DeviantInvestor January 15 2014 (Thanks, Gary)
Fractional 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!