The idea of money - fractional reserve lending

500 to 1,000 families control most of the world's money supply. When I first
heard that I thought, “That can not really be true! Could it? I
mean, how could that be possible?” Sounds like a conspiracy
theory.When I did my own research into the history of money and
how money is controlled, I realised how it was actually possible
for a small minority of people to virtually control the wealth of the
entire world. It is so critical if we are going to master this thing
called money that we know more about it than what most people
are taught at school and university or by our local media.
Many people believe that Governments print money, which is
true. Governments do print some of it. However, most of us would
think that is what the Government is for - to create money. When
we look into the history and study money, the facts are that
governments only print a very small fraction of it. In fact, you
would be amazed at what really goes on. The banking system
creates about 99% of the world's money supply. The government
only creates a fraction of the money supply. So how does this
affect you?

The few families that control the world's money supply can
determine what we pay for virtually everything. Ranging from
the t-shirt you wear to the fuel that goes into your car, even how
much you pay for your mortgage! If this were true, how is it
possible for a select few families to have this control? Simple!
Throughout history, these families have controlled the money
supply and my research found that they maintained control over
governments and citizens. One example was the Rothschild
family. By the early 19th century, they and their allies used
fractional reserve banking techniques to dominate the central
banks in the UK, USA and France.

However, the concept of fractional reserve banking did not
start there, it began in medieval England around 1024 AD by the
moneychangers. They were not considered bankers as such but
were generally goldsmiths. They started storing other peoples'
gold for them in their vaults. On receipt of this gold, goldsmiths
issued gold deposit receipts to the owners. This was the advent of
paper money. Paper money became popular because it was
more convenient and safer to carry than gold. People then no
longer needed to visit the goldsmith regularly to collect their gold
to purchase something.
To simplify the process, the receipts were eventually made out
to the bearer making them easily transferable, without the need
for an endorsing signature. This broke the tie to any identifiable
deposit of gold. Over time the goldsmiths became aware that
most depositors never returned for their gold. At this time they
started to lend out some of the gold that was entrusted to them
and kept the interest earned from the loan themselves. They then
started to print more gold deposit certificates than gold they had
in reserve.

They discovered they could lend out this extra paper money
and charge interest on it as well. This was the birth of fractional
reserve lending or in other words lending out more money than
reserves you have on deposit.
Really, it was the beginning of an elaborate scam that
continues to this day. If you and I should commit such acts, we
would be jailed for fraud.

Would you agree then, that it is definitely in the bank's best
interest for you to deposit your money with them? Remember at
school, not only were we conditioned to work hard, but also the
bank came around to our school to encourage us to open an
account and regularly deposit money into an account. Now I
have nothing against savings, but is it not interesting that at a
young age I was conditioned that the safest place to put my
money was in the bank? Let's look at whether it really is the best
place for us to put our money.

Modern day fractional reserve banking works in the same way
as when the goldsmiths first started it. For example, if we put
$1,000 in the bank tomorrow, the bank is legally able to loan out
a lot more than the $1,000 you have deposited. The amount of
leverage it can get depends on the type of bank you deposit your
money into and its liabilities ratio.
Since 1984, trading banks have been able to loan out 18.3
times the money they have on deposit, and savings banks and
building societies up to 32.8 times. Therefore, for each $1,000
deposited, the bank is able to loan out $32,000 plus. From this
example, you can see how money is created and expanded. Not
all banks do this, usually just the larger central banks. Some
banks just buy money off other banks at one rate and sell it at a
higher rate. If the bank loans your $1,000 out 32.8 times at 10%
they would earn $3,280 p.a. This interest rate could vary
anywhere between 5% and 10% for a mortgage and up to 16%
for a credit card. The interest you would get in return would be
around 3%-6%. For this example, let's be generous and say you
earned $60 on your $1,000, i.e., 6%. You then pay tax to the
government and you are left with about $45. In essence, the bank
has risked nothing and earned $3,220. So you can see that the
money is usually made by the bank, rather than the depositor.
Would you not like to be a bank?
Who sets the bank's liability ratio? Generally, there are rules
and regulations that to some degree are set by the government.
Most people would assume that the government, seeing that it
is designed to represent the people, should regulate that figure in
the best interest of the people. However, there is a tremendous
amount of money at stake when it comes to 'fractional reserve
banking' and the Centrally Controlled Banks (CCB) can wield a
lot of influence over individual politicians or the entire
government to have the regulation set at a level that they would
prefer.
If the banks have only a small fraction of reserves, what then
would happen if everybody wanted to withdraw their money?
The truth is if everyone demanded their money, the banks would
run out before they had even paid out 3 percent of their
customers. This is because the account holder's funds no longer
physically exist as they have been loaned out so many times. The
banks have little or no reserves. Essentially they are giving you
fake money but because everyone accepts it, they can keep
creating more of it, without actually earning it like we have to.

Through the Fractional Reserve System, they effectively create
counterfeit money and get away with it, yet you and I would go
to jail if we did the same thing. Is it any wonder the banks own
the tallest buildings in every city?
So, how does a small minority of the world's population gain
control of the money supply and why is this of concern to us?
There are two major players in the money game. The first is
what we call a Centrally Controlled Bank (CCB). CCBs are owned
and controlled by a small number of families and individuals. The
second player is the US Federal Reserve. Now with a name like
the US Federal Reserve you would think it was a government
organisation designed for the people. The interesting thing is if
you ask the average Australian or American if the US Federal
Reserve is a government organisation, what do you think they
would say? Most would say, yes of course. However, if you look
it up in the Yellow Pages, guess where it is listed? It is not listed in
the Government area; it is listed in the commercial area where
all commercial businesses are registered, because it is a private
organisation and not a government organisation.

The US Federal Reserve is a private organisation designed to
make maximum profit and does not answer to the US
Government or the citizens of the USA. The US Federal Reserve
is a deliberate name designed to fool people into thinking it is a
Federal Government organisation. The US Federal Reserve was
actually formed out of deceit when the US Federal Reserve Act
was railroaded through a carefully prepared Congressional
Conference Committee meeting.
You may ask, “If governments only print around 1% of the
money supply, where do they get their money?” The answer is
often the International Monetary Fund (IMF), which is largely
controlled by the US Federal Reserve, which is the face of many
of the CCBs. You often hear about the Federal Reserve through its
spokesperson making certain decisions that are going to change
the interest rates and you would probably realise that American
interest rates have an effect on Australia and the rest of the world.
So, you can see that decisions made by the US Federal
Reserve can affect how much we pay for our credit cards, our
mortgages and virtually everything because interest rates affect
the whole economy.

The IMF loves to loan as much money to governments as
possible. Why might they do that? If you were a CCB and your
agenda was to make a lot of profit, do you think that, say the
American or Australian Government would be a good
organisation to loan money to? It would be, would it not? Most
governments would be.

Governments have a choice, including the American and
Australian Governments. We can print our own money debt free
and back it up by our own reserves and not have to pay interest
overseas, or we can borrow money. If the governments want to
borrow money, the IMF is only too happy to loan it because,
firstly it will be guaranteed security from the taxes imposed on its
citizens. The IMF knows that the government can increase taxes
to pay back that loan. So the IMF knows it is fairly certain they
are going to be repaid. Secondly, if the country cannot get
enough money from its citizens, they know that a country has
assets. If a country cannot afford to meet its interest repayments it
can then be forced to sell its assets. Now, of course this would
never happen in Australia or America, or would it?

If we look at what the Australian Government has done over
recent years you will see that it is now selling off what was the
last remaining asset of any significance in Australia. Of course,
that asset was Telstra. The Government's promise as part of its re-election
platform was that in return for being allowed to sell
Telstra it could completely wipe out the government debt.
At first it sounds smart, does it not? If they can do that and wipe
out the debt, the repayment money can then be used to virtually
bribe voters to ensure they win the next election. I am sure if you
are old enough to vote then you may know that during an
election governments find out what different sections of the
community want and then offer it to them as an inducement to
vote for them.

In fact, governments tend to promise voters whatever it takes
to win that next election. So you can see these decisions are often
made for short-term gain.
Short-term pleasure, however, often leads to long-term pain.
The result being that if we cash in all our assets to wipe out our
debt, which virtually has already happened in Australia, and the
debt habit has not changed, then the whole country is in financial
trouble.

Unfortunately, governments are in the habit of getting into
more and more debt. Let's relate back to your so it makes more
sense. If you had a profitable business that brings you in money
without you needing to be there and you had a credit card bill,
which is getting bigger, should you sell your business and lose
your income in order to wipe out your debt?
In the short-term it looks great because you have eliminated
the debt. Only now you still have the same habit of getting into
debt, so you run up a huge bill on your credit cards again,
however, now you have got nothing left to sell to wipe out the
new debt.

The result being that you are now going to have to work
harder for someone else to earn money to pay it off. If you are the
government you simply send the bill to someone else in the form
of increased taxes. Guess who that someone else is? Generally
the middle class, everyday Australians as that section of the
community gets the biggest tax bill.
Australia has been quoted as being one of the highest taxed
nations in the world. If taxes go up in a country then there is less
wealth for the individual of that nation and their standard of living
decreases.

Running a country is in some ways very similar to running a
business. If that is the case, then you can see that politicians need
to understand how to run a business successfully because they
need to have the same mentality to run a country.
Unfortunately, many of our politicians have no real-life
experience at running a successful business.
Let's look at the challenges this situation creates. We will use
Australia as an example as it affects us if we choose to live here.
What happens if the government borrows a lot of money?
Firstly,the country becomes impoverished because of the higher debt;
this leads to higher taxes to pay back the debt, with lower wealth
for citizens and the sale of national assets like Telstra.

This then results in the need to encourage investment in Australia by
foreign companies, leading to excessively high levels of foreign
ownership.
Recently, I was skiing in Whistler, Canada. Whenever I go to a
new country I like to read the newspapers to study the economics
of other countries as it fascinates me. In Canada, the government
controls the majority of newspapers and foreigners are only
allowed to own up to 25% of them. Is that the same as in Australia
or America?

Australian newspapers are mainly foreign controlled, despite
technically being Australian owned. The interesting thing is that
in Canada foreign ownership levels have increased from about
22% to 27% and Canadians are getting a little bit nervous. They
are beginning to think that maybe foreign ownership is creeping
up too much. The mentality is, “We do not mind the money but
we do not want to sell off our whole country.” In Japan, the USA
and the UK foreign ownership levels are all less than 11%.
What surprised me was that these countries are worried about
the level of foreign ownership. Then dare we ask the politicians
of Australia how high our foreign ownership level is? These
figures are actually meant to be published regularly, but for some
strange reason they have been hidden over the last four or five
years. Could it be possible then that the government is a little bit
concerned about the average Australian finding out how much of
their country has actually been sold?

Many experts are stating that foreign ownership is now
between 70 and 90 percent and in the not too distant future it is
predicted that Australia will be virtually foreign owned. Not that
there is anything wrong with controlled foreign investment, but
should we be concerned at this excessively high level?
In the short-term foreign investment means our standard of
living increases, because there is an influx of money flowing into
the economy. Foreign investment creates jobs, Australians get to
work for the foreign owned companies and take home a wage.
But where do the profits go?

Do they stay in Australia or do they go back to the companies
that invested here? Obviously, if foreign companies are going to
invest in Australia they are going to expect to make a profit and
there is nothing wrong with that, but these profits mostly go
offshore virtually tax free.
As a result the standard of living in Australia in the future may
start to fall. We are now only rated the 30th wealthiest nation in
the world and we used to be rated number one. There are
countries that were once rated as third world countries that now
have a higher ranking of wealth per capita than Australia, i.e.
Singapore.






I am amazed that a tiny country like Singapore with no natural
resources can buy out large
Australian companies. It is a classic
example of Singapore outperforming
Australia as investors
and savers.
There is another country that
used to be as wealthy as Australia
that has dropped to 33rd wealthiest
country and is now classified as a
third world country. You may have
heard of Argentina. Now, I am not
suggesting that we have their
problems but we must not become
too complacent living in Australia
that we will not face serious financial problems in the future.
Luck may be running out for the 'lucky country', unless of course
we all decide to do something about it.

The wealth of a nation is determined by the wealth of the
individuals of that nation.
The Australian Government has already sold off most of our last
remaining assets such as Telstra. This could explain why the
government had to introduce a new tax system called the GST.
If the Government knows that we cannot sell much more to
raise the revenue, the only place left to get the revenue is from
the people. The GST is a broad-based tax designed to target the
Australian people. But, will it tax the rest of the wealth in the
country like the foreign owned interests? Well, that is a different
question.
To run Australia as a business in 2009/10 cost $338.5 billion
dollars a year. Australia is a very profitable business, so when we
are told the economy in Australia is going really well that's great.
But it is a pity we do not own most of it so that we can share in it.
Australians now only own approximately 9 percent of corporate
Australia.
Do you think that as we only own 9 percent, it would be fair
that we only had to pay 9 percent of the tax and the remainder
should be paid by the foreign interests that potentially own the
other 91 percent? I mean, if they make most of the money, is it not
only fair that they pay most of the tax? The reality of the situation
is quite the opposite.
Australians actually pay the majority of the tax. Companies
mainly owned by foreign organisations contributed less than 9%
of the total $262 billion in tax revenue in 2006-07.
I hope this helps you understand why Australians pay such a high
level of tax. Someone has got to pay the bill and they know
where you live so to speak - that way you get sent the bill.
But it is not all doom and gloom! The good news is that you
can become wealthy despite the current tax system and the
country's foreign debt and economic challenges. It does not
matter what they are doing in Canberra - you can still get the
results you want.


The important thing to remember is not to be
disempowered by what the systems are creating. However, in
understanding that, we can take control of our own financial
situation and eventually change those systems to make them
fairer for everyone else in the future.
A number of other solutions to solving some of the world's
finance problems that I discovered are to firstly increase the cash
reserves in the banks by at least 50 percent. This would reduce
the spiralling debt of many countries and could be done at say a
1% increase over 50 months. These cash reserves could then be
used to wipe out third world debt. Once the third world debt is
gone, the individual country debts could be extinguished. The
consequences of not implementing some type of solution to
escalating levels of debt is that the CCBs will continue to do what
they are doing, which will create such poverty that it could lead
to a major economic collapse.

As nations become poorer and poorer, they will have less and
less money to spend on products and services. These countries
will become so poor and impoverished that they are not going to
be able to buy products to sustain their people and everyone will
eventually lose.

Repeatedly, there have been times in our history where this
has happened. The second solution is to completely reform the
world's monetary system to remove the power of the monetary
system from the private bankers. For example, from the US
Federal Reserve and IMF, back into the hands of the nation - that
is, governments elected by the citizens of the nation. (If these
things had occurred when I first wrote this book the world would
not be facing the Global Credit Crisis it is currently facing in 2009
which has been found to be caused by the excessive lending
practices of US banks with inadequate reserves and the failed
monetary system the Federal Reserve Controls.)

This may mean the complete elimination of the IMF, the World
Bank, and the World Trade organisation, or at least some major
restructuring and transparency so they are accountable to
individual citizens of nations. I would not be the first or last person
to suggest such major changes.

Central banking could still continue as it provides competition
to the government having complete control over money,
however, some benefit is that they must be controlled and
accountable to the individual citizens of nations. After all, it is
collectively our money and wealth they are taking.
It also comes back to personal solutions for ourselves for which
we can take control. We have the power to change our own
situation. After looking at the bigger world solutions, which we
may or may not be able to directly influence immediately, the
question I had to ask myself was whether I have ever been guilty
of running up a lot of bad debt like the government does. I
realised in the past I have been guilty of that. What we have to
look at are the areas under our control. If we are getting into a lot
of bad debt, then we are contributing to the debt of the nation.
We are contributing to the wealth declining in our country.
On the other hand if we become wealthy and manage our debt,
then our nation becomes wealthier. So I often say to people, “If
you do not have enough reasons to become wealthy for yourself,
then just know your entire country depends upon your decision
to become wealthy.”

So when you thought you were in control, think again!!