Money: Substance or Symbol?

Franklin Sanders

Public education has indoctrinated every one of us in Enlightenment rationalism. We don’t know any other way to think about the world. We’ve been taught that we have to abstract the essential principle of everything, separating it from all distracting particulars and details. But however useful they may be to discussions, abstracts will mislead us unless we remember that they are merely imaginary categories, and not real.

No matter what crazy conclusions result, the modern world plods on, enslaved to “scientific” rationalism. We are slaves to abstractions, to unreal things that do not exist. It is worse than being ruled by the dead. It is being ruled by the non-existent, for the benefit of a very few living. When a monetary system substitutes abstractions for realities, the error quickly and cruelly avenges itself – for real, and not in the abstract.

Our abstract monetary system creates money by borrowing it into existence through banks. Eventually, those who create the money will enslave everyone else in debt, and end up owning all property. The abstract will consume the reality. The only solution is, don’t use their money.

Part I: How I Learned About Our Monetary System

In 1987 an attorney in Memphis, Tennessee, informed me that an Assistant US Attorney for the Western District of Tennessee had called me “the most dangerous man in the Mid-South.”

Imagine the terror you would feel if someone named you that. What sorts of criminals does the US Attorney’s office deal with? Was I a drug trafficker? No. Bank fraud perpetrator? Check kiter? Purveyor of prostitutes? Pornographer? Briber of government officials? Murderer? Terrorist? Communist revolutionary?

No. None of these. I was the quiet father of seven children and a businessman. How on earth could the Assistant US Attorney dealing with all sorts of criminals call me “the most dangerous man in the Mid-South”? How could I be the most dangerous man in the Mid-South?

Because I had aimed a dagger at the heart of the American system: I had opened a gold and silver bank.

That’s probably a crime you didn’t know existed. You never heard of any Russian anarchist revolutionaries meeting in cellars and plotting to set up gold & silver banks, did you?

Crazy? The more I thought about it, the more I realized that the Assistant US Attorney had gotten it right. To her system, to the “American way of life as we know it,” and to her way of thinking, I was the most dangerous man in the Mid-South, but not because I was anything important in myself. Rather, I presented that one little needle point of truth she and her cohorts couldn’t let in, because that tiny needle point is plenty big enough to pop their enormous balloon of delusion, deceit, illusion, and lies. And that balloon supports all their power.

That system of lies enslaves every one of us, steals our capital day by day, and makes sure that we can never own or accumulate property to pass on to our children. Worse yet, the only force that keeps us slaves is our own cooperation. We forge our own chains, daily, and we fasten them firmly on our own wrists and ankles. Any day we want, we can drop those chains and walk out free men and women. Later I’ll tell you just how to do that.

To understand the American “system” or “the American way of life as we know it,” you must understand a bit of history. By the time the War Between the States ended, there had been a coup d’etat in the United States. The North didn’t win the war, and the South didn’t win the war. Big business won the war, and ever since, big business has been re-organising the country and the people to suit its own purposes and profits. That is the American system: Big Business runs the government. And its beating heart is the fraudulent monetary system that feeds and supports it.

What This Article Will Do

Its structure is really very simple. It only has one theme, moving from the abstract to the real. From symbol to substance. If you bear in mind that everything I am about to say will help you move from the abstract to the real, then you will easily understand it all.

My article is divided into two parts, first about the nature of money and our present monetary system, and second about how you personally can secede from that system. You don’t have to overthrow the government, you don’t have to abolish the federal reserve, you don’t have to elect congressmen or senators or presidents or dog catchers, and, best of all, you don’t have to throw any bombs. All you have to do is begin using rights and powers you already have. All you have to do is to step out of the shadows of delusion, deceit, illusion and symbol, and into the light of substance. Move from the abstract and imaginary to the real. And, it will make you money.

Two Theories of Money

There are two and only two theories of money, both known and described since the days of Aristotle.

One theory holds that money must have substance, the other that money is only a symbol. Symbol, or substance. If money must have substance, then it must contain some value itself. If money is only a symbol, an abstract representative of value, a tool society arbitrarily creates for itself, then any representation will do, from paper notes to electronic computer entries. After all, the money needs no value itself, it only represents value. Money is only a disembodied idea, not a concrete reality.

The money we choose will affect everything else in our world. The entire monetary question boils down to this, whether our lives will be ruled by realities, or by abstractions. Real things, or non-existent illusions conjured up to seduce and defraud us. Real things and real values we freely choose for ourselves, or unreal abstracts forced on us by somebody else. If money must have value, then I have to go out and earn – accumulate – real wealth. If money is merely a symbol, then productive work is unnecessary. Whoever creates the symbols controls society, and the rest of us become their gulled slaves.

Symbol v. Substance: Reciprocity v. Hot Potato

When money has substance, perfect reciprocity rules every human exchange. Why? Because money as substance requires that whatever is used as money has value itself. Real people value that money for some real benefit it confers by its nature. When I exchange using money of substance, every transaction is complete and just, trading value for value. I give you a weight of gold or silver or tobacco or goats, and you give me a specified amount of lumber or milk or vegetables or cloth. Good for good, measure for measure.

Don’t miss the essence of this transaction: you and I exchange real things, genuine, physical substances. Value for value. Reality for reality.

When I exchange money as symbol, then no transaction is ever complete, or equitable. It is never complete because the symbolic money does not pay anyone. It does not deliver anything of substance, it merely transfers a promise to pay. It transfers the obligation to pay the transaction to the next person who ends up with the symbol. Symbolic money creates a never ending game of hot potato.

Using symbolic money, no transaction is ever equitable, because in every transaction one party receives something of substance, some valuable real thing, while the other receives only a symbol. That symbol, in turn, represents – nothing! We’ll look at it more closely in a minute, but take my word for it now. Whether the symbol represents only debt (the negation of value), or whether it represents only confidence (the willingness of the next victim to take it), the symbol itself has no value.

A Tool of Love or Power

There is no other system or theory of money besides these two. Money either exchanges substance for substance, or substance for symbol. Money is either a tool of mutual enrichment and love, or a tool of exploitation & power. By “love” I mean not sentimental affection, but the justice of the Golden Rule. As Andrew Lytle observed, “The opposite of love is not hate, but power.”

These two monetary systems are utterly incompatible. Where they exist side by side, one will always drive the other out of existence, just as bad money armed with government force always drives good money out of circulation. Only one monetary system is compatible with freedom, and that is substance. Only one system can protect and maintain property rights, and that is substance. A symbolic money system will eventually transfer title to all property to whoever creates the symbols. Think about it: it must end that way. On one side are people who can only get money by working for it, while on the other are those who create it out of thin air. At what point will the “creators” decide they have created “enough” money? Answer: when they have created enough money to own everything.(i)


By now either a big light bulb has lit up in your mind, or you have no idea what I am talking about. An example will explain how substance and symbol differ.

It’s Monday, and you’re a little short on cash this week. You see your friend Joe, who always seems to have money. You pull Joe aside and ask him to borrow $50 till you get paid on Friday. Generous Joe agrees to lend you the money.

Now as far as you and Joe are concerned, Joe loaned you something of substance, even though it was only a piece of paper with a picture of a dead yankee general. Why? Because even though the money itself is symbolic, Joe had to trade something of real value – his labour – for the fifty. At the end of the week, when you get paid, you give Joe back substance for substance, equal for equal.

But what happens when you borrow money from a bank? Banks don’t loan you anything of substance. They don’t even loan you money. They loan you credit. And that credit they create by exercising a privilege – a title of nobility – granted by congress or state legislature. That’s right, government grants banks the privilege to create credit out of thin air. (If you disbelieve this, try issuing your own bank notes and see what happens.)

If you still believe that when you deposit $100 in the bank, they put it in an envelope with your name on it and then carefully place that envelope in the safe, you have another thing coming. And when they make a loan, they don’t go into the vault and take your $100 bill off the shelf and loan it to the borrower. Oh, no.

Here’s how a bank loan works. You’ve been depositing your money at the Metastatic National Bank for ten years. You’ve taken out a car loan through them, and a mortgage, and paid them both off. You want to buy another car. You need $10,000, so you go see Fred, your friendly loan officer.

“Fred, I need to borrow $10,000 to buy a car,” you say.

“Well,” Fred says, “you’ve always been a good customer of the bank. You’ve always paid your notes on time. Here, fill out these papers giving us a lien on the car, and we’ll put the money into your checking account.”

Then Fred calls upstairs to Louise-in-accounting, and he says, “Louise, our good customer here wants a loan for $10,000. Credit that loan to his checking account, would you?”

So Louise-in-accounting turns to her computer and enters a loan on the books (an asset of the bank), for $10,000 and posts a $10,000 entry to your checking account (a liability to the bank).

Now ask, Where was the $10,000 the second before Louise posted the transaction? It wasn’t in the bank vault. It was nowhere. It only came into being when Louise created it through the miracle of double entry book keeping.

And even if the bank had handed you one hundred $100 bills, they would still be creating the money out of thin air. They’d be handing you the $100 bills somebody else had deposited, not their $100 bills. The bank’s assets and liabilities -- the $10,000 loan to you and the $10,000 liability to a depositor -- would balance the books exactly the same.

Reserve Requirements

Hey, wait a minute, Moneychanger! What about the banks’ reserve requirements? Aren’t they supposed to keep in reserve a certain percentage of all the money deposited with them?

It’s amazing how effective the banking system’s propaganda is. Whenever I ask people how much banks keep in reserves, their answers vary from 50% to 10%, but never come close to the real truth – probably because it’s so outlandish that nobody could imagine it.


Data from FRED
March 1 or March 15, 2006 figures

Total checkable deposits $    598.9 Billion

Total time and savings deposits
at all depository institutions

$ 6,108.2 Billion
Total Bank Deposits $ 6,707.1 Billion
Required reserves, not adjusted for
changes in reserve requirements
$      41.253 Billion
Total Req reserv / total bank deposits    0.6151 %
Implied multiplier = reciprocal of
reserve percentage
For every $100 deposited in the
banking system, banks can create
this much money


This table calculates the reserve requirement for the banking system as a whole. Reserve requirements are figured on classes of deposits, and range from 0% to 10% on those classes. My table calculates the actual reserve requirement of the entire banking system across all classes of deposits.

On deposit liabilities of $6.7 trillion, banks keep in reserve only $41 billion.

That works out to about six-tenths of one percent in reserve.

It’s crucial to understand how that reserve requirement works for the banking system. The multiplier for banks, the factor by which they can pyramid created money on their deposits, is the reciprocal of the reserve percentage. If the reserve requirement is 50%, one over two, they can create two dollars for every one dollar deposited. If the reserve requirement is 10%, one over 10, they can create $10 for every $1 deposited.

Presently, banks have a reserve requirement of six one-thousandths -- six over one-thousand. That yields a multiplier of 1000 over six, or about 162.

For every $100 you deposit in your bank, the banking system can create $16,258.45 to entice and enslave your neighbours. Friends, meet the Tapeworm. This is the ultimate financial ju-jitsu, leveraging your own financial strength against you and your neighbours.

What Does The Bank Loan You?

From my loan example you ought to draw two obvious conclusions. First, that the bank risks nothing at all in the loan. If you default on the loan, they lose nothing -- their credit cost them nothing, remember? -- but they gain the property you pledged. If you pay the loan off, the bank gets your money for which they laboured not a second and risked not a penny of real value. They have enslaved you with a non-existent abstraction. They got your “something” for their nothing (“credit” or symbolic money).

Second, it is obvious that the value of the bank’s franchise — the privilege of creating money out of thin air – is not sufficiently measured by the bank’s “income.” That is, the value of the bank’s privilege is measured not only by the “dollars” that it receives in interest for loaning out its credit, but also by the full capital amount of the credit it creates. Therefore the profit to the bank on this $10,000 loan is not the $1,000 in interest the borrower will pay over the life of the loan, but the $1,000 in interest plus the $10,000 credit the bank created.

From this, it ought to begin to dawn on you that whenever government grants an entity the monopoly privilege of creating money out of thin air, sooner or later that entity will own all the property in the country. By the power of an abstraction, an artificial mental construct, a thing that does not exist, namely, symbolic money, all property in American society has been gradually being taken over by the banks.

Now perhaps you are beginning to understand why I said earlier is that the whole issue is, which will rule us, reality or an abstraction? And why I also said that freedom and private property cannot long coexist under a symbolic money system.

Credit Cards and Seigniorage

Let’s examine also what happens with credit cards. First, I need to explain “seigniorage” (SEEN – yur – idg)

Seigniorage is the difference between the value of money and the cost to produce it. Once upon a time it accrued to the government that minted coins. When the bullion value of the coin is less than its face value, the difference is seigniorage.

For example, in 1853 the U.S. price of silver had risen so much against gold that even the small change was being melted down and sold as silver bullion. In order to keep small change in circulation, congress made dimes, quarters, and halves subsidiary coins. That is, they reduced the amount of silver in them to less than a dollar’s worth. (The law defined (and still does) a dollar of silver as 371.25 grains of pure silver. Until 1853, 10 dimes or 4 quarters or 2 halves contained 371.25 grains of silver, same as a dollar. After 1853 they contained about 6-1/2 less silver. That 6-1/2% was seigniorage or profit to the US government.)

Now think about credit card companies. What do they do? At your order – whenever you use the card – they create money for you. Only the money they create isn’t minted out of metal, it’s minted out of imagination and administration. And other than the tiny cost of that administration, it costs credit card companies nothing to mint credit card money. And because you and thousands of businesses willingly accept imaginary credit card money, the credit card companies are willing to profit from near 100% seigniorage.

Once again, you give them your substance, and they give you a symbol.

Borrowing Money Into Existence: The Game of Cards

All money today is borrowed into existence. At its birth, it comes into the world with a burden – an interest rate burden. Here’s how it works.

Imagine five people shipwrecked on a desert island. After a few weeks they get bored. One survivor, whom we’ll call “Banker”, has a deck of cards. Another person approaches Banker and asks to borrow his cards.

Banker answers, “I’ll be glad to loan you my cards, but nobody plays for free. At the end of an hour, each of you must pay me the 13 cards I loaned you, plus one card as interest. As security in case you can’t pay me back, you can put up all your real and personal property as collateral.”

So the other four shipwreck victims pledge their property, take their 13 borrowed cards, and sit down to play. Now you don’t need to be a mathematics professor to know that a deck of cards contains only 4 times 13 cards = 52 cards, and that at the end of the hour, it will still contain only 52 cards. But at the end of the hour, each borrower must repay 14 cards. Obviously, it can’t be done, so at the hour’s end, at least one player, and maybe more, will go broke and lose all his property. If all play cards equally well, they’ll all go broke in the first hour.

As long as the players keep playing – keep borrowing money into existence – then some will continue to go broke. Eventually banker, who owns all the cards, will wind up with all their property.

This story illustrates two inevitabilities about our present monetary system:

  • Eventually, the money issuer winds up with all the property, and
  • Whenever the money supply fails to grow by enough to pay the interest burden created by borrowing the money into existence, bankruptcies will multiply and the economy will slip into incurable deflation and depression.

Why There Will Be No Deflation

The federal reserve (and every other central bank) is a machine created to inflate the money supply by loaning money into existence. Like Kryptonite to Superman, its mortal enemy is deflation. So the Fed will always inflate the money supply. Always.

How hilarious, then, is the idea that the Federal Reserve is “fighting inflation”? The Fed doesn’t fight inflation, it is inflation.

However, it is the Fed’s job to “fight inflation fears,” in the same way that the beaters in a big game hunt are used to flush the game into the shooters’ sights. They keep the animals in the trap until the shooters are ready to shoot them. Whenever inflation fears threaten confidence in the dollar, whenever the nervous victims threaten to flee from the line of fire, the Fed will roll out the propaganda cannon and fire loud, noisy blanks about how hard it is fighting inflation, so you won’t notice that you’re running smack into the shooters’ guns.

By Their Fruits Ye Shall Know Them

What is the outcome of this monetary system? All consumerism, all boom/bust investment cycles, all bubbles, all abuse of debt, have their roots in this monetary system – plus the death of the local economy

It creates money that otherwise wouldn’t exist, imaginary money. Do you remember what happens when you’re playing Monopoly™ and the game’s banker hands you $2000? Why, you spend it just as fast as you can. After all, it’s not like money you had to earn yourself.

When banks make huge amounts of credit available, it lowers interest rates. Low interest rates make all sorts of projects appear to be profitable that really are not. So people borrow money, because it’s cheap.

To consumption it adds huge artificial demand at the margin because it makes consumption look much cheaper than it actually is.

That additional consumption demand also hurts the local economy. Once the money flowed in a circle in local economies. People bought what they needed from their neighbours. But when most of what they “need” is not available, it must be imported. Then the money that used to circulate locally must leave to pay for the imports. Pretty soon, nothing produced locally is consumed locally.

If it is not spent on consumption, that hot borrowed money then goes looking for a big return. It flows into whatever is fashionable at the time. Right now, that happens to be real estate. Any sane person knows that property has an economic value, that is, how much return can it generate? Any sane person also knows that a 1,500 square foot home, even in California, cannot have an economic value of a million dollars.

So our present monetary system not only transfers all property eventually to the banks, it not only teeters always on the edge of collapse because it borrows money into existence, it also funds the insane, wasteful consumerism that American society is addicted to, and it funds the ridiculous investment bubbles that continually fleece us.

The fruit of the system is seen in the debt.

Today, the US government admits to a debt of about $8.3 trillion. If they were forced to use honest accrual accounting, it would be closer to $60 trillion. Before the Federal Reserve system, the debt was 10% or less of Gross Domestic product. Today, it’s about 66%.

Personal and corporate debt is estimated at another $30 trillion dollars, about 2-1/2 times the current GDP of $12 trillion.

We were once a nation of independent freeholders who owned property and worked for ourselves. Today, we are a nation of serfs. The banks own our property and we work for them or some other corporate master. All of this has happened because we were willing to accept abstract, rather than real, money.


Don’t take my word for the contention that the money we use is wholly symbolic and backed by nothing. Let’s get some credible witnesses. Let’s call somebody from the government.

G. Thomas Woodward, Specialist in Macroeconomics, Economics Division, Congressional Research Service, the Library of Congress, from “CRS Report for Congress “Money and the Federal Reserve System; Myth & Reality”, July 31, 1996, Publication 96-672 E.

“The principal form of currency in the United States consists of Federal Reserve notes. These notes are by law “legal tender” . . . A great deal of concern is often expressed about what “backs” a Federal Reserve Notes. Technically, the notes are collateralized by holdings of securities – mostly those of the United States government. Many people, however, feel that this begs the question. What then “backs” the securities that back the Notes? “The short answer is nothing. There are no real assets, public or private, that are specifically pledged to collateralize the debt of the government. The government borrows on its “full faith and credit,” which is to say that it borrows as long as everyone thinks it is able to service the debt. This means that ultimately nothing backs the money (Except the full faith and credit of the US government.) (ii.) [All italics in original]

Here is another government witness, one who ought to know, the Federal Reserve Bank of Chicago. This comes from its booklet, Modern Money Mechanics,

“What makes money valuable? In the United States neither paper currency nor deposits have value as commodities. Intrinsically, a dollar bill is just a pierce of paper, deposits merely book entries...

“What, then, makes these instruments – checks, paper money, and coins – acceptable in payment of all debts and for other monetary uses? Mainly, it is the confidence people have that they will be able to exchange such money for other financial assets and for real goods and services whenever they choose to do so...

“The actual process of money creation takes place primarily in banks. As noted earlier, checkable liabilities of banks are money. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts. (iii.)

Now you know what the monetary system and the banks have done to us, and are doing to us daily. Now you can understand why Thomas Jefferson is alleged to have said,

"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."(iv.)

continue to Part 2

Worth Quoting

If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace.  We ask not your counsels nor your arms.  Crouch down and lick the hands which feed you.  May your chains set lightly upon you, and may posterity forget that ye were our countrymen.

Samuel Adams


What is liberty without wisdom and without virtue?   

Edmund Burke