Like many of the institutions of the modern world system, the banking organization along with other associated entities that spawn the face of the earth remain almost exclusively fixated on one thing-profit. To make more profit, (not necessarily earn them) banks have devised all sorts of schemes outside of their traditional activities. Some of these squarely fall in the category of fraud. Nonetheless establishment narrative adamantly and continuously tries to hide and protect the fraudulent nature of banking. In the words of the former chairman of the Bank of England and the richest man (not sovereign) at the time: “Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” Josiah Stamp – Bank of England Chairman, 1920s.
Why is banking conceived in inequity? Modern banking as we know it started in earnest about five hundred years ago. At the time it was the goldsmiths that literally became banks, as they were the only ones with heavy-duty deposit boxes (safes) that could be entrusted to keep precious metals, gold coins, etc. safe. Initially, the goldsmiths were charging nominal fees for their depository services. As trust and confidence increased in the overall soundness of the goldsmiths, depositors started to treat their gold depository receipts ‘as good as gold.’ In other words, instead of going to the goldsmiths to retrieve gold coins for all sorts of transactions, market participants started to consider depository slips or receipts of the goldsmiths as equivalent to the actually deposited gold. Very importantly, the goldsmiths soon realized it was only a fraction of the gold coins deposited in their vaults that were claimed back in a course of a day, week, months, etc., at least in normal times!
Having discovered this marvel, the goldsmiths decided to issue receipts to themselves/cronies and later to others who were willing to pay interest/fees for receipts impostering to represent gold deposits. Note, in this case no gold coins were deposited in the safes. Magic! This is the birth of ‘fractional reserve banking.’ Soon greed took the better of them (goldsmiths) and they started to flood the market with phony receipts. Inflation became rampant! It didn’t take long for genuine market operators to figure out what was happening and moved to withdraw their gold deposits. After all, it was not the real gold depositors (mostly hardworking people) that were flaunting/abusing the receipts, but the conspicuous parasitic crooks with phony receipts; just like the oligarchs of our modern era. Ultimately, since the issued receipts were far too many compared to the deposited gold, serious difficulties arose when all those with deposit receipts (those backed and not backed by gold) tried to withdraw gold coins. If truth be told, market operators cannot differentiate between the two receipts, exactly what obtains today! In our modern world, real money (coins, notes…) and bank money (entries on a ledger) are hardly differentiable! Needless to say, the medieval goldsmiths were promptly dealt with; they were sent to the guillotine! Today when depositors come en masse to claim their deposits, (bank run) the central bank and the IMF step in to salvage the bank & calm the general situation, unnecessarily idling the good old guillotine! In current set ups, central banks mostly serve as the ultimate godfathers to the minion banks of nation states!
Two major problems arise from the system of ‘fractional reserve banking.’ They are perennial inflation and mal-investments. We will illustrate both using local and familiar example. Take a new business entity in Ethiopia. Let’s say the company managed to secure a business worth hundreds of millions of birr. On the strength of this contract tens of millions of birr is loaned to the business under various pretexts, working capital, etc. Let’s be conservative and say only 5% of revenues end up as remuneration to the bosses (salary, travel, entertainment, cars, blah, blah, to say nothing about the skimming off the collective monetary crème that ends up stashed under the lying mattresses or in the standing concretes-real estate.) When a member of the bosses is asked to pay birr 50 for a kg of sugar, he/she probably won’t blink an eye, after all it is affordable to him/her because of the above blah, blah. On the other hand, his poor employee on a fixed low monthly wage might be forced to forgo the luxury of sugar consumption. If this situation becomes rampant, i.e., plenty of bank/polity anointed billionaires/millionaires & thousanders in town, then the price of goods/services will skyrocket; a case of too many phony birr chasing too few real goods. Debt is created when a bank extends credit to all and sundry. Without incessantly creating debt, banks will not be profitable. To this end, a borrower must also come up with some kind of believable project, believable in the eyes of banksters and their fellow travellers. It really doesn’t matter if the project is viable or not, so long as it serves as a decoy to help access credit/bank money under the usual drummed up guise of investment. To reiterate; to create money out of thin air banks must create debt perforce! The macro effect is to burden the country with unnecessary and un-payable debt. Inevitably, when such loans go bad, (besides the IMF types from outside) the national bank has to move in and bail out the troubled banks, compliment of the printing press & the beast’s sweat. No wonder ‘white elephants’ proliferate our landscape!
The moral of the above is, inflation and mal-investment (misallocation of resources) can create havoc to peace & stability! For a start, and as a result of hyperinflation those on fixed/low income can easily end up on the streets, incentivizing the beast (human mass) to take to the streets. Moreover, the systemic malaise encourages society to internalize the notion; ‘serious wealth acquisition is a function of proximity to the credit machine, i.e., connection, not entrepreneurship’, thereby silently sowing all sorts of grievances on the ground. In the rich countries the beast has already started to distance itself from paper currencies, getting invested in precious metals and other hard assets. In addition, new currencies that are not based on fraudulent schemes are being attempted by the thinking elements of the beast. Bitcoin is only one example. As we have been saying all along, it is only the legitimate state that must create credit, otherwise, credit creation must be completely liberalized, not strictly confined to the connected mafiosis! We also think fiat currency based on the deceitful scheme of ‘fractional reserve banking’ will ultimately bring down the global financial system, even though establishment/entrenched interests swear it is the greatest discovery since fire! Simpletons; learned & unlearned, paid or unpaid, reckon our arguments in regards to ‘fractional reserve banking’ and its unappetizing consequences, are based on pure ideological grounds (as if ideology doesn’t matter.) We beg to differ! To enlighten our detractors, who always seem to be in the dark when it comes to existing (not imagined) reality, we have decided to cite distilled wisdom (quote) from amongst the most prominent gurus/icons of the system!
“Every industry should be either effectively competitive or socialized. If other remedies were unworkable, the state should face the necessity of actually taking over, owning, and managing directly all industries in which it is impossible to maintain effectively competitive conditions.” Henry C. Simmons of the University of Chicago and of the ‘Chicago Plan, 1933’ fame.
Here is a full-blooded monetarist who was regarded as the most prominent economist of the latter part of the 20th century (by establishment.) “The creation of fiat currency should be a government monopoly.” Milton Friedman, Nobel laureate.
“Gold is money. Everything else is credit.” J.P. Morgan’s words to Congress in 1912.
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Rothschild, father of modern banking.
“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It is no coincidence that the century of total war coincided with the century of central banking.” Ron Paul.
As for us: “ Fractional Reserve Banking, coupled with fiat currency, is the greatest non-violent crime of the past millennium.” Good Day!