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Magic Money Ian R Thorpe

7 th February, 2013

The Fractional Reserve Banking System:  Money from Fresh Air 

Hands up anyone who as a child or teenager was not told by their Dear Old Mum

or Dad, "Money doesn't grow on trees you know."

One, two… two more over on the right and one at the back ready to make a uick e!it

i the debt collectors show up. # had no idea so many leading $abour politicians read

our blog.

%hile our political leaders have spent the past ew years e!plaining why they

will have to cut public spending i they get elected and uriously back&pedalling on

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earlier promises that their parties can reduce the deicit without cutting services,

socialists like rance's rancoise Hollande, the () $abour *arty's inance spokesman

+d alls -his real name and a description o this economic policies, and arack

Hussein Obama -who as a child was not advised that money does not grow on trees

 because that would be racist or something have been happily swanning about in

their respective money tree orchards and telling the media how when they would be

handing out ree laptop computers and cellphones to empower "the needy" and make

them part o the connected generation /ust as soon the silly realists stopped

obstructing their plans to take all o everybody's money and give it to everybody else.

%ith the world already eectively bankrupt due to politicians's and economists'ability to delude themselves that the money ruit harvested rom the orchard grows

naturally on the branches o his trees rather than being pinned there by us

compassionate ta!payers who do not want to traumatise these retards by stripping

destroying their illusions.

%hat our leaders hope to achieve by using the money & ruit harvest to give

laptops or cellphones to the needy is unclear. 0he needy have more need o a bowl o

soup, a servicable pair o underpants and some cash to help with their meganormous

uel bills that a ree laptop computer they will not be able to use because the

electricity has been cut o due to non payment o bills and even pay&as&you&go

cellphones, as the name implies, do not go i the owner cannot pay. *erhaps when he

says needy he means in need o a bribe to persuade them to vote.

#n our e!perience there are two types o destitute people, the truly unlucky and

the wasters and no & marks. 0he ormer could get a lot more beneit rom a hot meal

and a thick blanket. 1ou can't eat a laptop computer even i you boil it or a very long

time, nor can you wrap it around yoursel when huddled up in a doorway on a cold

night. %asters and no&marks on the other hand would be very happy to get a ree

laptop computer as they could take it down to 2ash 2onverters and hock it to get

money or boo3e and drugs.

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0he people mentioned above are not the irst political leaders to believe money

grows on trees. 0he entire sub & species seem alicted with the same problem.

*erhaps they are predisposed to inancial proligacy by something in their D45. #

know or a act there is a gene that causes people to spend money they don't have, my

wie and daughter both have it. ut even those wonderul people do understand that

when you have emptied the bank account and ma!ed out the credit cards you have to

stop. %ith political leaders the silly & spending gene leads to a belie that the only

way to cure the problems caused by overspending is more overspending.

5nd the bankers, who would happily make slaves o us all, gleeully run their

hands together and say bring it on …

O), let's get serious.

Most people know little or nothing o how the banking system really works, or

e!ample how many o you understand the ractional reserve system which is the basis

or so much o the global economy. #n act, how many people have even heard the

 phrase 'ractional reserve system'.

ractional&reserve banking reers to the standard practice ollowed by most banks

in the developed world o lending out more money than the bank holds as reserves.

anks in modern economies typically loan their customers many times the sum o the

cash reserves that they hold. Did you know that or every buck or mark or yen or a

 pound in your current or savings account, the bank can legally loan out ten times that

or even more6

Once upon a time, or maybe '"5 long time ago in a gala!y ar, ar away...."

although it was not that long ago and right here on earth, there was a thing called

70he 8old 9tandard:. 0he 8old 9tandard is oten misrepresented as a system that

reuired there to be an amount o gold in the national treasury to underwrite the value

o every coin or banknote in circulation. 0his has never actually been the case since

 beore the ;oman era when base metal was alloyed with gold in coins that

represented a value in pure gold.

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72entral banks and governments have always trusted in gold to the e!tent that

they own over <=,>>> tons o it, about <>? o the above ground stocks in the world.

0his level o gold was necessary to ensure the maintenance o the gold standard. 0he

gold standard was essentially a monetary system where the currency is backed by

gold, and allows currency holders to convert their currency into gold. 0he ritain

abandoned the gold standard in (.9. went o the gold standard in @AB@:.

- bi3Ced.co.uk

0he gold standard on which national economies were based rom the renaissance

until the twentieth had three essential reuirements. 0he irst was government had to

i! the currency value to the price o gold. 0his price o gold in terms o the currency

is known as the par value o gold. or e!ample, @o3 o gold may be worth @>>>

euivalent in sterling.

0he second reuirement is that the government must maintain the convertibility

o gold. #n other words, they must notionally allow the public to convert their

currency into gold. 0he ultimate situation would be @>>? backing o the currency.

0his would mean that all paper money in the economy was backed by an euivalent

amount o gold in the vaults o the government and central bank, which is how the

myth o gold arose. #n reality @>>? backing was rare i not non e!istent as it reuiredvery large gold reserves. Operating on the gold standard means there is automatic

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control over the money supply as the only way that the government could print more

money would be i they bought gold back o the general public. 0hus gold acts as a

 brake on governments printing money to inlate away debt, a practice notorious or

eroding savings and the buying power o earnings.

0he third and inal element is convertibility o the currency with other currencies.

*eople need to be able to convert their currency into others i they are to be able to

trade internationally. 0he e!change rate will be given by the relative gold par values

o the two currencies. or e!ample, i @o3 o gold is worth @>>> and is also worth

-at today's e!change rate as # type this E@=B>, then the e!change rate would have to

 be @ F E@.=B. 9imples.

9o where does ractional ;eserve anking come in6 1ou might well ask.

Here's a description o ractional reserve banking's origins rom a standard

university macroeconomics te!tG

"%hen the ancients began to use gold in making transactions, it became apparent

that it was both unsae and inconvenient or consumers and merchants to carry gold

and have it weighed and assessed or purity every time a transaction was negotiated.

#t thereore became commonplace to deposit one's gold with goldsmiths whose vaults

or strongrooms could be used or a ee. (pon receiving a gold deposit, the goldsmith

issued a receipt to the depositor. 9oon goods were traded or the goldsmiths' receipts

and the receipts became the irst kind o paper money.

"5t this point the goldsmiths embryonic bankers used a @>>? reserve systemItheir circulating paper money receipts were ully backed by gold. ut, given the

 public's acceptance o the goldsmiths' receipts as paper money, the goldsmiths

 became aware that the gold they stored was rarely redeemed. 0hen some adroit

 banker hit on the idea that paper money could be issued in excess of  the amount o

gold held. 8oldsmiths Jthen began to issueK additional notes or tokens into circulation

 by making interest&earning loans in the orm o gold receipts. 0his was the beginning

o modern banking:.

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0he college te!t rom which the above uote

is taken does not uestion the propriety o

goldsmiths creating these new "receipts" or

money without any gold backing, without any

authority, and indeed without any real reason to

do so other than to enrich themselves. #n act, the

te!t even praises the uestionable behavior o the

one who began this hidden orm o corruption as

"adroit."

0he public had no idea that goldsmiths wereissuing paper receipts accepted as money which were backed by no gold deposits at

all or ten times or more the amount o gold that had been entrusted to them and or

centuries the system worked on trust with ew bankers deaulting. 0he goldsmiths

were had stumbled upon a way o creating money out o thin air. 0hey thus made

themselves antastically wealthy without anyone noticing what was going on. 5s long

as the pretence that a bit o gold was held in a vault somewhere to underwrite the

value o any dollar, mark, yen or pound, people were happy to trust the system and it

worked so long as people trusted it. 0o better hide the deception and divert people's

attention, the goldsmiths stopped their old practice o charging or storing gold and

instead began to pay customers a small interest on their gold deposits to keep them

happy.

5ma3ingly, apart rom the /argon and the scale o banking operations the system

has changed little today. 4obody involved with banking and inance, rom +conomics

tutors and politicians themselves ever uestioned the ethics or morality o this

ractional reserve system. 0hey knew that i they did the whole system might easily

collapse. +ven now with the system having teetered on the edge o the abyss or

several years, ew people challenge in any meaningul way the ethics and corruption

involved in creating money out o thin air. #n act, the ractional reserve system wasormali3ed into law centuries ago, probably irst in +ngland where 0he ank O

 Heraldic Arms of London's

'Worshipful Company of

Goldsmiths', a prototype

banker's association

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+ngland was ounded in @LA, and continues to be both legal and the accepted

common practice around the world today.

# you ever wondered how banks aord those massive, opulently urnished oice

 blocks i they charge only @>? or so on loans and pay =? or less interest on deposits,

it is because they can create money out o air. # the banks had to operate like other

 businesses they would be making only a ew percent a year on every loan issued, ar

rom enough to build the towering skyscrapers owned by banks in practically every

ma/or city. ut by creating credit - ait money using the ractional reserve system,

 bankers can legally claim credit to @> times or more the amount o any loan, in other

words i they lend you E@>>> they have added E@>,>>> to their working capital andthus can lend @> people E@>>> each. # they lend that at @>? that is E@>>> per year

interest they have earned rom lending you E@>>>. 0hey don't care i you deault,

they're still ahead o the game.  4ow you can understand the shaky, insubstantial

oundation upon which banking empires and the global economy are built.

5s this system has been used or centuries by every country in the world, it

clearly works to maintain a relatively stable economic order. %hether it is even

 possible to change the system at this stage is a moot point, suppressing inormation

on how economies work and otherwise hiding this key inormation is a massive

deception which does not serve the public and only serves to allow the bankers to

easily become e!cessively powerul and corrupt. 0heir corruption is what led to the

economic crisis o N>>.

If you are interested in knowing more, take a look at these documentaries on

money and the banking cover-up:

 Money, *ower P %all 9treet -*9 & hours, best to take this in several sessions

0he 5scent o MoneyG 5 inancial History o the %orld -*9

Money Masters -N@> min., transcript available here

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;+$50+D *O909G

0a! 0he ;ich, Hurt 0he *oor 

0he olly O (sing #nlation 0o ;educe 0he Debt

Mister Micawber's +conomic %isdom

0he olly o %orld Qiew 0heorists rom 0he $et 5nd ;ight

Mar!ismG 0he Main 2ause O *overty 5nd #neuality

0he olly o %orld Qiew 0heorists rom 0he $et 5nd ;ight

2an the euro be saved by screwing the proles and at what cost to reedom

Mar!ismG 0he Main 2ause O *overty 5nd #neuality

1ou've 8ot 0o $ove 0he 2ra3iness O 0he inancial 2risis

*issed O %ith +uro, rance 0urns 0o 2oupon Money

0he 9econd %ave O 0he Debt 0sunami or 0he 2oming O 0he 4ew %orld Order 

(4 *anel 9ays ;edesign 0he %orld +conomy or 9ustainability

+urogeddon *ostponed 0emporarily Due 0o inancial 2on/uring 0ricks

9moke and Mirrors lur #nlation 9tatistics

0he Debt 0hreat 0o Our %ay O $ie

Goldsmith's Hall, London. An 1th century en!ra"in!.