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Saturday, August 06, 2005

Why the banking system is a fraud

From Porcupine blog:

When you go to a bank and borrow money you probably think the bank loans you the money out of its deposits. This may have been the situation originally, but this is certainly not the case today. Banks are allowed, by governments, to loan 15- 17 times the amount they hold as deposits. "Credit that can be accessed by credit card, overdraft cheque or bank loan represents nothing more than a bank's promise to pay. Credit money exists only as numbers in bank computers…When someone borrows from a bank, perhaps taking out a housing loan, the bank records in the borrower's account the debt that must be repaid with interest, and in return provides a bank cheque to the borrower or direct to whoever he is purchasing the house from. The bank cheque is bank created credit, not backed up by the bank's own money nor anyone else's" Deposits consist not just of coins and bills, as you might think, but also the credit of previous loans. Thus "banks are able to build a mountain of credit based on earlier credit until it amounts to 95% of all money"

From Monetary Evolution:

Each year the total stock of money in most countries increases. In the UK (similar figures apply worldwide) 4% of new money is printed as new cash by the government. The remaining 96% of new money is created by privately owned banks as interest bearing loans to individuals, businesses and the government.

And it has negative effects: inflation, rat-race between businesses, higher taxes and loan discrimination in favor of large corporations (what concentrates production and increase pollution because goods must travel further in order to reach the consumer).

Now let's see how banks create money for national debts:

A country's national debt is completely separate from, and additional to, the level of private and commercial debt directly associated with the money supply. The United Kingdom national debt in 1998 stands at approximately £380 billion. If the private and commercial debt of £780 billion and the national debt are added together, the total indebtedness associated with the UK financial system stands at some £1160 billion, which dwarfs the total money stock of £640 billion! How did this condition of overall negative equity come about? This excessive indebtedness -- which is a blatant misrepresentation of the real state of economic wealth enjoyed by the nation -- is a position shared by all the developed nations.

The national debt is actually composed of thousands of pieces of paper called stocks, bonds and treasury bills. These stocks and bills, known as gilt-edged securities, or gilts, are essentially elaborate forms of government IOU. These IOUs are issued because each year the government fails to collect enough in taxes to cover the costs of its public services and other spending -- and it borrows money to cover this shortfall. [...]

But governments are unable to pay this money owing on their past stock issues. [...] What happens is that the government obtains the money to meet the payments due on maturing national debt stocks by selling more government stock to the financial institutions -- promising even more money in the future.

So, how developed countries lend money to empoverished countries?:

The answer is that they do not. The money advanced to Third World nations is not money loaned from the wealthy nations. These sums consist almost entirely of monies that have been created, via the commercial banking mechanism, specifically for the purpose of the loan concerned. In other words, the same debt-based, banking process used to supply money to national economies is also employed for the creation and supply of funds to debtor nations.

Thus, these monies are not owed by debtor countries to the developed nations, but to private, commercial banks.

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