The European stock markets rose slightly yesterday despite the looming Greek debt crisis, and the planned austerity measures that must pass in order for the country not to default on its loans. However, there is still a large cloud looming over the Greek citizenry. The planned austerity measures would mean higher taxes on the Greek people, and lower program spending by the Greek government. Greeks will be in a servitude reminiscent of post World War I Germany. Greece is a prime example of what happens when a central banking system is in existence, and if the United States doesn't smarten up we will be going down the same road.
The way this Greek debt situation works is pretty simple to understand, and a great model to show why the United States is in so much financial trouble. When Greece was accepted into the Euro zone they basically got an improved credit score. The rest of the Euro zone countries agreed that Greece had a stable enough economy to enter into their monetary system without having a negative impact. This was like giving a college student a credit card with a $100,000 dollar limit.
Politicians want to get reelected, but that is hard to do when they raise taxes and cut spending. So the power hungry 'representatives' of all democratic countries long ago figured out a way to get unlimited funding, and thus have a much greater chance of keeping their jobs. The only downside is that they sold the soul of their country to the devil by making a deal with bankers. The banks said, "We will always buy bonds that are for sale if your citizens cannot." This money turned out to be something called fiat money, checkbook money, or money not backed by any physical commodity, such as gold or silver. So the countries and the banks started scratching each other's back. The countries needed money, and they get money by selling bonds. If the bonds don't get purchased by the citizens of the country, the central banks, the 'lenders of last resort' will purchase them.
This system has a few shortcomings. Even though the central banks seem like they are working for the government of their country, they are really working for the banks of their country. To understand why this is the case, one must familiarize themselves with the ways money enters the economy. The first way is for the United States government to sell treasury bonds to the Federal Reserve. If the US needed $100,000, but no citizen would buy a bond, the Federal Reserve would tell a member bank to change the balance in the US's bank account to $100,000. The Federal Reserve gets the bond, and the United States has the money it needs. The money was created out of nothing. It was simply written into the account with the assumption that the money would be paid back in the future. Keep in mind that the Federal Reserve has the control over the creation of our money, not the treasury. So the Federal Reserve created $100,000 and loaned it to the US with interest. If the interest on the loan was 1%, then the US would owe the Federal Reserve the original $100,000 plus an additional $1,000 in interest. Keep this in mind.
The second way money is created is through private loans to businesses and individuals. Imagine that you are a government worker, and you do a job that costs the Federal government $1,000,000. The Treasury will sell a $1,000,000 bond, most likely to the Federal Reserve, and you will be paid with this money. Once you have this money you go to a bank and deposit the $1,000,000 into an account. The bank then loans most of the money out to someone else, but they must keep 10% in the bank. This system of loaning out money that you deposited is how banks make money for themselves.
Now imagine that you just made your deposit, and the next day John Doe comes into the bank and asks for a loan. The bank loans John the maximum amount they can, $900,000, which is 90% of your deposit, with the agreement that John will pay 10% interest on the loan. Now the bank only has $100,000 dollars, but they must be able to give you all $1,000,000 whenever you want to withdraw it. When you made the $1,000,000 deposit the bank was able to claim that they had an asset, or something of value, specifically, an account with $1,000,000 in it. Then, when the bank made the loan to John, they didn't lose any money. Instead, they claimed that they acquired an account which would eventually have $900,000, plus interest, paid back to it in the future. This $900,000+ is John's debt, and it is also worth something because it is assumed that John will pay it all back. So the bank was able to write down that they had your $1,000,000 and $900,000 of John's future money. There now exists a small monetary supply of $1.9 million.
Next imagine that John never spent any of his $900,000 dollars. Instead, he just used it to pay his loan back. Every month he would pay a certain amount of money, let's say 5%, back to the bank. After 20 months of paying $45,000 a month John has given all of his original $900,000 back to the bank, but remember the bank loaned him the money with %10 percent interest, so the total amount of money he owes the bank is $990,000. However, if you keep your $1,000,000 to yourself, and there is only $1.9 million in the money supply, there is not enough money for John to pay back his debt to the bank. There will never be enough money to pay back every outstanding loan, the system is designed that way.
If John lives in the US, and he owed $90,000 to a bank, but had no way to pay it off, he would have to work for the bank in order for his debt to be repaid. If he didn't work for the bank he would have his credit rating reduced, possession taken away, perhaps even brought up on criminal charges. So John now has two choices. He can work for the bank, or they will take everything, with the help and approval of the government.
In Greece right now there are a lot of people in John's situation. Out of money, but in debt. The Greek government also owes money to banks. So much money in fact that the banks threatened not to loan any more money to the Greek government unless austerity measures are put in place. The austerity measures are that the Greek government will spend less on everything, and at the same time they will tax people more. Today the austerity measures were adopted. The people of Greece will now have to work harder, have less, and pay the government more, which goes directly to pay the country's debt to the European central bank. Over time this will happen again, and in many other countries, and if the central banking system is not done away with we will all be working very hard for central banks, and nobody will have the slightest clue that it is happening.
What you must do is call your representatives and tell them to vote for H.R. 459 and S. 202, The Federal Reserve Transparency Acts. This is a vital first step in fixing our banking system and throwing off the fetters our money masters have put on us.
For more details about Central Banking please visit the video page and check out the movie "Money Masters"
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