Mitchell’s laws:

●Austerity = poverty and leads to civil disorder.


Visualize this: You deposit $1000 into your bank savings account.

What have you done? You have lent your bank $1000. That money was not a gift; it was a loan. Your bank now owes you $1000, plus interest. Your deposit has increased your bank’s total debt by $1000.

There is zero difference between a “deposit” and a “loan.” They are identical in every way.

Banks love to be in debt. In the old days, a bank would give people toasters, if people would lend it money.

Like all debt, your loan to your bank creates dollars. When you deposit (lend) that $1000 into your bank savings account, you still own $1000. Remember, it was not a gift. But now the bank also has $1000, which it invests to make more money.

So where there were $1000, now there are $2000. You have created $1000, and added it to the money supply, simply by lending to (depositing with) your bank.

Banks brag about their indebtedness. Big banks tell the world how much they owe. “We have $10 billion in deposits (debts).” Banks advertise to get people to lend to (deposit with) them.

The media, the politicians, the old-line economists and the debt hawks do not criticize banks for accepting too many deposits (borrowing too much money). When your bank borrowed that $1000 from you, no one said that debt (deposit) is “unsustainable.” No one told the bank its deposits (debts) are too high and it should “live within its means” by not accepting more deposits (borrowing more money).

No one published a debt clock showing how much of the bank’s debt you supposedly owe, when it is the bank that owes you.

At some time after you have lent your bank money, you will decide you want your money back. As the banks creditor (“depositor” and “creditor” are synonyms), you will say, “I want to end the $1000 loan (deposit). Give me back my money.”

The bank can return your $1000 in several ways. One way: It can give you a check for $1000, which you will deposit in (lend to) your checking account — perhaps at the same bank. Or, it simply can debit your savings account loan and credit your checking account loan (Checking accounts also are loans to banks).

I hope I have beat this dead horse enough to make the point: A loan is a deposit; a deposit is a loan. “Loan” and “deposit” have exactly the same meaning. The total of deposits is the total debt.

Now, let’s say that instead of lending your bank $1000, you decide to lend the U.S. government $1000. How will you do it? You will reduce the size of your bank checking account and deposit $1000 into your T-security account, at the Federal Reserve Bank. You have reduced your loan to your bank and increased your loan to the federal government.

You have caused the federal debt (deposits) to increase $1000. But, the Federal Debt is nothing more than a total of deposits in the Federal Reserve Bank.

The media will express concern about the size of the federal debt (deposits). The politicians will look for ways to reduce the federal debt (deposits). The old-line economists will write articles saying the federal debt (deposits) are too high. The debt-hawks will put up signs warning about the size of the federal debt (deposits).

All of these people will want you to transfer dollars back from your T-security account at the Federal Reserve Bank, to your private bank checking account. They will want you to reduce the size of your deposits with the federal government, while you increase the size of your deposits with private banks.

They even will put up debt clocks showing how much of the federal government’s debt you supposedly owe, when it is the federal government that owes you.

Now consider the irony. The federal government is Monetarily Sovereign; private banks are monetarily non-sovereign. Financially, the federal government is much stronger than any private bank.

Banks can and do become insolvent, and be unable to repay their loans (deposits), but fortunately, most bank loans (deposits) are guaranteed by the federal government (FDIC). So the irony is, the media, the politicians, the old-line economists and the debt hawks want you and your fellow Americans to increase your lending (deposits) to private banks, while you reduce your lending (T-securities) to the financially most powerful entity in America, the federal government.

They call it, “fiscal prudence”! I call it “financial nuttiness.”


Then smile while he stumbles for an answer.

Rodger Malcolm Mitchell
Monetary Sovereignty

Federal Deficits – Net Imports = Net Private Savings