkeeping: credit expansion does not require prior savings. Schumpeter offers a clear summary: “It is always a question, not of transforming purchasing power which already exists in someone’s possession, but of the creation of new purchasing power out of nothing”.

As noted by Moore, central banks have to accommodate the need for reserves if they want to avoid a credit crunch: “once deposits have been created by an act of lending, the central bank must somehow ensure that the required reserves are available at the settlement date. Otherwise the banks, no matter how hard they scramble for funds, could not in the aggregate meet their reserve requirements”. This means that the money multiplier is a poor control mechanism: increasing the amount of reserves will merely decrease the money multiplier ratios (for instance, the M2 to base money ratio).

In fact, this is what has happened since the Federal Reserve embarked on a reckless program of quantitative easing in 2008: the ratio of the broad money supply to the monetary base has decreased tremendously, meaning that in spite of all the “central bank money printing” so virulently denounced by Austrians, the effect on the broad money supply has been surprisingly limited. To put it simply: no matter how much they print, central banks cannot force commercial banks to lend.

Central banks still retain a modicum of control over the money supply through interest rates, but the impact of the official interest rate is mostly limited to the quantity of reserves held by private banks and, indirectly, the relative profitability of privately-created loans. Furthermore, this is mostly a one-sided tool: while high official interest rates may effectively induce private banks to increase their reserves and reduce the quantity of private credit, the recent crisis has shown that even zero or near-zero interest rates have little impact on commercial bank lending.

In conclusion, commercial banks, rather than being simply the “distribution arm” of central banks, are truly the “tail that wags the dog”. The broad money supply, 97% of which corresponds to credit created by commercial banks, is in fact modulated according to the market’s demand for credit rather than by government or central bank intervention. This turns the “money multiplier” mechanism on its head and renders the entire concept of “reserves” irrelevant. Although Austrians may wish to blame “paper money” for this situation, claiming that this would not happen if we used a commodity-based currency, credit created by commercial banks had already replaced notes as the most important form of money in the 19th century, while the United States were still under the gold standard, according to Congressman Wright Patman’s Primer on Money.

The role of the central banking dogma in the Austrian-Keynesian dialectic

The obvious question to ask, after considering the evidence in favor of the endogenous model, is why both Austrians and mainstream Keynesian economists are still defending the exogenous theory, although it is unsupported by the data. My view is that Keynesianism and Austrianism are two poles of an elite dialectic, focusing mostly on four dualities:

Keynesianism Austrianism
Government Big Small or none
Currency “Soft” “Hard”
Control of the money supply Central banks The “free market” (ideally)
Causes of recession Excessive saving Government intervention

This is evidently an oversimplification. Nevertheless, I think that it captures the essential dichotomies between these two theories. However, while these dichotomies are important and meaningful, they do not reveal what is obfuscated by both schools. In that context, it is remarkable that both schools want us to believe that central banks play an important role (good or bad), a claim that is debunked by the available evidence. It is likely that the goal of these apparently competing elite memes is to conceal the role of private banks and the importance of commercial loans behind the false “central banks versus free market” dichotomy.

Moreover, although both schools make a sharp distinction between central banks and private banking, the data tends to support the idea that the banking system is one (which as we know is controlled mostly by the same people), with central banks acting simply as a backstop to stabilize the system and justify the legal monopoly on currency. Viewed in that light, proposed reforms to the banking system, such as the BIS raising “capital reserve requirements”, can be seen as mere posturing: a pathetic effort to maintain the illusion that reserves and the “money multiplier” effect actually matter.

Finally, let us not forget that each school ascribes the cause of economic recessions to a phenomenon which is actually endorsed by its “opponent” (Austrians support “excessive saving” while Keynesians favor government intervention), but both ignore what is likely the main reason for our economic problems: usury.

Thanks to Anthony Migchels


Understand that the Banking System is One

  1. Unlike the U.S., several countries impose no reserve requirement. Rather their central banks automatically cover bank overdrafts at a penalty above their target for the money market rate. They also pay interest on bank reserves held at the central bank at a rate somewhat below the target rate.

  2. Martijn permalink

    I’m new to this blog and am happy to see this critical issue being discussed on a more technical level. I have a lot to study and read up on I can see! I’ve been looking for forums to spread awareness on this issue to the uninitiated. I’ve put together a simple booklet ( that I’m eager to disseminate as well as having started a petition on AVAAZ ( Any critical feedback on either would be much appreciated as well as any help in spreading the word! Thx

  3. Jim Evans permalink

    Could the creation of derivatives be an example of creating “off books” money via the creation of debt which is outside the control of central bankers?

    • REN permalink

      Greenspan’s deregulation of financial markets in late 90’s led directly to housing bubble, and deregulation of derivatives market. Wall Street then created an infrastructure of creating bad debt and disguising it as AAA investments. Mortgage documents were sliced and diced (tranched) to create mortgage backed securities (MBS). Legal documents, which are our taxpayer FDIC insured Mortgages -made at commercial banking level – were used as the basis to create a security at Wall Street Investment bank level. The MBS security is based on an insured mortgage, and hence it could be sold as “secure.” The FED is now using QE infinity, by creating digital dollars on their keyboard, and swapping for crap MBS’s. FED is doing this to forestall RICO racketeering investigation by Sheriff’s. It turns out that Sheriffs have staffs and wherewithal to go after the Bankers, and were becoming a huge threat. So, the FED is complicit in covering up crime by removing evidence.

      Another form of derivatives is Interest Rate Swaps. This is like two people betting on the price of hamburger meat. One person says it will go up and the other bets it will go down. Interest Rate Swaps are taken out by municipalities when they borrow money, usually by issuing a bond. Think of it as a form of insurance offered by Banks. Municipalities don’t want rates going up because then they will have to go to their voters for more tax income. Too big to fail banks are usually also Primary Dealers like JP Morgan and Goldman Sachs. TBTF primary dealers can manipulate LIBOR through FED influence, thus keeping rates low and forcing municipalities to continue to pay, essentially stealing from the public via taxes. If rates go up, the Swap deal makes the banker pay an offset to Municipalities. If rates go down, the municipality continues to pay Banker. One of the parties can manipulate the price of hamburger, and hence when they make a bet, they have inside knowledge and power. This is yet another form of crime done by our private banking friends. As long as rates are kept low and Municipalities are held in the legal “deal”, taxpayers are forced to fund and capitalize TBTF banks via insurance rate swaps.

      • Jim Evans permalink

        Thank you for the response.

  4. Chris permalink

    Jew high street bank creates and loans “Money”of account”, Jew Central Bank creates “legal tender” to settle debts.

    Can you identify the problem?

    • Chris permalink

      Not to mention the Jewdiciary which upholds the fraudulent transaction.

      Now can you identify the problem?

  5. REN permalink

    Here’s a comment by Cullen Roche of He says it better than I can:

    In short, MMT builds a govt centric view of the world where all money essentially comes from the govt. They say banks “leverage” what I call outside money (bank reserves). They reject the money multiplier, but use this strange terminology which implies the same concept. It’s not correct.

    Banks don’t leverage anything. They have been outsourced the right to create money. Banks are the primary issuers of money in our system. Banks issue what I call inside money (bank money – the money we all use daily) and the govt has designed a facilitating system around the banking system to protect it (the reserve system, regulations, etc).

    So the money supply is controlled by an OLIGOPOLY of private entities. It is absolutely positively not a state run “monopoly” controlled by the govt.

    • Memehunter permalink

      That’s a nice summary. I wish I could have said it so clearly. But this goes to show how various elite memes, although apparently opposed, all propagate this view of the “fiat money monopoly” controlled by central banks, when most of our money supply is in fact private bank credit.

      • REN permalink

        Central Banks are a banker creation – not a Government creation. Banker’s have an objective of facilitating transactions within their system; this in order to make their system work smoothly. Cause and Effect are reversed improperly in most people’s minds. Private Banks acquired money power (cause), then worked together to create a facilitating system (effect). Facilitating systems are check clearing, and allowing complex financial deals to be consummated. The logistics of complex deals require some sort of final authority and rule making body. Said systems need a central authority in order to facilitate the desired control e.g. a central bank. Central Bank formations in history are always funded by a merchant elite (who holds money power, monopoly power, and land rents power) or a private banking cabal working together to maneuver governments. Usually government elites are an idiocracy who have no idea of how money power works, and so they fall prey and become victimized by the parasite; laboring citizenry then become disenfranchised from their natural money power rights, as the usury mechanism has fallen into “oligopolies” hands. An oligopoly can also be church/king/bankers hence the black nobility or their equivalents..

        When a government becomes self aware, it is usually attacked and beheaded.

  6. comment deleted. See our Comment Policy.

  7. nixonscraypes permalink

    Thanks for listening,most of the posts ARE understandable, it’s mostly in the comments section where they become scrambled. Looking at the Abu stuff I can see that it is deliberate. I get a fair understanding of what you are saying,then test it against the comments and of course when the trolls are at work everything gets confused which is just their intention. It’s terribly hard explaining the money system to people, they say “that’s impossible, it doesn’t make sense” To which you reply “exactly”,and they think you’re daft,so thats why I’m studying you so I can explain a little more.

  8. REN permalink

    It’s impossible for banks to lend their reserve balances. Commercial banks are not reserve constrained. Origination of loans depends only on if a credit worthy victim agrees to be hypothecated. This is why the parasite likes to reside at the commercial bank level, it is the reproductive organ of the usury system. Yes, the parasite likes the head too, and jumps there whenever possible.

    Because reserve balances cannot be loaned, the transmission mechanism for Quantitative Easing to the regular economy is blocked via this path.

    Anybody can prove to themselves Meme’s point by calling a bank and asking the following questions:
    “Can you lend out the bank’s reserve balances”
    “No, the reserves are used to settle payments in the overnight market and to meet required reserve ratios”.
    “Is it accurate to say that loans drive deposits”
    “Yes, that would be accurate”
    “Is your lending ever constrained by reserves”
    “As I said earlier, reserves cannot be loaned. We will make a good loan regardless of our reserve position and will settle up later, if necessary…sometimes up to the last second.” “The quantity of reserves never matters but the price makes a difference to us, though we rarely care”.

  9. It is not an oversimplification to say that the central bank franchises of the international banking cartel are the source of most of mankind’s problems. The key is to understand that sovereign nations never need to borrow from any entity. It’s a cruel ruse to say that nations need to borrow money from banks that simply create it as needed for free.

    Central banks, like the Federal Reserve, are essentially insolvent entities. Their books are a train wreck if you remove the credit-ability and collateral of their captive client states. Just as in nature, the parasite is totally dependent on the sinews of the host.

    When discussing the political economy of nation states; the most important fundamental is that nations MUST issue their own money if they have any hope of being free and prosperous.

  10. Abu Aardvark permalink

    Memehunter, if we remove all your fancy words and over-reliance on mainstream central bank economists, your argument boils down to the idea that commercial banks cause tremendous booms by lending too much money. But this argument assumes that 100s or 1,000s of banks suddenly start to lend. The question is WHY. The answer is because central banks – that have the power to raise and lower interest rates – create artificial booms by keeping rates too low for too long.

    Likewise, modern monopoly central banks (in concert with the Treasury in the US) can choke off a boom if they wish by raising rates and demanding that banks stand by these rates. When price inflation was at a peak and money was circulating with incredible velocity in the late 1970s, Fed chairman Paul Volcker punctured the inflationary bubble by raising rates to nearly 20 percent. This caused a terrible recession. But then the Fed lowered rates and the 1980’s boom was on.

    This is irrefutable stuff. Commercial banks don’t have the power to raise and lower rates throughout the world with the stroke of a pen as Ben Bernanke does. This is simple common sense.

    Central banks create business cycles by manipulating credit. To try to maintain that central banks do not have this power is an exercise in futility. To try to maintain that commercial banks somehow have a mystical, larger power than the power LODGED LEGISLATIVELY in modern, monopoly central banks to manipulate rates, etc. is a contradiction of observable fact.

    No doubt you will now respond with more big words. But even the biggest words cannot change reality. You can cite all the Nobel Prize winners and Fed economists you want, but in fact, these individuals are simply trying to absolve modern central banking for the terrible pain it causes. They want central banking. They seek to justify that control. In fact, you are acting, unfortunately, as an agent of central banking by promoting this stuff.

    You want to blame the private sector (commercial banking) for a boom-bust cycle that in the modern era is generated by central banking rate manipulation. You are intent on doing this because Anthony Migchels (like Ellen Brown) wants to make a case for a government takeover of the private banking sector.

    Of course, as we know, the current banking system is nothing like a private one. But allowing government to run central banking will just make things worse. Despite Mr. Migchel’s apparent infatuation with pre-World War II German economic solutions, the dirigiste model of monetary production will always produce terrible distortions in the banking system.

    Get rid of monopoly central banking and you will be surprised how quickly modern commercial banks lose power and profitability.

    • Memehunter permalink

      Do you have any evidence to invalidate the data or the conclusions of Kydland and Prescott’s paper, which debunk the Austrian dogma about the role of central banking? If not, why should we take seriously anything you say?

      I do not deny the role of interest rates, but as documented by serious researchers (not people writing undocumented assertions like you), interest rates set by central banks have only a relatively limited effect, and central banks are in effect following private banks, as explained in the article.

      The point is not necessarily to “blame the private sector”. I am simply pointing out that commercial credit plays a much bigger role than what Austrians and mainstream Keynesians (or Chicagoans, for that matter) would have us believe. When private credit constitutes 97% of the total money supply, I think it is safe to say that we should perhaps spend a bit more time analyzing the role of commercial banks, instead of focusing almost exclusively on central banking.

      I see that you want to play the “affiliations game”, but you seem to ignore that a mainstream economist like Krugman (himself a Nobel Prize winner) is in fact defending the exogenous model of the mighty central bank, and that people like Kydland and Prescott are neoclassical economists. Interestingly, Prescott has been involved in political activity sponsored by the Cato institute:

      His colleague Kydland was a fellow of the Hoover Institute, another neoliberal think-tank. So I don’t think that the “affiliations game” will lead you anywhere in this case. The data favoring the endogenous model is very solid and has been confirmed independently by several researchers.

    • Abu Aardvark wrote:

      You want to blame the private sector (commercial banking) for a boom-bust cycle that in the modern era is generated by central banking rate manipulation. You are intent on doing this because Anthony Migchels (like Ellen Brown) wants to make a case for a government takeover of the private banking sector.

      It is ludicrous to blame “commercial banking” for booms or busts. Commercial banks are a small part a system that is totally dominated by investment banks (e.g. Goldman Sachs, JPMorgan Chase, Bank of America Merrill Lynch, Deutsche Bank, Credit Suisse). And it is no coincidence that the investment banks are also “primary bond dealers.”

      Commercial banks are being destroyed along with the real economy. In the US, the six biggest investment banks hold assets equal to 63 percent of the country’s Gross Domestic Product (GDP). I think we should be more precise in explaining the system.

      Forget the purported experts, especially Nobel prize winners, they are hired hands that avoid clarity preferring to cloud rather than clear the matter.

  11. REN permalink

    Another clue the banks are colluding is that we never have a bond failure in the primary markets. Too Big To Fail (TBTF) banks collect federal reserve notes (FRN – dollars) from their overseas banking partners and make them (FRN’s) available in the primary market. If there are not enough returning overseas FRN’s, TBTF banks will make themselves a loan and buy said TBILL. In other words, Treasury issues a TBILL into the primary market, and it always finds FRN’s available. A TBTF bank will either create new FRN credit money, or recycle from overseas, depending on conditions at the time. Later, the FED may create new digital dollars on their keyboard, and buy the TBill, now held in a TBTF bank. In this way, all ledgers balance.

    If NOT enough FRN’s are recycled from overseas, a new TBill finds new FED digital dollars, thus increasing base money supply. New money enters the supply this way.

    For each FRN dollar in negative trade imbalance, a dollar leaves and goes overseas. Those dollars are recycled back to U.S. to buy new TBills, thus funding deficit spending. Deficit dollars are re-spent, finding their way to unemployment and the military industrial complex. These FRN’s enter the economy to buy more overseas products, further hollowing out industry. Our dispossession from our own lands continues by this system. Whenever, external overseas sources of FRN’s dry up, TBTF banks step in.

    At the private bank level (horizontal) the FED makes money available through its discount window and in this way there is never a failure. Private banks can also borrow from other banks on the overnight market. Private Banks never recall their loans because there are not enough “reserves.” No BOND failures and NO recalls means debt spreading usury money private banks are in complete control.

    • REN permalink

      Addendum: It may be the TBTF bank swaps its dollar reserves for a new TBills, and then later the FED swaps its new digital (Quantitative Easing) money. In other words, TBTF don’t make themselves a loan, but instead swap reserves. TBills are considered near money and are allowed to be on the books as reserves. I’m not sure exactly what they do here, since Banking manevers are opaque at this level. But, the premise stands, private banks fund the Treasury.

      Almost all money comes into being in this fashion, about 97% in the U.S., with the balance being minted money such as coins. Note: Coins do not say “Federal Reserve” on them.

      Private Banks then have their TBills swapped out for Cash newly created at the FED. The whole idea of new TBills (Bonds) going through the Primary Bond Market first, in order to impose discipline on Government, is false. A FED agent, the TBTF bank, makes sure Government is monetized.

      Analyzing the faults of Double Entry, Debt Spreading, Usury consuming, Private Banks such as we currently enjoy, does not automatically make Gold the solution. The Gold argument is a false dialectic foisted on the unaware.

  12. nixonscraypes permalink

    Anthony,I have learned an awful lot from your blog,but you are leaving me far behind here. I am not an economist,I didn’t go to university,I just plain don’t understand half the words.If you really want to end this God awful system you must talk to real people in real words . A lot of the comments just look to me like elitist intellectuals showing off how intelligent they are. The whole system relys on fooling people with deceptive language,after all the plebs are far too stupid to understand the complexities of finance,dear boy, have another brandy and soda,light a cigar and bring on the dancing girls.When the man in the street understands the dishonesty of the money system it will change but a bunch of academics waffling in their own exclusive code are only going to perpetuate it to maintain their own status.Your gift is translating the insider talk into outsider-understandable language and I,for one,am very grateful for it and pray it will continue.

    • Thank you nixonscraypes, point taken!

    • Memehunter permalink

      Thanks for your comment, I’ll try to keep it simpler next time. But, just so that you knows, I didn’t know anything about this topic a year ago (Anthony can confirm this), so I’m not an expert and I was not trying to “show off”. However, I felt it was necessary to get a bit technical to debunk once and for all the idea that central banks control the money supply. I’m normally not writing in such a technical way (at least I hope so), but this was difficult to avoid with this topic. Or maybe I don’t have Anthony’s gift…

    • Nix,

      I agree that it seems like a bunch of academics debating undebatable subjects. There are facts, e.g. What banks are allowed to do in the way of transactions. Then there is reality, where these transactions combine to form all kinds of perilous relationships between the actors, at everyone’s risk.

      The complexity of the system causes arguments to always have a twist, and a response of “But what about X?” With a confounding bit of info from some other perspective.

      The fact that who/how/when money is created cannot be definitively explained, as well as which money matters to the economy says to me that the arguments are going nowhere. Unequal distribution of wealth has always been the case. Reformers rise and fall. If the PTB have to change their game, so be it, but guess who makes up the new rules?

      So the bottom line is that it’s a game. The system is designed for easy manipulation of the rules to allow those with assets to perpetuate their holdings once a particulate size threshold is reached.

  13. If usury is the problem, why would the master in Jesus’ parable admonish the worthless servant. “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest”?

    Would He who was without sin suggest conduct which was sin?


  14. If usury is the problem, why would the master in Jesus’ parable admonish the worthless servant. “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest”?

    Would He who was without sin suggest conduct which was sin?


    • Robert permalink

      Good point.

      Christians believed and Muslims still believe that usury is mortal sin against society.

      Jesus Christs’s social teaching is very limited. Christian social doctrine had to be built by scholars in the Middle Ages.

      We have Christ supporting interest on savings and we have Christ cleansing the Temple. Why did He do it?

      Holy Prophet Muhammad’s social teaching is very clear: Riba is Haraam (usury is strictly forbidden). Usury is classified as one of the Seven Deadly Sins in Islam.

      Islamic economics is still alive and sharia’t economists are able to interpret modern financial environment in classic terminology to fight usurious practices.

      Classical Christian interpretation of usury is presented by Thomas Aquinas:

      History of the corruption of Roman Church by Money Power is described by Michael Hoffman:

      • “Islamic economics is still alive and sharia’t economists are able to interpret modern financial environment in classic terminology to fight usurious practices.”

        How well does central government interact with this system of Islamist Economics? Is there a similar relationship between central and commercial banks as in the U.S.? How is money created in those economies? Is there much in the way of non-government money in use?

        Have you got any good references that address those kinds of questions?

  15. marxbites permalink

    By the by Anthony, you completely ignore that Austrian School Economics is 100% behind moral money and economies, EG the VOLUNTARY ones chosen by individual actors.

    Anything less is just shades of IN-voluntary statist plunder and control by the few upon the many.

    Its just that simple.

    Face it, in American history specie did its job JUST as it was supposed to. The only times it didn’t is when banks counterfeited paper beyond reserves and/or when the govt thugs intervened and allowed the crooks to SUSPEND redemptions for specie. Bimetalism was also problematic but is 100% easily cured with monometalism.

    Its all right here for those not already too twisted to bother;

    History of Money and Banking in the United States: The Colonial Era to World War II
    Murray N. Rothbard

  16. marxbites permalink

    Au contraire, the FED is owned by its member banks foreign & domestic.

    And yeah, the Treasury is absolutely complicit in the crimes. Thats why a bankster or one of their proxies is always apptd to Sect of Treas.

    Check THIS out fellows, by none other than the great grandson of well known Rockefeller man Frank Vanderlip, ex-NY Fed-head iirc – freakin scary;

    What I have been afraid to blog about: The ESF (Exchange Stablization Fund) and Its History_Part 1

  17. Dark Dirk permalink

    You should put Silvo Gesell next to Keynesianism and Austrianism. Because it is another system.

    • There are many other systems Dark Dirk, Austrianism and Keynesianism are the two elite promotions locked in a dialectic that is under investigation here.

      • Dark Dirk permalink

        Yes, you are right. My post is off topic.

  18. Ummer permalink

    Islamic finance balances between the two quite perfectly with usury being forbidden, hard currencies allowed, contracted loans witnessed, and zakat taken by the government.

    • Nassim Kamdar permalink

      One should add, that by the rate of zakaah being fixed, governments should be powerless to extort any amount they wish from the citizens. It is a built in protection against state tyranny.

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