could exchange with another tribe that had a surplus of
grain. This is how bartering started. As humans developed, the
barter also developed and covered an even greater number of
goods and services.
The most famous example of bartering in human history
is the bargain of Peter Minuit in 1626. For trinkets and beads
costing $24 he obtained the island of Manhattan. In 1993 the
island was valued at $50 billion.
Gradually people realized that carrying a bag of wheat or
dozens of skins for exchange was not very convenient. By trial
and error humans began using silver and gold as an equivalent
for exchange. Gold and silver could not be faked or spoil, so
they served as money for a long time.
Jewelers began minting gold and silver coins. They needed
a reliable storage for gold and silver ushering in the first safes.
Soon, traders and the general population began to rent space in
the jewelers safes to store their coins and valuables. So, long
before credit existed jewelers began to lease shelves in their
safes earning income from that business.
Years later one jeweler began to understand that people
never came for their gold all at once. This occurs because
people were holding onto obligatory bills given by the
jeweler as a proof of the stored gold. These bills were
considered real money in the market instead of the gold
as it was more convenient and easy to exchange. Sellers
of goods accepted them as receipts for payment of goods.
Borrowers began to take loans in this paper form instead
of real gold.
The jeweler came up with another business – he started
to lend his gold at an interest. He used his own and the
stored gold of the merchants and townspeople, who kept it
for safekeeping. But since everyone never come at the same
time, this business grew rapidly. The ability to give loans
was limited only by the amount of gold in the safe. Then
the bankers came up with an even more daring idea. Since
they were the only ones who knew how much gold was in
the safe they could issue obligatory bills for gold that they
did not have. If all the investors would never come at the
same time to collect, then who would find out? They figured
out how to make money out of thin air. This was the origin
of the phrase “to make money out of thin air”. Jewelers
who realized how to make money out of thin air are today’s
bankers.
That principle became the ground of the existing
financial system that began to take shape about 400 years
ago. Bankers began to lend to governments, who used that
money to wage wars of conquest, and to merchants, who
conducted “business” by exploiting new territories. Since
the governments depended on the banks’s money, they not
only allowed them to make money out of thin air but also
legitimized this process by skewing the ratio making it 9
to 1. Today this is called a “fractional reserve” system.
Today this works in most of the worlds banks and
accepted as a part of the banking philosophy. For example,
if you deposit $1000 into an account, the bank can then
turn around and lend someone else $10,000 in the form
of credit based on this fractional reserve system – legally
creating money out of thin air.
State fraud
The first major state endorsement of this financial fraud was
the Bank of England in 1694. That institution was as a result of
the so-called transaction between a nearly bankrupt government
and a group of financiers. The bank was private and so the state
gave it the official title and the right to issue money. The King
of England was in great need of money for the war with France
and willingly agreed to give the bankers this national title and
get the loans he needed.
In the 1690s the banking system of England included
lending bankers, who provided loans out of borrowed funds,
and jewelers receiving gold for deposits and extending loans
as well. Bankers realized that the power over money might
well result in unlimited opportunities. In a couple of centuries
the British Empire became a leading world power due to the
relentless colonization of other peoples and continents.
In 1913 the next leader emerged surpassing the Bank of England
in the scale and scope of using this fraudulent system. This was the
Federal Reserve (FRS) of the United States. But the Federal Reserve
was not a governmental organization. It was a private enterprise
made up of bankers, a joint stock company established by 12 Federal
Reserve banks, which in turn had been created by commercial banks.
The FRS operates as a private bank. The US government issues bonds
to procure the “national currency” and the FRS prints bank notes and
lends them to the state through the sale of the bonds. The state buys the
bonds and the money returns to the FRS with interest.
Thus, the main objective of the FRS was its income through
seignior age – the difference between the face value of the bank
notes and the cost of their production. For example, if a hundreddollar
banknote costs 10 cents to make, the seigniorage will be
99 dollars 90 cents. Like the Bank of England, the FRS is not
part of the state.
The third US President Thomas Jefferson (1772—1782)
said: “Banking institutions are more dangerous to our
liberties then standing armies. If the American people ever
allow private banks to control the issue of their currency, first
by inflation, then by deflation, the banks and corporations
that will develop around them will deprive the people of all
property until their children wake up