Near the conclusion of my essay explaining an alternative solution to the global financial crisis (The People’s NWO: Every Man His own Central Banker), I pointed to an October 2010 speech by the central Bank of England governor, Mervyn King.
In that speech, King suggested that the world should “divorce the payment system from risky lending activity – that is … prevent fractional reserve banking (for example, as proposed by Fisher, 1936, Friedman, 1960, Tobin, 1987 and more recently by Kay, 2009)”.
My warning then, was that the elite string pullers of the present global financial system appear to be planning their own “solution” to the crisis; one that is particularly cunning and dangerous. Why? Because often it is not falsehoods, but the deceitful mis-use of truth that is the most dangerous to our well-being.
The “solution” being canvassed by the world’s economic, academic, and banking elite does appear to address one (1) fundamental structural flaw that most of the “sound money” and “anti-bankster” activists correctly identify and oppose – fractional reserve banking, or, the creation of “credit” out of thin air by banks, in the form of loans-at-usury.
To recap, this is what I wrote on 7/7/11 in reference to Mervyn King’s suggestion that the world should now “prevent fractional reserve banking”:
Their current plan to address the fear of global systemic banking risk – a fear which they have created through control of the boom-and-bust “cycle”, of which the GFC is only the most recent example – is to divorce the transactional currency system from the store of wealth system.
This is precisely what my idea would achieve … without the centralised control.
…
We need to understand the true and proper nature of “money”, and “currency”. So that we are not hoodwinked by the next stage of the global bankster scam.
Many are aware of the evils of “fractional reserve banking”. And it is these who will be the first to sing “Hallelujah!” and fall for the trap, when TPTB suggest doing away with fractional reserve banking as a “solution” to the global systemic banking crisis that they have created.
Well, it appears that I was right.
(More correctly, Dave Harrison was right.)
From Positive Money, one of those well-meaning activist groups who I fear are just the kind to fall for the trap being prepared, and thus naïvely serve as “useful idiots” in supporting a deceptively appealing proposal to “fix” the problems of the global money system, without removing the two greatest problems of all (usury, and central control by elite bankers), we learn that:
A very interesting conference took place on 17th April 2013 in Philadelphia, USA. Big senior figures in the economic, monetary, and financial worlds, including Adair Turner, Laurence Kotlikoff, Michael Kumhof and Jeffrey Sachs were discussing fundamental solutions to current global monetary and banking problems.
This was probably the first conference ever where the top academics were seriously discussing ending fractional reserve banking.
Now you can watch the recording of their presentations, highly recommended:
If the video doesn’t play on your browser, please click here.
Michael Kumhof, Deputy Division Chief, Modeling Unit, Research Department, International Monetary Fund, explained in very clear and straightforward way how exactly banks work and presented the Chicago Plan proposal.
“The key function of banks is money creation, not intermediation. And if you tell that to a mainstream economist, that’s already provocative, even though it’s hundred percent correct.”
His presentation starts at 1:02:12
Adair Turner, Former Chairman of the UK Financial Services Authority and Senior Fellow at the Institute for New Economic Thinking, gave a noteworthy presentation on “Money and Debt: Radical Solutions to the Challenge of Deleveraging”
“Fractional reserve banks create whole new level of danger. Because the fundamental fact is, that when people say ”banks take savings and intermediate it to loans” – that’s not true.
One of the most fundamental insight is that banks simultaneously create new credit and new money ex nihilo.
And that is one of the most fundamental, important things for people to be taught, which economics undergraduates should be taught about the nature of how monetary economy with banks works.”
His presentation starts at 4:06:07
…
Jeffrey Sachs, Director of The Earth Institute, Quetelet Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, on Implications for Global Development
“Could we really have liquidity without fractional reserve banking? If we could, we might be able to address another degree of this problem.”
His presentation starts at 2:35:08
In the opinion of your humble blogger, herein lies great danger.
What these lauded men are saying here … is the Truth.
This is how the world’s modern “money” system works. Most people in the world do not understand that this is how it really works. And yes, the power of banks to create endogenous money via the fractional reserve system is dangerous, risky, and profoundly flawed, and does lie near to the root of the world’s financial troubles.
The great danger here rests in the fact that so many intelligent, well-meaning activists and opponents of the present global financial system are certain to applaud and support the act of stating these truths, and as a result, be lulled into a false sense of security – the idea that these “truth-tellers” must therefore be “honest brokers”, whose proposed solution to the problem they (now) highlight is the best solution for all of us.
And not just the best solution for them.
I will state the case bluntly, dear reader.
The only way that humanity can ever be truly freed from the power of the moneylenders, and the only way for “money” to be rendered a true servant of humanity rather than our master, is for usury – the taking or offering of any interest on “money” – to once again be outlawed.
And for the power of issuing “currency” to be maximally de-centralised.
See also:
The People’s NWO: Every Man His Own Central Banker
The World’s Most Immoral Institution Tells You How
A May Day Economic Jeremiad For All Ages
On Savages, Barbarians, And Money-Lenders
A Tale Of Usury, Explosions, And A Used Car Salesman
Usury – The Golden Age Of Big Money Oligarchy
A History Of The Legal Case Against Usury
Conspiracy Theorists Proved Right: Everything Is Rigged
Barnaby Is Right 
Shoot central bankers the world over and display their carcases for all who would behave in a similar corrupt manner for all to see. That’d fix ’em Tangles!
I suspect you’re right Mick. Funny how some nations (ie, USA) hold up capital punishment for murderers etc as being a deterrent … well, it is abundantly clear that there are no similar deterrents for central bankers, who are … incontrovertibly … responsible for causing infinitely more pain, suffering and death than even the worst serial killer ever sent to the chair, lethal injection, or hangman’s noose.
You’ve got that one right Blissful.
The way I see the Banking System.
If you go before a judge he may demand that you say that the bank lent you the money that resulted in your purchase say of a house or car. But, if you agree that the bank lent their money to “purchase” your promissory note, then you are testifying that the bank violated the law – GAAP. [GAAP = generally accepted accounting principles]
Per GAAP and Federal Reserve publications, two loans were exchanged. You lent the promissory note to the bank that funded the loan back to you. The loan from you to the bank is the deposit of the promissory note. GAAP requires that the bank “match” a new bank liability with your name on it showing that the bank owes you for the deposit they accepted from you, just like they do when you deposit cash into your cheque account, you lent the bank your money. Your signature on a promissory note is your money backed by real wealth which enables a bank to create their form of money in the form of interest bearing paper or electronic digits which you accept in exchange.
The form – contract says that the bank lent you money, but the substance – book keeping entries – say that the bank accepted your promissory note as new money as a deposit just like depositing cash into your cheque account. Your signature cannot testify that the bank lent you the banks money to purchase your promissory note. If you lent the bank money as a deposit, the bank accepted money from you. The bank never gave up one cent of the banks money. The bank accepted money from you and deposited it, which is the opposite of lending you the money.
Um, you really shouldn’t cal it fractional reserve banking if you’re trying to get to the truth of the matter. As you should know, banks seek reserves after the fact of producing a loan. Which probably is a loan created by another bank…
Yes, a very good point Christopher.