Article 1: The interest-based banking system, which now forms the foundation of the monetary system in every modern nation, developed from the practices of goldsmiths who established the first banks in Europe many centuries ago.

These goldsmiths were prepared to offer their services to those who wished to deposit gold coins for safe-keeping. Upon taking a deposit of coins, the goldsmith would issue a receipt to the depositor. The receipt would be issued in 'bearer' form, meaning that any individual bearing it could claim back the face value in gold from the goldsmith on demand.

As time progressed, the public found that the goldsmiths' receipts would be accepted in payment for goods and services. The receipts had become the earliest form of 'bank money', and were of an entirely different nature to the gold coins produced by the state.

On most banking days, the coins withdrawn from the goldsmith by some customers would be offset by new amounts of gold deposited by other customers. Therefore, there would be little substantial change in a goldsmith's stock of gold from one day to the next. The temptation to lend this otherwise idle gold was irresistible. However, sufficient quantities would be retained in the vault in order to satisfy expected demands for redemption of receipts. The amount of coins kept in reserve, as a proportion of the amount of receipts outstanding, became known as the 'reserve ratio'.

The subject of how large a reserve ratio was required for safe operation became one of fierce debate among the early goldsmith bankers in England. Some argued in favour of a 100% reserve on the basis that if goldsmiths had issued £100 of receipts promising redemption on demand, then they should keep £100 of gold in the vault to honour this promise. Others foresaw the lucrative possibilities of holding a 'fractional' reserve ratio. The debate was of vital importance. If it was safe to keep, say, a 20% reserve ratio, then the remaining 80% of gold could be lent out at interest. The lower the reserve ratio, the greater the profit.

It soon became apparent that there was little need to lend the vault gold itself. Since the goldsmiths' own receipts were by now regarded as money among the general public, it would suffice for these receipts to be lent out as a proxy for gold coins. Such a policy had the great advantage that receipts could be manufactured at almost no cost, whilst gold itself could not be.

But, if it were indeed the case that the banker had the power to manufacture money, why did he not simply print receipts and spend them on his own consumption? Simply because, in spending his receipts, the banker would no longer own them. It would then be certain that in due course all of the receipts would return to his institution for redemption in gold - gold which never existed in the first instance. By lending the receipts instead, the banker could charge interest on the amount lent. Upon repayment, the receipts could be destroyed as easily as they had been manufactured, but the interest charge would remain as revenue.

In seeking to protect their loans of receipts, it became common for banks to avoid profit sharing investments altogether and to concentrate instead upon interest based loans supported by collateral. The collateral would act as a cushion to protect the banker's loan in the event of the borrower's default. Such criteria for extending loans naturally biased the lending of funds towards wealthy individuals, thus explaining the origin of the quip that "bankers are people who lend you money if you can show that you don't really need it". Wealth would therefore tend to circulate amongst the rich of a community, by-passing those poorer individuals whose business ideas might nevertheless have been worthy of receiving finance.

A problem soon arose in the operation of this new industry, the most profitable business idea of all time. The bankers charged interest on money that only they could create. How then could borrowers hope to repay loans of this manufactured money plus the interest charges? Imagine that, initially, the total amount of state money in existence is £100. If bankers now create £400 of bank money there will be a total money supply of £500. Let us further imagine that the £400 of bank money is loaned for three years at 10% interest per year, and that an amount of £532.40 will therefore be due for repayment. Now, if the total money supply at the beginning of the loan period is only £500, where will the extra £32.40 come from?

The required new amount of money could only come from two sources. Either the bankers would have to expand the supply of bank money, in other words lend yet more, or the state would have to increase the supply of state money. This simple fact would have enormous repercussions for the economy as the practice of banking spread. In the long run, both money supply and debt would increase despite all attempts at control. And, in due course, a whole spectrum of economic problems would result. Among these problems would be endemic inflation, a 'business cycle' whose ups and downs would follow the creation and destruction of bank money, and an increasingly imbalanced distribution of wealth.

Article 2: The check and account system can be analysed most easily if we assume that there is only one bank operating in the economy. Imagine that this bank has several customers of which A and B are two. Both A and B start with a zero balance on their current accounts. Customer A now gives customer B a cheque of £100 in payment for goods, and customer B deposits this cheque with the bank. The banker credits account B with £100 and debits account A with the same amount. B is now in credit and A in overdraft to the amount of £100 and the goods have been paid for. The amount of new (bank) money in existence is the £100 in customer B's account.

Notice that one group of bank customers must always be in debt to an amount that equals existing bank money supply. Notice also that if A now repays his overdraft by depositing a cheque of £100 drawn on Customer B, then the bank money transferred from B to A simply vanishes. Bank money stands in complete contrast to state money. Gold coins and even modern paper money are never destroyed in the act of repaying a loan.

"Only the inner force of curiosity and wonder about the unknown, or an outer force upon your free will, can brake the shackles of your current perception."

Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.

Reply: Thank you so much for that recommendation. I am very interested in The Venus Project.

You are most certainly welcome!

Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.

Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.

Money as debt is better. It's more informative, accurate, and less conspiracy theorist than that video. Athough it hold the general idea that bankers are evil and gives some bad solutions to fix the problems of the monetary system.

Money as debt is better. It's more informative, accurate, and less conspiracy theorist than that video. Athough it hold the general idea that bankers are evil and gives some bad solutions to fix the problems of the monetary system.

True, very true, it leaves out many facts such as how the debt system that determines our currencies rate of exchange as well as other such important factors [as well as how Nixon made it impossible to exchange your cash for its value in gold, but then again, I hate gold].

Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.