The following is my high school teaching assignment for Advanced Placement Macroeconomics students (available as extra credit for other classes) on how money is created. I offer this for non-profit use; divided into seven sections:


1. Contextual orientation: seeing the past as clearly as possible

“All the perplexities, confusions, and distresses in America arise, not from defects in their constitution or confederation, not from a want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.” – John Adams, letter to Thomas Jefferson (1787-08-25), The Works of John Adams

“If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.” - Robert H. Hemphill (1), Credit Manager of the Federal Reserve Bank of Atlanta, 1934 foreword to 100% Money, by Irving Fisher. Fisher was a Yale economist whose proposal for monetary reform lost to Keynes’ deficit spending plan during the Great Depression.

Without knowing how money is created and managed, all other topics concerning money are out of context. This is crucial: regarding trillions of dollars of economic power, you have no idea where money comes from.

It’s time for you to learn.

I teach Advanced Placement (AP) Macroeconomics. The following is what I provide to students, AP colleagues, and non-controversial in its first four points of content. That is, there is zero disagreement among professionals in economics about factual accuracy.

And that said, although textbook economics provides the information of what we have as a monetary system, citizens need to take the last step to see for themselves what the private banks that own the Federal Reserve will never admit: their monetary system provides parasitic profits to leading Wall Street banks, bailouts in the trillions, and that an honest cost-benefit analysis proves their system should immediately be retired and replaced.

I assert the facts to prove this are obvious upon inspection, affirmed by many of America’s greatest historical figures beginning with Benjamin Franklin, and that those of us who present this argument are unaware of any refutation of our claims. Indeed, we welcome any attempt.

Because this information will likely be new to you (and to your parents), it may help to consider the paradox of learning history: every generation sees itself as “completely modern,” and that treachery such as an economic system parasitizing trillions from the public could not be possible in “modern times.” It’s easy to look back in history and see exactly such treachery, of course. It’s also easy to empathize with historical citizens who failed to recognize objective facts from “official propaganda.”

Need I say more…? A crucial lesson from history is appreciating the possibility that such treachery exists today, that “official propaganda” attempts to hide it, and as always, objective facts reveal what is actually happening. You’ve heard this quote; please allow it to resonate with you:

“Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it.” - George Santayana, The Life of Reason, Vol. 1.


“There is nothing new in the world except the history you do not know.”   - President Harry Truman, Plain Speaking: An Oral Biography of Harry S. Truman (1974) by Merle Miller, pg. 26.

Let me tell you a story that might help: my grandfather (“Papa”) was born in 1891. He grew up on a farm, loved to read, and had a father who never read for pleasure. One day, Papa was hiding behind a stack of hay bales to read. Suddenly, his father appeared, hands on his hips, boring his eyes upon his son in disbelief, and said, “What are you doing? You’re just sitting there, doing nothing. Why aren’t you doing something?” Papa’s father believed himself to be a “modern man,” capable of understanding life’s most important ideas. He concluded that if there was an idea he didn’t already understand, it had to be without value. And importantly, it didn’t matter that the evidence was right in front of his own eyes; he couldn’t recognize what he couldn’t imagine.

With hindsight, we all know that my great-grandfather was correct that people who read are indeed “just sitting there,” but we are far from “doing nothing.”

With a little curiosity, new worlds open for us. This topic you’re reading now, worth trillions of dollars, is arguably the most valuable investment of time you’ll ever make.

Before we begin exploring the mechanics of what we use for money, one more point:

Because people don’t know how money is created and managed, the only thing between them and tyrannical monetary policy is trust in ethical government. American democracy is founded upon cautious distrust of government. To compensate for temptations of power and personal profit in government, the US Constitution is designed with checks and balances. However, because checks and balances can be thwarted if politicians are unethical, the only real protection of liberty is citizen responsibility.

American democracy and freedom is dependent upon our taking personal responsibility for understanding our most important economic and political issues. This is one of them.

“A mere demarcation on parchment of the constitutional limits (of government) is not a sufficient guard against those encroachments which lead to a tyrannical concentration of all the powers of government in the same hands.” - James Madison, Federalist Paper #48, 1788

“Political parties exist to secure responsible government and to execute the will of the people. From these great tasks both of the old parties have turned aside. Instead of instruments to promote the general welfare they have become the tools of corrupt interests, which use them impartially to serve their selfish purposes. Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to dissolve the unholy alliance between corrupt business and corrupt politics, is the first task of the statesmanship of the day.” - Theodore Roosevelt, “The Progressive Covenant With The People” speech (August, 1912; one year before passage of the Federal Reserve Act)

Many Americans believe in the US without understanding our major economic and government policies. Collectively, American’s trust in our government to ethically create and manage money is so pervasive that few of us ever give this multi-trillion dollar issue a moment’s thought. As a teacher of economics, I hope this brief is helpful to your responsible citizenship.


1 With greater context: Herman, C. Washington’s Blog. Federal Reserve, national debt nearly defeated during Great Depression; let’s finish the job. Feb. 8, 2012.