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Banking Favourites

Imaginary Money Equals Imaginary Debt

What is money? No. Seriously now, I’m not joking. Can you say what money is?

I can’t.

I asked this question a good while back and nobody came up with a satisfactory answer then, although it seems to have become a little clearer in the intervening few years that money these days is made up. It’s imaginary.  As Mr Darwin points out, the banks didn’t have to borrow the money they lent to you.  They just invented it.

There was a time when money was based on something tangible, even if that connection was arbitrary. We had the gold standard, which meant that there could never be any more money than there was gold, crudely speaking. But of course, an arrangement like that isn’t convenient for people who wish to make money by charging interest on lending, because it doesn’t allow them to engage in that magical process called leverage.

JP Morgan

What’s leverage? Well, this means that for every euro or dollar or pound a bank has, it can lend nine more.

On what basis, you might be wondering, can anybody lend what he doesn’t have? Well, that’s the very foundation of modern banking and it lies at the very heart of the current financial crisis. It also goes right back to the source of the problem: Wall Street.

These were the people, a century ago, who came together on a private island off the coast of Georgia, and conspired to take over the world, and they succeeded.  Back in 1910, eight powerful men came together on Jekyll Island to devise a new way of banking . Between them, they represented one quarter of the entire world’s wealth, and their business on Jekyll Island was to establish nothing less than absolute control of world finance by the small group that dominated Wall Street. In some ways, it was like an agreement between mob bosses, but a comparison with medieval merchant princes is probably more accurate. Over nine days, these men came up with a plan to set up a private banking cartel which they called the Federal Reserve System. They chose the name carefully: Federal to create the illusion that their creation had some official governmental status, Reserve to hint that it had substance and System to divert attention from the fact that it was solely for the benefit of a few enormously wealthy New York families.

What was their plan? Simple. After years of competing, they decided that enough was enough. What was the point of fighting against each other when there was so much more profit to be made if only they could find a way to unite? Besides, these were civilised fellows who all knew each other. One didn’t wish to to have such unpleasantness in one’s life.

Who were they?

Senator Nelson W. Aldrich, father-in-law of John D Rockefeller.

Abraham Piatt Andrew, Assistant Secretary of the United States Treasury

Frank Vanderlip, president, National City Bank of New York (owned by JP Morgan) , on behalf of William Rockefeller. Also representing Kuhn, Loeb & Company

Henry Davison, senior partner of the J.P. Morgan Company

Charles Norton, president First National Bank of New York (owned by JP Morgan)

Benjamin Strong, president Bankers Trust Company (owned by JP Morgan)

Paul Warburg, partner in Kuhn, Loeb & Company, representing Rothschild banking family. Brother of Max Warburg, the chief executive M.M.Warburg & Co in Germany and the Netherlands

The idea, largely the brainchild of Warburg, was simple but ingenious. Break the link with the gold standard, making it possible to invent money. The US government was constantly running at a deficit and in perpetual need of funds. With a world war looming, the need for dollars would be all the greater and the money would have to come from somewhere. After all, without money, how could there be a world war? These men understood full well that they had a vital contribution to make: without their help, there could be no war, and what a catastrophe that would be.

Ancient kings understood the idea of a war chest. The more gold sovereigns you have in that box, the more soldiers you can send out to fight the king of Spain or France or Portugal or whatever relative you wish to invade, but once the gold is gone, you must bring your troops home. Now, this might have been a restraining influence on warlike kings, but it was bad news for bankers, and the clever men on Jekyll Island knew it. They needed a new plan, and these fellows were up to the task.

Instead of basing money on gold, what about just making it up? What about claiming to have the cash even though you don’t, because money no longer exists, except in the imagination? This means that you have all the money in the world to lend out, and you can collect vast interest on something you never had in the first place. You just made it up. No matter how much money the government asks for by way of loans, you can supply their needs because you’re just making it up. You’re pulling it out of thin air.  And therefore, no matter how low the interest rate is, you don’t care. This is free profit, earned on something you don’t own and never had. You just invented it.

This is pure genius. It works in a rising and a falling market.   It works in wartime and it works in a crash. When everyone is going broke, you can buy up all they own for peanuts, and anyway, you just invented that money this morning. It’s in your interests to collapse the market.  You can’t lose.

That was the start of it, and that was how ten or twenty families came to hold ownership of almost the entire world, by sleight of hand.  The US government is now so wedded to the concept of the Fed that most US citizens and even most US legislators think it’s another arm of the administration, which it is not.

The Fed is a private banking cartel, designed to create vast profit for a few out of nothing. It exists solely to ensure that prices keep going up, that governments keep borrowing and that those loans are repaid using taxes. Isn’t it beautiful? Banks overstretch themselves having borrowed phony money from Wall Street. They collapse and governments bail them out using money borrowed from Wall Street.  It repays those loans by taxing ordinary citizens and every single penny of this money goes to the people who invented the cash in the first place. The descendants of those eight men who met on Jekyll Island back in 1910 to play tennnis, smoke cigars, dine well, and carve up the world.

So that’s it? The end of money? Well, yes. Or more to the point, the end of value, because we’ll always have money of some sort, and the more money central banks issue, the more prices will rise. This is why different currencies trade at verious exchange rates.

Of course, inventing money wasn’t the sole domain of the spurious Federal Reserve System. After all, only three years ago we had Irish banks conspiring to pass around a single ball of money with a view to hoodwinking the auditor, by the simple expedient of holding the examination if the books on different days for each bank.

You take it. Ok. Now you have it. Now you.

A travelling roadshow of money creating the illusion that Irish banks were solvent when in fact they were anything but. This was done with the agreement of the banking regulator, who was, of course, an absolute disgrace, but you’d have to wonder if the same thing has been going on right across Europe.

So, all this talk about bailing out the banks by Merkel and Sarkozy is based on the fantasy that money exists outside the imagination of bankers. And all of this austerity here at home is to save these people from losing money they only dreamed up by magic in the first place.  So if money doesn’t exist except in the minds of those who caused the catastrophe, isn’t it about time to ask if debt should likewise be considered imaginary?

Or would we prefer to remain slaves for generations, paying off a debt that might as well be measured in feathers.

Categories
Crime Economy Scandal

Letter To Brian Goggin, Bank of Ireland CEO

Mr Brian Goggin

Chief Executive

Bank of Ireland

Dear Brian,

So there I was thinking we had nothing in common. You were a big-shot bankster, while I was just some faceless internet presence. But that all changed, Brian, when I saw you interviewed on TV during the week.

Do you remember that, Brian? Do you remember the bit where the reporter asked you if you’d be taking home less money this year, considering the fact that you presided over a total collapse of your bank’s value, and now the taxpayer has to pump billions into your bank to prop it up?

You didn’t mess around. You told him you certainly would. Your income would be substantially less than last year. That was the word you used, Brian. Substantially. A very good word, if I may say so.

Do you remember that bit, Brian?

Then he asked you how much you earned last year, and I have to confess, you started to lose me. You told him that your disclosed compensation was €2.9 million. Disclosed? Compensation? It made me wonder if you were living off some secret insurance claim instead of a salary.

Big money, Brian. Big, big money.

Look, Brian, I realise you didn’t get where you are today by being stuck for words, so when the reporter asked you how much you’d be taking home this year, after the bank collapsed under your management, you levelled with him.

It’ll be less than two million, you told him.

That was when you won me back, Brian.

That was when I realised we were so alike.

You see, Brian, this is what you and I have in common: next year we’ll both take home less than two million. What a coincidence.

Brian, you have no idea how much you share with ordinary Irish people.

Best wishes

Bock

_____________

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Economy Favourites Humour

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