The Banking System

2011-08-05T06:53:00.000-07:00

The cause of economic depressions.

The depressions that the Western economies have been cyclically undergoing during the last 200 years, are the exclusive consequence of the banking system. A system with a monetary central planning pretty similar to the Gosplan of the extinct USSR.

The US Central Bank (Federal Reserve) propagates world wide huge credit expansions: new money out of thin air (bank loans). This very seductive easy-money, massively throw investors and whole nations headlong in malinvestments, ending inevitably in severe depressions (debt slavery plus bankruptcies... 'banks always profit').

The Solution.

United States of America is involved in an unstoppable process to solve this problem (Congressman Ron Paul, presidential candidature in 2012). The rest of the world will follow.

In a conference given at the London School of Economics (LSE), Ph.D. Jesús Huerta de Soto explains that bringing this current and global 'financial slavery' to a close, will be a step as large and important as the Slavery Abolition Act.

There are serveral ways for issuing money:

Government debt-free interest-free money
gold standard
denationalisation of the money
etc.

...¡ Doctor, we are loosing the patient !...

Please, use methods already working as first step, the time for innovation and improvement will come.

Videopresentation.

Presidents, politician, economists, finance reporters and humorists explain how our banking system works. Also you will see places that operates in a different way.

Terminology.

Capital: all goods that a society produce in order to increase productivity, not for direct consumption. Examples: operating systems, tractors, etc.

The only difference between poor and wealthy countries is the amount of well invested capital. For instance, instead of using ox plows, they have tractors.

That capital increases dramatically the productivity, being able to sustain a larger amount of people with higher standard of living.

Credit: the use of savings exclusively for generating capital goods. No savings, no credit. The production of capital goods is extremely time demanding, during the development it is required to consume the savings given as credit.

Credits for consumption waste all savings produced by the people... supported by an artificial 'monetary expansion', with the impoverishment involved. It is obvious that if money is produced as interest-bearing debt, the system automatically promotes the waste of savings, sinking people into debt-slavery.

Money: common scoring mechanism for transactions between producers and consumers.

1973 : The oil depression.

History records speaks with a single voice about the most efficient form for the productive side of the economy: free markets.

On the scoring or measuring part of the economy (financial or monetary system) there are three main schools: british (Keynes), american from Chicago (Friedman) and austrian (Mises, Hayek).

Over two centuries presidents and economists had critized the current monetary system, but never accepted since every time there was a different reason on the market for the bubble to be created (oil, housing, etc.).

The 1973 oil crisis changed things forever, bringing Bretton Woods to an end. For the first time the orthodox macro-economic procedures (Chicago printing more money, british increase/decrease public expending) failed, ending up in stagflation, deepened and lengthened the adverse effects of the crisis. The only explanation that finally has been consolidated is the austrian micro-economic one. This theory is a solid economic framework that explains and also predicts depressions.

Finally, after two centuries, a very precise scientific monetary theory, tested over and over again, reflects Thomas Jefferson's words (quoted above), can no longer be hidden (Friedrich Hayek in Denationalisation of Money).

Banking System collapses during the XX Century.

2001 - Argentina: "el corralito" and "argentinazo". The country was dollarized. Private banks would be bailout through the US Central Bank (Federal Reserve) when they were in need of money avoiding a banking collapse. When the FED refused to print more money (inflate the currency), the system collapsed, producing catastrofic effects. That extreme crisis forced people to produce their own currency, called "social currency". The desperation with the inability to get savings back from the banks ended in a national revolt in December 2001, the so called "argentinazo".
1923 - Germany: Hitler's rise to power. Hyperinflation made money worthless, people burned it to heat their homes. Hitler's campaign promised to be the only way out of such desesperate misery.

References.

MILTON FRIEDMAN
Free to Choose: http://www.freetochoose.tv/
Importance of Education: http://youtu.be/WKkehoC5khc

WEB SITES
Bretton Woods: http://en.wikipedia.org/wiki/Bretton_Woods_system
Wikipedia: http://en.wikipedia.org/wiki/Monetary_reform
http://en.wikipedia.org/wiki/A_Program_for_Monetary_Reform
Cato Institute: http://www.cato.org
American Monetary Institute: http://www.monetary.org
Money Masters: http://www.themoneymasters.com
Mises Wiki: http://wiki.mises.org/wiki/Criticism_of_fractional_reserve_banking
Ripple Project (private money): http://ripple-project.org

INTERVIEWS
Richard Cook: http://youtu.be/DVj0aLzIAb4
Edward Griffin: http://youtu.be/bhMacPvc5qc
Freidrich Hayek about Keynes: http://youtu.be/Oqhe4K1Jz-8
Jesús Huerta de Soto: Conference at London School of Economics
http://youtu.be/mPDKc6KEF80
http://youtu.be/p4rlTUuTWZY

DOCUMENTARIES
Money Masters: http://youtu.be/a3GWFBEpjbY
Secrets of the Wizzard of Oz: http://youtu.be/swkq2E8mswI
Zeitgeist Addendum: http://youtu.be/EewGMBOB4Gg
Argentina, surviving without money: http://youtu.be/PDKeQ4IACJ4

BOOKS
How an economy grows: http://youtu.be/bFxvy9XyUtg
http://freedom-school.com/money/how-an-economy-grows.pdf
Creating New Money: http://www.jamesrobertson.com/book/creatingnewmoney.pdf
Money, Bank Credit and Economic Cycles: http://mises.org/books/desoto.pdf
The Denationalisation of Money: http://mises.org/books/denationalisation.pdf

VIDEO CLIPS
Ron Paul about Austrian vs. Keynesian: http://youtu.be/Gf3NxGM5IkU
Ron Paul on Fractional Reserve Banking: http://youtu.be/b_jr1xVqjYU
Ron Paul on National Debt: http://youtu.be/Hmj9J9eHzcc
Ron Paul on Monetary Central Planning: http://youtu.be/4u4lBRdPSMc
Milton Friedman on Depression and Inflation: http://youtu.be/dgyQsIGLt_w
Ron Paul about FED: http://youtu.be/ARTvrU_TXrg
http://youtu.be/8pEiLHnjAiw
http://youtu.be/CtvHAqK8P14
Subprime Crisis: http://youtu.be/DbW7VRb-g6c
http://youtu.be/hNYxTpEVQWc
Iceland Case: http://youtu.be/_ziWPPMdlqs
Greece Case: http://youtu.be/lAeO6jLUc4Q
Spain Case: http://youtu.be/sXrUkof5PMc
German Hyperinflation: http://youtu.be/LPitcRcIT7U
Regional Currencies: http://youtu.be/BU5CKfju1ss
Private Currencies: http://youtu.be/3pH47531SbE

ADDITIONAL CONTACTS
Peter Schiff, William T. Still, G.Edward Griffin, Jesús Huerta de Soto

Fractional Reserve Lending
----- Ratio {Assets:Loans} ------
Goldman Sachs - 1:333
Freddie and Fannie - 1:72