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Full Reserve Banking revisited

by on September 6, 2012
bankers

Recently the International Monetary Fund (IMF) published a report called ‘the Chicago Plan Revisited’. The report claims that Fractional Reserve Banking is problematic and discusses the perceived benefits of Full Reserve Banking.
However: the problem is not money creation and not even Fractional Reserve Banking. The problem is interest. It matters not whether we pay interest for fully or partly backed loans.

The report did make the rounds in the Alternative Media. Several people sent it to me and a number of sites commented on it.
Most people of course understand that when the IMF moves its lips it is probably in the process of committing genocide, but since full reserve banking has been almost universally promoted by monetary reformers in the US (but not Europe), it has raised many eyebrows. People feel vindicated.

But unfortunately the Money Power is again ahead of the field and has slyly sold this ‘reform’ to both the libertarians and the populists.

Fractional Reserve Banking
First, let’s recap. Under a fractional reserve banking system, banks do not lend out deposits, but create new credit, new dollars based on the deposit. Classically a bank can create 90 cents for every dollar that is deposited. This is not a constant. The last 20 years the banks were allowed to create up to 98 cents on every dollar deposited.

It is not true that the bank can lend out ten times the deposit as is often claimed. In the old days the goldsmiths did lend out ten times the deposit, but in the modern age the banks have managed to obscure the process.

The banking system as a whole does create 10 times as much  and up to 50 times as much when they are allowed to lend out 98 cents on the dollar.

Here’s how it works: when a dollar is deposited, the bank creates 90 cents and lends it out. Now there is $1,90 (the deposit, plus the new 90 cents). The new 90 cents are then deposited in another account, perhaps at another bank. This 90 cent deposit is used to create 81 cents. Now there is $2,71 in circulation. Next the 81 new cents are deposited at the next bank, who the proceeds to lend out 72 new cents, after which there is $3,43 in total. Etcetera. After the whole process is done there are 10 new dollars in circulation.

So this is the sleight of hand of fractional reserve banking: the bank requires a deposit to lend, but it does not lend the deposit. It creates the credit the minute it is lent out. Individual banks almost double the depost, but the banking system as whole in this way ultimately creates 10 new dollars on every dollar that is deposited.

To fully appreciate the extent of this fraud, it is crucial to understand that the banking system is one, as we previously discussed. All the banks own each other so basically there is one banker at the top that does indeed create all the money out there.

Full Reserve Banking
Full reserve banking pretends to solve the problem because it would require the banks not to create new money based on the deposit, but to actually lend out the deposit itself.

Full reserve banking is propagated by many monetary reformers, both proven frauds like Murray Rothbard and his Austrian Economics and classical populists.  The Kucinich HR2990 N.E.E.D act, which was penned by the American Monetary Institute’s Zarlenga and which calls for a debt free government unit, also wants to provide credit via full reserve banking.

However, the problem is not debt, it’s interest.

This is just one of the reasons why it is so essential to have a clear grasp of the issue, to understand that debt does not automatically mean interest. The point is: we are made to believe that we would feel better if we would pay interest over fully backed loans than over freshly printed cash.

For instance, Gary North made a career of denouncing ‘Greenbackers’ (an antiquated term in this day and age of Social and Mutual Credit) by writing:
“Counterfeiting (he is calling fractional reserve banking counterfeiting, AM) is theft for one reason, and only one reason. Paper bills are issued that look exactly like bills that are backed by 100% of their face value in money metals, but these bills do not have such a backing. In other words, if all the individuals went to claim their money metals at the same time, some people could not collect.

Pay attention here, because these are the ‘little details’ that make or break real reform. It is somewhat subtle lies like this that allow the Money Power to maintain its domination.

In a full reserve gold based banking system there would be no theft, according to Gary North. However: we would still pay $300k interest over a $200k mortgage. We would be paying them in gold coins or in paper fully backed by gold, but we would be paying.

We all know that gold is completely controlled by the Rothschilds and their ilk. Gold based loans is what brought them to power.
Are we really going to believe they care whether they get paid for a gold or paper based, full or fractional reserve banking based monopoly?

I don’t think so.

The truth is, that Fractional Reserve Banking actually proves for all with eyes to see that we can create all the money we will ever need at basically zero cost.

And if credit can be so cheaply created, it is insane that society should pay such incredible sums for it.

Let’s recall that interest is always a wealth transfer from poor to rich. The rich have money, the poor need to borrow. All in all the poorest 80% pay anywhere between 5 to 10 trillion dollars per year in interest to the richest 10% worldwide.

And yes, fractional reserve banking is unstable: banks go bust all the time. But really, even that would not happen if the system was not controlled by total maniacs who create the boom/bust cycle by letting their own banks go bust after each credit induced boom. In this way they create depressions, because their banks cannot lend when busted, meaning a deflation with associated economic collapse.

Normal people managing the system would allow a stable situation, even with fractional reserve banking.

It also is a convoluted and expensive way of creating credit. Mutual Credit is completely simple and requires zero reserves or savings and the credit facility cannot go bust because of bank runs.

But antiquated as it may be, fractional reserve banking is not the heart of the matter.

Compound Interest
The Chicago Plan encompasses more than full reserve banking. It is based on debt free Government money. This is obviously much better than a usurious monopoly in private hands. This matter is also (favorably) discussed in the IMF report.

However, debt free money combined with full reserve banking allows the Money Power to regain full control of all the money in circulation in a relatively short period of time through compound interest.

Here’s some relevant text from the linked article on compound interest with debt free units:

“Let’s say, for argument’s sake, they obtain 10% of it’s supply.

They start lending at say 5%. Of this 5% they use 2% for cost. The remaining 3% is profit, new capital, new deposits for their banks.
After 1 year of lending they control 13% of the money supply. After two years 16.09%. After three years 19.28.
After 10 years of lending they would control 34 percent and after 20 years 81% of the money supply.

Compound interest in operation.

Of course, the exact numbers are not important here, it’s the process that matters.”

Conclusion
Full Reserve Banking is still……well, banking. The wise know that banking is one and banking is the problem. Don’t try to control the banks, because they will always control you. They control the money supply and rape us with interest on a money supply they completely own, be it through paper or through gold, through fractional or full reserve banking.

To the Money Power it’s all the same.

The System was built to enslave, it cannot be really reformed. Banks should be closed and replaced with Mutual (interest free) Credit facilities.

But why would the IMF promote a debt free Government unit? That indeed is a good question. It’s not the first time that a blatant Money Power outfit like the IMF does so. Some time back the Financial Times’s Lex suggested the Government might consider printing some debt free cash. (Unfortunately I read about it in their paper edition and their Internet content is behind a pay per view wall.)

Why?

It seems the System is so insolvent the Money Power is actually fearing losing control over the bond market, which is the basis of its supremacy. The level of indebtedness is such that its banks and the taxpayer underwriting their operations might get overwhelmed. Printing some debt free cash to plug a few gaping holes might actually just be what the doctor ordered at this stage.

Related:
Mutual Credit, the Astonishingly Simple Truth about Money Creation
Gary North’s Bluff: the Lie he’s been sitting on for 50 years
Understand that the Banking System is One
The Few Banks that Own All
Debt free money alone does not solve compound interest
The Problem is not Debt, it’s Interest (with Video!)

 

85 Comments
  1. Jct: It’s an A+ explanation of the banking systems engineering. Rare and pleasing to read. Only one quibble on another angle, if the banksters can corrupt it:
    “However, debt free money combined with full reserve banking allows the Money Power to regain full control of all the money in circulation in a relatively short period of time through compound interest.
    Jct: As long as the Government spends enough “debt-free” “Interest-free” money into circulation for labor and goods, who’s going to need to go to the loansharks at interest. And won’t the government be able to fund all sorts of new commercial subsidies with interest-free funds? Who’s going to need the banksters any more. Stick with the happy Good News, you can drop such thoughts of Bad News.

    • Thanks John!

  2. forgot to check the Notify me of follow-up comments via email.

  3. REN permalink

    Here is link describing the difference between 100 percent reserve and Sovereign Money (AMI proposal). Essentially, 100% reserve will only be on hand to back up demand deposits (checking) type money. 100% reserved money supply is still banker created credit.

    http://sovereignmoney.eu/100-per-cent-banking-and-plain-sovereign-money

    I can add to the above article, and mention that double entry ledger functionality behavior transforms in a sovereign money world. Creditor is now the saver, who is loaning out his stored savings. Savings are already in the money supply, so any debtor defaults do not change money supply volume. Assets are no longer hypothecated, but instead are held as collateral. The double entry function machine has apples being inserted into its input, instead of banker created money as oranges. So, the machine behaves differently, and has a different output.

    • 82413 At the risk of starting another unappreciated dialogue – Under the current system all the money in a savings account is there because a borrower has signed a promissory note to capture that money and return it to a banker. Are you saying that under your plan money in savings accounts would be there because someone has signed a promissory note to a saver? And in turn another promissory note could be signed for the money that’s already promised to someone?

  4. It was the year 1666 when Charles the 2nd created “The “Private Coinage Act”, and the bankers used it to their advantage.

    And the enslavement than ensued… enslaved to the financial system – you either live as the system tells you or you can go hack a living out of the wilderness… nope, that option ended about 100 years ago too. We are left with few choices and they all end up in debt for the average person [the proof is in the pudding - allmost everyone is carrying debts].

    Household debt is about 150% of GDP and Government debt is, as % of GDP, 35% in the USA and 85% in Canada and 200% in Japan… The banksters and Global Elite and the Elite Wealthy set out to own the world and now they do, or about 80% of it anyhow.

    Banks are skimming off too big a slice of the national economic pies. WE are the 99% and WE can write the rules, WE just have to stand up for ourselves and DO IT.

    We could put it to a “majority wins” vote the proposal to wipe out all debt owed to banks, and the people said yes, and it is perfectly legal under the “proceeds of crime” – all banks are all participating in illegal activities [mortgage fraud, illegal drug money laundering, illegally high interest rates on credit cards, etc] – and started again under new rules [perhaps regional currencies would be part of it], THEN maybe we would be on a path to prosperity.

    It might even be possible to do it in such a way that we would continue to go to work and get paid, but our savings would likely be gone, people would still vote yes because they owe more than they have in savings. Possessions are kept, including houses and the houses have no mortgage – the bank that held it is gone.

    HA! So the 1%, the top 20% really, would lose a lot, but 80% would be further ahead.

    Things like the idea presented in the report by the IMF mavericks do grow into the consciousness of the public very slowly, but it wouldn’t take long for people to catch on if such a vote were proposed [in the form of a "referandum"]

    Maybe this sort of thing is the “new world” the Mayans were predicting… as the Dark Rift aligns with our planet’s north pole we could skoosh the bankers off in that direction… and the world begins anew, with hope in people’s hearts…

    • I don’t know.

      I have a few problems with the IMF suggestions. But I guess I could have lived with them.

      But the fact is the IMF is proposing and that means it’s fireproof sure bet that the Money Power has purpose for it. I’d like to know what it is and my guess for now is, that they have overdone it and need a stopgap to fill the worst holes to save the bondmarket.

      Another take could be that they could still keep money scarce through full reserve banking, and printing insufficient money.

      • Conrad Jones (Cheam) permalink

        Full Reserve Banking means that the Currency is Controlled by the Government and the Decisions for creating money or destroying money are made by an independent transparent body – like the MPC in the Bank of England. The amount of money created is not decided by the Government but the policy by which the decision is made is decided by the Government, and is therefore controlled by the public.

        At present, many people believe that the Government causes inflation by creating too much money when the figures show that only 2.6% of the money supply is Government Created. In 1968 it was 20%.

        Banks decide when to create money and where to invest it – only 8% of lending goes into Productive Investment. Some of it goes into destructive investment – like Cluster Bomb Manufacture and Tar Sands.

        Even someone who is suspicious of Full Reserve Banking must concede that the level of Reserve Ratios for Banks is far to low. It has dropped from 20.5% (1968) to 3.1% (1998). Today, there is NO Reserve Ratio enforced. This is why we have had the Credit Bubble and why House Prices are double what they were a generation ago.

        The common ground for Monetary Reformers and Anti Userers is that the Reserves of Banks must increase, but if they increase without Government created money to fill the Gap, the Economy will collapse into a deflationary downward spiral.

        I hope we can agree that the Reserve Ratio is too low ?

  5. How a 100% gold/silver-backed Treasury-note currency could operate; and why Henry Clay hates it:–

    The last paragraph in the section provides that, for the purpose of payments on the public account, it shall be lawful for the Secretary to draw upon any of the said depositaries, as he may think most conducive to the public interest, or to the convenience of the public creditors, or both. It will be seen that no limit whatever is imposed upon the amount or form of the draft, or as to the depositary upon which it is drawn. He is made the exclusive judge of what is “most conducive to the public interests.”

    Now, let us pause a moment, and trace the operation of the powers thus vested. The Government has a revenue of from 20 to 30 millions. The Secretary may draw it to any one or more points, as he pleases. More than a moiety of the revenue arising from customs is receivable at the port of New York, to which point the Secretary may draw all portions of it, if he think it conducive to the public interest. A man has to receive, under an appropriation law, $10,000, and applies to Mr. Secretary for payment. Where will you receive it ? he is asked. On New York. How ? In drafts from $5 to $500. Mr. Secretary will give him these drafts accordingly, upon bank-note paper, impressed like and simulating bank notes, having all suitable emblazonry, signed by my friend the Treasurer, countersigned by the Comptroller, and filled up in the usual way of bank notes.

    Here is one of them. [He here held up to the gaze of the Senate a Treasury note, having all the appearance of a bank note, colored, engraved, and executed like any other bank note, for $50.]

    This is a Government post note, put into circulation, paid out as money, and prepared and sent forth, gradually to accustom people of this country to Government paper.

    I have supposed $10,000 to be received in the mode stated by a person entitled to receive it under an appropriation law. Now let us suppose what he will do with it. Any where to the South or West it will command a premium of from 2 to 5 per cent. Nowhere in the United States will it be under par. Do you suppose that the holder of these drafts would be fool enough to convert them into specie, to be carried and transported at his risk ? Do you think that he would not prefer that this money should be in the responsible custody of the Government, rather than his own insecure keeping ? Do you think he will deny to himself the opportunity of realizing the premium of which he may be perfectly sure ? The greatest want of the country is a medium of general circulation, and of uniform value every where. That, especially, is our want in the Western and interior States. Now, here is exactly such a medium; and, supposing the Government bank to be honestly and faithfully administered, it will, during such an administration, be the best convertible paper money in the world, for two reasons: The first is, that every dollar of paper out will be the representative of a dollar of specie in the hands of the receivers general, or other depositaries; and, secondly, if the receivers general should embezzle the public money, the responsibility of the Government to pay the drafts issued upon the basis of that money would remain unimpaired. The paper, therefore, would be as far superior to the paper of any private corporation as the ability and resources of the Government of the United States are superior to those of such corporations.

    The banking capacity may be divided into three faculties: deposites, discount of bills of exchange, and promissory notes, or either, and circulation. This Government bank would combine them all, except that it will not discount private notes, nor receive private deposites. In payments for the public lands, indeed, individuals are allowed to make deposites, and to receive certificates of their amount. To guard against their negotiability, a clause has been introduced to render them unassignable. But how will it be possible to maintain such an inconvenient restriction, in a country where every description of paper imposing an obligation to pay money or deliver property is assignable, at law or in equity, from the commercial nature and trading character of our people ?

    Of all the faculties which I have stated of a bank, that which creates a circulation is the most important to the community at large. It is that in which thousands may be interested, who never obtained a discount, or made a deposite with a bank. Whatever a Government agrees to receive in payment of the public dues, is a medium of circulation, is money, current money, no matter what its form may be, Treasury notes, drafts drawn at Washington, by the Treasurer, on the receiver general at New York, or, to use the language employed in various parts of this bill, “such notes, bills, or paper, issued under the authority of the United States.” These various provisions were probably inserted not only to cover the case of Treasury notes, but that of these drafts in due season. But if there were no express provision of law, that these drafts should be receivable in payment of public dues, they would, necessarily, be so employed, from their own intrinsic value.

    The want of the community of a general circulation of uniform value everywhere in the United States would occasion vast amounts of the species of drafts which I have described to remain in circulation. The appropriations this year will probably fall not much short of 30 millions. Thirty millions of Treasury drafts on receivers general, of every denomination, and to any amount, may be issued by the Secretary of the Treasury. What amount would remain in circulation cannot be determined a priori, I suppose not less that 10 or 15 millions; at the end of another year, some 10 or 15 millions more; they would fill all the channels of circulation. The war between the Government and State banks continuing, and this mammoth Government bank being in the market, constantly demanding specie for its varied and ramified operations, confidence would be lost in the notes of the local banks, their paper would gradually cease to circulate, and the banks themselves would be crippled and broken. The paper of the Government bank would ultimately fill the vacuum, as it would instantly occupy the place of the notes of the late Bank of the United States.

  6. wittytongue permalink

    Thanks, Anthony, for your response. The same friend has more to say (after reading the article in full):

    I agree with much of the above. However, it does contain several errant assumptions. First, the study of the “Chicago Plan” is not an IMF policy paper. It is just a study undertaken by an individual. Second, it is a mistake to broad brush everyone in the IMF with such prejudicial language as used. There are people in the IMF, Federal Reserve, and U. S. Treasury that know we need reform. Third, it is a mistake to indulge such an “I am right and everyone else is wrong” attitude.

    On compounding interest, I was referring to the compounding of debt that results from the creation of loans and not creating the interest to pay the loan. I have had some heated discussions about this with economists and others, but no one has shown me, including Steve Keen’s model attempt, that exponential growth of debt is avoidable with the present system.

    Interest is a legitimate problem, but the scenario of the banks regaining control as outlined is only an imaginary scenario. It is worthy of consideration and could be controlled by progressive taxation. I, personally, prefer the Muslim ideal of no interest where loans for business, etc., are a shared risk. Muslims are not doing that; it is just their ideal. It may end and certainly would curtail our credit mania for consumerism.

    There are many “ideals” around that cannot be attained due to the U. S. Constitution, established culture, etc. HR 2990 is not a fix all by any means, but it is achievable with mere statute law. It would not disrupt the economy in an of itself, but the banks my try to even without the power to create credit. It is a good place to start, but it would require, in my opinion, a lot more.

    What Steve Z. and I have both observed from history is that the quest for power over money will always be there and we have to establish a counter force, or they will get it back.

    Mutual banking is a good idea, and I am not sure that it is not possible under existing law.

  7. wittytongue permalink

    I asked a friend who is associated with American Monetary Institute to comment your your post. His response:

    I did not read the full article, but it would appear that the author has not read or does not understand HR 2990. He does not appear to understand that all legal tender money is fiat money regardless of its symbol such as gold, paper, or computer bytes. He does not distinguish between interest on money creation by bank credit. and interest on borrowed already existing money that does not disappear when loans are repaid on which no compounding would happen.

    I presently doubt that fractional reserve banking was ever used as a limitation on money creation because when banks ran out of reserves on that basis there were alternatives such as borrowing from the Fed or other banks.

    • “He does not appear to understand that all legal tender money is fiat money regardless of its symbol such as gold, paper, or computer bytes”
      where does your friend get that idea?

      It’s true I don’t distinguish between interest on money creation or already existing money.
      The simple fact is that the rich lend and the poor borrow and that’s why interest is always a wealth transfer from poor to rich and that’s why it’s got to go.
      Why ‘no compounding’?
      That’s the whole problem with full reserve banking: it does not preclude compounding interest. In fact, through compound interest the Money Power would regain full control of the entire money supply within max two decades:

      http://realcurrencies.wordpress.com/2012/01/05/debt-free-money-alone-does-not-solve-compound-interest/

      To say fractional reserve banking was used as a means to limit money creation is to say that the war on drugs diminished the crack epidemic.

      Thanks for forwarding this story to the AMI people. I appreciate them and I personally spread Kucinich’s YouTube video on HR2990 in the Alternative Media after seeing it was languishing at just a few thousand views.

      But I can assure you I’m not the only advanced thinker on monetary reform that is worried about the Full Reserve Banking aspect of this initiative. It’s a mistake. No problem with that, its debt free money creation is a great boon compared to our current situation, but it’s not perfect.

  8. madtom permalink

    ok, I have some questions. please excuse my ignorance as I am new to all this, am by no means an economics expert, and am just waking up to the real problems we face. For the past couple of years that I’ve been researching this stuff, I came to realize the problems behind the Federal Reserve and fractional reserve banking. I also understood why people were calling for a return to the gold standard, but never really liked the idea. I mean, who says gold is worth anything? and why limit our money supply to some finite, scarce resource? now, I’ve recently stumbled upon your site and have been researching the ideas espoused by “greenbackers” (sorry if you don’t like that label – no offense!) and I’m intrigued. however, the idea of money created out of thin air isn’t appealing to me either. so why not a system that is essentially the best of both worlds? paper money, backed by gold and silver (which is more abundant), issued by the government (not private bankers) and get rid of fractional reserve banking? I know this leaves out the issue of interest, but how can you advocate NO interest? if I need a loan, who is going to give me a loan without charging some interest? I should have to pay SOMETHING for the risk involved, shouldn’t I? perhaps set some reasonable level of interest? I guess I don’t see why it has to be your way or their way when in reality, both sides have valid points. why not meet in the middle? what am I missing?

    • Hi madtom,

      There are a couple of issues:
      If we have fully backed gold and silver certificates, chances are money would be real scarce: metal mining is slower than economic growth, which leaves eternal deflationary pressures, unless new gold or silver mines are found, when we would risk inflationary shocks. Also, it’s not clear what the Government would be doing in teh banking business.

      But the most vital issue is: the key reason to print money is because is it’s so cheap.
      If we can just create money by bookkeeping, which we do with both fractional reserve banking and mutual credit, than we don’t need savers for a loan: we just print it the minute we need it. So no interest is needed.

      The problem with a ‘reasonable’ level is obvious: what is reasonable and who decides on that? Also: if you have a 3% mortage, over 30 years you would still pay almost 100k interest over a 200k mortgage. While we could have interest free mortgages when we create the money with a computer program.
      So it just makes no sense.

      So the question remains: what is your problem really with money creation?

      • what is your problem really with money creation?
        Jct: It’s the same problem all the “money out of thin air” people experience, the “more money causes inflation” fear. There are hundreds, nay thousands, of money reformers decrying the banks “creating money out of thin air,” who don’t appreciate how stupid they sound the moment they try to decry casino banks creating chips out of thin air. As long as you fail to use the ideal model everyone is familiar with, poker chips, you can never beat this Mammon’s Meme in their minds. “Creating money out thin air” sounds so inflationish, they think that’s the problem. And only when you point out they don’t object to the casino bank creating chips out of thin air, because someone has to do it, anyone as long as it’s done right with everyone watching the money go in the box and chips come out and then the chips going in and money coming out. But if you don’t use the ideal model, you’ll never get them to understand that “printing money out of thin air,” isn’t the problem, it’s not printing the interest out of thin air with it that’s the problem.

    • >>>>>>so why not a system that is essentially the best of both worlds? paper money, backed by gold and silver (which is more abundant), issued by the government (not private bankers) and get rid of fractional reserve banking?
      You hit upon the centuries old, true, solution which has been from time to time advanced during the past 200 years. Being a real solution, it is not popular with “monetary reformists” nor fractional reserve bankerites.

      a loan and interest–
      If you borrow money (actual coin, not a bank-book entry) to buy an automobile (because you do not have the discipline and patience to save up first), you pay 4% extra –pay $1,000 today or pay $1,400 a little later; you are simply paying a fee, as you would if you rented a car. The money you borrow is not created, but pre-existing, and the money you pay back is not created. (the money supply did not increase, and did not need to increase.

      When interest-bearing bank-loans are issued, new money is created and the money supply is increased; and the money to pay the interest also has to be created (generally by borrowing more created money from the money creator banks) before it can be paid; until the balloon is burst and a new game has to be started

      • When interest-bearing bank-loans are issued, new money is created and the money supply is increased; and the money to pay the interest also has to be created (generally by borrowing more created money from the money creator banks) before it can be paid
        Jct: If you used the the principal from a new loan to pay the interest that was never printed on the old loan, how are you going to pay the principal on the new loan and its interest? Try all you might, you can’t borrow your way out of debt.

      • REN permalink

        History shows that people are confused when two different metals are used. The East West mechanism was used for centuries to steal from the producers. Silver would be mined in Roman lands, transported East toward India, and take the difference in exchange rates. This mechanism enriched the ancient money powers. This east west mechanism is really the beginning of Illuminism. Control of the trade routes by Caravan (Jewish, then Roman), then by ship (Portuguese around horn of Africa) and then finally rail, is a dominant theme that drives money history. Sephardic Jews followed the Portuguese when the mechanism fell to (Portuguese). This Jewish migration to Holland set up the genesis of today’s banking system. Mix in Templers returning from fourth crusade, now conversant in banking trickery. The subsequent busting out of England with Orange Kings was a function of this money power now in Holland. Bank of England in 1694 has its lineage all the way back to Holland, and even further to East/West mechanism.

        In interwar period, when Germany went off of Silver and to only Gold, it enriched the oligarchs . Gessel discusses this in his book, “the natural economic order.”

        Let’s not forget about all the Indians in America that were wiped out in the hunt for metals, or British warships designed to raid Spanish Galleons.

        Money is not metal.

  9. Here’s how it works: when a dollar is deposited, the bank creates 90 cents and lends it out. Now there is $1,90 (the deposit, plus the new 90 cents). The new 90 cents are then deposited in another account, perhaps at another bank. This 90 cent deposit is used to create 81 cents. Now there is $2,71 in circulation. Next the 81 new cents are deposited at the next bank, who the proceeds to lend out 72 new cents, after which there is $3,43 in total. Etcetera. After the whole process is done there are 10 new dollars in circulation.
    Jct: Actually, there are 9 new dollars in circulation, the total being multiplied up to 10.

    So this is the sleight of hand of fractional reserve banking: the bank requires a deposit to lend, but it does not lend the deposit. It creates the credit the minute it is lent out. Individual banks almost double the depost, but the banking system as whole in this way ultimately creates 10 new dollars on every dollar that is deposited.
    Jct: Notice that this complies with the http://johnturmel.com/bank.jpg blueprint of the real system. It’s always nice to see someone get fractional reserve money creation right.

    • Thanks John, you’re right about the calculation. There are nine new dollars.

      • REN permalink

        Banks are no longer reserve constrained. Go to pragcap.com and read up. There is a three week window between when loans are made, and when reserves need to be on hand. So, banks loan first and look for reserves later.

        If private banks don’t have reserves on hand, they borrow them from another bank on the overnight (interbank) market. If bank still cannot acquire reserves, they borrow from the FED discount window. FED never turns down a bank request, as that would mean recalling loans…FED always obliges with new reserves. The FED and U.S. Government is a rump for private bankers. Please, I know that the FED is owned by their private banks, but it also serves a Government mandate. Private bankers essentially call the shots, and FED as well as U.S government follow along.. The FED is typically at .25 percent discount window, so the bank earns the spread even if they have to borrow new “base” money, to acquire reserves.

        In other words, the fractional reserve model is no longer operative. Banks make loans first, getting reserves later. If no reserves come in, there is option to borrow overnight or through FED discount window.

        For all practical purposes, the amount of money (bank money isn’t really money) created by private banks is limited only by the willingness of a borrower to by hypothecated and put into debt. Yes, the debt contracts are a problem, as well as the usury. The amount of Bank Money that can be created is unlimited. But, it comes with debt contracts attached, and said contract has mathematics (usury) at its base, making an impossible contract. These contracts make demands on the real economy, and are at odds with nature.

  10. The System was built to enslave, it cannot be really reformed. Banks should be closed and replaced with Mutual (interest free) Credit facilities.
    Jct: Yes, the 1/(s-i) positive feedback on debt usury banking system was built to enslave. And yes, it can be replaced with interest-free mutual-credit 1/s LETS facilities. But since we’re only upgrading the banking system software, it can be reformed. Upgrading to 1/s LETS is the reform.

  11. Larry permalink

    Dark Dirk “Fed does not have any debt because it is a central bank. Ot creates money in exchange of debt.”

    The bizare part of the Fed is that may also create money without incurring any bebt – and no other debt is crrated.

    They do it by creaiting “reserves” along with the mew money. Reserves are a quasi asset/liability as they are assets to member banks instead of lianility (debt).

    They can only do this with the blessings of the state. Of course, the state may alsp create debt free money pn it’s own.

    It is rather crazy that a sovereign state would ever bortow; eith s pledge of collateral that which ot may cteate for free.

  12. Dark Dirk permalink

    I think that money power do not like fractional reserve banking, because causes constant price inflation in the system witch erodes their money. But back in 1971 they had no choice. They had to remove gold standard, because as US peak oil happened, US should ran out of gold. It’s easier to purchase oil from Arabs with paper money instead of gold. But what happened now ? We had reached the global peak oil in year 2006. Live will get more expensive in the next 10 years. But now, in 2012, US treasury notes bears only 2% interest, witch is insufficient for money power to sustain their luxury live styles. It is time for money contraction and wealth collection. In fractional reserve system the way is to rise reserve requirement, witch forces banks to offer higher interest rates on deposits and collect back money supply causing depression. But politicians what to support the economy and the only why to do this is quantitative easing (print more money), witch further erodes money value. So money power send their agents to explain to masses that fractional reserve banking is bad and we should return to gold standard and full reserve metal banking.

    But what will happen to US if US had to buy oil with gold ?

    • I wouldn’t worry about peak oil. It’s a hoax: artificial scarcity has been the name of the oil game ever since the days of Rockefeller.

      The US has immense oil reserves. Coal even much more. But they are being suppressed with the ‘anthropogenic global warming’ hoax. Another silly invention that tries to obscure that all planets have been heating up (until 1998, there seems to be no more heating since then) on all planets. The result of growing solar activity. the agenda behind AGW is simple: install a global agency (world government) to ‘prevent catastrophe’. Oil is not a ‘fossil fuel’ but a ‘abiotic': methane being pressed together in the Earth’s mantle. Nobody knows exactly what function oil has in the lower regions of the earth’s mantle and crust but there is little doubt that there is a total abundance of it.

      But even this is completely irrelevant: suppressed energy technology would provide free energy to the masses today, should they become available.

      • Dark Dirk permalink

        Yes, i think that global warming is hoax. But peak oil is fact. Fact that is kept out of main stream media and I think that it is connected with removal of gold standard.

    • REN permalink

      Kissinger’s agreement with Saudi’s insures oil is priced in dollars. This was 1973, shortly going off of the gold standard. Note, Saudi’s get front line military gear as well as protection from the sixth fleet. Who else is flying AWACs?

      The deal: Saudi’s get to have a Cartel (OPEC), their leaders are sanctioned …this is critical since Saudi King came in with an illegal coup. Saudi’s get military protection, where the sea lanes stay open using the U.S. Navy.

      The U.S. gets what? Oil priced in dollars, and said dollars get put in PRIVATE BANKS. The most important part, petrodollars are stored in Western, mostly U.S. private banks.

      The Saudi/U.S dynamic means that oil will remain priced in dollars for the foreseeable future. It also means that domestic U.S. production will remain stifled. Demand for dollars to buy commodities such as oil is a key underpinning for Money Powers.

  13. Abu Aardvark permalink

    “One of the characteristic features of this age of wars and destruction is the general attack launched by all governments and pressure groups against the rights of creditors. The first act of the Bolshevik Government was to abolish loans and payment of interest altogether. The most popular of the slogans that swept the Nazis into power was Brechung der Zinsknechtschaft, abolition of interest-slavery.”

    Ludwig von Mises, April 24, 1946

    http://mises.org/daily/6081/The-Economic-Consequences-of-Cheap-Money

    Gee, Anthony, you chose some interesting company indeed! Would you like to comment on the striking parallels?

    • Dark Dirk permalink

      Yes, but only Silvio Gessell got it right.

      Communist tried to remove interest with planned economy. That did not work.
      And Nazis hated Jew and declared them as lower race and tried to wipe them out. Nazis actually postponed interest payments to the future where they control the whole Earth. http://www.arpejournal.com/ARPEvolume1number1/Preparata.pdf

      • of course Communism had it all already monopolized in the State, so interest as the ultimate centralizer of wealth and power had become antiquated. Communism is the endgame of capitalism, which is the economic system where capital dominates labor through usury and scarce money.

    • oh, but abu, I think I have made very clear on many occasions that Nazism was closely associated to anti usury activism and that the demise of Hitler was killing to the cause after the war and most likely this was a very important part of making him important: by destroying him and his credibility anti usury activism was made susupicious by association.

      The situation with Marx is far, far more complex. Just read the Red Symphony: http://www.yamaguchy.com/library/symphony/red3.html

      Keep in mind that Mises was interested in playing the guilt by association game. Also the ‘rights of creditors’ line is interesting: that’s what it’s all about right? Austrianism? The right of the creditor! To be paid in full! With interest!

      Yes, you are a solid defender of the right of the creditor, of which there are few, and surely he is very grateful for it Abu!

      Now begone little one! We defend the rights of debtors here, of which there are many.

      • Abu Aardvark permalink

        Anthony Migchels says: “oh, but abu, I think I have made very clear on many occasions that Nazism was closely associated to anti usury activism and that the demise of Hitler was killing to the cause after the war and most likely this was a very important part of making him important: by destroying him and his credibility anti usury activism was made susupicious by association.

        The situation with Marx is far, far more complex. Just read the Red Symphony: http://www.yamaguchy.com/library/symphony/red3.html

        Keep in mind that Mises was interested in playing the guilt by association game. Also the ‘rights of creditors’ line is interesting: that’s what it’s all about right? Austrianism? The right of the creditor! To be paid in full! With interest!

        Yes, you are a solid defender of the right of the creditor, of which there are few, and surely he is very grateful for it Abu!

        Now begone little one! We defend the rights of debtors here, of which there are many.”

        —————————————————————-

        Hey, it’s your website. Of course you can blow smoke instead of commenting on the striking parallels between ‘solutions’ for the marketplace enforced by Nazi/Communist governments – both courtesy of Money Power – and ‘solutions’ being promoted on this very website.

    • Just for the information of ya’ll: during the leninist years, a person may have walked into a branch of the national savings office and deposit money, and if he kept it there for a whole year, received interest; similarly, a person may have borrowed (and many did) from this institution and paid interest on it.
      What the leninist countries did was repudiating government bonds

      • Great comment.
        This is really a pretty damning piece of historical evidence against usurious public banking.

  14. Reblogged this on Recovering Austrians.

  15. Good points Anthony. The problem is they already own all the property. It is clear the system is insolvent.

    The difference between full reserve banking with gold and what we have now is the game collapses much sooner. I have said for years that dollars don’t have babies, so how can they increase as if they do. In a gold system, one gives property for a collateral loan against property. If this is done too quickly or too much, the loan collapses, the money is lost and the property as collateral changes hands. In a paper system, especially one we have now, the property is acquired with the purchasers credit and a loan of nothing but evidence of this credit. Someone else usually gets the bill other than the person who ends up with the property.

    There are 2 primary ways to acquire property. One is through slight of hand and the other is with earned money. All paper is slight of hand. No paper has value unless it is needed to convey property or pay debt. This is a cruel joke played by an idiot that pure paper would have any international value. Its value could only come from enforcement at the point of a gun by a group known as the state. Who are they? In every case, they are the same referenced Rothschild groups in various nations. But, it isn’t quite so possible to point the gun at a foreign nation and force them to take the paper. The current world system was based on gold and only when it became necessary to remove the gold or lose it did the system change. By that time, the system had changed to credit, a pure paper system based on debt and the need to acquire the paper, which was always insufficient to pay the debt. Free money is worthless, unless you happen to be the state and its cronies.

    • REN permalink

      Money is a division of the commonwealth. More specifically, it is a division of the total output of goods and services. The dominant characteristic of money is that it is drained by taxation. Credit, on the other hand, drains into the double entry ledger and disappears. Money and Credit are two very different things.

      Another key defining feature of money is that it is divisible, so it can divide itelf during a transaction. During a transaction, money stands in as a good temporarily, and then said money is thrown back into money supply to mediate another transaction. A third defining feature is confusion between money’s accounting function, and its asset function.

      A state can issue paper money to good effect. The important point is that it is lawfully done and controlled. In fact, State issuance of money has a history that is far better than private issuance. See this link, and then read the IMF paper

      http://www.positivemoney.org.uk/2012/08/imf-working-paper-offers-supports-full-reserve-banking/

      Who controls the money supply is a big question. If money supply is Gold, then money is a divison of Gold, and hence is not related to an economy of producers. Holders of gold then have money power to lever the economy of producers. If money supply is credit with debt instruments/private banks, it supports oligarchy. Oligarchs then have money power to lever economy of producers.

      Gold masters evolved to become private credit masters. Credit masters issue paper notes on top of hypothecated assets. Paper money as most people know it is primarily privately issued bank money, and hence serves oligarchs. It is entirely feasable and desireable to have paper money serve producers. It is the money system that matters.

  16. Larry permalink

    The term “fractional reserve lending” does not apply to modern banking. It is a term that confuses much more than clarifies. It is not really relevant to banking.

    First of all, 100% of the money lent by banks is created on the spot; there is nothing fractional about it. This is a good thing as the alternative is to make people find others willing to lend them their money which would increase the cost and reduce the amount available for lending.

    Second, the fractional reserve lending myth leads one to believe that banks must have deposits in order to lend. In actuality, banks are not constrained by deposits but are required to maintain certain capital and leverage ratios. Deposits are not required other than transaction accounts.

    Investment banks have very few deposits and they create far more money than commercial banks that may have lots of deposits.

    The important part of Kucinich’s HR2990 N.E.E.D act is that it would enable the government to create debt free money and to spend it into the economy. This is direly needed and fully possible. Any sovereign government may issue it’s own money without incurring any debt.

    Sound too good to be true?

    Well the Federal Reserve does just that – if you check you will find that the Federal Reserve has no debt – 0 – none – and never has. Any nation may do the same thing. The debt crisis is by choice not necessity – government should immediately begin issuing debt free money.

    As far as the fractional reserve bug-a-boo, banks should be allowed to issue new money through loans but they should not charge interest. Transaction fees and services can help cover costs and enable them to make a profit.

    • I too thought that HR 2990 proposed interest free fiat and hence fractionally lending would not be possible by definition. Inflation and deflation with respect to volume, however, become issues which ideally be controlled by congressional committee.

      • Larry permalink

        Contrarian Rex wrote: Inflation and deflation with respect to volume, however, become issues which ideally be controlled by congressional committee.

        I don’t think a special committee is required as there are many ways to spend debt free money and most of them are neither inflationary nor deflationary. In fact, debt free money would be an elixir to help mitigate the fact that more debt than money exists (P < P+I).

        For example, in the U.S., $15 trillion of debt free money could be used to eliminate the national debt as the securities mature. An instant $2.5 trillion could be used to cancel out intragovernmental debt (we owe the money to ourselves via Social Security and Medicaid).

        In addition, if debt free money is spent on tangible assets, like rebuilding infrastructure, it would not be inflationary as with each new dollar issued debt free, we would be adding to our national wealth.

    • Dark Dirk permalink

      Fed does not have any debt, because it is central bank. It creates money in exchange of debt. The interesting part is that the fed is the biggest creditor of US and interest covers it’s running costs, 6% of profit is payed to money power and another 94% is payed back to Us treasury. So the biggest magic happens in banks, not in Fed.

    • REN permalink

      HR2990 has a large credit window, 15% of the GDP. Bankers simply borrow from the Credit Window to loan to industry. The banker is simply a facilitator for credit loan, but does not make “money.” In this way, industry has credit to expand or cover gaps in income. It would explode productivity in the economy. Real entrepeneurship and productivity would flower.

      A social credit window needs to be added, particularly for housing.

      Money is separated from Credit in HR2990, this is right and proper since they are two different things.

      To prevent excessive usury, a money loan cannot exceed the principle. This keeps usury from climbing up the exponential.. This point cannot be overemphasized. Read it again please as it is important. HR2990 deals with usury. A loan is truncated to a doubling, and hence doesn’t become exponential.

      Since the Credit window is backed up by State type assets, in can be jubileed easily, thus thwarting the legal tangle endemic to private debts. Some default rate is to be expected in the credit window, and that is covered by the usury. Industry credit window may behave different than money loans with regards to usury rates. Loans of money, too bad …the saver/creditor may get hosed down if not paid back. But, there is no dominoe of counterparties as in today’s system.

      HR2990 is not just 100% reserves. It has a lot of moving parts and is a sophisticated construct.

      To prevent oligarchial accumulations, where the now limited usury may endow certain private parties, that should be addressed with fiscal policy. How we tax is as important as the money system. In any system, monopoly interests, and especially those who get free gifts from the earth (mining, and oil) wil attempt to become dominant private lenders. They have to be taxed.

  17. Carl Jones permalink

    Well, they are (almost) creating debt free money. ECB loans over 500 billion Euros to around 500 banks and 3% interest over 3 years. All this money was taken by the banks and most put it back on deposit getting more than 3% over 3 years. Of course, the objective of these loans, was to save various bust banks that were about to go under. Earlier this year, 5 big US banks should have been declared bankrupt, but they weren`t. As the article points out, once money enters the banking system, it goes everywhere.

    The ECB has just agreed to pump more or less unlimited money into the bust baniking system and that means in the UK and US!!

    The European Stability Mechanism (ESM) is a treaty that forces EU states to pay whatever is demanded of the respective governments. No demand can be turned down and the ESM cannot be investigated, so its staff are outside the law with respect to their work.

    What the article fails to put over is that the Western economy was runon a system were growth was created by debt….so you go and borrow $10k, the economy just grew by $10k plus interest. I don`t think the 10 to 1 or 99 to one really matters anymore. Before the designed crash, I don`t think banks cared about their deposits in relation to the loans they made.

    You see, this is how the collapse was designed. Since Dotcom popped, the money supply was wound up and this was a NWO conspiracy where the digital presses were flogged to death. Raes were kept low by the likes of Greenspan and the lending criteria was nonexistant, including to corporates. The Central Bankers knew exactly what they were doing…they knew that banks would be falling over each other to lend this money.

    If you were a prudent banker, you`d have been fired, or your bank would have been classes as under performing, gone bust or brought out by a reckless bank. So this really was a sheep mentality. Of course, every bank has risk managers, so do Central Banks, treasuries and regulators. When UK bankers appeared before the UK gov finance committee, it was established that none of these big UK bank heads had a single finance qualification between them, but they all ignored the best risk advice they could afford…one risk manager left, because of what was going on and another was sacked for doing his job. So what did the big bank chiefs know??? These wre guys who got to their positions using the “old boy network”!! Clearly, they were in on the plan to crash the global finance system and then socialise the banks debts.

    When David Comeron was illegally installed in No10, he appeared on the BBC Andrew Marr Show where he said “the banks, BoE, the regulators and the previous government had all made some mistakes”….right!! The fact is, Cameron is in the criminal conspiracy…they are all in it!!

    This designed financal collapse was designed to be fixed…THERE WON`T BE A FIX!! We are never going back to 2006!! Roll on WW3 and the human cull.

    • Yeah Carl, pretty insightful stuff.

      I absolutely agree on the banks not caring anymore whatever backs their loans. I just wanted to get Fractional Reserve process on the Real Currencies record, but it’s true what you are saying: it’s just uncontrolled printing these days.

  18. huibvde permalink

    Hallo Anthony,

    Ik hoop dat je het niet erg vindt dat ik hier in Nederlands schrijft. Het duurt erg lang in het engels.
    Toevallig had ik het idee van full reserve banking vandaag ook in in mijn hoofd.

    Ik weet dat de rente het probleem is, maar het is op deze manier het wel mogelijk om een bankvergunning te krijgen en een bank te beginnen denk ik. De spaarrente is voor de meeste mensen reden 1 om geld te verschuiven naar een bank.

    Ik weet dat full reserve met rente niet perfect is, maar zou het niet goed kunnen dienen als overgang
    om zo langzaam de rente tot nul te verlagen?

    Graag zie ik je mening over mijn stelling toegemoet,

    Met vriendelijk groet,

    Huib

    • Hoi Huib,

      Persoonlijk geloof ik niet dat het systeem binnen z’n eigen paradigma’s kan worden gerepareerd. Denk aan Einstein: een probleem kan niet op het zelfde niveau worden opgelost als het is gecreeerd. (of zoiets).

      de minste van twee kwaden is nog steeds een kwaad.

  19. Abu Aardvark permalink

    Anthony Migchels says: “The rich have money, the poor need to borrow.”

    ——————————–

    So you’re claiming that, a ‘rich’ entrepreneur who is expanding his business, for example, and needs additional workers, machines, company grounds, plants, etc, doesn’t need to borrow, because the ‘rich’ hold all their assets in cash, right?

    Prove it!

    And while you’re at it, you may also explain the cause and purpose for such mysterious things like corporate bonds and stocks.

    • Hello Abu my good friend!
      Are you here to talk to me again?

      The entrepreneur pays the interest, books it as cost and passes it on to…..you and me. That’s why we have stated over and over again that 45% of prices are interest.

      Everybody loses 45% of his disposable income to this through prices. But the middle class (of which there are very few these days) can compensate this at least partly, by for instance renting out a second home or usurious income on bonds etc.

      The poor not. As you know, 50% of americans have zero assets or less.

      That’s why we say 80% pay more interest than they receive. We don’t say: pay interest. You dig?

      • Abu Aardvark permalink

        Anthony Migchels: “we have stated over and over again that 45% of prices are interest.

        Everybody loses 45% of his disposable income to this through prices.”

        ——————————————-

        Everybody in western Europe, for example, loses 70-80% of his disposable income to TAXES –
        collected trough government coercion. The actual number is easy to verify. The loss of
        purchasing power via expansion of the monopoly fiat-money supply NOT included.

        Besides, have you worked out by now what exactly Margrit Kennedy – who is peddling the
        questionable 45% interest number – was doing at OECD and UNESCO before she started
        propagating another free-lunch-for-all paper money scheme?

        • 50% of taxes are interest Abu.

          Read my budget for an interest slave to see the numbers crunched.

          fine to say ‘questionable’, so get the report, check the methodology and report back your findings. I’d be most interested in your conclusions. Unfortunately an uninformed ‘questionable’ just makes the impression of driving home points, instead of quest for truth. It is called ‘intellectual dishonesty’.

          • Abu Aardvark permalink

            Nice try. But since you talk about ‘dishonesty': Have you worked out by now what exactly Margrit Kennedy was doing at OECD and UNESCO before she started propagating another free-lunch-for-all, ‘interest free’, paper money scheme?

            • yeah, she was involved in all sorts of silly ‘save the earth’ schemes.

              What is a ‘free lunch for all’ scheme? Is that bad?

              Is it bad that we don’t have to pay the rich anymore? Is this some sort nonsenical add on with no other purpose than to create the illusion of a problem?

              A little calling scarce, usurious, boom/bust related gold ‘honest money’ or ‘sound money’ as bankers always have called their favorite currency.

              • Abu Aardvark permalink

                Anthony Migchels says: “yeah, she was involved in all sorts of silly ‘save the earth’ schemes.”

                AA: She still is. You’re too. ‘Saving the earth’ – via prohibition of interest … while ignoring government and taxes. Worse still, you lack the will or capacity to differentiate between

                a) legitimate interest in a free-market economy, where the parties involved agree voluntarily on the terms. In a free-market environment, ‘disposable’ money is not created out of thin air, but has to be SAVED first in order to be lent out later. Think ‘time-preference’. If you’re unable to grasp the concept, think the ‘PRICE OF MONEY’ that you pay for being able to spend money NOW – as opposed to being able to spend it LATER when you have SAVED it by yourself.

                b) illegitimate interest in a monopoly fiat-money economy, where money is created out of thin air – AT NO COST – and interest rates are fixed by central banks in order to transfer wealth via credit expansion and to finance bloated governments – you know, the ones YOU want to task with ‘saving the earth’ via ‘interest free’ money out of thin air.

                Did/Do you work – accidentally, of course – for OECD and/or UNESCO too, Anthony?

                • there is no difference between the two. It’s all just usury. Its all a wealth transfer from the have nots to the haves. Since we can easily have interest free credit it’s all totally moot too. It’s a none issue. Unless you are defending the rights of the ultra rich, of course. Than it’s a vital issue.

                  I’m not ‘saving the earth’. I’m attacking the iniquity or usurious usurpation.

                  Lol, no, have no affiliation with either organization. I used to work for the Dutch Government a little less than 10 years ago. I quit: civil servants are boring. Although I did learn a lot there, I must say. But it was just a mediocre job as a process manager, project leader in IT.

                  You don’t have to capitalize all these silly concepts like SAVINGS (which we don’t need), CHOICE (which we don’t have, since we can only choose between Money Power outlets, just like you can ‘choose’ in the coming election) or the boring, antiquated and utterly discredited time function of usury.

                  I do hate taxation. In an interest free economy there would be no income tax. Tax pressure in the Middle ages was about 10%.

                  Even your mentors at the Daily Bell admit Rothschild is worthed probably a few hundred trillion Abu. They are just ignoring the fact that he got it through interest and that all of the interest eventually ends up with him. And that everybody on the planet is paying interest to him, with perhaps, but not certainly, the exception of the Warburgs and maybe a few other banking houses.

                  Now hush, I don’t want to spend too much time on you. I like you, but we will not agree, you will not look into anything, everything you bring forward I have already read at the Daily Bell (and refuted too) so what’s the point.

                  Stop by any time if you have something interesting to share though!

                  • Abu Aardvark permalink

                    No, obviously we will not agree. One of the strange things with you is this: Even when one TRIES to accept your paradigms, or rather assertions – for the sake of argument, that is – one cannot get around the fact that you contradict yourself several times … in ONE article or comment alone.

                    So, even if one was willing to follow you … one CANNOT. You’re actively preventing it by thinking and arguing neither straight nor consistent. Naturally, your writing follows the pattern.

                    This doesn’t indicate a reasonable approach, does it?

  20. Abu Aardvark permalink

    Anthony Migchels says: “We all know that gold is completely controlled by the Rothschilds and their ilk”

    ———————————–

    So all the gold that is being held by literally hundreds of millions of people – for example in China, India, Turkey, etc. – is in actual fact ‘completely controlled by the Rothschilds’, right?

    Prove it!

    • Yes. Well, it’s indeed well known that China and India have vast private gold reserves. I remember reading a book by Fernand Braudel, a french historian, on capitalism. He called China and India necropoles of Gold, because the West would buy their stuff (their economies were vast, immensely bigger than the West’s) and were forced to pay with gold, because they had nothing to trade with, and they never saw any of the gold back.

      But you know what? This Gold is in India and china. Not in America or Europe.

      And you know something else? Nobody knows where the gold in China and India is. But let’s make a bet where it is not: it is not with the 99% of these nations.

      Just a guess. A wild thought. Ok?

      Come on man! Start Thinking! Stop regurgitating!

      • Abu Aardvark permalink

        Anthony Migchels says: This Gold is in India and china. Not in America or Europe.

        And you know something else? Nobody knows where the gold in China and India is. But let’s make a bet where it is not: it is not with the 99% of these nations.

        Just a guess. A wild thought. Ok?

        Come on man! Start Thinking! Stop regurgitating!

        —————————-

        1) Why would you want to ‘guess’ or throw around ‘wild thoughts’? When you WANT to know where the gold in China or India (or Turkey, etc.) is – start traveling, or do some research for Christ’s sake. If you’re not blind, deaf and dumb, you’ll see gold on display wherever you care to look. Hint: mostly women wear and herd it.

        2) As to ‘this gold is not in America or Europe': Last time I passed by my local gold trader, the waiting line (for buyers, that is) was just as long as during the last four to five years. This trader alone, by the way, runs more than ten branches in the German-speaking area. There are quite a few of these traders. You may want to extrapolate this.

        3) Which brings us back to your initial claim that ‘gold is completely controlled by the Rothschilds’ – which is obviously and demonstrably wrong. Given your track record, you will probably continue to peddle this and other falsehoods. How come, I wonder … NOT.

        • Don’t give us this please. you know only a very small percentage of the population has any gold assets besides a wedding ring, don’t kid yourself just because you have some.

          • Abu Aardvark permalink

            Anthony Migchels says: “it’s indeed well known that China and India have vast private gold reserves.”

            Anthony Migchels also says: “you know only a very small percentage of the population has any gold assets besides a wedding ring, don’t kid yourself”

            ————————-

            Now, what is it?

            • huh? Are these two comments in any way contradictory?

              • Abu Aardvark permalink

                Anthony Migchels says: “huh? Are these two comments in any way contradictory?”

                —————–

                Hmmm … these are some of YOUR statements – from this page alone:

                ‘we all know that gold is completely controlled by the Rothschilds’

                ‘it’s indeed well known that China and India have vast private gold reserves’

                ‘Nobody knows where the gold in China and India is.’

                ‘you know only a very small percentage of the population has any gold assets besides a wedding ring’

                Gee, that’s what I call consistency … NOT.

                • taking quotes out of context and then putting meaning into them that is obviously falacious when you DO include the given context does not become you abu:
                  ‘we all know that gold is completely controlled by the Rothschilds’ should be read combined with the notion that ‘the gold of china and india is not in America or Europe’

                  ‘it’s indeed well known that China and India have vast private gold reserves’ comined with ‘Nobody knows where the gold in China and India is.’ and the notion that their gold is not ‘with the 99% of those nations’ make it very clear that I’m saying the ‘vast private gold reserves’ of china and India are in a few ultra rich private hands. Perhaps even the rothschilds themselves, but I wont go that far speculating. There are illuminati families in India and China too.

                  ‘you know only a very small percentage of the population has any gold assets besides a wedding ring’
                  I don’t know what you find ‘contradictory’ about this statement.

                  Your ‘debunking’ makes a shallow and quarrelsome if not trolling impression. Why not get a life or suck up some more to the DB elves? Nobody needs your trash here Abu, don’t you know when you’re overstaying your welcome?

                  • Abu Aardvark permalink

                    Calm down. Get your facts straight. Stop whining!

                    From Wikipedia:

                    The consumption of gold produced in the world is about 50% in jewelry, 40% in investments, and 10% in industry.

                    Most of the gold used in manufactured goods, jewelry, and works of art is eventually recovered and recycled. Some gold used in spacecraft and electronic equipment cannot be profitably recovered, but it is generally used in these applications in the form of extremely thin layers or extremely fine wires so that the total quantity used (and lost) is small compared to the total amount of gold produced and stockpiled. Thus there is little true consumption of new gold in the economic sense; the stock of gold remains essentially constant (at least in the modern world) while ownership shifts from one party to another.[80] One estimate is that 85% of all the gold ever mined is still available in the world’s easily recoverable stocks, with 15% having been lost, or used in non-recyclable industrial uses.[81]

                    India is the world’s largest single consumer of gold, as Indians buy about 25% of the world’s gold,[82] purchasing approximately 800 tonnes of gold every year, mostly for jewelry. India is also the largest importer of gold; in 2008, India imported around 400 tonnes of gold.[83] Indian households hold 18,000 tonnes of gold which represents 11% of the global stock and worth more than $950 billion.[84]

                    http://en.wikipedia.org/wiki/Gold#Consumption

  21. Dave permalink

    They may be pushing full reserve banking to usher in an era of deflation

    Milton Friedman “The Federal Reserve caused the Great Depression by contracting the amount of currency in circulation by one-third from 1929 to 1933.”

    So many ‘middle class’ people in the West are dependent on easy credit. Perhaps they will soon pull the rug from under our feet

    • Brian Hughes permalink

      Sounds about right

    • Yes, full reserve banking in itself would probably see tight money.

      On the other hand, combined with debt free money it should probably allow for sufficient liquidity. But it’s all a matter of execution of course and it seems likely that the Money Power wants deflation, without destroying its own infrastructure. Meaning it would print enough money to pay its banks and let the rest be damned.

      Or that would seem their normal way of going about things.

  22. >>>>Printing some debt free cash to plug a few gaping holes might actually just be what the doctor ordered
    Oh dear, you dare to suggest that there might be a need for a batch of greenbacks, again? Can a re-organized Currency Bank network be far behind?
    ========================

    Was it not Mr. Fisher who recommended to Roosevelt to manipulate the price of gold on the London market in order to benefit American farmers ? Did this theoretical model not blow up in Roosevelt’s face in real life? This Chicago Plan is a “theoretical model”

    question:
    according to this Chicago Plan, “the core of our theoretical model,” what would be the money of the United States, and what would be the currency of the United States ? (I read the .pdf but somehow missed it)

    The one blemish on the record of government money issuance was deflationary rather than inflationary in nature. The van Buren presidency triggered the 1837 depression by insisting that the government issuance of money had a 100% gold/silver backing. This completely unnecessary straitjacket meant that the money supply was inadequate for a growing economy.

    This is ignorance or lie. The panic of 1837 was caused by Biddle and his friends, and not by the Government’s insistence on using coin alone. The coins used during Jackson’s and Van Buren’s presidency and during the next 20 years, did not have “100% backing” they were made of gold and silver. The 10million non-legal-tender Treasury notes of 1837, the 20million non-legal-tender Treasury notes of 1857, the $10million non-legal-tender Treasury notes of 1860, were tokens of loans from the people to the government.
            The Independent Treasury Act curtailed the note issue of banks: in the 1840s and 1850s the bank note circulation was about $300million, the amount of specie in the country was about $300million, the banks held less than $200million which means they issued no more than 3 notes for each coin, the lowest ratio in history. These bank notes circulated within States as local currency, and they were based on State indebtedness.

          Jackson, Van Buren, and the Independent Treasury Act aimed at using money (gold/silver/copper coin) or Treasury notes receivable for taxes and duties, 100% percent backed by specie and taxation. Ye IMF-sponsosed monetary reformers claim ye want 100%-backed currency, but ye object to the historical example and experience of such currency……… Ye call it a “strait-jacket” (beware of IMF greeks with a reform idea)

    18 Zarlenga (2002) documents very persistent attempts by the private banking industry, throughout the late 19th century, to have the Greenbacks withdrawn from circulation.

    —-Zarlenga obviously avoided documenting that the National Currency Bank act required the banks to keep in their vaults Greenbacks

    • what is the difference between currency and money for you name?

      I assume currency would just be paper notes and electronic money and the money a debt free unit? Does that make sense?

      • Vlaams Belang

        Pound by Pound

        Reality cheque:–

        http://freedominourtime.blogspot.ca/

    • btw, that was indeed interesting speculation on the causes of Lincolns murder.

      I don’t really know what to make of it, but it gives a good idea of the kind of thinking going on at the time.

      • You requested a theory on the assassination, I compiled one……

        Today, I think, money and currency are the same in most countries. Currency used to refer to a note currenct among people promising to pay money. 200 years ago, in the U.S., money was decreed to be a certain number of grains of silver, and currency was generally bank notes.

        This 75-page IMF paper does not mention what would be money, the foundation of this 100%-reserve banking. Obviously they differenciate between money and currency, otherwise they wouldn’t be talking about 100%, or any, reserve. My point is that they come up with this theoretical model without naming the unit of exchange

        ==========
        Personally I would like to see money and currency being the same –like the paper notes of the leninist countries. In old Sumeria the barley based system and clay notes worked well, too.

        In the past 2000 years we were never allowed to practice and work out the details and bugs of a system of “people’s money”, we always had to use banker’s money

        • “In the past 2000 years we were never allowed to practice and work out the details and bugs of a system of “people’s money”, we always had to use banker’s money”

          Exactly name789 ,that’s such a crucial point. That’s why I support basically all units that are developed these days, even stuff like bitcoin, of which I’m pretty sure it will not survive the test of time. But it is so crucial to simply have the practice and learn from there, instead of this eternal theorizing and being stuck with banker rubbish.

        • REN permalink

          The accounting rules in 2012 were changed to define money as a division of the commonwealth. I believe the IMF paper mentions it. I would define money as a division of all goods and services produced in an economy.

          I would define Credit Money, as issued by private Bankers as a division of debt contracts. I prefer the term BM as a scatological humor. BM therefore has a very loose correlation to the real organic economy. Again, BM is a division of debt contracts, and worse it disappears when paid back, making it wholly unsuitable to trade our output. Debt contracts want to grow mathematically and are at odds fundamentally with a real economy. So, these contracts are a real problem, in ADDITION to the usury.

          In order for money to stand in as a good during a transaction, its volume should be controlled. In other words, a credit/debt contract can be consummated with a good. For example, if I give you a chicken, and you hand me back another chicken, then our debt/credit contract becomes satisfied. Or, we could trade using money, which stands in as a good. Money satisfies the debt/credit contract when it stands in for the good, and then said money goes back into the supply, for example, when former creditor uses money to buy a new chicken.

          The latest iteration of Chicago plan has monetary aggregates that are legally defined and controlled. This means that real money is issued (a division of the commonwealth), in accordance with total amount of goods and services. It also means that government controls ONLY the money supply in accordance with law, and it is very easily supervised and transparent. Private banks remain private, only money becomes public.

          For the first time, monetarist theory may work, and the gold bugs can shut up. Also, please see Yamaguchi’s models which use system dynamics, and have been peer reviewed by the System dynamic community. It cannot be poo pooed away so easily.

          There is also a very large credit window, about 15 percent of GDP if memory serves. This credit is targeted at industry, which has the ability to pay back the usury out of improved productivity. The credit window may also avoid using the usury exponential, and instead may only require FEES. A credit window backed up with Government assets has the ability to wipe out accumulated debts via a jubilee due to no legal tangle. It also prevents private money powers from creeping in like a snake.

          Money loans are limited to principle doubling, a Babylonian proscription. This mechanism prevents debts climbing up the usury exponential. I note that this limiting mechanism is not listed here alongside demurrage and mutual credit?

          Additional safeguards are in place to prevent usurious rates. Although I would prefer demurrage, this principle doubling limiting mechanism is a practical first step at keep usury at bay.

          States get direct spend at 25 percent of the total. This will help insure Federalism. It also means states will protect their prerogative, and keep a close eye on Treasury. I find this to be a necessary component allowing balance of forces. Note this direct spend of debt free money is a variant of social credit, but goes to States instead of individuals. Let the states become laboratories of democracy as the founder’s intended.

          The remaining debt free spend is into a mode of production: Land, Capital, Labor, Public Commons are the four modes of production, as per John Stewart Mill. Of these, spend into Public Commons is legitimate for Government, and is the way the U.S got rich in the 19’th century.

    • REN permalink

      I believe the main point is that Greenbacks were issued in accordance with the Law, and the Law was not abrogated. Exactly as many Greenbacks were issued as the Law allowed. Going back in American history that seems to be the case also with Continentals and Massachusetts bills.

      When issuance is transparent and governed by the people, the people earn their Seigniorage back with spend into the commons, or with reduced taxes.

      There is no escaping that money has a force and law component. Even going all the way back to the East India Company, they had their own mercenary force to ensure contracts.

  23. samalbahaykubo permalink

    I’m off to open a bank!

  24. Brian Hughes permalink

    “Banks should be closed and replaced with Mutual (interest free) Credit facilities”.

    It really is astonishing how simple and morally right a solution this is. The obvious dilemma is the entrenched mindset of humanity that thinks we need banks. And what is so tantalizing is that it is all a hypnotist’s trick and coming out of its trance is just a snap of a finger – a pinprick on a soap bubble.

    • yes. It will take some time still, before the alternative media realizes this. Let alone the herd.

      • Thank you for all your hard work and excellent articles. People are not dumb, they do understand but they need guidance. Especially in this word full of useful expendibles like Abu Ardvark creating lot of smoke to hide the devil.

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