How Credit Came About
This is a simple guide to help you understand the credit process.
In England in times gone by, people who owned gold would often deposit it with their local goldsmith for safekeeping. In exchange for this, the depositor was given a signed receipt, guaranteeing that the gold could be redeemed in full at a later date.
It’s Important to note that this receipt, was actually a promissory note. UK bank notes bear the phrase “I promise to pay the bearer on demand the sum of”.
Example 1
Supposing John deposits £10 worth of gold and receives a promissory note for £10, he could use this to settle his debts, pay for goods etc. This note, over time, became what is now called money. The actual note could still be redeemed at any time for the original gold held at the goldsmiths, no matter who was in possession of it.
At the same time, David borrows £10 worth of gold from the same goldsmith, but instead of receiving gold, he gets a promissory note for £10. David then uses this note to pay off his outstanding debt of £10.
So, from that Initial £10 gold deposit, there are now two £10 promissory notes in circulation. The goldsmith was smart; he knew that all claims on deposits would never be honoured on the same day, so he continued issuing more and more notes.
On the off chance that there was a run on people wishing to redeem their gold on the same day, the goldsmith is safe in the knowledge that his debtors owe him gold, even though they only received a paper note.
Should the debtor default, the goldsmith could seize whatever possessions the debtor had, sell them for gold, and settle the outstanding claims.
As the goldsmith was smart, he also traded notes that had no gold in reserve. Interest was paid on these loans, the money having just materialised from thin air as a piece of paper.
Is all of this starting to sound familiar?
You bet, because this is exactly how banks work today.
The only thing to have changed is the fact that the gold standard was abolished in part in 1933 and fully in 1972. What this means is that unlike the goldsmith example, we no longer have an asset backing our currencies.
Successive governments/banks have sold the lions share of it. We can never redeem our original gold.
This means that a £10, £20 or £50 note is actually worth, about 2 pence, the actual cost of the paper and Ink.
The whole process is an elaborate fantasy of Insolvent trading. The government can’t stop it, as they’re bankrolled by the bankers.
There simply isn’t enough gold in circulation to back all of this debt money.
The whole thing works because of peoples FAITH in the credibility of the banks themselves.
Recently, the so called credit crunch has put pressure on the banking system, and the cracks in the whole system are starting to appear.
Example 2
Simply put, every loan given is a deposit.
You go to the bank and ask for £1000. They check your credentials and credit your account accordingly.
If you ask for it in cash, in order to settle a debt, someone else will deposit £1000 at a later date. You still owe the bank £1000 plus interest, which was just created out of thin air, as soon as you requested the loan. The money created is debt.
Without debt, there is no money.
In my mind, the system is Scandalous, Immoral and Illegal.
Here are some videos that may be of interest:-
Money as Debt 1
Money as Debt 5