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[ The German version of "The Moneysyndrome" ]

[ Some other english texts on monetary reform ]

This is a preliminary translation accomplished by the non-native English translators Hans Eisenkolb, B.C., Ca. and Robert Mittelstaedt, Munich. With this work they hope to promote an English edition of THE MONEY SYNDROME, which in German has already become a standard work of reference.
The Money Syndrome

Helmut Creutz Helmut Creutz

The Money Syndrome 
Paths to an Economic Order Free from Crises


Dear reader,

twelve years ago a reader of my School-Diary wrote to me that I had taken up important questions, but had not always found the right answer. He suggested to probe into the problems around our money.

I was not very much interested, because I could not imagine any problems with money. After all, I had more than 30 years of practical experience with financing, calculation and viability estimating. A few things in the letter made me curious though some of the dimensions seemed unbelievable. As a pragmatic person I wanted to disprove the writer, without knowing what can of worms I opened with that. There was not much statistical material available on the one side and on the other side I noticed so many contradictions in the sphere of money that I could not leave it alone any more.

The results of twelve years of analysis you hold now in your hands. Even though I was able to close most of the »white spots on the map«, the dealing with the problems of money will become more necessary and important with every day.

I presume you will agree with me after you have read this book.


»We should not behave as if the knowledge of economic relations is the sole right of the keepers of the grail, who on one side scientifically and on the other side demagogically stick to their hardened standpoints.
No, every citizen of our state must know about the economic relationships and be able to judge, because these are questions of our political order, the stability of which is the concern of all of us.«
Ludwig Erhard, 1962



What is wrong with our money?
What importance does money have?


Part I
Terms, Quantities and Functions around Money


Chapter 1
Explanation of Monetary Terms and Processes

What is money? What do we understand money to be nowadays? Are cheques, credit and cash cards money? How about E-Cash or payments in the Internet? What about the amount of money in circulation? How can money be defined? For what purposes can money be used? Why does one have to distinguish between money and other means of balancing claims? Why is money superior to work and goods? From where does money derive its value? How much cash is there? How much cash does the EURO provide? What are the orders of magnitude for money calculations? How does money come into circulation? Which advantages are there in controlling the amount of money in circulation via credits? From where do Central Banks get their money? Who owns money?

Chapter 2
Money and Credit

What are credits and how do they augment? Why can we not add up money and credit as the same kind of money? Can we combine money and credit anyhow? What are current accounts and how do they come about? How do transactions take place between one account and another? Can one increase demands through current accounts? What are the consequences of the increase of credit transfers by banks? What came first: credit or debt, money or credit? How large are the differences between cash supply and bank credits? What does saving mean and what does paying mean?

Chapter 3
Money Movements - Money Circulation

The enigma of the 5 DM coin. How to understand circulation. Which consequences may arise from savings? What can we learn from the examples of an island? What effects have claims of interest in detail? Does the money circulation change in a macro model?

Chapter 4
Commercial Banks, Central Banks, Non-Banks

Relations and sizes in the areas of money and banks. What are the main tasks of banks? What about the power of banks? Does the power and influence of banks grow with the increase of their turnover? What are the tasks of central or issuing banks? What does "securing the currency" mean? How do central banks control the circulation of money, and why is this task so important? What does it mean: "regulates... the provision of the economy with credits"? Credits to banks - how does it work? What about minimum reserves? When do issuing banks have to expand money? How can they do this? What about the target of money amounts of issuing banks? Which "amount of money" do the issuing banks try to regulate? Where do the profits of the issuing banks come from?


Part II
Interest and other Dysfunctional Structures


Chapter 5
Interest in the Past and Present

Why is interest a problem? What actually is interest? Which functions does interest fulfil? Have there been periods without interest in history? What effects did the ‘bracteates’ have? What is interest today? Which concepts of interest do exist? What are the components of interest? What is included in the bank margin of interest? What does ‘indicative interest’ [base rate] mean? What influence do issuing banks have on the market interest? What are the amounts of proceeds and expenditures of banks and their relation with respect to interest?

Chapter 6
The Effects of Interest and Compounding Interest

Where does interest actually come from? How much interest do we pay hidden in prices? Is interest a monopoly revenue? What are the effects of compound interest? Does compound interest also play a role in the normal course of time? Is an interest rate of 12 percent unrealistic? Who or what determines the level of interest? Where do the fluctuations of interest come from? Can the level of interest be kept high only by rendering money insufficient?

Chapter 7
Interest as Means of Redistribution

How does the charging of interest work? Who receives interests? What are the effects of interest in distributing the national income? What role do interest rates play in transferring assets? What changes the ratio of distribution? Does interest increase the gross national product? What about tax on interests? Why is time money today? Does interest change the quality of money? Is there a just interest? What does science say about interest?

Chapter 8
Inflation and Deflation

Is the necessity of stable money an insight of our time? What actually is inflation and what are its effects? Is a stable currency really that important? Inflation in industrial nations. Can buyers trigger inflation, too? Does the increase of single prices influence inflation? How about the increase of wages? Can inflation rates be balanced by adjusting wages? What else is associated with inflation affected increases of interest rates? And what about deflation?

Chapter 9
The Problem of Hoarding Money

Is money still hoarded today and what kinds of hoarding have to be distinguished? What is the extent of hoarding in foreign countries and what are the consequences? What kind of hoardings are particularly critical? How big are money expansions when interest rates are low? What are the consequences of hoarding money today? Is there long term evidence for fluctuations by keeping money?

Chapter 10
The Dilemma of Controlling the Money Supply and the Money Circulation

Why is it so important that money circulates? How do issuing banks exercise their efforts for stability? What is the result of such efforts? What is the greatest dilemma of issuing banks? Are issuing banks capable of limiting the amount of money? What do issuing banks have to pay for dearly?

Chapter 11
The Creation and Supply of Money by Central Banks

How does the economy get supplied with money? The control of liquidity by the European Central Bank. What does 'tender rate' mean? Who can participate in biddings and how are they performed? Why do banks need money from central banks? How do overnight and day credits originate?

Chapter 12
‘Money Creation’ by Commercial Banks

What are these theories all about? How does 'multiple money creation' work? Where is the flaw in the reasoning? What other arguments are being presented in favour of money creation? Are there clues for the creation of money by commercial banks?

Part III
The Problematic Consequences in the Area of Money


Chapter 13
The Over-development of Debt

How is debt to be understood? Who is living on debt in industrial nations? Do single examples show the overall reality?

Chapter 14
National Debts

Why do national debts have particularly serious consequences? What about national debts in industrial nations? ...and in European countries? What happened with the debts in Eastern Europe?

Chapter 15
Corporate Debt, Private Debt, Overcoming Debt

Consumer debts - a credit with a future? Which consequences arise from buying on credit? Can over-indebtedness be overcome? Does debt decrease by insolvencies? Can the problem of indebtedness be solved by repayment?

Chapter 16
The Over-development of Monetary Wealth

What are the particular components of monetary assets? To whom belong these monetary assets? How did the shares of sectors change? How do private assets get distributed? Are there any indicators for the dispersion of private money assets? What can be concluded from these random samples? What does the distribution of monetary wealth look like in our world? How do monetary assets come into being and where does the over-growth come from? What does science say about the over-development of monetary assets?

Chapter 17
The Over-development of Interest Flows

How do interest flows change in national economies? Where does the diverging development go in the long run? Money related interests of the state. How is the situation in other nations? What are the consequences of higher interest charges for the state? What would happen, if the state directly asked for cash from its citizens?

Chapter 18
Amounts of Interest in the Enterprise Sector

What effects does the increase of interest rates have in the housing economy? What about the totality of interest charges? How big is the total of interest-bearing assets? Can interest charges be calculated in a different way, too? How big is the share of all interest charges in single prices?

Chapter 19
Interest Charges and Income from Interest in Private Households

What about direct interest? What is the amount of interest returns in private households and how is it distributed? What is the lowest and highest income from interest? Where does Miss Quandt get 650’000 DEM from every day?

Chapter 20
The Over-development of Speculation

How do the banks behave? What are the consequences of stock speculation? What is the amount of stock in the world and how does it spread? What about the shares per capita of stocks? What does the distribution look like in reality? Which figures determine events at the stock exchange? Stock speculation and the real economy. Can share prices fluctuate? Is there a possibility for a partial sharp fall in prices? Derivatives and other variations of speculation. The problem of speculation with currencies. Where does speculation lead to? Consequences. Should it be permitted to control the free flow of monetary capital?

Part IV
The Social and Economic Effects


Chapter 21
Money and Justice - The Social Question

What makes income unjust? What kind of injustice is caused by inflation? What kinds of injustice does interest cause? How is wealth being spread? How can the quantity of interest flows be investigated? What results do balance calculations yield? How large is the total of interest transfer between winners and losers?

Chapter 22
The Consequences of Interest Dependent Redistribution of Income

The background of the 'new poverty'. Can there be poverty when there is no wealth? What are the differences of poverty in Europe? How is the interdependence between rich and poor to be explained? When did this discrepancy begin to develop? What are the consequences of the deepening gap between rich and poor? Does the growth of the discrepancy also show in different ways?

Chapter 23
Money, Growth, Environment - The Ecological Consequences

What rules of growth have to be observed? Are there different courses of growth? How unrealistic is exponential growth? What about other kinds of growth in organisms? What does economic growth mean? How did our economic output actually get augmented since 1950? Where did the enduring economic growth originate? What else had been done to augment the output steadily?

Chapter 24
The Causes of our Enforced Growth

Why is our capitalistic economic system compelled to expand? How does interest enforce growth? What are the actual reciprocal effects? What are the consequences of permanently increased output for the environment? Can there be growth without degrading the environment? Which doubtful results have so far been produced through the promotion of growth by governments? Can environmental problems be solved by ecological taxes?

Chapter 25
Money and Crises - The Economic Consequences

What were the great crises of the last century? Which factual findings could lead to a great crisis in our time as well? Is capitalism itself the cause of crises? How can we explain the frequent slumps in the economy? What are their causes? Are the relationships between interest and economic prospects generally known? Why can interest rates trigger crises even if they are too low? What causes deflationary crises? Which effect does money retention have on the employment situation?

Chapter 26
Crises in Planned Economies

Did the crises in the former East Block have to do with money, too? What are the actual consequences of surplus money? Was the money problem known in socialism? What happened in Yugoslavia? Which role played the problem of interest in the countries of the former East Block? Are there still other critical problems in the East that are also associated with money? What should be done today? What were the effects of the unification of East and West Germany with respect to money?

Chapter 27
The Problem of Unemployment

What are the causes for long term changes? Are there more causes for the origin of long term unemployment? The causes of middle term statistical exceptions in unemployment. Which role does indebtedness play? Do dismissals occur only in indebted firms? What are the consequences of these discrepancies? What do periods of high interest rates originate from?

Chapter 28
Unemployment when Interest is Falling

How can we explain the rise of basic unemployment? How does the interest charge change in relation to the national product? Are the effects of changes in interest rate the same in different countries? What actions does the government take in times of employment crises?

Chapter 29
Market Economies - Capitalism - Globalisation

What exactly does market economy mean? What is meant by capitalism? What does globalisation mean? What about liberalization and deregulation? What is happening with provisions for old age?

Chapter 30
Money, War and the Destruction of Capital

Does interest really have anything to do with wars? Have the destructions of World War II lasted long enough? The madness of overkill. Does armament only serve capital? Is it true that capital is rendered scarce and destroyed? What about the first Gulf War? And what brought the second Gulf War? Why not a conversion of armaments after all?

Chapter 31
The War against the Third World and against Ourselves

Did the developing countries prevent us from going through 'purification crises'? Where does the indebtedness of developing countries originate? Which consequences does this indebtedness have? Is cancelling of debts the right way out? What should happen instead of cancelling debts? Which consequences would falling interest rates have?

Part V
Overcoming Dysfunctional Structures -
Paths to Crisis-Free Economies


Chapter 32
From Symptoms to Corrections

Where must change start? What are the characteristics of public institutions? What is the consequence of today’s judicial situation? Why does our money need the compulsion to pass it on? What is meant by ensured money circulation? Why is it necessary to ensure efficient circulation? Does ensured money circulation work for a ‘money strike’, too? Examples for ensured circulation that are independent of interest - from the ‘bracteates’ to Wörgl? What does potential for demand mean, and what does potential for credit mean? What additional effects will changes in paying habits initiate? Who is entitled to change the judicial order of money?

Chapter 33
The Effects of Corrections

What effects does the retaining fee have? What consequences would the distinction between demand and credit potential have for issuing banks? What are the actual consequences for the commercial banks? How will interest originate in banks after a reform of our money order? How could money be made to go around? What practical options exist for cash? What does economic science say about the question of constructing ensured circulation? What do economists, bankers and politicians say to the reform proposals? Can one country alone start with monetary reform?

Chapter 34
Thoughts and Arguments about Monetary Reform

Does man have to change? Will escalating speculation be restricted by reform? Do we have to fear a flight towards gold or other material assets? Will there be a flight into real estate? What must be done for real estate? What about flight of capital in case of falling interest rates? Does ensuring circulation lead to growth euphoria? Is the EURO a solution? Can money saving costs be compared with inflation?

Chapter 35
Local Exchange Trading Systems and other Alternatives

How do local exchange trading systems work? Can money be put in circulation by local exchange trading systems? The WIR-Wirtschaftsring (economic circle) in Switzerland. What happens to interest in accounting circles and alternative models? Can alternative banks help further? What about environmental or ethical funds?

Chapter 36
A Concluding Summary

Why do we fall in such bad ways? Where does the lever have to be positioned?

Concluding Summary


If not stated otherwise, all quoted data and figures have been taken from publications of the Bundesbank and the Statistisches Bundesamt. All of my own converted and progressional calculations as well as most of the graphics are based on this material.



Money is a phantastic institution. Yet, while we have known and used it for centuries there is nothing in comparison about which we know less! Money is still hidden in a fog of mysticism. Even economists talk about the illusion and the magic of money.

In this book we try to explain the very idea and the functions of money and its role in the market and how it affects people. Above all we will trace the basic dysfunctional structures ingrained in the money as we know it and show the resulting consequences. In the end we will try to show a way out of the age-old dilemma. For, the knowledge of these dysfunctional structures and the possibilities to correct them is essential for our future, not only for the indebted Southamerican countries or the inflationary descent of the former East Block countries. It also applies to the industrial nations where the money related development of problems becomes more obvious day by day. Nobody can escape these monetary forces unless he flees like Robinson to an island.

The normal citizen hardly thinks about these matters. He gets money for his work and spends it on his living expenses. At the most he heard a few proverbs in his youth without giving them much thought. For instance: "Money destroys the character" or "The devil always throws money on the biggest heap". Or still better known in many languages: "Money rules the world".

Why does money destroy the character? Would you say that about a voucher or a theatre ticket, which, similar to money, documents the claim to a good or a service? And why do the ones who already have a "big heap" still get more? Is money not tied to work done? If yes, is income without work not against all basic and human rights? And how about the proverb that money rules the world? Are all governments, whether red, black or green, elected or not, only a farce and marionets of money? Can we speak of an enlightened and grown up world or, first of all, about democracy, if these questions remain unanswered? Or is the fog that covers the sphere of money intentional?


What is wrong with our money?

Whoever concerns himself unbiasedly with questions of money will soon find his hairs rising. Just to mention the contradictions, which you encounter if you try to logically comprehend, will have no end: These contradictions alone should explain the tribulations caused by money, particularily, if you realize what central role money plays in the economy of today.


What importance does money have?

If you ask the inhabitant of a house, which parts of the house were the most important ones, you would probably get the answer: the living quarters. Hardly anybody will mention the basement or the foundation, even though the foundation is a basic necessity for the stability of the house. Similarily, the storeys of our »political house« in which we live, the fields of social politics, are the most important ones, economy concerns us less and money or currency hardly at all. This does not only apply to the majority of the public, but it is also true for almost all politicians. A member of the Socialist Party in the German Bundestag, formerly banker at the National Bank and then expert for currency questions of his party once lamented: whenever social questions of the day are being dealt with, the plenum is full. If the discussion was about economics two thirds of the members would leave and if it concerned questions of money or currency at the most half a dozen members would stay. - In other parties it is probably hardly any better.

Everybody should see the real importance of money if we arrange the sections of currency, economy and society above each other just like in our example with the house: a stable society is only possible with a stable economy and the economy needs the foundation of a stable money and currency system. But similar to the foundation of buildings we hardly know anything about this fundamental role of currency. If cracks develop in the "societal living quarters" or if the whole building threatens to collapse, we try to fix the problems by patching the cracks. Yet, such solutions have no chance to succeed, where the causes for the disorder lay deeper. If we take the trouble to probe into the underlying causes for the cracks and the state of decay in our society, which means to follow the chain of cause and effect down to the lowest level, we will almost always find them in the foundation - the level of money and currency.

Before examining the fundamental dysfunctional structures it will be useful to clarify some definitions concerning money and economic functions.

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