Fractional Reserve Banking as Economic Parasitism

A Scientific, Mathematical, & Historical Expose, Critique, and Manifesto

Vladimir Z. Nurivznuri@yahoo.com

Abstract

This paper looks at the history of money and its mod-ern form from a scientific and mathematical point ofview. The approach here is to emphasize simplicity.A straightforward model and algebraic formula for alarge economy analogous to the ideal gas law of ther-modynamics is proposed. It may be something like anew F = ma rule of the emerging econophysics field.Some implications of the equation are outlined, de-rived, and proved. The phenomena of counterfeiting,inflation and deflation are analyzed for interrelations.Analogies of the economy to an ecosystem or energysystem are advanced. The fundamental legitimacyof “expansion of the money supply” in particular isre-examined and challenged. From the hypothesesa major (admittedly radical) conclusion is that themodern international “fractional reserve banking sys-tem” is actually equivalent to legalized economic par-asitism by private bankers. This is the case because,contrary to conventional wisdom, the proceeds of in-flation are not actually spendable by the state. Alsopossible are forms of “economic warfare” based onthe principles. Alternative systems are proposed toremediate this catastrophic flaw.

1 introduction

“An invasion of armies can be resisted, butnot an idea whose time has come.”

—Victor Hugo

The dynamics of money is an extremely complicatedsubject. It’s a foremost preoccupation of humans,

as in the way money system mechanics is intricatelywoven into major plotlines of complex and influentialpopular fiction works such as Rand’s Atlas Shrugged[52] or Stephenson’s Cryptonomicon [61]. Extrapo-lated, it even becomes a “social energy system” themein more futuristic or outlandish forms such as emerg-ing from the popular science fiction movie The Ma-trix.

Possibly the full leverage of focused worldwide sci-entific inquiry and attention has yet to be appliedto economics. Some evidence that the science isstill in its infancy are that new fields of “economicphysics” or “econophysics,” “computational finance,”also dubbed “phynance,” have been proposed onlyrecently. [4, 19, 18] Physicists are applying statisti-cal and computational modelling techniques to comeup with creative, ad hoc, or highly realistic theoriesof money flow in e.g. large economies or stock mar-kets. [20] Despite the overused cliche, objective scien-tific commentators sensitive to these kinds of shiftsand trends could easily identify all the signs of anapparent Kuhnian “paradigm shift” [38] in progress.

So the blaring headlines read, “Physicists try tobreak economists’ monopoly on financial theory” [4]and “Physicists attempt to scale the ivory towers offinance.” [19]

One major factor in the shift is increased compu-tational power due to the so-far-uninterrupted real-ization of Moore’s law over about four decades at theclose of the 20th century, i.e. exponential growth (ingates per chip or many other similar measurements).This awesome and accessible power has elevated thecomputer to the status of a new scientific instrument,roughly analogous to the invention of the microscope

1

or telescope, which has rapidly transformed conven-tional scientific perspectives on laws of both natureand societies.

Complexity is the buzzword across multiple disci-plines, even as previously segregrated disciplines aremarried [12, 66] (e.g. in the case here, physics, fi-nance, biology, thermodynamics, etc.). It is likely keyinsights have not yet been totally realized, remainingpotential lying undeveloped. For example, virtuallyall economic theory of the 20th century was devel-oped largely without extensive computational exper-iments, modelling, simulations, and empirical analy-sis, so central to the new style of inquiry via the pre-miere, even transcendental instrument(s) of science—the computer and the algorithm. [13, 5]

The new breed of econophysicists are very open-minded in their metaphors, borrowing seemingly al-most indiscriminately (leaving them open to one ofthe major but predictable criticisms). A particularnew meme receiving heavy attention and advance-ment is the metaphor of the economy as an ecosystem.Such a view seems obvious in retrospect of various re-search delineating the parallels, but it was unfamiliar,novel, and even somewhat radical when first exhaus-tively and definitively proposed by e.g. Rothschild inthe seminal and foresightful book Bionomics: Econ-omy as Ecosystem. [55] It was not clear initially ifthe idea was just another shallow fad not so muchwith scientific merit but to be mostly appropriatedby those seeking to justify ulterior political or socialagendas. [7]

However, subsequent quantitative research, now afull decade after Rothschild’s manifesto, has pushedthe metaphor into reality and significantly strength-ened the case for its validity and correctness. Asa Wall Street Journal reviewer wrote, used as thefront-cover blurb for the book, “Revolutionary. . . afascinating and highly creative alternative to the wayconventional economics views the world.” The earlytour de force analysis by Farmer, “Market force, ecol-ogy, and evolution” [20] invokes and reapplies theimportant Lotka-Volterra differential equations orig-inally proposed for modelling population dynamicsto a stock market system (see Farmer’s work for anexcellent survey of the economy-as-ecosystem memethread in the scientific literature).

As usual with a paradigm shift, the perspectiveflip-flops. How can the economy possibly not bethought of as an ecosystem? In Farmer’s work, dif-ferent traders’ strategies are fluctuating adaptationsanalogous to evolutionary niches occupied by variousorganisms. The Lotka-Volterra equations originallyintroduced to explain oscillations in populations withpredator-prey relationships map readily into describ-ing capital (money) gains associated with the com-petitive speculative strategies utilized by inter- andindependent traders.

The analysis presented here will be heavily depen-dent in places on the economy-as-ecosystem conceptand mostly take it as unequivocally justified and vir-tually proven, even though it is not a common per-spective among mainstream economists, and the un-derlying research agenda is clearly only beginning.Nevertheless, building on it, an important additionaltheme proposed and explored here is that of economicparasitism.

Along these lines, another paradigm shift is go-ing on in the field of parasitology. Researchers areonly recently beginning to appreciate the full implica-tions of parasites in and on ecosystems, via similarlyboundary-crossing interdisciplinary scientific collab-orations, all forcing a serious re-evaluation of the“big picture.” [70] In fact the study of biology is inmany ways the study of parasites; by one estimate, onplanet earth parasites outnumber ‘freeliving’ speciesfour to one!

New realizations are manifesting around the ubiq-uitous and crucial role(s) that parasites play inecosystems. In many ecosystems parasites are farfrom inconsequential, insignificant, or innocuousstowaways, but in actuality, despite their relativephysical and scientific invisibility, drive entire ecosys-tems. Parasites have been a domininant force, andmaybe even the dominant force in the evolution oflife! [70] So. . . given their forefront role, what is thepresumable link to economics?

The third major theme pursued here in naturalconjunction with bionomics and parasitism is a largescale economy seen as an energy system. While againthis concept may seem obvious, the full understand-ing stemming from this perspective appears not yetavailable. There is a strong parallel between eco-

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nomics equations and e.g. thermodynamics or elec-tronics formulas that does not seem to have beenexplored systematically by researchers so far. More-over, if the economy is an energy system, then vari-ous laws governing it can be analyzed and regulatedbased on solid engineering principles, and the mys-tery of economic dynamics should be minimized ine.g. the same way engineers understand the construc-tion of buildings based on applying Newton’s law.

So far econophysicists have tended to focus onthe dynamics of markets. However it is possibly in-evitable that they will soon arrive at a reconsidera-tion of the classic questions of economics, one of thechief ones being the question of the optimal policy forexpansion or contraction of the money supply. Hope-fully new scientific light can be shed on this age-oldquestion and definitive rather than speculative an-swers are within reach. This paper has been writtenwith that main goal in mind.

2 brief history of money

adult: Our government borrows money ev-ery year.

child: Where does the money come from?How can we always be in debt and nothave to pay it off?

adult: We’re in debt to ourselves.child: That doesn’t make any sense!adult: It’s based on fractional reserve bank-

ing. Banks do not have to have all themoney that they lend.

child: I still don’t understand.adult: You’ll understand it when you get

older.

Paper money was not used by Europeans until themiddle ages, partly on the discovery of its success-ful use in China by Marco Polo in the 13th century.The Greeks and Romans used coins. Some standardterminology is useful: (see e.g. [32] or [50])

commodity money Money that is made out of acommodity e.g. typically a precious metal, ei-ther gold or silver, i.e. coins.

receipt money This is also called “fully backedcommodity money” in [50]. A goldsmith orbanker issues paper receipts or certificates al-ways redeemable for an exact quantity of pre-cious metal and the receipts may be traded in-dependently.

fractional money Money that is backed by a com-modity only at a fraction of the face value. Alsocalled “fractionally backed commodity money”in [50]. Also called “bank money” or “bookcredit” in [17]. For purposes here, the exact frac-tion is considered to be fixed in perpetuity.

fiat money Money that is declared “legal tender”by a government with no commodity backing.Or for purposes here, arbitrary manipulationrather than fixed commitment to any fractionof backing.

paper money For purposes here, money made outof paper. Depending on backing it could be ei-ther receipt, fractional, or fiat money. Many au-thors use it as a synonym for fractional or fiatmoney to contrast it with commodity money.

electronic money For purposes here, money as re-duced to an abstract accounting process in-volving ‘blips,’ no longer requiring a physicalmedium for transfer. Also called “digital cash”or “cybercash.” Depending on backing it couldbe either receipt, fractional, or fiat money.

As e.g. Griffin [32] and Rothbard [54] explain, re-ceipt money was often turned into fractional moneyby bankers. They found they could temporarily loanout additional pseudo-certificates exceeding their col-lected inventory of gold and collect interest on theseloans. Rothbard notes that this practice was ruled le-gal by courts in some historical cases. Griffin assertsthis practice invariably leads to an inherently unsta-ble money system and periodic runs on banks, withmany historical examples to make his case. Griffinalso asserts that fiat money always leads to hyper-inflation and worthless currency. These views willbe carefully reappraised here with slightly differentconclusions.

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Immediately upon any inquiry into money, the top-ics of debasement and counterfeiting arise. Someonecan take a gold coin, clip or shave it down, and passon that coin, or create entirely fake coins with no goldcontent. Complicating the picture is that the govern-ment itself may adopt debasement of the currency asan official state policy! Many authors have blurredthese cases. So a strict definition of these differentforms of debasement is required.

counterfeiting The criminal practice of debasingthe currency or creating fraudulent money.

publicly-owned money expansion At the knowl-edge and consent of citizens, the government de-bases the currency as a matter of policy for arevenue stream other than taxation, spent on le-gitimate government services.

privately-owned money expansion The situa-tion mentioned above where private bankerstransform receipt money into fractional money,and the practice is regarded as legal by thegovernment. Revenue is counted as ‘profit’ byprivate bankers.

Counterfeiting is equivalent to theft. The criminalobtains tangible assets as booty at the collective rob-bery of all who use the currency. However it is not anovert theft in which victim is readily aware of, as, say,when their car is stolen and missing. Embezzlementis more accurate, presuming it is eventually detected!

As is widely understood by economists and thegeneral public, both counterfeiting and publicly-owned expansion lead to, or more accurately, causewidespread inflation of prices and, if uncontrolled,destabilization of the integrity of the overall moneysystem. Often governments have had draconian lawsagainst counterfeiting practices as equivalent to actsof sabotage, treason, or war. Sometimes wars wereactually waged partly via the very effective techniqueof one country counterfeiting another’s currency and‘buying’ (in actuality confiscating) resources with it.In this sense it is a camouflaged seizure of assets, or,economic warfare. Whereas pillaging is sometimesthe goal of warfare, counterfeiting permits an invisi-ble pillaging with no arms or army required!

The third case above, privately-owned money ex-pansion, is not so sharply delineated in the eco-nomics literature or popular treatments and is typ-ically mixed up with the other two cases. This is acatastrophic error as will be considered below. Forreference, call this the cui bono caveat emptor error(Latin, “who benefits—let the buyer beware”).

The above account hides further detail and mixesterminology based on the modern perspective. Fromthe historical standpoint, a nation can have two kindsof banking or money systems:

centralized banking A universal, standardized, of-ficial government currency is controlled and is-sued by a central bank.

noncentralized banking Different banks may is-sue their own receipt money as currency, alsocalled “banknotes.” The different banknotes cir-culate simultaneously in the overall economy.

Most nations worldwide now have their own cen-tral banks based on complex historical economic andpolitical events. American history involves eras ofalternation between centralized and noncentralizedbanking systems, now currently centralized. In theU.S. the central bank is known as the Federal Reserveand was established in 1913. Note that the centralbank may either publicly-owned or privately-owned.Despite its name and management protocols the U.S.Federal Reserve is privately owned. The assumptionthat a central bank is always publicly-owned is thesame cui bono caveat emptor error.

seigniorage

“By this means government may secretlyand unobserved, confiscate the wealth of thepeople, and not one man in a million will de-tect the theft.”

—John Maynard Keynes

In economics literature, the word seigniorage is typ-

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ically used as a synonym for money expansion.

seigniorage: revenue or a profit taken fromthe minting of coins, usually the differencebetween the value of the bullion used andthe face value of the coin.

In a fractional money system the mechanism is dif-ferent (not associated with minting coins) but withthe same effect.

Here a very careful distinction must be made. Thefollowing are separate and distinct but are sometimesconfused by neophytes or unclear in some accounts.The terminology is somewhat arbitrary (remarkably,there does not seem to be a standard terminologydevised by other commentators).

straight borrowing A government borrows moneyvia issuing bills or bonds at a discount on facevalue, promising to repay the purchaser the facevalue at some specified date in the future. Theinterest rate is the difference between the facevalue and the purchase price.

expansion borrowing The government may also‘borrow’ via money expansion, either publicly-owned or privately-owned. Even though in thiscase the standard overt procedure of “selling abond” seems identical to the prior case of gov-ernment borrowing, the underlying mechanismsand effects of the transaction are fundamentallydifferent.

Note that both cases involve a “shortfall of funds”but the first case does not constitute seigniorage,whereas the second does. If a government’s expen-ditures exceed revenue (government revenue is gen-erally taxes) then it can make up some difference viaborrowing such that additional funds become avail-able via a free-market loan by bondholders. Demandof these bonds is mainly tied to the interest rate of-fered by the government; higher interest rates spurhigher demand. However, even after the “auction ofdebt,” the additional available borrowed funds maystill be inadequate to fully cover a budget deficit.In which case another last resort, other than rais-ing bond interest rates, is money expansion. Hence

the latter case can be considered in a sense a “doubleshortfall” (a shortfall of demand or buyers agreeingto loans).

A further key distinction must be made on moneyexpansion. A bank may lend funds either to individ-uals or the government. In the former case typicallythe “noncentral” bank lends funds deposited by otherindividuals. In the latter case, typically the govern-ment borrows money from the nation’s central bankwhich controls issuance of the nation’s currency, thatis, when the bank buys government bonds. In eithercase, if the bank has assets on deposit equivalent tothe borrowed funds, it’s “straight borrowing.” If onlya fraction of the loan is backed by assets, it’s “expan-sion borrowing.” This latter case is called fractionalreserve banking (or, lending, borrowing). The frac-tion of deposits-to-loans a bank is required to hold iscalled the reserve requirement.

Hence money expansion can be localized to a givenbank’s own banknotes in the noncentral system, oraffecting the entire nation’s currency in the case ofa central bank. In the cui bono caveat emptor error,most economics literature does not apply or blurs theconcept of the central bank owning assets to back thegovernment loans, not using the idea of a “reserverequirement” relative to it.

The above establishes an important direct corre-spondence between commodity or receipt money tostraight borrowing, and fractional or fiat money toexpansion borrowing. Moreover the two types maybe practiced by either noncentral banks or a centralbank. The banks may further be either publicly-owned or privately-owned. An even more precisedistinction requires more sophistication than thisoverview and will be pursued further below.

In economics literature and popular accounts, thefollowing two cases are also not always carefully dis-tinguished. Current prices in an economy may shiftunder two separate and distinct key factors:

supply and demand Demand for a particulargood or service may fluctuate due to chang-ing economic conditions. This is the “invisiblehand” of Adam Smith’s theory. The value ordemand of the underlying assets has changed.

money manipulation In a fractional money sys-

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tem, money units can be shifted or modifiedbased on money expansion. The value or de-mand of the underlying assets is not changed.

This paper will focus on the latter case and reservethe word inflation exclusively for it. (To add to theconfusion, many authors refer to the latter case asthe supply and demand of money.) The distinction isalso roughly between extrinsic and intrinsic factors,respectively.

The economist Keynes helped analyze the processof publicly-owned money expansion and consideredthe ensuing inflation as a pernicious “hidden tax”on the masses. However, many monetary reformistshave proposed publicly-owned money expansion as avery useful means of taxation superior to alternatives,presuming it is limited and erected at full knowledgeand political consent of citizens (see e.g. [27]). Viasuch a system:

The state can obtain spendable revenue that re-quires no vast, complex, and cumbersome ac-counting system in e.g. the way the income taxdoes.

It also is an extremely uniform taxation system;representing a percent of every dollar in circu-lation, in contrast to every reported dollar, orevery dollar in only particular types of trans-actions. Conventional taxes on the other handhave uneven effects which are notoriously diffi-cult to anticipate by a legislature.

Tax evasion is essentially impossible underpublicly-owned money expansion!

money policy

“All the perplexities, confusion and distressin America arise, not from defects in theirConstitution or Confederation, not fromwant of honor or virtue, so much as from thedownright ignorance of the nature of coin,credit and circulation.”

—John Adams

In 1849, in a racist screed championing the righteous-ness of slavery over free market economics, Thomas

Carlyle lambasted supply-and-demand ideology as“the dismal science” in the first reference ever. [41] Inmodern form the preoccupations of “the dismal sci-ence” are over money expansion and inflation but theroot issues are timeless. After centuries of commen-tary and reaction, it seems an utterly poorly under-stood, mysterious, intractable, and at times incom-prehensible subject. How should money expansion beregulated? New theories arise regularly. For examplethe major trend of monetarism advanced chiefly byFriedman came about in the second half of the 20thcentury in response to dissatisfaction with existinggovernment policies regulating money expansion.

This lack of consensus seems tremendously ques-tionable and unsettling given that the health of entireworld economies is at stake. Routine money expan-sion has become the modus operandi of virtually allmajor and minor governments worldwide. Regard-ing different policies on its regulation, no school ofthought seems to have tangible proof of its supremacyof interpretation and guidance. Here maybe econo-physics research can eventually untangle the tangledmess of conflicting and contradictory approaches.The following is a rudimentary “first cut” in this di-rection representing in parts a radical departure fromconventional dogma.

3 mathematical analysis

“Better cut my pizza into four slices, I’mnot hungry enough to eat six.”

—Yogi Berra

What is needed to cut through the legacy of am-biguous verbiage and claims on money expansion andinflation phenomena is a correct, preferrably simplemodel. Extremely complex models of money expan-sion effects on the economy have been proposed re-cently with the help of computational simulations,and researchers will presumably continue to pursuethese directions to yield new insights. [6, 35] As themodels reflect, the interplay between taxation, pro-duction, and expansion is surely tremendously intri-cate. However, while these are admirable analyses,complicated models are only necessary if simple mod-

6

els do not give correct or accurate results for the pur-poses or questions at hand.

The approach here will be to take perhaps the sim-plest possible model(s) imaginable, with the fewestoverall “moving parts,” and derive straightforwardconclusions. These models are offered as plausiblebut falsifiable hypotheses to serve as a base for fur-ther research rather than a definitive or final anal-ysis. They’re mainly a vehicle for introducing somekey metaphors and analogies to guide intuitive think-ing on the subject. (Also, in the following presenta-tion, the prose will fully explain the meaning of themathematical equations, leaving the latter optionalfor nontechnical readers.)

Economics’ basic equation for “money demand” isthe “equation of exchange” outlined by Irving Fisherin his 1911 treatise, The Purchasing Power of Money :[50, 17]

MV = PY (1)

where

M is the stock of money

V is the velocity of money

P is the price level

Y is the level of real output in the economy, e.g.the GDP, Gross Domestic Product.

The velocity is typically assumed constant by the“standard behavioral proposition;” it may also betaken as a measurement of individuals’ preference forsaving vs. spending.

No monetary authorities appear to have ever re-marked on the striking correspondence between thisformula and the ideal gas law from thermodynamics,which holds for gases at low density. The equationsthat follow are mainly adapted from [65]:

pv = nRT (2)

where

p is pressure measured in dimensional units offorce/length2 (i.e. force/area)

v is volume measured in length3

T is temperature,

R is a conversion constant

n is the number of particles (atoms or molecules)

The product p·v has units force·length, i.e. energy,also analogous to heat and work in thermodynamics,measured in units of joules.

The correspondence is established and metaphorrevealed when eq. 1 is written in the form1/P ·MV = Y . The analogies are:

1/P ⇔ p

MV ⇔ v

Y ⇔ T

The above seems to constitute something of avery important “bridge theorem” between economicsand statistical physics (specifically thermodynamics).From this parallel many new insights are immedi-ately available. The mass economy can be seen assomething like a given volume of gas under pressure.For example, if the volume is increased, the pressureper area decreases, assuming constant temperature;analogously, if the money stock is increased, pricesincrease (being inversely proportional to pressure),assuming constant GDP.

In thermodynamics a process involving no heattransfer between the system and environment istermed adiabatic. For ideal gases, a related processoccurs at constant temperature, called isothermal.The thermodynamic equation for the special case ofconstant temperature is known as Boyle’s law:

p1v1 = p2v2 (3)

Quite probably, economic transactions between in-dividuals are the parallel to atomic collisions in theideal gas. This hypothesis and direction are veryrecently being pursued by pioneering econophysicistDoyne Farmer: “[our] results suggest that some ba-sic properties of markets can be explained by a the-ory much like statistical mechanics, in which each

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trade imparts an impact to prices, much like a molec-ular collision.” [21] This concept also has strong par-allels to fascinating new research by econophysi-cists Bouchard and Mezard into economic models ofPareto’s law of wealth distribution related to temper-atures in directed polymers. [11, 8]

Another link can be found in the extremely im-portant Black-Scholes equation for derivatives (op-tions) pricing which was actually initially adaptedfrom a heat transfer formula from mechanical engi-neering. In it, price differentials become analogous toheat variations. An overall stock market behaves as aheat diffusion system. It seems likely that stock mar-ket results directly correlate with general economictransactions, although this link has apparently notyet been systematically explored.

On the local, microscopic level, the collisions andtransactions are random and statistically distributed.On the macroscopic level, a simple global propertyemerges as one of the best scientific examples of the“law of averages” realized. This will surely be avery fruitful line of inquiry for future econophysicsresearch.

Apparently then, prices are an instantaneous mea-surement of money-energy denominated in units ofcurrent pressure, which economists sometimes referto as “underlying value” vs. “nominal value.” Theproduct p ·v, pressure times volume, gives a quantityof money-energy. Boyle’s law states that under “con-stant temperature” (constant GDP), money-energyis conserved under changes in the money stock; thismight be called the law of conservation of money-energy.

In thermodynamics the direct analogue wasdemonstrated by Joule in a classic two-chamber airtransfer experiment, which shows the internal energyof an ideal gas is a function of temperature only (i.e.not pressure and volume), written

u = f(T )

Now suppose that the money stock, v1, (denom-inated in e.g. units of dollars) is increased by anamount v2 = v1 + x. Then p1v1 = p2 · (v1 + x),or, (assuming constant GDP)

p2 =(

v1

v1 + x

)p1 (4)

The new “pressure per dollar” is a fraction of the oldpressure, and a greater “volume of dollars” is requiredto obtain the same level of money-energy. This is thesimplest scientific and mathematical explanation ofthe fundamental phenomenon of inflation.

intuitive analogies

This new framework and vocabulary is not merelya superficial restatement but a very important newinsight into money expansion and an answer to thequestion, what exactly is money? A nice analogyfrom introductory engineering emerges here. In en-gineering the concepts of weight vs. mass, which ini-tially seem synonymous and are sometimes casuallyinterchanged, are carefully distinguished.

Mass is a fundamental unit and property of mat-ter. Weight, measured in units of force, is an amountof mass relative to a given gravitation, i.e. masstimes gravity (acceleration), typically presumed to beEarth’s. Analogously, “underlying value” or money-energy is a fundamental property of economic trans-actions, whereas price is a quantity of money-energymeasured relative to a given volume or pressure (pres-sure times volume). The same mass has differentweights on different planets just as the same money-energy has different prices within different volumesor relative to different pressures. In economics andpopular literature, lacking strict terminology, confu-sion easily arises as writers often use the single term‘money,’ or others, to connote the two distinct mean-ings depending on context.

On the other hand, remarkably, much literatureanticipates the thermodynamical equivalences estab-lished here without actually taking the slight extrastep of articulating them directly or formally (i.e.mathematically). For perhaps centuries, many com-mentators have talked about the volume of money,the pressure of a deal, or the heating up of an econ-omy.

Another analogy is extremely helpful. Imagine acompany stock trading on an exchange, with somequantity of shares publicly owned. The founders

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decide to issue additional stock. As is well knownthis “secondary offering” dilutes the share price. Onecould say that the supply and demand of the stockchanged, but this is not a change in supply and de-mand that is related to market effects or change inunderlying value of the company. It’s a simple varia-tion on money manipulation as defined in the previ-ous section.

Eq. 4 is immediately applicable and gives the newprice per share after some adjustment period, assum-ing no other factors. v1 is the initial number of shares,x is the number of new shares, p1 is the original priceper share, and p2 is the final price per share. Theexact dynamics and timing of the transition wouldrequire further empirical study and is an excellenteconophysics research topic. This also suggests thatstock markets could be a very nice model for expan-sionary bank lending and government monetary ad-justment (i.e., a microcosm of the fractional reservesystem).

Cui bono? The issuers of the new stock shares thenown a greater share of the company even after theprice depreciation of their previous shares. All othershareholders have lost real value in their holdings atthe abstract redenomination. Caveat emptor!

Now obviously this analogy extends further. Evi-dently a nation’s currency actually represents sharesof the economy of that country (the GDP) and moneyexpansion is exactly analogous to issuing new shares.But how are additional shares allocated? Cui bono?Who owns them? Caveat emptor!

counterfeiting vs. seigniorage

“The process by which banks create moneyis so simple that the mind is repelled.”

—John Kenneth Galbraith

These algebraic formulas often taught in high-school-level physics may seem trivial. But they are a basic,useful, rarely applied tool for analyzing some simpleeconomic situations. For example, in the previoussection it was asserted that counterfeiters embezzleat the expense of all currency holders of an economy.This seems intuitively obvious, yet what are the un-derlying mechanics? Exactly what is embezzled, and

how much?Remarkably, the above straightforward formula for

the simplest case, eq. 4, is again immediately appli-cable. x can be taken as simply the number of coun-terfeited dollars spent into circulation; v1 is the totalnumber of dollars in circulation. The formula givesthe final value of all dollars assuming the counterfeitdollars continue to circulate without detection, suchas with debased coinage. The counterfeiter obtainsmoney-energy by debasing the value of all dollars inthe system.

(If all the counterfeit dollars are detected and thoseholding the dollars must forfeit their loss then nomoney expansion occurs. But typically taxpayersmust make up for counterfeiting losses via a “write-off” which may be equivalent to money expansion.The formula correctly gives the instantaneous theo-retical loss.)

However, a very complicated question also imme-diately arises that cuts to the heart of this model.How much money-energy was actually obtained bythe counterfeiter? The counterfeiter spent x dollars,but was the money-energy obtained based on initialpressure pi, or final pressure pf? For insight, an an-swer can be related to the ideal gas metaphor. Boyle’slaw refers to the state of the gas at two separatetimes, such that it has reached an equilibrium in bothstates. Suppose that a significant volume change ismade in a very short time. Boyle’s law may not nec-essarily apply to all intermediate states.

Suppose that the counterfeiter spends the fake dol-lars slowly. Then each subsequent dollar will havea decreasing pressure associated with it, pi > p2 >p3 > . . . > pf . Apparently in the “best case sce-nario” the counterfeiter obtains x · pi money-energyif the money is spent rapidly with no further trans-actions, and as an asymptotic worst case with slowongoing transactions, x · pf . The actual precise quan-tity is also exactly the “invisible tax” levied uniformlyover all currency holders. The difference between thepn is related to how large the economy is and howquickly monetary perturbations spread throughoutit (another crucial and compelling econophysics re-search question). For later comment, call this phe-nomenon the decay rate.

Fig. 1 shows three hypothetical scenarios for a pres-

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p2

p1

t1 t2

pres

sure

time

linear paexponential pb

logistic pc

Figure 1: Three hypothetical scenarios pa(t), pb(t),pc(t) for decay in pressure p1 → p2 from volume ex-pansion during the time period t1 → t2, i.e. depre-ciation in asset value due to inflation from moneyexpansion via a gas thermodynamics model.

sure decay rate. The graph was generated for thescaled range [0..1] with t1 = p2 = 0 and t2 = p1 = 1via the following formulas:

pa(t) = 1− tpb(t) = 1

e6t

pc(t) = 1− 11+ 1

e12t−6

(5)

These formulas represent path functions for pres-sure change over time between the two intermediatestates. pc(t) is based on the S-shaped logistic curveused in many physical fields, such as for chemicalmixing or measuring population dynamics in biology.Their shapes are adjustable by varying the constantsand they’re readily adapted to the general case usingthe substitution

p(t′) = p2 + f

(t′ − t1t2 − t1

)· (p1 − p2) (6)

Next, what about publicly-owned money expan-sion? Again, remarkably, in the simple analysis, theformulas are exactly the same. The ratio

r =p2

p1, r < 1 (7)

is exactly equivalent to the seigniorage discount (anddepending on currency issue rates). r is clearly di-rectly analogous to a publicly-owned central bank re-serve ratio. v1 is the reserves, the entire nationaleconomy. The ‘revenue’ x accruing from the moneyexpansion can be spent on government services. Con-ceivably, here x could represent the entire governmentbudget. Again, different levels of money-energy areobtainable depending on the decay rate (analyzed inmore detail below).

The quantity of extracted dollars x ‘levied’ by thestate can also be expressed in terms of the seignioragediscount rate r and the original money stock v1:

x =(

1r− 1)v1 (8)

This naive model has special meaning for x > v1, orcorrespondingly r < 1

2 ; those ranges imply a ‘levy’greater than the entire economy. The equation showsthe ‘tax’ is minimal as r → 1 (from below), maximalas r → 1

2 and infinite as r → 0 (from above).So one is left with the perplexing question, how is

publicly-owned money expansion different from coun-terfeiting? Obviously, with e.g. coin debasement theunderlying mechanism is identical. The inescapableconclusion: the only difference is that in the lattercase, the funds are spendable by the state and serveas an official pseudo-taxation system, i.e. as exam-ined and partially endorsed in the prior section. Theother key difference between counterfeiting and tax-ation comes down to citizen knowledge and consent.

The simple overview of this publicly-owned expan-sion system is that the government issues x additionalshares of “stock” (dollars) of the GDP and uses the‘revenue’ to buy government services, paid for by in-flation.

privately-owned money expansion

“Thus, our national circulating medium isnow at the mercy of loan transactions ofbanks, which lend, not money, but promisesto supply money they do not possess.”

—Irving Fisher

Finally, consider the strange worldwide case of

10

privately-owned money expansion. Here a privatebank is allowed to debase its receipt money basedon fractional reserves, i.e. loan out more money thanit has in reserves, either to a government or citizens.The idea of money expansion as equivalent to a frac-tional reserve system is not an explicit observationof modern economics, but it’s transparently identi-cal. Again, the above formula for depreciated valueis still applicable except that the borrower must payback the loan.

With straight borrowing, a lender provides imme-diate money-energy in return for the money-energyreturned plus a fee at a future time. (That fee, “in-terest,” may therefore be regarded as the price ormarket rate of instantaneous money-energy per re-payment time; the complex subject of interest is pur-sued below.) But by the money-energy conservationprinciple, no money-energy is provided by the lendervia privately-owned money expansion—this holds re-gardless of changes in GDP. The ‘illusory’ money-energy that is spent by the borrower is accumulatedvia the depreciated value of the lender’s fractionalmoney—inflation. Ergo, ‘pseudo-lending.’

In short, in this situation all money holders’ as-sets denominated in terms of the fractional moneydepreciate relative to the bank’s assets. If the bank’sfractional money is universally standardized as witha central bank, then for simplicity the groups “moneyholders,” “taxpayers,” and “citizens” can be taken toall overlap and be roughly interchangeable.

Mathematically, this means approximately that ifa government borrows x dollars into circulation viaprivately-owned money expansion (x is the shortfallafter straight borrowing), all dollars depreciate at theratio v1/(v1 + x) during and after the governmentspending. However, in contrast to publicly-owned ex-pansion where there are no further obligations, withprivately-owned expansion the government and itstaxpayers are additionally required to ‘repay’ the bor-rowed quantity of x dollars to the private pseudo-lender(s).

In one plausible scenario the government spendsthe money quickly and obtains money-energy atthe undeflated pressure p1, and taxpayers repay thepseudo-loan later at the deflated pressure p2 (inflatedvolume v2). Therefore total money-energy cost to

taxpayers is

E1 = xp1 + xp2 (9)

If the economy measured by v1 is extremely largerelative to x, then p1 ≈ p2 and the bottom line isapproximately 2x dollars cost for x dollars worth ofgovernment services! This bizarre and irrational ‘sys-tem’ is known as “monetizing government debt.” Un-der it, where privately-owned money expansion cov-ers government budget deficit(s), the taxpayers effec-tively ‘repay’ the value of the pseudo-loan twice, firstthrough inflation, a second time through taxation!

The total energy extracted by the private bank canbe taken as x · p2, which from eq. 8 can be expressedin terms of total money stock and the central bankreserve ratio:

E2 =(

1r− 1)v1p2 (10)

But since p2 = r · p1,

E2 = (1− r)v1p1 (11)

This extraordinary equation shows that via the sys-tem, the pseudo-bank extracts the proportion 1 − rquantity of money-energy from the original economyEi = v1 · p1, leaving only r remaining!

Even more shocking, in the modern privately-owned money expansion system, the lending bankis essentially allowed to count the ‘loan’ as an as-set, immediately, not being required to wait until theend of the repayment period of the pseudo-loan todo so. In this case the pseudo-lender then essen-tially immediately extracts x · p1 money-energy fromthe overall economy (i.e. via the device of a centralbanking system) at the initiation of the pseudo-loanof zero money-energy, and the taxpayers more accu-rately obtain x · p2 worth of government services (at2x · p2 energy cost). In this case the money-energyextracted by the private bank is

E3 =(

1r− 1)v1p1 (12)

Note that if r < 12 then x > v1 and E3 exceeds the

entire initial energy of the economy—this represents

11

net indebtedness by all money holders to the privatebank! Evidently, economics is in fact the scienceof heat transfer of money-energy; E > 0 representswealth or assets, E < 0 represents indebtedness.

The entire prior analysis proceeded without ref-erence to the concept of interest. Evidently inter-est relative to private-based money expansion is sim-ply inapplicable, because regardless what interest feeis charged, even zero interest, the pseudo-lender haslevied a real charge for a pseudo-service of no realvalue.

Usury is defined as “the act or practice of lend-ing money at an exorbitant or illegal rate of inter-est.” Similarly, practices identified as predatory lend-ing have been outlawed in various jurisdictions. Butthis situation does not qualify as usury or predatorylending; it’s fundamentally different and far moreinsidious because no money-energy is actually pro-vided. So the analysis and conclusions stand gen-erally independent of considerations on interest—it’sirrelevant.

A slight variation is the possibility of a hybrid sys-tem in which the money expansion is both publicly-and privately-owned at some ratio; this appears tobe the case with the U.S. Federal Reserve. How-ever exactly the same conclusion applies, i.e. that anyamount of privately-owned expansion is illegitimate.

In short, the government can finance its operationsoutside of taxation via borrowing, or money expan-sion. However privately-owned expansion reduces toan illegitimate combination (“borrowed expansion”?)with disastrous ramifications. Cui bono caveat emp-tor.

good vs. bad money

In standard economics and banking r is also called thereserve requirement, and the inverse 1/r is known asthe money multiplier. [17, 50] In examples a typicalrate is given as r = 0.1. [32] gives a banker’s rule-of-thumb ratio of 4:1 circulated (debased) receiptsvs. deposits corresponding to r = 0.2. These are ex-tremely low and in the previous (primitive) model fallinto the range r < 1

2 that results in net indebtednessof all money holders to the bank.

However, the previous generalized formulas do not

attempt to model money that circulates outside thebanking system, such as would occur with one bankissuing fractional money in much a larger economy.In this new scenario there is an amount of “nonbank”cash, say v0, in addition to the bank reserves v1, andv0 � v1. A ratio can be defined to give the amountof bank vs. nonbank cash in the economy:

s =v1

v0 + v1(13)

s can also be taken as the savings rate. From this,

v1 =(

s

1− s

)v0 (14)

This time the bank reserve ratio is logically definedas

r =v1

v1 + x(15)

which implies

x = v1

(1r− 1)

(16)

In this scenario, instead devaluation is based on thisformula:

(v0 + v1)p1 = (v0 + v1 + x)p2 (17)

Using the higher estimate for money-energy obtainedby the bank, x · p1, and eq. 16,

E4 = v1

(1r− 1)p1 (18)

Substituting in the equation for v1, eq. 14,

E4 =(

s

1− s

)v0

(1r− 1)p1 (19)

That gives the energy extracted as a fraction of theoriginal nonbank cash economy v0 · p1. Or equiva-lently

E4 = s(v0 + v1)(

1r− 1)p1 (20)

This equation bears a remarkable resemblance tothe prior full economy money-energy transfer quan-tity E3 (eq. 12). It shows that for a bank holding the

12

fraction s of the entire economy in reserves, the en-ergy extracted from the total initial economy, givenby (v0 + v1) · p1, varies according to the ratio

r2 = s

(1r− 1)

(21)

For this equation, r2 < 1 even for small r if s is small.That is, in contrast to eq. 12, total money-energyextracted is now proportional to s or the proportionof money deposited in the bank relative to the entireeconomy. Still, for small r and s, the ‘leverage’ ishigh and E4 entails the entire economy. More exactly,r2 ≥ 1 if s ≥ r/(1− r) (or r ≥ s/(1 + s)). For r = 0.2this is at s = 0.25; for r = 0.1 this is at s ≈ 0.11.

This all appears to be one possible mathematicalrepresentation of Gresham’s law, which states “badmoney drives out the good.” In other words, if onebank circulates debased receipts into the economy,all money depreciates based on eq. 17 and energy ex-tracted from the overall economy is based on the sav-ings rate and fractional reserve ratio of the individ-ual bank. The equation appears to show that moneyholders may defend against mass money depreciationby minimizing their savings!

Moreover, eq. 20 seems to shed new light onFisher’s equation of exchange, eq. 1. Recall from theearlier discussion that the thermodynamical v waschosen as analogous to the Fisherian term V ·M whereV is velocity and M is the stock of money. It appearsto be possible that velocity of money V and savingsrate s are being mixed up in the classical theory, ı.e.possibly

s · (v0 + v1)⇔ V ·M (22)

From this, if savings rate decreases, money circulatesmore in the nonbank economy v0 than is stored inthe bank reserves v1, apparently decreasing the ve-locity. The classic quantity of velocity may actuallybe measuring nonbank money circulation relative toa fractional reserve bank. Maybe nonbank moneyvelocity increases as the bank extracts more money-energy from higher savings.V is a somewhat mysterious quantity in classical

economics, sometimes assumed constant or not, used

in multiple contexts, and its thermodynamical cor-respondence is not so obvious. However, some rela-tion to savings rate does seem plausible. Thermo-dynamics does have equations for molecular veloci-ties derived from statistical mechanics that it may berelated to—altogether, another key item for futureeconophysics analysis.

A more sophisticated analysis might take into ac-count that the bank offers some fraction of the ex-tracted revenue as interest to depositors. In that sce-nario some depositors will lose or gain total money-energy based on their ratio of nonbank money to bankdeposits.

growth, interest, temperature, etc.

“Anyone who believes exponential growthcan go on forever in a finite world is eithera madman or an economist.”

—Kenneth Boulding, economist

The prior model very carefully and deliberatelyavoided the issue of growth in the overall economyfor simplified analysis. For completeness an expand-ing economy will now be considered. Let Ti = pivirepresent the perfect gas law term nRT from eq. 2at different states. Then Ti is simply proportional toGDP, and

p1v1

T1=p2v2

T2(23)

Let the economy grow by the rate rT > 1 so thatT2 = rT · T1. Then

rT p1v1 = p2v2 (24)

For constant volume, e.g. no expansion in moneystock,

p2 = rT p1 (25)

i.e. an increase in pressure p2 per dollar. But sinceprices are proportional to 1/p this implies a decreasein any price in the economy, i.e. overall price defla-tion. This is a somewhat counterintuitive result byconventional wisdom: growth of the GDP results indeflation if money stock is held constant.

13

A major goal of modern monetary expansion poli-cies is price stability, in which in theory the moneystock is expanded to the degree of keeping prices‘stable’ or constant. From eq. 24 this occurs whenrT v1/v2 = 1 or when a quantity x of new dollars(v2 = v1 + x) are ‘created’ such that:

p1

p2=

1rT

(v1 + x

v1

)= 1 (26)

which, solving for x, occurs simply for

x = v1(rT − 1) (27)

Spending and circulating x new dollars will stabi-lize prices, but the key question is, who owns thosedollars? They may be either publicly-owned orprivately-owned. Cui bono caveat emptor. The is-sue of ownership ties into the question of how theeconomy enlarged. Presumably it is due to the in-creased work, productivity, or efficiency of all moneyholders. Therefore, fairly, all money holders shouldgain.

This is one embodiment of the principle of inter-est. If an economy grows then all money holders cangain that increased energy without risk or work. It ispossible to gain money in an economy without workvia other means such as speculation, but it inherentlyinvolves a risk-reward tradeoff. By the money-energyconservation principle, the only risk-free revenue pos-sible from an economy is via an increased GDP. Be-cause of boom and bust cycles, even that is subjectto fluctuation.

It is possible to have interest systems that are notdirectly tied to growth in the economy such as thecurrent framework, but they are necessarily equiva-lent to wealth redistribution systems!

Note that arguably any rational model of the econ-omy absolutely must consider the equilibrium state asone that does not involve growth. A century-and-a-half of the “dismal science” (or the history of moderncivilization) may be based on an evasion or defianceof that principle. It is quite possible that economics isbased on a mass collective rationalization in much thesame way that U.S. citizens subscribed to the visionof the “manifest destiny” during the era of expansionto the west. Relative to serious worldwide dangers of

environmental degradation (e.g. global warning, pol-lution, deforestation, etc.), at the dawn of the 21stcentury the rationalization is increasingly taking onthe signs of mass psychological delusions of grandeur.

mattress myth & other legends

A pivotal observation is crucial here. By the money-energy conservation principle, after a temperature in-crease, the money-energy that accrues to money hold-ers due to price deflation with constant money stockfrom eq. 25 is exactly equivalent to that representedby the x dollars of eq. 27! That is, no money expan-sion system is inherently necessary to distribute risk-free interest gains! It’s built into “invisible hand”supply-and-demand pressures on prices. It’s a simpleconsequence of the law of scarcity, or, scientificallyspeaking, an emergent property of the system.

This finding directly contradicts the supposedly en-lightened modern view of “putting money into thebank where it can earn interest instead of hidingit under a mattress.” If money stock is kept con-stant, all money holders effectively gain interest with-out keeping their money in banks based on increasedpurchasing power from a global economic tempera-ture increase. It’s also compatible with the use ofcommodity currency such as gold. The only-banks-can-do-it view is simply false mythology. The findingalso conflicts with the legend of deflation as synony-mous with economic catastrophe.

A direct corollary to the above is that if GDPis increasing and prices are stable (and any inter-est payments are lower than the GDP increase) thenmoney holders are losing money-energy. By the ear-lier analogy of money as stock shares, it’s analogousto the idea of a company that has increased marketvalue but shareholders’ stock prices remain constant.Therefore the idea of maintaining price stability perse may be a specious economic doctrine!

Keynesian economic theory holds that prices andwages are “sticky,” especially downward, meaningthat they resist deflation. [17] This is one reason thatan allocation mechanism for the additional money xmay be justified. However, the problem is that sucha system is more readily manipulated to channel theincreased money-energy of the economy toward elitist

14

machinations that unfairly exclude money holders ingeneral.

But it seems plausible that deflation in prices oc-curs inversely to inflation in prices. It is known thatwage inflation increases slower than goods inflationso that the net effect to wage earners is diminishedpurchasing power. The inverse would be a decrease inwages that occurs slower than the decrease in prices,resulting in increased purchasing power. The finalconclusion is that the constant money stock systemis theoretically superior to the re-allocation methodbased on (a) guaranteed fairness and (b) lack of ne-cessity of a central administration system.

A closely related concept to stickiness of prices iselasticity. [17] Prices that are inelastic have associ-ated demand that is not affected by price changes.Elastic prices involve changes in demand at pricechanges. Elasticity is also a measure of “specific pricesensitivity to general inflation.” Elasticity is crucialbecause it suggests that in general inflation, somegoods, e.g. luxury items, inflate in price faster thanothers. Luxury items tend to have higher price elas-ticity.

The U.S. Consumer Price Index, CPI, measuresthe inflation of a market basket of goods purchasedby a “typical household.” However, by tracking onlya set of inelastic goods with prices that are not assensitive to inflation, the CPI may consistently un-derestimate true inflation rates. Such a misleadingor deficient indicator would be highly preferred byprivate bank owners in a privately-owned expansionsystem, because they would be able to extract moremoney-energy without detection by general moneyholders!

“optimal” expansion policy

Obviously, referring to the rate of increase of theeconomy as “interest” is not the concept generallyused in economics. The U.S. Federal Reserve deter-mines interest rates which are returns paid on govern-ment loans or bonds (“securities”) by taxpayers. Theremainder of the government deficit not covered viasales of the securities is that which must be financedvia money expansion. But this direct link means theFederal Reserve has strict control over the money ex-

d1

d2

r1 r2

secu

ritie

s de

man

d

�

interest rate

linear daexponential db

logistic dc

Figure 2: Three hypothetical scenarios da(r), db(r),dc(r) for increase in government securities demandby investors d1 → d2 from increasing interest rates inthe range r1 → r2.

pansion rate based on the interest rate selected. Totaldemand for (and therefore sales of) government secu-rities must vary based on interest rate according tosome relationship.

Fig. 2 gives three hypothetical scenarios for the in-crease in government securities demand by investorsover increasing interest rates. (The plot was gen-erated simply using mirror-symmetric versions ofeqs. 5.)

This mathematical relationship is the central pivotaround which monetary expansion policy is balanced.When the Federal Reserve “buys” government bonds,it involves inflationary money expansion and does notconform to the supply-demand curve(s) in the fig-ure. Government deficits could always be covered viahigher interest rates (and no expansion) if the FederalReserve chose that route.

The conclusion from the prior (simplistic) resultsis that the optimal monetary expansion policy fromthe point of view of money holders is always to in-crease interest rates up to 200% to meet budget short-falls, i.e. no privately-owned money expansion ever,assuming the budget outlay is not adjusted. Thosemoney holders will always end up paying less in totalmoney-energy than from privately-owned expansion.The 200% figure seems ridiculous, but really it shows

15

the absurdity of using privately-owned money expan-sion for any so-called “financing” whatsoever!

A strong case can be made that if the interestrate were managed and determined in this hypothet-ical way (the true free market embodiment), citizenswould begin to understand the true cost of publicly-owned government expansionary borrowing insteadof it being invisibly disguised in inflation. The infla-tion rate in a publicly-owned system probably variesalmost precisely according to interest rates in the hy-pothetical system! The inflation rate for a privately-owned system is even worse.

A more mathematically rigorous treatment wouldrequire taking into account the “term structure of in-terest rates,” i.e. long-term vs. short-term rates, andthe exact speed of the inflation and government vs.private spending, but similar results are to be ex-pected. Whereas publicly-owned expansion has niceproperties as described, privately-owned expansion issimply scientifically and mathematically vacuous inany variation!

advanced verisimilitude

The prior models are easily criticized and should notbe taken too seriously, particularly the limit cases.The formulas for energy in particular are merelyrough analogies. They do not have major verisimil-itude but neither are they merely ‘toy’ models—primitive, but not crude. What is interesting aboutthem is how the mathematics can reflect the variousassertions (some obviously approaching hyperbole)made by various purely prose-oriented writers on theextreme implications of money expansion mechanics.There is new insight lurking in the framework; hope-fully future econophysicists can use this platform toseize them rapidly.

More sophisticated models are immediately avail-able from thermodynamical theory and are readilyutilized. A brief sketch of natural refinements will bemade here. In thermodynamics the general equationfor work based on pressure and volume changes is

W 21 =

∫ 2

1

p dv (28)

For a polytropic process, also reversable, meaningroughly that there is no frictional dissipation, p vn isconstant, i.e.

p1vn1 = p2v

n2 (29)

The exponent n may range anywhere from −∞to ∞. n = 1 gives Boyle’s law. For n 6= 1,

W 21 =

p2v2 − p1v1

1− n(30)

For n = 1 (isothermal perfect gas process),

W 21 = p1v1 ln

v2

v1= p1v1 ln

p1

p2(31)

The logarithmic dependency in this formula mighthave some relation to formulas for measuring “marketimpact” from buying or selling stock investigated byFarmer. [20]

If the pressure remains constant then

W 21 = p(v2 − v1) (32)

A constant pressure process is called isobaric. Theprior sections used this formula for work as a veryrough approximation for calculating energy changeswith x = ∆v and rough estimates for p (using thelimit cases).

The overall energy of the system remains constantwith a constant GDP. However, the isothermal casen = 1 applies only for perfect gases. n 6= 1 can beused to model a perfect gas and nonisothermal con-ditions, or a general polytropic process. n is also thenatural measure of the pressure decay rate mentionedearlier. The exact value of n would ideally be deter-mined from empirical data. Maybe there is some rulesuch as n→ 1 as the economy gets larger.

A more refined model can naturally use W 21 as

a measure of the total energy associated with amoney redenomination. Note that by conservation ofmoney-energy, no money-energy is expended by a re-denomination; W 2

1 represents the maximum money-energy re-allocated or seizable via money expansiondepending on ownership. For constant temperature(no energy via increased temperature), a fraction ofthis energy is available to the government (providingpublic services financed by taxpayers), the remainder

16

is allocated to the private bank. A simple approachwould be to set x = y + z where y is dollars gained bygovernment, and z is dollars gained by private banks.z > 0 would be defined as “unfair.”

The above model is somewhat awkward in that theenergy calculation splits into two separate formula-tions depending on n = 1 or n 6= 1. To escape this,one alternative is a simple variation that uses a pa-rameter 0 ≤ m ≤ 1 to represent the continuum ofpressure available at different times during the ex-pansion process. Then

pm = p2 +m(p1 − p2) (33)

So pm = p1 for m = 1 and pm = p2 for m = 0. Themoney-energy associated with x dollars at differenttimes in the pressure decay process becomes simplyx · pm. Spenders obtain energy with different efficien-cies m1 > m2 > m3 depending at what point andtime in the process they spend the money. m canalso be related to the earlier pressure decay curves ofeqs. 5.

Another improvement in fidelity would break upexisting owned assets, say v1 = va + vb + vc whereva is assets owned by the government, vb by citizensand taxpayers, and vc private banks. vc could befurther split into domestic vs. foreign ownership. Theexpansion has variable allocation to the government,money holders (interest), and private banks, i.e. x =xa + xb + xc.

The general model would be very careful with theenergy analysis. Basically, additional energy out-side of overt capital flow is available from either in-creased temperature (GDP) or currency redenomina-tion. The analysis determines how much of this en-ergy goes into government services, how much goesto money holders via interest or money deflation, andhow much goes to private banks.

All of these equations can be easily converted todifferential form for extended computational simula-tions:

pt+1 = f1(pt)vt+1 = f2(vt) etc.

electronics analogy

“The greatest shortcoming of the humanrace is our inability to understand the ex-ponential function.”

—Albert A. Bartlett, physicist

The science of “mechatronics” has been describedas a marriage of electrical and mechanical engineer-ing and computer science. A remarkable correspon-dence is noted in the field whereby mathematicalanalysis from one discipline can be mapped onto an-other. Holbert has compiled a convenient table sum-marizing these correspondences in [33], “Interdisci-plinary electrical analogies.” Electrical, mechanical,hydralic/acoustic, and thermal sciences all have sim-ilar laws for the basic physical entities of force, mass,energy, etc. This paper adds a new column for eco-nomics.

So under this correspondence, one could take acomplicated dynamical system from physics requir-ing analysis by Newton’s law. The physical setupor apparatus translates to a system of mathematicalequations. But there is a direct correspondence be-tween e.g. an electrical circuit that embodies exactlythe same properties and leads to an identical mathe-matical analysis. The established parallel is intuitive,extraordinary, and somewhat uncanny. For example,mapping mechanical to electrical:

force ⇔ currentvelocity ⇔ voltagefriction ⇔ resistance

mass/inertia ⇔ capacitance

For economics, the case for the electrical analogyis made in very sophisticated detail in [2]. Thesecorrespondences permit a systems analysis and mod-elling of a vast economic system, reduced to theo-retical equations. The electrical or circuit analogy isparticularly relevant in the computer age. This allcombines to serve as the strong underlying basis forthe new science of “blip mechanics” as a new engi-neering discipline.

In electronics, power is given by P = V I where Pis in watts, V is voltage in volts, and I is current inamperes (coulombs of charge per second). The energy

17

is given by the product of power and the timespan,V I ·∆t. But for the infinitesmal time period dt, thiscan be taken as the “instantaneous energy:”

Edt = V I dt (34)

Watts are joules per second, so this equation mea-sures joules. From the earlier equations (e.g. perfectgas law eq. 2), voltage V is analogous to pressurep and current times timespan I · dt to volume. Thequantity I ·dt as volume implies that dollars are anal-ogous to coulombs of charge. The system of a perfectgas in equilibrium with an internal energy is thereforeanalogous to a circuit in equilibrium being fed by avoltage source, e.g. a battery.

A brief example will be considered. In finance, thecompound interest formula can be given as a recur-rence relation At+1 = f(At),

At+1 =(

1 +r

k

)kAt = A0

(1 +

r

k

)kt(35)

where At is the capital at year t (initial capital A0),r is the interest rate per year, k is the number ofcompounding periods per year. But by an applicationof l’Hopital’s rule (from elementary calculus) it canbe shown that as k →∞

limk→∞

At = A0 ert (36)

This is referred to as the “continuously com-pounded interest formula,” and the longer any com-pounding is in effect the closer it approaches the for-mula. It can also be used as an estimate of priceinflation given the inflation rate. Or conversely ifr < 0 it can measure the depreciation in value due toinflation.

In electronics the standard RC resistor-capacitorcircuit has similar exponential dynamics, analyzed intypical introductory references. [67] This is a circuitwith a battery with voltage V , R-ohm resistor, andC-farad capacitor all in simple series. The voltageover the resistor at time t is given by the formula

VR = V e−tRC (37)

The formula is giving the “inflation” that occursin the circuit when −1/RC = r. The resistor can

be thought of as the load. The capacitor accumu-lates charge over time. The voltage available to theload declines exponentially over time as the capacitorcharges. Recall that voltage is analogous to pressure,and prices are inversely proportional to pressure.

Current represents “dollar circulation.” The cur-rent and therefore instantaneous energy of the circuitfalls to zero as the capacitor charges and t→∞. Thecapacitor represents the mechanism of some entity(either public or private) that removes dollars fromcirculation in the economy. The asymptotic limit inthis model is a circulation deadlock or energy freeze.

So, this circuit gives one possible long-term dynam-ical solution for the earlier systems with decreasingpressures, pi > p2 > p3 > . . . > pf , approximatelyaccording to the recurrence relation (or differentialequation) associated with k = 1 and as t→∞

pt+1 · (1 + r) = pt. (38)

This example is simple yet important in how itexemplifies the depiction of inflation dynamics as aclosed energy system and analysis via engineeringprinciples. A key property of the science of “blip me-chanics,” somewhat in conflict with the conventionalwisdom of economics, is that inflation is not an in-explicable aspect of arbitrary mass psychology. Par-ticularly in a large scale economy, price inflation is aprecise, mathematical measure of the macroscopic en-ergy dynamics of a system which adheres to physicallaws.

recursive bite ’em ad infinitum

So, naturalists observe, a fleaHas smaller fleas that on him prey;And these have smaller still to bite ’em;And so proceed ad infinitum.

—Jonathan Swift

A remarkable paradox emerges in the careful studyof the prior mathematics, very much reminiscent ofSchroedinger’s notorious is-it-alive-or-dead quantummechanical cat riddle (which many are not aware wasphrased mathematically in his original paper). Ear-lier x was defined as money loaned to the state in

18

excess of straight borrowing, i.e. the quantity of ex-pansion borrowing.

Consider that the model can be totally reformu-lated in a parallel way based on the earlier idea ofexpansion borrowing as a “double shortfall”. Letx simply refer to the budget deficit, the differencebetween funds spent by the government and totaltaxes collected. x then represents the amount offunds obtained from straight borrowing, and all themathematics is identical. Then the “reserve ratio”r = p2/p1 then represents the dilution of value ingovernment services provided to taxpayers due to theoverhead cost of repaying government borrowing, or,in a sense, the degree that the future has been mort-gaged to the present. There seems to be lurking hererecursive bite ’em ad infinitum, noted by some otherwriters, e.g. [2].

In fact, to take it to even further extremes, a po-litical libertarian in favor of a minimalist governmentmight take x to simply refer to all taxes. Then fromthat perspective the ratio r = p2/p1 represents the‘drain’ of government on ‘productive society’ ! (Fi-nally, the anarchist argues against the validity of ‘pro-ductive society’ !)

Apparently what the mathematics is really ad-dressing is the general theoretical concept of moneyspent without consent of money holders via moneysystem mechanics. x is the embezzlement, and r isthe resulting debasement. The government may notspend funds without consent of taxpayers. Borrow-ing requires the consent of future taxpayers. Privatebanks may not spend public funds. There dilutionimplies the consent of the public.

But if the government does it, why not privatebanks? The conclusion is that at the core of the prob-lem, banking and government contain two sides of onephenomenon. Both contain by nature some mecha-nisms, elements, and agendas capable of, and at timesapplying, money-energy extraction without consentof money holders via concealment within the moneysystem administration (i.e. embezzlement). Further-more, from kindergarten wisdom, “two wrongs do notmake a right.” So. . . is it alive, or is it dead? Howto stop it? The halting problem.

4 commentary: blip corruption

“One does not have to eat an entire appleto know it is rotten.”

—literary critic

Over centuries, many commentators and authoritieshave struggled to articulate these ideas using vocab-ulary that has been itself correspondingly debased!Many of their quotations will be re-examined in thisnew light over following sections. The process ofmoney expansion is typically called ‘creating money’and the pseudo-money pseudo-loaned by the pseudo-bank is typically referred to as “credit.” But alsowithin the literature, dire confusion or obfuscationreigns on the razor-sharp cui bono caveat emptordistinction set out here between publicly-owned vs.privately-owned expansion. As outlined, this intellec-tual error has potentially catastrophic consequences.The former case can be a legitimate means for collec-tion of government revenue. The latter stands cur-rently as unexposed embezzlement. The manufactur-ing of abstract credit is a means for real wealth ex-traction!

Banking authorities make a distinction between de-posits and loans in the same way they distinguishbetween “money” and “credit.” In the nonphysicalfractional reserve blip-based money system, the dis-tinction is invalid. Creation of credit is equivalent tothe creation of money. Whoever has or is given theauthority to create credit has the authority to extractwealth from the economy by that same mechanism.Moreover, there is no meaningful distinction betweenfractional reserve banking and money expansion.

The analogy of counterfeiting looms large asthe mathematics reveals. In many ways the onlydifference between illegal counterfeiting and legalprivately-owned money expansion is that gains by therecipient in the latter case are officially sanctioned,not indiscriminate, and limited based on the expan-sion rate. Therefore, paradoxically, privately-ownedmoney expansion is basically equivalent to ‘legalizedcounterfeiting,’ i.e. a surreptitious state-sanctionedplundering of money holder wealth by private bankers!Because it is an intrinsic oxymoron, however, thecounterfeiting analogy is awkward and unsatisfactory,

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and some other metaphor seems necessary.Perhaps the simplest explanation for this situation

is that new shares of the economy are issued, but theyare owned by private bankers at the expense of theownership of all other shareholders (i.e. money hold-ers, taxpayers, citizens). Via mere money manipula-tion the private bankers own a greater real share ofthe entire economy (e.g. GDP denominated in dol-lars).

Hence the term “money stock” takes on new mean-ing! The tragic absurdity of the situation has reachedepic, international, worldwide proportions. All thecomplex economic theory, terminology, and mathe-matics could simply be dropped for the following ex-planation:

The government has delegated its responsi-bility of ensuring public monetary integrityto private bankers. But the arrangementhas devolved and degenerated to negligenceand abdication. Those bankers have re-neged on the implicit promise of providingmonetary integrity. Their system correctlymeticulously keeps track of ‘blip’ ownershipand its transfer except, via the delegatedownership and administration of the blip-system, and under the guise of specious,distorted, and flawed economic science, thebankers can arbitrarily create and own new‘blips’ !

What has occurred is an unequivocal corruption inthe integrity of the money. Money is a representationmeans for scarcity. Holders utilize it precisely forthat property. Any entity that can allocate scarcity-units without exerting economic work by definitionhas debased the scarcity-units relative to all otherholders—the units are not scarce for the embezzler.Somewhere along the line, the promise of integrityhas been trashed.

The holders of the scarcity-units determine the def-inition of economic work. Legitimate government ser-vices are included. The government is erected partlyto protect scarcity-unit ownership and regulate legaland illegal scarcity-unit transfer.

Privately-owned expansion is equivalent to siphon-ing or leeching of money-energy with dollar holders

“left out in the cold.”

scarcity integrity

“The price of liberty is eternal vigilance.”—Thomas Jefferson

“The buck stops here.”—Harry S. Truman

The terminology and mathematical vocabulary of theprevious sections gives a new framework for discus-sion of the different types of money. Evidently it’s acontinuum:

receipt money r = 1; the money is fully backed.

fractional money Fixed r < 1. The unbackedfraction 1− r may be either publicly-owned orprivately-owned.

fiat money Unfixed r < 1; r may arbitrarily fluctu-ate. Or r → 0.

Paper money, in contrast to commodity money, isrequired and a prerequisite for a fractional moneysystem, although a paper money system is not neces-sarily either receipt, fractional, or fiat. Paper moneyrepresents an abstraction away from directly trad-ing a scarce entity such as precious metals. Thisdivorce simplifies, but does not imply, debasementof its scarcity representation via money expansion—actual debasement is tied to administration. Elec-tronic money simply replaces paper with even moreconvenient ‘blips.’

What a fair and sound money system really re-quires is scarcity integrity. All systems devised so farcan be debased. However, debasement is not neces-sarily an intrinsic property of any of them. Clearly,a fair public money system must at the very mini-mum be either publicly-owned fractional, where thereis legislative control over r, or fully-backed, in whichcase ownership of the unbacked fraction is irrelevant(there is no unbacked fraction). Fiat currency is un-sound, but not in the sense that it will inevitablylead to total loss of value. Loss of value occurs atthe discretion of whoever can effectively manipulate

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r via scarcity-unit creation and ownership unilater-ally and clandestinely, concealed from other holders(i.e. without their consent).

As concluded, privately-owned fractional bankingis not a fair system because, in short, it facilitatesprivate confiscation of public property, representedby the public money. However, it is not necessarilyunsound in the sense that it is unstable or will alwayscollapse. Collapse occurs as r → 0. With negligent,malignant, greedy etc. administration, money movesthrough the “backing continuum” from full, to frac-tional, to fiat. But even private expansion ownerswould presumably seek to avoid r = 0. Privately-owned fractional banking can be quite sound.

Apparently, the unrecognized dichotomy of fairnessvs. soundness lies at the heart of much economic the-ory. One does not necessarily imply the other. It ap-pears another variation on the cui bono caveat emptorerror.

[32] quotes a bulletin of the Federal Reserve Bankof St. Louis:

Modern monetary systems have a fiatbase—literally money by decree—with de-pository institutions, acting as fiduciaries,creating obligations against themselves withthe fiat base acting in part as reserves. Thedecree appears on the currency notes: “Thisnote is legal tender for all debts, publicand private.” While no individual couldrefuse to accept such money for debt re-payment, exchange contracts could easily becomposed to thwart its use in everyday com-merce. However, a forceful explanation asto why money is accepted is that the fed-eral government requires it as payment fortax liabilities. Anticipation of the need toclear this debt creates a demand for the purefiat dollar.

By previous interpretation, “fiat base” might as wellbe called a “baseless base.” What the above amountsto, paraphrased: “wealth is denominated in blips andthose blips are legally, arbitrarily manipulated at cit-izens’, taxpayers’, and government’s expense for in-visible confiscation by faceless private bankers.” An-

other booklet entitled Modern Money Mechanics bythe Federal Reserve Bank of Chicago states:

In the U.S. neither paper currency nordeposits have value as commodities. Intrin-sically, a dollar bill is just a piece of paper.Deposits are merely book entries. Coins dohave some intrinsic value as metal, but gen-erally far less than their face amount.

What, then, makes these instruments—checks, paper money, and coins—acceptableat face value in payment of all debts andfor other monetary uses? Mainly, it is theconfidence people have that they will be ableto exchange such money for other financialassets and real goods and services wheneverthey choose to do so. This partly is a matterof law; currency has been designated “legaltender” by the government—that is, it mustbe accepted.

This reflects the perception of conventional wisdomthat money is backed by ‘confidence’ or ‘faith.’ Inreality the expectations over exchanging money forassets, goods and services are arguably a secondaryphenomenon. The confidence refers to the generalmoney holder’s expectation of an implicit promisethat blips will not be arbitrarily allocated—whichhas been exposed here and elsewhere as a monolithicfraud and sham. [32]

faith in blips

“One thing to realize about our fractionalreserve banking system is that, like a child’sgame of musical chairs, as long as the musicis playing, there are no losers.”

—Andrew Gause [27]

Many understandably fail to regard “faith in blips”as something to be taken very seriously. The re-duction of money to a total electronic abstractionand its consequences has been called “the death ofmoney” by Kurtzman. [39] But merely denominatingscarcity-units in terms of blips does not mean thatthose scarcity-units are meaningless or that they willbe arbitrarily manipulated! Blips have a total reality.

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Blips take the physical form of the vast accountingapparatus used to record, manage, and track them.Blip value is the mathematical property of energyderivable from the science of blip mechanics and nota mere psychological phenomenon. Blips are exactlyas real as the entire economy.

If wealth-owners wish to preserve their own as-sets against blind robbery, then they must understandthe basic engineering principles of sound blip-systemsand ensure their blip-system has the absolute high-est degree of integrity achievable and is free of cor-ruption—it is the imperative of citizens, taxpayers,and money holders to actively create one, and notpassively accept any shoddy or boobytrapped systemfoisted on them (bootytrapped?). They must be hy-pervigilant for the slightest signs of ‘leakage.’ Bugsin blip algorithms or implementations have the mostcatastrophic consequences imaginable—blip loss.

Evidently from history this task is in many waysfar more difficult than erecting a government—herculean, sisyphean, gordian, and pandoran (mas-sive, futilely repetitive, intractable, and insidious).It seems both government and banking are defectivelegacy systems and their functions need to be rewrit-ten and consolodated into a new blip-system!

The following statements were made during hear-ings of the House Committee on Banking and Cur-rency, September 30, 1941. [32] Members of the Fed-eral Reserve Board call themselves ‘Governors.’ Ec-cles was Chairman of the Federal Reserve Board atthe time.

Congressman Patman: “How did you getthe money to buy those two billion dol-lars worth of Government securities in1933?”

Governor Eccles: “We created it.”

Patman: “Out of what?”

Eccles: “Out of the right to issue creditmoney.”

Patman: “And there is nothing behind it, isthere, except our Government’s credit?”

Eccles: “That is what our money systemis. If there were no debts in our moneysystem, there wouldn’t be any money.”

Paraphrased, in a way that neither Eccles nor Pat-man would have understood at the time: after nation-wide economic dislocations that eventually escalatedinto a national congressional inquiry, almost certainlyensuing as direct consequences of the corrupt blip-system, Patman is asking Eccles if the blip-systemhas integrity. Eccles replies that no, the blip-systemhas no integrity, but that it is running smoothly andexactly how it was designed to operate. New blipscan be and were created arbitrarily and ownership as-signed to the private bank, and subsequently loanedto the government. The state is required to repaythose blips.

The debt is the blip-debt owed to the private Fed-eral Reserve bank by the U.S. government, i.e. citi-zens, taxpayers, and money holders. Eccles has suc-cinctly explained the process whereby all money is ul-timately based on blip-debt—to private bankers. AsSenator Barry Goldwater stated:

Most Americans have no real understandingof the operation of the international moneylenders. The accounts of the Federal Re-serve System have never been audited. Itoperates outside the control of Congress andmanipulates the credit of the United States.

Translation: the entire U.S. economy is denominatedin blips, the debasement of which its government haszero control over. By the design architecture, dic-tated by first-class users, the blip system is simply notaccountable to second-class users. The world’s “lastremaining superpower,” with the largest stockpile ofnuclear weapons, and the correspondingly most gar-gantuan and highest security military-industrial com-plex of all nations worldwide, has outsourced its blipmanagement! The blips stop somewhere else.

gold & Greenspan

“In truth, the gold standard is already abarbarous relic.”

—John Maynard Keynes

Complex treatises on gold as a money standard havebeen written and its role in finance will only be brieflyregarded here for completeness. For a representative

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view on its role, an excerpt from an unreknownedarticle by current Federal Reserve chairman AlanGreenspan is highly useful. The article (or the follow-ing quote from it) circulates among money reformistsand gold money advocates. Entitled “Gold and Eco-nomic Freedom,” it was published in 1967 in the bookCapitalism, the Unknown Ideal edited by Ayn Rand:[30]

The abandonment of the gold standardmade it possible for the welfare statists touse the banking system as a means to anunlimited expansion of credit. . . .

The law of supply and demand is notto be conned. As the supply of money (ofclaims) increases relative to the supply oftangible assets in the economy, prices musteventually rise. Thus the earnings savedby the productive members of society losevalue in terms of goods. When the econ-omy’s books are finally balanced, one findsthat this loss in value represents the goodspurchased by the government for welfare orother purposes. . . .

In the absence of the gold standard,there is no way to protect savings from con-fiscation through inflation. There is no safestore of value. If there were, the governmentwould have to make its holding illegal, aswas done in the case of gold. . . . The finan-cial policy of the welfare state requires thatthere be no way for the owners of wealth toprotect themselves.

This is the shabby secret of the welfarestatists’ tirades against gold. Deficit spend-ing is simply a scheme for the “hidden” con-fiscation of wealth. Gold stands in the wayof this insidious process. It stands as a pro-tector of property rights.

More on young Greenspan’s brush with Rand’s phi-losophy of Objectivism can be found in Bradford’sarticle, “Alan Greenspan: Deep Cover for Capital-ism?” [10] Or, the Randian libertarianism view ofmoney finds expression in her novel Atlas Shrugged[52] in which a secluded utopian society is foundedbased on a gold coin money system.

Greenspan’s article is very astute and incisive, suchas in how it focuses on the issue of consent by moneyholders, but it contains the same classic cui bonocaveat emptor error. Greenspan assumes the “wel-fare state” is the recipient of the revenue accruingfrom money expansion. The article also tends to mixup the fairness vs. soundness issue.

By the previous section, scarcity integrity is thetrue goal of a fair and sound monetary system.Greenspan’s argument phrased in this terminology isthat a gold standard implies scarcity integrity. Yet inthe same article he describes privately-owned moneyexpansion based on fractional reserves, backed by agold standard, as an accepted, conventional, and le-gitimate banking practice. But in that case there isnot necessarily a way for wealth-holders to protectthemselves from confiscation via dilution either, ex-cept, traditionally, government regulation! Alas, an-other case of recursive bite ’em ad infinitum, whichgold does not inevitably halt.

Greenspan does make the excellent point that ina free market of private fractional reserve banks,r will at least be subject to competitive pressuresbased on best interest rates offered. Unfortunately,there is nothing intrinsic about gold that ensuresthat bankers will not debase a receipt system—historically, oftentimes governments (taxpayers) havehad to refund losses to depositors due to collapsesfrom poor or greedy management. (A minor casecould be made that gold coins circulating in the econ-omy would serve as a check on private expansion.)

Gold money advocates, oftentimes a motley crew,have recently gained some traction by starting newcurrency systems administered over the internet,as profiled recently in an entertaining account byDibbell in Wired magazine entitled “In gold we trust:from gun-wielding libertarians to radical Muslims,an unlikely global cabal is plotting financial revolu-tion.” [16] But they seem to not directly confront thereal key issue of how money holders ensure or areguaranteed it is fully backed and not fractional.

Within money reform circles there is much lack ofcareful distinction over the difference between themedium itself and the administration system, i.e.what mechanisms ensure scarcity integrity. Maybethey adhere to the unconscious equation that “the

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purity of the gold is equal to the purity of the bank.”But the former is physical and the latter is more ab-stract, and scarcity integrity is exactly the chasm sep-arating the two.

Gold or other precious metals certainly seem an ex-cellent base for a fully-backed currency with scarcityintegrity. What might ensure scarcity integrity is notso much gold backing but regular, independent auditsthat certify full backing. A later section, “21st cen-tury blip-system,” will make proposals on alternativesystems based on these observations.

Gold advocates may disagree with the conclusionalready reached above that ‘blips’ alone are a possibleand viable basis for a sound and fair monetary systemwith scarcity integrity. The case will be made that ablip-system may actually maximize scarcity integrityin crucial ways that a physically-backed system can-not, by simplifying the process of auditing.

5 blips vs. nations

“Let me issue and control a nation’s moneyand I care not who makes its laws.”

—Mayer Amschel Rothschild

“A private central bank issuing the publiccurrency is a greater menace to the libertiesof the people than a standing army.”

—Thomas Jefferson

The striking dichotomies and convoluted gyrationsthat arise between political and economic power werein full force at the founding of the U.S. and havepersisted strongly throughout its history. Griffin[32] documents very thoroughly the numerous up-heavals and crises that centered around the bank-ing system. The entire U.S. government revolution,with the motto “no taxation without representation!”was based on defiance of the existing dual economicand political order. The modern equivalent might aswell be framed as, “no allocation without represen-tation!” (Re, recursive bite ’em ad infinitum! ) Thedebate is very much reflected or even epitomized inthe archetypical schism between Hamilton and Jeffer-son and excellently analyzed in Gordon’s work. [28]

In the year before the Constitutional convention,egalitarian populist Thomas Paine wrote that he wasstrongly opposed to fiat money, which he called coun-terfeiting by the state. He specifically abhorred legaltender laws which force people to accept it, saying“the punishment of a member [of the convention] whoshould move for such a law ought to be death.”

The provision allowing “emitting bills of credit”contained in the prior articles of the confederacy(used as a draft for the new constitution), provenhistorically disastrous, was struck down by an over-whelming margin. Voicing the sentiment of the ma-jority of deligates, Hamilton said, “To emit an un-funded paper as the sign of value ought not to con-tinue a formal part of the Constitution, nor ever here-after to be employed; being, in its nature, repugnantwith abuses and liable to be made the engine of im-position and fraud.” But his views were complex; hehad also stated:

A national debt, if it is not excessive, willbe to us a national blessing. It will be apowerful cement to our nation. It will alsocreate a necessity for keeping up taxation toa degree which, without being oppressive,will be a spur to industry.

During the many political trials-by-fire of thefledgling nation, Jefferson shrilly sounded the alarmbell many times:

If the American people ever allow privatebanks to control the issue of their currency,first by inflation and then by deflation, thebanks and the corporations that will growup around them will deprive the people ofall property until their children wake uphomeless on the continent their Fathers con-quered.

In 1814 Jefferson retired to Monticello and bitterlyresigned himself to defeat on the issue of the nation’scurrency. In a letter to John Adams he wrote:

I have ever been the enemy of banks; notof those discounting for cash, but of thosefoisting their own paper into circulation,

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and thus banishing our cash. My zealagainst those institutions was so warm andopen at the establishment of the bank ofthe U.S. that I was derided as a Maniac bythe tribe of bank-mongers, who were seek-ing to filch from the public their swindlingand barren gains. . . . Shall we build an al-tar to the old paper money of the revolution,which ruined individuals but saved the re-public, and burn on that all the bank char-ters present and future, and their notes withthem? For these are to ruin both republicand individuals. This cannot be done. TheMania is too strong. It has seized by itsdelusions and corruptions all the membersof our governments, general, special, and in-dividual.

In the phrase contrasting “discounting for cash” vs.“foisting paper into circulation, thus banishing cash,”Jefferson was making the distinction between a legit-imate bank seigniorage fee (known to the depositor)and fractional reserve banking. The remainder cap-tures firsthand the ‘maniacal and delusional corrup-tion’ of ‘filching and swindling bank-mongers’ Jeffer-son faced, who’d witnessed the entire revolutionarywar. Ironically, Jefferson died leaving his mansionestate Monticello deeply in debt!

President Andrew Jackson successfully managed toextricate the government from the clutches of a pri-vate banking system run by Biddle during his term ina vicious battle, even after a monumental confronta-tion with Congress and the Supreme Court, onceshouting at a group of bank supporters in a fit ofrage, “You are a den of vipers and thieves! I willroute you out!” Jackson declared that the secondbank of the U.S. was a quarter owned by foreign in-vestors who reaped its profits via the era’s equivalentof privately-owned money expansion.

blips vs. civilization

Josiah Stamp, a president of the Bank of England,once spoke candidly during an informal talk to about150 history, economic, and social science professorsin the late 1920’s at the University of Texas: [27]

Banking was conceived in iniquity and bornin sin. The bankers own the world. Takeit away from them, but leave them thepower to create money and control over thatmoney, and they will create that moneyright back again. Take this power away frombankers and all great fortunes will disap-pear, and they ought to disappear, for thisthen would be a happier, better world tolive in. My sons should not object; theyare well educated and should be willing totake their place in the business world. Butif you want to continue to be slaves to thebanker and pay the cost of your own enslave-ment, then let the bankers continue to cre-ate money and control credit. However, aslong as government will legalize such things,a man is foolish not to be a banker.

This is a remarkably modern view relative to theideas espoused in this paper. Stamp has capturedthe idea of worldwide enslavement via the money sys-tem and contrasted it with the productive activitiesof business.

The following quote circulates in money reform lit-erature and is attributed to the Rothschild brothers.

The few who can understand the system[of fractional reserve banking] will be so in-terested in its profits, or so dependent onits favors, that there will be no oppositionfrom that class, while on the other hand, thegreat body of the people mentally incapableof comprehending the tremendous advan-tage that capital derives from the system,will bear its burdens without complaint, andperhaps without even suspecting that thesystem is inimical to their interests.

Here the Rothschilds refer to the parasitical money-energy extracting ‘class’ on one hand and how itis woven together, and the careful balance with anuneducated public that supports the system on theother hand. All the words “tremendous advantage,”“burden,” and “inimical” are arguably understatedor misleading. Also note that they suggest only that“perhaps” no suspicion will be aroused, implying the

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system may still be workable if suspicion is arousedbut it never comes to anything (e.g. the conversationquoted above between Patman and Eccles in 1941).

Robert H. Hemphill, Credit Manager of FederalReserve Bank, Atlanta, Georgia stated: [32]

This is a staggering thought. We arecompletely dependent on the CommercialBanks. Someone has to borrow every dol-lar we have in circulation, cash or credit.If the Banks create ample synthetic money,we are prosperous; if not, we starve. Weare, absolutely, without a permanent moneysystem. When one gets a complete graspof the picture, the tragic absurdity of ourhopeless position is almost incredible, butthere it is. It is the most important sub-ject intelligent persons can investigate andreflect upon. It is so important that ourpresent civilization may collapse, unless itbecomes widely understood, and the defectsremedied very soon.

Ergo, blips vs. civilization, humanity, the world,atoms! Hemphill is correct in the account except hisinsistence that the system may collapse, a claim bymany other writers. Assuming the parasite is not sui-cidal, the system would be carefuly maintained andkept as stable as possible—no “killing the goose thatlays golden eggs.” Also, from the point of view ofthe parasite, the system has no defects, it is func-tioning as required. He also fails emphasize the mereborrowing of dollars is not so sinister as much as theobligatory repayment to the Commercial Banks.

So some basic themes emerge from all accounts.In the real world of atoms, blip mechanics involvesvarious key dynamics:

religion vs. science The public and its elected of-ficials may simply have blind faith in the scarcityintegrity of the blip-system, both in theoreticaland physical terms, or they may actually directlyat least verify that it runs correctly, according tointent, and is free of corruption.

slavery vs. freedom Blips measure scarcity-unitswhich are also equivalent to time and labor by

citizens, taxpayers, and moneyholders by theirvoluntary consent. “Blip-masters” (controllersof the blips) can gain indentured servants—slaves.

parasitism vs. productivity If a parasite can de-feat defense mechanisms, infiltrate, and seize ef-fective control of the blip-system, it can leechreal money-energy via abstract blip manipula-tion. But it must be done while evading detec-tion of the host, either physical or theoretical.

warfare vs. prosperity Jefferson direly warnedthat, in his opinion, in-the-flesh “standingarmies” lined up against the country’s borderswere less deadly than blip-system parasite in-fection. By earlier analogies, counterfeiting isan almost unbelievably effective tool of invisiblewarfare via seizure of assets and control (of e.g.slaves or especially political machinery).

6 the religion of capitalism

“. . . the free-market faith stands on theverge of becoming a national cult.”

—T.C. Frank [24]

“But my second response, horror, had todo with seeing, writ large as only a confabof True Believers can do, technolibertarian-ism.”

—Paulina Borsook [7]

Capitalism as a religion may seem a dubiousmetaphor to many, but the symptomology is present,identifiable, and unmistakable in modern culture.Critiques of capitalist ideology as verging on religioncan be found in e.g. “The folklore of capitalism” [24]or the chapter “Bionomics in your Daily Life” in Bor-sook’s book, Cyberselfish [7]. Any critique quicklyfaces the “fish in the water problem.” Capitalism en-gulfs and encircles humanity’s modern intellectual en-vironment in the same way water surrounds fish, pre-sumably those of which (as the analogy goes) who’venever experienced “fresh air” are incapable of com-prehending the concept.

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The same people that would scoff at the idea ofcapitalism as a religion might also scoff at the idea oflack of true scarcity integrity in the U.S. blip-system.Yet their confidence is a matter of faith. Among thepublic, nobody has firsthand knowledge of how thesystem operates or what super-secure safeguards arepresent to ensure lack of corruption. Re: Patman vs.Eccles, the interal dynamics of the Federal Reserveare shrouded in secrecy even from Congress—hence,books on the Federal Reserve with titles like Secretsof the Temple by Greider [31], Secrets of the FederalReserve by Mullins [49], The Secret World of Money[27], The Occult Technology of Power [1], or Creaturefrom Jekyll Island by Griffin [32].

It’s all reminiscent of the now-urban-legend ofFort Knox that supposedly once stored all the na-tion’s gold reserves. As stated by Barry Goldwaterin the earlier quote, the Federal Reserve has neverbeen independently audited. This may not seem sodisturbing—after all, many companies are never au-dited by outside agencies either. Except, when oneconsiders that if new blips are arbitrarily created inthe electronic transaction system of the Federal Re-serve (known as FedWire), no outside detection ispossible whatsoever because there is no outside sys-tem that verifies (or even can verify) the total quan-tity of FedWire deposits!

As outlined, as is commonly mistakenly supposed,the religious aspects of capitalism are not related tothe abstraction of blips, because a nonphysical blip-system is a totally workable foundation for a securebanking system. What involves faith is the assump-tion that it is administered without any kind of ma-nipulation, or that the only kind of manipulation isthat in which the government uses the extra revenuefor the same purposes as taxation, i.e. public services.

Another related faith is that government represen-tatives will ensure it has scarcity integrity; but aswith the Patman-Eccles exchange, that accountabil-ity approaches a fantasy. The banking “priesthood”uses the catchword credit as a euphemism for routineand unrestrained blip creation—the exact opposite ofscarcity integrity! Not coincidentally the rational jus-tification for economic scripture is not available, norquestioning permitted, to “laymen.”

If capitalism is a religion, then any suspicion re-garding the system’s integrity, particularly that fo-cusing on the specific mechanisms of its actual phys-ical embodiment (such as money expansion, centralbanks, or fractional reserve banking) may all be re-garded as sacrilege, heresy, blasphemy, or a conspir-acy theory. Definitely the idea of privately-ownedmoney expansion gains veers into this territory. Simi-larly, by one account, ex-chief economist of the WorldBank Joseph Stiglitz was “excommunicated [fired]purely for expressing mild dissent from globalisa-tion World Bank-style. . . Stiglitz cannot simply bedismissed as a conspiracy nutter.” [51] ApparentlyStiglitz no longer qualified as the chief proseletyzer.

Capitalism as a religion finds a major expressionin the works of Ayn Rand such as Atlas Shrugged[52] published in 1957, one decade prior to the essayby Greenspan [30] quoted previously. Rand’s philos-ophy of “Objectivism” overlaps with libertarianismespecially in regards to money. The idea of govern-ment bureacrats as inherently a parasitical force onthe productive members of society is an intense themeof her book. Unfortunately this falls into the cuibono caveat emptor trap. There is nothing inevitableabout embezzlement ending with government, andthe assumption possibly dangerously diverts atten-tion. Government bureacrats could be unwitting orwitting pawns in a more “insidious process” (to bor-row her early disciple Greenspan’s own phrase). Asthe saying goes, follow the money.

church dogma

“Religion is the opiate of the masses.”—Karl Marx

“Don’t worry, be happy!”—Bobby McFerrin

If capitalism were a religion, one would expect un-usual, mystical, intricate symbology, such as thatwhich adorns a dollar bill. Or, elaborate worship cer-emonies, such as a master priest routinely appearingbefore Congress to utter mysterious proclamations,such that a mere single phrase like “irrational exuber-ance” could throw worldwide markets into gyrating

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repercussions. The adjustment of key economic pa-rameters with worldwide-rippling consequences suchas interest rates or money expansion would seem tohave all the same scientific precision and consistencyas interpretation of slaughtered animal entrails.

Martin Luther sparked the protestant reformationof the Catholic church in Europe by nailing his 95theses to a church door in 1517. He chiefly protestedthe sale of “indulgences” by the church, via whichhe asserted the church authorities were misleadingthe public into believing they could buy forgivenessfor their sins—that they were in fact worthless rel-ative to that purpose. Historically, the indulgenceswere sold as a financing mechanism for additions andembellishments to the elaborately expensive and or-nate Church cathedrals! Replace “indulgences” with“blips” and the modern worldwide religion beginsto emerge. Are money holders being “sold” worth-less blips by the central banking or fractional reservebanking systems? Caveat emptor ad nauseam.

Another phenomenon of capitalism as a religiontakes place in teeming business pep rallies, of whichall companies Microsoft has probably most perfectedvia Steve Ballmer’s revivalist-preacher showmanship.Tens of thousands of employees regularly file into astadium for a show resembling a religious celebrationturned “mass” hypnotism.

In a speech at Carnegie-Mellon University on April10, 1980, candidate George Bush attacked incum-bent Ronald Reagan for “a voodoo economic policy”comparable to something concocted by a “GovernorMoonbeam,” a deadly-resonant epithet that ringedthrough public debate and launched two decades ofeditorial derisions about “voodoo economics” thatcontinue to the present day.

There may be some hope that the new science ofeconophysics, in its bare and fragile infancy, may nev-ertheless be able to hold up some candlelight in thedarkness of “the dismal science.” What aspects of itare really senseless superstition now masquerading asscience?

In a religion, various terms have special meaningthat may drift from reality via reiterated, increas-ingly disconnected dogma, such as:

money supply Expansion is called “increasing the

money supply” in the mainstream media. Butthis is specious and misleading lacking informa-tion on to whom specifically the money is sup-plied. The terminology is far more accuratelycalled dilution (totally analogous to secondarystock offerings) or “debasing the currency.” It’sa secondary money stock offering backed by theentire country’s assets (underwritten and paidfor by all citizens, taxpayers, and money hold-ers).

deflation Deflation in the modern vocabulary issynonymous with calamity or disaster. Butby the findings on temperature increase in theeconomy, a deflation may be a natural pro-cess whereby an increasingly efficient economydistributes the gains to all money holders—an“emergent” interest system requiring no central-ized or bureacratic administration, or possibilityof ulterior manipulation. Deflation therefore canbe a sign of a healthy economy with highly securescarcity integrity!

price stability The doctrine of Keynesianism ad-vocated that governments spend countries outof recessions via borrowing. It was eventuallyeclipsed by monetarism which proposes a fixedmoney supply rule where the money expansionrate should match growth in GDP. This doesensure price stability, but by the findings ontemperature increase, money holders may losewealth in a growing economy due to price stabil-ity.

fighting inflation Inflation is conceived as a myste-rious, external, and only-marginally-controllablephenomenon much like the weather. But acentral bank such as the Federal Reserve andits valiant but quixotic expansionary monetarypolicy “rain dance” are the source of infla-tion. [54, 26] If the expansionary monetary pol-icy is flawed then the end effect may be to fightcollective gains of publicly-generated wealth in-creases by diverting them to an elite few!

free market In lassaiz-fair capitalist proponents’ideology the market is guided by Adam Smith’s

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“invisible hand” of supply and demand forces.However the most important supply and demandmechanism, that which entails and subsumes allothers, is the scarcity integrity of the overall sys-tem. All market dynamics is built on top of thatstructure. If the underlying “blip operating sys-tem” is flawed, nothing built on top of it is pos-sibly legitimate—the possibility of a free marketis fundamentally and intrinsically corrupted.

growth One of the most charged and loaded termsof all, “growth” as equivalent to salvation is apresumption not necessarily fulfilled by reality.The gains may not be equally distributed. Butthe “more pressing” matter is that growth in theoverall economy is increasingly totally equiva-lent to dangerously amplified earth-wide envi-ronmental stresses verging into crises.

market rates The “free market” non sequitur isepitomized in the central banks’ control overinterest rates and money expansion whichwould otherwise be determined by self-regulatingmarket mechanisms such as deflation. Self-correcting mechanisms have been hijacked forbureaucratic machinations, effectively installinga built-in, invisible caste system—with an eliteclass euphemistically referred to by the Roth-schilds as “the few who can understand the sys-tem, interested in its profits, or dependent on itsfavors.” In a sense, the money system itself isnot free. Or, tail wagging the dog, it becomesthe arbiter of all freedoms.

7 economic slavery

“Whoever controls the volume of money inany country is the absolute master of all in-dustry and commerce.”

—James Garfield

“Money is a new form of slavery, and dis-tinguishable from the old simply by the factthat it is impersonal—that there is no hu-man relation between master and slave.”

—Leon N. Tolstoy

“None are more enslaved than those whofalsely believe they are free.”

—Goethe

Slavery has persisted throughout recorded humanhistory, possibly as long as or longer than money,and the modern era’s supposed obliteration of it canbe regarded as something of a rare anomaly. Entirecivilizations such as those of both Rome and Greecehad economic systems that were unsustainable with-out slaves—more accurately, slavery formed the basisof their systems. But one might argue that slaverypersists at the entry into the 21st century, just in adisguised form. Modern vernacular is rife with di-rect and indirect allusions to slavery. For example,the trap of low-paying jobs is referred to as “wageslavery.”

One origin of the modern “dismal science” of eco-nomics is sometimes dated as beginning with ThomasCarlyle’s 1849 denunciation of its views for the con-flict of market dynamics with slavery. As Levy an-alyzes in his essay entitled “150 Years and Stil Dis-mal!”: [41]

Carlyle makes a point of vital impor-tance: the economics of his contemporariesin its idealization of market relationshipsamong equals stands in opposition to hisdream of slavery’s hierarchical obedience.

Too often soft-pedaled by those who ad-mire his attack on economics, Carlyle wasthe premier theorist of the idealized slavesociety. In opposition to the economists’supply-and-demand model of human soci-ety, he put forward the doctrine of obedi-ence to one’s betters.

One may recoil at Carlyle’s aged sneer as a dark cor-ner of a past era, an aberrant monstrosity of moralityrelative to today’s enlightened view. But eerie resem-blance is not so easily dismissed if one remembers theentire modern worldwide economic system is based onsubservience to abstract ‘blips.’

Therefore the concept of blips denominating tangi-ble wealth or property can be deceptive. Blips havealso become the standard denomination for all human

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labor. The supply-and-demand model of human soci-ety has become the doctrine of obedience to blips. Or,“one’s betters” has been replaced with “blip-owners.”

The saying “time is money” is a reference to humanlabor—workers’ time is equivalent to money and canbe bought and sold like a physical commodity. Inmany ways the central concept of economic scarcityis most apropriately applied to the finite time of allhuman lifetimes. The goal of “scarcity integrity” istherefore closely related to life conservation.

More uncomfortable insight is available in thestudy of the etymology of the word seigniorage whichstems from seignior, a feudal lord who held domin-ion over his serfs. As modern economics preoccupa-tion with “seigniorage” reveals, the supposed “marchof progress” culminating in today’s wildly rampanttechnological age may not have abolished slavery,only streamlined, optimized, and perfected the systemfor implementing and managing it. If the blip-systemis corrupted it has the potential to become a state-of-the-art, technologically-based, 21st century slaverysystem. Re: Goethe’s quote, it may also have the ex-traordinary property that it is largely invisible, thehidden framework not perceived by the slaves them-selves!

In a stark historical irony, the word “Luddite” hascome to be synonymous with an anti-technologicalstance: “one who opposes technical or technologicalchange.” Luddites were hand-weavers and craftspeo-ple who attacked the introduction of the automatedloom but also by association the squalid and inhu-mane working conditions in factories in the early1800s. (Jacquard, the inventor of the loom, wasonce almost killed by a rioting mob!) The automatedJacquard loom served as an inspiration for Babbage’sdifference engine and is therefore accurately regardedas an early conceptual origination of the computer.

Hence, Luddites as merely anti-technologists is theone-dimensional view and possibly a dangerous redherring. The original Luddite movement could justas well be regarded as an opposition or rebellion totechnological slavery. The concept of technology assomehow incompatible or inconsistent with slaveryis an unconscious prejudice verging on an insidiousarchetype. Historically, various technological inven-tions (one example being improved shipbuilding or

shipnavigation techniques) have exacerbated slaveryby making it more viable, practical, manageable, orefficient.

21st century sweatshops

“If you don’t know who the sucker is, thenyou’re it.”

—gambler’s aphorism(reiterated by Warren Buffet)

So not uncoincidentally, realistic accounts that chron-icle the high-technology “revolution” inescapably fallinto documenting “sweatshop-like” conditions, e.g.White Collar Sweatshop: The Deterioration of Workand Its Rewards in Corporate America by Frasier[25], NetSlaves: True Tales of Working the Web byLessard and Baldwin [40], or Coupland’s influentialMicroserfs [15] about actual working conditions in-side Microsoft. As Lessard writes, “The unluckyones—and by that I mean the four million or so work-ers who labor every day in the tech business—workaway in high-pressure, low-security positions where apink slip is a far likelier thing to see in their inboxesthan a Vegas-style payout.”

These books sometimes can only be publishedin the vein of parody or satire even though theymore closely approach anthropological studies, oftena compromised dilution of the original intents of theauthors in exposing inhumane conditions. (One chap-ter from NetSlaves is entitled, “Robber Barons: WhoNeeds Dynamite When We’ve Got IPO’s?”) Lessardand Baldwin’s book, initially “rejected by innumer-able agents and publishers, rescued from the gutter”assert the mass media is responsible for distortingthe reality of the business (Borsook calls it “businesspornography” [7]):

The more I thought about the Net’s Uni-versal Success Myth—the idea that winnerspredominate in this business and losers arethe exception—the more it grated on myown experience and the experiences of al-most everyone I know in the technologybusiness. I’m a living testament to thefact that most Internet careers are nasty,brutish, and short, and I’m not alone.

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Life as nasty, brutish, and short is an allusion toThomas Hobbes’ observation of the human condition,made during the medieval era of mass serfdom, butbasically a synonymous euphemism for slavery.

The founding of the U.S. and an entire century ofits government was fundamentally oriented aroundslavery and its official government sanctioning. Manyearlier colonists of the country were penniless inden-tured servants who paid for the trip abroad via a kindof temporary slavery, buying their freedom at the rateof e.g. 1

7 per year. (The use of the many Jeffersonquotes in this paper could certainly be construed ashypocritical, Jefferson being a slavemaster.)

The modern view clearly has a blind spot; appar-ently slavery and economic systems have always beeninextricably intertwined. And progress in both politi-cal and economic systems have come via shifting per-ceptions and new realizations on the true nature ofslavery, the exact forms of its manifestation, and itsfundamental immorality. Arguably the key legal roleof government even agreed-to by extreme libertari-ans, protecting property, is symmetrically mirroredby a twin: preventing slavery. The dated term “slav-ery” may be replaced with the equivalent present dayterminology, economic exploitation.

If the blip-system has scarcity integrity, then itsfairness implies the impossibility of its use for enslave-ment. In a fair system, private entities cannot createand own blips at the expense of the public. However,that is not the case with the fractional reserve bank-ing system, with its intrinsic privately-owned expan-sion, from the mathematical results here on money-energy siphoning and even by the implicit or directconclusions of various authorities.

Eccles’ reply to Patman was that blips are rou-tinely created outside of state authority. Since theyare not owned by the state (the question whichprompted their dialogue in the first place), they mustbe privately-owned. Therefore, fundamentally, frac-tional reserve banking is equivalent to economic slav-ery. It might be renamed a “fractional freedom” sys-tem. Re Bank of England president Stamp’s quote

with relevant terms emphasized:

. . . if you want to continue to be slaves tothe banker and pay the cost of your own en-slavement, then let the bankers continue tocreate money and control credit.

8 economic parasitism

“History records that the money changershave used every form of abuse, intrigue, de-ceit, and violent means possible to maintaintheir control over governments by control-ling money and its issuance.”

—John Adams

“The money power preys on the nation intimes of peace, and conspires against itin times of adversity. It is more despoticthan monarchy, more insolent than autoc-racy, more selfish than bureaucracy. It de-nounces, as public enemies, all who questionits methods or throw light upon its crimes.”

—Abraham Lincoln

Mere belief in a religion may have a relatively innocu-ous effect on practitioners if it doesn’t demand major“sacrifices”—except that, as history shouts, economicpolicy according to superstition is inescapably disas-trous. Slavery, in contrast, is today regarded as amoral horror or even poison. But even these dis-turbing charges may pale in capturing the accuratereality of a corrupt blip-system. Smith noted an “in-visible hand,” Keynes noted the “invisible tax,” andprior sections considered the possibility of an “invis-ible caste system” promoting “invisible slavery.” In-visibility can be especially treacherous. A more dia-bolical metaphor is required.

Invisibility is a common theme in the earlier de-scriptions. Again, the Rothschilds noted the class of“the few who can understand the system, interestedin its profits, or so dependent on its favors.” AboveAdams refers to the “money changers” and Lincolnrefers to the “money power that conspires and preys

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on the state.”

conspire: To plan together secretly to com-mit an illegal or wrongful act or accomplisha legal purpose through illegal action.

In the strongest indictment possible, Jefferson re-ferred to “maniacal, delusional, corrupt, swindlingbank-mongers.” Jefferson attempted to make a care-ful distinction of banks with seigniorage fees, andthose practicing fractional reserve banking via “foist-ing their own paper into circulation, and thus ban-ishing our cash.” Greenspan referred to money de-basement as “an insidious process.”

What these accounts all have in common is anattempt to distinguish legitimate from illegitimatebanking practices, and the contents of this paper aredesigned to nail down that dichotomy even furthervia mathematical precision. But they also are re-ferring to a sort of “hidden alien force” that tran-scends the existing conceptual boundaries of govern-ment and banking.

They warn of it as an almost indescribably dan-gerous phenomenon, almost an entity. Earlier thiswas referred to as the “mechanisms, elements, andagendas capable of, and at times applying, money-energy extraction without consent of money holdersvia concealment within the money system admin-istration” that may reside in either government orbanking institutions. (To borrow Eisenhower’s neol-ogism on the “military-industrial complex,” call it the“government-banking complex.”) Along these lines,privately-owned expansion was also concluded to bea leeching.

These accounts all converge to describing para-sitism. Hence, insight from biology on parasites be-comes relevant and applicable.

parasite: An organism that grows, feeds,and is sheltered on or in a different organismwhile contributing nothing to the survival ofits host.

The idea of parasitism in economics or society ismillenias old (an alternate meaning of “parasite” is“a professional dinner guest” that dates to the Greekera!) but was historically typically applied to people

who refused or evaded work. Zimmer [70] gives acolorful overview in his chapter “Nature’s Criminals”that weaves from ancient to modern times, with stopsat Darwinism and even Nazism. The idea of wealth-owners as parasites is a more recent invention.

In yet another case of recursive bite ’em ad infini-tum, in 1898 a pamphleteer John Brown wrote a bookcalled Parasitic Wealth or Money Reform: A Man-ifesto to the People of the U.S. and to the Workersof the World, charging that three-quarters of the na-tion’s money was concentrated in the hands of threepercent of the peopulation, that the rich sucked thewealth of the nation away, and that their protectedindustries flourished at the people’s expense: [70]

With the refinement of innate cruelty, theseparasites eat their way into the living sub-stance of their unwilling but helpless host,avoiding all the vital parts to prolong theagony of a lingering death.

bionomics

“I believe that I have given only the firstrough outlines of a province of a great terraincognita which lies unexplored before usand the exploration of which promises a re-turn such as we can at present scarcely ap-preciate.”

—Johann Streenstrup on parasites (1845)

Rothschild’s seminal and definitive Bionomics [55](published in 1990) has a short chapter “Parasitismand Exploitation” with the following:

Discerning “right” from “wrong” in eco-nomics is a matter of distinguishing mutu-alistic from parasitic relationships. The his-tory of civilization chronicles the gradualerection of a system of laws banning par-asitic economic behavior. . . . Slavery, themost obscene form of economic parasitism,has been virtually eradicated.

Hosts are victims. No victim everchooses to be robbed, enslaved, or deniedbasic human rights. Economic parasites use

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secrecy, deception, brute force, and legal au-thority as their “hooks.” By latching ontotheir unwilling hosts, they are able to extortprofits that no mutually voluntary relation-ship would provide.

. . . to the extent that parasitic behavioris curtailed, society benefits. A healthy cap-italist economy is a community of interde-pendent mutualists.

To create an environment where cooper-ation flourishes, the elimination of exploita-tion in all its forms should be the chief ob-jective of a society’s economic laws. Butkeeping antiparasite laws in step with arapidly evolving economy isn’t simple. Iden-tifying the economy’s true parasites andwriting laws that destroy their hooks re-quires a bionomics perspective.

One survey of the idea of parasitism relative toeconomics can be found in Levy’s essay, “The se-cret history of the dismal science: parasite economicsand market exchange.” [42] However, it advances thecommon idea of nonworking people (such as welfarerecipients) as parasites, the typical association for theidea in this context, also a major theme of Rand’s fic-tion. [52] But this seems an inaccurate view, becauseit fails to capture the key element of invisibility ofthe parasite. In biology, parasites must evade the de-fenses or detection of its host. The analogy is thatthe parasite blends in to the normal surroundings,such as a faceless bureacrat within an institution—or specious theories in standard economic dogma. Asynonym for corruption then becomes infection.

Lincoln warned of the money power “preying onthe nation,” very close to the parasitism conception.But arguably a key distinction between predator-preyrelationships and parasitism is the invisibility of theparasite. The predator openly kills its prey, but theparasite covertly sucks the energy of its living host forindefinite time. The parasite must be invisible to thehost to accomplish this. Invisibility is a prerequisiteto sustaining the ongoing parasitism.

Hence, it naturally makes sense to define invisi-ble slavery as human parasitism. Then arguably theconverse case to Rothschild’s assertion above can be

made, (and like Goethe’s observation on slavery) par-asitism is the most insidious form of slavery.

The standard form of worldwide “fractional reservebanking” is synonymous with privately-owned moneyexpansion. It is not generally regarded as harmful;in fact it is seen as intrinsic to the institution ofbanking. But by the prior mathematical findings,it inequitably leeches money-energy from all citizens,taxpayers, and money holders. Therefore, fundamen-tally, fractional reserve banking is equivalent to eco-nomic parasitism.

From the prior analysis, one immediate question is,how could a privately-owned expansion system possi-bly have been erected? As [32, 49] and many othershave accused, the Federal Reserve was erected sur-reptiously, clandestinely, and possibly even via sub-terfuge(s). Griffin refers to the Federal Reserve asThe Creature from Jekyll Island, where the schemeof its founding was hatched in collusion and strictsecrecy in 1910 among the world’s most powerfulbankers of the time.

The “creature” is a parasite. Jefferson’s “tribeof bank-mongers,” Adam’s “moneychangers,” Lin-coln’s “money power,” Garfield’s “absolute masterof all industry and commerce,” Rothschilds’ “classof few who can understand the system, dependenton its favors,” Greenspan’s “welfare state,” Griffin’s“creature”—they are all simply describing the para-site attaching to the host organism, the government-banking complex, while evading its normal defensemechanisms, such as open legislative hearings, publicreview and debate, expert scrutiny, etc.

For purposes here, the hypothetical entity will becalled “the money parasite.” Jefferson warned in histime that “it has seized by its delusions and corrup-tions all the members of our governments, general,special, and individual.” Does it still survive?

If the parasite exists it would not be surprisingfrom the biological perspective. As noted in the in-troduction, by some estimates parasites outnumberfreeliving species by four-to-one. Biology is, there-fore, largely the study of parasites. Economics at itsheart is a life energy system with extremely strongparallels to biology. It is quite plausible that bio-nomics must also, therefore, largely be the study ofparasitism. Such a view is of course completely un-

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conventional and disturbing, to say the least.

bloodstreams

“It’s a little like the Middle Ages. Whenthe patient died they would say “well, westopped the bloodletting too soon, he stillhad a little blood in him.”

—Joseph StiglitzWorld Bank ex-chief economist

The prologue to Zimmer’s outstanding and colorfulrecent overview of new paradigm shifts in parasitol-ogy, Parasite Rex: Inside the Bizarre World of Na-ture’s Most Dangerous Creatures [70] (published year2000) is entitled “A vein is a river.” Virtually all bio-logical parasites tend to live partially or wholly in thebloodstreams of their hosts. It can be used as a trans-portation system to other final target sites, but verycommonly the blood itself is used as the parasite’sprimary or sole food source. So the earlier engineer-ing analogies of economics as an energy system maponto the biological parallel of it as a bloodstream.

In a bloodstream, blood platelets transport oxygento all cells, which require and use it to burn chemicalfuel and produce energy. So it can be viewed as an en-ergy component. Similarly in an economy, dollars arethe energy source for citizens—both are called circu-lation systems. The natural nexus for a government-banking complex parasite is in the money system.And the natural place to look for clues to its dynam-ics is among the tactics of real parasites.

Malaria, caused by the plasmodium parasite, is oneof the most deadly human parasites, and still kills anestimated 2.7 million humans per year. Plasmodiumenters the human bloodstream through a mosquitobite and lives in the red blood cells. The parasitecan clamp onto and wanders blood vessel walls withhooks (recall Rothschild’s terminology) that act liketank treads, also used to latch onto platelets for in-vasion. It blasts through a platelet, fully enters, andthe platelet’s resilient meshwork seals tightly shut be-hind it, all in fifteen seconds. The parasite then eatsaway at the hemoglobin within the cell.

Plasmodium raises the metabolic rate of its hostblood cell three hundred fifty times to make new

copies and build molecular scalpels. The parasiteadds sticky molecules to the surface of the plateletthat cause it to cling to blood vessel walls and dropout of the body’s circulation (recall the earlier charge-storing capacitor electrical analogy). They clump upin capillaries in the brain, liver, and other organs.In this way they evade detection of the spleen whichserves as a slaughterhouse for old or damaged redblood cells.

Trypanosoma brucei is the parasite that causessleeping sickness, another extremely deadly humanparasite that kills about 3 million per year. Try-panosomes are the drill-bit-shaped, self-containedcells of the parasite that swim alongside regular bloodcells. During replication they occasionally changetheir coat proteins to conceal their existence fromthe immune system. The immune system recognizestheir characteristic shape and attacks, but by then asmall contingent of trypanosomes have changed intothe new unrecognizable form and multiply furiously.

The human hosts’ immune system then becomeschronically overstimulated, attacking their own bodyuntil the victims die. The trypanosomes carefullygo through the sequence of new coat proteins froma large reservoir in a carefully predetermined order,because using any prior ones would be immediatelyrecognized and be thwarted based on the immunesystem’s memory. Via this mechanism, infection canbe stretched out for months or even years!

Plasmodium has a similar approach. The hooksjutting from the surface of the blood platelets riskgetting the attention of the immune system. Thereare over a hundred latch variations, each with aunique shape. The parasite occasionally switcheslatch designs randomly. The technique is actuallyequivalent to that used by polymorphic computerviruses that can alter their own code into equivalentbut unrecognizable forms.

Trypanosoma and plasmodium analogies will beconsidered in the following sections. Meanwhile, an-other striking metaphor presents itself relative to“economy as a bloodstream.” The application of par-asitical leeches to patients to remove “bad blood” asa medical treatment persisted throughout the middleages, and is now regarded as a shockingly harmfulor even deadly practice without any redeeming legit-

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imacy whatsoever.That is, a practice supposedly with therapeutic

properties, fully endorsed by theory and authority,with precisely the opposite effect was promulgatedfor centuries by some of the most knowledgeable andwell-intentioned people of the times whose occupa-tion was promoting health—physicians.

Is fractional reserve banking economics’ modernday form of bloodletting? Does the Federal Reserve“fight inflation,” “prevent deflation,” and achieve“price stability” in the “free market” by “increasingthe money supply”?

baitswitching & frog boiling

“Through no fault of his, it all came tonaught. . . . Almost as fast as it issued fromthe Mint, the new coinage went into themelting pots of the goldsmiths.”

—Richard Westfallon Newton’s Royal Mint term

“Experience has prevent that the simplestmethod of securing a silent weapon andgaining control of the public is to keep thepublic undisciplined and ignorant of the ba-sic system principles on the one hand, whilekeeping them confused, disorganized, anddistracted with matters of no real impor-tance on the other hand.”

—Silent Weapons for Quiet Wars [2]

Recall Adams’ warning that the money parasite“uses every form of abuse, intrigue, deceit, and vio-lent means possible to maintain its control.” This isa chillingly accurate description that is precisely mir-rored with biological parasites, almost to the pointthat Adams seems to have anticipated modern dis-coveries in the field of parasitology!

So the sinister basic strategies of parasites such asplasmodium and trypanosoma brunei involve certainkey themes. The technique of bait-and-switch is pre-dominant, also similar to the tactic of utilizing de-coys. A parasite can be invisible if it can distractor divert the “attention” of the host’s immune sys-tem. Relative to the money parasite, the sociological

equivalent of an immune system are the safeguardswithin the government-banking complex such as laws,investigators, regulators, hearings, etc.

As part of the bait-and-switch strategy of para-sites, the immune system can be driven into wildoscillations, i.e. repeated waves of attack. In factthis oscillatory behavior was one of the first cluesinto the underlying bait-and-switch mechanisms oftrypanosoma brucei.

In 1909 Ronald Ross plotted trypanosome countsover the period of infection for a patient. The “re-markable graph” showed a clear rhythm: for a fewdays the trypanosomes would skyrocket, multiplyingby as much as fifteen-fold. Then, just as suddenly,they would drop back down to barely detectable num-bers. The cycle would take a week or so and coincidewith the patient’s fevers. In other words, not a sin-gle assault, but sequential, periodic waves of flaringoutbreaks.

The money parasite parallel is not obvious, butone remarkable possibility can be proposed. Clas-sical economists believed in the fundamental self-regulatory nature of the economy. In modern par-lance, the mass economy functions as a unified bio-nomical organism. By the earlier findings here, defla-tion can be a natural and beneficial redistribution ofincreased GDP or efficiency. Deflation doesn’t imply“price stability” but it may imply beneficial money-energy redistribution. Similarly, possibly price fluc-tuations are symptoms or consequences of parasiticalinfluence, or possibly even mechanisms for fightingmoney parasitism!

The basic conclusion is that economic dislocationsand notorious boom bust cycles that have occurredso frequently in history may be “money parasiteand immune system related”—directly analogous tothe wild oscillations in parasite populations and im-mune system response. This view is generally sup-ported and confirmed by Griffin’s careful historicalre-examination. [32]

Griffin summarizes the strategy of the Jekyll Is-land colluders who founded the Federal Reserve, theworld’s richest bankers of the time: “to convinceCongress and the public that the establishment ofa banking cartel was, somehow, a measure to pro-tect the public.” The plan was one of baitswitching,

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distraction, diversion, even deception: [32]

1. Do not call it a cartel nor even a centralbank.

2. Make it look like a government agency.

3. Establish regional branches to createthe appearance of decentralization, notdominated by Wall Street banks.

4. Begin with a conservative structureincluding sound banking principlesknowing that the provisions can be qui-etly altered or removed in subsequentyears.

5. Use the anger caused by recent pan-ics and bank failures to create populardemand for monetary reform.

6. Offer the Jekyll Island plan as thoughit were in response ot that need.

7. Employ university professors to givethe plan the appearance of academicapproval.

8. Speak out against the plan to convincethe public that Wall Street bankers donot want it.

What Griffin is describing is a stealth invasionby the money parasite into the government-bankingcomplex host body, based on subtle sabotage of itssocial defense mechanisms, via diversion, distraction,and deception. The integrity of legitimate bankingand government institutions is debased exactly inparallel to the money itself! The quasi-government,quasi-bank netherworld duality serves as a subterfugeto evade the established checks and balances withineither system!

red herring: Something that draws atten-tion away from the subject under notice ordiscussion. [From the use of red herring byfugitive criminals to distract hunting dogsfrom their scent.]

Griffin is also describing another horrific tactic thatmight be referred to as “frog boiling.” The story is

that a frog, when thrown in a pan of boiling water,will immediately jump out. However, if placed ina pan of cool water, the frog will tolerate a gradu-ally increasing temperature—even to the point thatit is eventually boiled to death. Institutional integrityof the government-banking complex can be similarlygradually corroded—like a sort of Chinese water tor-ture that slowly drives it to insanity.

immune system infiltration

“. . . were it left to me to decide whether weshould have a government without newspa-pers, or newspapers without a government,I should not hesitate a moment to prefer thelatter.”

—Thomas Jefferson

The concept of the free press espoused by Jef-ferson and enshrined in the Constitution was as asupra-organizational force that could serve as a checkon government and other social organizations—i.e. akind of social immune system.

Instead of evasion of defenses, some of the mostgrisly parasites hijack or destroy the body’s own im-mune system. In several related species, leishmaniacan cause sores in the mild form (leishmania ma-jor), or in the more virulent and deadly forms, killits human host within a year (leishmania donovani),or chew away the soft tissue of the head until thevictim is faceless (leishmania brasiliensis). It infectsmacrophages, the immune system cells that normallydestroy parasites by engulfing and slowly digestingthem. As Zimmer writes: [70]

Leishmania doesn’t have to muscle itsway into its host macrophage the way plas-modium pushes into red blood cells. It’smore like an enemy spy that knocks on thedoor of the headquarters and asks to be ar-rested.

The macrophage swallows up the para-site in a bubble that sinks into its interior.Normally, this would become a death cham-ber for a parasite. The macrophage wouldfuse that bubble with another one filled

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with molecular scalpels, which it would useto dismantle leishmania. But somehow—scientists still don’t know how—leishmaniastops the bubbles from fusing. Its own bub-ble, now safe from attack, becomes a com-fortable home where the parasite can thrive.

Another parasite, the blood fluke, can somehowcloak itself with a coat partially made out of thehost’s own blood cells by means that scientists arestill only hypothesizing. “It may be that when theflukes pass by red blood cells or are attacked by whiteblood cells, they can tear out some of their host’smolecules and attach them to their own surfaces.Thus, to the eyes of the immune system, the para-sites are nothing but red shadows in a red river.”

The tactic of evasion is replaced by infiltration.Recall Griffin’s account above that the Jekyll Islandplotters sought to “employ university professors togive the plan the appearance of academic approval,”or to “offer the plan as though it were in response topopular demand and the need of monetary reform.”As with bloodletting, the parasite masquerades as thecure.

So along these lines, a systematic study of seignior-age sponsored by the Federal Reserve such as [6]might have questionable impartiality.

Another direct possiblity is skewed metrics formeasuring crucial economic indicators such as infla-tion (CPI, Consumer Price Index) or unemploymentlevels. Historically there are many examples of polit-ical tinkering that have consistently weakened theirsensitivity in detecting deteriorating economic condi-tions. These indicators are critical measurements forscientific study and in determining government eco-nomic policy, especially in identifying any deleteriouseffects!

Or, another analogy in the case of the money par-asite is that social warning and defense mechanismssuch as Jefferson’s free press could be compromisedor dismantled in a worldwide blitzkrieg of rampantmoney growth. This is exactly the assertion of JohnMcMurtry, Professor of philosophy at the Universityof Guelph who has documented the case for interna-tional capitalism as entering a “cancer stage.” (Inmedical science, cancer is not currently thought to

originate with parasites although a parasite sourcehas been proposed and investigated in the past, seee.g. [43].)

The cancer metaphor is strongly in line with theearlier analogy of the economy or money system asalso a life conservation system. McMurty has honedthe analogy carefully in his book, The Cancer Stageof Capitalism and its Cure. [46] “As on the cellularlevel, the cancer advances by not being recognized bysurrounding life communities.” McMurtry advancesthe metaphor of “world media as immune system”and suggests it has been hijacked and sabotaged. Ashe writes:

The essential problem of any life-threatening cancer is that the host body’simmune system does not effectively recog-nise or respond to the cancer’s challengeand advance. This failure of our socialimmune system to recognise and respondto the cancerous form of capitalism isunderstandable once we realise that thesurveillance and communication organsof host social bodies across the world,as they now function, are incapable ofrecognising the nature and patterns ofthe disease. That is, capitalist-organisedmedia and information systems select fordissemination only messages compatiblewith the capitalist organisation of socialbodies.

mind control & zombiefication

“They control their hosts, becoming in ef-fect their new brain, and turning them intonew creatures. It is as if the host itself issimply a puppet, and the parasite is thehand inside. ”

—Carl Zimmer [70]

Adams warned of the money parasite’s “use of ev-ery means possible to maintain its control” includingdeception and violence. Host control in parasitologyhas undergone a revolution in thinking. It was pre-viously considered rare and few cases were known.

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However, parasitologists are turning up new aston-ishing cases of the parasite controlling its host viaaltering host behavior to serve the parasite.

In many situations this control is very subtle anddifficult to detect, particularly because it may bemeasurable only in the natural habitat of the host,not within an artificial laboratory environment. Of-ten the precise mechanisms are unknown and in sev-eral cases actively under investigation by parasitolo-gists. It’s prime terra incognita territory to borrowparasitologist Streenstrup’s quote.

The sacculina barnacle parasitizes crabs. Once in-fected the crab no longer moults and grows, whichwould funnel energy away from the parasite. Thecrab also loses the ability to regrow claws and mate.As Zimmer writes, “the crab begins to change into anew creature, one that exists to serve the parasite.”Female crabs actually groom the parasite larvae as ifthey were their own eggs, launching them as heavyclouds in exactly the way their eggs are dispelled.The infected male crabs even adopt this characteris-tically female behavior with the same effect!

An Amazonian spore can infect ground-dwellingants which normally never climb plants. It alterstheir behavior such that they become “insane” andbegin to climb plants. The ant dies at the top of theplant where the spore can grow and break outside theant carcass and launch itself airborne, falling to theground to infect other ants.

A fly fungus accomplishes a similar feat, exceptthat it causes flies to clamp down on high objectswith precise timing. The infected fly maneuvers intoa spore launching pad position only at sunset, whenthe air is cool and dewy enough for the spores toquickly develop on another fly, and only when otherflies are moving down toward the ground as infectiontargets.

Dicrocoelium dendriticum, the lancet fluke, infestscows and other grazers as an adult, which spread theeggs in their manure. There snails swallow the eggs,which hatch in the intestines. The flukes reproducein the snail, which are expelled by the snail in ballsof slime. Ants eat the slime balls which may alsocontain hundreds of flukes. The flukes moves throughthe ant and eventually split up and move to the ant’smandible nerves, the abdomen, and the brain.

As Zimmer explains, “there they do some parasiticvoodoo on their hosts.” At night, the ant climbs andclamps down to the top of grass blades, unmoving,where it is devoured by a cow or another grazer eat-ing the grass. That completes the cycle. Yet thefluke lets the ant loosen its grip on the grass at dawnif the ant hasn’t been eaten, because both the antand fluke would die from baking in the heat of directsunlight! So instead “the ant scurries back down tothe ground and spends the day acting like a regularinsect again”—but repeats the “eat me” ritual thenext night.

Plasmodium, the malaria parasite, alters the be-havior of mosquitos to go from nonhungry to hungrydepending on its vulnerability and readiness. A sickmosquito is twice more likely to drink the blood oftwo people in a single night. Carrying more blood tomore hosts, it becomes a far more effective vector forspreading malaria.

Several parasites manipulate host behavior so thatthe host becomes more likely to be eaten by thenext host in the chain. The extraordinary toxo-plasma gondii parasite infects billions of humans butis thought to be benign in the human host, althoughthere is new evidence linking it with schizophrenia.

Part of t. gondii’s lifecycle is lived in rats. It al-ters rat behavior via mechanisms that are not yetmapped. Rats normally exhibit fear of new environ-ments, “neophobia,” and avoid areas with cat smells.The infected rats are not neophobic and do not avoidcat smells, and may possibly even seek them out (butare generally otherwise indistinguishable). In effectthey become “rodent kamakazes,” more likely to beeaten by cats. The cat is t. gondii’s next host in itsown “food chain.” These subtle behavioral modifi-cations were only discovered as recently as the late1990s.

T. gondii has also been shown within the mid-1990s to alter human behavior. Men become lesswilling to submit to the moral standards of a commu-nity, less worried about being punished for breakingsociety’s rules, and more distrustful of other people.These changes presumably occur when t. gondii en-ters and manipulates their neurons. Researchers haveso far casually or laughingly dismissed the idea thatthese behavioral changes have any significance in the

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human host, but so far neither is there any evidenceto the contrary—it’s a gaping open question.

What analogies can be drawn to the money para-site? The newer model of parasite evolution articu-lated by Zimmer is that they can be exquisitely so-phisticated and evolutionarily adapted, from milleniaof intimate co-evolution with their hosts, with thesurgically-precise behavioral modifications as excel-lent, possibly foremost examples. If the money par-asite persists, it is reasonable to suspect that it hassimilar sophistication. The idea of “parasite psychol-ogy” seems bizarre but its an inescapable and now-firmly-established direction of the research: someparasites alter host behavior by altering their brains.Zimmer accurately refers to altered hosts as “zom-bies.”

There are some immediate parallels, others pre-sumably waiting to be mapped out in any new scienceof economic parasitology. Jefferson seemed to talkabout a similar “zombiefication” associated with the“strong Mania of the tribe of bank-mongers, seized byits delusions and corruptions.” In a sense, “kamakazebankers.”

However, the more relevant analogy seems to beto economic theory, which serves as the “brain” be-hind money expansion principles. The possibilitymust be faced that existing economic doctrine hasbeen influenced, distorted, or even corrupted by themoney parasite—conceivably at least as insidious asall the prior examples! There is some circumstantialevidence. It could be dismissed for its sketchiness,but on the other hand, increasingly parasitology in-evitably must work from shadowy clues gleaned fromfieldwork. Not all answers are matters of looking upreference books.

smoke & mirrors, sleight of hand

“. . . you can see the computer age every-where these days except in the productivitystatistics.”

—Robert Solow [60]

“The productivity paradox is an artifact ofsuperficial thinking.”

—Michael Rothschild [56]

The Patman-Eccles exchange takes on the sur-real quality of a snake-charmer hypnotism session.The smoke-and-mirrors, sleight-of-hand magic act is“hard to swallow.” Or, alternately, the audience hasbeen swallowed psychologically into the maw of theparasite. As magicians say, “now you see it, nowyou don’t!” Or, “A magician never reveals his se-crets.” The dialogue accurately reduces the U.S. gov-ernment’s financing mechanism and its accountabilityto a disgraceful parlor trick.

Joseph Stiglitz is the ex-chief economist for theWorld Bank and International Monetary Fund (IMF)and shared the Nobel Prize for Economics in 2001.After disillusionment over the effects of its policies,in 2001 he went public with scathing criticisms thatreverberated through the world media. He describeda four-step process by which a developing country isravaged by the influx of capital aided and abetted bythe IMF. He described the process as “squeezing thelast drop of blood out of them.” Stiglitz resigned overhis ideological differences. [62]

This case depicts an epic break in the status quo ofeconomists. The IMF and World Bank can be com-pared to an international financial rescue agency—much like an economic “doctor.” Stiglitz is assertingits prescription is always for bloodletting via leeches.In a word, parasitism.

Moreover, he rejected the ideological underpin-nings of the policies as corrupt. In other words,there was no legitimate economic science behind thepractices, or whatever existing economic justificationused was a sham. As reporter and interviewer Palastwrites in [51]:

Stiglitz has two concerns about theIMF/World Bank plans. First, he says, be-cause the plans are devised in secrecy anddriven by an absolutist ideology, never openfor discourse or dissent, they “underminedemocracy.” Secondly, they don’t work.

Ultimately, what drove him to put hisjob on the line was the failure of the banks

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and the U.S. Treasury to change coursewhen confronted with the crises, failures,and suffering perpetrated by their four-stepmonetarist mambo.

Stiglitz does not seem to realize the deadly accu-racy of his own metaphor. A parasite is not so in-terested in the health of its host. “Crises, failure,and suffering perpetrated” are the modus operandiof any parasite and a money parasite would presum-ably be no different. As considered earlier, secrecy isthe mechanism promoting invisibility of the parasite.

“Absolutist ideology never open for discourse ordissent” certainly seems incompatible with the con-cept of a legitimate economic science, familiarity withwhich presumably was Stiglitz’ original qualificationfor the job. Arguably, it does not even qualify asreligion. Overall, it appears that Stiglitz no longerserved as a suitable victim for parasitic mind controland was discarded.

Stiglitz notes the same phenomenon of twisted eco-nomic language. He likens “free trade” by the rules ofthe World Trade Organization and the World Bankto the Opium Wars—“That too was about ‘openingmarkets.’ ”

Other examples of “dissension within the ranks”of economists are easily spotted. Friedman is one ofthe most vocal and influential economists who hasfocused on and been critical of monetary expansionpolicies. [26] He’s also attempted to convey to thepublic the intrinsic relationship between monetaryexpansion and inflation. His approach can be seen asa strong rejection of Keynesianism that dominatedmonetary policy in the first half the the 20th cen-tury. Strangely, bulletproof principles for governingmass world economies via an “economic science” stillseem open to constant debate, revision, and reversal.

The parasitism hypothesis could explain othertroubling anomalies noted by economists, foremostamong them Nobelist Robert Solow’s “productivityparadox.” [60] How is it that the entire informationrevolution of the late 20th century cannot yet bequantified in economic statistics? Apparently eco-nomics has its own form of “dark matter.” Produc-tivity is generally defined as goods produced per hourof work by laborers. It’s conceivable that, basically

by definition, a money parasite could siphon off pro-ductivity gains and make any improved advantagesinvisible to economists—and the public at large!

Keynes: “economics’ Einstein”

“In the long run, we are all dead.”—John Maynard Keynes

Keynes has been called the “Einstein of economics”but some physicists might consider it a slur. Scienceswith lack of rigor and the strict, uncompromising “re-ality check” of experimental testing have been said tohave “physics envy,” and the “dismal science” mayqualify among all with flying colors.

Economics as epitomized in Keynesianism appearsto fail spectacularly the Popperian criteria of sci-entific falsifiability—which some economists almostseem to take pride in. Even supporters of Keynesacknowledge his contradictory and inconsistent pro-nouncements. Economist and disciple Paul Samuel-son wrote the following non sequitur of Keynes’ mas-terwork, The General Theory of Employment, Inter-est, and Money, published in 1936:

It is a badly written book, poorly or-ganized. . . it is arrogant, bad tempered,polemical. . . it abounds in mare’s nestsand confusions: involuntary unemployment,wage units, the equality of savings and in-vestments, the timing of the multiplier, in-teractions of marginal efficiency upon therate of interest and many others. . . flashesof insight and intuition intersperse tediousalgebra. An awkward definition suddenlygives way to unforgettable cadenza. Whenit is finally mastered, we find its analysis tobe obvious and at the same time new. Inshort, it is a work of genius.

Keynesianism at its core is a rejection of the clas-sical economic doctrine of lassaiz-fair and a self-regulating economy. It makes a distinction betweenthe “real GDP” and the “natural level” of the GDP,proposing a divergence that may occur via e.g. sav-ings levels, unemployment, “price stickiness,” etc.The general slippery idea is that government and

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citizens may be required to increase consumption(spending) to fully deploy the economy, even to theextent of deficit borrowing (i.e. money expansion).

This ideology could be seen as a psychological ra-tionale for a parasitical economy. Why is it preciselyfocused on the implicit concept of an “unnatural” andsubpar (below-optimal) GDP that requires unilateralintervention? Possibly because savings represent en-ergy storage by the “cells” of the host organism(s).The urging is to release that energy, to minimize thestorage of it, presumably so that it is more readilyavailable for money parasitism.

Perhaps most revealingly, Keynes opposed a strictgold standard, calling it a “barbarous relic.” He wasinstrumental in negotiating the worldwide Bretton-Woods agreement that abandoned it and erectedthe International Monetary Fund and World Bankin 1944. The gold standard was also the strongesthistorical impediment to money expansion. AsGreenspan wrote, “In the absence of the gold stan-dard, there is no way to protect savings from con-fiscation through inflation. There is no safe store ofvalue.”

A money-parasitic doctrine would be preoccupiedto the point of obsession with the idea that GDPor host energy is below an optimal level and mustbe increased—via artificial stimulation. Recall theplasmodium parasite that increases the metabolismof its host cell three hundred fifty times, hijacking itfor its own malevolent “agenda” or “ends.” In otherwords, growth at all costs—exactly the same modusoperandi as McMurtry’s “cancerous capitalism.”

Keynesianism may be the corrupted ideology ofveiled monetary parasitism in theory or practice.Maybe a future “Einstein of econophysics” will bemore interested in economics as a rigorous and hu-mane science and engineering discipline rather thanas a political buzz-saw power-tool.

growth & red-queen dilemmas

Recall the key money parameter of velocity. Par-asitologists have in many cases isolated “red-queendilemmas” in biology. Named after a passage fromLewis Carroll’s Alice in Wonderland, the parasite andits host are locked in a tight evolutionary embrace

that increases the stress, activity, and pace of thehost. The Red Queen runs faster and faster to stayin the same place. A hyperkinetic culture as nowuniversally perceived by all (noted early on by e.g.Toffler’s Future Shock, 1970, or recently in Gleick’sFaster: The Acceleration of Just About Everything,1999) is therefore a conceivable symptom of a moneyparasite!

A red-queen dilemma in an economy could have“sweatshop” conditions (noted earlier) as one symp-tom. The red-queen acceleration also relates to the“frog boiling” phenomenon. If workers from an ear-lier culture were transplanted into the present cul-ture, it might be psychologically intolerable ala Tof-fler’s “future shock.” Again, recall the mass eco-nomic energy is measured in temperature. If the“temperature” is slowly increased (as an effect of themoney parasite), the “water” is slowly brought to a“boil” without notice. The increased life-threateningscarcity resulting from gradual money expansion is aclose analogue.

A tightly-coupled red-queen feedback loop seri-ously complicates the problem of considering or un-derstanding a parasite-free system, especially relativeto growth. For example, it may not be clear if an or-ganism is growing at a “normal” rate or grows fasterin response to the parasite. Or, the parasite may begrowing but the host does not.

Some species grow faster as a defense mechanismto the parasite infection, in other situations the ram-pant growth is provoked by the parasite to increaseits energy reserve, so abnormal growth is sometimes asymptom. Generally growth is often in some way ab-normal under infection, either stunted or accelerated.If there’s a money parasite present, what’s “normal”economic growth?

This is the same dilemma encountered earlier inthe streamlining of technology that can be more con-ducive to slavery systems. Growth may disguise thepresence of a parasite. The vast and awesome tech-nological achievements of the 20th century take on anentirely new light if one considers they can be mech-anisms for optimizing parasitism efficiency!

Another remarkable possibility relative to growthcan be considered, as hinted in the electronics ca-pacitor analogy. The capacitor simply keeps stor-

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ing energy as the instantaneous energy of the circuit“grinds to a halt.” A parasite can conceivably extractmore energy from the system than is even requiredfor its own survival. Or, it may jeopardize its ownsurvival by “accidentally” or “mistakenly” extract-ing more than the host organism can bear withoutdying!

The dynamic and rapid adjustment of interest ratesby the Federal Reserve as frequently as several timesa year might therefore have parasitic implications. Itcould be a mechanism for maximizing energy extrac-tion while adjusting to uneven growth spurts in thehost. It could be seen as a way to carefully finetunethe level of energy extraction from the host organismwhile avoiding too-dangerous lethality!

The bogus terminology of economics has alreadybeen noted, in phrases and words such as “moneysupply,” “deflation,” “price stability,” “fighting infla-tion,” “free market,” “growth,” and “market rates.”What is particularly striking is how all these termshave been skewed in exactly the false directions thatwould serve a philosophy of parasitic money expan-sion. With the precision of Orwellian doublespeak,the meanings twist harm into benefit like physicians’leeches!

cancer stage of capitalism

“The current financial stripping ofeconomies and environments across theworld exhibits, in fact, all the hallmarkcharacteristics of a carcinogenic invasion.”

—Joseph McMurtry [46]

“The cancer stage of capitalism is not ametaphor. It is a rigorous description ofwhere we are.”

—Susan George

McMurtry [46] does not outline all the mechanismsfor the capitalist cancer, partly implying that theyare yet all to be recognized, but he refers specificallyto the “increasing volume and velocity of money thatdoes not sustain life-hosts:”

The comparison with a carcinogen is starklyevident. A cancer pattern of disease and

metastasis is confirmed when money cap-ital lacks any commitment to any life-organisation on the planet, but is free tomove with increasing volume and velocityin and out of—but not to sustain—socialand environmental life-hosts. On the con-trary, ever more social resources and pro-tection are being diverted to assist the cap-italist cancer to multiply.

As outlined, fractional reserve banking and moneyexpansion are the two key banking mechanisms forregulating—or manipulating—volume and velocity ofmoney. McMurtry’s immune system analogy also ap-plies paramountly to economic science, which abso-lutely must be able to discriminate flawed, destruc-tive, or parasitical economic principles from healthyones (both theoretical and applied) if a cancerous in-vasion is to be repelled. That framework arguablydoes not currently exist. Economists must act as“white blood cells” as much as investigators, regu-lators, reporters, etc. perhaps even more crucially so!

McMurty regards public institutions as societies’vital organs. The “metastasizing” process is iden-tical to mass multiplication by a parasite violentlyrampaging through its host or destroying defense sys-tems:

Globally, protective systems are now beingdismantled at every level. The pattern isnow so universal and aggressive that eventhe language of its agents no longer dis-guises its destructive intent—“drastic cut-backs,” “axing social programs,” “slashingpublic services,” and so on. And society’sprotective systems are openly being “cut,”“slashed,” and “axed” to “reassure lendersand investors”–that circuit of money invest-ment and profit that is no longer linked tothe production or circulation of useful goodsand services.

The “circuit of money investment and profit nolonger linked to production or circulation of usefulgoods or services” may again be compared with theelectrical capacitor analogy and closely parallels the

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dictionary definition of parasitism. McMurtry conve-niently nails down the precise analogy to the follow-ing points:

Long-term, systematic and irreversible de-struction of global life-organisation emergedfor the first time during the current ad-vanced stage of capitalism. If we considerthe defining principles of cancer and theeventual destruction of a life-host, it is diffi-cult to avoid seeing that a cancer pattern isincreasingly invading and spreading acrossthe planet. In other words, there is:

an uncontrolled and unregulated re-production and multiplication of anagent in the host body that:

is not committed to any function ofthe host body; increasingly appropri-ates nutriments from the host body inits growth and reproduction;

is not effectively recognised by the im-mune system;

possesses the ability to transfer ormetastasise its assaultive growth tosites across the host body;

progressively infiltrates and invadesthe host body until it obstructs, dam-ages, or destroys successive organs ofits life-system; and

eventually destroys the life-host in theabsence of an effective immune-systemrecognition and response.

virulence

“There is more than one way to look backat the dawn of humanity. You can go toEthiopia and sift the dust for stone toolsand scoured bones, but you can also go tothe National Parasite Collection, find theright jar, and stare at a fellow traveller.”

—Carl Zimmer [70]

“If you’ve lost a parasite, you have lostsomething in the fabric of the ecosystem.”

—Daniel Brooks

The interpretation of the morality of a parasite is afundamentally subjective distinction. Are parasitesevil? Given that parasites are so prevalent, or con-versely and more accurately, that freeliving organ-isms are in the minority, it could be argued that par-asitism is in fact the ‘natural’ order in biology, andcorrespondingly in bionomics. This argument mayhave some validity, with various significant qualifica-tions.

The virulence of a parasite is the measure of howdeadly it is to its host. Some parasites are relativelyharmless while others are heinously lethal. As Zim-mer states,

A parasite lives in a delicate competi-tion with its host for the host’s own fleshand blood. Any energy that the host usesitself could go instead to the growing par-asite. Yet, a parasite would be foolish tocut off the energy to a vital organ like thebrain, since the host would no longer be ableto find any food at all. So the parasite cutsoff the less essential things.

The harshness with which a para-site treats its host—what biologists callvirulence—contains a trade-off. On onehand, the parasite wants to make use of asmuch of its host as possible, but on the otherhand, it wants its host to stay alive. Thebalancing point between these conflicts isthe optimal virulence for a parasite. Andquite often, that optimal virulence is quitevicious.

This is the “killing the goose that lays golden eggs”constraint. In short, is the parasite suicidal? If amoney parasite exists, there is evidence it is quitevirulent. Adams insisted it was quite capable of vio-lence. McMurtry makes the plausible case that it is atleast as virulent as cancer. Mass global environmen-tal destruction as attributed to the money parasite,as McMurtry does, is a case for very deadly virulence.Stiglitz came to a similar conclusion.

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However, virulence may lie in the eye of the be-holder, and may be too much a one-dimensional con-cept. In this area there is a very new and tenta-tive hypothesis in parasitology advanced by DanielBrooks and others. The idea is that parasites maybe crucial links in promoting evolution or that theirpresence may dampen wild population oscillations ofother species, serving as a balancing mechanism. Forexample, suppose sheep overgraze on land and be-gin to multiply. The parasite has more targets andmight spread faster, culling the herd and prevent-ing overgrazing, consequently having major ecologi-cal implications such as preventing grassland turninginto desert.

Or, by preying only on weaker animals, the para-sites preserve the health of overall species by prevent-ing them from breeding. There is also evidence thatcarnivores and parasites sometimes work in tandem.Wolves that chase and eat sick, weak, and wheezingmooses are actually the next host-link in the chainfor the parasite infecting the moose. A parasite mayalso cut down on the competitive edge of a speciesso it can’t drive out a competitor, making it possiblefor the two species to live side by side.

As very recently discovered, birds in California saltmarshes are thirty times more likely to eat infectedkillifish than uninfected ones, because of a parasite’sbehavior modification to the fish that makes themeasier to spot and catch. This reveals the parasite ex-erts a very significant, previously unrealized effect onits ecology. Any judgement of those parasites as use-less or harmful might be disputed by the birds. Entireecosystems have invisible dynamics due to parasitesthat are only beginning to be uncovered.

Under the fairness of full disclosure, it must beadmitted that the money parasite could conceivablypromote stability among highly unstable alternatives.One immediate conjecture is that the government-banking complex is naturally likely to overinflate thecurrency if it has no limits, possibly to the point oftotal collapse. This occurred in post-WWI Germanhyperinflation, leading to national ruin. A moneyparasite could actually serve the role of extractingmoney-energy, but only within limits, and thus pre-venting the tendency toward total wanton collapse.

Another possibility is that individuals may really

attempt to save “too much” relative to circulatingmoney in some situations, or routinely succumb tovarious extreme irrationalities. The parasitical si-phoning could be unfair, but a possible “last resort”to a frozen or stalemated economy. This was oneof the cornerstones of Keynes’ original theory (bornin situations of crisis unemployment) codified in theparameter of “marginal propensity to consume.”

An even more outlandish possibility is suggestedby some perspectives such as [2]. The idea is thathuman populations inherently become unstable andreach crisis proportions in density, such that a para-sitism mechanism actually prevents dangerous insta-bility and wars. But that twisted line of thinkingon the other hand seems to embody a “self-fulfillingprophecy.” Wars are arguably likely a symptom orconsequence of money parasitism. The link betweenmoney manipulation and wars is very deep and com-plex, and supported by Griffin’s account [32] andmany others.

Generally, any ideas about a parasite adding sta-bility to the overall system should be regarded verywarily. They may be just new masked versions ofthe same parasitic philosophy, new “wolves in sheep’sclothing.”

At the close of his book, Zimmer makes the casethat all humans are a parasitical species on the earthorganism. The earth has a sort of “metabolism” thatshuttles carbon, oxygen, nitrogen, etc. around theworld. The rain cycle moving through streams andrivers can be regarded as a giant circulatory system.The earth is a superorganism. Humans exploit itexactly the way a parasite exploits its host.

There’s no shame in being a parasite. Wejoin a venerable guild that has been on thisplanet since its infancy and has become themost successful form of life on the planet.But we are clumsy in the parasitic way oflife. . . . If we want to succeed as parasites,we have to learn from the masters.

McMurtry comes to a similar conclusion. He pro-poses that a worldwide revolution is required to erad-icate the capitalist cancer—i.e. yet another paradigmshift. “This could be a transformation of the world’s

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now-failing political and economic systems whichnothing short of a global cancer could effectivelybring about.” [46] Then Hamilton’s quote about gov-ernment debt as a “powerful cement to our nation”and a “spur to industry” takes on a new meaning.

host psychological complicity

“A great many people think they are think-ing when they are merely rearranging theirprejudices.”

—William James

“We have met the enemy, and he is us.”—Pogo, by Walt Kelly, Earth Day 1970

The Rothschilds as quoted in money reform literaturecan now be revisited for striking new meaning:

The few who can understand the system[of fractional reserve banking] will be so in-terested in its profits, or so dependent onits favors, that there will be no oppositionfrom that class, while on the other hand, thegreat body of the people mentally incapableof comprehending the tremendous advan-tage that capital derives from the system,will bear its burdens without complaint, andperhaps without even suspecting that thesystem is inimical to their interests.

This quote is simply a veiled reference to the host-parasite relationship. The “few who can understandthe system, so dependent on its favors” comprise theparasite. The “great body of the people mentally in-capable of comprehending who bear its burden with-out complaint or suspicion” are the vast masses witha failed or compromised social immune system. The“burden” is exactly the money-energy extracted bythe parasite from its host. “The great body of peo-ple” takes on new meaning—something like “succu-lent host.”

The quote reveals more, however. It’s suggestingthat the money parasite feeds not only on the money-energy but also on the psychological weaknesses of thepopulace. This is an absolutely crucial element in thedynamic of the host-parasite coupling. It must be

approached and understood as not merely a physi-cal phenomenon. Its existence is partly or perhapseven solely based on nonphysical properties relatingto psychology. Its a link in the exploitation process.

McMurtry makes the case that the population asan immune system is not tuned to recognize themoney parasite. That is certainly a major part of theequation. But one can ask, “why is it not tuned?”A full examination of money parasitism must fully,candidly, and realistically take into account all fac-tors. While the parasitism itself is an unpleasant andmacabre subject, host complicity is simply the “otherside of the coin.” The word “victim” as applied to ahost may be too much a one-dimensional concept.

A money parasite could be considered to simplybe the outward manifestation of degenerative hostconditions. Parasites typically prey on the weak andsick and are simply fought off in healthy hosts.

Ancient history has a simple parallel and model.The Roman Empire was built and dependent on anancient imperialistic colonization process that im-ported a steady stream of slaves from newly con-quered territories. This was the basis of their econ-omy. Arguably, parasitism was the official state pol-icy.

One of the formulas for its government that servedfor centuries was the “bread and circuses” combi-nation. The rulers discovered the simple recipe forminimizing occurences of the periodic riots of the dis-enfranchised. The masses were pacified with somefree food and entertained with bloody gladatorialevents. The modern equivalent seems to have meta-morphosed into something like “Twinkies and TV.”

Extended considerations of host psychological dis-eases conducive to the money parasite can be foundin [2] or [1]. A short representative summary:

greed vs. honesty The tactful Rothschilds did notexplicitly mention greed, but its implicit in theclass “dependent on the favors.” Honest individ-uals would reject the so-called “bargain.” Greedis the foremost disease of money.

profligacy vs. conservation Or “irresponsibilityvs. responsibility” relative to money spendingtendencies. Government indebtedness is just the

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macrocosmic mirror of individual debts on themicrocosmic level.

apathy vs. concern If the public is apathetic to-ward its institutions, they will deteriorate. Howmuch does the public care about its own gov-ernment or banking system vs. extracting gainsfrom either?

ignorance vs. education As Adams warned, thepublic must understand basic money and bank-ing concepts to be able to fight off parasiticalinfections.

dependency vs. autonomy Entire nations can becomposed of dependents and their “enablers.”

passivity vs. action If the public “gives away itspower,” i.e. delegates its authority and takes apassive role, a parasite may arise to take the ac-tive one.

reactive vs. proactive As Griffin [32] has docu-mented, the public can be manipulated via crisesand a false “problem-reaction-solution” cycle.

delusion vs. rationality The public must under-stand “there is no such thing as a free lunch”or they will become one for the parasite.

credulity vs. oversight As Ronald Reagan re-marked on his philosophy over a nuclear armstreaty with the Soviet Union, “trust, but verify.”

distraction vs. vigilance “Eternal vigilance is theprice of freedom.” Mass sporting events and in-ternet pornography are probably in the first cat-egory.

groupthink vs. leadership Some derisively referto the public as “the unwashed masses,” “cat-tle,” or “sheeple.”

cowardice vs. courage It is possible that somehave glimpsed the parasite firsthand but lackedthe nerve to confront or challenge it.

9 economic warfare

“I believe that banking institutions are moredangerous to our liberties than standingarmies. Already they have raised up amonied aristocracy that has set the gov-ernment at defiance. The issuing power[of money] should be taken away from thebanks and restored to the people to whomit properly belongs.”

—Thomas Jefferson

“The first casualty when war comes istruth.”

—Hiram Johnson

“Give me a place to stand, and I will movethe world.”

—Archimedes, on the nature of leverage

To the modern ear Jefferson’s shrill warnings onbanks sound like exaggerated hyperbole, especiallythe idea they are “more dangerous to our libertiesthan standing armies.” Hence the term “economicwarfare” may seem unfamiliar to the point of sound-ing like an oxymoron. It’s a foreign or even alien idea(much like money parasitism) but its reality is sup-ported by some of the most rare and circumstantialevidence. Under a different light, the Jeffersonianquotations are as uncannily perceptive and future-anticipating as Adams’.

Earlier it was observed that governments havehistorically regarded counterfeiting as a treasonouscrime. Counterfeiting has the ability to destroy theeconomic integrity and vitality of an entire nation. Itcan be used as a mechanism of state sabotage, andit is even regarded as an act of war if advanced byone country on another. Widespread counterfeiting,lawlessness, and anarchy are sometimes the historicalprogression of collapsing empires.

As M.A. Rothschild asserted, “Let me issue andcontrol a nation’s money and I care not who makesits laws.” By all the previous verbiage, the differencebetween counterfeiting and money issuance can bea very subtle matter—“razor-sharp.” For purposeshere, loosely define “economic warfare” as “state-

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sponsored counterfeiting used as a means of seizure ofassets and establishing control over another country.”

The metaphor of “invisible slavery” was appliedearlier to economic parasitism. Economic warfarelikewise can have the very treacherous property ofinvisibility. If a nation’s currency is being counter-feited without detection, or assets seized and controllost via an equivalent process, it seems equivalent toa means of waging invisible warfare.

The theoretical possibility of economic warfare ishinted in the earlier mathematics. Gresham’s law,“bad money chases out the good,” fundamentally isabout the economic leverage that can be applied viareserves of capital. Just as in physics when hugemasses can be moved via carefully constructed pul-ley systems that increase “mechanical advantage,” itseems totally analogous that mass economic disloca-tions can be effected by the transfer of capital. Bythe formulas, a bank that issues debased currencyvia fractional reserves that circulates into the largereconomy is exerting leverage against that economyby extracting energy from it.

Now, suppose that two private banks A and Bare competing to extract money-energy from a giveneconomy. Suppose that the owners of bank A manageto clandestinely incite a run on the reserves of bank Bby its depositors, such as by spreading rumors of col-lapse. Bank B fails, and its assets then may comeunder control of bank A. If undetected, bank A ap-pears to have successfully waged “economic warfare”against bank B. It successfully attacked and seized“economic territory.”

The attack is not necessarily limited to collapses.Bank B may not totally fail due to the run, but be sig-nificantly weakened from decline in its reserves fromwithdrawals. The economic leverage of bank A isstill commensurately increased. In a sense, bank B’smoney has been undermined from an economic oscil-lation.

Substitute “nation A,B” for “bank A,B,” “nationalcurrencies” for “bank deposits,” and this gives thetheoretical background of a worldwide economic war-fare technique. Moreover, if the losses are made upby taxpayers, it becomes essentially state-financed!Bailouts may fail dangerously to address the coredisease and maybe even unintentionally mask or pro-

mote it.The analogy applies on international levels. Dif-

ferent nations have currencies that are backed bytheir reserves. Nations become analogous to indi-vidual banks in a larger world economy. Currencyexchange rates are a measure of the leverage of onecurrency against another. If a nation expands thecirculation of its own fractionally-backed money out-side its borders, it’s totally analogous to banks thatincrease circulation of their debased money, and onenation can seize assets of another based on moneymanipulation.

Now, note the basic parallel between a collapse ofa bank due to a run, and mass failure or default ofloans made by the bank. Suppose corrupt privatebank C lends mass funds to an accomplice D. D de-faults, but with kickbacks to C. Government bails outthe “failed” loans of bank C.

These are extremely crucial, initially counterintu-itive situations to observe. Bank failures, bailouts,loans, or aid can be disguised weaponry for wag-ing economic warfare against the governments ofeither foreign or domestic countries. Moreover,government-funded bank bailouts may have the un-intended effect of feeding the money parasite! Theseare the money system analogues of infiltration of thegovernment-banking complex’s immune system.

Hence large-scale currency machinations especiallyduring “crisis situations,” such as “currency swaps”tied with foreign money devaluations by the FederalReserve, can be seen as weapons for waging massworldwide economic warfare—invisible annexation offoreign assets.

Similarly, in 1970 the IMF created a new monetaryunit called the SDR, or “Special Drawing Right.” AsGriffin quotes Dennis Turner: [32]

SDRs are turned into loans to Third-Worldnations by the creation of checking accountsin the commercial or central banks of themember nations in the name of the debtorgovernments. These bank accounts are cre-ated out of thin air. The IMF creates dol-lars, francs, pounds, or other hard currencyand gives them to a Third-World dictator,with inflation resulting in the country where

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the currency originated. . . . Inflation iscaused in the industrialized nations whilewealth is transferred from the general pub-lic to the debtor country. And the debtordoesn’t repay.

Turner is simply describing the process of frac-tional reserve banking as a tool for money parasitismnot on an intra-national but on the internationalscale by the IMF. By definition, inter-national moneyparasitism wages economic warfare.

Economics makes the distinction of GDP, GrossDomestic Product, vs. GNP, or Gross National Prod-uct. [17] GDP can be defined alternatively, roughly,as the percent of GNP that is owned by the na-tion’s own citizens. That is, in a sense, the ratior = GDP/GNP represents a fractional reserve sys-tem of the entire country, with the fraction 1− r rep-resenting foreign ownership of the country’s assets.If a money parasite is “foreign” to the country, thenthe part 1 − r represents degree of parasitic controlof the host country. A debtor nation status can bea sign of nationwide infection and subjugation by aforeign money parasite.

But equivalently, such a situation can be regardedas a domestic invasion and subjugation by an invisibleforeign army—the virtual definition of attack by aparasite from the host’s perspective.

“four steps to damnation”

“In essence, these countries end up buyingback their own money, but at incrediblyhigh rates. And this is just the beginningof the IMF’s involvement.”

—Gregory Palast [51]

“Is globalization about the eradication ofworld poverty, or is it a mutant variety ofcolonialism, remote controlled and digitallyoperated?”

—Arundhati Roy

Possibly the most extraordinary single damning itemof circumstantial evidence for the existence of an or-ganized economic warfare program is the documentcalled Silent Weapons for Quiet Wars. [2] This very

narrowly-known document purports to be a trainingmanual for the science of “quiet wars” waged againstthe populace. It includes amazing scientific andmathematical descriptions very similar to the priorsections. It has much material relating to “debili-tated host psychology,” using the depiction adoptedhere.

The document has never been published anywhereexcept in very obscure locations and on the internet.The scientific community seems to be unaware of itor ignoring it. It’s circulated in small circles for atleast a decade; the author is unknown. Any seriousresearcher looking into economic slavery, parasitism,or warfare must absolutely be familiar with the man-ual. But since its legitimacy and authenticity areso easily questioned by the literal-minded, it cannotserve as any form of definite evidence. Other avenuesmust be pursued to make the case for economic war-fare.

One excellent recent item along these lines is theincendiary article, “IMF’s four steps to damnation”by reporter Gregory Palast. [51] During an IMF con-ference in Washington in 2001 he interviewed ex-chief World Bank economist Joseph Stiglitz who wasfired over his ideological differences. Stiglitz openlycharges the lending program is really one accomplish-ing economic subjugation not unlike colonialism, onlythat it is implemented economically rather than mil-itarily. Stiglitz reduced the IMF modus operandi rel-ative to developing nations, described by more reli-gious capitalist doublespeak:

privatization State industries are sold off after thecountries shave billions off of the prices of elec-tricity and water companies with “commissions”(kickbacks) going to the country’s politicians.

market liberalization Stiglitz refers to this as the“hot money” cycle. Cash comes in for real es-tate and currency speculation and then “flees atthe first whiff of trouble.” The nation’s reservesthat back the currency are drained sometimes indays. The IMF demands the nations raise inter-est rates to the astronomical ranges 30-80%.

market-based pricing The nation is required byIMF to raise prices on the staples of food, water,

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and cooking gas. This has a disproportionatelyheavy cost on the poor.

social unrest Also called “the IMF riot.” Step“three and a half” occurs at this point as theIMF “squeezes the last drop of blood out ofthem, turning up the heat until the whole caul-dron blows up” when food and fuel subsidies forthe poor are eliminated (Indonesian riots, 1998;Bolivia, 2000; Eucador, 2001). Secret IMF planscoldly anticipate the likely “social unrest.”

free trade Free trade by the rules of the WorldTrade Organization and the World Bank, anal-ogous to the Opium Wars. Trade barriers areknocked down in foreign countries but with fi-nancial blockades in return.

The consistently re-occurring riot stage noted byStiglitz is evidence of the link between money par-asitism, violence, and destruction. In overt wars,armies engage in bloody confrontations on a battle-field. In covert economic warfare, a riot may be seenas a symptom of or reaction to the invisible invasion.It’s also arguably analogous to a futile mobilizationof the immune system.

Much of the science of warfare centers around max-imizing the element of surprise. It is to be assumedthat if some renegade groups have discovered effectivemeans of waging economic warfare that they wouldtake extreme measures to attain the strictest secrecy.When asked by reporter Sandeep Kashik, “You claimto know the dirty inner secrets of the IMF. How isthat possible?” Palast replied:

I’ve had large numbers of secret hidden doc-uments slipped to me. The IMF really is itsown secret world government; all of thesereports are stamped “for official use only”and “restricted distribution.” They know ifthe details of what they’re doing gets out,there’d be people in the streets.

Palast writes, “A pattern emerges. There are lotsof losers but the clear winners seem to be the west-ern banks and U.S. Treasury.” Stiglitz nor Palast donot appear to realize the significance or magnitude

of the game. The steps he describes seem probably aglimpse at the mechanisms by which the money par-asite can infect entire national economies.

A pattern indeed emerges. The above clearly de-scribes the overt thrashing ensuing from a covert pro-cess whereby banking and governmental systems aresystematically leveraged against each other to debasethe integrity of each. This would be the core strat-egy exactly expected of a money parasite attackingthe government-banking complex! Extensive delin-eations of this “leverage polarity” in which “bothsides are played against the middle,” can be foundin Silent Weapons for Quiet Wars [2] and The Oc-cult Technology of Power [1].

More analysis of the IMF and World Bank canbe found in Michael Rowbotham’s book, The Gripof Death: a Study of Modern Money, Debt Slavery,and Destructive Economics. [57] Another angle canbe found in ex-CitiBank CEO Walter Wriston’s 1992work, The Twilight of Sovereignty: How the Infor-mation Revolution Is Transforming Our World. [69]

sovereignty 1. Supremacy of authority orrule: sovereignty over a territory. 2. Royalrank, authority, or power. 3. Complete in-dependence and self-government. 4. A ter-ritory existing as an independent state.

high crimes & treason

If a covert plan of economic warfare has been waged,it may have international rather than mere nationalimplications as various commentators have charged.Counterfeiting on a national level is a treasonouscrime against that nation. However, it seems reason-able to classify international scale economic warfareas a “crime against humanity.” Accusations on thislevel have been made by U.S. Senators on several oc-casions.

Senator James Traficant entered a vocal (not le-gal) indictment against international agencies andthe Federal Reserve in the Congressional record in1993 referring to undeclared economic war and eco-nomic slavery: [64]

Federal Reserve Notes (FRNs) are un-signed checks written on a closed account.

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FRNs are an inflatable paper system de-signed to create debt through inflation (de-valuation of currency). When ever there isan increase of the supply of a money substi-tute in the economy without a correspond-ing increase in the gold and silver backing,inflation occurs. . . . The Federal ReserveBank who controls the supply and move-ment of FRNs has everybody fooled. Theyhave access to an unlimited supply of FRNs,paying only for the printing costs of whatthey need.

The receivers of the United StatesBankruptcy are the International Bankers,via the United Nations, the World Bank andthe International Monetary Fund. . . . Thisis an undeclared economic war, bankruptcy,and economic slavery of the most corruptorder!

An extremely extensive accusation of about thir-teen thousand words was entered into Congressionalrecord by Representative Louis T. McFadden in 1934:[45]

Mr. Chairman, we have in this Coun-try one of the most corrupt institutions theworld has ever known. I refer to the Fed-eral Reserve Board and the Federal ReserveBanks, hereinafter called the Fed. The Fedhas cheated the Government of these UnitedStates and the people of the United Statesout of enough money to pay the Nation’sdebt. The depredations and iniquities of theFed has cost enough money to pay the Na-tional debt several times over.

This evil institution has impoverishedand ruined the people of these UnitedStates, has bankrupted itself, and has prac-tically bankrupted our Government. It hasdone this through the defects of the lawunder which it operates, through the mal-administration of that law by the Fed andthrough the corrupt practices of the mon-eyed vultures who control it.

Speaking at the height of the U.S. Great Depres-

sion, McFadden gaves ample historical informationthat mirrors Griffin’s account [32]. McFadden as-serted the foreign bankers used the system to fi-nance and foment entire wars. He insinuates a covertagenda to create “a superstate controlled by interna-tional bankers, and international industrialists actingtogether to enslave the world for their own pleasure.”“I do not like to see vivisections performed on humanbeings.”

McFadden has a thorough listing of crimes and in-dividuals he charges. “I charge them, jointly andseverally, with the crime of having treasonable con-spired and acted against the peace and security ofthe U.S. and with having treasonable conspired todestroy constitutional Government in the U.S.”

McFadden was Chairman of the House Bankingand Currency Committee for a ten year period andsurvived two apparent assassination attempts. Bysome accounts, McFadden died in “suspicious circum-stances” in 1936.

If “international bankers” have indeed extractedvast fortunes from the U.S. and other countries glob-ally, one might guess they have erected vast hiddeneconomic empires. Such financial empires certainlyexist and are documented and acknowledged, but ob-viously not as any ongoing international parasite sys-tem. [14, 22]

Any attempt to identify and disengage any sup-posed existing parasite system must face and contendwith the vast historical battlefield littered with priorapparently failed attempts.

10 21st century blip-system

“In theory, there’s no difference betweentheory and practice, but in practice thereis.”

—Anonymous

It would be facile and absurd to propose any defini-tive solutions for the complex socio-econo-politicoproblem of money parasitism documented here, giventhe vacuum of systematic worldwide research. Thenatural immediate proposal to make would simply bethat the scientific community “officially” recognize it

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and come to grips with it in a way that banking andpolitical authorities have spectacularly failed to con-front. A major part of the problem, possibly the corepart, is public awareness.

There is certainly intense stigma associated withthis subject; in many ways human money parasitismis the ultimate taboo of society and civilization. Anyundermining of belief structures on being “on top ofthe food chain” is unequivocally shocking. It couldbe an immense challenge merely to achieve the statusof a legitimate scientific inquiry. A “hall of mirrors”effect seems to come into play and even the possibil-ity of parasitism already infecting the existing scien-tific establishment is conceivable. [6, 23] Consistently,parasitism appears to transcend all boundaries.

The parasite problem is quite inherently multidis-ciplinary. Just as the government-banking complexseems to have been deficient in its defense mecha-nisms, a narrow and specialized inquiry cannot possi-bly hope to succeed. In many ways, cooperation is theantithesis of, and antidote to, the parasitism. Sim-ilarly, the significant new breakthroughs in biologi-cal parasitology have been hard-won from interdisici-plinary collaborations and insight and might serve asa model.

One serious difficulty plaguing progress is the dif-ficulty in drawing the lines between the “free mar-ket” and “government intervention” with many un-intuitive side-effects. Allowing banks to compete tooffer different currencies and interest rates seems likea reasonable lassaiz-fair idea, except that if any faildue to either ineptitude or corruption the deposi-tors demand government bailouts, possibly effectivelyresulting in state-sponsored pathologies. Moreover,multiple currencies are a serious impediment to fluidcommerce and arguably one of the very first problemsa basic money system must address.

As for fractional reserve banking, one possibilityis a system that comes close to “full reserves,” al-ready advocated by some economists. A system canbe devised where people agree to penalties for earlywithdrawal of funds, and the bank offers a range ofdifferent timed deposit accounts. The bank can countthose possible penalties and loan default rates to cre-ate a system whereby all money holders are essen-tially consenting to any loan arrangements. Any runs

are fully handled and covered via application of theagreed penalties. This replaces the system wherebydepositors do not explicitly select or agree to specificwithdrawal conditions.

One nice possibility for minimizing parasitism hid-den in state budget systems would be the following.The entire government budget distribution systemcould be broadcast on web pages. Individual citizensor even automated “crawling” software could followall budgets and sub-budgets by moving through hy-perlinked web pages in a way that accounts for everysingle dollar spent. These pages could be updatedwith instantaneous information on state revenue andexpenditures. Such a system for meticulous account-ability will of course be opposed by the vast military-industrial complex which now has tens of billions ofdollars in “black budget” items.

A simple system that might significantly decreasethe possibility of economic warfare is one in whichuse of different currencies is closely tied to nationalcitizenship. So for example it would not be legal forlarge amounts of dollars to circulate outside of theU.S. This would not necessarily decrease converta-bility of currencies. Such an idea is obviously highlyantithetical to the existing worldwide monetary sys-tem now in place.

There is some remote possibility and flicker-ing indication that new emerging digital currenciescould scale “parasite free.” [9, 16] However it seemsmoney parasitism could be an incredibly tenaciousphenomenon that will continue to carry into “cy-berspace.” The argument could even be made thatthe numerous attempts at digital currencies havebeen failing due to money-parasitical factors.

One remarkable idea for a blip-system is one witha totally fixed number of blips. It seems counter-intuitive, but such a system is inherently feasibleand practical and possibly highly parasite-resistant.The blip-system owners, or currency authority, issuesblips based on any arbitrary but agreed-on criteria tothe money holders, such as work or tangible assets.This can be done all at once, or gradually.

The system ideally has some way for individualholders to check (electronically) that there are nomore blips in circulation than officially allowed (i.e.a built-in auditing system) and might also support

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anonymity. Note that an electronic system has thetremendous advantage that it might be audited elec-tronically by all holders whereas a commodity-backedcurrency cannot be!

Phrased in this form, the idea becomes very similarto the problem of preventing double spending foundin cryptographic security systems for digital currency,such as those pioneered by David Chaum. [68] It’salso roughly identical to a system known as LETS(Local Exchange Transaction System) pioneered byMichael Linton. [37]

The concept may seem counterintuitive, but onecan observe the close parallel of its widespread func-tioning in the form of hundreds of thousands of com-pany stocks on worldwide stock markets! In fact onetantalizing possibility is an increased merger betweencurrency systems and stock markets such that theybecome less distinguishable. Depending on imple-mentation, such a system could be either highly par-asitic or non-parasitic.

toward full integrity

“Science is a long history of learning hownot to fool ourselves.”

—Richard Feynman

“Never doubt that a small group of thought-ful committed citizens can change the world;indeed it’s the only thing that ever has.”

—Margaret Mead

An extraordinary problem with money parasitismis that arguably, laws against “money laundering”could conceivably be construed as parasitism enforce-ment mechanisms. So increasingly draconian mea-sures to track all privately circulating currency areinstalled, such as in the U.S. by the secret agencyknown as FinCen, as profiled in Wired magazine byKimery in 1993, “Big brother wants to look in yourbank account.” [36] Similarly, The European Parlia-ment investigated the use of the NSA’s (U.S. Na-tional Security Agency) worldwide “Echelon” elec-tronic surveillance system against charges of eco-nomic espionage. [3]

Some innovators are proposing and erectingnew money systems that are locally-oriented and

community-based. [29, 37] That is certainly a strongpossibility, but again they may be illegal by invasivestate laws that require reporting both gifts and bartertransactions and subjecting both to taxation. A par-asitical money system fundamentally has three majorrequirements that are arguably now already fully in-stalled worldwide: (a) any money must be exclusivelyin the form of the state-authorized currency, (b) alleconomic transactions are subject to taxation, and(c) loss of government control over the central bank.

Ultimately, the issue largely comes down towhether individuals have the right to make economictransactions between themselves free of state surveil-lance or interference. U.S. and international laws andlegal administration currently do not appear to sup-port such a right. Coincidentally this is precisely thesame question surrounding the legitimacy of any tax-ation. Again, the issue is closely related to the cir-cumstances surrounding the founding of the U.S. and“no taxation without representation.” In the newterminology, the U.S. Declaration of Independencephrase that

Governments are instituted among Men, de-riving their just powers from the consent ofthe governed.

comes close to a tautology:

money holders define, determine, and regu-late what constitutes parasitism in the sys-tem via its administrative mechanisms.

In any case, a new realization of fractional reservebanking as a kind of fractional integrity or vitalitysystem must enter the mass consciousness, along withthe full understanding that the modern economic andpolitical systems based on it are therefore deeplyand intrinsically flawed—to borrow the informal yethighly descriptive phrase, rotten at the core.

All the associated doublespeak must be discreditedand cleared away for any meaningful or widespreadchanges to occur. Humanity finds itself entering the21st century with a medieval money system. Maybesome of its intense energy directed toward technolog-ical innovation can be channeled toward a state-of-the-art money system upgrade—maybe money is theultimate technological tool of humanity!

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Note that some social mechanisms that might seemto fight off parasitism could in fact be useless or evenexcellent decoys for the parasite. For example, ifmany people engage in even peaceful demonstrationsat world economic summits, what is accomplished rel-ative to captalistic or money reform? The activistsmay be fooling themselves into thinking they madeprogress by whether they “made the evening news.”They might instead more productively find myriadways of reducing “host psychological complicity” con-sidered above. How about organizing conferences in-stead of demonstrations? There does not seem toexist a single major conference in the world for anissue as uncontroversial as “money reform.”

Re: the “leverage polarity” encountered above asa fulcrum for economic warfare, it’s as if the moneyparasite’s food source is a form of money-energy thattranscends both banking and government. It encom-passes both economic and political power and crossesthe boundary of each. Surely any effective counter-measures or new defense system must carefully studyand fully embrace that same polarity.

Previous inoculation attempts have fallen short,such as with the founders of the U.S. and its Con-stitution, or say Marx’s critique of capitalism, notfor lack of valor or diligence but only because of theawesome “nature of the beast.” The money parasitein its various forms has probably co-evolved with hu-mans for millenia, arguably even since the origin ofexchange.

It’s conceivable this all hints at a new, previouslyunrecognized form of energy—say, “monergy”—thatmight be tamed with the full force of scientific and en-gineering discipline applied to it. Econophysics showssome promise along these lines, but a new revolution-ary realm of science and engineering might be bornthat merges politics and economics.

Correspondingly the government-banking complexcould merge and evolve into a new institutional sys-tem that corrects the present flaws in exactly thesame way (e.g.) the well-intentioned, creative, and vi-sionary founders of the U.S. attempted in their time.That is, remove the identified bugs uncovered in thefield from the legacy system via re-engineering andre-release. “Government-banking complex OS v. 2.0”. . . beta . . . virus checked

11 further research

“I seem to have been only like a boy play-ing on the seashore, and diverting myselfin now and then finding a smoother pebbleor a prettier shell than ordinary, whilst thegreat ocean of truth lay all undiscovered be-fore me.”

—Isaac Newton

This section collects all the references to items forfuture research from the prior text and adds someadditional proposals, raising and outlining the manykey questions.

1. The general agenda of applying econophysics re-search to fully analyze money expansion in a waythat classical economics has somewhat avoided isa premiere and extremely critical pursuit. Vastworldwide computational resources are now ap-plied to e.g. global warming simulations andeconophysics research arguably has similar cru-cial priority (the two problems are intrinsicallyintertwined). A model with high theoretical andactual verisimilitude (utilizing some of the priormathematical ideas) seems within reach. Sim-ulations are a very natural and promising ap-proach.

2. Given some fit of the model, the value of n forthe expansion process is unknown and could pre-sumably be determined from careful study anddatamining of economic records. How does nscale for different size economies? However, dueto Federal Reserve secrecy, some key parametersmay not be available, such as the precise amountthe money stock has been expanded. Two keyquestions: over the timespan of the Federal Re-serve, how much money-energy has been illegit-imately extracted, and how much of that movedoutside the country to foreign ‘investors’?

3. Similarly, the decay rate of pressure and demandof government bonds relative to interest ratescan be studied via historical data. These mayboth follow nonlinear formulas that are only ap-proximated by the simpler approximations. A

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key question is how much complexity is requiredfor different resolutions of insight.

4. The nature of velocity of money is murky andmay be tied into thermodynamical expressionsfor average molecular velocities derived from sta-tistical mechanics. Analogously, money pathsmay follow in some sense “brownian motion”over the graphs of holders. Also the link tosavings rate is very promising. What are othermathematical estimations of Gresham’s law?What is the exact leverage possible by an in-dividual bank in a larger economy? When do in-dividuals lose more from inflation and taxationthan they gain from interest?

5. Based on strong theoretical understanding andinsight, what are new systems that have fair-ness and soundness (scarcity integrity) as funda-mental design principles, and avoid recursive bite’em ad infinitum, cui bono caveat emptor, etc.?Presumably cryptographic design principles willplay a role. What is a rational and optimal sys-tem?

6. The money expansion process probably is similarto stock depreciation on the issuance of secondrounds and some insight could be gained fromstudy of these cases. However this line of inquiryquickly runs into the complication of differenti-ating intrinsic vs. extrinsic factors. A generaltheory relating stock market dynamics to moreglobal money systems seems plausible.

7. More research on making more detailed and rig-orous (ideally via mathematical modelling) allthe metaphors advanced in this paper seems rea-sonable: economy-as-ecosystem, economic slav-ery, parasitism, warfare, electrical capacitance,cancerous capitalism, etc.

8. Silent Weapons for Quiet Wars [2] alone de-mands the attention and further investigation ofthe scientific community, particular relative tothe question of covert worldwide warfare. Thehistorical link between money manipulation andwars is available in many references such as

[32, 14, 22] yet is still arguably underexploredby experts.

9. The establishment of small, localized, and iso-lated testbeds of real economic systems to studymoney dynamics laws empirically could be anabsolutely key component in moving economicscience into a philosophy of strict experimentalintegrity.

10. Modelling social class divisions based on wealthdisparity such as through Pareto’s law is closelyrelated to the ideas of this paper, especiallythe “temperature of a physical substance” anal-ogy. [11, 8]

11. Can new econophysics principles shed light onthe historical record of bank dynamics, past dis-locations such as booms, busts, even wars? Grif-fin’s [32] is an outstanding new perspective andre-examination.

12. How secure from tampering or corruption is theadministration of the Federal Reserve and itscomputer and communication systems, e.g. Fed-Wire?

13. The subject of “capitalism as a religion” is a wor-thy sociological or sociopolitical inquiry. Psycho-logical aspects of money-energy parasitism arealso open for investigation.

14. Is CPI calculation flawed based on the conven-tional system from underestimation and the elas-ticity problem? What are mathematical modelsof elasticity across diverse sets of goods?

15. To what degree is Solow’s “productivity para-dox” explained by the “parasitism hypothesis”?

12 frequently asked questions

“Imagination is more important thanknowledge.”

—Einstein

54

“Never attribute to malice what can ade-quately be described by stupidity.”

—American proverb

An attempt is made here to anticipate some questionsthat might frequently occur on the contents of thispaper and provide a brief summary.

Q. Isn’t fractional reserve banking the onlyway to do it?

A. No, there are alternatives. The idea thatit is, is probably based on a centuries-old philosophy and practice of moneyparasitism—a kind of dark-ages “leechbloodletting” that persists into the 21stcentury.

Q. Isn’t a full-reserve system impossible be-cause then nobody could borrow money?

A. The concept of timed-deposit accountswhere depositors agree to penalties forearly withdrawal is compatible with afull-reserve system with borrowing.

Q. Doesn’t the Fed “fight” inflation?A. Inflation can never be prevented by “ex-

panding the money supply” because thatis the cause of it.

Q. Isn’t deflation to be avoided?A. The mathematical findings here contra-

dict that. Deflation can be a means forwidespread and equitable distribution ofthe public gains of an economy. Histori-cally, “demonizing deflation” may havebeen one means of infection by para-sitism.

Q. Isn’t “price stability” an important goal?A. By the same line of thinking, it can be

a means of preventing equitable distri-bution of public gains. Also, price fluc-tuation can be seen as a self-regulatingmechanism.

Q. Isn’t it true the government must borrowmoney?

A. Governments can and should functionwithout borrowing in addition to tax

revenues. Borrowing represents a depar-ture from an equilibrium state. Moneyexpansion is an even further removeddisequilibrium. It’s all just variations onthe same theme of parasitism.

Q. Won’t the system collapse without con-tinued growth?

A. The question is similar to the priorone. Growth is a non-equilibrium state.A sane economics must be based on anequilibrium. Collapse as a result of con-tinued growth is the more accurate sce-nario. Growth can also disguise a moneyparasite, or be a symptom of one.

Q. What’s wrong with interest?A. Interest, defined as “risk-free gain(s),”

is only possible via growth (or accelera-tion) in the economy, which itself is sub-ject to boom-bust cycles. An interestdistribution system could also be seen asan ineffective defense mechanism againstparasitism—it might even be a symptomof it.

Q. Doesn’t the government just printmoney whenever it needs it?

A. That’s the cliche. The Federal Re-serve and U.S. Treasury relationship isvery convoluted, but basically “printingmoney” can be an accurate or mislead-ing picture depending on the context.The key question is “who gains?”

Q. Aren’t business cycles related to hu-man irrationality & fundamentally in-escapable?

A. It is possible the boom-bust cycle is in-escapable in any system, but it is alsopossible that it isn’t, or at least has beenhistorically exacerbated (amplified) by amoney parasite.

Q. Isn’t there not enough gold in the worldfor modern economies?

A. The question involves a lack of under-standing of the nature of scarcity. Priceswould naturally adjust to the amount

55

available if it were used as a standard.

Q. Wouldn’t it be a waste to use gold as astandard when it could be going to some-thing more productive?

A. Again the question implies a lack of un-derstanding about the nature of scarcity.The stored gold not going to other usesis a perfect visual depiction of the fun-damental nature of money as a “store ofvalue” and the definition of “reserve.”

Q. So there should be a gold standard?A. It’s one but not the only possibility; un-

fortunately any system can be debased,as gold was routinely in the past. Thefocus needs to be on the administrationsystem.

Q. Is there really an organized national orinternational “money parasite”?

A. The case for a nationally unorganizedone, i.e. on the level of a metaphor oras an “emergent phenomenon,” is cer-tainly reasonable to conclude. As for“organized”—unknown. Proposed hereas a hypothesis but left as an open ques-tion. There is ample circumstantial ev-idence but nothing definitive or conclu-sive. “Need more data.”

Q. How solid are all the mathematical for-mulas in this paper?

A. Not all of it is to be taken totally seri-ously. It’s laid down immediately askingfor revision. The underlying theoreticalconception of energy dynamics is likelyvery solid.

Q. Doesn’t this entire paper fly in the faceof vast swathes of existing economic the-ory?

A. Yes. In fact in places it’s quite disre-spectful.

Q. Why hasn’t anyone in banking or gov-ernment described or confronted moneyparasitism before?

A. Many have, in different forms, as doc-umented here. But it’s also a prob-

lem of each mistakenly thinking that theother “has it covered,” a blind-spot ex-ploitable by a parasite. If regulatorsdon’t know what to look for, it just re-sults in “close calls” and “near misses.”

Q. Is the Federal Reserve a nexus for a realmoney parasite?

A. Possibly. A central banking system isthe natural habitat of a money parasite.A worldwide system such as the IMFor World Bank would be an especially“juicy host.” If the world had a bank,the World Bank would be it.

Q. How could it be isolated if it exists?A. Determined investigation, maybe a real

“audit.” Note that published recordsdo not necessarily accurately depict hid-den dynamics. Also, in any serious in-vestigation, the possibility must be con-fronted that some participants may be“tainted.”

Q. That sounds like a witchhunt!A. More like a parasite hunt. Remember,

the immune system itself can be compro-mised in a parasitic invasion, in the moreinsidious cases. But it could even be fun,like a game, like hunting for easter eggs.

Q. But that still sounds like McCarthyism!A. Yes, or maybe McCarthyism was a para-

site decoy. Public hearings are flamboy-ant but not necessarily a very effectivestrategy.

Q. [snicker] So then what’s “a very effectivestrategy?”

A. Andy Grove, ex-CEO of Intel and pre-miere 20th century surfer of Moore’sLaw and the technological age, wrotea book called Only the Paranoid Sur-vive. Seriously, maybe a truly effec-tive strategy is yet to be invented. Aparasite at the scale of national or in-ternational economies in the 21st cen-tury must necessarily have developed ex-traordinarily, verging on incomprehensi-

56

bly sophisticated mechanisms for ensur-ing its own survival. But Zimmer’s workreveals, that is in fact exactly the levelthat real biological parasites have rou-tinely attained through millenia of co-evolution with their hosts.

Q. It’s still all just a conspiracy theory.A. As Lincoln, front-line expert on slav-

ery and liberation, warned ominously,“the money power conspires.” Historyabounds with real conspiracies, and toparaphrase Santayana, those who do notlearn from them are doomed to repeatthem. (On the other hand, it has alsobeen said “history is written by the as-sassins. . . ”) Anyway, a thorough inves-tigation does not imply belief in a con-spiracy. Money holders have the rightand imperative to enforce the integrityof their system. It’s their money.

Q. The overall paper flips in an almostbipolar way between money parasitismin its theoretical vs. real forms, abound-ing with multitudes of nebulous ab-stractions, mathematical fantasies, out-landish and disconnected references,flimsy innuendoes, foggy and tenuous in-ferences, nonsequiturs, shrill polemics,awkward mixed metaphors, unprovenspeculations, unwarranted and wild ex-trapolations, frivolous quotations, bor-derline purple prose, and gratuitous,thinly-veiled accusations.

Q. Yes. So?

A. . . . The slurs on the public citizenry atthe end are tasteless, insulting, mean-spirited, out-of-line, outrageous and in-tolerable.

A. ok.

Q. The text has too much italics, and ex-clamation points should never be usedin a scientific paper!

A. ok!

Q. . . . If there’s a worldwide economic slav-

ery or warfare system, why can’t I see it?A. Maybe because it’s invisible. And

note that scientific advancement (the“paradigm shift” cliche) is fundamen-tally about making the invisible visibleas e.g. in the case of Pasteur, or the pastand modern parasitologists.

Q. Can econophysics really replace “the dis-mal science” of economics?

A. Hopefully. It’s an entirely differentparadigm with fundamentally differenttools, outlooks, and strategies. Its alla truly vast terra incognita waiting foranother Einstein, so to speak.

Q. How could entire banks be corrupt?A. There are historical examples of this

even on a large scale such as the BCCIcollapse, Bank of Credit and CommerceInternational in the early 1990s; regu-lators reported that mass funds simply“disappeared.” All scenarios must beconsidered for a healthy immune system.

Q. How much money has been lost to theparasitism?

A. In one sense, nothing, because it hasnot been detected or considered a loss.In another sense, possibly astronomicalamounts over many generations, con-ceivably enough to enslave entire na-tions.

Q. Can a single paper really make any dif-ference?

A. Maybe. If it is read, understood, anddisseminated. Martin Luther’s did.

Q. Who will solve these problems?A. Concerned citizens, if they exist.

Q. But will they be solved?A. Maybe. Probably, especially in the long-

term as public consciousness is raised.There are occasional “tipping point” or“critical mass” phenomena along theselines.

57

13 comments on references

The following comments are offered in addition toprior notes to other researchers interested in navi-gating some of the references cited. The literaturepertaining to the subject of money, economics, andfractional reserve banking is vast. The selection be-low represents only one possible set with its own id-iosyncracies.

Easily an entire paper could be written analyzingSilent Weapons for Quiet Wars: Operations ResearchTechnical Manual. [2] The scientific community ap-parently has been totally silent on or unaware of thisdocument, but the contents clearly deserve seriousanalysis as to their possible authenticity. There aretwo main versions circulating, one of which has no di-agrams or equations (in e.g. Cooper’s collection), theother has many diagrams and complex formulas suchas partial differential equations, electronic schemat-ics etc. (in e.g. web site version cited) that stronglyconflict with any view of it as some kind of amateurprank or parody.

In many ways it is the most important single refer-ence among this collection apropos to this paper’sown analysis. It contains a scientific sophistica-tion arguably at least two decades or more aheadof its time at its published date (1979), but alsothe most sinister and diabolical undercurrent con-ceivable. There is a very strong case to be madeit is exactly what it purports to be, i.e. a leaked topsecret manual, handbook, and manifesto for insidersdocumenting the history and mechanics of economicparasitism and warfare, razor-honed to a deadly sci-ence.

At 608 pages, Griffin’s tour de force [32] is oneof the most ambitious and thorough treatises on thesubject of the Federal Reserve and the history ofmoney and fractional banking. Griffin focuses mainlyon U.S. history and historical figures during and sincethe revolutionary war, with meticulous analysis andmany historical quotations, with special attention toU.S. war engagements. It’s also one of the most com-prehensive bibliographies on the subject available.

Much literature on the Federal Reserve falls intothe genre of “conspiracy theories.” The approachtaken in this paper is to include these sources simply

as additional perspectives for consideration, piecesfor a sociological or anthropological study. [2] and[1] are classic pieces from this genre. Unlike main-stream accounts, these articulate and explore thecovert means by which money and political powercan be intertwined and leveraged against each other.In [23] the economist Flaherty has taken pains to de-bunk the conspiracy theories on his web page, focus-ing particularly on [34].

Mullins’ work [49] is another classic from the con-spiracy literature, has much historical detail appar-ently based on copious research and highly accurate,but is seriously marred by the lack of citations and abibliography. [27] is similar, also having much histor-ical information but weak organization and no bibli-ography.

Rothschild’s Bionomics [55] is the first com-prehensive treatment of the economy-as-ecosystemparadigm, a very innovative and seminal book atits introduction; the ideas have been very influential.The Bionomics Institute and web site has active andongoing publications and conferences.

Borsook [7] has an irreverent and facetious chap-ter on bionomics as a social movement, “Bionomicsin Your Daily Life,” documenting the various con-ferences in the 1990s and personalities behind theirorganization. It also delineates the major politi-cal agendas behind bionomics, mainly libertarian-ism. Borsook focuses on a brand of libertarianismfinetuned by Silicon Valley hackers, verging into aphilosophy of “anarcho-capitalism.” Her work servesas a fair, skeptical critique and warning on extrem-ist views and hidden ulterior agendas on e.g. digitalcash.

Bhattacharya’s work [6] is a recent complex and ad-mirable analysis with computational simulation of amoney expansion model that includes diverse factorssuch as production, taxation, etc. by a Federal Re-serve sponsored economist. It also has an extensivebibliography of conventional economists’ views onmoney expansion, i.e. “conventional wisdom” largelycontradicted by this paper’s findings and assertions.It can be reviewed while keeping in mind the poten-tial conflict-of-interest issues noted earlier.

The accumulated edifice of 20th century economicstheory is extremely formidable, and summary and

58

overview references such as [17, 50, 58] are very help-ful in condensing decades of diverse materials. How-ever they should be recognized as not substituting fordefinitive treatises and textbooks from the field.

Doyne Farmer in many ways embodies the newbreed of econophysicists and is the forerunner. [18, 19,20] He was key in helping bring about the scientificparadigm shift in recognizing chaos, complexity, andnonlinear dynamics long before it was a fashionablepoint of view—in fact, the agenda was initially veryunsupported, risky, criticized, and even ridiculed; see[66].

The economists that come closest to articulatingthe same ideas of this paper are Friedman [26] andRothbard [53]. Both writers are internationally ac-claimed. Rothbard is sponsored by the Ludwig VonMises Institute with many similar writings and is oneof the few economists in the entire world to argue di-rectly against the central banking system in the formof the Federal Reserve. [54] This reference also con-tains an analysis of American history based on themachinations of private banking dynasties.

[64] and [45] are remarkable, astonishing, incendi-ary denunciations, indictments, and condemnationsof the Federal Reserve entered into Congressionalrecord by representatives McFadden and Traficant,totally obscure, unknown, or forgotten among thegeneral public.

[31] is about the best documentation of the internaloperation of the secretive Federal Reserve availableto the public. [63] is a very accessable abbreviatedsummary on the function of the Federal Reserve.

[22] is a comprehensive account of history basedon the interpenetration of banking and key historicalevents such as world wars, a crucial link not typicallyexplored by historians. [14] is a similar retrospective.

[46] is one of the few available references that pro-poses a similar analogy explored in this paper, the“cancer stage of capitalism.”

[59] is a 413 page treatise on economics targetedat the layman. It’s got excellent history on the inter-penetration between politics and economics, focusingon the 20th century, as well as a basic introductionto the Federal Reserve system.

[39] and [69] were published at about the sametime and look at the extreme international fluidity

of electronic money at the end of the 20th century,the latter emphasizing its disruptive effects on gov-ernments. [57] takes the case further and argues thecase for worldwide “debt slavery” via internationallending institutions (IMF, World Bank).

[29] and [37] are particularly helpful in proposingalternative currency systems.

[70] is a very lucidly written yet highly scientificaccount of the recent revolution in biological para-sitology, based on many first-hand interviews of re-searchers.

Thanks to V.S. for many helpful materials and discussions.

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