Hi,

This document is intended to increase the understanding of the monetary system. Trying to explain how the money takes its birth and comes into circulation. Later how it ceases to exist. In doing so, here I am trying to explain the monetary defect which makes people as slaves. Money makes many things. The god's greatest creation for humans, because money affects humans in many ways as almost every problem we face in our daily life directly or indirectly deals with money. Each and every person in a society deserves his share of money for his needs. But in practice large portion of money belongs to very few people and many are starving without it. Why is it so..? Is the God is not mercy enough to share it to all? Is it really the god that needs to correct things? Or Is this the problem in our monetary system on which we need to take an action?

Rigid Mind on God and Money

The problem lies in the mind of people that it is God's mercy that will make us the rich. This misconception blinds our eyes not to analyze the monetary system, because god is the limit for humans to think. We stop analyzing at this point. But the truth appears only when you think beyond the god. To understand the monetary system we need to understand how the money is created.

Birth and Death of Money

Normal opinion is that currency generates from production of goods and it ends with consumption of goods. But in actual practice, every currency note that comes in to circulation should have the official seal from the reserve bank. Otherwise we do not consider it for exchange of goods. So the origin for the currency is the central bank of the country. Later we use this currency to buy or sell the goods.
FACT1: Trade or business does not produce money. In truth, we exchange our products with the money that is available in circulation

So lets see in what ways that the currency is generated by the central bank or any other bank in the country.

There is a misconception that central bank creates money based on the needs of country, but it is not the complete truth. No bank including central bank creates money for nothing. The only way that banks issues money through loans with a promise to pay the interest. Even the central bank provides currency to Government only by taking bonds from the government with a promise to pay the interest. So when you cleared your loan debt, the money that is created is ceased to exist. Banks Issues money as loans based on the deposits available and cash reserve ratio (CRR).
FACT2: Money takes its birth in banks through loans with a promise to pay the Interest

The Dubious Interest

When banks are creating money only through Loans, that means every note that comes into circulation only by Debt and everyone should promise to pay the principal money back to bank with the added interest. Here we need to understand two things carefully. 1) Every currency note that comes into circulation only through loans. 2) We are taking money (principal) from the bank as loan and promising to pay back with extra interest (principal + interest). When every currency note that comes in to circulation as debt(only Principal), where is the money in circulation to pay the extra interest? Because in practice banks never created interest money. It never existed physically. We only have the principal amount in circulation. We do not have any money available to pay the interest. This is the root cause for all problems. If you understand this logic, it is very easy to understand the reason behind the sufferings of people. In the current monetary system, at any given point of time, there is no money available in circulation to clear all the debts. So someone should be bankrupted unless he get some more loans from the banks to clear the previous debt. That means banks should create more money through loans in order to cover the interest so that people do not get bankrupt. It increases the money supply as well as debt in exponential manner.
FACT3: At any point in time there is no enough money in circulation to clear all the debts

How Banks Create money exponentially?

Deposits are liabilities to banks. But loans are assets to Banks. Banks follows Fractional Reserve system in making loans. This means, Banks allowed to supplying money through loans based on the CASH RESERVE RATIO. In India, we have CRR as 6. It means Banks can provide up to 94Rs as loan for every 100Rs. If this 94Rs deposited in the same bank, Bank considers this loaned amount as its deposit. So if you deposit one lack in any bank, it allows to create loans up to 94000. if this 94000 deposited in another bank it allows to create loans up to 88360. From this 88360, Banks can make loans up to 83058.4 It continuous so on... This is nothing but creating new money in exponential way. As money is increased, Debt should increase as banks only creating principal amount but not interest. The truth is the amount of debt a country had, that much money is in circulation for that country. When we clear all the debts including the government debts, we dont have a single rupee in circulation. The Debt will increase exponentially as the money is created exponentially through Fractional Banking system. Just for Information, the much developed country United States of America has the total debt of $55 trillion (http://www.usdebtclock.org/).
FACT4: The amount of debt a country had, that much money is in circulation for that country

Inflation & Depression

Here comes the inflation. Suppose when I have one rupee in my pocket I try to sell my goods for a profit around 1.5Rs. But when I have 10 rupees in my pocket I try to sell my goods around 15Rs. When money created in exponential manner then the money supply will be high in society and prices should go high. Similarly depression takes place when there is not enough money in society. This happens only when banks not willing to provide loans to people for their operations because the only way that new money comes into society are through banks. So both Inflation and depression are depends only on the money lending organizations. When the money supply increases exponentially it drastically decreases the value of existing money. It of no use having money deposited in banks until unless you buy some property like lands whose value increases with inflation. Your life long savings will be worth less because of inflation.
FACT5: Inflation and depression are directly depends only on the money lending organizations

When Government Takes Loans?

How it will effect when government takes loans for the sake of society. The money will be huge and it will be invested in people welfare and infrastructure. It is more likely that what the government spending wont be coming back with profit. This makes governments bankrupt and forced to increase in taxes for the repayment of interests. The people who had more money with them will pay more taxes and the poor will pay fewer taxes. The rich people will increase prices on their goods to compensate losses and the poor unable to buy. It increases the living cost of a society. People constantly protest for the hikes in salaries to cope up with the inflation or rising prices. It leads to the Divisions in society. Life becomes burden more than a joy.
FACT6: People suffer more when there is more money in circulation in order to cover the inflation

Crime and Corruption

The current monetary system makes you bankrupt if you do not get the profits. The one who out smarts others can only get the profits. This leads to the rat race between people. As money is a very much necessary for people, they try to earn in wrong ways. This leads to corruption. People ready to produce Unhealthy goods for society to earn money. Moral values decrease between people for the sake of money. Life becomes burden to people. People will have a mechanical life style instead of a joyful one.

It is not the God who puts us in bondage, but the worst monetary system that makes our life a real Hell
In my opinion, Money and emotions are the essential reasons for all crimes. I feel 75% crimes are because of money only and it wont be a surprise because money is more essential and decisive factor in our daily life. It is useless to describe a person as good or bad. To my understanding both good and bad exists in every action and always comes together. The same action can be good to some people and can be bad to some other. It all depends on which side we are. After all what really matters are goods or products, but not money. Money is invented to exchange the goods in society, But not to increase and decrease in the money supply in the name of development.

Final Destination
After all where the money ends. ? If you understand the process, the final destination of the money is the safe pocket of a banker. After clearing all the debts with extra added interest it goes to the bankers pocket. You may say that our banks are nationalized, is that all the money is created through loans with added extra interest is belongs to the nation? I mean people or government? If so, why the Government need to take loans again..? The following link gives information about about who owns America and who rules American Government. http://www.youtube.com/watch?v=JXt1cayx0hs I am sure, 90% of people do not know that money is created as debt through loans. It is really helpful for me to understand the money supply, if you discuss the above mentioned points.

Links to Research
For your own research, I am providing some links to have a clear understanding on this topic. 1) http://www.michaeljournal.org/plenty8.htm - Birth and Death of Money 2) http://www.michaeljournal.org/myth.htm - Money Myth 3) http://www.youtube.com/watch?v=pEAjOk_UY9I - Fractional Banking System 4) http://www.youtube.com/watch?v=Dc3sKwwAaCU&feature=fvwrel - Money as Debt I 5) http://www.youtube.com/watch?v=rCu3fpg83TY&feature=related Money as Debt II 6) http://www.youtube.com/watch?v=JXt1cayx0hs - Money Masters 7) www.webofdebt.com
8) http://www.chrismartenson.com/crashcourse 9) http://www.themoneymasters.com/