Re-visioning Money and Banking

Post by AIMCat Peter

Money is a “token of value” invented to bridge any value asymmetry in an exchange of goods or services.

In any exchange of goods or services it is highly unlikely that the exchanging parties will each have exactly the same value to offer the other at the time, to create an entirely balanced barter deal.

Indeed, most exchanges are entirely in one direction, where goods or services are wanted by one party from the other, with no compensating value transfer.

To offset this value exchange imbalance a mechanism was developed to “store” real durable wealth (gold, silver, etc.) at a bank for safekeeping, and use banks “notes of value” receipts arising therefrom as “value tokens” which could effectively transfer ownership of some of that stored value to another in exchange for goods or services wanted.

So, we have banks reliably storing durable valuables deposited with them, the value receipts from which can act as transferable value tokens by the owner/depositor acceptable to another in exchange for real goods or services.

Clearly any time the owner/depositor wishes to remove his deposited valuables, he would have to return the full amount of bank tokens he had “spent” for the bank to cancel these notes, and entirely clear the deposit from their records.

With all banks working to a similar process, and with co-ordinated value token notes, it becomes possible for unrelated transactions to exchange value notes, from different banks, to have the same ability to redeem and complete any return of deposited wealth.

Over time, insured property was added to gold and silver as a reliable source of stored wealth, and money as an entirely paper-based concept was born.

A Great Idea – Corrupted by Greed

So, by this means, banks became middlemen controlling the safekeeping of deposited valuables, and created and transferred their paper “value notes” to and between depositors, enabling the flow of goods and services in otherwise unbalanced or one-way transfers.

This all worked accountably and reliably provided the value tokens issued always related to the value stored, and if any depositor of valuables with the bank wished to repossess them, he would have to return value notes to the bank equal to those he had spent against the security of the valuables, for the bank to cancel them and return the actual valuables.

However, rather than sticking within the constraints inherent in this understandable and reliable system, banks saw an opportunity to game the process in their favour.

Firstly, they realised that their paper “value notes” were constantly in demand as essential to the process of any exchange of goods or services, so rather than charge a fee for any work they actually did, they charged a small percentage continuously on the notes they issued.

Secondly, rather than this percentage being on the original notes only, they applied it to the additional notes needed as “interest” on the original notes also.

This “compound interest” payable to them had to be created against the continual devaluing of the notes against the deposited collateral value, a process we call “inflation”.

Thirdly, they noticed that most of the real value collateral deposited with them was not reclaimed over considerable periods of time, offering them the possibility of creating more “value notes” than they actually held in collateral value, allowing them to expand their business, albeit in a manner putting the whole money creation process into irredeemable risk and chaos.

To cover up the clear fraud of issuing more value notes than they had valuables in collateral, they created a book keeping process based on a lie, that the wealth they held was the value notes rather than the collateral valuables.

Thus, they created loans from these notes entirely independent of any collateral value they held.

Fraudulently accounting for “loans” being created by bank value notes (in the possession of depositors) being temporarily lent to borrowers, banks freed themselves to CREATE as many loans as they felt they could get away with, always assured that the resulting deposits would balance in their book keeping.

As further consolidation of this fraud, they paid “interest” to bank note depositors, reinforcing the false impression that deposited bank notes were “lent” to borrowers, rather than the opposite TRUTH that their loans (created by them at will) created deposits.

This true money creation process is set out and confirmed by Bank of England Quarterly Bulletin Q1 2014, entitled “Money Creation in the Modern Economy”. In this Bulletin, and to quote “…rather than lending out deposits that are placed with them, the act of lending creates deposits – THE REVERSE OF THE SEQUENCE TYPICALLY DESCRIBED IN TEXTBOOKS….” (capitals added by me for emphasis only).

When challenged as to why banks still charged interest from borrowers which they paid to depositors, when it was not depositors money that they lent, the Bank of England replied that the morality of commercial bank practices was not their responsibility.

The real value they held, namely deposited collateral real value, became ignored in their accounting.

The Way Back to Functional Reality

In order to restore an understandable and workable system, we must return to the point where real valuables are “deposited” with banks, and bank “value notes” are only issued to these collateral depositors to the limit of real value held.

This ensures that there is a direct accountability between each depositor of real collateral value, and the money he creates against that value.

Banks would account real deposit value held against money issued for each depositor, such that in the event that the money was not returned for cancellation by the bank, by the depositor, the collateral could be sold by the bank to retrieve the money that way.

All safe and secure.

Banks would act as professional book keepers and would charge competitive fees for any activity they perform, with no “interest” involved in any activity.

Real value offered as collateral for banks to create money against can be any durable valuable, traditionally gold and silver, but clearly insured property holds value in the marketplace, and as an essential component of life for most, and with it’s potential for adding value to itself, it is collateral of choice for most.

Now that the ownership and current value of property can be secured for all to rely on via blockchain technology, we have an ideal medium and mechanism for any property owner to register how much money he has created against the value of that property, entirely free of “interest”, with that charge against that particular property at any time being secured, to be removed as part of the eventual sale of that property in due course.

Thus the concepts of “mortgage” and “equity release” become merged in one secure account unpolluted by any notion of interest.

Each homeowner has his own stable and secure banking system in the varying equity he decides to invest in his home.

Indeed, there is no theoretical reason preventing the development of property via the creation of money from the developing value itself, i.e. provided the developing market value always runs ahead of the money created to construct it, the property can just remain with the money needed to construct it as a charge awaiting cancellation at the sale of the property.

Banking would thus become secure and paid for in fees for a professional book keeping service.

Property and home ownership would be available for all.

By engaging and managing the real market value in his home, any property owner has the potential to release this value and buy it back as he needs to fund his life.



Continue your banking education with this video or research yourself by searching for “state land banks”: What are Land Banks & How to they work?

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