Before we begin today's exercise, I want you to first think about your income. How much do you make every month? Now I want to think about that as your life. Out of the eighty years on this earth, how many of them will you spend at work? Money is a representation of your time, an ultimately limited and invaluable commodity.
Additionally (by way of preface), please do not take the tone of this article as conspiracy-theory, or a rant against the injustice of the system. Think of it more as a product review, or perhaps a customer's feedback about a company or an industry.
When a bank receives money on deposit (say, from you opening an account) it is allowed to put this money "on reserve". This means that the bank can loan out ten times that amount. This is called "fractional reserve banking". They keep a fraction on reserve.
So, if a bank has $1000 on reserve it can make a loan for $10,000.
Now, let's say that you walk in and want a loan for, say, a car. If the amount of the loan is $15,000 the bank is allowed to make that loan on the basis of $1,500 in deposits (the reserve). So, where does the other $13,500 come from? It doesn't come from anywhere. That other 90% of the money wasn't saved, invested, or deposited. The bank did not have it. It was conjured from nothing based on your signature to repay.
This is called "fractional reserve banking". It's not conspiracy theory, just a fundamental fact of how the banking system works.
But this is ever so different than how the common man thinks it works. I always thought the bank loaned out money that it got on deposit. That's how it's explained in "It's a Wonderful Life".
Let's go back to your car loan for $15,000. Let's say that over the course of the loan you pay back the principle plus $3,000 interest. What is the bank's profit? $1500 on reserve has doubled to become $3000 in interst payments from you. Not only that, but you also paid back the invented money to the tune of $13,500.
You paid back money that never really existed.
The real kicker is that it's possible that you were the very person that has the $1500 reserve dollars on deposit. Because the bank is allowed to leverage your money at ten to one you have made yourself an indentured servant.
One more time, slowly. If you keep $1500 on deposit at your local bank, and then take out a loan for $15,000 from the same bank, you will pay them back $18,000 over the course of X years. On your own money.
Look it in the eye: a bank is a creature that produces no tangible good or service. It takes an apple, stores it, lends out ten fake apples, and collects thirteen real apples. A bank is not only the least valuable business on the street, it actually has a net negative affect on the community in which it resides.
I'd like each person reading this to think of his or her private debts. Now imagine that each one is only really worth one-tenth of its value.
In some cases, reserve money is leveraged out at even more ludicrous rates of 30:1 or 40:1. Your home could possibly be backed only by $5,000 of reserves.
This is worse even when considering the purchase of a home. Let's say a man buys a modest home for $200K. Conservatively, he will pay back $100K interest on top of the $200K in principle, representing perhaps two or three years of his life working to pay money for only $20K of real money on deposit. He has been made an indentured servant.
Right now you are paying into this system. Even if you rent (you're just paying indirectly through your landlord).
It is through this means that the banks are able to buy up the town and make everyone squatters on what is now their property. Seriously, think of what the total property value in your city is. Let's take a town with 10,000 homes in it, each worth a value of say $200K. So, a bank with 200 million on deposit can effectively provide loans for everyone to "own" their home. The truth is that they have traded beads for the land and made every inhabitant a feudal serf. A well-dressed, well-fed, well-housed serf.
This leveraging of money (ie taking deposits and then inserting ten times that in invented money into the pool) also makes prices higher. About ten times higher. Houses and cars are so expensive because of the inflated money supply. Easy credit makes prices go up.
It is a swindle of mind-breaking proportions.
By the time you die you will have indirectly built a summer home for a Banker somewhere. You will have built his yacht without so much as a thank you in return.
It breaks a fundamental law of the universe: "by the sweat of thy brow shalt thou eat thy bread all the days of they life". Or if you prefer, "you can't get something for nothing."
So, what to do about it? Here's what I'm working towards. First, pay of my debts. Sure, it rankles me that they are collecting on money that doesn't represent an honest investment. But that's all right. It is not for me, but for God to deal as he sees fit. I hope He is merciful to them.
Then, I plan on taking the maximum amount of my deposit-money out of the system so they can't ensnare other people into debt with it. I will deal in real commodities directly with my fellow man.
Where necessary and possible, I will keep my debts with fellow-citizens and pay interest to them instead (PS- I am looking for an investor in BTP).
I will do what I can to provide my children with homes that are paid for so that future generations can live free.
I will live humbly and live within my means.
Now, some may be thinking that the "services" (so called) that banks provide are voluntary. No one has to buy them. That is true to a great extent, and ties into the call that I am making with this article (which is to get as far away as possible from this dirty business). Bear in mind the effects of the inflation of the money supply. You can't get away from this because everything you buy (especially a house, car, college education) is significantly more expensive because of the effects of invented money.
Imagine that a band of counterfeiters moved into your city and printed off millions of dollars to buy local goods. They could argue that they are enriching local businesses and indirectly making it possible for them to make their house payments. But the fact is that the town is drained of actual goods and services that are transferred to the counterfeiters in the net transaction. It gets worse. There is now an increased supply of dollars chasing after the same amount of goods. They have caused inflation.
Of course, the federal government would say that the counterfeiters are "stimulating" the economy!
Even though it (fractional reserve banking) is legal, this is the same net effect that a bank has on the local community.
It is my opinion that the banks mask the real value of things. If they were to be cut out of the loop, a home might cost only $10,000 or $30,000. You really could save up and pay with cash (or even better, commodity-backed money). Divide everything by ten.
"But Shawn," I hear someone wail, "don't you know that the labor and materials just to build a home is on the order of $70,000." Yes, perhaps, but its $70K of inflated money! The lumber, nails, and labor were all distorted in value by the vast ocean of credit.
As Pete Schiff has pointed out, all the Credit is not the cure, it's the cancer.
Now imagine for a moment a world where there is no lending on interest, and there is no fractional reserve banking. Puzzle it through. How would that play out? Would everyone be in the streets with no home, no car? I suggest to you, gentle reader, that the opposite is true. You would own your home, own your car, own the land, own your life.
Now this can't be right, because wages would be a tenth, wouldn't they?
You cannot opt out of this system. Taxes are levied in order to ensure the existence of the banks. I'm talking about bailouts. Bail out the toilet paper factory. At least they are producing something you can use.
Government should never provide bailouts. If a company needs an influx of cash they should get it from customers and investors. If there is no customer or investor then that business has no right to exist. We should all be very leery of something
Right now there is talk of setting up regulatory systems by which a "systemic" company (read: too big to fail) can be kept straight. No! If a company is that big it needs to be broken up vis a vis the anti-trust laws. Government should ensure fair play and healthy competition. Is that right?
I'm hearing often now cries out against "Fascism" or "Socialism" but never a peep about "Oligarchy".
[PS- as usual, I am open to hearing new information. This is what I have so far. I am a political explorer.]
Posted by Blue Table Painting at 5:22 AM