The Fish Don’t See The Water

"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 a pen they will create enough money 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."

- Sir Josiah Stamp, former Director of the Bank of England

"We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."

- Robert H. Hamphill, Atlanta Federal Reserve Bank

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

- Henry Ford

We are living in a financial environment which has been becoming more and more hostile towards ordinary people for a hundred years. The very medium of exchange – what we call “money” – is tainted at the source, and we are all contaminated by its use. The reason? The currency we use is borrowed into existence by governments from their Central Banks (at interest), which each control the supply of currency and credit (read: Debt) in their respective countries (read: National Debt) by creating it out of thin air. They have a monopoly on new reserves of this “thin air money”, so where does the extra interest come from to pay the National Debt? It comes from YOU and ME. It comes from the fruits of our work, as we strive to create value for other people, whose gratitude pays us. We create real value, which is then extracted as tribute by the money powers. Sadly, as not enough currency and credit exists to allow everyone to pay their part of the interest burden, some people go bust. At that point, their real and valuable collateral is taken from them in compensation, and the true nature of this subtle, elusive and fundamentally evil scam is exposed. Imaginary currency is used as the trap to steal real valuables from unwitting people.

Money used to be different. It used to be based on substance of real value, and was called asset-based money, rather than the debt-based currency and credit which masquerades as money today. The valuable thing was usually gold, and in most cases each new asset-based money system started off well enough, with good intentions and enough value tied up in the assets to allow all the paper currency in circulation to represent this value. The gold was normally stored in vaults, because it was so easily stolen if you carried it on you, and anyway, paper claims for the gold were normally just as good as the gold they represented – “as good as gold”. This is where the fabled words “I promise to pay the bearer on demand the sum of…” came from: once upon a time, you really could turn up to the gold store and exchange one of their valid paper receipts for an agreed amount of gold. Not any more...

Now if you’re not in business yourself, the next bit might be new to you and seem a bit abstract. Trust me: it is a real as going bust, and all healthy businesses spend a lot of their energy managing a thing called Working Capital. Working Capital is the liquid cash or credit you have at your disposal to buy things from suppliers and pay staff – it’s the “Readies”, if you like. Run out of Readies – you’ve gone bust. Today, most businesses run on an overdraft. If you go back more than 100 years ago, the Readies came from paper promises made by business people with real assets to back them. They were called Real Bills of Trading.

Real Bills were the perfect form of asset-backed, self-liquidating credit; they were also transferable and could function as real money in the economy, because they were backed by something which had real value. Real Bills were solid promises to pay (in gold) issued by a customer, with a term of 91 days (or 1 natural season, as much trade was literally “seasonal”); they could be passed from one person to another as an exchange of value. If an issuer of a Bill defaulted (“couldn’t pay his Bills”), they were made bankrupt and their reputation was ruined – there were no bailouts when the paper money was REALLY worth something. The invention of debt-based paper “Legal Tender” money in 1909, by the central banks of France and Germany, unleashed a process which rapidly destroyed the asset-based "Real Bill" as a vital medium of exchange, crowding them out of the marketplace with a flood of speculative bank paper. In common use, Real Bills could be “discounted” when transferred (i.e. you could sell them to the bank for, say 98% of face value in gold) so they could be used to pay raw materials suppliers and workers’ wages, well in advance of the original buyer’s final payment to the holder of his Real Bill.

This pool of “wages money” has been destroyed by paper legal tender money, and that is why there is permanent unemployment now – there never used to be before 1909. The banking system and their Legal Tender “debt” paper money has crowded out Real Bill “asset” money, at great social cost in terms of unemployment, business failure and reduced opportunity for ordinary people. However, for members of the Banking Club, it has been gravy all the way, and if a major bank should ever fail, their club membership nearly always entitles them to a bailout. After all, since modern money is worthless at source and it’s the banks who create it, it’s no cost to them to save one of their own.

And that's not all. Most of the funny money we play with nowadays was created by Clearing Banks, playing by Central Bank rules. If you're feeling strong, I'll tell you how it works in America (where most of the trouble comes from), via a fiendish, convoluted process dubbed as The Mandrake Mechanism and explained in the brilliant book The Creature from Jekyll Island. If you want to corroborate this information, refer to the (now out of print) article entitled "Modern Money Mechanics", originally published by the Federal Reserve Bank of Chicago and now available here.

The Mandrake Mechanism

GOVERNMENT DEBT

The federal government adds ink to a piece of paper, creates impressive designs around the edges, and calls it a bond or Treasury note. It is merely a promise to pay a specified sum at a specified interest on a specified date. As we shall see in the following steps, this debt eventually becomes the foundation for almost the entire nation’s money supply. In reality, the government has created cash, but it doesn’t yet look like cash. To convert these IOUs into paper bills and checkbook money is the function of The Federal Reserve System. To bring about that transformation, the bond is given to the Fed where it is then classified as a…

SECURITIES ASSET

An instrument of government debt is considered an asset because it is assumed the government will keep its promise to pay. This is based upon its ability to obtain whatever money it needs through taxation. Thus, the strength of this asset is the power to take back that which it gives. So the Federal Reserve now has an “asset” which can be used to offset a liability. It then creates this liability by adding ink to yet another piece of paper and exchanging that with the government in return for the asset. That second piece of paper is a…

FEDERAL RESERVE CHECK

There is no money in any account to cover this check. Anyone else doing that would be sent to prison. It is legal for the Fed, however, because Congress wants the money, and this is the easiest way to get it. (To raise taxes would be political suicide; to depend on the public to buy all the bonds would not be realistic, especially if interest rates are set artificially low; and to print very large quantities of currency would be obvious and controversial.) This way, the process is mysteriously wrapped up in the banking system. The end result, however, is the same as turning on government printing presses and simply manufacturing fiat money (money created by the order of government with nothing of tangible value backing it) to pay government expenses. Yet, in accounting terms, the books are said to be “balanced” because the liability of the money is offset by the “asset” of the IOU. The Federal Reserve check received by the government then is endorsed and sent back to one of the Federal Reserve banks where it now becomes a…

GOVERNMENT DEPOSIT

Once the Federal Reserve check has been deposited into the government’s account it is used to pay government expenses and, thus, is transformed into many…

GOVERNMENT CHECKS

These checks become the means by which the first wave of fiat money floods into the economy. Recipients now deposit them into their own bank accounts where they become…

COMMERCIAL BANK DEPOSITS

Commercial bank deposits immediately take on a split personality. On the one hand, they are liabilities to the bank because they are owed back to the depositors. But, as long as they remain in the bank, they also are considered as assets because they are on hand. Once again, the books are balanced: the assets offset the liabilities. But the process does not stop there. Through the magic of fractional-reserve banking, the deposits are made to serve an additional and more lucrative purpose. To accomplish this, the on-hand deposits now become reclassified in the books and called…

BANK RESERVES

Reserves for what? Are these for paying off depositors should they want to close out their accounts? No. That’s the lowly function they served when they were classified as mere assets. Now that they have been given the name of “reserves,” they become the magic wand to materialize even larger amounts of fiat money. This is where the real action is: at the level of the commercial banks. Here’s how it works. The banks are permitted by the Fed to hold as little as 10% of their deposits in “reserve.” That means, if they receive deposits of $1 million from the first wave of fiat money created by the Fed, they have $900,000 more than they are required to keep on hand ($1 million less 10% reserve). In bankers’ language, that $900,000 is called…

EXCESS RESERVES

The word “excess” is a tipoff that these so-called reserves have a special destiny. Now that they have been transmuted into an excess, they are considered as available for lending. And so in due course these excess reserves are converted into…

BANK LOANS

But wait a minute. How can this money be lent out when it is owned by the original depositors who are still free to write checks and spend it any time they wish? Isn’t that a double claim against the same money? The answer is that, when the new loans are made, they are not made with the same money at all. They are made with brand new money created out of thin air for that purpose. The nation’s money supply simply increases by ninety per cent of the bank’s deposits. Furthermore, this new money is far more interesting to the banks than the old. The old money, which they received from depositors, requires them to pay out interest or perform services for the privilege of using it. But with the new money, the banks collect interest instead, which is not too bad considering it cost them nothing to make. Nor is that the end of the process. When this second wave of fiat money moves into the economy, it comes right back into the banking system, just as the first wave did, in the form of…

MORE COMMERCIAL BANK DEPOSITS

The process now repeats but with slightly smaller numbers each time around. What was a “loan” on Friday comes back into the bank as a “deposit” on Monday. The deposit then is reclassified as a “reserve” and ninety per cent of that becomes an “excess” reserve which, once again, is available for a new “loan.” Thus, the $1 million of first wave fiat money gives birth to $900,000 in the second wave, and that gives birth to $810,000 in the third wave ($900,000 less 10% reserve). It takes about twenty-eight times through the revolving door of deposits becoming loans becoming deposits becoming more loans until the process plays itself out to the maximum effect, which is…

BANK FIAT MONEY = UP TO 9 TIMES NATIONAL DEBT

The amount of fiat money created by the banking cartel is approximately nine times the amount of the original government debt which made the entire process possible. When the original debt itself is added to that figure, we finally have:

TOTAL FIAT MONEY = UP TO 10 TIMES NATIONAL DEBT

The total amount of fiat money created by the Federal Reserve and the commercial banks together is approximately ten times the amount of the underlying government debt. To the degree that this newly created money floods into the economy in excess of goods and services, it causes the purchasing power of all money, both old and new, to decline. Prices go up because the relative value of the money has gone down. The result is the same as if that purchasing power had been taken from us in taxes. The reality of this process, therefore, is that it is a...

HIDDEN TAX = UP TO 10 TIMES THE NATIONAL DEBT

Without realizing it, Americans have paid over the years, in addition to their federal income taxes and excise taxes, a completely hidden tax equal to many times the national debt! And that still is not the end of the process. Since our money supply is purely an arbitrary entity with nothing behind it except debt, its quantity can go down as well as up. When people are going deeper into debt, the nation’s money supply expands and prices go up, but when they pay off their debts and refuse to renew, the money supply contracts and prices tumble. That is exactly what happens in times of economic or political uncertainty. This alternation between periods of expansion and contraction of the money supply is the underlying cause of…

BOOMS, BUSTS, AND DEPRESSIONS

Who benefits from all of this? Certainly not the average citizen. The only beneficiaries are the political scientists in Congress who enjoy the effect of unlimited revenue to perpetuate their power, and the monetary scientists within the banking cartel called the Federal Reserve System who have been able to harness the American people, without their knowing it, to the yoke of modem feudalism.