Some words of Stupidity

No, I don't know that atheists should be considered as citizens, nor should they be considered patriots. This is one nation under God.

-- George Bush Sr.

Wednesday, April 8, 2009

Fractional Reserve Banking is Public Theft

Banks in the US and throughout most of the world work using a method called Fractional Reserve Banking. If you do a search on this term you will see that there are those that are for it, and those against it. How FRB or Fractional Reserve Banking works is pretty simple in a way. They "loan" out up to, and usually less then, a certain percentage that they have on the books. I use the words "loan" because if you do not pay them back it is not as if they then loose that money, the bank just looses the profit they might have realized in giving you that loan in the first place. The bank might also take a hit in its credit rating if enough people do that, but that is a different story.

To really understand how a bank works imagine one of your friends is named Conway and he is a counterfeiter. I do not know your name but I will call you Shaun the duped. You both want to go see a movie. When you arrive you realize you forgot your wallet. You have no way to pay for the movie. Conway being a friend offers to pay for the movie with his counterfeit money, but of course you do not know it is counterfeit, otherwise you would have told him no. In the end though you say yes. So you go to the movie and everything is fine. You pay back your friend (with interest, which seems most not friend-like, but you do not protest since you want to see the movie). You see the movie, and the movie house gets to pay for its expenses and earns a profit.

Now since Conway is counterfeiting it would seem logical that someone is loosing and someone is gaining. Obviously Conway is on the gaining side once everything is all said and done. Yeah, he could have just printed up the money he gave you and spent it himself, but through you he did one better, he gets all that money back with interest. He is doing quite well by this transaction. You and the movie house in this deal are co-equal in honesty and agreed upon work and capital (unless you count how much the movie house charges for popcorn!). So who looses? Society looses, that's who. If Conway did community service equaling the value he printed in work then everything would have gone full circle. Yeah, Conway would still be a crook, but at least he would be an honest crook. The money he injected into the economy would have had a chance to act like all money should, which is to say as nothing more then an agreed upon medium of exchange.

Conway though has no desire to spread his wealth around. He takes the money he "loaned" and was repaid for and is free to pay to get all manner of goods and services with it. He buys yachts and big houses, bonds and stock, etc... None of this largess does much good for mothers on welfare checks. They would have had more of a chance getting a job if that money went into the productive end of the economy. Conway gets rich really fast so he opens up a bank. Once he has his bank nothing much changes. Instead of printing the money he puts it into electronic accounts. He is also not free anymore to just "print" up as much money as he wants, he has to follow more regulations, mostly. Life is good for Conway; life is shitty for you and me.

Welcome to Fractional Reserve Banking, where exponential functions rule supreme and everything flows up to the top of the pyramid. There is so much more to explain about how corrupt current banking practices are that it might take a library of books. One good book to start on though is Ellen Brown's book "Web of Debt". Her web page is located at

http://www.webofdebt.com/.

Buy this book! Buy it now! You will learn so much that what you thought you knew before you will realize probably is wrong.

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