Bankers are often called Banksters. Did you know that our economy is controlled by a cartel? Did you know that all states have less than a 50% free market economy left? No? Then you have to read this! You should also know that there is just very limited security for your bank account (around 10,000 USD).
This is a serious matter. Although I am filled with anger it's important for me to write this article. There isn't probably any other political problem in this world which is as important as this one. And still almost nobody knows anything about it. That's why I want to give my personal contribution for education.
But first I have to give a personal confession: I am a radical capitalist. I am for a totally unregulated financial market. As far as I'm concerned everybody should earn as much money as he can. I regard all mainstream parties in Europe and America as socialistic. So, dear reader, please don't think that I'm just another socialist whining about how bad capitalism is. I love the free market.
You will not find here any "the rich are bad" propaganda. The only thing I want to attempt here is to spread information in a most serious manner as possible even though I try to keep it simple and in easy to understand everyday language.
To be exact: I want to spread information about one of the biggest crimes of our time. I will not take part in speculations or dubious theories.
All mentioned information I will give to you here are publicly accessible (see also the links in this article to the official pages of the institutions). And I don't want to blame any single person or organization for the problem. Even though I will grill the banks in this article I mean the general banking system. I don't arrogate to say which individuals know how much and are guilty to what extent. Rather I want to show that we are all guilty ourselves for letting it happen.
We live in the information age and yet we are rather dealing with less important problems and some alleged problems if you believe the media. That we urgently need education regarding our monetary system became very aware to me one day when a German parliamentarian visited my university.
After his talk, I approached the confessing friend of the Euro and started a talk about our money system mentioning many things from this article. But up to then he was totally unaware of all these facts and wanted to receive some more information per e-mail by me. I wrote him more details per mail but never received any reply.
This incident made it clear to me that most people won't have any idea about the system we live under if not even our highest political representatives know anything about it. But since it is enormously important for our economic freedom of action to know how our monetary system works and because it is also important for our worldview to get rid of wrong ideas of reality this article is mandatory for any freedom loving person.
Now in plain terms so that anyone might understand. Imagine this: I have some forgery equipment in my basement and I print everyday several thousand Euros.
Would this be fair? No, because if I am the only one who does it I will have an advantage against anyone who uses real money. I diligently spend my funny money cause the prices to rise. Because my forged money enters the economic cycle and increases the supply of money. Therefore, the value of money is decreasing or in other words: The value of all other goods and services is increasing relatively to the value of money. Everything becomes more expensive.
But why would it be so unjust? Actually, only because we are all depending on that money and because we are not allowed to print our own money. If this would be the case it would be the end of any paper money. Because paper money in itself is as valuable as toilet paper. If you have enough of it, you might even be able to use it to heat your house in the chimney. And nobody would exchange that paper against something to eat if he wouldn't have to.
On the contrary, if you buy a burger you might even get some paper tissues extra so that you can clean yourself after eating. So why do we accept paper as money?
The only reason for it is: Euro bills are legal tender in for example Germany. That means one must take them as payment. We trust that the state will enforce this obligation to take paper money in the future and that the economy will somehow work.
This trust is the reason which gives value to the paper money. Not because the Euro is allegedly great we use Euro but because we are enforced to do so. If one tells me that the Euro is after all a good thing, then I ask: "Why then don't we give the people a free choice which currency they want to accept as money?"
My thesis is: If we would abolish the legal and factual monopoly of the Euro tomorrow, then the day after tomorrow we will not have the Deutsche Mark back (this would despite the many advantages for Europe be not much better). No, we would probably go back to money which is made of precious metals or maybe even use the more efficient crypto currencies like bitcoin.
Gold for example has historically always proven to be good money because it is scarce and easy to carry. And even if one finds a new gold deposit then the market adjusts to it. One would expandingly buying different goods to not suffer loss of value. But generally, an inflation of gold should be rare.
But what is today's alternative? A certain inflation rate is even the declared goal of the European Central Bank. But inflation robs us steadily and in large-scale our wealth. Two percent may not sound much but over the years this is a lot which is deduced from your future pension.
Deflation on the other hand is always demonized because sometimes it comes as a necessary but severe correction after massive production of economic bubbles due to inflation. But in itself it is great for the people: The prices decrease and the pensions therefore increase.
In many schools, you learn that inflation is an increase of the price level. This is not quite correct. Sure, it results in an increase of prices. But inflation is in itself a growth of the money supply. If we don't take energy prices into account, the general increase of prices is caused mainly by devaluation of money through creating more money.
Who creates new money? First and foremost, the ECB. That is publicly known and bad enough. But there one could just say that it is a public organization and that its new created money will be pumped into the economy and will be to general public's benefit. However, private banks can create money as well. Yes, they are not allowed to print Euros and therefore cannot literally create legal tender.
They may create book money. This is the alleged money which we believe to be in our banking accounts. Because frankly not every Euro we see on our bank statement is really deposited in the bank's vault. Banks are only legally required to have a small part of the money as a fractional reserve in their vaults.
That is the reason why bank runs are feared so much. Yes, this is even the reason why bank runs are possible. Bank runs don't occur because the ATMs are empty and all bank customers are going crazy. They occur because a certain bank really does not have money anymore.
Banks take your money and reinvest it somewhere else. That's their right. That's how they finance their costs and how they generate interest for their customers - at least in theory (yeah, that were good times when all interest rates still weren't below zero percent).
Today banks often generate only negative interest rates. What an idiocy! I would rather keep my money at home and hide it under my pillows. There at least only the inflation steals from my wealth and not negative interest rates and other banking fees. But this will end soon, too, when they will finally abolish all cash. Then I cannot even use money as toilet paper anymore.
Since banks only have to keep only a part of the money physically in stock for possible crises it implicates that banks can create new book money whenever I bring my money to the bank. If the bank must only hold 1% of my money as reserve, it can create 99 virtual Euros when I only bring one physical Euro to it. Because the Euro it got from me the bank locks in the vault as legal fractional reserve.
Therefore, it has 1% of 100 Euros stored. It can now take 99 Euros out of the 100 for own purposes as book money. Those 99 Euros might for example be the loan my neighbor receives from the bank. Yes, the bank often requries securities. But those can easily be valued incorrectly.
And since my neighbor uses this money to book his next vacation flight for next year and transfers the money online and never requests cash at the ATM nobody recognizes this Ponzi scheme. So, more and more book money can be created and which is officially no real money and no legal tender and what you graciously don't need to take unlike those colorful papers (at least now until they will abolish cash).
Since book money is de facto accepted by everyone and since it makes me feel richer if I know I have a lot of money on my bank account I am more likely to spend my colored papers. So not only the general money supply increases due to the inflation of book money but also the paper increases its velocity of money which probably results in another inflation of prices. Altogether prices rise.
Because this is not enough there is another problem due to the creation of money by banks. Let's just assume for clarity that my neighbor and I represent the total economy. My Euro I brought to the bank is representing the whole amount of physical paper money in our model.
In our example the neighbor gets his loan of 99 Euros as well. And as usual he has to pay it back one time plus a more or less high interest rate. Let's say he has to pay back 100 Euros what would be earnings of 1 Euro from interest for the bank.
Now my question is: Where does this 1 Euro come from? From the bank's vault, we cannot take it because this constitutes the minimal reserve. Furthermore, I could have also picked a more realistic example of 2 Euros of interest. The answer for our problem is: The money doesn't exist and yet has to be created whether by real new money from the Central Bank or by new book money.
In both cases the money supply must increase. And in both cases debts increase as well. Because if new real money is emitted it will certainly end up as reserve money which makes new loans possible. Thus, the whole economy runs more and more into debt and the interest which cannot be paid without new money anyway increase as well.
Compound interest is not even mentioned here. This explains why the whole world seems to be plunged in debt including states which seem to break apart for that reason.
That Central Banks pump money into the markets and therefore increase inflation is widely known. But what does this mean in plain terms? It means that Central Bank together with some private banks as I showed control the money. This cartel of banks has monopolized the creation of money. And the Central Bank sets the price of money: the interest rate.
If the price is set like in a planned economy an important function of the price gets lost: the signal function. Thus, a manipulated price cannot convey correct information about supply and demand in a market. It follows that one whether consumer or businessman cannot judge the situation correctly and therefore makes wrong economical decisions.
In the end that means most often that resources get used in the wrong place and investments cannot be evaluated correctly regarding their risk. And if you realize that money as universal means of exchange is the most important good in our economy then you can imagine what a big problem this is going to be.
Because if money is controlled and doesn't underlie the basic laws of the market anymore, then almost any deal and any transaction in our economy is affected by it. For whenever I buy or sell something a good will be exchange against money.
Therefore 50% of any trade is manipulated. You cannot call this free market anymore. And if you also think of all the other state interventions into the economy we can easily claim that more than half of our economy is not a free market anymore.
Now one could be smart and come up with the idea to found a bank himself. Doesn't a famous quote say:
What is robbing a bank compared to founding one? ~ Bertolt Brecht
The bad thing is that as an average person you won't get access to this cartel. If I wanted to found a bank today I first need a few million to pay the bank license. And then I didn't yet hire all the clerks which deal with all the regulations which exist. And admittedly, there are some regulations which make bankster's life hard and not easy to create money from the scratch. But my overall description demonstrates in an easy manner how it basically works.
So, in the shadow of the state monopoly on money there exists a banking cartel which creates money out of nowhere and therefore contributes to new bubbles which end up in economic crises.
And just in case something doesn't work well for a single bank this bank is hopefully economically entangled with so many other banks so that politics want to intervene so that not the whole banking cartel system collapses as a house of cards which is built by cheap and partly self-created money.
As I said I am a capitalist. I would be fine if there were no regulations at all for banks. I don't even care if there isn't any minimum reserve required. Banks might even keep on creating book money. Everything else would be like a 100% reserve. Then they couldn't even give any loans out anymore. I wouldn't even mind if they just print the money directly in the ATM.
Do whatever you want! But please, please don't enforce that I have to us your money. I am for competition in the currency market. And no, I don't say that we have to give up the Euro and go back to national currencies. This would end up in the same game but with a smaller playing court.
I don't mind if even any private person would emit his own currency. There just shouldn't be any legal tender. Like there is no legally monopolized supermarket where I have to buy my bread. For example, bitcoin besides gold would be my currency of choice.
Bitcoin doesn't get centrally controlled. Bitcoin is systematically designed somewhat deflationary. But more on this in another article. In any case competition of currency will lead quickly to the point that the best currency would win. Probably that would be as mentioned above a precious metal like for example gold.
As mentioned the money system is one cause for the high debt of the economy and states. And the easy and cheap money is a temptation for populist politicians to hand out election gifts. Within the voting population therefore a culture of entitlement arises.
A social state getting out of hand is replacing natural security systems like the family. And since excessive indebtedness seems to be a most normal economic action another culture of "I can have everything now and here" arises as well.
Virtues like thriftiness, patience and diligence disappear. Pension savings get consumed by inflation. Whole societies and states decay. Permanent peace cannot be ensured anymore. And first and foremost, the working mass gets enslaved because the wealth produced by them gets redistributed by the money system and inflation.
So, where are the unionists, socialists and self-proclaimed labor parties if you need them once?
I am not sure if it's moral to participate in elections. But I am sure that I would never vote for a party which didn't take up the cause of fighting this kind of monetary system.
We cannot easily escape this game of the cartels. You can hold different currencies but they are all in the same inflation system. The Euro might be one of the biggest dangers because of European political instability. The USD as the world leading currency gets hurt as well if the Euro collapses first.
Cryptocurrencies could help but they are also very volatile and the future isn't written yet. Whiskey is not a currency but it has one of the most calculateable rise in prices. Houses are not mobile and history has shown that they are very easily subject to a special tax.
What else should you do but get a mixture of the best things? The world has always been full of dangers and possibilities.
Did I miss any important aspects? What do you think about this topic? How can we better educate society about these things? Please write it in the comments below!
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