Banking Unmasked - Part II
In part one we discussed the first act of the confiscation of individual property rights over one’s own production based on axiomatic natural law:
In a “barter” system, your product is your “money” with which you buy (trade, acquire) the goods-services of others. Notice the dynamics of this system, which is the root system from which other more convenient systems must be derived: The person or group of persons have absolute, exclusive right of ownership, to do with whatever he pleases, for the pursuit of happiness, and such.
In modern banking all money is generated through debt (a promise to return the money with interest to the entity who issued those AR’s, namely banks and financial institutions.)
The dynamics of ownership change instantly. The producer no longer has absolute and exclusive rights to his wealth; and the bank has acquired a degree of power when it dictates the terms of transactions.
The second confiscatory practice is the creation of money by the “fractional reserve” system.
The basic principle of money (acquisition rights, or right to claim goods and services from others), which must always be kept in mind when analyzing any economic problem, is:
Money is back by the productive capacity of a population. This is products. Real wealth in physical form, food, buildings, cars, houses. It is NOT back by services. In fact, services are possible ONLY through a sufficient surplus of real products to distribute through the service sector of the economy.
When a bank lends money or gives “credit,” which is the same as the right to acquire goods and services,” it does so by increasing the money supply. The existing money supply is already slated for the existing productive capacity of the population. Therefore, it MUST BE “new money” for products that do not exist. (see Federal Reserve MODERN MONEY MECHANICS, booklet obtainable in any library or Internet research-here is one.)
The history if this confiscation method is couched in the romantic tale of the goldsmith-updated:
It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.
Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.
It sounds so incredibly reasonable and clever, that the underlying fraud escapes most people, since we’ve been educated over 700 years to accept this as a rational system of money creation.
Keep in mind that, whether gold, silver, paper, or whatever the currency is, it is still “backed by the productive capacity of a population.”
The booklet details how
Conventional economics explains that this is necessary because that’s how the economy is caused or allowed to grow. It is true that money must be injected into an economic system so exchanges can take place, and productivity can grow.
But again, keep in mind that ALL THAT NEW MONEY is “backed by the productive capacity of a population;” and the money is an investment belonging to the population, which must ONLY inure gain to the population, those on whose productivity the worth of the money is based, NOT to the banker or the government or anyone else.
(As production increases, services can be added to the system to support and increase the productive capacity. In this way, as people move from the production of real things, into the service sector, money distributes accordingly.)
In the current system, repaid loans are returned to the control of the bank, interest is returned to the bank. When loans are defaulted, the losses are charged to the community through higher service fees, inflation, and taxes.
This further drastically alters the dynamics of ownership, where large percentages of wealth are confiscated by banking on the guise of fees for services. A service is time spent performing a task to the benefit of another. After the loan is processed, how much more time is spent on providing a service? If this fraud and deception of property confiscation is not clear then you indeed deserve to be poor.
Next part, we’ll review how confiscation is perpetrated through planned inflation and depressions.