Bankers make Debts just as bakers make cakes. That is what they do. Debts are the products of banks just as cars are the products of automakers.
Imagine yourself in a classic movie as one of the bad guys, a counterfeiter. You have no criminal record but the others do. They talk about prison. The first thing you learn is never commit a crime that gets you into a state prison. Only do business with the federal government. They have much nicer prisons. The next thing you learn is the rules for jail time. Never carry a gun. Never defraud a bank in bankruptcy court by hiding cash. People who hide $100,000 in bankruptcy proceedings get 2 1/2 times as long a sentence as someone who counterfeits 20 times that much money. It is who you offend and not the amount of the offense that counts.
This gets you to thinking. You look at wages and bonuses. It seems to you that bakers who make cakes and automakers who make cars do not earn as much in bonus money as Bankers. The price of a home in London is quite high but it is affordable to a Banker who just received a £5 million bonus. This gets you to thinking about just what a Banker does contribute to society that makes him so valuable. This leads you to researching how banks work.
Mrs Jones goes to the bank and deposits $1,000. Her Banker can through fractional reserve banking loan out $10,000. A man comes in and wants a $10,000 loan. The Banker enters a credit for $10,000 into the customer’s checking account as soon as he signs the loan agreement promising to pay back $10,000 plus interest of say $1,000 by the end of the year. Knowing math you realize that the interest rate charged is not 10% but closer to 20% because the customer only gets to use the money for half of the year. This is all in the Banker’s favor because Mrs Jones only gets 1% of $1,000 or $10 and she has to leave her money in the bank for the whole year so the Banker can get more than one loan out of her deposit. He might consider credit card loans at 29%. Mrs Jones is actually losing money because the inflation rate is 8% and she has to pay taxes on that $10 interest payment. Her purchasing power is down more than $70 by the end of the year.
You continue your conversations with the counterfeiting crew. You learn that the number one thing the police have going for them is that they have every known criminal in their computer files. Every time there is a crime committed all they have to do is go down the list of previous offenders. You do a quick census of the crew and their criminal records. You decide to wipe all your fingerprints from the printing area and quit the gang. You go to New York and get a job with old Uncle Fuddy Duddy. You tell him, “I have seen the errors of my ways. Banking is the most important job in the world. Bankers create liquidity and make all commerce possible.”
The old geezer will be retiring in three years which should give you time to take over. Your goal is to become the Boss of Bosses replacing Jamie Dimon and Lloyd Blankfein in importance.
You weren’t lying when you said, “Bankers create liquidity and make all commerce possible.” Bankers create our money whether it be in the form of checking account deposits or in the form of Federal Reserve Notes. If we repay a loan, the Banker credits the interest paid to his profits and subtracts the rest from deposits which decreases the money supply. This means that under our present system that if everyone paid their debts and the federal government somehow paid off the national debt as well, we would quite literally have no money to buy and sell anything at all.
In the Great Depression in 1933 a lot of homes and farms were foreclosed. The properties were sold. Bank losses were written off which decreased debts outstanding and the money supply as well. There is an old formula Money Supply X Velocity = Prices X Transactions. Velocity is the number of times money turns over in a year. What MV =PT indicates is that if the Money Supply contracts due to defaults on debts, then the economy goes to hell because there simply is not enough money to do business. A Depression is a period in time when massive amounts of debts are cancelled which automatically shrinks the money supply. This lack of money to do business causes retail sales to plummet, factory orders to decline and in the final stages massive layoffs and another round of bankruptcies.
There is another way to cancel debt. If you take July 1914 as the base for the German Wholesale Price Index, you will note that wholesale prices rose 72,600,000,000,000% by November 1923. The Weimar Republic cancelled debt by exponentially increasing the Money Supply. The consequences for this method of debt cancellation in Germany were arguably worse than what happened in America where 3 million or so Americans had starved to death.
Let’s go back to our classic movie. You have served your apprenticeship at uncle Fuddy Duddy’s bank. You have persuaded the Board of Directors to follow in your new swinging ways for the bank to make lots of money. Your first step was to become a bullion bank. You began by leasing three tons of gold at a very low interest rate from the US Treasury. You opened a gold facility and sold fifteen tons of gold to your very best customers who were long time friends of old Uncle Fuddy Duddy. They deposited their gold at your facility. You used the proceeds in part to pay enormous bonuses to yourself and the board to convince them that the new ways were the best ways.
This was during the heydays of subprime mortgages. You used your gold sales to fund a subsidiary which gave out mortgages to people who could never afford to make their payments. It was better than gold sales because there were fees to collect every time you handled those notes. You did know that you could sell any bad debt to the Federal Reserve Discount Window. The FED’s job was to cover up fraud. You went through the bad debt on your books and sold them to the FED’s Discount Window in batches of $10 million. This FED Discount Window operation was called expanding liquidity. This was true in the sense that it was illegal for you to sell fraudulent mortgage notes to anyone else. You noted that things got a little dicey but the FED loaned $7 trillion at 0.01% interest to European Bankers who were mad. No sense of humor those Europeans. Just because you and your friends had sold them trillions of dollars in worthless Mortgage Backed Securities (MBS).
It is illegal for a pension fund to buy worthless securities. In fact it is a felony to sell fraudulent investments. But you had that beat coming and going. You had paid an exorbitant fee to Wall Street ratings agencies to give AAA ratings to your fraudulent paper. Then you made a trip to Washington and agreed to pay $50,000 a month as a ‘legal retainer’ to a well connected law firm to get you classified as Too Big To Jail. Chicken feed compared to the billions you were stealing every year. While there you hired private detectives to do background checks on your old friends from the counterfeiting gang. You paid the various detectives in cash so it was not traced back to you. They were all in prison or on parole. Apparently, their judges didn’t go for ‘I didn’t do it your Honor. And I promise never to do it again.’
Your studies convinced you Depressions were caused by the accumulation of Unpayable Debts. One day you heard an economics professor from Australia say we have the worst Financial Crisis in 500 years coming because we have more Unpayable Debts than anytime in five centuries. There are only 3 ways out of all those Debts you had been creating at the bank. One was foreclosures like 1933 America. Millions starved to death. Hyperinflation in the Weimar Republic cancelled debts too. One man paid off his farm mortgage by selling 2 eggs. The third option was what Babylon did. They had a formula that told them when it was time to cancel debts. The Romans copied this and did it during the Republic but never during the Empire. Empires do not have citizens. They have slaves. The Bible writers copied it and called it the Jubilee. They never practiced it. The lack of debt cancellation was Jeremiah’s explanation for Judah’s Babylonian Captivity.
Your study of modern history has convinced you that Bankers started wars to get out of Depressions. Wars also eliminated human rights at least for awhile which was good. Bankers need protection from angry mobs. You see all the signs about you of an impending war. There is no chance for Debt Cancellation. The Bankers want to keep everyone in Debt Slavery. And they want to keep all that money they stole from the public. Catherine Austin Fitts said Wall Street stole $40 trillion from the citizenry and they would steal trillions more. Your money was safely offshore.
You had sold a few trillion dollars in Credit Default Swaps (CDS) to raise the billions of dollars you needed for bonuses and your rainy day exit fund. A CDS is a phony insurance scam. You insure someone’s bet against interest rates rising. You do not have to set aside money to pay off losing bets. It is not as if you were selling car insurance. You just pocketed the premiums and let the taxpayers pay for the losses with another Bank Bailout. There was talk of a Bail-in which would allow Bankers to steal their customers’ deposits. As an American, the idea of Bail-ins never appealed to you because you knew that American bank depositors owned 350 million guns. America wasn’t Cyprus.
Your exit plan consisted of several elements. You hired Dopey and Sleazebag to sign every document at the company. You remember the old line from the movies. The cop always says ‘When this is all over someone has to go to prison.’ Dopey could plead stupidity. And Sleazebag belonged in jail anyway. You hear about plans on the Internet to invade offshore bank havens like the Cayman Islands and Lichtenstein to seize the $40 trillion the Bankers stole from the taxpayers. You protected yourself. You started buying American cigarettes by the ship load selling them overseas for untraceable cash which wound up in Patagonia where all the best criminals had built mansions. And if World War III did go nuclear, you could survive in the southern hemisphere because you would grow your food in greenhouses. Well, you could survive a little nuclear war but maybe not a big one. You decided not to bother building a survival shelter. But you did store enough food to last for several years and tunnels to get you away from the mobs.
For some reason people just do not like Bankers. You would think it is true that there is some kind of anti-Semitic gene passed down from one generation to the next. You aren’t even Jewish and people hate you. You have taken to telling tradespeople and waiters that you are an international arms dealer so people will think more highly of you. You have analysts looking 24 hours a day in markets all over the world for the One Event that means it is time to get out of town. Your doctor convinces you that it is time to quit. Stealing that last billion dollars is just not worth it so you fly south to Patagonia leaving Dopey and Sleazebag to take the rap.
Unfortunately, for us this is not a movie. It is real life. There is no plan to send the Bad Guys to jail. And there might not be any such thing as a little nuclear war.
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