Thursday, November 26, 2009

Fractional Reserve Banking

"Anonymous said...
FDR - what is the history of fractional banking as it is practiced here in the US? Did it originate with the creation of the Federal Reserve or does it pre-date the Fed."

The quick answer is that fractional reserve banking dates to at least the Roman Empire, probably earlier. On a purely historical note, the most famous confrontation with Money Changers, those who make a living by subversively varying currency value at the expense of the people, was the crucifixion of Jesus. He overturned the tables of the swindlers who monopolized the Jewish Shekel to force the masses to pay marked-up exchange rates. Jesus was killed for doing so, a few days later.

Shekel - 400 B.C.

Shekel - 69 A.D. (Inflation at work?)
[My note: Both coins clearly exhibit anti-coin-shaving designs. The 90 degree convex markings, and lip on the flip side of the older coin are intended to reveal if the diameter was reduced. The newer coin has writing nearly to the edge, plus a bimetal design that makes shaving the outer circumference less valuable than the coin's center. This proves that currency devaluation was well understood at least by the currency issuers. The greatest coin shaver of all time was President Lyndon B. Johnson, who shaved all United States silver coins to plated zinc, then returned them to circulation. As a result, today's circulated U.S. coins are completely worthless, making them as easy for the private Federal Reserve banks to inflate as paper cash.]

It is interesting, worth pondering today, that it was Money Changers, bankers who controlled the Roman government-corporatocracy, who had Jesus put to death.
"And Jesus went into the Temple of God and cast out all them that sold and bought in the Temple. And overthrew the tables of the Money Changers and said unto them, "It is Written, My House shall be called a House of Prayer; but ye have made it a den of thieves."

An early confrontation between
government-connected bankers and the people

But the modern day model of fractional banking, or Money Changing to scientifically engineer credit booms and deflationary busts for the exclusive profit of connected bankers, is a British export. The 1694 establishment of the Bank of England was the first fully functional sham outfit to use fractional reserve banking to pay royalty at the direct expense of her people.

To this day, central banks of the world follow the BoE model. It is why New York holds the concentration of US central bank swindlers and horse thieves--it is geographically closest to the king's bank, which never stopped siphoning US wealth. The BoE and the FBUS, SBUS, and now the Federal Reserve, were and still are one and the same institution, as are most other modern central banks hellbent on exploiting the good people of the world.

I'll point out, right now, that a continuously recycled trick in the BoE's "Create a Depression for Profit Playbook" is to slowly cycle onto and off-of a gold standard, to assure an outraged people that government action is being taken to "reign in" those wild bank speculators. Of course, the bank is the government and the government is the bank, as you will see, below. Cycling on a wavelength greater than a human lifetime helps the central bank foil attempts to uncover "their craftiness and tortuous tricks." (Otto von Bismark)

So the story goes, mid-evil Britain developed the principals of fractional reserve banking when goldsmiths leased-out unused space in their fortified bullion banks to store nobles' valuable possessions. The goldsmiths issued paper receipts for each deposit, "IOU one silver candlestick." Over time, people started trading the paper debt receipts instead of the objects themselves. And so, the gold-men became the first issuers of paper cash (side note--Marco Polo brought back paper currency from China in the 13th Century).

It is probably a timeless truth, spanning all corners of our globe, galaxy, and universe, that once paper IOUs start trading, depositors tend to leave physical wealth at the bank, and then it takes 15 minutes for a banker to stare quizzically at the pile of deposits, wondering, "why not put this idle wealth to work for me?" That Goldman might, say, use the silver candlestick to spice up his dinner table, just for a night or two. Or, he might wear another person's gem-encrusted gold ring for a while--or, perhaps--loan all this great stuff out to other people for a profit! (ding! ding! ding!) The money isn't his, but you know, if it is only "lent out" then he hasn't "technically" stolen it.

And so, fractional reserve banking, risking other peoples' money without their consent or knowledge, was born.

Money in circulation, owed to more than one person, and the bank-printed un-backed paper IOUs floated on top of known phantom deposits (pure, counterfeit cash), became the first inflationary paper. The amount of stuff the bankers didn't steal, to keep on hand to satisfy the small number of customers who occasionally claimed their stuff, was the bank's required reserve ratio. Bankers got rich counterfeiting their own paper IOUs, and honest people continue to pay for it via increasing quantities of un-backed, banker-printed, inflationary cash.

When the most powerful bank kingpins pay a cut of their counterfeiting profits to politicians to legalize and monopolize the scam, an odd creature known as a public-private central bank corporation is spawned (e.g. the privately held Federal Reserve banks).

This fun little story is exactly why I keep reiterating that "the government" has no ability to print cash, they cannot inflate, nor can they arrest deflation. Commercial banks, not the government, issue our entire cash supply, every penny of it, solely to generate private profit for themselves. Commercial banks, our Goldman, and only commercial banks can print paper cash for one, very good reason. It is the same reason people rob banks: that's where the money is.


  1. "I know a lot of people love gold right now. So many, that in a strange way it reminds me of the oddly equivalent, but polar opposite desolation of those of us who were buying gold in 2002 and enjoyed 300% returns.

    I'll post more in a Thanksgiving Special Report I'll get out sometime this weekend. Hopefully in time for some casual holiday reading."

    Good blog, i can't wait!, thanks

  2. It was surprising upon recently reading a biography on George Washington to find out that many of our Founding Fathers were in much the same shape as Americans are today - i.e. the Bank of England had provided the American colonists cheap credit for many years - cheap credit that had encouraged speculation and expansion of plantations - these were exceedingly profitable up until the 1760's or so would credit suddenly became much more expensive and agricultural prices plummeted, leaving most of these early plantations indebted to the English banks.

    George Washington was one of the first to recognize the usury rates and one of the few early colonists to extricate himself from debt - although at great effort and personal losses none the less.

    The American Revolution was basically a revolt against unfair economic policy and usury interest rates and taxes by the English banks and government.

  3. Yep, have a look at "Follow the Money Parts 1, 2, and 3" in the PLEASE READ ME FIRST section above. The $100 quote is a good one.

  4. The old goldsmiths only lent out the silver candlesticke that not belong to him, but it looks like that now if people put a silver candlestick into bank, the bank will issue 10 or 40 IOUs and lent to people, is it?

  5. Yep. And it all works like a swiss watch. Until, 30 of the 40 people can't repay the Goldman, and that giant phantom-deposit pyramid begins to crumble.

    Here it comes.

  6. Ok FDR it took me a while to understand what you are doing with your investment portfolio. OMG you will get the move plus the ETF management fees this way. I get it!

  7. "Ok FDR it took me a while to understand what you are doing with your investment portfolio. OMG you will get the move plus the ETF management fees this way. I get it!"

    You got it. Good work. I've updated the welcome message to clarify the positions I set up on Weds in anticipation of Wave 3 of C imminent in stocks, and Wave 1 of C imminent in PMs, given the USD was pinned.

  8. We want Cashzilla!


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