Outline of Monetary Theory

Frank F. Bille

[An undated pamphlet written by the author]


True Credit is the giving of goods and services in exchange, against a promise of compensation. True Credit is based on a moral code of value: Trust. True Debt is the necessary corollary of True Credit. There cannot be the one without the other. True Credit is, the primary, positive action; True Debt is the secondary, negative re-action.


The promise of compensation is the vehicle of True Credit. It is contingent upon a moral code of value: Justice.

Fulfillment of the promise takes place when goods and/or of an equal value are received as compensation for that which was given on credit. Payment in money is not fulfillment but just another form of promise. The promise can have different forms:

1. Promise, without evidence but based on moral obligation alone. Fulfillment depends on Individual Justice.

2. Promise evidenced by a document stating the credit given, and the promise received. Fulfillment depends on Individual and Legal: Justice.

3. Promise evidenced by MONEY. To the money holder, money is the evidence of a credit given to the Nation and a promise received from the Nation. Fulfillment depends on N ationa1 Justice.


The money holder who has given True Credit to the Nation is abstaining from his interest in the goods and services which he delivered trusting the promise evidenced by the money. This abstention, or sacrifice of interest is the money holder's contribution to the Nation's monetary establishment, and the sacrifice is richly compensated for by the immeasurable advantages and conveniences provided by the universally accepted Medium of Exchange, MONEY.

The Nation's Money is the evidence of a forever circulating, interest-free credit given by an endless succession of people who successively receive the fulfillment while passing on the forever unfulfilled promise evidenced by money.

Because money is the evidence of the Nation's Credit, the Nation is the true original owner of the money at the point of issue. The individuals become true owners of the money when it is given them in exchange for goods and services rendered to the government.

The Nation's true credit evidenced by the Nation's money is the government's true debt because the Nation has given the Credit to the government with an obligation to supply the Nation with money and to regulate the value thereof (Constitution, Art. 1, sec. 8, par. 5) Therefore, the Nation's total money supply, or circulating media, does constitute a never to be paid, interest-free loan which the national government will owe to the Nation forever. In the true spirit of the United States Constitution, this form of national debt is the only one under which the national government can prudently commit itself, (Constitution, Art. 1, sec. 8, par. 2.)

The Nation's money is given in trust to the national government on the assumption that the government will execute its power to secure justice by preventing injustice.


Justice requires that nobody shall receive the evidence of promise under any form of circulating medium without having first given given the true credit that is a necessary prerequisite to the promise.

When this necessary national justice is being constantly performed the value of the Nation's money is rendered secure against both Inflation and Deflation. National justice is a guarantee of the necessary equilibrium of the credit given and the promise received. Therefore,


Inflation is the injection of promises not justified by an equivalent of true credit given.

Deflation is the removal of promises, even though the true credit may have been rendered already, by somebody else.


The credit given and the promise received are evidenced by being engraved, stamped, printed or otherwise attached to a material substance which has the quality that it cannot easily be substituted or counterfeited.

The material substance -- such as Gold or Paper -- cannot either add to or subtract from the value of the promise attached to the substance. In such cases as when the promise has become worth less than the intrinsic reclaim value of the substance (as demonstrated by the vanishing American Silver Dollar) the substance is still not adding to the promise but will simply terminate its function as money material and revert to its original status as a commodity. By so doing, the substance becomes, in itself, the fulfillment of the promise (Gresham's Law).

The hoarding of gold and silver under the pretense of safeguarding the value of dollars is, therefore, about as effective as would be the hiring of a thousand meteorologists under the pretense of tense of procuring fair weather on the fourth of July.


The value of existing promises as evidenced by the total supply of money depends on the production and availability of goods and services. Prices of goods in general are higher or lower depending on the rate of exchange between goods and money.

An increasing population increases the production by an arithmetical progression. A rising productivity will add to the production by a geometric progression.

The question as to the quantitative control of the money supply is whether the issuance of new money should p r o g r e s s along with the increase of population or in step with, the increase of production. The former case can be designated the "Population Standard" and the latter the "Production Standard". If the population standard is applied, the prices will tend to fall because a rising production per person is to be exchanged against an unchanged number of dollars per person. If the production standard is applied, prices will tend to remain stable because the number of dollars is being increased in proportion to the number of economic units produced. Practical and judicious considerations will decide in favor of the population standard, for several reasons:

1. The exact population figure is easily available through the periodical census, whereas it is impossible to compile any reliable statistician the Gross National .Product (GNP) expressed in terms of standard units of-production.

2. If the population standard is applied, all wage earners will automatically receive the increase in: real wages caused by the rising general productivity without having their monetary wages increased. The need for constant or periodical pay raises and the resultant work stoppages and strikes will be eliminated thereby. That does not rule out pay raises motivated by advancement from a less appreciated job to a more appreciated job.

3. Savings accounts, life insurance policies and all other investments expressed in terms of dollars would, automatically gain-in value, and it would be possible and worth while to save sufficient funds for one's own retirement instead of having to rely on the Welfare State's bankrupt Social Security System.


If national justice is maintained, no person will gain possession of money without having contributed the equivalent value in goods and services. In charity cases the giver -- and in robbery cases the robbed -- will have fulfilled that dirty in behalf of the recipients.

If national justice is performed, the producers will receive enough money in wages and interest to enable them to buy their own total production in exchange. Production will be stimulated, and the general standard of living will rise rapidly, unemployment will be reduced to the technical minimum, and individual freedom will replace the paternalism of the Welfare State.

If the population standard is applied, the wage earner, with the same amount of monetary wages, will be able to buy the usual bagful of groceries for less and less money, so that he can use the surplus to buy the luxuries which the higher productivity has made available.

However, we do not have national justice, nor economic balance. The Welfare State's frantic attempt at balancing the economy by its "War on Poverty" and its ideas of taking from the "haves" and giving to the "have nots" is a contradiction in its itself because we can not absolve a crime by committing another.


Disregard of natural justice has established customs, beliefs and practices which violate the natural right of ownership. Since the right of ownership is the fundamental -- and indispensable economic principle, economic balance is disturbed, and man-made economic calamities occur which are worse than all natural catastrophies combined.


Not understanding the fact that the true basis for issuance of money is the interest-free credit given by the people to the Nation and let in trust to the government, the Nation has permitted this valuable a s set to be left unused and wasted. Because of the failure of Congress to provide for the Nation's money supply, the business of originating money - and the profits therefrom -- have become the monopoly of banks, and this monopoly is now, since tile year 1913, consolidated in The Federal Reserve System.

The banking system does not give any true credit, it does not produce anything whatsoever fit for human consumption, Yet, it originates bank credit, a fictitious credit, fictitious in the sense that it does not belong to the banks but to the Nation. This fictitious credit is made available to both the government and the people as loans against interest. In order to obtain the vitally needed circulating media with which to carry on the Nation's business, the government as well as the people must first create a fictitious debt to match the fictitious bank credit. The federal debt is fictitious because the government is, ipso facto, borrowing its own money against interest; the bank credits financing the business community is fictitious because the business community as a whole would, if justice had prevailed, become the true owner of the money in the normal course of exchange, so the business community is also, ipso facto, borrowing its own money from the banks against interest. Thus, the businessmen are sacrificing their interest twice, first by the very holding of money instead of goods and services, and secondly by direct payment of interest to the banks.

The Nation's money supply can be maintained only by continuous borrowing from the banking system. The borrowing -- and the supply of money -- are increasing in periods of optimism, causing what is called boom conditions, and decreasing in periods of pessimism, causing recession, depression, unemployment and poverty. The money supply is an elastic currency, and the deplorable fact is that it is made so on purpose. It is elastic because nobody really claims the true ownership of the Nation' s credit. If all money were truly in the hands of the individual owners at all times, no such inflation and def1ation could possibly take place, and neither optimism nor pessimism could have any influence on the money supply. Our currency is as untrustworthy as would be an elastic yardstick.


Furthermore, the borrowing will not take place, and the money supply cannot be maintained, if the would-be borrowers cannot put up sufficient collateral to prove their creditworthiness.

The government is considered creditworthy because Uncle Sam can capitalize the expected tax revenues from future generations of taxpayers in the form of government bonds, and the bonds are offered as securities in exchange for fictitious bank credit.

The same bonds, now in the hands of the banking system, are then used as collateral when the banking system "obtains" paper money marked "Federal Reserve Note" from the National Treasury, practically interest-free.

The citizen is considered especially creditworthy if he owns real estate. A large part of all real estate value consists of raw land value which is the capitalized value of the expected land rent from future generations of land users.

Government bonds and land value's are forms of false capital, or non-existent wealth. False capital is capitalized unearned income arising from the monopolization of the Nation's credit and the Nation's land rent which are both forms of community-created values which truly belong to the Nation, or the community, and not to individuals. Capitalization of these community-created values is possible only because the Nation is ignorant of its own true public property and is not claiming the revenues arising from the Nation's credit and the Nation's land rent. When this huge false capital is financed with fictitious bank credit, the inevitable result is inflation.

The increasing cost of bank interest, inflated land rent and inflated taxes combine to cause a slowdown in business, in construction and in employment, in investment and in borrowing, in profits and in tax receipts, in optimism and in creditworthiness, and, the old scapegoat, the business cycle, assumes the downward trend towards deflation, recession and depression.

To counteract this downward, trend the government must start its pump priming by deficit spending, selling more bonds, spending more money on projects which have absolutely no economic justification, increasing socialistic welfare programs and leading us further down the path towards communism.