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(NaturalNews) The world's economy is in a state of chaos because of the unbridled greed of bankers. Their recklessness and deception has brought many countries to the brink of ruin, including the United States where the global rot is believed to have started with the avaricious sub-prime lenders.
But now, because of unprecedented public scrutiny (and previous articles on Natural News), people are becoming aware of a great banking secret. It`s a banking secret so astonishing, so simple, and so brazen that it takes one`s breath away. It is a secret that the powerful moguls of banking have assiduously kept from the public for centuries.
The secret?...
Banks don`t lend hard cash from their vaults as most people think, neither their own money nor their depositors` money; they just create new money out of thin air!
Furthermore, they charge exorbitant rates of interest when they lend this magically created money not only to individuals and businesses but also to governments who must then raise taxes in order to repay these devious con men.
"The modern day banking system manufactures money out of nothing," said Sir Josiah Stamp, Director of the Bank of England, 1928-41. "The process is perhaps the most astounding piece of sleight of hand that was ever invented..."
This type of monetary magic is known as the Fractional Reserve System which allows banks to create, lend out, and collect interest on money that, moments earlier, didn`t even exist. This is done with the full knowledge and connivance of governments. Over the years some courageous politicians have opposed the system but they invariably ended up suffering defeat and ignominy, or worse.
But just how do the banks create money out of nothing?
In days of old, when gold was the currency of barter, people deposited their gold in the local goldsmith`s vault for safekeeping. The goldsmith gave them certificates or claim cheques which, because of their convenience, were freely exchanged for goods and services in the marketplace.
Whenever the goldsmith loaned out his own gold the borrower usually preferred to accept a claim cheque instead, for ease of handling. Goldsmiths` claim cheques were then universally accepted and traded.
But greed would get the better of the goldsmith and he soon began to lend out and charge interest on claim cheques issued against his depositors` gold, without their knowledge. When the depositors eventually found out what he was up to, he was forced to pay them part of the interest.
Then it dawned on the goldsmith that no one but himself knew how much gold was in his vault so he began creating claim cheques for gold that wasn`t even there. He knew there was little danger in being caught out because people never came in all at the same time to withdraw their gold. Soon he was making a huge fortune. (See Paul Grignon`s compelling 47 minute video called "Money As Debt". Google it for free online viewing.)
This was the foundation of the banking system as we know it today.
In 1694, the modern era of lending began when the newly formed Bank of England received a Royal Charter of Fractional Lending with a ratio of 2 to 1. This meant that the Bank could lend out twice as much money as its own shareholders had actually invested in the business.
But greed prevailed and the ratio was soon pushed out to 9 to 1. Individual banks could then lend out nine times as much as their shareholders had placed on deposit with the Central Bank. Later, in some cases, it could go to 20:1, 30:1, and beyond.
The Fractional Reserve System worked like this...
All banks in England worked within a system controlled by the privately owned Bank of England - the Central Bank. Operating on a ratio of, say, 9:1, each bank needed to deposit with the Central Bank only one ninth of the money it wanted to lend its customers. Therefore, for every 1,111 pounds a bank had on deposit with the Central Bank it could create and issue a loan of 10,000 pounds, without reverting to its `power money` on reserve at the Central Bank.
And it gets better... Whenever a borrower received this newly created loan money of, say, 10,000 pounds he would pass it on to a creditor for goods or services purchased. The creditor would then deposit the money in his own bank which was now permitted to create 90% of the amount, 9,000 pounds, as further new loan money, in addition to the 10,000 pounds just deposited. And when this extra 9,000 pounds was then loaned out and deposited by another creditor in yet another bank, that bank too could then create a further 90%, or 8,100 pounds, in new loan money. And so on, and so on.
This then had the potential to go on through the central banking loop until almost 100,000 pounds was created. Imagine that! Creating 100,000 pounds of electronic money and charging interest on it all, for a mere lodgement of 1,111 pounds with the Central Bank.
Because all banks worked together under the control of the Central Bank the system ran smoothly as if it all happened within a single bank. This was all made possible by governments allowing private banks to provide loans and pay debts in a country`s paper fiat currency, made legal tender by government decree. The government also compelled businesses and individuals to use this officially sanctioned fiat currency to discharge debt.
To clarify a little more, let`s say you get a mortgage from your bank for $500,000. The bank does not give you $500,000 of its own money nor does it give you $500,000 of depositors` funds. It simply keys in a new account in your name as bank credit, thereby creating $500,000 that didn`t previously exist. Hey presto!
Borrowers are only given such loans when they sign a Pledge of Indebtedness to the bank, backed by an asset like a house or a car or whatever. This is the only thing of value in the whole transaction. Without this Pledge of Debt banks have nothing to lend. In other words, banks are using your asset and your Pledge of Debt to create large profits for themselves.
The world`s economy is now based on debt. The more money people borrow, the more money will be in circulation. If people stopped borrowing, or if everyone paid off their debts at the same time, there would be no money in circulation and the economy would collapse.
One of the most sordid aspects of money lending is the charging of interest. This is known as usury. For many hundreds of years usury was forbidden by both church and state, under penalty of death. Money was meant to facilitate the trading of goods and services and was not intended as a commodity to make profits for the rich. How times have changed.
Today, when banks create the principal out of nothing, they do not create the interest. Somehow, the interest has to be paid out of the same pool as the principal, an apparently impossible task.
For example, a debt pool of a newly created billion dollars, with interest over time, would need to be repaid as several billion dollars. The only way borrowers can do this is to keep borrowing more so that there will always be an increasing amount of debt money in circulation. Foreclosures are not only inevitable and expected but are built into the system. This is how banks increase their wealth, by seizing property at knockdown prices for defaults on loans which were originally created by them out of nothing.
The only thing that prevents the whole money-as-debt system from collapsing is the time lag between the issuing of the loan and the final payment.
In this system, countries and economies can never get out of debt. Debt will always grow larger and larger and spiral exponentially into an ever-growing mountain. Governments borrow more and more and try to catch up, but they never will. It is impossible.
Since 1914, after the formation of the Federal Reserve, U.S. government debt climbed alarmingly from 2.9 billion dollars to over 8 trillion dollars. The dollar lost 96% of its value in the same period. And incredibly, the two Bushes & Clinton managed to increase public debt by 5 trillion dollars in the last 16 years. This is almost double the debt presided over by the 40 previous U.S. presidents in more than 200 years since the birth of the nation.
Another little-known reality is that most central banks, including the Federal Reserve, are privately owned or controlled, even though they cleverly give the impression that they belong to the State. This means that their huge profits go to private bankers and not to the government or to taxpayers.
When governments borrow money, they issue bonds. These bonds are purchased by the Central Bank/Federal Reserve who pays the government with money they have just created out of nothing. They also charge interest which, over time, can amount to many times the principal sum borrowed and which the government must pay by taxing its citizens. Some analysts say that all the income tax collected in the U.S. goes to private bankers in the Federal Reserve just to pay interest on government loans. (See the late Aaron Russo`s thought-provoking documentary, "America: Freedom To Fascism", which can be viewed free on Google.)
"I have never yet had anyone who could, through their use of logic and reason, justify the Federal Government borrowing the use of its own money...[The people] will actually blame...Congress for sitting idly by and permitting such an idiotic system to continue." Wright Patman, Chairman, Committee on Banking and Currency, 1963-75.
Many Americans are only beginning to realize that the Federal Reserve is actually a private corporation. It is not Federal and may not have any reserves. It is believed to be owned by a covert group of private international bankers and was set up by stealth in the small hours of December 23rd, 1913, when most senators had left the senate for the Christmas holidays. The Federal Reserve Act was then voted on and passed without opposition.
President Woodrow Wilson (1913-21), who signed the Act into law, would later lament, "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit...[We are] no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."
But now the jig is up.
People are becoming increasingly aware that they`ve been duped. Private bankers have been fleecing the American people of trillions of dollars for decades. And, in the course of their plundering, they have literally gotten away with murder.
However, on the positive side, growing public awareness of the corruption of the banking system now presents a massive opportunity. It is evident that the whole structure is broken and fraudulent and needs to be replaced. Citizens can see that by eliminating the moneychangers, i.e., the Federal Reserve, and printing their own money, America can quickly become debt free and prosper as never before. By printing and issuing its own interest-free money a government can work to benefit its citizens, not the bankers.
The right of the U.S. Treasury to print its own money is enshrined in the Constitution. There are many who assert that it was, and is, illegal for the U. S. Government to allow the Federal Reserve to print the country`s money and decide economic policy like setting interest rates and controlling the amount of money in circulation, etc.
Abraham Lincoln, after turning down bankers` demands for up to 36% interest on war loans, printed almost 450 million dollars of interest-free government `greenbacks` to fund the Union Army in the Civil War. It worked so well that the bankers became infuriated. Here is an astonishingly candid excerpt from an editorial in the London Times in 1865...
"If this mischievous financial policy, which has its origin in North America, shall become endurated [sic] down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe."
Lincoln intended to implement his new financial system after the War and declared, "The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By adoption of these principles, the taxpayers will be saved immense sums of interest."
Barely 2 months into his second term Lincoln was assassinated.
Another president who spoke out against the bankers was James Garfield. "Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate." Garfield was assassinated in 1881, only weeks after releasing this statement.
And now, people are only learning of President Kennedy`s Executive Order 11110, of June 4th, 1963, whereby he authorized the U.S. Treasury to issue over 4 billion dollars of United States Notes (USN) in denominations of $2 and $5. These notes were interest-free and debt-free currency backed by silver bullion. This was seen as an attempt to take back from the Federal Reserve the power to issue America`s currency.
Dollars issued by the Federal Reserve, FRN or Federal Reserve Notes, were backed by nothing of value whereas the USN dollars were backed by silver. There is no doubt which notes the public would favour. This presented a huge threat to the influence and to the very existence of the Federal Reserve.
Five months after signing EO 11110, President Kennedy was assassinated. At the time of his death the Treasury was preparing to print USN bills in $10 and $20 denominations. Immediately after Kennedy was killed, these larger bills were not printed and the USN dollars he had issued were taken out of circulation post-haste. Federal Reserve notes then regained their place as 99% of all U.S. circulating paper currency.
Other U.S. presidents and politicians have locked horns with the bankers over the last 200 years. President James Madison said, "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance."
President Andrew Jackson battled with the corrupt influence of the Central Bank of his time, the Second Bank of the United States (SBUS), throughout his two terms (1828-36). The SBUS was said to have been controlled by the European Rothschilds and it caused immense headaches for Jackson who fought to wrest back control of the American currency and economy from these avaricious foreigners. (Jackson would become the only U.S. president in history to bring the national debt to zero, in fact with a multi-million dollar surplus, a year before he left office in 1836.)
When Congress voted to renew the charter of the SBUS, Jackson vetoed the Bill and prevented it from passing. He saw the powers of the SBUS as a threat to American liberty and independence and referred to the bankers as a "den of vipers and thieves". Jackson also withdrew government deposits from the SBUS and placed them in safe banks. (Jackson later survived an attempted assassination.)
The SBUS then blustered and threatened to cause a depression if their charter wasn`t renewed. They knew that the widespread suffering of a depression would influence Congress in agreeing to a re-charter. They duly caused a great depression by calling in existing loans and refusing to issue new ones. (Just as the Fed did in 1929 and seems to be doing today.)
But the SBUS charter eventually ran out in 1836 and the central bank ceased to exist. Jackson exultantly declared, "I killed the bank!" It would take the bankers 77 years to recover the ground they had lost to Jackson when they furtively finagled the Federal Reserve Act in 1913.
A great outspoken opponent of the Federal Reserve was Louis T. McFadden, Chairman of the House Banking Committee in the 1930s. After two attempts on his life McFadden was later poisoned at a banquet, while in the process of impeaching the Board of the Federal Reserve. One of his attacks on the Fed can be found in the Congressional Record, House pages 1295-96 on June 10, 1932:
"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks. [They have] cheated the Government [and the people] of the United States out of enough money to pay the national debt. [Their] depredations [and] iniquities... have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government."
Central banks such as the Federal Reserve exert tremendous power and control. As we`ve seen with the SBUS, credit crunches can be caused by central banks calling in loans and refusing to issue new loans. In such a scenario stocks, shares, and property can be snapped up by wealthy con men for a fraction of its value. Dr. Milton Friedman, Nobel Prize winning economist said, "The Federal Reserve definitely caused the Great Depression by contracting the amount of currency in circulation by one third from 1929 to 1933."
And Senator Barry Goldwater (R-AZ) said, "The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and... manipulates the credit of the United States."
But today, as we flounder in economic and financial turmoil, we need a new monetary system. We need to think outside the box. This calls for revolution and innovation. Our wretched politicians are unable or unwilling to innovate, but we, the people, must force the issue.
A government can and should issue its own money. It can do this without incurring interest charges. Abraham Lincoln did it with amazing success and economy. Why borrow money and pay exorbitant interest to a private bank?
The American colonists printed their own money before the Revolution; it was called Colonial Scrip. It was debt-free paper money and facilitated the smooth exchange of goods and services. It was backed neither by gold nor silver and there was no inflation because money was printed only in proportion to the needs of commerce. No interest was payable to the banks and prosperity abounded in the colonies.
But the Bank of England put an end to colonial prosperity by forcing the passing of the Currency Act of 1764 which made it illegal for the colonists to print their own money and which compelled them to pay taxes to the Crown in gold or silver.
Almost immediately prosperity ended, a depression set in, and unemployment increased dramatically. According to Benjamin Franklin these abject conditions directly led to the Revolution of 1776.
Today, our new economic system should not be based on debt. Economists calculate that in less than 10 years America will be unable to pay the interest on its national debt and will become bankrupt. Nor should a new economic system be gold-backed because two thirds of the world`s gold is in the hands of private bankers. (They could corner the market.) A new economic system could be based on VALUE.
Examples of a value based economy would be a government issuing its own interest-free money to create long-term infrastructures like roads, railroads, bridges, canals, schools, hospitals, ports, harbours, urban regeneration, etc. If money is created in proportion to the increase in trade there would be no inflation whatsoever.
Taxation would be minimal. Under our present system most of our taxes go to servicing interest on government borrowing. In a new system, governments could offer municipalities interest-free loans. Citizens could even be given interest-free loans on their houses and cars.
Recycling and replanting would help preserve our natural resources from intensive consumer consumption and waste. Today, our economy is predicated on looting our natural resources, creating short-life products, and rapidly converting them to trash. That is just not sustainable.
Four decades ago we sent a rocket to the moon powered by hydrogen (energy from water). The oil companies don`t want us to know that we can power our cars and public transport and heat our homes and factories with hydrogen power, at only a fraction of the cost of today`s fossil fuels.
In the film, "Zeitgeist Addendum", (a must-see, watch it on Google) reference is made to current technology that is blocked from public use by wealthy special interest groups who would lose money to cleaner, more efficient products. For instance, electric cars were invented decades ago and a vehicle can travel 200 miles at 100 m.p.h. on a single charge. It is clean and efficient and virtually pollution free but the oil companies have bought up the patents and prevented mass production.
See "Zeitgeist Addendum" also for information on the Maglev train, a train that levitates on a magnetic field and can travel at 4,000 m.p.h. using only 2% of the energy of airplane travel and gives off no pollution. (Imagine - New York to Dublin for lunch and back to Manhattan for work in the afternoon.)
The film also describes sustainable power sources like tidal, wave, solar, and wind and demonstrates that current geothermal capability (heat from water) can power the entire planet for the next 4,000 years without the need for oil, coal, or gas.
The first thing America needs to do is to repeal the Federal Reserve Act of 1913 and have the U.S. Treasury print the nation`s money, just as the Founding Fathers intended.
Thomas Jefferson said, in the debate over the recharter of the Bank Bill (1809), "If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Then America can print its own money and become master of its own financial recovery and prosperity. Let us get these bold new ideas out in the public forum for discussion and improvement. Let us find new, well-informed leaders who will take us into a new age of affluence. This is all easily achievable. We just need the will to do it.
But are there any countries today that operate a system such as that just discussed?
The citizens of the Channel Islands of Guernsey and Jersey, located in the English Channel between Britain and France, issue their own money, are individually wealthy, have 100% employment, have a national debt surplus, and have very low taxes. This is a model well worth aspiring to.
And now consider the opposite end of the spectrum. Apart from all the wars, misery, and murder instigated by the bankers, their most reprehensible sin is that of Third World Debt. Thousands of children are dying from starvation and disease every day. Water, food, housing, and medicine are denied to them because their governments must pay huge loan interest to the international bankers who created the money out of nothing in the first place. This is a despicable crime much greater in scale than even the Holocaust. It must stop. Now!
Let`s leave the last word to Sir Josiah Stamp, 2nd richest man in England and Director of the Bank of England, 1928-41, when he spoke of the Central Bank`s power to create money...
"Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But, if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit."
Some important sources used in writing this article are:
"Zeitgeist" and "Zeitgeist Addendum" by Peter Joseph
http://www.zeitgeistmovie.com/
"AMERICA: Freedom To Fascism" by Aaron Russo
http://video.google.com/videoplay?d...
"Money As Debt" by Paul Grignon
http://www.moneyasdebt.net/
"The 2nd Declaration" by Hugh W. Johnston
http://www.jlkfoundation.com/
Further Recommended Research:
"The Creature of Jekyll Island" by G. Edward Griffin
"Secrets of the Privately Owned Federal Reserve" by Eustace Mullins
"The Shadows of Power" by James Perloff
"Tragedy And Hope" by Carroll Quigley
"Debt Virus" by Jacques S. Jaikaran, MD
About the authorGabriel Donohoe is a writer, researcher, Shamanic counsellor, and natural health therapist in Ireland. He can be reached at: gdonohoe@iol.ie
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