Saturday, November 5, 2011
Here is how the banker's game works
Here is how the banker's game works:
1) Get the government to issue some currency (cash -- paper or reserves at the central bank -- reserves are government issued cash central bank deposits). Government issued cash is around 5% of the currency (money) supply. The government issued currency is put into circulation by the government simply spending it.
2) The rest (95%) of the currency is issued by the private banks. Each customer loan is a new bank deposit (i.e., new currency) and increases the currency (money) supply of the economy. Note that this newly created money (currency) is put into circulation by the borrower spending it. Most currency (about 95% America's currency supply) has been borrowed into existence and when bank customer pays the loan back that amount of currency is removed from circulation. The banking system cannot go backwards (fewer net loans) as time moves on because fewer net loans means less currency in circulation in the economy.
Accumulation of interest charges on outstanding loans means that the currency supply must constantly increase even if it means giving out lower quality loans. Think of it like a plane flying it must fly at some minimum speed or else the plane (the banking system) will crash (i.e., banking system collapse).
3) The bankers make dam sure that the common public does not understand how the monetary system works meaning that the private banks issue 95% of the currency. This is whole another topic how they do this.
4) The system works until real economic capacity of the economy grows and debts can be serviced and interest charges paid. Most of the time the economy oscillates between boom (growth) and bust (recession) because bust is needed to clear debts and start a new lending cycle.
5) Eventually, one of these cycles goes so deep that currency supply (and demand) falls so low that too many debts become un-serviceable. The recession becomes a depression now.
6) The bankers then have to decide how to "reset" the system. One way to reset the system is to let the depression takes its course. But of course this path is very chaotic because people lose jobs and may become violent. Once most debts are cleared lending can start again and the currency supply is replenished. Wars are a good way to get initial money (currency) into an economy after a depression to get demand going again. This is the great depression scenario.
7) Another way to "reset" the system is to get the government to print too much money and spend and destroy the currency and blame it on the government. This justifies issuance of a totally new currency (note that hyperinflation clears debts) and the lending cycle can start again. For example, the Argentine economic crises with hyperinflation (1999 - 2002).
8) The banking system (as is) is setup to maximize the power and influence of the global bankers and NOT for the maximum general well being of people. By the way this is a global game. This is the only system around no matter what country you are in. The global banking cartel makes sure that no competing systems are allowed to exist (so they might be copied and global bankers will lose power).
9) We need a currency system where money is spent into existence and does not need to be lent into existence so the economy is never starved of currency in circulation.
For more details on this stuff please read the following articles in order listed below:
Mansoor H. Khan