Tag Archives: Fractional reserve banking

Scott Cundill ~ The Future Of Money And Business

FACT: All money owed by a government or person to any bank is nothing more than a legal fiction.It does not exist. In fact, the word credit comes from the Latin word credere which means “to believe.” Debt, interest, IOU’s promises and money are all literal and legal figments of the imagination. Without belief (or ‘confidence’), then the system will die.” ~S Cundill

cartoon_moneyprintingWelcome to a new world. A world where money does not exist and everyone lives in a Utopian society.

But not quite yet.

It will take time and an evolution of consciousness to get there. And, it will require us to open our minds to some important and startling facts about this thing called ‘money.’

1. Money does not exist

Money does not exist in the world today. Gold, silver and copper have been replaced by the promise to pay money. As strange as this may sound, a “promise to pay” made by a bank to you is termed money because these promises serve in effect as money. In other words, our global monetary system is made up of things like IOU’s, bonds and guarantees, but there is no actual money.

2. The ‘money’ in your bank account does not legally belong to you.

In legal terms, the ‘money’ in your account belongs to the bank, not to you. This is horrifying, but it is a legal fact in most countries. Instead, we enjoy a kind of rental agreement that grants us temporary permission to trade with a bank’s IOU… for a fee of course.

If I work for Vodafone and Vodafone runs out of money, then they could pay me with “airtime” instead. Airtime is a commodity that could be traded in effect as money.  This is precisely how the banks work. The ‘air’ gets passed around as an exchange for goods and services.

3. A bank “loan” is not a “loan” at all.  A loan is the creation of brand new money. Continue reading

Jörg Guido Hülsmann ~ How Inflation Helps Keep The Rich Up And The Poor Down

LudwigvonMisesInstitute  May 31 2014

Banking is fraudulent whenever bankers sell uncovered or only partially covered money substitutes that they present as fully covered titles for money.” ~ J. G. Hülsmann

The production of money in a free society is a matter of free association. Everybody from the miners to the owners of the mines, to the minters, and up to the customers who buy the minted coins — all benefit from the production of money. None of them violates the property rights of anybody else, because everybody is free to enter the mining and minting business, and nobody is obliged to buy the product.

cartoon_bernankeThings are completely different once we turn to money production in interventionist regimes, which have prevailed in the West for the better part of the past 150 years. Here we need to mention in particular two institutional forms of monetary interventionism: (fraudulent) fractional reserve banking and fiat money. The common characteristic of both these institutions is that they violate the principle of free association. They enable the producers of paper money and of money titles to expand their production through the violation of other people’s property rights.

Banking is fraudulent whenever bankers sell uncovered or only partially covered money substitutes that they present as fully covered titles for money. These bankers sell more money substitutes than they could have sold if they had taken care to keep a 100-percent reserve for each substitute they issued.

The producer of fiat money (in our days, typically, paper money) sells a product that cannot withstand the competition of free-market moneys such as gold and silver coins, and which the market participants only use because the use of all other moneys is severely restricted or even outlawed. The most eloquent illustration of this fact is that paper money in all countries has been protected through legal-tender laws. Paper money is inherently fiat money; it cannot thrive but when it is imposed by the state. Continue reading

Prominent Economists Call For End To Fractional Reserve Banking

WashingtonsBlog  April 30, 2014

Challenging a Sacred Cow of Banking Dogma

Excessive leverage by the banks was one of the main causes of the Great Depression and of the 2008 financial crisis.

As such, lower levels of “fractional reserve banking” – i.e. how many dollars a bank lends out compared to the amount of deposits it has on hand – the more stable the economy will be.

But economist Steve Keen notes (citing Table 10 in Yueh-Yun C. OBrien, 2007. “Reserve Requirement Systems in OECD Countries”, Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board):

The US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals; banks have no reserve requirement at all for deposits by companies.

So huge swaths of loans are not subject to any reserve requirements.

Indeed, Ben Bernanke proposed the elimination of all reserve requirements for banks:

The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

Continue reading

The Crane Report ~ Humanity Vs Insanity (Episode 8) [Video]

ukcolumn  March 24 2014

Ian R. Crane discusses fractional reserve banking and fraudulent mortgages with Roger Hayes from the British Constitution Group.

GE Christenson ~ Fire and Ice: Inflation And Deflation

DeviantInvestor  January 15 2014 (Thanks, Gary)

gechristensonFractional reserve banking and central banking began their reign of destruction upon our financialworld a few centuries ago.

Politician’s greed and need for control over people have been ever present.

Their mutual interests created an unholy union from which were born two progeny. Call them Fire and Ice. Call them Inflation and Deflation.

This is their story – simplified and sanitized.

FRACTIONAL reserve banking allowed banks to loan out considerably more currency than was received from depositors – this increased the supply of currency in circulation. If demand for currency did not increase proportionally, then each currency unit was devalued and prices increased. The first child born of the unholy union – Fire – destroyed the purchasing power of the currencies in the world financial systems. (Inflation was created via fractional reserve banking instead of the usual debasing coinage or printing paper.)

Do you remember gasoline selling for $0.15 per gallon? Why does it cost 20 times as much now? The fires of inflation have destroyed most of the value of the currency unit – each dollar in circulation.

Because of government greed, its need for power over people, and every politician’s desire to meddle and spend, government granted bankers the power to create and control currency, monetize debt, fix interest rates, and so much more. Central Banking was born. In return, government could spend in excess, borrow from bankers, members of the legislature collected handsomely from the banking community, national debts expanded, and interest expense paid on those debts grew to outrageous levels. Politicians, their friends, favored industries, and bankers won, while most others lost.

For a personal perspective, how much interest have you earned on your savings since 2008? Does it seem like you lost and bankers won? Have your after-tax wages increased proportionally with your expenses since 2008, since 2000, since 1971? Probably not!

Continue reading

GE Christenson ~ Gold, Silver, And The Sins Of The Past

Deviant Investor July 30 2013

Consider these thoughts on “the great lie,” our strange world, its unstable financial system, overwhelming debt, exponential growth, inevitable collapse, fractional reserve banking, counterparty risk, and gold – from highly intelligent individuals who think beyond the traditional:

From Karl Denninger: Detroit: The Shape Of Things To Come

“If you make political promises that can only be met through increased tax rates, now or in the future, you begin the process of slitting your own throat. That outcome is inevitable when you agree to political promises that have escalating expenses over time as pensions, medical benefits, salary “step” increases, bond issues that have a payment schedule longer than the useful life of the asset bought and similar.

There is no way out of this box other than to repudiate those promises.”

From Richard Russell: (subscription service)

“The compounding debt is the monster that is eating the U.S. The only way out is to renege on the debt or try to pay it off with inflation or hyperinflation. The bull market in bonds is over. From now on, we are dealing with a bear market in bonds, at which time natural forces will drive bonds down, and as bonds fall, interest rates will rise.”

“It’s taken almost two centuries for bankers to pull the wool over Americans’ eyes, but today you and I are working for intrinsically worthless paper that can be created by bureaucrats – created without sweat, without creative ability, without work, without anything but a decision by the Federal Reserve.

This is the disease at the base of today’s monetary system. And like a cancer, it will spread until the system ultimately falls apart. This is the tragedy of the great lie. The great lie is that fiat paper represents a store of value, money of lasting wealth.”

From The Burning Platform: Trying to Stay Sane in an Insane World – Part 1

Continue reading

Real vs False Money – Key Insights From Monetary History

 July 22 2013

Where does money come from? Is its value constant or does it change? Are there risks associated with money? These are all important questions, because today’s monetary system combined with fractional reserve banking has a lot of risks. It is vulnerable to bank runs, inflation, and economic bubbles, to name just a few. Yet, those risks remain invisible to the majority of people. Global Gold Switzerland, a bullion company specialized in brokerage and custody services exclusively in the physical precious metals market, created a report and a short educational video. They explain how our current monetary system works, where it fails and how you can protect yourself against it.

In this article we extract twelve insights from the extended report. Readers are recommended to read the extended report (request the report “Real vs false money” here).

  1. Governments have a track record of diluting the value of their currency. History is full of examples where governments started mixing worthless metals into gold coins as soon as they ran into financial trouble.
  2. The first documented case of fraud by a banker dates back to the year 393 BC. A banker called Passio used bribes and falsified documents to misappropriate the gold which was entrusted to his bank. It became a widely used practice of goldsmiths and other depositories to lend out the gold which was handed to them for safekeeping; earning interest on lending out gold in the form of receipts; which wasn’t legally theirs. Continue reading

10 Things Government Can Do That Would Land You in Jail

Activist Post May 29 2013

Do you still believe the government represents the people? Are you part of the majority that genuinely wants the government to do good things?

There remains a large portion of the population that believes government to be a force for good and they blindly support giving it more power even at the expense of their own liberty.

Perhaps government should be a force for good represented by the will of the people. But, unfortunately, that is not what it is. Instead, the government does horrible things including breaking laws that regular citizens would go to jail for.

Ask yourself, why is a “representative” government allowed to do things that regular citizens are not allowed to do?

When a government declares itself above the law of the land, then the people live in a imperial dictatorship, and a tyrannical one at that.  It is the hallmark of a ruling class that lives with a separate set of rules than the rabble.

Take a look at the top ten things the government can do that would land you in jail:

Spying: You are considered a Peeping Tom if you spy on your neighbor, and if caught you’d go to jail or be sued. Citizens are also increasingly being arrested for filming police or public buildings under wiretapping charges of all things.  Meanwhile, the government is using massive resources (paid for by tax slaves) to violate the Constitution to spy on everyone and everything with impunity.

Insider Trading: Yes, you will serve jail time like Martha Stewart did for using marginally helpful insider trading information, but politicians voted themselves exempt from insider trading laws.  It must be nice to be exempt from the peasant’s laws.

Hacking: You will go to jail if you hack into someone’s cell phone or email account. The government, on the other hand, has legalized wiretapping and hacking to keep us safe. As they attempt to convince the public that nation-states and terrorists will engage in cyber attacks so that they can pass Internet control legislation, the U.S. and Israel are the only nations to publicly admit to attacking another nation with a computer virus.

Continue reading

GE Christenson ~ Gold And What I Know for Certain

Deviant Investor May 16 2013

What I Know for Certain

  • Death and taxes!
  • Fear and greed are powerful motivators.
  • Individuals, businesses, and governments do what they think is beneficial for them.
  • Businesses and governments protect their products and territory and resist competition and enemies.
  • Concentrated wealth creates power and corruption. The greater the concentration of wealth, the larger and more pervasive the power and corruption.
  • Gold and silver have been money for over 3,000 years.
  • Unbacked paper money systems have always failed.

What I Think is True

  • The basic product of a central bank is the unbacked paper currency it prints in ever-increasing quantities.
  • Central banks will fight all competitors to their currencies. The oldest competitor to unbacked paper currencies is gold, ancient money.
  • Politicians want to spend money and increase their power.
  • Bankers want to create money, lend it to governments, and thereby secure a permanent and increasing revenue stream.

Continue reading