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Money in capitalist economies is an IOU, an IOU that
can’t be repaid
Paper money, invented by the Chinese, first appeared
in the West in the 13th century. Brought back from China by Marco
Polo and his uncles, author Ralph Foster describes the West’s reaction
to the hitherto unseen phenomena of money as a piece of paper.
Upon returning to Italy, Polo showed off some Chinese currency notes
and explained how they were used…An article by Will Willbond
in the November 1995 issue of ‘The Bank Note Reporter’ describes
the Venetian reaction:
The Emperor of China (who we call Kubalai
Khan) gave the Polos a camel loaded with 1,000 cash
paper notes as a gift from their sovereign. The doge (chief magistrate of
Venice) and the cardinal (the Pope’s cousin) looked at
these…notes in awe and dismay.
The hen-scratched writing was not in Latin or Greek but in a secret
language, most likely the language of the Devil. They proceeded to burn these
notes and accused Polo of heresy.
pg 38,
Ralph Foster, Fiat Paper Money: the
History and Evolution of our Currency, 2nd ed.
In retrospect, the disturbed reaction of the Venetians
was not without cause. For when paper money was later issued in the West, it
was to assume a far more sinister guise—no longer was money a
savings-based instrument of exchange as it had been throughout human history.
In the West, paper money was to become an integral part of a scheme to profit
by the spread of debt, i.e. usury.
DEBT-BASED
CAPITALISM AND THE RISE OF MODERN BANKING
The human
species, according to the best theory I can form of it, is composed of two
distinct races, the men who borrow, and the men who lend.
Charles Lab, Essays of Elia,
1833
The above quote is from Will Slatyer’s The Debt Delusion, Evolution and
Management of Financial Risk (2008). In his remarkable book, Slatyer traces the origins of debt to before the coinage of
gold and silver.
Slatyer
notes: In ancient times, interest was rarely charged on advances of precious metals
… However, if one did not pay the loan back as agreed, interest was
charged at very high rates …The word ‘interest’ refers to
the compensation under Roman law which was due to the debtor who had
defaulted, i.e. compensation. (pg 12)
Debt distinguished the West’s paper
banknotes—issued from central banks in the form of loans—from
China’s paper money issued by the state. In the West, however, debt was
to replace savings as the basis of commerce.
Although it was two Scots, William Patterson and
John Law, who introduced paper money to the West, paper money as debt, i.e.
capitalism, can be traced to the Jews who had observed the earlier use of
paper money and paper financial instruments in the East
Ralph Foster notes: Jews doing business in China observed and studied the use of
promissory notes, vouchers, draft notes, and negotiable certificates of
deposit. They saw how this paper circulated freely among the general
population rather than only among merchants. Eventually, they adapted these
financial instruments to their own use—long before the first Christian
travelers had even heard of them.
Europe was thus
an indirect beneficiary of eastern financial knowledge. Max Weber, the famous
sociologist, recognized the importance of Jewish contributions to the
development of capitalism and lectured on their common oriental origin.
pg. 34, Ralph Foster, Fiat Paper Money: the History and Evolution of our Currency, 2nd
ed.
HOW
CHINA’S FIAT MONEY BECOME DEBT-BASED PAPER BANKNOTES IN THE WEST
Ralph Fosters’ Fiat Paper Money: the History and Evolution of our Currency
explains how China’s paper money came to the West: Those who benefit
from fiat money’s devious gifts would rather its origins remain
forgotten. Thanks to Ralph Foster’s scholarship, however, the history
of fiat money is now known.
Note: To order Fiat
Paper Money send check or money order for $29.95 to Foster Publishing,
2189 Bancroft Way, Berkeley, CA 94704, free shipping in USA, Global Priority
mail outside USA $18.00, email: tfdf@pacbell.net
When the Scot, William Patterson, proposed his idea
of a central bank to King William III of England, banks and paper money were
unknown, at least in the West. In the East, paper money had for 600 years led
to reoccurring episodes of runaway inflation and the collapse of dynasties.
Finally in 1661, China outlawed paper money; and thirty-three years later, in
1694, paper banknotes became accepted as money in England.
Patterson’s central bank combined paper money
with usury, i.e. money-lending. In Patterson’s scheme, money would
henceforth be issued as loans from banks, i.e. if all loans were repaid, all
money would disappear. Earlier, the Venetians had feared China’s paper
money was the work of the devil. They were wrong. Patterson’s money
was.
The underlying purpose of Patterson’s central
bank was not to replace gold and silver with paper money (although it
eventually did) but to instead profit by the charging of interest on the
loaning of paper banknotes as if they
were gold or silver.
Debt-based
money issued from central banks on which interest accrues is the basis of
capitalist economies. In capitalist economies, central banks are engines of
credit which emit debt just as internal combustion engines emit carbon
dioxide.
Debt accruing
from money issued by central banks constantly compounds and unless capitalist
economies also constantly expand, constantly compounding debt eventually
overwhelms all economic activity, resulting in ’parcus
nex’, i.e. economic death.
It is the charging of interest on money issued as
loans from a central bank that is the foundation of capitalism. It should be
noted that prior to capitalism, charging interest on money lending was
considered immoral by Christians, Muslims and Jews alike.
Outlawed by Islam, considered by the Catholic Church
to be a sin and contrary to the Law of Moses, because of William
Patterson’s combination of money and debt, money lending is now the
basis of all modern economies.
BE CAREFUL WHO
YOU SHUN
Jews, barred from all trade guilds in Medieval
Europe, were allowed only two avocations in the Middle Ages, that of money
lending and the selling of used clothing. It is not without irony that the
once shunned practice of money lending has now catapulted Jewish bankers to
their pre-eminent position of power and wealth in the world today.
The Catholic Church’s ban on usury, i.e. money lending, came originally from Talmudic law which banned
Jews from lending money at interest to other Jews. Jews, however, interpreted
this ban as still allowing them to lend money to non-Jews.
In Hebrew law, an
indulgent perception of usury meant that one could loan at usury to a racial
alien or one not of the Jewish faith…In early Palestine, loans with
interest had been allowed to gentiles and Samaritans, and the practice had
spread to Europe.
pg 17, Slatyer, The Debt
Delusion, Evolution and Management of Financial Risk (2008).
Today, some three hundred years after William
Patterson introduced central banking’s debt-based paper money in the
West, the centuries-long prohibition against money lending is as long-forgotten
as China’s 600 year history with paper money, hyperinflation and
dynastic collapse.
Oh laddie of the highlands
What changes you have wrought
With your bubkes paper banknotes
Governments you have bought
You fueled a Tower of Babel
Where banks and bankers rule
With nations now the victims
Of your monetary tools
When capitalism—institutionalized money
lending in debt-based economies—became the world’s predominant
economy, bankers found themselves temporarily on top. The operant word is temporarily
because where credit and debt is concerned, that which goes up always comes
down.
In 1971, capitalism began to unravel when the US was
forced to suspend the convertibility of the US dollar to gold. Without
gold’s constraint on the money supply, governments—especially the
US—began printing and borrowing money virtually without limit. Today,
that limit has been reached.
William Patterson’s 300 year-old house of
cards and credit is now collapsing as defaulting debt consumes what’s
left of savings. Despite the efforts of governments to save the system that
allows them to spend money they don’t have, the end of the
banker’s reign is near.
Since the
advent of paper money, bankers have tended to form an unholy alliance with
elected governments to expand debt. Both prosper until the time when debt
cannot be repaid.
pp. 32-33, Slatyer, The Debt Delusion, Evolution and
Management of Financial Risk, 2008
WAR AND THE RISE AND FALL OF CAPITALISM
The chartering of the Bank of England changed the
course of history. Central banking allowed governments to go to war on
credit, an advantage England parlayed into world dominion over the next 150
years.
In Dollars
& Sense show 8, I describe what happened when central banking
transformed both England and the US. But the ability to arm the military on credit
would ultimately indebt nations beyond their ability to repay and, in the
end, would contribute to the end of capitalism itself, see http://www.youtube.com/user/SchoonWorks#p/u/3/deRQOa2EIxM
Since WWII, the US has maintained a costly war
footing in peacetime and in so doing dissipated the greatest hoard of
monetary gold in history. John Exter, a central
banker, tells what happened when the US
removed the gold-backing of the US dollar in 1971:
The final link
between the dollar and gold was broken. The dollar became nothing more than a
fiat currency and the Fed [and especially the banks] were
then free to continue monetary expansion at will. The result..was a massive explosion of debt
p. 77, Ferdinand Lips, Gold Wars, 2001
Gold was the cotter pin that held capitalism’s
scheme of debt and usury together for almost 300 years. In 1971, the removal
of gold from paper money caused the rapid expansion of the money supply and
debt, and ultimately, the end of capitalism itself.
GOVERNMENTS WILL FALL AND GOLD WILL RISE
The collapse of Chinese dynasties caused by the
excessive issuance of fiat money is about to be repeated, albeit in a modern
iteration and on a much wider scale. The recent and unprecedented increase of
credit in China and the negative interest rates in much of the world are no
less consequential than the excessive printing of fiat money that caused the
serial collapse of five Chinese dynasties.
The slowing of the global economy in 2008 was met
with an immediate flood of fiat money from China hoping to reverse the severe
economic contraction. It worked, albeit temporarily and at a perhaps fatal
cost.
The flood of fiat money in 2008/2009 set in motion inflationary
forces that will dwarf the inflation of the late 1970s that in the US sent
gold surging almost 2300 % between 1971 and 1980 (9 years); shaming the
Dow’s historic rally between 1982 and 2000, an increase of 1500 % over
18 years.
The rise in gold and silver prices has been underway
since 2001. The process itself has been underway since 1971. There is further
to go and the price rise will be steeper. In an interview with Ralph Foster,
I discuss this process with the noted author and gold and silver dealer, see http://www.youtube.com/user/SchoonWorks#p/u/0/pFx9EfM_Ugs.
China may well play the unfortunate role for the
world economy that it did for its own for five successive dynasties. China is
once again issuing excessive amounts of fiat money. Then, governments fell.
Today, they will fall again; and when they fall, the price of gold will rise
vertically.
YOU CAN’T EAT GOLD
The study of capitalism is like the study of religion
in a time of idolatry
“You can’t eat gold” is a
sophomoric assertion intended to dismiss the value of gold in times of severe
economic crisis. Professor Antal Fekete who lived through such times, i.e. the post-WWII
Hungarian inflation, simply dismisses this absurd statement by answering,
“You can always eat what gold will buy”.
I was fortunate to learn much about the Austrian
school of economics from Professor Fekete. The Austrian school holds that human
choices and interaction play causal roles in economies, i.e. Human Action
by Ludwig von Mises.
I recommend that for
those interested in matters of economics, there is no better venue for
discussion than with Professor Fekete, a man of towering
intellect, humor, compassion and a concomitant love for discourse and
argument.
From August 20-29 in
Munich, Germany, Professor Fekete will lecture on The
Austrian Theory of Interest and Discount. He will be joined by Sandeep Jaitly whose study of
the gold and silver basis, an area first explored by Professor Fekete, has led to the basis as a strategy for profitably
trading gold and silver.
Note: For inquiries about
Professor Fekete’s seminar, email nasoe@kt-solutions.de
The Austrian school of
economics emerged at a time when communism and socialism were offered as
alternatives to the capitalist model. Because of the central role of
government inherent in communist and socialist models, the potential for
tyranny was obvious.
That capitalism, however,
offered the same potential is less obvious. The threat of capitalism to human
freedom is even more insidious because of its covert agenda and global
presence, an agenda described by Carroll Quigley in his seminal work, Tragedy
and Hope (1975)
Quigley was a professor
at Princeton and Harvard Universities, and later at the School of Foreign
Service at Georgetown University where he was a mentor of Bill Clinton.
Quigley’s observations are to be valued as they are an insider’s
look at the activities of powerful elites who use government and commerce to
accomplish their aims and disguise their activities.
Because of his position
as an academic and scholar, Quigley had access to individuals and elite
groups who influence events and activities far outside the purview of others;
and, in Tragedy and Hope, he exposes the hidden agenda of these
elites:
The
powers of financial capitalism had another far reaching aim, nothing less
than to create a world system of financial control in private hands able to
dominate the political system of each country and the economy of the world as
a whole. This system was to be controlled in a feudalist fashion by the
central banks of the world acting in concert, by secret agreements, arrived
at in frequent private meetings and conferences. The apex of the system was
the Bank for International Settlements in Basle, Switzerland,
a private bank owned and controlled by the worlds' central banks which were
themselves private corporations. The growth of financial capitalism made
possible a centralization of world economic control and use of this power for
the direct benefit of financiers and the indirect injury of all other
economic groups.
The global economic collapse is perhaps humanity’s greatest
hope for escaping the debt slavery the world’s financiers and bankers
have planned for the world. However, to escape slavery one must first know he
is a slave.
Debt is the
slavery of the free
Publius Syrus, Sententiae, c 50 BC
Man’s
wisdom is most conspicuous where he is able to distinguish among dangers and
make choice of the least.
Niccolo
Machiavelli, The Prince, 1513
The above quotes are from Will Slatyer’s
The Debt Delusion, Evolution and
Management of Financial Risk (2008)
Buy gold, buy silver, have faith.
Darryl Robert Schoon
www.survivethecrisis.com
www.drschoon.com
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