Finance Wanted.

By Luke Hawthorne

As an example of how rulers of a country gained control over the banks, let's use something we are familiar with, the U.S.A. It could equally be ANY other country, so this is as good an example as any.

Firstly, note that it's never done quickly; a very important part of the technique is a very slow progression towards the ruler's goal of total control over the banks. An abrupt change would cause too much controversy and possibly and uprising or full-out rebellion, so that would not work.

Therefore, the men in government of that era cleverly chose to compete with the banks directly. How? They simply determined that they would ALSO get into the business of minting coins.

Now they had to rid themselves of the competition! Almost 90 year after Independence from Britain, the National Bank Act of 1863 and later the Act of 1864 in effect drove the other banks out of business by enforcing a 10% tax on all non-federal (the other banks) trades. The other banks simply couldn't compete because the federal government had a 10% advantage over them, easily enough in any purely financial transaction.

So, people now HAD to take their gold to the federal banks because they had no other way to protect their money, other than to buy a building and have it surrounded by armed guards 24 hours a day.

The slips of paper (receipts) that the government of the day issued started to become known as dollars. However, it wasn't until late in 1913 that the government took the final step and passed the Federal Reserve Act. This gave the Federal Bank the authority to print these 'receipts' without having to offer them in exchange for the gold that people brought to them.

The government was then in a position to "print money"!

People could still demand gold instead of the 'currency' called dollars, but they typically didn't, as it was difficult to carry and trade with. But the PROMISE was always there: "you give us the dollars (receipts) and we will give you your gold".

If people lose confidence in a bank, they will want their gold out so they can put it somewhere safer. If a LOT of people do this, it's called a 'run' on the bank. These 'runs' have happened throughout history in all countries and will no doubt continue to happen.

Now, of course rulers of any country spend vast amounts of money, and the U.S. was no exception. So the gold held in reserve at the Federal Banks was used for whatever purposes the government of that day felt was necessary.

In 1917 they set a limit for all banks that they had to keep 10% (of the receipts that they had issued to people) in actual gold. This meant, of course, that 90% of the balance of money in their bank was just paper receipts, backed by nothing! If somebody wanted actual gold, once the 10% was gone, there would be no more left to give in return for the receipt.

Some of the people's gold still existed, but they weren't allowed to have it. However, the people in government at that time DID use it to buy from other nations. I can only guess what they bought with it. ALL rulers have done this at some time in the history of their country.

The step after that was in the early 1930's when they abandoned the 'gold-standard' completely, so not even 10% had to be kept on deposit at each bank. So at that time, EVERYBODY'S dollars were backed by exactly NOTHING. If somebody wanted to redeem their dollars for gold, they couldn't, because there was no gold to give. At that time, a dollar was just a 'piece of printed paper'.

Today most 'money' isn't even that; it's just digits in a computer's memory.

Continued in Part IV.

Luke Hawthorne has been writing for over 12 years. His interests include flying airplanes, scuba-diving, skiing, paragliding and making money. http://www.lukehawthorne.com