License To Steal

The central banking system is the tap root of the modern Corporate-State: the main root that must be struck at for the state to collapse. If the income tax, all business regulations, wealth transfer schemes and the military/industrial complex were somehow miraculously ended tomorrow while central banking remained, then the state would still have the means to enslave you. The modern Corporate-State is controlled by a cartel of banks: the elite of the elite. Most people believe it is perfectly normal for the Federal Reserve and its "member" banks to be granted a license to steal. The central banking system is based on fraud and deception, plain and simple. Let's follow the money.

First, what is money? Money is both a medium of exchange and a store of value. The main swindle occurs when money becomes just a medium of exchange and is no longer an effective store of value. Money can continue to circulate and be used as a medium of exchange, but it becomes worth less and less in terms of goods that it can be exchanged for. Fiat money is used to accomplish this objective for those who seek a license to steal.

Commodity based money requires saving to occur before it can evolve into a medium of exchange. Fiat money uses the good will previously created by established commodity money to then legitimize it as a medium of exchange such that saving is left out of the equation. Thus the fraud and deception perpetrated by central banks that kings and dictators were not able to get away with (for long) becomes accepted as legitimate in society. The threat of force cannot accomplish this objective (for long), only fraud and deception can.

The basis of real money creation is savings. For example, Joe Farmer would grow more wheat than his family could eat. Bill Smith was better at working metal than growing wheat. These neighbors discovered that if Joe spent more time farming and less time smithing, then he could grow an even bigger surplus of wheat, and if Bill concentrated on manufacturing farm implements, he could build a surplus of these items. Trade and the division of labor allows those in a trade group to specialize in what they do best and thus savings, that is the cumulative surpluses, increase in quantity for the entire group. Everybody gets richer, though some more than others depending on relative skills.

A barter economy can only grow so big so fast until the most commonly accepted (or marketable) commodity is used as a medium of exchange. Joe Farmer no longer needs to store the value of his savings in bundles of wheat waiting to find someone who will trade with him. He can exchange his wheat for the most commonly accepted commodity and then use that item in trade for what he desires. Note that the value of what Joe is really trading originated from the savings or surplus of what he produced.

As the number of different marketable commodities that are most commonly used in these type transactions decreases, the demand for each as a medium of exchange increases. Although their intrinsic usefulness may remain the same, their value increases due to this increased demand for trading purposes. This process continues until one commodity (or a very few commodities) is most generally preferred. The commodity that is most durable, easily divisible by weight, easy to transport and not easily reproduced typically has been chosen by market participants to be money. This is why precious metals have historically been most popular as money.

The process of a society choosing a commodity to be used as money further develops an increasingly complex division of labor and more precise economic calculation is possible. Farmer Joe now can figure out more easily how much surplus wheat will buy shoes, milk cows, nails, lumber and clothes that he will need. Bill Smith can calculate how much he can pay for raw materials, a helper, transportation costs and food to allow him to produce the maximum surplus. Profit and loss come into the picture with greater focus. This allows for more people to profit and save, though some will not. But overall, as long as people continue to produce and save, the aggregate of savings (wealth) will continue to grow. This is how wealth and economies grow: through production and savings.

The next development in a complex economy is the introduction of a system of banking. A bank is simply a secure warehouse for the commodity that is used as money that will redeem notes representing quantities of the stored commodity for individuals. For instance, Joe Farmer deposits, say, 100 ounces of gold that he has saved with the bank. Once a reputation is established by the bank that they will actually redeem certificates written by deposit holders for gold when called upon to do so, Joe will be able to then trade these certificates as if they were real gold or real money. This type of transaction is basically writing a check on deposits.

The next step is to issue marketable notes that are redeemable at face value for a specified quantity of the commodity. Bankers profit from providing a secure warehouse for other people's money and for facilitating transactions. They also provide a service by facilitating loans between deposit holders and those seeking investment funds. As deposits and trust in the community grows for a bank, the more opportunity that arises for the banker to scam both deposit holders and anyone holding their notes. This is accomplished by what is known as fractional reserve banking.

Once people begin to accept notes or certificates representing, again say, gold stocks, a banker can then easily print up more notes or issue loan certificates for amounts that exceed the total stock of gold that they are supposed to represent. This is fraud. If a banker commits "only" a small amount of fraud, this scheme may go on for long periods of time. However, once the scheme is successful for even a little while, the incentive for bankers to expand the amount of fraud typically leads to increased amounts of notes and certificates not backed by "real" money and hence real savings. This process is known as monetary inflation and leads to price and/or asset inflation.

Historically this deception and fraud has always led to the eventual failure of the bank as it ruins its reputation and deposit holders rush to redeem their certificates only to find out that the money they hold is worthless paper. Trust is difficult to get back once it is lost. No other business is allowed to do this. Yet banking gets a free pass because so many people see the growth of paper money as equivalent to a free lunch.

The community at first had a boom because the fraudulent money leads to a lower rate of interest which in turn sends faulty signals to investors to invest in projects that are not feasible given the level of savings in the community. Basically people are fooled into thinking that because there is more money in circulation that they are now wealthier even though nothing was produced or saved to justify it. Manufacturers see the prices of their products increase, labor advocates see wages increase and borrowers see interest rates decrease. Appearing to provide something for nothing is a good way to get people to invest in a fraud. You could say it works every time.

Bankers tried for centuries to get away with this fraud, but it always unraveled because the only way to grow an economy and increase wealth in a community is to produce and save. Then bankers and their sycophant investors seeking subsidized interest rates discovered that they could bribe politicians into making it all legal. Gee, its not fraud if it's legal. Also, the laws of economics don't really matter in the short run and we're all dead in the long run!

Today it is legal (allowed by the state) for licensed banks to use less than five "dollars" from bank investors to use as "reserves" to turn around and loan you about $95 that you must pay back with interest. People who want to borrow $95 ignore the fact that this money was "created out of thin air." Then for every $100 you work hard to "save" in the bank, the bank can loan out about $95 while pretending that you still have all $100 in your bank account.  Basically, since everybody else in the game accepts this "Monopoly Money" as "legal tender," this fraud is transformed in society to a legitimate business practice. Of course, the rub is only a small number of well connected people are allowed to legally perform this deception with the blessings of the state police. Sure, some marginal players are thrown a small bone once in a while before being gobbled up by the larger players, but the families that created the Federal Reserve still control this private corporation. Lots of "official" regulations and auditors make it appear even more legitimate in the eyes of the public as they line up to be sheared.

Legal fraud is then defined as those who attempt this fractional reserve banking scheme without the blessings of the centralizing, controlling cartel and its enforcement thugs (the state). An organized crime syndicate is thus given legal sanction. That is a license to steal.

So, what can be done about it? This real world game of Monopoly has been set up such that financial ruin for millions of common working people will result and the cartel will simply eliminate these "bad debts" via accounting entries, sending the "money" back into thin air. Hastening financial ruin for most of the world population is not a very appealing goal likely to gather much support. However, this scam will lead to its own ruin sooner or later just like all other scams when the truth becomes widely known. The only thing that can be done is to continue to expose the fraud itself as well as the smug moral degenerates that perpetuate it. Hopefully a large enough remnant will prepare for the coming financial storm by using proven commodities as a store of value for their savings. Then the rebuilding that follows will come much faster.

If enough wealth is stored in real commodities, Gresham's Law will do the rest (bad money replacing good money in transactions) until nobody accepts fiat money. The more people who own (hoard) gold, silver, oil, platinum, etc. the better will be the chances for our society to survive this state-induced debacle when it comes. The question is not if it will come, but when it will come. Because when enough children yell out that the emperor has no clothes and enough adults realize that they are being duped, then the paper tiger that is the central bank-controlled international financial system will go up in flames.

The reorganization of society and regional market-based financial systems without control given to a fascist central authority will allow for an economy to be built on real savings, real wealth, and the real work of entrepreneurs as opposed to phony "stimulus packages" where only a small group profits from fraud. Stealing is wrong and making it legal does not make it right. In addition to the moral decay that this scam has caused, the levels of trust, work ethic and propensity to save built up over centuries in our culture are decaying before our eyes. When financial stability is officially based on increasing borrowing and spending instead of producing and saving, then the official leaders are either fools or scam artists. I don't believe that they are fools.

Fractional reserve banking is an amazingly successful con-game. It is immoral and provides the foundation of state power. This method of "getting something for nothing" is not only considered to be morally acceptable by good, intelligent people in modern society, but it is hailed as the reason that modern economies exist at all. To challenge this method of legalized theft is blasphemy because it appears to work so well on the surface. Most people simply prefer not to look a gift horse in the mouth. What is seen looks fabulous and what is not seen is easily ignored.

A con-game is a ruse based on gaining the confidence of the marks. The subterfuge must be believable to work. The cover of legality is the ultimate disguise for con-men. Thus we have the wedding of bankers and politicians in the most un-holy of matrimonies. The smoke and mirrors used to build confidence in the system of fractional reserve banking would be useless without the sanction of state legality. These financial institutions became inherently unsound the minute they went from being warehouses for savings to pyramid scheming credit creators.

The state lends its monopoly on the use of force (a.k.a. the full faith and credit of the government) to "back-up" the system. The only way to get away with stealing for very long is to get enough people to accept fraud based on accounting tricks as legitimate. Several generations later, that's just the way it is.

How would you like to be able to loan money that doesn't exist? Do not fall into the trap of confusing credit for money. Money represents real goods that were earned and then saved. Present consumption was sacrificed for future consumption. This is the pain that we all wish we could do away with and the fundamental appeal of fractional reserve banking. So we end up looking the other way when the banker gives us a loan with money created out of thin air at a low interest rate. But when a deal appears to be too good to be true, it usually is. So if you want to buy insurance against the financial storm that is growing on the horizon, I suggest you visit your local numismatic dealer and/or commodities broker before it is too late.

Your rating: None
Mark Davis's picture
Columns on STR: 55

Mark Davis is a husband, father and real estate analyst/investor enjoying the freedoms we still have in Longwood, Florida.