Banking and Legalized Fraud

Banking came into existence as a fraud. The fraud was legalized and we've been living with the consequences, both good and bad, ever since.

In the 16th century as the gold and silver the Spanish had taken from America poured into Europe, coins grew larger, more plentiful and heavy. Merchants needed a safe place to keep them when they weren't needed. The goldsmiths had large safes and fierce dogs and it became customary to leave coins on "safe deposit" with them.

Next people saw that a "gold certificate" or warehouse receipt signed by the goldsmith was more convenient to circulate than those heavy coins made of soft metals that quickly wore out if they passed hand to hand. So the smiths printed up receipts in convenient denominations promising payment in gold to whoever presented the receipt. Some people took to writing notes to the smith ordering him to transfer the ownership of some of their coins to someone else. Thus the personal check was born.

Then one day one of the smiths had a brilliant, and wholly dishonest, idea. He noticed that people so much preferred his paper money to its "gold backing" that the gold in his vault hardly circulated - some of it hadn't moved in years. So he thought, "I could print up some extra gold certificates and lend them out to gain the interest.”

The idea was irresistible, and thus banking was born!

Consider this…..

$1,000 dollars on deposit at the bank.

To make money with your money the bank loans out the $1,000 dollars.

Now there are $2,000 dollars in the monetary system. $1,000 in the bank and $1,000 out in the street.

Once loaned out, the amount of money in the system is inflated. If that money is not paid back, then paper money becomes worth - less until the loaned money out in the system is destroyed or PAID BACK.

When the $1,000 loan is paid back, all is well, and the system is even with only the original $1,000 in the bank.

These are basic facts of money.

Enter, Wall St., October 2008.

Too much of your money was loaned out by banks over the past 10 years and since that money is NOT being paid back the system demands that money be destroyed.

The banks made bad loans, sold the bad loans to Wall St. who in turn packaged and sold them on the open market. With those loans not being paid back the borrowed money has to be destroyed.

The money supply has to shrink.

This is why the market is in a free fall and will continue until all the inflated money out in the system is destroyed.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Great post Gary.

Would you agree though that a little inflation is a good thing? Given the gold coin example, increased availability of money made it possible for new ideas to be tried out and great advances for civilization. I agree that wall street does stupid things. Do you really think that banking is a fraud though?

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Never sign intellectual property agreements...

Yes.

In the goldsmith banking story above the fraud of printing up more gold certificates to loan out certainly causes inflation but also provides increased economic activity but creates a core problem when those loans stop being paid back.

When that happens the inflated monetary supply has to be destroyed which is what is happening on Wall St. right now.

Following the goldsmith story if there is 1 oz. of gold on "safe deposit" valued at $1,000 and if the goldsmith prints up $1,000 of paper money for the owner of the gold to use as a convenience that's great and would result in zero inflation.

When the goldsmith prints up another $1,000 and loans it out that temporarily causes inflation until the $1,000 of phony printed money is paid back.

Once paid back the system is even with only the original $1,000 in circulation and the phony $1,000 has been destroyed by paying back the loan and is no longer out in the system being circulated.

You ask:
Yes, it is a fraud.

Let me quote the story from above:

Quote:

Then one day one of the smiths had a brilliant, and wholly dishonest, idea. He noticed that people so much preferred his paper money to its "gold backing" that the gold in his vault hardly circulated - some of it hadn't moved in years. So he thought, "I could print up some extra gold certificates and lend them out to gain the interest.”

Isn't that exactly what the United States Government has been doing for years? They spend every single dime of tax revenue that comes into the treasury. Then to make up for the short fall to pay for more useless government programs they borrow money. Then when borrowed money isn't enough to pay for their reckless spending they simply print more money.

The fraud here is that the goldsmith already gave the owner of the gold the printed certificate to circulate but then printed up more and more and more and more and more certificates to make loans to people to earn interest for himself.

All is well EXCEPT for inflation until those fraudulent loans don't get paid back. Then the fraudulent printed money out in the system has to be destroyed.

The method by which the USA government decided to destroy the inflated money supply in the system was to crash the stock market.

Bush, Paulson and Bernake are not that stupid as to announce that if they don't get $700,000,000,000 billion dollars right away the market will crash.

The very announcement crashes the system.

Which was the intent, but it serves its purpose of destroying the fraudulent printed money out in the system that's not being paid back.

The fiat monetary system would collapse if the inflated money supply caused by reckless loans not being repaid doesn't shrink.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Regarding banking being a fraud.

I just happened along THIS LINK.

The article is titled: Banks: Where the Money's NOT.
by Aaron Krowne written September 11th 2008.

It's a very good and informative read.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Shamelessly ^-bumping-^ this thread to the top of the board because people need to understand a little bit more about how fiat money works than what is spoon fed them from the Gubment and its media outlets.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

I wouldn't go as far as saying that banking is fraud, but I would say that the gold and silver smith example certainly does illustrate what powers a financial system has if it is not properly regulated.

In the spirit of argument and not to be argumentive,

MrJpp wrote:

Quote:

I wouldn't go as far as saying that banking is fraud,

Okay, let's examine the United States' Government checkbook.

In 2008 the United States Government has spent each an every dollar in tax revenue that it has collected.

To make up for the short fall it borrows money from large institutions such as insurance companies, foreign countries and others who buy Treasury Bonds.

If that's not enough they simply print more money but not in the printing press sense, in the loan out money from their credit line they increase themselves as needed.

The United States Government IS the "goldsmith."

Loaned out money NOT being paid back is devastating to the fiat money system and CANNOT be remedied by loaning out more money. But rather than let the under capitalized companies fail our Government is simply propping them up with more fiat money, AKA, LOANS.

Loans from where?
How does a United States Government check bounce?
Hmmmmmmmmm?

That's how they "print" the money by way of a check they loan out.

We are witnessing the largest financial fraud ever perpetrated against the American people.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

The USA Gubment IS the "goldsmith" referenced in the first post of this thread.

The reason why the USA Gubment can give the banks and Wall St. a $700,000,000,000 billion dollar bailout is because a USA Gubment check can't bounce.

As a result they can then write AIG checks totaling $150,000,000,000 billion dollars.

Then for some icing on the cake they write a check for $17,000,000,000 billion dollars to the failed USA auto industry.

The news media always reports this as "taxpayer money."

Actually it's not.

It's money created by government fiat, aka, Administrative Decree. The Gubment writing of these checks is no different than if you wrote yourself a check for $1,000,000 million dollars EXCEPT your check would bounce and their's clears....remember they ARE the goldsmith.

The USA Gubment has spent every dime in taxes it has collected in 2008.

To make up for the short fall in revenue it borrows money from large institutions (insurance companies) and foreign governments by way of selling Treasury Bonds.

When that's not enough they simply write a check.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert