1 ONE of the episodes of a popular TV show, “LittleHouse On The Prairie,” portrayed a sharp avaricious neighbor of the Ingalls family pulling a raw business deal on a young man who wanted to get a small farm going so he could marry Laura Ingalls.

2 The land included a small stream originating on the seller’s farm. After the young man had made a down payment and worked hard all spring to put in a good crop, the seller cut off the stream of water.

3 This not only threatened the growing crop but made the farm useless to the new owner.

4 The seller then offered to buy the land back, including the crop, for a mere $100, a fraction of what it cost.

5 When Mr. Ingalls challenged this deceitful and conniving neighbor for pulling such a crooked deal on the hopeful trusting young man, the shrewd neighbor replied, “Well... that’s Business!”

6 The audience enjoyed it when Mr. Ingalls wound up and delivered a fistful of righteous indignation directly to the sneaky neighbor’s jutting jaw.

7 The point is, sometimes deceitful things are done in the name of “Business.”

8 CHEATING AND ROBBING IN THE NAME OF “BUSINESS”

9 Robbery is defined as “taking property from another by threat, force, or violence.”

10 When this is done by a hijacker or mugger it is judged to be a felonious crime with stiff penalties.

11 But when robbery is done by manipulating circumstances within the technicalities of the law, some people — as in the above case — call it “business.”

12 Of course, it is NOT business in the ethical sense of the word because legitimate business, as described by Adam Smith, is a transaction where both parties feel they have improved their position.

13 Business which amounts to “legal robbery” is really a very dirty business.

14 This happens whenever a person with a technical advantage “legally” robs another under the threat of using the force of the courts to support his so-called “rights” in carrying out a deceitful deal.

15 We mention this simply because this has been the tragic and unfortunate history of the privately-owned “central banking business” during the past 300-400 years.

16 DIFFERENT KINDS OF BANKS

17 Banks ordinarily represent depositories for the people’s savings.

18 This accumulated capital then becomes available for loans to buy farms, build homes, construct factories, and do a multitude of other things which are indispensable to a prosperous industrial society.

19 Banks, therefore are very important, and represent the major source of investment capital needed to promote the growth of a nation and provide millions of new jobs for our ever-increasing population.

20 But then there is a different kind of bank, a sort of super-bank, which represents far larger deposits of accumulated wealth. This type of bank is often referred to as a country’s “central” bank.

21 Even though each bank of this type is privately owned, it often carries the name of the country it serves because the government of that country uses it as the depository for government funds, and borrows the money it needs from it in times of great emergency.

22 This privately-owned central bank therefore becomes the manager of money and credit for the entire nation. It handles major investments in agriculture, industry, factories, and homes.

23 This private central bank also loans the government the funds it needs in time of war, or for the preparations of war, and for the armaments of the nation.

24 The managers of central banks are in a powerful position to manipulate the affairs of a country for good — or evil.

25 CENTRAL BANKS SUFFER FROM TWO EVILS

26 When the managers of the central bank of any particular country are looking around for ways to accumulate even more wealth, they’re tempted by two things which are inherently evil and totally destructive to civilized countries.

27 One temptation is to encourage an involvement in war, so that the nation will be forced to borrow heavily from the banks.
28 Government Bonds (Government IOU’s paying substantial interest) are considered to be the most valuable form of collateral for a central bank.

29 The other temptation is to promote cycles of ‘booms and busts.’ This consists of starting a boom with generous loans at low interest rates and after a few years suddenly raising the interest rates and calling in the loans, bankrupting home-owners, industries, farmers, and millions of people who had placed their trust in the bank to continue its policies.

30 Some economists — including Karl Marx, claimed author of the Communist Manifesto — want Americans to think that these boom and bust cycles are an inescapable characteristic of a free-market economy.

31 But the truth of the matter is that these boom and bust cycles are primarily a phenomenon of manipulated economics engineered by individuals who find themselves in an extremely powerful position to control money and credit but lack the moral integrity to resist the opportunity to fleece the common people who place their trust in them.

32 Any study of central banking will disclose the highly visible profile of these two pernicious problems with which central banking has been continually involved over the years.

33 It is easy to see, when pointed out, that wealthy money managers have a strong proclivity toward both war-mongering and manipulating cycles of booms and busts.

34 Having personally passed through several of these wars and cycles of booms and busts, this writer has been ever on the lookout for trends that might signify a repeat performance of this dishonest and abusive use of power.

35 LATEST BANKING INVENTION: MAKING MONEY OUT OF NOTHING

36 Several hundred years ago the goldsmiths of Europe needed to build vaults of substance for their precious metals.

37 As might be expected, it wasn’t long before others asked to leave their gold in these special vaults for safekeeping.

38 The goldsmiths consented, and gave each depositor a certificate which could be used to reclaim his precious gold at any time.

39 These certificates were therefore considered “as good as gold” and soon circulated in business channels as though they were gold.

40 In fact, they were so much more convenient to handle than gold, that very few depositors ever came back to the goldsmiths except to make more deposits of gold.

41 It soon became apparent to the goldsmiths that since only a small percentage of the depositors ever came back for their gold, the goldsmiths only had to keep enough gold on hand, as a ‘reserve,’ to satisfy those who did come back.

42 Realizing this, the goldsmiths decided they could safely issue more gold certificates than the amount of gold “on deposit.”

43 By this ‘fortuitous’ (deceitful) circumstance they had discovered how a shrewd unethical goldsmith could issue certificates on gold he didn’t have, and become super-rich by “making money out of nothing.”

44 What’s more, these certificates could be used to buy up all kinds of tangible property; or they could be loaned out to others at interest.

45 Here indeed was the ‘royal road’ to wealth.

46 THE PROBLEM OF A “RUN ON THE BANK”

47 It was important to keep a good ‘reserve’ of gold for those who did want to cash in their certificates, but this ordinarily involved only a fraction of the certificates in circulation.

48 Thus “fractional reserve banking” was born.

49 But every once in awhile people would become suspicious that perhaps the goldsmith-banker didn’t really have as much gold as he claimed to have.

50 Then there would be a rush (or ‘panic’) to cash in the certificates to get what gold was available before it was all gone.
51 This is called a “run on the bank.”

52 On such occasions the goldsmith-bankers usually tried to allay the fears of those who first demanded their gold, by promptly hauling out the precious metal and redeeming the certificates.

53 But if the “run” continued they would not be able to keep up their pretense for long, because the bank would run out of gold.

54 When this happened the only alternative was to “close the doors” in disgrace and go out of business, while the depositors paid the high price of the goldsmith’s deception and greed.

55 THE CENTRAL BANKS OF EUROPE LEARNED TO AVOID RUNS ON THEIR BANKS

56 As “fractional banking” became an established practice, it did not take long for the wealthy bankers of Europe to realize that if they were to prevent occasional runs on their banks by suspicious depositors who might want their gold on demand, they would have to work out a cooperative agreement with other banking families.

57 It was agreed that if a bank had a “run,” all the other banks would quickly pool their gold and send it to the trouble spot until things cooled down.

58 They learned from experience that if a bank could demonstrate that it did have plenty of gold to redeem its certificates, the people would regain confidence in the bank and re-deposit their gold.

59 The yellow metal could then be returned to the various other banks from which it had been hastily gathered.

60 FRACTIONAL BANKERS DO SOMETHING ORDINARY PEOPLE CANNOT DO

61 It is immediately evident that “making money out of nothing” is selling something the money-managers don’t really have.

62 It’s considered a criminal fraud if a person sells a house he doesn’t own. The same thing is true if he sells something which doesn’t even exist and never will exist.

63 Then how do the bankers get away with it? The answer is amazing!

64 The bankers saw the danger of their position and decided to protect themselves by getting the government involved.

65 They reasoned that the government wouldn’t prosecute the bankers if the government itself was in on the deal!

66 So this is what the bankers set out to achieve — first in Europe, then more recently in the United States.

67 THE BANK OF ENGLAND

68 In 1694 William III was involved in a war with France. He needed money in large quantities and he needed it quickly.

69 The British coffers were empty so he asked for vast loans of money from a super-rich Englishman, William Paterson, and from some of his wealthy friends.

70 Paterson and his friends were perfectly agreeable to the loan, provided that they were allowed to do two things:

71 (1) Set up a privately-owned bank to be called The Bank of England.
72 (2) receive authority from the King to issue their own bank notes as England’s official legal tender.

73 Since “Paterson Bank Notes” would be loaned to the King, so he could build and equip his armies, he readily agreed.

74 This gave legal sanction to a private bank being authorized to print bank notes as the legal tender for the nation.

75 Each bill promised to pay in gold “on demand” but the bankers actually had only a small fraction of the gold needed to cover the vast quantity of bank notes they were printing.

76 By this means the bankers brought the King in on the ruse as a Patron and Beneficiary of a system of “fractional reserve banking” — “making money out of nothing.”

77 This gave the King what he needed, and it gave the bankers what they wanted.

78 What did it matter if the bankers were making money out of nothing?

79 King William would have the needed bank notes that merchants would accept as “money” so he could buy the mercenaries and armaments to carry out his war with France.

80 Governments take the same attitude today.

81 The King even went so far as to eliminate any possible competition for the so-called “Bank of England” by giving Paterson and his friends an official Charter from the Crown, and by commanding the Goldsmiths of London to discontinue issuing receipts as depositories for precious metals.

82 This drove most of the merchants to store their gold with the Bank of England.

83 So a privately-owned bank became the official depository of the English Crown by printing its own bank notes as the King’s legal tender, thereby legalizing its deceitful formula for making money out of nothing, with the government’s OK.

84 By any standard, William Paterson considered this fantastic achievement pure genius!

85 It is interesting to note that right at the time William III was setting up this privately-owned Bank of England, based on “fractional reserve banking,” the colonists were moving in the opposite direction, developing a system of “sound money” in America.

86 May the grace of our Lord Jesus Christ be with you all. Amen.