The Greatest  Fraud committed On Humanity is the creation of paper money out of  thin air.


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GOLDSMITHS[/center]In the old days gold was minted into coins and those coins, along with silver coins, formed the nation's currency. Goldsmiths had strongboxes and vaults in which to securely store the precious metal with which they worked. It was natural enough then that other people took to asking the goldsmith to store their gold and gold coins in his vault and to pay the goldsmith for the service. A merchant (for example) would entrust to the goldsmith £20 worth of his own gold for safekeeping. When he handed over his gold, the goldsmith would provide him with a receipt or note promising to hand back the gold (pay the bearer on demand) whenever the depositor returned and presented the note. The receipt held by the depositor was in fact as good as gold because he could exchange it for his £20 worth of gold any time he chose. But the note was easier to carry around than heavy and bulky amounts of gold and easier to conceal, so the depositor was often content to leave his gold in the goldsmith's safekeeping for long periods. In fact when the time came to pay for some commodity with his £20 of gold, instead of returning to the goldsmith, exchanging the receipt for the gold and then using the gold to pay for his purchase, it was more convenient for him simply to hand over his receipt to the seller. The seller was happy to accept the receipt in lieu of actual gold because it was more convenient to carry around and he knew that should he present it to the goldsmith, £20 of gold would be handed over to him.

Thus those gold receipts began to circulate and became the first paper money. People were happy to exchange them back and forth rather than the cumbersome gold they represented. The receipts had value because people were confident that in the goldsmith's vault lay the gold, which they could redeem at any time.

Eventually the goldsmiths noticed that the gold left by depositors remained in their vaults for longer and longer periods. People turned up wishing to exchange their receipts for gold less and less often, and that the receipts they had issued to depositors circulated in its stead. It seemed a shame to have that gold just sitting there doing nothing. Why not lend some of it out for a while? If it just sat there for year after year the owner, the holder of the receipt, was not going to miss it if it were loaned to someone else for a period.

As long as there was enough gold in the vaults to satisfy anyone who did turn up with a receipt, then no-one would be any the wiser. So depositor Joe would leave £20 of gold with the goldsmith for safekeeping and depart with his receipt which he would then use as money in lieu of the gold and it would circulate. It might be years before anyone turned up with that £20 note asking for £20 of gold. Meanwhile Tom would turn up at the goldsmith's asking to borrow £20 of gold and the goldsmith would lend it to him, demanding that it be paid back after a certain period at a certain amount of interest. But instead of lending Tom actual gold, the goldsmith would draw up a £20 receipt, just like the one depositor Joe had been given. Tom was happy to take the receipt in lieu of the gold because it was more convenient to carry around and people were happy to accept such receipts in payment for things.

So Tom went off with his £20 note, content that through it he was now in temporary possession of £20 of gold. But unbeknownst to Tom, Joe also has a receipt representing that gold. In other words there are now two notes in circulation representing the same £20 of gold! Clearly the goldsmith's issuance of two receipts for the same amount of gold is fraudulent - particularly when Tom repays the gold he believes he has borrowed in real gold. As each receipt promises to hand over the same £20 of gold on demand, the goldsmith is making a promise he knows he cannot keep.

Several things are clear at the moment the second receipt was issued and entered circulation: new money has been created out of thin air; that new money has been loaned into existence; as the loan has interest charged upon it, then a debt has been created out of nothing that is greater than the amount of new money created.

And another thing: Tom will eventually return to the goldsmith and repay his £20 loan, say at 10% interest. He will therefore hand the goldsmith, £22 in real gold. In other words, the goldsmith, in creating that bogus receipt and lending it to Tom, is creating for himself, albeit after a delay, real debt-free gold worth more than the new money he loaned into existence! It gets worse.

After a while the goldsmith, seeing that his fraud is working pretty well, thinks that if he can issue two £20 receipts against the same £20 of gold, then why not two, three or even four?

So Joe deposits £20 of gold and the goldsmith gives him his receipt. In time four other people turn up at his shop wanting to borrow that £20 of gold. The goldsmith obligingly lends it to each of them at interest, giving each a receipt purporting to represent that £20 of gold. There are now five receipts in circulation representing the same deposit of gold, one for the original depositor and one for each of the four borrowers. For that deposit of £20, £80 (4x £20) of new money is created merely by writing on a fancy piece of paper.

If(say) £2 of interest (10%) is charged on each loan, at the same time that £80 of new money is created out of thin air, a debt of £88 is also created out of thin air.

Property is held as security against these loans so if the borrower fails to repay with real gold the fraudulent piece of paper he borrowed, the goldsmith takes his property.

Each time the goldsmith lends £20 of bogus gold he charges 10% interest on the loan. By lending out £20 four times over and charging £2 interest on each loan, the goldsmith makes a whopping 40% (four times £2) in interest on the £20 "reserves" that were not even his to begin with! The goldsmith cannot lose and soon begins to amass a fortune from his fraud. It is the greatest get-rich-quick scheme ever invented. And it is, in essence, the basis of the modern banking system.

The goldsmiths of yesteryear became the bankers of today and although paper money and latterly electronic money took over from gold, essentially the same fraud is being run.


[center]THE MODERN INCARNATION OF FRAUD[/center]
What happens when you or I, or for that matter the government, borrow money from the bank? Prepare yourself for a surprise.

Let's say we want to borrow a £100,000 mortgage on a house. The bank or building society does what the goldsmith did and creates £100,000 out of thin air. Instead of handing us a paper certificate, it simply credits our bank account with the £100,000 and registers that £100,000 as a debt, with (say) a further £100,000 interest over 25 years. The money is simply penned into our account without any account anywhere being debited the loaned money. New money is therefore created. Alongside it a debt (in this case £100,000 plus the roughly £100,000 of interest) is created. When we repay the debt, the interest is accounted as income for the bank. The £100,000 we originally borrowed is withdrawn from circulation and is accounted as collateral for further lending, loaned back into circulation when someone else borrows.

Our house is held as security so if we fail to keep up our repayments, the creditor takes possession of it. The repayments themselves can vary through no fault of our own, according to interest rates set by the banking industry.

After 25 years of blood sweat and tears we finally pay back the last installment of the £200,000 capital-plus-interest we owed and the house in finally ours. It is not ours until that point.

The lender, who loaned us money which did not exist until the moment he created it out of nothing, winds up with £100,000 of interest on the loan: that is real, spendable income that comes courtesy of our real work and real wealth creation. The numbers have been simplified to highlight the nature of the fraud and in practise the process is hidden under a great deal of complexity but this in essence is the process of money creation.

Each time the banks create money they create a debt that is greater than the spending power they create. One can see too that each time they are creating a debt for the borrower, they are ultimately creating debt free money for themselves.

Before the goldsmiths' scam began, the money in circulation was hard currency - usually gold or silver minted into coins which then circulated as the tokens used to represent goods and services. That minting and circulation of coinage was usually administered by the government or king.

However as soon as the goldsmiths' certificates became used in lieu of gold, paper money had made an appearance. As soon as the goldsmiths began issuing paper notes for gold they did not actually have, the goldsmiths were themselves creating new money and lending it into circulation.

One can see that this establishes debt as the basis of our currency. Where once, long ago, the British pound represented something -so much gold or silver - it now represents so much debt, which is not only nothing it is less than nothing.




PAPER MONEY =  SLAVERY

very very informative

this is a wonderful piece, i need the permission to publish this in my upcoming magazine production.

permit me plz

thnx man very useful. But I'll like to look back at this to see if there are any subtle facts that you missed.

You might not want to go publishing this in a "real" publication.

It is half-truth at best, which is often worse than the truth. It might have started that way in the begining, but soon the need to regulate these activities became obvious and hence the heavily regulated banking system we have today. This is why countries are monitored so they are not just dumping money into the economy - although sometimes it becomes necessary. There are several safeguards, even in the simplified story presented here:

1) The fact that whatever is borrowed must be paid back, in which case if you do not need $100 you would not need to go borrow it - because YOU MUST REPAY it. Nobody forces you to borrow!!!;

2) There must be a reason why someone would keep their resources with someone else and not do it themselves - there is a cost, a risk. In the case of the goldsmith, it was probably easier to have designated safe harbours who pay the cost to protect the gold than every Tom, D-ick and Harry trying to protect their small stash - just like the way Nigerians are now building massive walls to protect chairs and tables in each house, rather than build an effect public policing system. Imagine  how easy it was back in the day for people to off each other for gold. The goldsmith is not working for free. It is either he gets paid for holding the gold or else is allowed to "work" with the gold to get his income - hence he allows others to lay claim to the gold - aka give them a receipt;

3) The goldsmith, as hinted, has to pay attention to time in dealing in gold receipts. It is the time value of money that he is really trading - it is invisible but real, like the air you breath. [size=14pt]The time value of money is what allows someone to borrow $100,000 and HAVE HIS HOUSE TODAY, rather that work to save $200,000 to buy his house 25 years later - WHEN HE PROBABLY HAS NO MORE USE FOR A HOUSE[/size]. Think of it as rent paid over 25 years being used to buy a house today.

Interest is mainly to cover the [size=14pt]time value of money, share profits and account for risks that the money may not be repaid[/size].

Todays's system is self-sustaining as long as people don't forget not to borrow far, far beyond what they can or plan to produce in the time frame for the loan's repayment. That is what happened to the world over the last few years - people lost their heads borrow and overvaluing their products. The world still backs currencies with gold reserves, but in the last few years than link was almost severed, hence the price of gold shot through the roof, and the crisis unfolded.

I hope this helps.

bilms:

this is a wonderful piece,   i need the permission to publish this in my upcoming magazine production.

permit me plz