Due to differing values of items to be traded, mediums-of-exchange began be adopted to enhance trade. The mediums-of-exchange have been many things including shells and beads. As an example a person agreeing to trade a cow for 100 chickens may not have wanted all the chickens at that time. Therefore might agree to accept 10 chickens and 90 shells for his cow. He could then at a latter time trade some of his shells for more chickens or for some thing else. Silver, gold, iron, copper and other metals made into rough coins were also widely accepted as a medium of exchange.
History tells us that the word dollar (first called a thaler) originated as a piece of silver stamped into a rough coin by a German Count Stephen Von Schlick who was a miner and a merchant. If a person came to trade some thing of a greater value for some thing of a lesser value, the Count would give them some coins to equalize the value of the trade.
Value is only a state of mind based on emotions. A mental concept of how much I want to keep something, balanced against what I am willing to give up for some thing else. When two people agree on that point, value is set. Trade can take place. All exchanges (commerce) take place in one of two ways, fair and honest trade, where willing and knowledgeable people agree and trade, or theft by force or deception.
History tells us that banking came on the scene as a fair and honest deal between agreeing parties. However, it soon turned into theft by deception. The United States Treasury told me in a personal letter that our concept of banking originated with the goldsmiths during the seventeenth century. The goldsmiths had large vaults in which they kept the precious metals they worked with. People began to take their gold and silver to the goldsmiths for safekeeping. The goldsmith for a small fee would store other people’s gold and silver and give the people receipts (certificates of deposit) for the coins deposited in their vaults.
Imagine yourself as a rich person living in the seventeenth century. You have in your possession a large amount of silver and gold in coin form. You decide to take a trip however you don’t want to take all your coins with you. You decide to take your coins to the goldsmith and have him store it for you. The goldsmith gives you a receipt for the coins stored with him. Now you could go on your trip knowing your coins would be safe in a strong vault and you would have receipts to prove how many coins you had stored (banked) at the goldsmith’s.
While on your trip you decide to buy something that cost a few more coins than you have with you. You ask the seller if he would take one of the receipts for the coins you have stored with the goldsmith as partial payment. He agrees to do so. You decide that this is much more convenient than going back to the goldsmiths, producing your receipt, obtaining your coins and traveling back to make your purchase. You tell your friends how well it works to simply trade with the receipts instead of the coins. Appreciating convenience, it soon became a common practice to use the receipts as part of the medium of exchange, while leaving the silver and gold safely in the vault. Soon this concept of paper money was accepted throughout Europe. (Note here that this paper money represented wealth already produced not interest-bearing debt owed to the goldsmith) The goldsmiths soon found themselves in possession of large amounts of other people’s coins.
The goldsmiths, like most men, were open to concepts that might enhance profits. Maybe it started when a close friend of the goldsmith came by and said “I decided to buy something but I am short a few coins. How about a loan? The goldsmith thought about the silver and gold stored in his vault that people seldom asked for because they were using his receipts as their medium of exchange. Thoughts of enhanced profits popped in his mind. Yes, I will make you a loan, but I will have to charge you a fee which we shall call interest for the use of the coins.
[However this fee will be a little different kind of fee. It will not be a one time fee like other fees are. It will be a fee that renews it self every month as long as you use the coins; until in a few months time the fee will be 2 to 3 times greater the value of the coins that you borrowed. Think about it as you would a real estate agent who said sure I will find a buyer for your house. I will do it for a small fee that will in time become 2½ times the value of your house. Of course the borrower is never taught to think about it that way.]
With that loan the goldsmith changed the money both in quantity and quality. The change in quantity is very clear and understandable. The money supply increased as soon as the goldsmith made the loan of the silver or gold coins because both the coins and the receipt for the coins were in circulation at the same time, both passing as money. The change in quality is not as clearly seen nor understood, but it’s just as real. When the goldsmith loaned the coins into circulation the money supply increased as interestbearing indebtedness, not as an increase in wealth as it was when the silver and gold was first coined. At that moment debt money(money that some one must borrow before it can exist) was born.
The more wily and dishonest goldsmiths soon realized that they could increase their economic advantage, power and monetary gains, if they kept the coins in the vault and just loaned out thee receipts [their promise to pay]. Unlike the coins multiple receipts for each coin held in the vault could be loaned out. That would have the same profit effect as increasing the interest rate on the original coin. If the interest rate on one coin was 10% when the goldsmiths loaned out 10 receipts for one coin, his interest rate on the coin would jump to 100% and no one would see or understand the increase in the lenders profits. In fact, to this day few people have really under stood what happened or what is happening now.
The news spread rapidly. If you were a little short on coins to complete a deal you could go to the goldsmith and sign a promissory note pledging some of your property as collateral. The goldsmith would loan you receipts [his promise to pay you] for the coins you needed.
The goldsmiths soon realized that if he demanded that most the interest on his receipts be paid in silver and gold. It would not take too many years until he would own vast amounts of silver and gold. Using the rule of 72 we find that if the goldsmith loaned out one gold or silver coin at 10% interest it would take him 7.2 years to double his money. However if he loaned out ten receipts for the one coin that he had it would only take him 8.6 months to double his money.
Over the years the goldsmiths’ turned into bankers and great financiers and gained great control over the people by increasing the money supply as loans. The facts show clearly that the banking system has become the slave master over all commerce and today they hold mortgages on most all the property in the world, either through direct loans or indirectly through loans to governments.
Even after the bankers gained the control and ownership of lots of silver and most of the gold through the interest earning from the issuing of excess receipts, it was very important for the bankers to keep everyone believing the real money was gold and silver and all their receipts were backed by gold and silver. That way few would ever question their right to issue the receipts that had become the most accepted medium-of-exchange.
To ensure that most economic writings supported their practices, the bankers found it is very much in their self interest to fund schools of economic thought and professors who teach in them. It is very important for the banking system to have people believe that banking and high finance is too complicated to be understood by the average person and is best left to the “experts” It is very easy to control the minds of people by controlling what is taught in the schools they attend.
College banking and economists courses teach that the goldsmiths simply increased the money supply, leaving out the fact that the ‘increased money supply’ was as interestbearing debts to the people and a 100% gain to the bankers, rather than more wealth to the people as it was when gold and silver were mined out of the earth. Obviously the amount of gold or silver had not increased, but the promise (obligation/debt) to pay gold or silver, did increase. When the goldsmiths created extra receipts, he also created a shortage of gold or silver. Soon the receipts for gold or silver in storage were greater than the amount of gold and silver stored. In more modern times, it was an easy step from making the loans in the form of a note promising to pay gold or silver, to just making the loans as book entries to the customer’s checking account.
Knowing that there was not enough gold and silver to cover their promises to pay, bankers had no choice but to demonetize gold and silver (Roosevelt demonetized gold in the U.S, in 1933 and Nixon demonetized gold internationally in 1971) and declare it outdated and no longer useful as money. The minute gold and silver was demonetized, the original wealth dollar died and all that was left was the debt dollar. The original dollar was produced as wealth though the combination of labor and raw resources. (Man getting monetary benefit of his productivity). The new debt dollar was created by an act of deception designed to acquire wealth, produced by someone else, by fraud." (snip) ...
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