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SovereignLife
Are you looking for some "clarity" as to why the current financial crisis has happened - and what needs to be done to not only "fix" it, but ensure such events do not happen
again?
If so, then I encourage you to read what follows - and to download the quoted publication at the end of this message.
As financial and market instability persist, as governments flail and fumble, one thing is for sure - we're on the brink of a most serious economic event - a "depression" which is
the BUST component of the typical "boom/bust" cycle.
Popular criticism is centred on blaming the bankers, the financiers, and to some extent the politicians, and the overall lack of "regulation". And above all there is a consensus emerging that it is ultimately the fault of the free market, of capitalism - and that what is needed to fix this problem is more regulation, more easy credit (debt),
and ultimately more government.
Nothing could be further from the truth.
The cause of the "bust" is the same as the cause of the previous "boom" - the willy-nilly creation of credit out of thin air, for the purposes of creating political and economic
advantage in the short term.
To understand the root cause of this crisis you need to understand the root cause of "boom and bust". Contrary topopular opinion, this is not the result of capitalism or the
free market, rather it's caused by the nature of the banking and monetary system itself - the way it operates.
The boom cycle is achieved by the three pillars of the global financial system - the "Trinity" of the banking "religion" - which are fiat money, fractional reserve banking, and central
banks. When the pyramid of debt generated by this unholy Trinity gets out of control, it must be liquidated, creating what we call the "bust".
Consider these facts:
1. Banks lend out more than they take in. The reason banks
can and do fail, is because if all depositors ask for their
money back at the same time, the bank is unable to meet such
a demand. The money is simply not there.
2. Banks employ what is termed a "fractional reserve" policy,
which means they can literally take in $1 on deposit and
lend out $10. Thus the basis of the banking system we all
take for granted is fundamentally fraudulent. The money you
think the bank has on your behalf is in fact not there. The
business of fractional reserve banking is based on faith and
confidence. In other words, it's a CONfidence trick.
3. It's fraudulent because banks are lending out money held
on deposit which is supposed to be "on demand" and are
effectively making money on money they do not have, and
have no right to use.
5. Because of this fractional reserve system, and the essentially
fraudulent nature of it, it's always possible that banks can
fail - if enough depositors suddenly show up to withdraw all
their money. And to avoid this "ugly" scenario, central banks
were created to be "lender of last resort" - in other words to
provide the money (out of thin air) the banks don't have, in
order to make good on their bogus promises. This is designed
to maintain the "faith" in banks.
6. Central banks manipulate the money supply at will, by
controlling all elements of the fractional reserve process,
by altering the reserve requirements and the total money
supply as and when deemed necessary. Operating under a state-
granted monopoly, central banks wield enormous "hidden"
power.
7. Governments love fiat money, fractional reserve banking
and central banks, because it allows them access to "free"
money with which to bribe the electorate and carry out their
objectives. It allows governments to appear "generous" by
over-promising on social welfare - and to take aggressive
actions by financing wars and mayhem out of the same
store of "funny money".
8. Money can be manipulated in this way because it is money
by edict/command - or what is called fiat money. Fiat money
is paper money without any true or inherent value - and is given
"value" simply by government command, via the legal tender
laws in each country. Unlike the money which naturally evolved
during history - gold and silver - fiat money has no natural
constraints and no historical precedent for long term success.
When the state inflates the fiat money supply ad infinitum, then
such money simply loses its purchasing power, becoming a
stealth tax on the people. And when the end-game arrives it
becomes as valuable as toilet paper (but not as absorbent!).
9. Governments and bankers love fiat money and fractional
reserve banking because they are "partners in crime" and
co-conspirators in the business of engaging in fraudulent
financial transactions - at the expense of the rest of us.
10. The current financial/economic crisis has its roots in
the expansion of easy credit (debt) - which creates the boom
and bust cycles. This is made possible by loose monetary
policy as initiated by central banks and endorsed by their
political masters - using the mechanisms of fiat money,
fractional reserve banking and central banks.
The only solution to all these shenanigans is as follows:
1. Abolish fiat money and make all currency 100% backed by gold - the only money that has evolved over time via the true free market. Gold (and to a lesser extent silver) is "market" money, whereas as fiat money is government money - backed by force.
2. Change the laws so that banks must hold 100% of all demand deposits in reserve - and put an end to all fractional reserve banking. Make banks behave like any other business
- and to ensure no fraud takes place.
3. Close down/abolish all central banks.
4. Remove the issuance of money from the government's hands - because as long as they control its issuance, either directly or via their central bank proxies, they can and will
manipulate it to their own political advantage.
5. Allow private banks to issue money - 100% backed by gold, and keep them in line via anti-fraud legislation - i.e. legal provisions to ensure they do not lend any more
than what they have on deposit. In other words, end fractional reserve banking.
6. Do away with national fiat currencies and floating exchange rates. Instead, allow gold to become the naturally evolved global currency - a money fully backed by something which
cannot be manipulated by banks OR politicians.
7. Establish a free banking, non-fractional reserve, 100% gold-backed global monetary system - the only monetary reform that attacks the problem at the root, and the only
reform that will not only abolish boom/bust, but will bring about a rational international system of exchange.
8. Abolish the "boom and bust" mentality and reality, and allow purchasing power to increase over time, as production
grows in relation to the gold held as currency backing.
Any monetary "reform" that does NOT attack the cause of the problem - fractional reserve banking and monopolized banking using fiat money - is doomed to failure.
Don't let those who have caused the problem in the first place be the only ones writing the "rules" of reform - because you can bet your bottom dollar, it will not be the reform we
need or want.
For a complete theoretical and practical exposition on all of the above - and a rigorous assertion of the viability of a 100% gold backed currency and non-fractional reserve banking, I recommend you download the following e-book. At 876 pages it's not your average bedtime read, but if you have any interest at all in where all this is headed, then you owe it to yourself to discover why it has happened and the only sure way to prevent it happening over and over again in the future.
"Money, Bank Credit And Economic Cycles" By Jesus Huerta de Soto
Published by the Ludwig von Mises Institute and available for free download here:
http://mises.org/books/desoto.pdf
Like I said, it's a BIG book - but even if you only read certain chapters, the ones that immediately interest you, you will already be better informed on this crucial subject than all your "leaders" put together!
Yours in freedom
David MacGregor
http://www.sovereignlife.com/invitation.html
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