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Tuesday, August 7, 2007

History - What Really Happened

Here is my overview of the progress of history. It's been pieced together from various sources and simple reasoning.

When the level of technological sophistication was low, whoever had an army got to make the rules. When two people had armies, the bigger army or better armed won. The person with the strongest army got to enslave everyone else. The person with the strongest army declared themselves to be the "government". This made the winner's status as ruler permanent. Eventually, people forgot what life was like without a government.

Then, a discovery was made. If all your subjects are complete slaves, there's no incentive for them to work. The slaves were allowed to have limited property rights so they could be more productive. People were allowed to form private contracts. People can individually allocate their labor more efficiently than a centralized dictator could. Some slaves were simultaneously clever enough to invent better weapons and stupid enough to give them to their master! At some point, gold became established as money. Banks were formed. Taxes were only payable in gold, but people could only obtain gold from a bank.

At some point, a bank discovered the power of fractional reserve banking. Some banker discovered The Compound Interest Paradox and how it allowed him to steal the wealth of the rest of society. However, government is needed to enforce the Paradox. Without government demanding taxes paid in bank-issued money, people could boycott the bank's product if interest rates became usurious.

If people knew how fractional reserve banks operated, depositors would demand full financial disclosure and withdraw their deposits at the first sign of trouble. Fractional Reserve banking is only exploitative when its workings are kept secret, when the bank doesn't disclose its full balance sheet to depositors. A depositor is a creditor, and the creditor has the right to inspect the books of the debtor. Fractional Reserve banking is only exploitative when the government regulates the behavior of the bank's creditors and debtors, banning depositors from withdrawing during a bank run while demanding debtors still repay their loans. Fractional reserve banking is only exploitative when the government demands that taxes be paid in money controlled by the bank. Fractional reserve banking is only exploitative when all the banks are controlled by the same person or they act as a cartel. Without forced taxation, people could boycott the banks if they became exploitative, switching to alternate monetary systems.

Government taxation forces people to use the banks' products. The demand for banks' services is backed up by government force. This drives up prices above the free market level. This allows the Compound Interest Paradox to begin operating.

Fractional reserve banking is not, by itself, exploitative. Without a coercive government, fractional reserve banking is an honest business. The interest charged would equal payments to depositors plus expenses plus profits; in a free market, the profits would be reasonable. Without government, there is no Compound Interest Paradox. It is the conspiracy between banks and government that is exploitative, with taxation forcing people to use the banks' product, and regulations hiding the banks' shady practices. Secrecy was needed to prevent the king and the people from figuring out the scam.

This led to the rise of secret societies. The bankers had to keep their secrets from the king, who would crush the threat to his power. The king thought that the banks were helping him collect taxes. The king didn't realize that by delegating his monetary and taxation power to banks, he was delegating his sovereignty to them. The banking industry's tricks had to be kept from the general population. They would revolt against the bankers if they figured out what was going on. The bankers shared banking secrets in private. They started making plans to influence world politics for their benefit. The bankers were really well organized and disciplined. They were patient enough to have plans that took 100 years or longer to achieve.

How come you've never heard of such secret societies? There are various rumors on the Internet. The reason is that the secret societies have a rule that anyone who breaks their ranks is killed or silenced. Imagine you have wealth and power far beyond what the average person has. However, if you tell anyone outside the inner circle, you will be killed or banned. For a serious offense, your friends and family might suffer as well. Such a rule would enable the secret society to keep strict discipline. Further, most/all of the secret society members are related to one another. They knew each other since they were born.

Before, the biggest army won. Now, the biggest bank won. Banks accumulated wealth and kept it hidden from the king. By having reserves in multiple countries, banks were able to be stronger than the king. Any king who tried to confiscate the bank's assets in one country would have a rebellion or invasion financed by the bank's branches in other countries. Banks were able to insist on the right to own property and the right to form and enforce contracts.

This was a revolutionary idea. Property ownership and enforcement of contracts were great inventions. The banks had to allow property ownership and contract enforcement for everyone, not just themselves. Contracts were the tool that let banks confiscate property when the Compound Interest Paradox put the rest of society in debt to them. The right of property ownership meant that banks were able to keep what they had stolen. There's nothing intrinsically wrong with property ownership or contracts. The problem is the Compound Interest Paradox and the ability of the bankers, in collusion with government, to economically enslave everyone else. Most of the gains in civilization were due to the ability of people to make contracts and own property. Unfortunately, the Compound Interest Paradox means that the vast majority of the wealth created winds up in the hands of bankers.

When the bankers became stronger than the king, they were able to get themselves declared as the central bank. Previously, fractional reserve banking was risky. The banker might have been lynched if people figured out what he was doing and if people understood the Compound Interest Paradox. The banks acted as a cartel, but their cartel wasn't backed up with the full force of law. This is when fractional reserve banking became truly exploitative; its operations were backed up by the full force of government. The king formally recognized the central bank, made fractional reserve banking legal, and imposed taxes to pay the interest he owed the bank. Taxes were payable only in money the bank issued. The bankers loved the fact that taxes were only payable in money they controlled. The king loved having a central bank, because it lent him money so he could make wars and expand his empire. He didn't realize that the banks were also financing his enemies! The bankers kept a careful balance of power so there would always be wars. If you have all the money, it's very easy to finance both sides of a war and keep them even. The bankers collect interest from the winning side and war reparations from the losing side.

In North America, people moved from Europe to escape political, religious, and economic pressure. Initially, they were truly free. There was no government at all to impose rules. However, the colonists had experience with government in their home country. They could not imagine life without a government, so they formed governments but tried to keep its power limited. Unfortunately, once you have a government, its power and influence can only grow over time. The people who control the government never voluntarily cede power.

Without gold, the colonies in America used paper money. The colony governments acted responsibly in their issuance of paper money, carefully managing the money supply. Benjamin Franklin told parliament how wonderful paper money was. The Bank of England was outraged. The Bank of England knew their monopoly was potentially threatened. Paper money was outlawed and the King demanded that taxes be paid in gold instead of in goods. He sent armies to enforce his decree. Some people say this was the cause of the revolutionary war.

The writers of the Constitution knew about the evils of banking and taxation. The original Constitution did not allow an income tax. The only valid tax was a fixed amount per person along with certain excise taxes and tariffs. They knew about the evils of banking, but Thomas Jefferson was unable to get a prohibition of fractional reserve banking into the Constitution. He said later that was the provision he most regretted not including. There was no constitutional provision forbidding the formation of a central bank. Also, gold and silver were declared as money, not paper which the Bank of England outlawed. Paper money works if the issuing authority is trusted to not inflate excessively. Paper money would have meant that the new country could issue money that the international banks didn't control. The international banks had a lot more gold and silver than was present in the USA. This enabled them to have power, through their ability to control the money supply by importing and exporting gold.

The new US government passed a "free coinage" law, which meant that anyone could bring gold to the government and have it converted to official money. This harmless-looking law doomed the new US government. The international banks controlled most of the gold in the world. They were able to import gold and have it converted to money. Immediately, most of the money supply in the new country was under the control of the international bankers. With control of most of the money supply, the international banks were able to issue it as loans and confiscate wealth via the Compound Interest Paradox. The gold standard meant that people needed to borrow from the banks to get the gold required to pay taxes. The international banks controlled most of the gold, which meant they could charge an interest rate above the free-market rate, allowing the Compound Interest Paradox to begin operating. The international banks were able to expand and contract the money supply by fractional reserve banking.

There were several attempts to form a central bank and debase the currency. They were all thwarted. The international banks in Europe were very patient. They had secret plans that spanned generations. As time passed, the Compound Interest Paradox worked in their favor, allowing them to gain more and more influence. Eventually, they won their final victory in 1913, with the passage of the 16th amendment and the creation of the Federal Reserve. It's not that Congress suddenly got stupid. This was a planned attack that lasted over 100 years. The original signers of the Constitution knew about the evils of a central bank and income tax. They were long dead and their work was undone.

The United States government has already been overthrown. It died in 1913. What exists now has only a vague resemblance to the original intent.

Why should I consider the Constitution to still be a valid contract, when its original principles were corrupted?


TZ said...

Great assessment FSK!

I agree with all that you say here - except that Fractional Reserve Banking IS, in my opinion(and certainly under the conditions in which it is used)exploitative.
One of these main conditions which make it so, and which you have not touched upon, is that all this money which is issued into society, is issued as a debt.

I agree that banks wouldn't be able to do it if it wasn't for the government, but even the government itself is fooled into thinking that money has some intrinsic value.
Money is not wealth - it is a claim to wealth. It is a token for the purpose of enabling the trade of REAL wealth in goods and services.
So what the banks have done, is that they have issued these tokens to enable trade, but rather than MATCHING the wealth which they are supposed to represent, they have LOANED the tokens to society AGAINST the real WEALTH and then asked for the face value of the tokens to be returned to them (plus interest).

This is their first and greatest sleight of hand - the inversion of wealth by their 'ownership' of the tokens, and their subsequent ability to demand their return at the value of the REAL wealth that they represent!
Interest is the second exploitation.
Fractional Reserve Banking is merely their pseudo justification for issuing the tokens.

Don't get me wrong here, I understand that money is a great tool for enabling trade, and I know that as our society grows we require more money in the system to enable more trade, but this ability to trade should not be issued to us temporarily (to be liquidated at an additional cost) but should be issued as a credit.

Please read Bryan Monahan's "Introduction to Social Credit" to get a more complete understanding of this subject.
It really is worth the read!
You can read it at

Regards, and keep up the good work!


FSK said...

I'm going to respond in a separate post. It's too hard to put a detailed comment in this tiny space. When I make a new post, I have many more formatting options.

Besides, I think that a lot of people don't read the comments; they just read the initial post.

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