2. THE MONEY CHANGERS IN JERUSALEM
Just who are these Money Changers to whom James Madison referred? The Bible tells us that, 2,000 years ago, Jesus Christ twice drove the Money Changers from the Temple in Jerusalem.
Apart from when the Temple Guards were forced to the ground in the Garden of Gethsemane, these were the only times Jesus used physical violence. What were Money Changers doing in the Temple?
When Jews came to Jerusalem to pay their Temple tax, they could only pay it with a special coin, the half-shekel. This was a half-ounce of pure silver, about the size of a quarter. It was the only coin at that time which was pure silver and of assured weight, without the image of a pagan Emperor.
Therefore, to Jews, the half-shekel was the only coin acceptable to God. But these coins were not plentiful. The Money Changers had cornered the market on them; then they raised the price – just as with any other monopolised commodity-to whatever the market would bear.
In other words, the Money Changers were making exorbitant profits because they held a virtual monopoly on money. The Jews had to pay whatever they demanded. To Jesus, this injustice violated the sanctity of God's house.
3. MONEY CHANGING IN THE ROMAN EMPIRE
But the money-changing scam did not originate in Jesus' day.
Two hundred years before Christ, Rome was having trouble with its Money Changers.
Two early Roman emperors had tried to diminish the power of the Money Changers by reforming usury laws and limiting land ownership to 500 acres. Both were assassinated.
In 48 BC, Julius Caesar took back from the Money Changers the power to coin money and then minted coins for the benefit of all. With this new, plentiful supply of money, he built great public works. By making money plentiful, Caesar won the love of the common people. But the Money Changers hated him. Some believe this was an important factor in Caesar's assassination.
One thing is for sure: with the death of Caesar came the demise of plentiful money in Rome. Taxes increased, as did corruption.
Eventually the Roman money supply was reduced by 90 per cent.
As a result, the common people lost their lands and homes-just as has happened and will happen again in America to the few who still own their own land and homes.
4. THE GOLDSMITHS OF MEDIEVAL ENGLAND
The Chinese were the first to use paper money, known as 'flying money' (a kind of banker's draft), in AD 618--907. In about AD 1000, private Chinese merchants in Sichuan province issued paper money known as jiao zi. Due to fraud, the right to issue paper money was taken over in 1024 by the Song dynasty, which then issued the first government paper money.
About that same time, Money Changers-those who exchange, cumulate and manipulate the quantity of money-were active in medieval England. In fact, they were so active that, acting together, they could manipulate the English economy.
These were not bankers per se. The Money Changers generally were the goldsmiths. They were the first bankers because they started to keep other people gold for safekeeping in their safe rooms, or vaults.
The first 'paper' money in Western Europe was merely a receipt for gold left with the goldsmith, made from rag paper. As the ditty goes:
"Rags make paper; paper makes money; money makes banks;
Banks make loans; loans make beggars; beggars make rags".
Paper money caught on because it was more convenient and safer to carry, than a lot of heavy gold and silver coins. As a convenience, to avoid unnecessary trips to the goldsmiths, depositors began endorsing these gold deposit receipts to others, by their signature.
Over time, to simplify the process, the receipts were made to the bearer, rather than to the individual depositor, making it readily transferable without the need for a signature. This, however, broke the tie to any identifiable deposit of gold.
Eventually, goldsmiths noticed that only a small fraction of depositors or bearers ever came in and demanded their gold at one time. Goldsmiths started cheating on the system. They begun secretly lending out some of the gold that had been given to them for safekeeping, and keeping the interest earned on lending.
Then the goldsmiths discovered that they could issue more money (Ie. paper gold-deposit certificates) than they had gold, and usually no one would be any the wiser. Next, they discovered they could lend out this extra paper money and keep interest on it. This was the birth of fractional reserve lending - that is, lending out more money than you have reserves deposit. Obviously, it was fraud, often specifically outlawed when understood.
The goldsmiths began with relatively modest cheating, lending out in gold deposit certificates only two or three times the amount of gold than they actually had in their safe rooms. But they soon grew more confident and greedy, lending out four, five and even ten times more gold certificates than they had gold on deposit.
So, for example, if $l,000 in gold were deposited with them, they could lend out about $10,000 in paper money and charge interest on it, and no one would discover the deception. By this means, goldsmiths gradually accumulated more and more wealth and used this wealth to accumulate more and more gold.
It was this abuse of trust-a fraud-which, after being accepted as standard practice, evolved into modern deposit banking. It is still a fraud, coupled with an unjust and unreasonable delegation of sovereign government function money creation-to private banks.
Today, this practice of lending out more money than there are reserves is known as 'fractional reserve banking'. In other words, banks have on hand only a small fraction of the reserves needed to honour their obligations.
Should all their account holders come in and demand cash, the banks would run out before even three percent had been paid. That is why banks always live in dreadful fear of 'bank runs'. This is the fundamental cause of the inherent instability in banking, stock markets and national economics.
The banks in the United States are allowed to lend out at least ten times more money than they actually have. That's why they do so well on charging, let's say, 8 per cent interest. But it's not really 8 per cent per year that is their interest income on money the government issues; it's 80 per cent.
That's why bank buildings are always the largest in town. Every bank is, de facto, a private mint (over 10,000 in the US), issuing money as loans, for nothing, at no cost to them except whatever interest they pay depositors.
Rather than issue more gold certificates then they have gold, modern bankers simply make more loans than they have currency (cash). They do this by making book entries, creating loans to borrowers out of thin air (or, rather, ink).
To give a modem example, a $10,000 bond purchase by the Fed on the open market results in a $10,000 deposit to the bond-seller's bank account. Under a 10 per cent (Ie. fractional) reserve requirement, the bank need keep only $l,000 in reserve and may lend out $9,000. This $9,000 is ordinarily deposited by the borrower in either the same bank or in other banks, which then must keep 10 per cent ($900) in reserve but may lend out the other $8,100. This $8,100 is in turn deposited in banks, which must keep 10 per cent ($810) in reserve but then may lend out $7,290, and so on. Carried to the theoretical limits, the initial $10,000 created by the Fed is deposited in numerous banks in the banking system, giving rise (in roughly 20 repeated stages) to an expansion of $90,000 in new loans in addition to the $l 0,000 in reserves.
In other words, the banking system, collectively, multiplies the $10,000 created by the Fed by a factor of ten. However, less than one per cent of the banks create over 75 per cent of this money. In other words, a handful of the largest Wall Street banks creates money as loans, literally by the hundred billion, charging interest on these loans and leaving crumbs for the rest of the banks to create. But because those crumbs represent billions, too, the lesser bankers rarely grumble. Rather, with rare exceptions, they, too, support this corrupt system.
In actual practice, due to numerous exceptions to the 10 per cent reserve requirement, the banking system multiplies the Fed's money creation by several magnitudes over ten times (e.g., the Fed requires only three per cent reserves on deposits under approx. $50 million, and no reserves on Eurodollars and non-personal time deposits).
To return to the goldsmiths... They also discovered that ‘rowing’ the economy between easy money and tight money could make extra profits.
When they made money easier to borrow, then the amount of money in circulation expanded. Money was plentiful, and people took out more loans to expand their businesses. But then the goldsmiths would tighten the money supply and make loans more difficult to obtain.
What would happen? Just what happens today. A certain percentage of people could not repay their previous loans and could not take out new loans to repay the old ones; therefore they went bankrupt and had to sell their assets to the goldsmiths or at auction for 'pennies on the dollar'.
The same thing is still going on today, only now we call this up-and-down rowing of the economy, the 'business cycle', or, more recently in the stock markets, 'corrections'.
5. TALLY STICKS
King Henry I, son of William the Conqueror, ascended the English throne in AD 1100. At that time, long before the invention of the printing press, taxes were generally paid in kind, Ie., in goods, based on the productive capacity of the land under the care of the taxpaying serf or lesser noble. To record production, medieval European scribes used a crude accounting device: notches on sticks, or 'tallies' (from the Latin talea, meaning 'twig' or 'stake'). Tally sticks worked better than faulty memory or notches on barn doors, as were sometimes used.
To prevent alteration or counterfeiting, the sticks were cut in half lengthwise, leaving one half of the notches on each piece-one of which was given to the taxpayer, and could be compared for accuracy by reuniting the pieces. Henry adopted this method of tax-record-keeping in England.
Over time, the role of tally sticks evolved and expanded. By the time of Henry II, taxes were paid twice a year. Giving the taxpayer a tally stick notched to indicate partial payment received, with the same lengthwise split to record, for both parties, the payment made evidenced the first payment, made at Easter.
These were presented at Michaelmas with the balance of taxes then due.
It takes only a little imagination to arrive at the next step: for tallies to be issued by the government in advance of taxes being paid, in order to raise funds in emergencies or financial straits.
The recipients would accept such tallies for goods sold at a profit or for coin at a discount, and then would use them later, at Easter or Michaelmas, for payment of the taxes. Thus, tallies took on some of the same functions as coin: they served as money for the payment of taxes. . .
After 1694, the government issued 'paper tallies' as paper evidence of debt (Ie. government borrowing) in anticipation of the collection of future taxes. Paper could be made easily negotiable, which made paper tallies the full equivalent of the paper banknote money issued by the Bank of England beginning in 1694. By 1697, tallies, banknotes and bank bills all began to circulate freely as interchangeable forms of money. Wooden-stick tallies continued to be used until 1826. Doubtless, ways were found to make them circulate at discounts, too, like the paper tallies.
One particular tally stick was quite valuable. It represented £25,000. One of the original stockholders in the Bank of England purchased his original shares with such a stick. In other words, he bought shares in the world's richest and most powerful corporation, with a stick of wood. It's ironic that after its formation in 1694, the Bank of England attacked the tally stick system because it was money issued outside the control of the Money Changers.
Why would people accept sticks of wood for money? That's a great question. Throughout history, people have traded anything they thought had value and used that for money. You see, the secret is that money is only what people agree on to use as money.
What's our paper money today? Its really just paper. But hem's the wick. King Henry VIII ordered that tally sticks he used to evidence tax payments received by the government. This built in the demand for tallies and eventually made them circulate and be accepted as money. And they worked well. In fact, no other money worked for so long as in the British Empire.
In the 1500s, King Henry VIII relaxed the laws concerning usury, and the Money Changers wasted no time reasserting themselves. They made their gold and silver money plentiful for a few decades. But when Queen Mary took the throne and tightened the usury laws again, the Money Changers renewed the hoarding of gold and silver coin, forcing the economy to plummet.
When Queen Elizabeth I, Mary's half-sister, took the throne in 1558, she was determined to regain control over English money. Her solution was to issue gold and silver coins from the public treasury and thus take away control over the money supply from the Money Changers.
Although control over money was not the only cause of the English Revolution in 1642 (religious differences also fuelled the conflict), monetary policy played a major role. Financed by the Money Changers, Oliver Cromwell finally overthrew King Charles I (Stuart), purged Parliament and put the King to death.
The Money Changers were immediately allowed to consolidate their financial power. The result was that for the next fifty years the Money Changers plunged Great Britain into a series of costly wars. In the centre of London they took over a square mile of property, known as 'the City'. Today, this semi-sovereign area is still one of the two pre-dominant financial centres of the world (with Wall Street, New York City).
Conflicts with the Stuart Kings led the Money Changers in England to combine with those in the Netherlands (which already had a central bank established by the Money Changers in Amsterdam in 1609) to finance the invasion of William of Orange who overthrew the legitimate Stuarts in 1688. England was to trade masters: an unpopular King James II for a hidden cabal of Money Changers pulling the strings of their usurper, King William III ('King Billy'), from behind the scenes.
This symbiotic relationship between the Money Changers and the higher British aristocracy continues to this day. The monarch has no real power but serves as a useful shield for the Money Changers who rule the City-dominated by the banking House of Rothschild.
In its 20 June 1934 issue, New Britain magazine of London cited a devastating assertion by former British Prime Minister David Lloyd George, that "Britain is the slave of an international financial bloc".
It also quoted these words written by Lord Bryce:
"Democracy has no more persistent and insidious foe than money powers" and pointed out that "questions regarding Bank of England, its conduct and its objects, are not allowed by the Speaker" (of the House of Commons).