As we approach presidential election 2012 one would hope to see the candidates addressing the underlying challenges facing the United States today. In light of the recent financial, economic problems befallen our country during the last several years, one would think that a change to the environment / system that created it should be examined. I do not believe it is.
Fractional banking is a system where a bank maintains reserves that are a fraction of it’s customers’ deposits. In other words, they don’t have it. If everyone wanted their money back at the same time, the bank would be bankrupt.
This is possible due to the existence of a central bank which holds the countries’ reserve currency. This entity is called the Fed. They have the ability to print money out of thin air. Since 1971, the Fed no longer even has to have a gold reserve to back up their dollars.
So, if a bank lends out all their money and needs more; they can simply borrow it from the Fed. The Fed, in turn will print this currency and lend it to the bank, who in turn will lend it to a customer at a higher interest rate.
This system of central banking was started in 1913 and is beneficial to only one segment of society – the banks. It creates an enormous amount of inflation. Inflation robs one of their wealth. When more dollars are created, each one is worth less. Result; the average American cannot save money because the underlying currency is constantly inflating plus they are being taxed on that imaginary inflated value!
What happens when one cannot save money effectively? They are forced to go to the bank to take out a loan or use a credit card to borrow more money and the cycle repeats. The banks get rich while the average American looses wealth. Banks thrive on quantity and the US governments’ monetary policy sees to it that the machine is fed.
If you or I counterfeit money – we go to jail. However, a bank does it with the justification that it is necessary to stimulate the economy and people believe it. The population have been led to believe that creating money adds value. This is a total falsehood. Only production creates value.
Politicians are sold out to the institution of fractional banking. This is evident by examining political contributions, lucrative jobs offered to officeholders after they leave office and the policies they make. High taxation and big government is an important tool for the fractional counterfeiters. High taxes reduce the amount of money a person can afford to save forcing them to borrow -the cycle repeats.
Government itself follows the same cycle of destructive policy. The US debt is now around $15 trillion dollars. Interest on that money goes to who? That’s right……Banks. Of course, the government always has the means to make those interest payments. They simply raise taxes on it’s citizens and print more money ( which is really just another tax ). The cycle repeats.
Now – here we are in 2012. We are being told by our government that because of the downturn in the economy which was brought on by the business community, taxes will need to be raised on individuals with incomes over $250K. Upon examination, the business community needs to be separated into segments -1) The productive ( manufacturing, technology, construction….) in other words those who make something and the 2) Financing industry; which are simply investors, stockholders and banks. The two are not symbiotic. The productive segment of the business community do not always benefit from the system of fractional reserve banking and the environment it spawns.
A company that makes something and creates real value has become undervalued in this system of fractional reserve capitalism and big government. High taxes, over regulation, inflation and forced unionism, all products of our governments’ policies, have eroded the productive segment of our economy. The United States has been on a downhill slide in manufacturing for 25 years. People borrowed their way through the last two decades on credit and an imaginary value on everything. One can imagine how the fractional reserve bankers did during the 1990s and 2000s. That’s right. Record profits. Multi-national investment banks grew exponentially. The Dow Jones nearly reached 15,000. Then the bubble burst. The fractional bankers were bailed out by the politicians and we, the taxpayer were left holding the bag! The cycle repeats.
What’s next? Assuming that the next president will be just another oligarch, aligned with the fractional bankers, they will have to find a way to grow the economy based on something other than real value or the dollar will collapse. This system must grow because of it’s inflationary nature explained in this article in order to survive. More than likely – The cycle will repeat.