The above quote is from William Gouge, discussing the Panic of 1819. The panic had been caused when the First Bank of the United States had actually very first broadened the cash supply significantly by offering loans, then contracted the cash supply by tightening its requirements for brand-new loans, causing a crash.
This is a beneficial quote, as, in its simpleness, it mentions the extremely nature of crashes caused by reckless banking practices. In every case in which this occurs, it is possible through the complicity of the government of the day.
The origin of this syndrome returns to Mayer Rothschild, a very creative fellow who, in the late 18th century, offered financial advantages to political leaders in Germany in trade for political support for whatever activities his bank might practice. Rothschild was a long-term thinker; his approach included the offering of regular emoluments to political leaders without their having to supply him with anything right away. Then, when he required a large favour, he would call it in.
Movie buffs may see a resemblance in between Rothschild’s technique and the deals made by Don Corleone in The Godfather. “Some day– and that day may never come– I’ll hire you to do a service for me.”
Rothschild created boom-and-bust cycles which were extremely rewarding for his bank, however relied on the assistance of the federal government when the “bust” part came along.
As described above, the bank would use loans to the public on generous terms, then suddenly check those terms on all future loans. The claim the bank would make would be that inflation was occurring and the bank was acting to manage that inflation. (Naturally, Rothschild did not bother to point out that it was the bank itself that had caused the inflation.)
The net result would be a “panic,” or, in today’s terms a “depression.” Everyone involved would be damaged by the occasion other than the political leaders and the bank.
This scheme was accurately and succinctly described by G. Edward Griffin in 1994:
“It is extensively believed that panics, boom-and-bust cycles, and anxieties are caused by unbridled competition between banks; thus the requirement for government guideline. The fact is simply the opposite. These disruptions in the free enterprise are the outcome of government prevention of competitors by the giving of monopolistic power to the central bank.”
Mayer Rothschild’s five kids followed in his steps and would go on to control much of the banking in Europe. The Rothschilds are maybe best known for the Bank of England, which is still in operation today as one of the world’s most powerful banks.
So, let’s have a brief take a look at main banking in America.
In 1782, the Bank of North America was opened in America during the infancy of the United States. It was modelled after Rothschild’s Bank of England. It operated as a reserve bank and, as it was organised by Congressman Robert Morris, it was meant from the start to serve both its directors and the political leaders of the day.
The bank did undoubtedly serve the lenders and politicians– at the expense of the depositors. Although the bank lost its charter in 1783, an effort was quickly afoot to create a virtually similar bank, called, “The Bank of the United States.” The proposition was backed by the Rothschilds, who planned to control it.
Having just seen, first hand, how much damage a reserve bank, with a fascist relationship to the government could do, a terrible (and continuous) row occurred within the Cabinet of President George Washington regarding whether another potentially disastrous bank need to be permitted. The main protagonist was Secretary of State Thomas Jefferson, who said,
“The system of banking [is] a blot left in all constitutions, which, if not covered, will end in their destruction … I best regards believe that banking institutions are more dangerous than standing armies; and that the concept of spending money to be paid by posterity … is but defrauding futurity on a large scale.”
On the other side, Secretary of the Treasury Alexander Hamilton led the argument in favour of the production of a second reserve bank. Extremely, despite the fact that Congress had actually simply seen what a disaster this might be, they authorized the charter for the new bank in 1791. It opened with less than 9 percent of the personal funds needed by its charter.
A primary object of the bank was to offer fiat currency for the federal government, whilst gathering deposits from the general public. Immediately, the brand-new bank began to print cash and to lend it, with foreseeable results. By 1811, it had actually closed its doors, having actually rewarded just its directors and some politicians, whilst the depositors lost their money.
This, certainly, would be the end of the failed concept of a reserve bank, a fascist partnership between financiers and politicians. Nevertheless, in 1816, Congress granted a charter to the 2nd “Bank of the United States.” Within three years, the bank had caused the Panic of 1819, as mentioned in the opening paragraph of this short article and, again, as Gouge stated, “the bank was conserved and individuals were destroyed.”
In 1832, President Andrew Jackson was up for re-election and he risked his success on a campaign to stop the renewal of the charter of the Bank of the United States. Although he won both his re-election and his bid to stop the renewal of the charter, both the Rothschild household and their American counterparts continued their efforts to develop a central bank that would offer both bankers and politicians with wealth whilst utilizing depositors as golden goose.
They was successful marvelously in 1913 with the production of the Federal Reserve, a more sophisticated relationship in between bank and State that has actually run ever since. In the boom-and-bust cycles it has actually developed, the United States dollar has actually been cheapened by over 96% and, in 1999, the repeal of the Glass Steagall Act permitted bankers to create the Mom of All Loaning Sprees, resulting directly in the collapse of the property bubble in 2007 and the crash of the stock market in 2008.
However the system today is much more advanced than in the eighteenth century. It is no longer essential to fold the banks included, or a minimum of not immediately. In the aftermath of the 2007/2008 crashes, Federal government has actually stated that the closing of the reserve banks would be the worst disaster that could befall the nation and for that reason, the country must obtain greatly to re-fund them. No requirement was made from the banks to really provide these funds on loan, let alone to bail out the debtors. The banks have actually instead been able to take in the funds, continuing the massive benefits to the really directors who triggered the catastrophe in the very first instance.
The above history is a quick, thumbnail sketch of events relative to central banking in the US since the formation of the country. It is not implied to be comprehensive and the reader is encouraged to study the subject further. But the sketch does have a purpose.
Today, most of the First World is in the middle of a recession that has been triggered by debt. That debt has actually been the item of lenders and federal governments collaborating.
History shows us that the present situation is not an accident. It is the repetition of a very successful approach by which lenders, with the complicity of governments, create boom-and-bust cycles; cycles that, whilst harming for almost all people of a nation, are really lucrative for those who produce the cycles.
If we are to view the night news, there are, daily, politicians and experts providing “options”– “Supply quantitative easing,” “tax the one percent,” or just, “kick the can down the road.” Through endless debate, audiences are encouraged to think that in some way, the government and the directors of the banks and the Chairman of the Federal Reserve will come up with an option to the problem.
However, a brief read of the history above recommends that there will be no “option,” as no service is planned by those who have created the issue. The whole principle is to occasionally hang the depositor out to dry. (It’s refrained from doing to be deliberately unkind; it’s done because it’s so really rewarding.)
If the reader has actually not yet been squeezed to the point that his net worth (worth of assets, minus financial obligation) is under water, he would be well recommended to think about methods by which his liquid assets can be removed from the banking system, a system that, if history repeats, might quickly take those staying properties, as the 2nd half of the Great Unravelling unfolds.
Does this mean that the reader should run right down to the bank and withdraw his possessions? Not always. What it does indicate is that it would be best to recognise that a clear pattern has actually existed for centuries concerning boom-and-bust banking and the reader would be well-advised to ask himself some unpleasant concerns. Here are a few:
- Will my bank be one of those that crashes?
- Will my savings be lost partly or entirely?
- How much time do I have prior to I should remove my deposits?
- Will my bank honour the contract of the paper gold that they have sold me?
- Will I be able to take shipment of designated gold that they “hold” for me?
- What do I make with my possessions if I withdraw them from the bank?
- Will there be banks that will remain in organization? Which ones?
The above questions need to be asked periodically, as events unfold. Doing so may imply the distinction in between the retention or loss of properties that the reader now trusts his bank to hold for him.
Editor’s Note: A serious financial hurricane far greater than what we have actually seen is on the horizon. And most people will not be prepared for what’s coming.
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