Sir Josiah Stamp, former President, Bank of England, didn't pull his punches. "Bankers own the earth," he said. "Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back."
In recent years, bankers have bought the Orient. BankAmerica's share was 16 billion. J.P. Morgan kicked in 23 billion, Chase Manhattan 32 billion, and Citicorp 60 billion. The notes, or IOUs of the debtor countries, became assets of these banks, and as such could serve as the basis for additional lending, via the "fractional reserve" procedure which allows a banker to create ten dollars (for instance) in new deposits, (i.e., loans), for every dollar he has in reserve. Of course, if the assets become worthless, as via bankruptcy, the loans which they supported have to be called in: a bad business indeed. Now those assets are in danger of becoming worthless. Are the bankers worried?
Ostensibly they are. The old saw says that if you owe the bank a million, you worry. If you owe it a billion, the bank worries. But the worry is unwarranted, and I suspect the bankers are wringing their hands more for the benefit of naive economics reporters than out of genuine concern. Why? Because if the borrowing Asians were to go belly-up, the loss of bank assets would be so severe as to seriously derange the American economy, not to mention those of Europe and the rest of the world. So it just won't be allowed to happen.
The IMF to the rescue! It has propped up the Philippine economy with a billion, that of Thailand with twenty-two billion, of Indonesia with forty billion, and South Korea with sixty billion. But gosh! the IMF is now taking its turn at hand-wringing: it's running out of money! A person would think that modern money were some scarce and precious commodity, considering how many financial institutions seem to be running out of it, while, in fact, they create it from nothing. Not to worry: the American taxpayer to the rescue---again. Never mind that bailouts don't work. Mexico has had four such bailouts in the last two decades, and could now be said, with justification, to be owned and operated by the IMF. But the central point is that the borrower not default. As long as he can pay interest on his loan, the loan remains an asset to the lending bank, and that means that there will be bailouts ad infinitum, or until an incredibly obtuse public wakes up.
If the taxpayer is funding the IMF, where does he get the funds? Well, he could do without food, clothing, shelter, and transportation, and just turn his paycheck over to that organization. It is more likely, however, that he attempt to maintain his standard of living, despite ruinous taxation and rising prices, by borrowing. From whom? Why, for starters, Chase Manhattan, Citicorp, J.P. Morgan, and BankAmerica, among others. If these institutions were to simply create enough money to reimburse themselves for their Asian losses, people might begin to ask questions that bankers would prefer not to answer, such as "Why do we have to work for money, when these guys get it with the stroke of a pen?" Rather, the banks accomplish the same thing indirectly: they lend to the general public funds which enable the public to pay, among other things, taxes, which are in turn used to reimburse the banks, via the IMF, for their "bad" investments. (We assume, being generous of heart, that this scenario of "failure" was not contemplated from the onset.)
One obvious lesson to be learned is that it is dangerous to link banking and government. That linkage becomes established when a government strips its people of money, and substitutes a scrip, or credit, created by a privileged class: the bankers. The bankers can do this only with the consent of the government, and at its pleasure, for otherwise modern banking would be clearly illegal. In return for this favor, the bankers finance government, coming, in time, to own it, as President Franklin Roosevelt pointed out. It's an unholy alliance, but very satisfying to banker and politician. The only loser is the rest of us, who, by our productive labor, keep the country going.
The Founding Fathers established a system of checks and balances, dividing the power of government into three distinct departments. But the most important check and balance of all was that provided by specie money. "No state shall make anything other than gold and silver coin a legal tender--." And "no state shall coin money." By ensuring that money was a substance owned by the people, and warehoused, (not created), by the banker, the people, who produced the money, just as they continue to produce everything else that they need, would call the tune. They, after all, paid the piper. Strip the people of their own wealth for use as a medium of exchange, and force (or trick) them into using imaginary, government-approved, banker-created "money," and you reduce a nation of free men into a nation of slaves, albeit reasonably contented ones. This process is easy for us to see as regards Asia; the view becomes cloudier the closer to home we look. Perhaps, from the Asian perspective, it is clearer: we are enslaved to the government which finances the IMF, as clearly as they are the slaves of that corporation.
Dr. Paul Hein
26 January 1998
Also by Dr. Hein:
It's The Truth That's Being Devalued
What's the Lek Lacking?
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