The History Of Central Banking - The Money Changers

In the last post I explained why the people of Greece were in so much trouble, and why the US needs to take heed lest our country gets in the same trouble. I explained how the European Central Bank has caught Greece in a debt trap, and secured payment on the debt's interest and principle by forcing Greece's government to adopt austerity measures. These austerity measures are a fancy way of saying increased taxes and decreased spending. If the Greek citizens did not accept these austerity measures their country would have defaulted on their debt, resulting in widespread disorder. This is a perfect example of what will happen to the United States if central banking, and more importantly fractional reserve banking, are allowed to continue. In order to fully appreciate the severity of the situation the US, and every other country in the world, is in, it is very important to understand the history of a group of people called Money Changers.

Money Changers are not a fictional group of evil bankers made up by paranoid conspiracy theorists. If you have any doubts about their existence throughout history, you do not need to search very far to find documented accounts of their business practices. Many former US presidents have acknowledged the existence and goals of the Money Changers. James Madison said:

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.

You can also go to numerous hospitals, hotel rooms, college campuses and even churches to find a very telling story about Money Changers, because they are found in the Bible. On the off chance that you are put off by organized religion like myself, remember that although parts of the Bible may or may not be fictional parables created by men, other parts of it are widely regarded as historically accurate when cross referenced with secular documents. With this in mind it can be determined that the events which happened in Matthew 21:12-14 are true. The verses read:

Jesus entered the temple courts and drove out all who were buying and selling there. He overturned the tables of the money changers and the benches of those selling doves. “It is written,” he said to them, “‘My house will be called a house of prayer, 'but you are making it ‘a den of robbers.’” The blind and the lame came to him at the temple, and he healed them.

The book of Mark also has a version of the story, found in Chapter 11:15-17:

And they came to Jerusalem. And He entered the Temple and began to drive out those who sold and those who bought in the Temple, and He overturned the tables of the money-changers and the seats of those who sold pigeons; and He would not allow any one to carry anything through the Temple. And He taught, and said to them, "Is it not written, 'My house shall be called a house of prayer for all the nations'? But you have made it a den of robbers.

This is the only situation in the Bible in which Jesus used violence to accomplish something, so it must have been an awful thing to be a Money Changer. Jesus accepted everyone else without violence, even his executors, but not the Money Changers. They are in fact very detrimental to societies, because they make profits by controlling the money supply itself. Jesus went so far as to call them robbers.

Think of money as another commodity, like milk, bread or eggs, and just like food, money is arguably necessary to survive, but at the very least it is in very high demand. The parable in the Bible is about money in high demand, a currency called the Shekel. The Shekel was the only kind of currency of its kind during Jesus' time. It was about a half ounce of silver, and was not imprinted with a Caesar's profile. This was very important because Jews visiting Jerusalem were required to make offerings to God with silver coins not carrying a Gentile's pictures, which made the currency very important. The silversmiths of the time realized this, and they collectively controlled the Shekel supply in Jerusalem.

These men had a good understanding of the basic principles of economics, such as the fact that people respond to incentives, and that an increase in demand or a decrease in supply both mean that the price goes up. These silversmiths used this knowledge to constrict the silver supply by hording it. Since they were the silversmiths they were also the ones who made the Shekel. With this complete control over the Shekel supply they could make the highest possible exchange rate between the Shekel and other currency. These silversmiths were money changers. They made profit not by contributing anything useful to society, but merely by controlling the monetary system. These Money Changers would set up their shop in the Jewish temples. Not only would the Money Changers overcharge pilgrims for the Shekel, they would not give the priests turning in the Shekel to the Money Changers the same amount of currency used by the pilgrims to purchase it. Jesus understood the detrimental effects that a control on monetary supply has on a society, so he drove the Money Changers out. The Bible then says that he healed the blind, which could be interpreted as educating those who did not understand how the Money Changers were taking advantage of them.

Thirteen centuries after Christ's death, the Money Changers were hard at work all across Europe. As goldsmiths they had access to very secure storage areas to house their precious metals. Throughout the century others who had acquired a good bit of wealth started paying the goldsmiths to keep their gold coins safe. The goldsmiths would then take the gold, document its weight, label the amount and to whom it belonged. The owner of the gold would then receive a receipt, which could be brought back to the goldsmiths at anytime to retrieve it. These receipts were the first banknotes, and were every bit as valuable as the gold itself. Because of the convenience of carrying banknotes, instead of large amounts of heavy metal, the pieces of paper soon became traded just as often as gold. Eventually, gold bullion was replaced by banknotes as the most common way of paying for things, just like today. Also like today people needed loans.

At this point the goldsmiths turned into Money Changers. They recognized the fact that they could create receipts for gold that didn't exist, then loan them to people at interest, and nobody would ever be the wiser. The banknotes were so popular as a currency for trade that there were always some in circulation, which meant the Money Changers would never have to pay everyone they owed gold to. This practice of creating more banknotes than gold reserves, then lending the notes out at interest is called Fractional Reserve Banking. The Money Changers had found a new way to make money by doing nothing beneficial for society. Aristotle said in The Politics that, "the most hated form of retail trade is usury, which makes a gain out of money itself... For money was intended to be used in exchange, but not to increase at interest... of any modes of getting wealth [usury] is the most unnatural."