“It is said that our paper is as good as silver, because we may have silver for it at the bank where it issues. This is not true. One, two, or three persons might have it; but a general application would soon exhaust their vaults, and leave a ruinous proportion of their paper in its intrinsic worthless form.” –Thomas Jefferson to John W. Eppes, 1813.
You know, there is nothing new in the current banking and credit crisis that hasn’t appeared before, in history, at least a dozen times.
Perhaps the greatest virtue of the Founding Fathers was their profound knowledge of history. Our current American generation, dumbed down by years of public schooling, has no concept of banking, or even of the nature of money.
Thomas Jefferson knew that banks, left to their own devices and operating above the law, would counterfeit the currency to point where the bankers would be rich, at the expense of the general population, which would be reduced to poverty.
What Jefferson refers to, in the quotation above, is the practice of “fractional reserve banking.” Hardly one in a hundred Americans have any concept of the nature of this crime. That is what makes it so deadly. At root, this is what has caused our financial crisis, which is essentially identical to the crisis of 1929, which is essentially identical to crisis of Diocletian in the ancient Roman Empire, all the way back throughout history.
Most Americans do not understand that banks have the legal power to counterfeit. If the American did understand this, they would be demonstrating in front of Capitol Hill with pitchforks and torches, demanding an immediate end to this thievery. But, since the practice of counterfeiting is well disguised, no one protests.
Here is a simple explanation of what really goes on.
When you go to your local bank, and deposit a hundred dollars in a so-called “demand deposit” (most frequently, a checking account), the bank enters that $100 in black ink on its books. So far, so good.
But under “fractional reserve” banking, the bank can then lend a portion of that $100, yet still keep the original $100 on deposit in black ink, as though they never lent the money. In other words, they have counterfeited. They have created money out of thin air.
The amount of money that must be kept in “fractional reserve” is determined by law. Let’s say it’s twenty percent. The bank lends out eighty percent of your hundred dollars ($80), and enters that $80 in black ink as a loan. In effect, they have created $80 out of thin air. ‘
The institution they loan the $80 to deposits it in their own bank, which in turn lends out eighty percent. And so on and so on. This is what economists call the “multiplier effect.” In other words, when banks engage in “fractional reserve” banking, they don’t just create a small amount of money out of thin air; each bank down the line does the same thing, creating huge amounts of paper money.
This whole con game is based on the notion that most depositors won’t demand their cash immediately. And even if they do (under the current system), the bank will simply cover the shortfall by taking out a loan from another bank, or from the Fed.
Are you beginning to see how this whole house of cards can come crashing down?
That, ladies and gentlemen, is the power we have ceded to the government and to its hired henchmen, the banks. It is only a matter of time before those with political connections will use this system of counterfeit money to enrich themselves, while leaving the rest of us in poverty.
Have you noticed how expensive it is getting to fill your gas tank? To put food on your table? To pay your rent? To pay your mortgage? It is all the result of counterfeit money, which the power elite get first, and you don’t get at all. You are impoverished by the fact that your money loses purchasing power every day.
If you are not mad as hell by now, you jolly well should be.
Observe that none of this is discussed by politicians, because they are all part of the same gigantic con game.
We will cut off this discussion at this point, in the interest of keeping things brief, but will continue the discussion in future posts.
I only hope you are beginning to get angry, as that anger is the only thing that will change this remarkably dishonest and impoverishing practice.