Books and documents:
Agustí Chalaux de Subirà, Brauli Tamarit Tamarit.
Agustí Chalaux de Subirà.
Agustí Chalaux de Subirà.
Agustí Chalaux de Subirà.
Magdalena Grau, Agustí Chalaux.
Chapter 7. The kingdom of darkness.
The features of the different forms of historic (metallist) currency
are: anonymity, uniformity and mobility.
The anonymity of metal-money or of paper-money (it does not
inform on who is buying or selling) allows all sorts of monetary
activities to be carried out without leaving any personalized and responsibilized
trace. The uniformity of these monetary instruments is almost complete
(except for the of monetary units represented by each), as they do not
provide any information on the details of the transactions. They do not
inform on what, how, when, or where a sale-purchase has been
carried out. They therefore prevent any attempt of exact analysis of the
complex and flowing trade reality. The mobility of this sort of
currency (that can be used indefinitely in lots of exchanges) prevents
the identification of each sale-purchase operation and, therefore, prevents
the partial or total accumulation of their values.
It would be interesting, as a literary recourse to describe a given
society, to tell the story of a bank note. Let us suppose that it carried
recorded on it the places where it has been, who has used it, and what
for. This would be an exciting story which each of us can try to build
up, using imagination, a story full of surprises. But if instead of being
somebody who tries to have a good time making recourse to fiction, the
interested party were an economist, he would like to know not only what
one bank note has been doing, but all the bank notes. It would be fantastic!
He could know the monetary flow of real economy, of financial economy and
of underground economy! All in a direct way, without creating indexes nor
trusting declarations, all of them biased and manipulated. If it were a
judge, instead of an economist, he might go mad, because he could compare
the declarations of the defendant with the actual story recorded on, or
told by, the bank notes which have taken part in the murder, in the bribery
or in the robbery.
This is then one of the disappointments in our civilization: that bank-notes
do not record anything and do not speak. They leave no trace and are dumb.
The economist and the judge will have to play the novelists, whether they
like it or not. They must construe real stories with partial or false documents.
The lack of evidence therefore acquits both the defendants and those judging
them, and leaves those who have been wronged in the greatest defenselessness.
All immersed in the kingdom of darkness, of shadows, of the lack of transparency.
Everybody becomes responsible before «God and History». The
politicians promise and don't honour their promises; the economists forecast
again and again, and almost never get it right; the judges must acquit
convicts for lack of formal evidence...
We are so used to cohabiting with money, to love it and to hate it,
that possibly we have seldom looked at a bank note long enough to see its
features beyond its practical function of paying or saving. Let us do it,
then, at least once. Let us take one, for its value does not matter.
We have a special kind paper. Some faces or drawings are to be seen,
while others, invisible, can only be looked at against the light. And finally
we see figures, several figures.
All the notes of the same value are practically the same. To be the
owner depends on the actual physical possession. If we lose them, or they
are stolen from us, we lose all rights to them. They are anonymous.
When I pay, the bank-note does not say anything. It is always silent.
It does not leave any trace. It is always running. It constantly goes from
hand to hand. Or it remains forgotten during centuries under a tile or
in a safe.
Monetary circulation is, by definition, the kingdom of darkness. Nobody
knows nor can know anything, neither for good nor for evil. Neither to
balance economy nor to pursue a murderer: And who ever says the opposite,
whether he is a minister, a banker or governor of the national bank, is
cheating and lying. And in the kingdom of darkness, of gloom, all is possible,
all goes unpunished.
The wizards of
«Let me tell you a story of when one thousand pesetas still
had some value».
«A civil engineer arrives at a small village, to study the project
of a road. He goes to the only inn and has lunch. He then calls the innkeeper
and gives him one thousand pesetas»:
«-I'll possibly stay a couple of days. Please book a room for
me. When I come back this evening I'll confirm it to you. In the meantime
please take these thousand pesetas and we shall settle matters later».
«The innkeeper went to the kitchen to talk to his wife. With those
thousand pesetas they could pay the butcher, to whom they owed the same
amount. When the butcher got the money he quickly settled a debt he had
with the carpenter; this did the same with the blacksmith; since the blasmith's
wife owed one thousand pesetas to the chemist for the medicine she bought
for her children when they got scarlet fever, and for her husband when
he had an abscess, she thought it was an opportunity to pay him off».
«When the chemist got the money, he closed his shop for a while
and went to the inn to pay a debt he still had from the banquet when his
daughter got married».
«In the meantime the day had gone and the engineer came back»:
«-Look, since the road will not cross the village, as we have
agreed with the local authorities, I have decided to go back to town to-day.
Therefore, please take the price of my lunch from those thousand pesetas,
and forgive any inconveniency».
«When the engineer went away, the innkeeper told his wife»:
«-It was good luck that the chemist paid his debt, because otherwise
I don't know how I could have settled things1!».
This story leads us into the matter of the creation of money, which we
have already mentioned. This is a very important matter, and quite unknown.
Almost everybody accepts that, at present, the bank system is, in fact,
the actual creator of our means of payment, which is currency. We can find
many explanations of the systems to create money in almost all the economy
Through a careful reading we may deduct the following conclusions:
«Creation of money» has two phases:
At first the national bank emits coins and banknotes, which are
the legal means of payment, and, at the same time, produces resources granting
to the banking system.
In a second phase the banks create deposits (current accounts = monetary
units) as a result of the credit expansion (through granting credits
on other people's resources).
Let us explain it more clearly. After a long process in which the gold
reserves are no longer related to the emitted currency, at present legal
currency has two instruments: the banknores and the metal coins produced
by each State, and which are accepted through the public trust and the
official support they receive. Oddly enough, however, the whole of the
banknotes and coins in many State represent only about 10 per cent of the
currency used. The remaining currency is created by the banks (banking
system) and works by means of cheques and notations in current accounts.
We shall give an easy example.
Let us suppose that somebody deposits in his current account a quantity
of pesetas in banknotes.
The bank knows, through its own experience, that this amount is not
usually cashed all at once and, therefore, it can put a part of this amount
at the disposal of a customer who has applied for a credit.
The credit is granted as an accounting deposit (entering a certain amount)
in a current account. The credit beneficiary will use it to pay his debts
or to meet some expenses.
The people receiving money from the beneficiary will possibly deposit
some of the money in the bank. (For the time being it is not important
whether it is the same bank or another one). What we must see is that a
new deposit has been created through a new down-payment.
This second deposit will allow the granting of a new credit. In this
way the procedure can to a certain extent be repeated, i.e.. a down-payment
in a current account (at sight) is the origin of a credit which generates
at the same time a new down-payment, and all without stopping the first
credit from being available to the customer. In this way the expansion
of the credit increases the amount of currency available to consumers and
On the contrary, the long term accounts (money left in the bank for
some months or years) do not allow the expansion of credit. The holders
of these accounts commit themselves not to use the deposited amount for
a given time. During this time the bank will lend the amount to whoever
applies for a loan. In this case the bank acts as a middleman: it collects
savings and converts them into capital-investment. This is, according to
the banks, their task, and what most people think they do: the business
of banks is the difference between the interests they collect and the interests
The creation of means of payment cannot be arbitrary without producing
serious market problems, since the imbalance between the real sector (production
and consumption) and the monetary sector of economy produces monetary inflation
In a growing market there are evidently new, necessary means of payment
to meet new investments, new production and new consumption. The problem
is to guess the right amount of money which must be invented. But at present
it is very difficult to know which is the right amount, because every State
and every bank look for their own advantage, and the controls of the monetary
authorities cannot be completely effective without really knowing the exact
data that must be balanced, which is the value of production and active
money for its purchase. Therefore, what can happen is that «nobody
knows exactly how many millions of banknotes -dollars- are printed by the
Federal Reserve, because their number is an esoteric figure which only
some priests of the Bank know3».
banking system. Judge and party in its own case.
We have tried to approach one of the nuclei of the economic system,
looking for clues on how money is created. But the following is also a
key question: who takes the invented money?
Apparently the invented money is distributed among customers. But we
must point out that the bank charges high interest rates and in practice
does not pay any, as it is granting credits with invented money. Some time
ago (and even now, in many cases) the initial deposit and the balances
of current accounts used to get a premium, but at a very low level (for
example: 1 per cent) with respect to the interests produced by credits
(for example: 17 per cent).
However, the bank has an important working hoard -which does not belong
to it- and of which it takes advantage at a very little cost. In short,
the important thing about money is to be able to use it, rather than to
have it. Banks and bankers can obtain selfcredit in very good conditions;
they can foster or hinder financial, speculative, exchange, investment,
political, electoral, cultural... operations. As far as credits are usually
granted to those having assets, they help owners and victimize those who
have good projects but nothing to mortgage. Another beneficiary of the
credit increase is the national bank. This compels the banks to lodge in
it a percentage of the deposits with almost no compensation. When the States
appeal to the national bank to cover the public deficit, they cause money
to be invented which, as long as it does not correspond to an actual increase
of production, will benefit some citizens -those receiving this money from
the State- to the detriment of the others, who will be prejudiced by inflation.
Most books on economy explain theses processes in greater or lesser
detail. What is surprising in all of them is that they make no comments
on the effectivity and legitimacy of this bank system for the creation
As far as effectiveness is concerned, the creation of bank money has
a serious inner contradiction. On the one hand, the banks try to create
as many deposits as possible, because on every new credit they charge high
interest rates. Let us remember that, banks almost never reward current
accounts at sight, which are the origin of credits. We have here a very
important phenomenon because of its economic and social implications. It
is impossible for the banks to look for the higest benefits for themselves
and for the global economic balance. The monetary authorities have a number
of means by which they to restrain the growth of the monetary offer when
it creates inflation. But since they are indirect means (increase of the
amount of compulsory reserves, increase of the basic interest rates, and
emission of Treasury bonds), the effects are unpredictable and, besides,
they involve other important economic variables (investments, unemployment...)
which not always give sufficient freedom of action.
As far as the legitimacy of the bank's creation of money is concerned,
this problem is usually not raised. Why should society consider it a positive
asset, that companies should invent and use money without a proportional
retribution to all of the current account holders on the basis of the common
savings of the whole population? Why should a task, with very important
«economic» common effects, that is not always balanced, be
left in the hands of private interests? We have here a very subtle phenomenon
of hyperexploitation which does not concern only one class (capital) taking
advantage of another one (labour), but bears very few persons taking advantage
of the whole of society. (This matter has already been shown in chapter
This subtle exploitation gives power. In this case it is a special power
which is stated in many ways, are being a strategical power for society:
the banking system is responsible for most of the financing of the electoral
system, that is for supplying funds to parties and candidates to elections
with no other standard than the «trust». Oddly enough, the
explanation and discussion of the legitimacy of these means of creation
and taking of money by the banking system do not appear in the economy
books or, even less so, in the electoral programmes.
As a matter of fact it is very difficult to throw light on the incidence
of these means of reality. In the absence of a clear monetary system, most
positions are opposed through different opinions and suggestions. Here
are some of them:
«At present, bankers, absolutely all bankers, are the actual
creators of money».
«They know it, but in an abstract form: in the last thirty years
most economists have explained this reality; but in the experiences the
matter is shifted to often that bankers do not see it clearly. They are
like the uncunning magician getting rabbits out of his hat and not remembering
having put them in...».
«Banks create money in the same way humans think: it is not necessary
to will it».
«When a banker examines his balance sheet, he finds that there
is an equilibrium between deposits and credits. But he knows perfectly
well that these deposits do not belong to him. With the exception of the
bank's own resources [...] he will see on the one hand some credits to
his debtors and, on the other hand, some debts to his deposit holders.
If he compares two successive balance sheets he will find that deposits
and credits have increased to a certain extent. Nothing more. The money
that he may have created cannot be singled out in his balance sheet. The
newly created money is not different from the old, which goes on circulating.
Deposits mix among themselves indissolubly. The rabbit does not come out
from the hat until all the balances of all the banks come together to produce
the complete statistics: then it can be clearly seen that the amount of
money in circulation has increased... Where is the secret?».
«The secret is that the money circulating at present is a circulating
debt [...] contracted by special concerns4».
«If we tell any banker of the chain that he has «created»
money, he will protest forcefully. He will sustain the credits he granted,
that were backed by an excess of reserves as big as the credit itself5».
«Bankers are right when they say that they never lend one cent
beyond what they have. The money is not created in the process of lending
because a bank gives more money than it has. Money is created because in
general you and I pay each other with cheques which give us rights to the
banks of the others. There would be no creation of money if we cashed all
the cheques we receive. But we don't. We deposit our cheques in our current
accounts and, in doing so, we give our banks more reserves than they need
to ensure the deposits they have. These new excesses of reserves put our
bank in a position to lend or to invest and, therefore, make it possible
for somebody else to open current accounts which again produce new excesses
«This may cause some fear. Does this mean that the new monetary
offer spreads indefinitely from only one new deposit? Wouldn't that be
«Of course this would be very dangerous, but it is impossible
for it to happen. After having well understood how an original increase
of deposits increases the offer of money, we must also understand what
causes expansion to stay within its limits».
All this complex reasoning is brutally casuistical. How can such an important,
strategic and powerful tool be so scarcely clear, and so little exact,
and how can it be left in the hands of the short-term intersts of the banks?
The complication does not finish here because, even if «theoretically»
the national bank says that it has control mechanisms, in practice they
are not always effective. On top of that it must be noted that today there
are a great number of other forms of «currency», besides paper-money
and bank-money, which can no longer be controlled by the national bank.
«There is no clear cut separation line, within the whole of cash-flow,
between what is currency and what is not. Whichever the definition chosen
for currency, this definition will be surrounded by a number of instruments,
more or less flowing, which can be used as substitutes6...».
To try to lay down the bases of the monetary policy not only shall the
bank-notes and coins, the deposits at sight, the savings deposits, the
long-term deposits... be kept in mind, but also the Assets in the Hands
of the Public (ALP), which cover a large amount of uncontrollable quasi-currency,
of paper being used as if it were currency: public debt, premiums, temporary
cessions, companies' promissory notes... In Spain these ALP, in 15 years,
have increased in number by in about 1400 per cent!
«It is easy to deduct, from all the previous considerations, that
there cannot be an effective control on the invention of money».
«The immediate result of this situation is that every bank, within
the more or less strict conditions set out by the national bank, behaves
according to its own convenience. And there is no effective law on the
whole to allow to set out global strategies for the whole market. Needs
are met empirically and partially not in terms of the overall needs but
almost always on behalf of the privileged sectors of society7».
in the vaults.
Up to now we have been considering the legal process of creation of
money, as a consequence of the interaction among emission of the national
bank, expansion of the banks' credits, and utilization of cheques and current
accounts by customers.
Wouldn't we be naïve, if we thought that this legal process is
the only actual process for the invention of money? There is apparently
a growing trust that fraud becomes more and more difficult, law is becoming
harder and harder, inspectors are incorruptible. But if this were true,
how is it that the Spanish government itself admits that in 1989 there
were about 9.000 billions of black money (which represented almost one
third of the gross national product8)?
There is no need to go that far. How many companies do not have a double,
or treble, accounting? and, in this general environment, are the banks
We may say that this happens only whitin our latitudes through the lack
of effectiveness of bureaucrats, but that, in the USA for example, all
this is impossible. For those who have no doubts, it is advisable to read
the last survey-book by Vance Packard (1989) on the ultra-rich Americans.
«As a matter of fact, the wealthiest people fix the amount of their
taxes themselves. As it is explained by a financial adviser of the Washington
area, specialized in established fortunes: «My clients decide the
amount they wish to pay to the government, and we do whatever is necessary
to make it so.» «We do not pay taxes. Only the small ones pay
them.» -says multimillionaire Leona Hemley. «I know people
five times wealthier than I am, who swank they have never paid a tax»
-confirms Mr. Sol Price, with a fortune valued 200 million dollars9».
on a macroeconomic level we do not find any clear recording showing the
yearly creation of money by the banks, nor any indicator of their relationship
with the cash deposits which have been effected. Everything becomes complicated
and difficult to calculate for any citizan, and also for any economist
that isn't a specialist. One of the few economists which give a capital
importance to the creation of money is Maurice Allais, Nobel Prize winner
of Economics in 1988. He suggests to «give back to the State, that
is to the collectivity, the income related to the monetary creation».
«The revenue from the creation of money would go directly to the
State, which could then reduce taxes. Most, if not all, of the progressive
income taxes could be suppressed10».
Besides, the bank system is a patron of foul play: black money (from
hidden economy), red money (from drugs), dirty money (from criminal circles),
are whitewashed by the banks. Many things are hidden by the bank. The clearest
case, but not the only one, is the whitewashing of red money, produced
by the drugs trade.
the great banks in the United States have accepted they had infringed the
Federal Reserve Law as a system to whitewash the money from the
maffia, collected in the areas where great amount of cash are deposited
every day.» «The Government representative for the National
Programme against Drugs acknowledges that up to now it is a mystery how
the money from drugs moves around in Spain. It is also not exactly known
what financial props are used by those dealing drugs. However, we know
that the profits obtained in Spain and in other countries, after their
are transferred to the network of tax paradises of the international
banking system.» Mitterrand himself has said that «the banks
which have recirculated money from the drugs trade deserve radical punishments,
because in this field we must act mercilessly. This matter justifies that
the necessary researches be authorized on the origin of bank money all
over the world11».
«The «naughty» ones are the tax paradises. What nobody
says is that most of the international banks have offices in them12».
«Unfortunately, we know of no study in which the percentage of credits
is stated, which were squandered by the élites of the Third World
countries, and which in most cases, found a discrete shelter in the banks
of the industrial countries through their tax paradises.» «Industrialized
countries usually do not remember that their banks are the first to take
advantage of these flights of capital, the same as with the «whitewashing»
of the black money from drug trafficking13».
In short, a subtle weapon is hidden behind the brilliance of marble,
the security of steel, the impeccable accounting, the undiscussed uprightness
of people... which only a small minority of very well located persons know
of, and who, since they only care for their own interests, not only jeopardize
the general balance and may endanger the whole, but, sooner or later, as
with a boomerang, may endanger themselves.
Busquets, «Només seixanta duros», El 9 Nou, 27.10.1989.
Ma. Bricall (1979), «Introducció a l'Economia», Editorial
Ariel, Barcelona, 1980; Richard G. Lipsey (1983), «Introducción
a la Economía Positiva», Vicens Universidad, Barcelona, 1985;
Miguel A. Lorente, «Banca y Mercado Monetario», Banco de Vizcaya,
crisis que viene», Más Allá, No. 19.
Lavrillère, «La industria de los banqueros», A. Redondo
Editor, Barcelona, 1969, pp. 87-89.
L. Heilbronner and Lester C. Thurow (1982), «Introducció a
l'economia», Editorial Empúries, Barcelona, 1985, p. 298.
Grau, «Moneda telemàtica i estratègia de mercat»,
Centre d'Estudis Joan Bardina, Barcelona, 1985, (mentioning
negro: lo único que sobra en España», La Mañana,
Packard, «Les ultra riches», Acropole, Paris, 1990.
que acabar con los impuestos sobre la renta», La Vanguardia-Dominical,
20.8.1989, pp. 16-22.
Narcotráfico y la Banca», La Gaceta, 29.12.1989.
e hipocresía», La Vanguardia, 9/1989.
problema de la deuda», La Vanguardia, 9/1989.