Where Does Money Come From?

The US national debt reached astronomical proportions in 2024, exceeding $34 trillion. Just the interest repayments on this is costing the US taxpayer $1 trillion a year. This is money now no longer going towards education, healthcare or infrastructure. In her documentary – Finding the money, economist Stephanie Kelton looked at modern money theory. In her interview with Jared Bernstein, who was President Joe Biden’s economic advisor, he struggled to explain why the US was in debt when it prints its own money. When Keltan asked “…if we can print our own money, it obviously begs the question why exactly are we borrowing in a currency that we print ourselves.” Bernstein went into a long rant where he said he couldn’t explain why the US government was in debt when it prints its own money and borrows in its own money.[1] In order to understand this, we need to look at where money comes from and the role of central banks.

The US central Bank, the Federal Reserve like all central banks is separate and independent from the government and was established like this on purpose. They are private corporations whose product is the creation of money in the form of credit. The US has had a long and difficult relationship with its central bank.

The founding fathers of the US were well aware of the power of banks and banking dynasties. They therefore resisted the establishment of a central bank. Most of America’s founding fathers were against the establishment of a central bank as they worried about the likes of the Rothchild banking dynasty that established a banking empire in Europe, who issued debt to the monarchies and governments at interest and grew their influence over the rulers of Europe. Most of the American founding fathers saw money printing as the right of the government and not for private businesses, such as a central bank. It would take three attempts and 130 years to establish a permanent central bank in the US by Europe’s premier banking dynasty.

The first central bank which was known as the ‘First Bank of the United States,’ was established by Alexander Hamilton, who supported privatising money printing leading to President George Washington in 1791 to sign a charter for the bank for 20 years. Congress reluctantly incorporated the Second Bank of the United States in 1816. Like its predecessor, the Second Bank of the United States was a privately held corporation that enjoyed the enviable position of being the sole depository of US government revenue and issuer of US currency, which it lent at interest to the US government in exchange for Treasury Bonds. Its charter, like its first, was only for 20 years.

The charter of the Second Bank of the United States was due to expire in 1836, but its directors applied for renewal four years early in the hope of thwarting opposition from then President Andrew Jackson, a fierce opponent of the bankers. Jackson vetoed renewing the charter and opened an investigation into reports of widespread corruption. In 1836 the central banks charter expired and no central bank would exist in the US for the next eight decades.

By the turn of the 20th century, Europe’s banking giants with the likes of JP Morgan and Goldman Sachs famously met in 1910 at Jekyll Island, Georgia to work out how to put an end to the lack of a central bank in the US. They wrote the details of what they wanted, and this became incorporated into the Federal Reserve Act that was passed by Congress on the 23rd of December 1913, creating the Federal Reserve Bank.[2] The Federal Reserve was established as a private company, controlled by its shareholders who would issue money (credit) at interest to the US government. The bill was bitterly opposed in the Senate, with nearly half of the senators missing and only a minority voting for the bill.

The nightmare of the US founding fathers came true after 163 years since the founding of the United States. When a banking crisis arrived in the 1930s, triggered by the Federal Reserve’s very own policies of excessive credit creation, the Fed failed to act. Hundreds of thousands of farmers lost their land and livelihoods. The Great Depression changed the face of America. Yet the Fed has never been held accountable for its policies.

America’s financial industry has expanded and evolved from the creation of the federal reserve in 1913. What we have today in the US was started by Europe’s banking dynasties in much the same way they came to dominate Europe’s financial system.

When the US government needs to balance its budget, it needs to borrow money, and it does this in two ways. It borrows directly from the federal reserve, which it then needs to repay with interest. Or as is most common the federal reserve issues bonds on behalf of the government and the government then has to repay this debt with interest from its revenues. The largest single owner of US treasury bonds to the tune of $6 trillion is the Federal Reserve itself. The US federal government owes the most debt to the Federal Reserve itself.

If the US federal government nationalised the Federal Reserve, then it would be issuing its own money and could print the dollar at will. But money printing in the US economy, much like most of the world, is in the hands of central banks and not with the central government. It is the US central bank, the Federal Reserve that determines how much money is in the US economy. In the US today, 97% of money is issued by banks in the form of loans. Whilst there are over 5000 banks in the US, a mere five banks control half of the nation’s banking assets. The dollar is, as a result, not issued by the federal government, but by the federal reserve and 5 large banks.

This raises the question, who does the Federal Reserve report to when it’s an independent corporation? The Fed is managed by the central bank of central banks – the Bank of International Settlement (BIS) in Geneva who gather annually in the Swiss Alps to determine their policies. The BIS was established in 1920 by Europe’s banking dynasties who wanted to create a global banking system.

Therefore, the reason why the US federal government is in debt and owes $34 trillion is because it doesn’t own its national currency, this was privatised to the US central bank, the federal reserve back in 1913.

[1] See, https://youtu.be/1Fj0zRmEWYc

[2] Dishonest Money, Financing the Road to Ruin, Joseph Plummer, 2024