PART 1 – Who owns the money in your bank account?



Part 1 – Who owns the money in your bank account?

Lee Friday

You deposited some money in your bank account. You owned the money before you made the deposit. Do you still own it?  Most people would answer “Of course I still own it. I did not give the money to the bank. I deposited it into my bank account, and it is still my money to do with as I please.”

Assuming you acquired the money honestly, you will continue to be the rightful owner after making the deposit. I think we can all agree this is the correct answer. Indeed, this is the moral answer, and there can be no other answer consistent with morality, but we must not confuse morality with legality.

When you own something, it means you have full control over the item, to do with as you please whenever you please – but government law pretends that more than one person can own the same item (specifically your bank deposit) at the same time. Clearly this is a physical impossibility. Two or more people cannot have full, complete, unconditional access to the same quantity of money at the same time.

State law extends to banks the legal privilege of using your deposits to make loans to others without your fully informed consent. This privilege lays the foundation for a complex scenario which brings enormous benefits to the banks and the state. Thus a money monopoly is created – The State/Bankster Cartel.

You might say “Why should I care? The bank has always returned my money when I request a withdrawal.” You should care because the benefits accruing to the Cartel do not arise in isolation – these benefits are produced at great expense to the public. The money monopoly triggers events which inflict tremendous economic hardship on the masses. The connection between the Cartel’s actions and the ensuing hardship is complex, but unmistakable. However, the complexity allows the cartel’s economists to spread propaganda blaming free enterprise for the economic hardship. Thus, the cartel absolves itself of responsibility for the economic hardship which it causes.

We must consider the operations of the cartel in proper perspective, which requires a very clear understanding of two concepts: Money and Banks. The purpose of this series of essays is to explore these concepts in layman’s terms, as well as to explain

(a) how the cartel forcefully extracts an enormous quantity of wealth from all members of the public, including those who do not have bank accounts, and

(b) the solution to the problem (hint – it is not complex)


What is the definition of money? What is its function? Where does it come from? If you think these are silly questions, then how do you explain the following statement by economist John Kenneth Galbraith:

The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled………..John Kenneth Galbraith (1908-2006), Canadian born, Professor of Economics at Harvard, Author, Public Official (this quote is from his book Money: Whence it came, where it went)

Money is not the root of all evil, but a legally created monopolistic power to control money is the root of much evil. Money is the foundation of a market economy. All members of society must somehow acquire the things we need to survive, and every time we buy or sell something, we are using money. In other words, money always represents one-half, or one side, of every transaction. We do not buy or sell anything without using money. As a consequence of the vital role of money in society, there have always been a few morally challenged individuals who seek ‘legal’ power to control money as a means of fraudulently transferring wealth from its legitimate owners to themselves.

Such evil aspirations have been successful for many centuries, to varying degrees, but especially so in recent decades. Such ‘legislated power’ to control money translates into the power to create money, and thus the power to control the economic activities of the people, the power to live at the expense of others, the power to siphon off a significant portion of the product of the labour of the masses, undetected.

This is no exaggeration, and likely an understatement. Ninety-nine percent of the general public lack a genuine understanding of how money functions in our modern society, to their detriment. Read Galbraith’s statement again. Do not forget it.

Let’s start at the beginning. Thousands of years ago, before the evolution of money, people exchanged goods directly – ‘direct exchange’ – aka the ‘barter’ system. For example, I make tools (knives, spears etc.) and trade them to a hunter for meat. So I am selling tools and buying meat. The hunter is selling meat and buying tools. Barter was an improvement over a life of self-sufficiency, but it had its limits. As a toolmaker, I have to hope that the clothing maker needs tools in exchange for the clothes I want to buy.

Through a process of trial and error, people eventually discovered a way to greatly expand their economy, which means to increase their production, thereby raising their standard of living. What they discovered was ‘indirect exchange.’ The clothing maker tells me he does not want tools but he does want eggs. A woman with chickens needs tools, so I sell her tools in exchange for eggs, and then sell eggs to the clothing maker in exchange for clothes. This might seem like a silly way of doing business, but people quickly learned which items were in high demand.


If most people in this ancient community like eggs, they will buy eggs to eat but they will also buy eggs because they know they can sell them to other people for other goods. Through experience, everyone discovers that there is a high demand for eggs.

There are two sides of every exchange, the buy side and the sell side. In this community, eggs frequently represent one side of each exchange, which means that eggs are a common means of making exchanges. So eggs are a ‘medium of exchange’. This is the definition of money: a medium of exchange. Therefore, it is appropriate to say that eggs are money in this ancient community.

For further clarification, if I am trading eggs for clothes, it is proper to say that I am selling eggs (or selling money) and buying clothes; conversely, the clothing maker is selling clothes and buying eggs (or buying money). But this does not mean everyone in the community is obliged to use eggs as money – other commodities may also be used as money.

This example shows how money developed in a natural way. People possessed the freedom of interaction (severely restricted in today’s world), which provided a strong incentive to experiment as a means of discovering the most efficient methods of trading with each other.

Throughout history, many different commodities have been used as money: sugar in the West Indies, tobacco in colonial Virginia, salt in Abyssinia (Ethiopia), cattle in ancient Greece, nails in Scotland, copper in ancient Egypt, cowrie shells in parts of Africa and South Asia, grain, beads, tea, fishhooks[1] and many other things which had intrinsic value and were in high demand.

Why did people use so many different commodities as money? Simple – because they recognized the benefits. If it worked well they used it and if it stopped working they moved on to something else because they were free to do so. Think of this as a competition amongst various types of money. Without this competition, the progress of civilization would have been severely limited.


With the passage of time, two commodities emerged as the most commonly used forms of money throughout most of the world – gold and silver. Though silver has many positive attributes, gold eventually came to be used far more than silver, but not by government decree. It was a decision made in the marketplace, meaning that masses of people gravitated to gold for the following reasons:

Gold is easily divisible. It can be melted and minted into coins of any size. Old coins or jewelry can be melted again and turned into new coins or jewelry. The cattle used in ancient Greece did not have this quality. If you try to divide a cow, you kill it.

Gold is durable. It does not tarnish or corrode, and will not rust like the nails in Scotland. Coins found on the ocean floor after centuries are still bright and shiny. Gold will not break or rot like eggs, and cannot be infested with insects like grain. Gold is highly resistant to chemical change and cannot be dissolved in common acids. It does not deteriorate or decompose. All of the gold mined throughout history still exists somewhere in the world. Divisibility and durability makes gold highly portable, an attractive feature of money.

Gold is more malleable than any other metal. This means it can be easily transformed into other shapes without breaking or cracking, which makes it ideal for jewelry. One ounce of gold can be drawn into a wire about 35 miles long.

Gold is one of the densest of all chemical elements. Its weight by volume is unique which means it cannot be counterfeited. Over the centuries many have tried and all have failed.

Gold is scarce – its supply can be increased only through costly mining – therefore the supply increases at a very slow rate – which helps to maintain the “exchange value” of all existing gold, an important attribute for reliable money

Gold is valuable because of its various attributes, and that is why people used gold as money for thousands of years. ‘Market’ is the term we use in reference to the voluntary exchanges of individuals and companies. People are constantly buying and selling goods and services: food, clothing, pianos, cell phones, stocks, bonds, money, cars, diamonds, computers, haircuts, video games and anything else you can think of. Whenever you buy or sell something, you are active in the market because you have made an exchange. Money is a creation of the market. Neither kings nor governments invented money but they have always sought to control it, as a mechanism for the seizure of power and the confiscation of wealth, as we shall see in Part 3.

(Note – powerful politicians, bureaucrats, and their economic advisors constantly tell us that the world’s gold supply is insufficient to handle the monetary requirements of modern society. It serves the interests of the ‘authorities’ to make such statements. However, their claims are completely false. Keep reading.)


Honest money (aka hard money, real money, sound money) is defined as a ‘medium of exchange determined by the market’, and is backed up 100% by a real commodity which is in limited supply (such as gold). When this type of money is used, whether in its hard form or its paper/digital counterpart, historical evidence shows its value increases over time. This is because the increased production of goods tends to outpace the increased supply of new money (mined gold for example). Thus, the money can buy more of the goods. This incentivizes people to save money because its purchasing power increases over time.

This also means that nominal wages would decrease over time but real wages would increase (your wages are lower but your purchasing power is higher). Therefore, with honest money, as opposed to fiat money, the masses enjoy a much higher standard of living, as we shall see in Part 4.


‘Fiat money’ is defined as paper/digital currency which has no commodity backing, and is declared ‘legal tender’[2] by the State. Fiat money is created by banks when they make loans. Banks have a fiat money monopoly granted to them by the State. This is the arrangement in Canada, as well as all other major countries. Powerful bankers and politicians understand our fiat money system. They love this invention of their predecessors. They control it. They exploit it. They benefit. Most citizens (including rank and file politicians, as well as most bank and government employees) do not understand the system, and we end up paying the price, as we shall see in Parts 3 and 4.

Politicians like fiat money because it allows them to buy votes, serve their friends, and expand their power, and they assume (hope) the fiat-money-system will not collapse during their term of office. There have been many fiat money systems throughout history. Every one eventually fails, without exception. Failures continued in the 20th century, including Germany and Hungary, ruining the livelihoods of countless citizens. In all likelihood, the Roman Empire would not have collapsed if the State had not seized control of money. In the 21st century, the fiat money systems in Zimbabwe and Venezuela are the latest casualties.

Historically, ‘money control’ has been a tug of war between the market and the State, with each entity gaining the upper hand at various times. During the last hundred years (approximately) political rulers took their countries, in stages, further and further away from commodity backed money. In 1971, for the first time in history, the commodity backing disappeared completely worldwide. Since then, all countries have used fiat money. As a consequence of the State maintaining complete control for so long, most people lack an appreciation of the vital role which money plays in their lives. Thus, they are completely unaware that the absence of honest money has denied them a much higher standard of living.

Murray Rothbard, one of the greatest economists of all time, wrote:

Many people believe that the free market, despite some admitted advantages, is a picture of disorder and chaos. Nothing is “planned,” everything is haphazard. Government dictation, on the other hand, seems simple and orderly; decrees are handed down and they are obeyed. In no area of the economy is this myth more prevalent than in the field of money. Seemingly, money, at least, must come under stringent government control. But money is the lifeblood of the economy; it is the medium for all transactions. If government dictates over money, it has already captured a vital command post for control over the economy, and has secured a stepping-stone for full socialism. We have seen that a free market in money, contrary to common assumption, would not be chaotic; that, in fact, it would be a model of order and efficiency.[3]

Go to Part 2

Image source: Adobe Stock

[1] Murray N. Rothbard What Has Government Done to Our Money? and The Case for a 100 percent Gold Dollar (Ludwig von Mises Institute, 2005) p. 26

[2] Legal tender refers to a currency which cannot legally be refused in payment of a debt.

[3] Murray N. Rothbard What Has Government Done to Our Money? and The Case for a 100 Percent Gold Dollar (Ludwig von Mises Institute, 2005) p 95

One thought on “PART 1 – Who owns the money in your bank account?

  1. very brave & honest analysis indeed, i am grateful i learned the truth. thank you so much, i recommend you study islamic economic system

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