This is the first of a series of five articles by Sonus [the Anon of the comments sections on this blog]. In view of the material here, I'll hold my own post '2012' over until tomorrow. This series will be linked in the sidebar in a few days. Thanks, Sonus, for the post.
The problem I have in writing an essay like this, is where to start?
What is the knowledge base of my readership?
If the knowledge base of my audience is inadequate, how can I explain the problem, have it recognised, and how to debate a solution?
So I find that to begin, a wider explanation of the current situation is needed.
We live in a financial system that is dominated by, or rather, called, a Fiat, financial system, which uses Fractional Reserve Lending as part of its business model.
Let's examine those terms.
A Fiat system is a false system, an un-backed system, that is, there is nothing of intrinsic value to back the promise on a Sterling note, other than the promise to pay the bearer with another sterling note, - another promise to pay the bearer. This is accepted as a medium of exchange because the Government says it is, and because the government recognises it as a legal way to pay government tax demands. It is “legal tender”. Sterling notes, indeed any currency notes in any Fiat system, are “irredeemable”, ie the promissory note can only be replaced by another promissory note. They are however accepted as a medium of exchange. The ultimate backer for any paper promise to pay the bearer with another paper promise is the issuing government, and that ultimately falls to the responsibility of the taxpayer resident in the issuing country, ie, the ability of the issuing government to tax the population of that country to be able to pay the debts that the government has already incurred.
It has not always been like this.
Prior to 1971, when president Nixon cancelled the right to exchange the US $ paper currency for gold on demand, at a fixed price, the system was not Fiat, ie it had the backing of gold.
Excessive expenditure by the Federal Government had resulted in the issuance of large amounts of paper dollars, and these were held by foreign governments. Several foreign governments, notably France, began to worry about the level of debt incurred by the US government, and demanded payment, not in paper dollars, but in gold. This created a demand for gold that would have drained the US gold reserves. The decision was taken to end the convertibility of the US dollar into gold. Henceforth US debts would only be repaid in paper dollars. The Dollar became Fiat.
The second term used was Fractional Reserve Lending.
Fractional reserve lending mainly arose as a matter of operational convenience.
Originally Gold and sometimes Silver (in certain geographical areas) were used as “monetary metals”. They were used as ingots of defined purity, or made into coins of various sizes and defined purity. As a matter of convenience and security, these were stored in premises held by people who became known as “money changers”, an ancient profession, mentioned in the Bible, in Egyptian hieroglyphs, and in Sumerian tablets.
Receipts for precious metal deposits were given by the money changers, and it became the norm over many years, for the receipt holders to use them for trading purposes, rather than the physical transfer of bullion.
Thus the modern “bank note”, or promissory note was born, - the promise to pay on demand.
Also over time, the money changers began to notice that not all owners of deposited bullion would seek to withdraw their bullion at the same time, and over many years they began to issue “loans” to borrowers, by way of debt obligations, - promissory notes they could present to a third party to obtain goods or services immediately on “credit”, and repay the debt to the money lender over time, together with an interest element.
After many years, in diverse countries, a ratio of 10% seems to have evolved, That is only 10%, on average, of depositors, would seek the return of their capital at any one time. The money changers were thus able to lend out ten times the amount of money (gold, or by this time other securities too) on deposit, as paper,without fear of insolvency.
Imagine that, the Banks, (for that is what the money changers had evolved into) were able to create 90% of their raw material, - money, - out of nothing, charge interest on 100% of their loans, and yet some currently still make monumental losses.
Look at it another way.
A bank pays interest to its depositors of (say) 3%. And that 3% is paid on effectively 10% of the loans it can create, and lend to borrowers at (say)5%.
Or, the interest it pays to deposits of £1M over a year (let's assume a static model for simplicity) at 3%, is £30,000.
Via Fraction Reserve Lending, with deposits of £1M, it is able to lend out £10M, and charge 5% interest on £10M, which is £500,000.
So £500,000 interest earned against £30,000 interest paid out. Then add in the £10M of capital repayments over time, remembering that £9M is pure profit, that the bank had created out of nothing, and you begin to understand just how profitable, or rather the extent of banking gross margins, that the banking model can deliver!
Naturally, that is a very simplistic explanation, and banking has evolved into a much more complex industry than portrayed, however, to better understand the evolution of banking, I would suggest this link .
This is a 3.5hour video, filmed in the US in the late '90s.
It is very revealing.
At this point for further details you should also acquire and read the book, - “The Creature From Jekyll Island”, written by G. Edward Griffin.
So, now you are an expert on the corruption of bankers, their centuries long endeavours to impose their debt based financial system on the US nation, copying the UK system of debt created “money”, and the unscrupulous methods employed to achieve these ends. The profitability of the debt-based financial model was their prime motivation coupled with their knowledge of the power that such a system would give them, to wield over whatever country they managed to subjugate into their system.
Not for them any notions of “national” pride or loyalty to a host nation. International branches of the same bank would arm both protagonists in any international war, and reap the rewards from both combatants. In fact the financing of wars, and subsequent reparations, were recognised very early in the games as being their most profitable activities. Naturally warring parties could not be funded, since the looser would be unable to pay, until the authorities in the warring parties were able to instigate a method of national taxation on the populace. The Napoleonic wars created the first income taxes in England, with the Rothschild Dynasty funding both parties. In many cases the providers of funds were able to choose the eventual victors, and finance flowed that would guarantee the desired outcome. This became the “National Debt”.
Now THAT is power.
However, nothing really changes: - Politicians, or minor aristocracies decide to wage war on a neighbour, convince the local population of a “common enemy” and the need to attack/defend, and suddenly the debt incurred and the interest payments become the problem of the entire population, while the banks/politicians/aristocracy, benefit!
Naturally, once “stock exchanges” were developed (initially Government bonds were the Rothschild favourite), the financiers were able to make the correct investments well before the event.
They rapidly grew very wealthy.
For thousands of years, gold, and intermittently, silver, have been regarded as monetary metals, and have been used in the manufacture of coins, - money. From the Sumerian civilisation, (which also used other commodities for monetary/barter purposes) through Egypt, Greece, Roman civilisations, their use was common. All through history currency issuing powers have sought to get more from their limited supply of precious metals, by the debasement of their coinage. This would take several forms, - reducing the precious metal content of the coin, reducing the overall weight of the coin, increasing the face value of the coin while maintaining the quality. Either way, the population viewed the act as devaluing the currency, as prices of other commodities, grains, etc were adjusted upwards by traders/importers in terms of the face value of the currency, in order to achieve the same QUANTITY of precious metal content.
This was inflation, it debased the currency of the realm, and mass protests featured strongly against this, particularly in the declining years of the Roman Empire as the practice became prevalent. Eventually, as the Roman Empire began to collapse, the quantity of money in circulation began to contract rapidly, and the entire economy of the Western Roman world fell into heavy deflation, the velocity of money also contracted heavily, and what is now known as “The Dark Ages” descended on the entire remnants of the Western Roman Empire.
This lasted for hundreds of years.
Many modern writers are drawing parallels with the current financial problems facing the West, and the US in particular. They point to an exported manufacturing base, internal price inflation, and military over-stretch, with balance of payments deficits, and a debased currency.
The populations in those days regarded monetary metals both as money, which is both a medium of exchange, and a store of value. Modern western writers seem to wish to prevaricate on these features, arguing that gold and silver may well be stores of value, but they are not money. Those writers forget history, and assume that fiat regimes dominate the world. Many current societies still use barter, still use monetary metals, and I can speak from experience that both Krugerrands and UK Sovereigns are regarded throughout the world as money, and their value is based on their gold content, priced at current prices. UK retail banks may now be totally divorced from monetary metals, and no longer buy or sell gold or silver in any form, leaving that activity to specific dealers. This is certainly not true for the majority of the remaining world.
Perhaps the most successful, though short-lived bankers of all times, were the Templars. But then again, perhaps they were/are, not that short-lived after all!
The Albigensian Crusade in Languedoc ended in 1244, but it was 62 years before King Philippe IV of France, and Pope Clement V were in a position to harass the Knights Templar for their reported vast wealth. Having murdered two Popes, Pope Boniface VIII, and his successor, Pope Benedict XI, Philippe installed his puppet Bertrand de Got, Archbishop of Bordeaux, as Pope Clement V, in 1305.
Philippe drew up his list of accusations against the Templars. Heresy was easiest, as it was known that the Templars did not hold the doctrines of the Virgin Birth, and the Crucifixion. Also known was that their diplomatic and business affairs involved dealing with Jews, Gnostics, and Muslims.
Philippes plan was to strike on Friday 13th of October, 1307, and it would be an international (as far as it could be organised) strike, involving hundreds of armed men, but principally throughout France.
In 14th Century France it was the practice for aristocratic families to have sons within the Church, as Bishops, or Abbots of allied orders. The Chaplain of the Manor of La Buzadiere was such a nobleman, and shortly before the Papal edict against the Templars was enacted, he entertained seven Templar guests at his castle, and fully informed them of Philippes plans. The Knights Templars were Gaston de la Pierre Phoebus, Guidon de Montanor, Gentilis de Foligno, Henri de Montfort, Louis de Grimoard, Pierre Yorick de Rivault, and Cesare Minvielle.
The Knights immediately departed for Paris to inform their hierarchy of the plans. Runners were despatched to spread the word. The Grand Master of the Templars was Jacques de Molay. He arranged for the Templar treasure, stored in their Chapter House in Paris, to be transferred to La Rochelle on the Brittany coast, from where it was shipped, together with as many Templars who could get there, in eighteen galleys. Most of the ships sailed to Scotland, beyond the reach of Papal inquisitors, since Scotland under King Robert the Bruce, that is the King and the entire nation, had been excommunicated by the Pope for taking up arms against the Catholic King Edward II of England. The Templars were made welcome in Scotland, with many (around 50) settling in the Mull of Kintyre region. (Interestingly, several ships sailed to the Americas, where buildings and graves can be found identifying them as Knights Templars – they had access to copies of the same maps as Christopher Columbus used in his quest, years later)
The Papal edict of Scots excommunication was eventually lifted in 1323, when Pope John XXII recognised Robert the Bruce as the true King of Scots. As a reward for Templar loyalty at the battle of Bannockburn in 1314, and in order to further hide the Templars, in 1317 Robert the Bruce hid the Templars under a new organisation, - the Order of the Elder Brethren of the Rosy Cross. The King of Scots was installed as the hereditary Sovereign Grand Master, and from that time whoever held the office of chancellery was known as the Prince, (or Count) St Germain. Gaston de la Pierre Phoebus, (one of the seven knights) had escaped to Scotland, and since the Pope held the international reins of Chivalric Orders, Gaston, as senior Knight of the Rosy Cross, arranged for a meeting with Pope John XXII at Avignon. Pope John agreed to issue a Charter, providing his nephew, Jacques de Via, became the operative Grand Master. De Via died on 6th May, 1317, and Guidon de Montanor (another of the seven Knights) was elected Grand Master. The Charter of Incorporation, signed by the Pope was duly presented to King Robert the Bruce.
The lifting of the Papal Edict in 1323 caused many historian to assume that the Knights Templar must have been disbanded in Scotland. Nothing could be further from the truth. Robert the Bruce had successfully hidden them behind the cloak of a new Chivalric order, duly Chartered by the Pope.
It was during these Templar influenced times that the Scottish Banking System evolved from the Orders financial experience in Europe and the Middle East. Scottish lands held significant Gold deposits, and the Templars were quick to commence their extraction. This wealth was one of the reasons that Plantagenet England so desired dominion over Scotland.
Today there are several active Gold Mines in Scotland.
With a Mystery Girl, a refreshment break.
Part 2 of this series can be read here.
It says 'written by James Higham below. Actually, it was written by Sonus but I can't reformat the author in my template.