George Washington
President from 1789-1796
By Richard E. Noble
George Washington, well, well ... no wooden teeth, no cherry tree, and it is even questionable whether he actually won the American Revolution or not. If it weren’t for the French joining in at Yorktown, doubling the size of George’s army and providing a navy off shore, Cornwallis probably would never have surrendered.
George may also have been sterile or impotent. His pear shape and particular ailments may have been indicative of a genetic distortion precipitous of this condition. This may explain his marriage of convenience to Martha - no children of their own; and his overwhelming desire to prove himself a brave, courageous leader.
His argumentative and illiterate mother, Mary Washington, didn’t think much of her little boy. She refused to participate in any ceremony honoring little Georgie, and always claimed of being neglected. To Georgie’s embarrassment she actually asked the Virginia legislature, at the height of the Revolutionary war, to come to her financial aid.
George was himself quite meticulous when it came to watching his pennies. Though he asked for no salary as Revolutionary General or as President, his expense accounts are a topic of a good deal of historical inquiry. There are those who contend that it might have been cheaper to pay him a salary after
Some letters show that he may have had a little thing going with a neighbor’s wife, a Mrs. Sally Fairfax. Of course if he was actually impotent, it would have been ... a very little thing, I’d imagine.
One thing does seem to be certain though. George Washington was a brave and fearless warrior. How smart, bright, or tactical a warrior he was, seems to be another matter. His best tactic seemed to be getting beat, but yet surviving long enough to escape overnight in order to come back again to fight on another day. He does seem to be a pretty lucky guy who led a rather charmed life. His marriage to the chubby, affable little widow Martha, made him just about if not, the richest man in the Colonies.
You could say that he was lucky in marriage, lucky in war, and lucky in business, but the truth is he sought out each in a planned determined way. When he decided to be married, they said that he rode all over the state proposing to any super-rich widow who might have him. In his business he was watchful and meticulous, and in war he was brave, courageous, determined, and if not the smartest, a man who learned well from his mistakes.
His greatest fame comes not from what he did, but from what he didn’t do. He was a military leader who won a revolution and didn’t attempt a permanent takeover of power after his victory. Unlike Cromwell, Napoleon, Lenin or Mao tse tung, Castro and who knows who else throughout history, he walked away from the seat of power, and had to be lured back and even begged to take a second term as a lowly president; never mind King or Caesar, or his Royal Majesty or something.
This may not seem to be much to some but it stands as unique in the annuls of human history. And if he didn’t take the reins for those first few years, it does seem that this Republic - for which it stands - might never have come about.
Monday, February 19, 2007
Wednesday, February 14, 2007
Generic Journalism
By Richard E. Noble
“Freedom of the press is guaranteed to those who own one.” A. J. Liebling (American Journalist)
Adam Smith, the modern day father of Economics, wrote a book in 1776 entitled The Wealth of Nations. In that famous book he spoke out against monopolization. In his time monopolies were chartered by the King. The British East India Tea Company was one such enterprise. It became so big that at one point it had its own army and was literally a nation unto itself.
Mr. Smith advocated free enterprise and entrepreneurship. He suggested that the economic world was guided by an invisible hand which promoted order and prosperity. He felt that the King and his government had no place in this economic world and that business would better meet the needs of the populous if it were left alone, Laissez fare.
The King’s continuous interference in business and trade was one of the main causes contributing to the American Revolution. “Give me liberty or give me death”, may have been the cry of the man in the street, but - let me sell my goods without interference from King George and his monopolistic government was the whispered breath of every colonial mercantilist and businessman - not to mention pirates like John Paul Jones, and smugglers like John Hancock.
There were many other famous anti-monopolists but the most famous and most controversial was a man named Karl Marx. In 1840 he published what he called, The Communist Manifesto. People have been fighting and dying over this little piece of literature ever since. He later published a book that is at least as famous as The Wealth of Nations. It was entitled, Das Capital. It was a barn burner in which Karl predicted the fall of Capitalism via the monopolization of industry.
Not too long after Karl, there was another anti-monopolist by the name of Henry George. Henry is not so famous today but he was quite a celebrity in his day. He ran against Teddy Roosevelt and Abram S. Hewitt in 1886 for the Governorship of New York, and he wrote a best seller. His Progress and Poverty, which was first self-published, became the intellectual rage of the day. In this book he championed what he considered to be the perfect economic system and the cure for poverty - forever. His notion was called the Single Tax Theory.
Just how this theory worked was exemplified in a game which was thought up by a housewife and teacher who became a Henry George disciple. The game that she invented was called Monopoly.
Originally this game had two sets of instructions. One exemplified the perils of monopolization, the other set of rules exemplified the Single Tax cure for the plague of monopolization. The rules exemplifying the cure have since been discarded and the game is played today by the rules which exemplify the failure of monopolization and the suggested reason for universal poverty.
The world did not heed the advice of the “wise men” and the game inventors, and by the Wilson administration an investigation by the Pujo Committee established that the vast majority of the capital and wealth of this nation, and very possibly the world, was in the hands or control of, less than a dozen men - J. P. Morgan, John D. Rockefeller Jr., Andrew Carnegie, Vanderbilt, Gould, Astor to name but a few. And in 1929 there came about what many around the world concluded to be the failure of Capitalism and the international monopolistic system.
Since the days of the Great Depression there have been many who have been warning about the returning roll of monopolization and the concentration of wealth and power into the hands of a few - economists like Thorstein Veblen and his Theory of the Leisure Class; more recently, John Kenneth Galbreith, and his the Affluent Society, and The New Industrial State and many, many others. But in the face of all criticism the monopolists continue to grow and prosper. They have broken the boundaries of individual nations and have gone international. We call them oligopolies, multi-nationals and conglomerates. They are not hiding; they are listed on everyone’s list of winning investment strategies. Today even companies thought to symbolize America, itself, have few ties to the American nation or its people. Companies like Coca-Cola, Wal Mart, GM, General Electric, McDonalds, Dupont, Dow Chemical, and even Ford Motor Company are all international business giants - many of them getting the majority of their income from their foreign investments.
There are those that think that this is all harmless. They argue that corporations have no dogmas, no ideologies, no prejudices, no theologies, no flags, no politics. They have only one line, and that line is the Bottom Line.
This all may be true; the future does not have to re-create the past. But when large organizations buy out even small town operations, one does begin to wonder what will happen to the Jimmy Stewart - red, white, and blue - small-town journalistic entrepreneur? What possible Bottom Line profits can be added to the coffers of conglomerates who purchase these small-town loosing operations in “Nowhere” America? If it is not money then what is left besides dogma and ideology - dare I say propaganda, heaven forbid? So whose afraid of Rupert Murdock or Time/Warner or Knight Ridder or Florida Freedom? Not John Milton or Thomas Jefferson, Benjamin Franklin or Thomas Paine or Jimmy Stewart - but those guys are all dead and Ted Turner is off somewhere raising buffalo.
What’s so bad about generic journalism - generic seems to be working all right in the grocery store and the pharmacy?
With our wars we like to cry; “Remember the Alamo”, or “Remember the Maine”. Maybe in our economics we need some crying too. How about: Remember the British and Dutch East India Tea Companies; or - Remember the A&P; or - Remember the Robber Barons; or Remember Teddy Roosevelt and his Trust Busters; or Remember Woodrow Wilson and the campaign of 1912, or how about - Monopolization without National Representation is Tyranny; not to mention Poverty.
Like the British East India Tea Company, the international business community is a nation unto itself. It will do what it is going to do and no one is going to stop it. Will it be a Wealth of Nations, or a cynical Das Capital?
But if free enterprise is behind all of this, that has got to be good ... right? We will have International economics - free from government intervention, free from Communism and Socialism, free from labor unions and pork-barrel national self-interest - a free world economic system where the pure theology of supply and demand and market interests will rule; where the only line will be the Bottom Line. This is going to be the greatest thing since the cotton gin, steam heat, or sliced bread.
Isn’t it?
I don’t know, individual nations can and have been held responsible by their people; corporations just seem to disappear into the small print and legal mumbo-jumbo. Who in the world is going to temper the might of the conglomerate?
They weren’t afraid or concerned about the monopolization of the news media in Italy when Mussolini did it; nor were they worried in Germany when Hitler did it. The Russians weren’t overly upset when Stalin went about the process, or Mao in China. But this is different; this is Free Enterprise who’s doing it today. There is no terrible government, national or global, to interfere. There can be no trust busters like Teddy Roosevelt or Harry Truman in a world economy. Who looks out for the people in a global economy? No fear of demagoguery or ochlocracy here. This could even be bigger than Big Brother of George Orwell fame.
Can a monopolized world be a free world? Can a monopolized press be a free press? This is truly going to take an invisible hand - the hand of God maybe.
“The basis of our government being the opinion of the people, the very first object should be to keep that (opinion) right; and were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate for a moment to prefer the later. But I should mean that everyman should receive those papers and be capable of reading them.” Thomas Jefferson.
By Richard E. Noble
“Freedom of the press is guaranteed to those who own one.” A. J. Liebling (American Journalist)
Adam Smith, the modern day father of Economics, wrote a book in 1776 entitled The Wealth of Nations. In that famous book he spoke out against monopolization. In his time monopolies were chartered by the King. The British East India Tea Company was one such enterprise. It became so big that at one point it had its own army and was literally a nation unto itself.
Mr. Smith advocated free enterprise and entrepreneurship. He suggested that the economic world was guided by an invisible hand which promoted order and prosperity. He felt that the King and his government had no place in this economic world and that business would better meet the needs of the populous if it were left alone, Laissez fare.
The King’s continuous interference in business and trade was one of the main causes contributing to the American Revolution. “Give me liberty or give me death”, may have been the cry of the man in the street, but - let me sell my goods without interference from King George and his monopolistic government was the whispered breath of every colonial mercantilist and businessman - not to mention pirates like John Paul Jones, and smugglers like John Hancock.
There were many other famous anti-monopolists but the most famous and most controversial was a man named Karl Marx. In 1840 he published what he called, The Communist Manifesto. People have been fighting and dying over this little piece of literature ever since. He later published a book that is at least as famous as The Wealth of Nations. It was entitled, Das Capital. It was a barn burner in which Karl predicted the fall of Capitalism via the monopolization of industry.
Not too long after Karl, there was another anti-monopolist by the name of Henry George. Henry is not so famous today but he was quite a celebrity in his day. He ran against Teddy Roosevelt and Abram S. Hewitt in 1886 for the Governorship of New York, and he wrote a best seller. His Progress and Poverty, which was first self-published, became the intellectual rage of the day. In this book he championed what he considered to be the perfect economic system and the cure for poverty - forever. His notion was called the Single Tax Theory.
Just how this theory worked was exemplified in a game which was thought up by a housewife and teacher who became a Henry George disciple. The game that she invented was called Monopoly.
Originally this game had two sets of instructions. One exemplified the perils of monopolization, the other set of rules exemplified the Single Tax cure for the plague of monopolization. The rules exemplifying the cure have since been discarded and the game is played today by the rules which exemplify the failure of monopolization and the suggested reason for universal poverty.
The world did not heed the advice of the “wise men” and the game inventors, and by the Wilson administration an investigation by the Pujo Committee established that the vast majority of the capital and wealth of this nation, and very possibly the world, was in the hands or control of, less than a dozen men - J. P. Morgan, John D. Rockefeller Jr., Andrew Carnegie, Vanderbilt, Gould, Astor to name but a few. And in 1929 there came about what many around the world concluded to be the failure of Capitalism and the international monopolistic system.
Since the days of the Great Depression there have been many who have been warning about the returning roll of monopolization and the concentration of wealth and power into the hands of a few - economists like Thorstein Veblen and his Theory of the Leisure Class; more recently, John Kenneth Galbreith, and his the Affluent Society, and The New Industrial State and many, many others. But in the face of all criticism the monopolists continue to grow and prosper. They have broken the boundaries of individual nations and have gone international. We call them oligopolies, multi-nationals and conglomerates. They are not hiding; they are listed on everyone’s list of winning investment strategies. Today even companies thought to symbolize America, itself, have few ties to the American nation or its people. Companies like Coca-Cola, Wal Mart, GM, General Electric, McDonalds, Dupont, Dow Chemical, and even Ford Motor Company are all international business giants - many of them getting the majority of their income from their foreign investments.
There are those that think that this is all harmless. They argue that corporations have no dogmas, no ideologies, no prejudices, no theologies, no flags, no politics. They have only one line, and that line is the Bottom Line.
This all may be true; the future does not have to re-create the past. But when large organizations buy out even small town operations, one does begin to wonder what will happen to the Jimmy Stewart - red, white, and blue - small-town journalistic entrepreneur? What possible Bottom Line profits can be added to the coffers of conglomerates who purchase these small-town loosing operations in “Nowhere” America? If it is not money then what is left besides dogma and ideology - dare I say propaganda, heaven forbid? So whose afraid of Rupert Murdock or Time/Warner or Knight Ridder or Florida Freedom? Not John Milton or Thomas Jefferson, Benjamin Franklin or Thomas Paine or Jimmy Stewart - but those guys are all dead and Ted Turner is off somewhere raising buffalo.
What’s so bad about generic journalism - generic seems to be working all right in the grocery store and the pharmacy?
With our wars we like to cry; “Remember the Alamo”, or “Remember the Maine”. Maybe in our economics we need some crying too. How about: Remember the British and Dutch East India Tea Companies; or - Remember the A&P; or - Remember the Robber Barons; or Remember Teddy Roosevelt and his Trust Busters; or Remember Woodrow Wilson and the campaign of 1912, or how about - Monopolization without National Representation is Tyranny; not to mention Poverty.
Like the British East India Tea Company, the international business community is a nation unto itself. It will do what it is going to do and no one is going to stop it. Will it be a Wealth of Nations, or a cynical Das Capital?
But if free enterprise is behind all of this, that has got to be good ... right? We will have International economics - free from government intervention, free from Communism and Socialism, free from labor unions and pork-barrel national self-interest - a free world economic system where the pure theology of supply and demand and market interests will rule; where the only line will be the Bottom Line. This is going to be the greatest thing since the cotton gin, steam heat, or sliced bread.
Isn’t it?
I don’t know, individual nations can and have been held responsible by their people; corporations just seem to disappear into the small print and legal mumbo-jumbo. Who in the world is going to temper the might of the conglomerate?
They weren’t afraid or concerned about the monopolization of the news media in Italy when Mussolini did it; nor were they worried in Germany when Hitler did it. The Russians weren’t overly upset when Stalin went about the process, or Mao in China. But this is different; this is Free Enterprise who’s doing it today. There is no terrible government, national or global, to interfere. There can be no trust busters like Teddy Roosevelt or Harry Truman in a world economy. Who looks out for the people in a global economy? No fear of demagoguery or ochlocracy here. This could even be bigger than Big Brother of George Orwell fame.
Can a monopolized world be a free world? Can a monopolized press be a free press? This is truly going to take an invisible hand - the hand of God maybe.
“The basis of our government being the opinion of the people, the very first object should be to keep that (opinion) right; and were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate for a moment to prefer the later. But I should mean that everyman should receive those papers and be capable of reading them.” Thomas Jefferson.
Monday, February 05, 2007
Banking and Money
By Richard E. Noble
Despite comments to the contrary by John Kenneth Galbraith in his book,”Money: Whence it Came and Where it Went”, I have found Money And Banking very perplexing. Mr. Gaibraith said that money was very simple and that anyone could understand it. I don’t think so. Not only that, I have come to the conclusion that the whole Banking thing was a scam, almost, from the beginning. Let me explain my confusion.
In the beginning, there came about the first Bank. This first bank was basically a vault. People who had accumulated large amounts of gold, and silver got tired of trying to hide it under the floor boards of their cabins, or in a secret place behind the fireplace. So, when they heard that some guy had opened up a Bank where they could put their gold and silver and have it guarded and protected, they were very pleased.
These wealthy people with surplus gold and silver took their money down to this Bank and “deposited” it. The Bank owner gave these people a receipt. This receipt was a certificate of deposit. It affirmed that “So and So” had “X” amount of gold or silver stored in this Bank. Up until this point everything seems to be on the up and up.
The people who had the receipts began to trade these receipts as if they were actually gold or silver. This became accepted as legal and legitimate by most people. To have this certificate of deposit in your possession was as good as having the actual gold or silver. Up to this point I think everything is still legitimate. This next evolution is where things begin to go haywire.
The man who owns the Bank has a bright idea. He thinks that it is a shame to have all this gold and silver sitting in his vault when there are so many good, trustworthy people out there in the world who could put it to good use - and would be willing to pay for that opportunity. He talks with his certificate of deposit holders and suggests to them that if they would be willing to loan out their accumulated assets, instead of paying a service charge for the privilege of having their gold and silver protected in his vault, they could actually receive a dividend.
This is, in my opinion, where everything goes coo-coo. Without getting into the obvious problems involved in the recording of assets and debits and who has what, and just sticking to the basic principles involved, I see a big problem here.
The problem stated simply is this: Mr. Jones has deposited, $1,000 in gold. He has a certificate to prove it. Mr. Smith has borrowed Mr. Jones’ $1,000 and he has a loan contract to prove it. But the Bank now has nothing in its vault but a promise. Now this all would have been okay if Mr. Jones understood that until his loan was paid back by Mr. Smith, he didn’t have access to his $1,000 anymore. But as we all know, this did not turn out to be the eventual case.
So, as time rolled on and people deposited money and others borrowed that money, the Bank recorded assets into the millions, and all the while it could really not have a cent or an once of gold in its vault. The Bank could have nothing but a ledger full of promises and no gold at all. When you think about all of this it begins to sound like that old Abbot and Costello routine - quick here’s two tens, gimme a five.
So, was all of this legal?
Well, legal or not legal, most people didn’t really understand what was going on. And because of this lack of understanding, we had Jimmy Stewart standing on the top of the counter at his local bank trying to explain to the bank customers that there was nothing wrong in the fact that the bank had no money to give to its depositors.
In the movie everyone understood what Jimmy was saying, but in real America nobody got it. They called this phenomena “The Bank Run”.
The Bankers tried everything that their cleaver little imaginations could come up with, but nothing seemed to work - the people still didn’t get it - and one might ask: What was there to get?
Banks got together and formed coalitions. They each kept a percentage of their deposits in reserve and if one of their coalition experienced a run - they ran to its rescue with bags of money in temporary loans. This worked for awhile for small runs, but when large numbers of people began to panic about the whereabouts of their life’s savings, whole coalitions were bank-rupted.
So, at this point, we have a good many problems with Banks. This problem could have been solved by not allowing banks to loan out other people’s money; or by turning a bank into some sort of investment fund - like the stock market - where the risks were explained to the depositors and they were given the choice to participate or not participate. I would have to say that what the banks were doing if not illegal, it was certainly morally suspect. They were promoting the unsubstantiated notion that they had people’s money when, in truth, they did not. This is similar to the well known Ponzi scam today. There was another guy by the name of Say – but he was not as obvious as Ponzi.
Ponzi’s idea was to get people to invest in him today on the promise of a large return on their investment tomorrow. The fact is that he had no investment program whatsoever and he simply manipulated the large sums of money coming in with staggered payments going out. As long as more money was coming in than was going out, Ponzi was rich and his investors were happy. The whole thing became a matter of book keeping.
Now you might say that the bank is not a Ponzi scam because it has legitimate investments. This is true, but if those legitimate investments prove to be unreliable then you have the same situation as with Ponzi, nevertheless. Then we have borderline elaborations on Ponzi - gold mines out west, swamp land in Florida, the Panama Canal fiasco, and last year’s failed corn crop.
Banks have gone out of business, over the years, because they were outright Ponzi scams with no investments at all; because they made false claims about their investments; because they made legitimate investments that failed. But the problem that bothered bankers was not the morality of their initial idea but what to do about banks that made good investments but were driven out of business by a sudden lack of confidence on the part of their depositors - the bank run. How they could have their cake and eat it too. Clearly a bank could not loan out its money to entrepreneurs and still have it on hand to return to its depositors on demand.
Now, it is at this point that the system has become an impossibility. It clearly and simply does not work, and there is no solution. You can not loan out the money and still have that money readily on demand for the depositors. This is impossible. One thing can not be in two places at the same time.
But, this slight-of-hand idea was so advantageous to society because it provided money for investment, expansion and growth, that those involved in profiting from this idea wanted to devise an acceptable method for promoting what was clearly an impossibility. And thus has evolved today what we call the central banking system - and here in the U.S. - “The Federal Reserve”.
So far this system has served to perpetuate and impossible idea. For example, if when Mr. Ponzi had run into his short fall - the point at which his payments going out were greater than his payments coming in - J. P. Morgan or the Rothchilds saw in his scam enormous long term potential and therefore decided to loan him money to carry him over his temporary cash flow problem, the Ponzi scam may have continued indefinitely. But, it would have finally collapsed when Ponzi had finally reached the saturation point. That point being when there was just not enough money available in the world to make the interest payments on all of his promises. In effect Ponzi’s system was a “Designed to Fail” system.
The Central Banking System is similar but much more sophisticated and self perpetuating. The Central Banking System does not create money from nothing as many people suggest. If it did then this system would self-destruct when the supply of money exceeded the world’s ability to absorb the funding. Would this ever take place considering expanding populations and expanding economic growth throughout the world, and product diversification and artificial demand creation for “wants” in addition to needs? Maybe not.
Inflation is simply the release valve on this money generating steam boiler. If the supply of money comes onto the world faster than the population and the various demand growth factors - you will have inflation. If inflation is allowed to grow too fast or without proper regulation then the bubble of public confidence could burst and economic collapse would be the result.
But this is not the situation which exists with the Central Banking System concept. This present system is based on debt creation. Governments borrow via a system of notes and bonds which are handled for a fee by their Central Banking systems. The central banks collect the vigorish. They handle the sales for the government for a fee - vigorish. [The vigorish is not the problem when we talk of the National Debt. The problem with the National Debt is the interest being collected by the Bond purchaser. The Federal Reserve bank is just the salesman for the government bonds. It charges and small “commission” which is negligible.]
As I see it this system has more potential points of destruction than does the politically unappealing Creating-Money-from-Nothing System. This system can also destruct from the same causes stated in the non-debt creating system mentioned above. But in addition to this possibility this debt system can also self-destruct from other factors.
It can also self-destruct when and if the interest payment on the created debt obligations becomes greater than the government’s money supply sources. This would be much the same as if your basic payment on your credit card exceeded your income.
Will that ever happen? I don’t know. The inflation safety valve would compensate or, as above, explode due to lack of public confidence. And, of course there is that same notion of infinite world economic expansion as mentioned above. And then, of course, the government can simply keep creating more and more debt even to pay impossible debt.
How long could such a process go on?
I don’t know. But paying debt with added debt can only go on for so long, before something negative would happen.
The vigorish could also become a problem. In other words the Central Banking fee could become so bloated as to create a debt problem in itself. In other words, the cost of the loan transaction could eventually outweigh any gain from creating the debt in the first place. Right now that fee is 7% as I understand it. If due to inflation that cost were to escalate to 20% or 30% - but by that time the monetary system would probably already collapsed due to inflation. So maybe that is a specious argument.
An added problem with the Central Banking System is that it has been partnered by the various national governments of the countries who have such systems - which may be every country in the world as far as I know. So instead of the banking system backing itself up via a conglomerate of banking institutions and becoming the bank of last resort for all banks - as is the claim - the government becomes the bank of last resort. The problem here is that in such a system if the bankers decide that they are tired of making money “the old fashioned” way and they would rather do it the easy way. They can simply steal their depositor’s funds, and loan them out by fraudulent and deceptive transactions and then petition the treasury to fund them out of their financial difficulties.
To put this simply, if an unscrupulous banker or group of bankers can figure out a method of divesting their banks of its capital yet still create what appears to be a legitimate paper trail of investments, they can double their personal wealth rather cleverly, simply by ripping-off their Federal or National Government.
The same thing can be done on an international basis via the IMF and the World Banking System. And I am of the opinion that this type of thing has already been done several times over - not only in the historical past, but in the recent past. And it can work both ways in a world system. Not only is it possible for the world banking system to bankrupt individual nations if it so chooses; it is equally possible that cleaver national bankers can swindle the world system. [I think that this technique was used in the U.S. S&L failure and the Commercial bank failure; and in the recent stock market crash; and most recently in the real estate boom and bubble. It is my person opinion that this is the current method for bankrupting the U.S. Treasury. It began seriously under Reagan and has been escalating under every succeeding Republican administration.
And what is the answer to all of this?
I don’t know.
By Richard E. Noble
Despite comments to the contrary by John Kenneth Galbraith in his book,”Money: Whence it Came and Where it Went”, I have found Money And Banking very perplexing. Mr. Gaibraith said that money was very simple and that anyone could understand it. I don’t think so. Not only that, I have come to the conclusion that the whole Banking thing was a scam, almost, from the beginning. Let me explain my confusion.
In the beginning, there came about the first Bank. This first bank was basically a vault. People who had accumulated large amounts of gold, and silver got tired of trying to hide it under the floor boards of their cabins, or in a secret place behind the fireplace. So, when they heard that some guy had opened up a Bank where they could put their gold and silver and have it guarded and protected, they were very pleased.
These wealthy people with surplus gold and silver took their money down to this Bank and “deposited” it. The Bank owner gave these people a receipt. This receipt was a certificate of deposit. It affirmed that “So and So” had “X” amount of gold or silver stored in this Bank. Up until this point everything seems to be on the up and up.
The people who had the receipts began to trade these receipts as if they were actually gold or silver. This became accepted as legal and legitimate by most people. To have this certificate of deposit in your possession was as good as having the actual gold or silver. Up to this point I think everything is still legitimate. This next evolution is where things begin to go haywire.
The man who owns the Bank has a bright idea. He thinks that it is a shame to have all this gold and silver sitting in his vault when there are so many good, trustworthy people out there in the world who could put it to good use - and would be willing to pay for that opportunity. He talks with his certificate of deposit holders and suggests to them that if they would be willing to loan out their accumulated assets, instead of paying a service charge for the privilege of having their gold and silver protected in his vault, they could actually receive a dividend.
This is, in my opinion, where everything goes coo-coo. Without getting into the obvious problems involved in the recording of assets and debits and who has what, and just sticking to the basic principles involved, I see a big problem here.
The problem stated simply is this: Mr. Jones has deposited, $1,000 in gold. He has a certificate to prove it. Mr. Smith has borrowed Mr. Jones’ $1,000 and he has a loan contract to prove it. But the Bank now has nothing in its vault but a promise. Now this all would have been okay if Mr. Jones understood that until his loan was paid back by Mr. Smith, he didn’t have access to his $1,000 anymore. But as we all know, this did not turn out to be the eventual case.
So, as time rolled on and people deposited money and others borrowed that money, the Bank recorded assets into the millions, and all the while it could really not have a cent or an once of gold in its vault. The Bank could have nothing but a ledger full of promises and no gold at all. When you think about all of this it begins to sound like that old Abbot and Costello routine - quick here’s two tens, gimme a five.
So, was all of this legal?
Well, legal or not legal, most people didn’t really understand what was going on. And because of this lack of understanding, we had Jimmy Stewart standing on the top of the counter at his local bank trying to explain to the bank customers that there was nothing wrong in the fact that the bank had no money to give to its depositors.
In the movie everyone understood what Jimmy was saying, but in real America nobody got it. They called this phenomena “The Bank Run”.
The Bankers tried everything that their cleaver little imaginations could come up with, but nothing seemed to work - the people still didn’t get it - and one might ask: What was there to get?
Banks got together and formed coalitions. They each kept a percentage of their deposits in reserve and if one of their coalition experienced a run - they ran to its rescue with bags of money in temporary loans. This worked for awhile for small runs, but when large numbers of people began to panic about the whereabouts of their life’s savings, whole coalitions were bank-rupted.
So, at this point, we have a good many problems with Banks. This problem could have been solved by not allowing banks to loan out other people’s money; or by turning a bank into some sort of investment fund - like the stock market - where the risks were explained to the depositors and they were given the choice to participate or not participate. I would have to say that what the banks were doing if not illegal, it was certainly morally suspect. They were promoting the unsubstantiated notion that they had people’s money when, in truth, they did not. This is similar to the well known Ponzi scam today. There was another guy by the name of Say – but he was not as obvious as Ponzi.
Ponzi’s idea was to get people to invest in him today on the promise of a large return on their investment tomorrow. The fact is that he had no investment program whatsoever and he simply manipulated the large sums of money coming in with staggered payments going out. As long as more money was coming in than was going out, Ponzi was rich and his investors were happy. The whole thing became a matter of book keeping.
Now you might say that the bank is not a Ponzi scam because it has legitimate investments. This is true, but if those legitimate investments prove to be unreliable then you have the same situation as with Ponzi, nevertheless. Then we have borderline elaborations on Ponzi - gold mines out west, swamp land in Florida, the Panama Canal fiasco, and last year’s failed corn crop.
Banks have gone out of business, over the years, because they were outright Ponzi scams with no investments at all; because they made false claims about their investments; because they made legitimate investments that failed. But the problem that bothered bankers was not the morality of their initial idea but what to do about banks that made good investments but were driven out of business by a sudden lack of confidence on the part of their depositors - the bank run. How they could have their cake and eat it too. Clearly a bank could not loan out its money to entrepreneurs and still have it on hand to return to its depositors on demand.
Now, it is at this point that the system has become an impossibility. It clearly and simply does not work, and there is no solution. You can not loan out the money and still have that money readily on demand for the depositors. This is impossible. One thing can not be in two places at the same time.
But, this slight-of-hand idea was so advantageous to society because it provided money for investment, expansion and growth, that those involved in profiting from this idea wanted to devise an acceptable method for promoting what was clearly an impossibility. And thus has evolved today what we call the central banking system - and here in the U.S. - “The Federal Reserve”.
So far this system has served to perpetuate and impossible idea. For example, if when Mr. Ponzi had run into his short fall - the point at which his payments going out were greater than his payments coming in - J. P. Morgan or the Rothchilds saw in his scam enormous long term potential and therefore decided to loan him money to carry him over his temporary cash flow problem, the Ponzi scam may have continued indefinitely. But, it would have finally collapsed when Ponzi had finally reached the saturation point. That point being when there was just not enough money available in the world to make the interest payments on all of his promises. In effect Ponzi’s system was a “Designed to Fail” system.
The Central Banking System is similar but much more sophisticated and self perpetuating. The Central Banking System does not create money from nothing as many people suggest. If it did then this system would self-destruct when the supply of money exceeded the world’s ability to absorb the funding. Would this ever take place considering expanding populations and expanding economic growth throughout the world, and product diversification and artificial demand creation for “wants” in addition to needs? Maybe not.
Inflation is simply the release valve on this money generating steam boiler. If the supply of money comes onto the world faster than the population and the various demand growth factors - you will have inflation. If inflation is allowed to grow too fast or without proper regulation then the bubble of public confidence could burst and economic collapse would be the result.
But this is not the situation which exists with the Central Banking System concept. This present system is based on debt creation. Governments borrow via a system of notes and bonds which are handled for a fee by their Central Banking systems. The central banks collect the vigorish. They handle the sales for the government for a fee - vigorish. [The vigorish is not the problem when we talk of the National Debt. The problem with the National Debt is the interest being collected by the Bond purchaser. The Federal Reserve bank is just the salesman for the government bonds. It charges and small “commission” which is negligible.]
As I see it this system has more potential points of destruction than does the politically unappealing Creating-Money-from-Nothing System. This system can also destruct from the same causes stated in the non-debt creating system mentioned above. But in addition to this possibility this debt system can also self-destruct from other factors.
It can also self-destruct when and if the interest payment on the created debt obligations becomes greater than the government’s money supply sources. This would be much the same as if your basic payment on your credit card exceeded your income.
Will that ever happen? I don’t know. The inflation safety valve would compensate or, as above, explode due to lack of public confidence. And, of course there is that same notion of infinite world economic expansion as mentioned above. And then, of course, the government can simply keep creating more and more debt even to pay impossible debt.
How long could such a process go on?
I don’t know. But paying debt with added debt can only go on for so long, before something negative would happen.
The vigorish could also become a problem. In other words the Central Banking fee could become so bloated as to create a debt problem in itself. In other words, the cost of the loan transaction could eventually outweigh any gain from creating the debt in the first place. Right now that fee is 7% as I understand it. If due to inflation that cost were to escalate to 20% or 30% - but by that time the monetary system would probably already collapsed due to inflation. So maybe that is a specious argument.
An added problem with the Central Banking System is that it has been partnered by the various national governments of the countries who have such systems - which may be every country in the world as far as I know. So instead of the banking system backing itself up via a conglomerate of banking institutions and becoming the bank of last resort for all banks - as is the claim - the government becomes the bank of last resort. The problem here is that in such a system if the bankers decide that they are tired of making money “the old fashioned” way and they would rather do it the easy way. They can simply steal their depositor’s funds, and loan them out by fraudulent and deceptive transactions and then petition the treasury to fund them out of their financial difficulties.
To put this simply, if an unscrupulous banker or group of bankers can figure out a method of divesting their banks of its capital yet still create what appears to be a legitimate paper trail of investments, they can double their personal wealth rather cleverly, simply by ripping-off their Federal or National Government.
The same thing can be done on an international basis via the IMF and the World Banking System. And I am of the opinion that this type of thing has already been done several times over - not only in the historical past, but in the recent past. And it can work both ways in a world system. Not only is it possible for the world banking system to bankrupt individual nations if it so chooses; it is equally possible that cleaver national bankers can swindle the world system. [I think that this technique was used in the U.S. S&L failure and the Commercial bank failure; and in the recent stock market crash; and most recently in the real estate boom and bubble. It is my person opinion that this is the current method for bankrupting the U.S. Treasury. It began seriously under Reagan and has been escalating under every succeeding Republican administration.
And what is the answer to all of this?
I don’t know.
Subscribe to:
Posts (Atom)
