Saturday, April 26, 2008

You thought you understood money? Think again

DOLLAR DECEPTION: HOW BANKS SECRETLY CREATE MONEY

It has been called "the most astounding piece of sleight of hand ever invented." The creation of money has been privatized, usurped from Congress by a private banking cartel. Most people think money is issued by fiat by the government, but that is not the case. Except for coins, which compose only about one one-thousandth of the total U.S. money supply, all of our money is now created by banks. Federal Reserve Notes (dollar bills) are issued by the Federal Reserve, a private banking corporation, and lent to the government.1 Moreover, Federal Reserve Notes and coins together compose less than 3 percent of the money supply. The other 97 percent is created by commercial banks as loans.2

Posted by planning4acrash @ 12:45 AM (983 views)
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18 thoughts on “You thought you understood money? Think again

  • very good p4ac…

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  • planning4acrash says:

    This blog really is interesting. I came on here about a year ago to decide whether to buy a flat. In looking at the reasons for the bubble, we have uncovered mass fraud by an international banking cartel and been incredibly accurate with our predictions. Far better than anything in the media. Could that be because we don’t have an editorial? Could be that humans, subject to the facts, and ability to freely discuss the truths untruths and truths and untruths untold in articles naturally gravitate to truth? Discuss!!

    This article, and I only just fully read it, is interesting. Carter took America from the gold standard in the 1930’s not because of problems with the gold standard itself, it was a fractional reserve system, where banks could lend out (generate from thin air) about 2.5x more cash than they had in gold bullion reserves. Hence, when collapse of debt came, and gold was pulled from American shores, the money supply contracted, because $1 of gold gone = $2.5 of fiat currency leaving the shores. It was not a failure of the gold standard part of the equation, but the fractional reserve component that fuelled the stock market boom that bankrupted Wall Street. So it makes sense for all of us to avoid a fudge and a half way house. S2R is right that more destruction is required. The entire fiat system must be put into question by a critical mass of people, because premature change would result in the same. The fractional reserve component becomes dominant whatever the situation, because it is self-reinforcing, whilst gold supply, by its nature, as a relatively unproductive rare mineral of almost stable supply, just sits there in the amount that it has done for ages, whilst the speculative fractional reserve component is free to multiply away in its yeast like boom trajectory towards recession and depression.

    Does anybody know whether the same legal case is true here? The one mentioned at the beginning of the article. Is there any legal or constitutional basis for private fiat money in the UK? Could a lawsuit avoid foreclosure on the grounds of consideration? Because that alone has the opportunity to pull down the whole system. Doubtless, the real test would come if the western world becomes bankrupt as a whole and governments sue the banking cartel. Imagine that, the USA and Britain, etc becoming bankrupt, then taking the banking cartel to court, in a mass class action, arguing that the debt be admonished for having no consideration/legal basis! Now that would be true revolution. Can anybody else see it going any other way?

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  • This is kinda well-known.What do you think Major Douglas and all those monetary reformers were on about in the 30’s — the last time things fell apart? It is not really possible to have a discussion about economic questions unless the people involved are in possession of the facts about where money comes from. The truth that banks create new money ab nihilo (out of nothing) by issuing loans without debiting their reserves may be shocking and induce feelings of Matrix-like entrapment , but it is an economic fact of life like your mother has a basque in her bottom drawer.
    This is not crank-fringe stuff. It is basic economics. Ron Paul does address the questions but his remedy is medieval:if the system has a fever drain all the blood /circulating medium/ credit out of the system till the fever goes–and the patient dies probably.

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  • Carter was president in the 1930’s? He’s aged well then.There is nothing all that wrong with fractional reserve banking when its distributing cheap credit and this is covered by an increase of goods and services preventing inflation.Its when it all goes into land and property (fiscal stimulus cannot increase the stock of land) that Keynesian money goes haywire.Keyness was told this in the 30’s but did n’t get it apparently.There is a good bit at the end of Keynes “General Theory of….” (1936) when he enthuses over money reformer Silvio Gesell (then an uber-crank now seen as quite sensible) but dismisses Gesell’s ideas about stopping money going into land, which he thought were too influenced by Henry George.In fact Gesell’s interest in Henry George (whose books outsold Marx and was a massive influence on the early Labour Party) was the vital bit that would have stopped demand stimulus becoming inflationary.

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  • It is the ultimate smoke & mirrors deception, I first came across this explanation, ( I call it an explanation, because this is what it is – it is not a theory, it is what actally happens.) some months ago. It takes a while to get your head around it. When you have got your head around it, you will never again view the world in the same light.

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  • I have seen the explanation several times.

    I’m still not sure if what is explained makes sense.

    People keep going on about the Gold Standard but gold can just be dug out of the ground.
    For example if I borrowed a few hundred million I could buy some mining rights and set up a gold
    mine and start incresing the supply of gold. Admittedly it would take effort and risk to start the
    mining operation but you get the idea.

    Another problem I could see is that with a gold standard you could end up with one person owning all
    the Gold (and hence money) in the world. Someone actually tried to do that with Silver a few decades
    back.

    Any comments from people who know more about economics.

    :- Duncan

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  • I purchased the book ‘Web of debt’ shown on the website. A fascinating read. Was responsible for the greatest paradigm shift I have experienced up to now. If everybody read this book today there would be a revolution by the morning.

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  • Surely everyone on here knows this by now?

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  • last_days_of_disco says:

    Keep your shirts on you lot. We are all up to our eyeballs in this system. We liked it up until a few years ago.

    The problem is, its going wrong. Its deflating and because the current economists are so steeped in inflationary solutions that they can’t actually make the right decisions to correct the system. Neither can the politicians, because it requires telling people they can’t have what they want and no politician has the balls to do that these days. This isn’t some new fact. Its been well know for years and years, its just in the boom times, we forgot about it. You can read textbooks from the 1960s that describe all these “revelations” in detail. I get irritated with the hysterical tone. The banks are actually doing the right thing now with a vengeance, raising rates! Its the government that is doing the wrong thing.

    Just because *we* are ignorant we shouldn’t blame some hidden banking class or something, that is just dumb. We thought they were heroes until the dot com bubble burst and we had our master class in bubbles (some of us did at least). And don’t tell me “why don’t they teach this stuff at schools”. Have you *ever* tried to teach school children stuff? Imagine trying to beat economics into a bunch of spotty little oinks, please, get real. In boom times, nobody cares. Especially not school children, think back and be honest with yourself.

    It seems the lethal combination is the fiat money system and democracy. Throw in a couple of socialists and away we go, bubble after bubble based on public spending (or lax regulation for the “public good” — think Bill Clinton style). It comes down to fundamental honesty and integrity of the population. Leaching the morality out of society has resulted in this. We don’t want to offend anyone, lets accept everything, all is great. But that is part of boom time thinking, morals become lax. Its the roaring 20s mentality. Even Rosie Millard is becoming more frugal these days and reminding me of my mom. So get ready for some shifts in public morality back to good old fashioned values. Hooray! I can’t wait.

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  • last_days_of_disco says:

    Keep your shirts on you lot. We are all up to our eyeballs in this system. We liked it up until a few years ago.

    The problem is, its going wrong. Its deflating and because the current economists are so steeped in inflationary solutions that they can’t actually make the right decisions to correct the system. Neither can the politicians, because it requires telling people they can’t have what they want and no politician has the balls to do that these days. This isn’t some new fact. Its been well know for years and years, its just in the boom times, we forgot about it. You can read textbooks from the 1960s that describe all these “revelations” in detail. I get irritated with the hysterical tone. The banks are actually doing the right thing now with a vengeance, raising rates! Its the government that is doing the wrong thing.

    Just because *we* are ignorant we shouldn’t blame some hidden banking class or something, that is just dumb. We thought they were heroes until the dot com bubble burst and we had our master class in bubbles (some of us did at least). And don’t tell me “why don’t they teach this stuff at schools”. Have you *ever* tried to teach school children stuff? Imagine trying to beat economics into a bunch of spotty little oinks, please, get real. In boom times, nobody cares. Especially not school children, think back and be honest with yourself.

    It seems the lethal combination is the fiat money system and democracy. Throw in a couple of socialists and away we go, bubble after bubble based on public spending (or lax regulation for the “public good” — think Bill Clinton style). It comes down to fundamental honesty and integrity of the population. Leaching the morality out of society has resulted in this. We don’t want to offend anyone, lets accept everything, all is great. But that is part of boom time thinking, morals become lax. Its the roaring 20s mentality. Even Rosie Millard is becoming more frugal these days and reminding me of my mom. So get ready for some shifts in public morality back to good old fashioned values. Hooray! I can’t wait.

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  • last_days_of_disco says:

    Sorry about the double post, my mobile internet is a bit dodgy

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  • planning4acrash says:

    Last Days of Disco. The conspiracy is quite logical, as is your analysis. We all know that the majority of the world’s financial wealth is concentrated in the hands of a very small group of billionaires. We all know that there are only a few big banks run by a couple of people. More to the point, we know that the Feral Reserve is run by a small board of individuals. So maybe the system leans them towards corruption, but corrupt they are. It is infact impossible for there to not be a small group of pple conspiring to boost their wealth, think about it!

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  • last_days_of_disco – not all of us liked it – i’ve tried to make the point a few times that most of this new-born concern for our economic system started only when people’s individual wealth was threatened. I suspect we differ a bit on the causes and solutions, though. You seem to hint that this is a recent phenomenon, borne of socialist spending – yet, as you say, we knew about it in the 60’s and before – boom and bust has happened through every stripe of government – socialist or conservative.
    When I hear politicians talk of ‘old fashioned values’, it is inevitably the ‘good old days’ when the plebs knew their place, could be kept in line by the threat of force and the ability of the elite to exploit others for profit was unquestioned. In other words, what we have today, the only difference being that now the middle classes are being shafted as well, so suddenly it’s headline news of the utmost importance.
    In my opinion, our current problems started when those in power re-interpreted the ‘old fashioned values’ so that the responsibility to uphold them flows only one way – up the power tree. In other words, those at the bottom must obey the law, work hard, know their place, while those at the top are free to label their mass theft and corruption as ‘economic progress’, their ‘responsibilities’ extending little further than ensuring profits.

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  • planning4acrash says:

    Last Days of Disco. I’ve been thinking a bit more about this.

    With sound money, governments can still tax and spend to re-distribute wealth. They can still regulate to avoid fraud. Both of which cannot be quite so prolific with sound money, so are easier and cheaper to control. But essentially, capitalism does distribute resources where organisations and individuals are productive and reward thrift. So sure, corporations have a headstart there, but, wealth divide cannot be quite so much so, once again, the tax and spend need not be so difficult and social equity is actually achievable, so long as it does not involve the printing of fiat money.

    But the main thing is, and this is the point, sound money means that government and, more importantly, corporations, can only ever redistribute money in a transparent fasion. Inflation acts as a tax, but is not seen, and occurs when money fiat money is printed and increases the money supply, because money printing is not productive, the supply of goods and services remains constant, so the only outcome can be that general prices must rise, also known as inflation. It destroys the value of your savings, income and pension.

    If governments cant print money, they must tax. Tax is explicit and even stealth taxes can be measured and debated. The impact of inflated money supply cannot so is anti-democratic as well as immoral counterfeit, theft and fraud.

    The same is true for companies. If they cannot print money, they must raise actual prices paid, or must do something that attracts money, e.g. make a product or provide a service that is useful!!!!! At the end of the day, companies, when they print money, they not only reduce everybody else’s standard of living, but in doing it, they can increase their share of wealth by doing nothing that provides any value whatsoever. They increase their share of wealth, not by providing a useful commodity, product or service, but by adding an entry into an accounts book and printing cash.

    Once companies have to do this to attract wealth then they become the servant rather than exploiter of the consumer, who only passes their wealth to the company in an explicit exchange of contracts, which the consumer decides is of greater benefit to them than hoarding of the wealth. Printing of fiat money provides the same exchange of wealth without a transparent contract being exchanged. The resulting web of deceit then occurs, whereby corporations must control government and media to sustain the crime, one white lie leading to another, resulting in a whole string of black lies!

    So, responding to last days of disco,. it is possible to tax those who benefit from the system to benefit those, who by no fault of their own cannot participate. Here, I am talking about tax to fund the futures of children who cannot participate in the economy, elderly who cannot participate, grants for businesses that do not benefit from economies of scale and require a push start. But it will all be transparent. Politicians and electorate will see a tax and a spend. It can be debated in parliament and an agreement achieved.

    Further to this, it is clear that regulation, taxes and spend are required to manage social and environmental costs of personal and business activity, because, even in capitalism, no market is perfect. Some social and environmental costs are so discounted into the future or so distant from the players, that those costs do not factor into the decision making process, without the benefit of internal or applied conscience, i.e. the players being aware of the harm they cause, or government recognising it, and one or’t’other intervening accordingly. Here, we are talking about, for example, a developer, who is not personally affected by the impact on neighbours if they build an ugly roof extension, or ugly building. So statutory functions like planning, environmental protection, social services, etc. are still required, but the excesses of the fiat system will not be there so there will be less to regulate. People will also have greater wealth to invest in good solutions, unlike now, where interest targets and inflated prices take up all wealth (in the housing market), thereby ensuring that developers cannot afford to not fight to spend as little as possible on design, materials, landscaping, etc. They would like to do this, where it can be afforded because it adds value, but when fiat money inflates a market so much that all income just pays interest charges, as occurs now in buy to let, that cannot occur.

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  • planning4acrash says:

    Also, corporations, in a true capitalist system, are owned by the people in stocks and shares. The absence of stock market bubbles in a good money system, would ensure that stocks and shares only rose and fell on performance and speculation of performance, rather than speculation of fiat money flows. Sure, insider dealing could still occur but its effects would be less and as a result it would be less common and easier to detect and regulate. Rights issues that dilute ownership of a company would only occur in extreme circumstances, if at all. And the corporations, could only survive by providing commodities, products and services under transparent contracts with consumers, so would be servants of the consumer. Unable to boost their wealth by printing money, they would be at the fate of consumers and government.

    So, no, I’m not anti-corporate. But I am anti a fiat inflated corporate mass that has a massive advantage over and controls and destroys the economics of mum and pop businesses and the ventures of young entrepreneurs. Its all about measure, balance and true market activity.

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  • planning4acrash says:

    Oh, and people would have to work, or recieve welfare payments to earn. They could rarely easily get rich on speculation alone, unless they actually seek out and nurture truly profitable businesses

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  • planning4acrash says:

    So, if you want cash, you have to explicitly go and sell something of value or do work for somebody or an organisation that already does that, and the economy would be such that it would be easier & more transparent to get involved in the economy. The absence of inflation would make it easy to plan company cash flow, etc.

    You could not get a loan, live beyond your means, etc., because the charging of interest would be outlawed, as it was in early Christian times and is now in Islam, also known as usury (that’s why Jesus chased money lenders from the temple). A bank could only do the equivalent by purchasing a business/asset and charging for it whilst a person brought the capital over time with income received. (I think that this is how Islamic mortgages work). Because of that, assets would not be inflated to the stage where they can only be bought by those who print money or to those close enough to the money printers to gain the loans necessary to purchase at inflated prices. Foreclosure would not occur so much, because you would either continue paying a rent to the bank or pay off the capital as and when you can.

    Family and personal planning would be easier. You know your worth, you can plan into the future. You know how much an extra qualification will earn you, how much extra work will earn you. If you no longer need to earn to pay interest charges, you can afford to step off the rat race when you can afford it, in the knowledge that house prices will be no more out of your reach when you return to work than they were when you left work. I reckon we would have way more holiday time. With all of the money in the world going into savings and contractual transactions, a huge proportion of our wealth would not go to interest charges, so more people would be doing more useful stuff, so the quality of life would rise considerably. I reckon that things like craft work would again be valued and you would get builders/designers really adding value again, like they did before the mechanical industrial mass-production economy. This still occurs on the fringe, but would become a greater thing. And more shops would be taken up by craftspeople, or be independent stores with character. Less chains because corporations would not be able to raise funny money to price others out of the market so much. Good organisations like John Lewis, which share profits with workers would thrive. Evil corporations like MacDonald’s, which provide awful service and poverty pay would find that their business model no longer works when other organisations start adding way more value for customers than their command and control operations could ever envisage.

    Music and culture? Now we can distribute media freely, there would be a cultural revival as big corporate music labels loose some edge over independents, that build a sustainable business model and would be happy at a certain size when they find their market, with no need to constantly grow to pay ever building interest payments on loans required to pay for overinflated business premises and ever inflating wage and materials bills. The same applies to all other business types and models.

    Travel around, and currency based on a 100% gold standard would be worth the same everywhere. Exchange rates would disapear and it would no longer be possible to have a nation’s wealth eroded through currency speculation. The lack of national debt to world bank, etc. would ensure that the third world could begin investing in education, etc. Expect a global renaissance as the nations of the world experience a revival. A nation state is based around a taxation system. That is what nations are for (laws and power structures above, but tax and spend, the social agreement, is central and why nations survive). Culture layers upon that. So, nations with stable wealth, you would see less warfare, less forced emigration or immigration and more social stability. Social movement around the globe would be more to do with curiosity (tourism) and old time trade. Restrictions on the movement of capital and people would not be so necessary as people no longer feel the need for mass emigration to escape poverty generated by the money system. Natural disasters would still occur and need to be mitigated, but they would not be clouded by torrid fiscal situations where Mozambique say, cannot respond to a flood crisis because 40% of its GDP is paying interest charges to the (American)/World bank!!!

    The military industrial complex would be diminished.

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  • last_days_of_disco says:

    Ok p4c, thanks for all your time, to type that long article!

    What you seem to be saying if we were more honest and *insisted* on honesty from our leaders and really did throw them out if they put their mits in the cookie jar (whatever form that took). The world would be a lot better place to live. The problem is somewhere along the line, the public morality that made it impossible for leaders to get away with the atrocious behavior we have seen in the last 10 to 15 years became diluted or disappeared altogether and now we have serious problems with the people running the shop and they are getting more and more outrageous (some of the restrictions on our freedoms would have been *unthinkable* only 20 years ago).

    This housing bubble could have been easily avoided if we had actually made an issue about it with our representatives. But greed prevailed, even though we all knew it was bogus. I will put my hand up and say, I enjoyed having my house price go up and get some free money when I sold it. In two years I only effectively paid 5000 pounds to live in a 3 bed house in a really nice village (208 pounds a month!). That includes all my legal fees, etc. The people who bought it from me are now probably less happy (I did sell in good faith, being temporarily insane thanks to the herd instinct). What I have learned from this is: 1. I am not immune from the power of the herd instinct. 2. I am now hyper aware of “group-think” and try to check out that everything I do is based on cold hard reason. This is a really very difficult thing to do in practice.

    You seem to be saying that if we banned ursury or interest, then inflation would disappear. Are you saying we don’t need banks? I have often thought about that idea. DIY banking, how to run your own micro-bank. Wouldn’t that be a much more efficient way of doing things? How would any form of lending work? I mean why would anyone bother if they can’t make a profit out of it?

    I am quite despondent about democracy though. Problem is I have seen some of the alternatives in action and they seem to be worse.

    Anyway, what this has to do with house prices, I am not sure, but I felt duty bound to respond since you put so much effort into your previous posts.

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