Outline of Monetary Theory
Frank F. Bille
[An undated pamphlet written by the author]
TRUE CREDIT AND TRUE DEBT
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
THE PROMISE OF COMPENSATION
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:
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 OWNERSHIP OF MONEY
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,
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.
NATIONAL JUSTICE IS THE TRUE FOUNDATION OF MONEY AND IS
THE ONLY PRACTICABLE STANDARD OF VALUE
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 MATERIAL EVIDENCE
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
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 QUANTITATIVE CONTROL OF MONEY
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
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.
THE FATAL FALLACIES OF FALSE CAPITALISM
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
MONETIZATION OF FICTITIOUS DEBT
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.
FINANCING OF FICTITIOUS WEALTH WITH FICTITIOUS CREDIT
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,
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
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.