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The Real "Deficit" is the Money Supply

"Growth of business requires a corresponding growth in the quantity of money, just exactly as a tree, that grows vigorously ...

Monday, April 30, 2012

Thomas Edison answers the "Money Question"

The chart above shows how much of our Federal Debt is owed to the private commercial banks ( $1.6 Trillion ).   Savings And Loans Institutions own an additional $1.6 Trillion.  When you add to this how much debt is held by the Federal Reserve ( $2.7 Trillion ) the sum is $5.9 Trillion dollars.   Where did the Federal Reserve and these U.S. Financial Institutions get the money to purchase these U.S. Government Securities?  They didn't "get" the money, they created it.

The following are quotes from an interview with Thomas A. Edison.   They appeared in the December 8, 1921 edition of the New York Times.   In this interview Thomas Edison endorses Henry Ford’s plan to pay for the completion of the Muscle Shoals dam by issuing new money directly from the National Treasury    -without incurring any debt or interest costs.

There is great wisdom here from one of America’s greatest men.  More importantly, this wisdom is applicable to our present day as our nation is searching for answers to our trillion dollar debts and deficits.

Though Edison is famous primarily for his revolutionary inventions (the light bulb, phonograph, etc.), he was also an astute economist - one of the best ever in this writers opinion.   The world could benefit immensely from his observations on how a money system should work.

In the following interview Edison discusses the nature of money, paper money vs. gold, and the inherent inflationary qualities of interest bearing money.   

Most importantly, Edison demonstrates that money created directly by the National Treasury (without debt and without interest)  for the  building of our nation's infrastructure, is a far better monetary policy than the one we presently employ - borrowing private bank created money - and forever paying the banks interest.

The Constitution grants Congress the power to create money (Article 1, section 8, clause 5).  

No private banking institution should have this power - though unfortunately, about 90% of our nations money supply is currently created by private banks for their own profit through a process called fractional reserve deposit expansion.

Edison's mental sharpness is abundantly evident as he doesn't succumb to the fallacy that money must be gold or silver or some other commodity in order to be valuable.   

Edison also nails down the primary cause of price inflation - interest on borrowed money.  

Paying for things with borrowed money always causes the final cost to be greater than the original price.  Or as Edison put it, "under the present system of doing business we simply add 120 to 150 percent to the stated cost."  

And when one considers that under our current U.S. monetary system all money is loaned into existence - you can begin to fathom the state of our current predicament. 

I believe this New York Times article should be required reading for all who want a deeper understanding of our current money system - and how we can fix it.  

Quoting at length:

Mr. Edison - Gold is not money until the people of the United States and other nations put their stamp on it.  It is not the gold that makes the dollar.  It is the dollar that makes the gold.  Take the dollar out of the gold, and leave it merely yellow metal, and it sinks in value.  Gold is established by law, just as silver was, and gold could be disestablished, demonetized by law, just as silver was.  When silver was demonetized the former so-called dollar became worth about 50 cents.

Reporter - But would not Mr. Ford’s suggestion that Muscle Shoals be financed by a currency issue raise some objection?

Mr. Edison - Certainly.  There is a complete set of misleading slogans kept on hand for just such outbreaks of common sense among the people.  The people are so ignorant of what they think are the intricacies of the money system that they are easily impressed by big words.  There would be new shrieks of ‘fiat money,’ and ‘paper money’ and ‘greenbackism,’ and all the rest of it – the same old cries with which the people have been shouted down from the beginning.

But maybe we have passed beyond the time when the thoughtful 2 per cent. – you know, I gather from my questionnaire that only 2 per cent. of the people think.

Maybe they can’t shout down American thinkers any longer.  The only dynamite that works in this country is the dynamite of a sound idea.  I think we are getting a sound idea on the money question.  The people have an instinct which tells them that something is wrong, and that the wrong somehow centers in money.  They have an instinct, also, which tells them when a proposal is made in their interests or against them.


Now, as to paper money, so called, every one knows that paper money is the money of civilized people.  The higher you go in civilization the less actual money you see.  It is all bills and checks.  What are bills and checks?  Mere promises and orders.  What are they based on?  Principally on two sources – human energy and the productive earth.  Humanity and the soil – they are the only real basis of money.

Don’t allow them to confuse you with the cry of ‘paper money.’  The danger of paper money is precisely the danger of gold – if you get too much it is no good.  They say we have all the gold of the world now.  Well, what good does it do us?  When America gets all the chips in a game the game stops.  We would be better off if we had less gold.  Indeed, we are trying to get rid of our gold to start something going.  But the trade machine is at present jammed.  Too much paper money operates the same way.  There is just one rule for money, and that is, to have enough to carry all the legitimate trade that is waiting to move.  Too little or too much are both bad.  But enough to move trade, enough to prevent stagnation on the one hand and not enough to permit speculation on the other hand, is the proper ratio.
Reporter - Then you see no difference between currency and government bonds?
 Mr. Edison - Yes, there is a difference, but it is neither the likeness nor the difference that will determine the matter; the attack will be directed against thinking of bonds and currency together and comparing them.  If people ever get to thinking of bonds and bills at the same time, the game is up.

Now, here is Ford proposing to finance Muscle Shoals by an issue of currency.  Very well, let us suppose for a moment that Congress follows his proposal.  Personally, I don’t think Congress has imagination enough to do it, but let us suppose that it does.  The required sum is authorized – say $30,000,000.  The bills are issued directly by the Government, as all money ought to be.  When the workmen are paid off they receive these United States bills.  When the material is bought it is paid in these United States bills.  Except that perhaps the bills may have the engraving of a water dam, instead of a railroad train and a ship, as some of the Federal Reserve notes have.  They will be the same as any other currency put out by the Government; that is, they will be money.  They will be based on the public wealth already in Muscle Shoals, and their circulation will increase that public wealth, not only the public money but the public wealth – real wealth.

When these bills have answered the purpose of building and completing Muscle Shoals, they will be retired by the earnings of the power dam.  That is, the people of the United States will have all that they put into Muscle Shoals and all that they can take out for centuries – the endless wealth-making water power of the great Tennessee River – with no tax and no increase of the national debt.

Reporter - But suppose Congress does not see this, what then?

Mr. Edison - Well, Congress must fall back on the old way of doing business.  It must authorize an issue of bonds.  That is, it must go out to the money brokers and borrow enough of our own national currency to complete great national resources, and we then must pay interest to the money brokers for the use of our own money.
The bank bail out and the Fed's recent QE2 have greatly increased the Fed's holdings of Federal Debt.


That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent.  He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 – that is what it amounts to, with interest. 

People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work.  That is the terrible thing about interest.  In all out great bond issues the interest is always greater than the principal.  All of the great public works cost more than twice the actual cost, on that account.  Under the present system of doing business we simply add 120 to 150 percent to the stated cost.

But here is the point:  If our nation can issue a dollar bond, it can issue a dollar bill.  The element that makes the bond good makes the bill good, also.  The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 percent, whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way.

If the Government issues bonds, it simply induces the money brokers to draw $30,000,000 out of the other channels of trade and turn it into Muscle Shoals; if the Government issues currency, it provides itself with enough money to increase the national wealth at Muscle Shoals without disturbing the business of the rest of the country.  And in doing this it increases its income without adding a penny to its debt.

It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency.  Both are promises to pay; but one promise fattens the usurer, and the other helps the people.  If the currency issued by the Government were no good, then the bonds issued would be no good either.  It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold.  

Look at it another way.  If the Government issues bonds, the brokers will sell them.  The bonds will be negotiable; they will be considered as gilt-edged paper.  Why?  Because the Government is behind them, but who is behind the Government?  The people.  Therefore it is the people who constitute the basis of Government credit.  Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?

Says People Must Pay Anyway.

The people must pay any way; why should they be compelled to pay twice, as the bond system compels them to pay?  The people of the United States always accept their Government’s currency.  If the United States Government will adopt this policy of increasing its national wealth without contributing to the interest collector – for the whole national debt is made up of interest charges – then you will see an era of progress and prosperity in this country such as could never have come otherwise.


  1. Edison was great but he was an SOB to Tesla. Federal Reserve , yet another violation of our rights. The gov’t constantly violates our rights.

    They violate the 1st Amendment by caging protesters and banning books like "America Deceived II".

    They violate the 4th and 5th Amendment by allowing TSA to grope you.

    They violate the entire Constitution by starting undeclared wars.

    Impeach Obama.

    Last link of "America Deceived II" before it is completely banned:


  2. Impeach Obama ???? Bush was behind all the recent major wars. Lets see him cjharged with war crimes.

    1. Eradicate the International JEW Bankers and International JEW Marxists to save our Nation and Culture. Presidents are mere puppets of these JEW sickos. There are very good reasons why the sickness of JEWRY has had to be removed from 109 territories throughout history.

    2. And why do you think Obama has done nothing to charge Bush with war crimes or even have the slightest effort towards investigating Bush??? Gee, maybe Obama is operating as a puppet for the same agenda as Bush.

      If Obama is not going to do anything to bring Bush's corruption to light, then only a fool would oppose those who call for Obama's impeachment.