What Is This National Bank Mentioned in the Communist Manifesto?

"Centralization of credit in the hands of the 

State, by means of a national bank with 

State capital and an exclusive monopoly,"

—5th Plank of the Communist Manifesto

What is this National Bank mentioned in the Communist Manifesto?

It's a Central Banking System, like our Federal Reserve System! In my opinion central banks, if not controlled (and they never are), are the most insidious and dangerous monsters on the face of the earth. Wars, famine, natural catastrophes, plagues, murder, drug trafficking, terrorism, you name it, all combined, pale in comparison to the total destruction of life, liberty, and the pursuit of happiness of individuals, as well as the sovereignty of nations caused by Central Banking Systems.

All that being said, before revealing why I believe a Central Banking System is so insidious and dangerous to a People and to any Nation, let's take a look at its origins.

Origins

Central banks practice the art of the best con game in town called "fractional-reserve banking". This art form is best illustrated in Renaissance Europe with the practice perfected by the early goldsmiths. In those Renaissance days, before our Republic was formed, goldsmiths in Europe would build what were called strong-rooms (sort of like a mini Fort Knox) against thieves and store not only their own cache of gold for their own smithing but would store gold coins for individuals, especially royalty, land barons, and merchants, for safe keeping. Upon deposit of the coins the goldsmith would give the depositor a receipt or note stating how many coins were deposited and that upon demand of the bearer of the note, the goldsmith would return the same amount of coins deposited, less the fee for storage. These notes were sometimes used within the community as currency—for trade, payment of debt, goods, etc. This practice led to the beginning of the use of paper money as currency in Europe.

During this same period of time, there existed a class of merchants called “scriveners” who lent coins to people from their own private funds. Seeing this, and the fact that very few of the goldsmiths' depositors ever withdrew their coins, the goldsmiths decided that they too could lend coins, just like the scriveners. Instead of practicing what the scriveners did, i.e., lending only their own coins, the goldsmiths lent their depositors' coins. At first they were very cautious and lent only a few coins at a time. Later they got emboldened and worked their way up to lending 80 or even 90 percent of the coins in storage. Of course, they charged interest (usury) for the use of the coins.

Sometimes, when a borrower came to the goldsmith, instead of lending the borrower physical coins, the goldsmith would issue a certificate stating that he had lent the borrower so many coins. The diabolical parts of this act were (1) that many of the coins never left the possession of the goldsmith, so he could lend out more and more certificates, and (2) the interest collected for the use of the coins by the borrowers wasn't shared with the true owners of the coins. It wasn't until later, when depositors discovered that the goldsmiths were collecting interest on coins that belonged to the depositors, that sharing of the profits from the interest was put into practice. Sharing of interest was only introduced by the goldsmiths in self defense, so they wouldn't run the risk of being lynched, as many before them had.

The practice of issuing more notes to the public than the number of coins held in storage deflated the value of the coins in the vault, especially on coins that were not the goldsmith's property to begin with. Basically, the goldsmith created notes (a form of money, a medium of exchange) with no true value (the coins were not his to play this con game with). These notes became “fiat money” (money that couldn't be converted into coins) because there were not enough coins on deposit to cash in all the outstanding notes. Let's say the goldsmith issued 200 notes, each note being worth one gold coin and there were only 100 coins in the vault. If everyone cashed in all outstanding notes at once and everyone was only going to receive an equal share, the coins would only be worth half of their value. So if the number of coins in the vault was the standard by which you conducted business, you would have to have two notes to have the same purchasing power of one gold coin. This is inflation.

Look at the cost of a $20 gold coin today in Federal Reserve Notes (today's “fiat money”) and compare it with the cost of a $20 gold coin in 1914. In 1914, when the Federal Reserve Act was enacted, a $20 U.S. gold coin was worth 20 $1 U.S. silver coins. In 1914 the Federal Reserve Act said, in essence, that if you took a $1 silver coin or a $1 U.S. Note or a $1 Federal Reserve Note to the bank and deposited it in savings or your checking account, you would receive a $1 entry into your account. Today, a silver dollar is worth about $28 in FRNS (pronounced “Ferns” for Federal Reserve Notes). A $20 U.S. gold piece costs somewhere around $1,400 FRNS. Talk about inflation! Talk about a con job on the American People!

This is fractional-reserve banking—lending out more money than the amount deposited. Number one, the deposits aren't owned by the bank but by the depositors, and two, the bank keeps only a fraction of those deposits on reserve. That's why, when there's a run on a bank, the bank can't pay out all the demands on the deposits and the bank becomes insolvent. When a bank fails and government steps in and either bails them out or pays off their debt, “We the People” lose, because the only way the government can pay a debt or bail someone out is through taxation. The more banks there are that fail, the more we pay in taxes. The more we pay in taxes, the less net worth we have.

A good example of the effect of fractional-reserve banking is illustrated in the movie “It's a Wonderful Life,” 1946, Liberty Films, with James Stewart, Donna Reed and Lionel Barrymore, distributed by RKO. In the movie, there was a run on the banks at the beginning of the crash of 1929, Bailey's Building and Loan had lent out most of the money deposited by the citizens of Bedford Falls to build homes, finance construction, pay medical bills, education, etc. However, Potter, the villainous banker of the town, offered to pay only 50% of the value of the paper the depositors owned with the Building and Loan, if they wanted their money immediately. Thus, Potter was able to buy up more shares of the Building and Loan and gain more and more control of the Building and Loan. By fractionalizing the deposits, the value of the deposits were worth only half the worth of the original deposits made. Potter made a fortune from the people who panicked and cashed in their paper with his bank. 

But are these deposits really available to be lent out?

Some are and some aren't. In the case of Bailey's Building and Loan the deposits were available for loan. The depositors knew and agreed that when they deposited their money it would be used for building and loan purposes and that they would be able to withdraw all of their deposits only after giving 60 days notice. But the notes given out by the goldsmith in the early days of Europe were certificates or contracts that stated that the smith would only store the coins and return them on demand. Nowhere did the contract state that the coins would be lent out nor did the depositors of coins know that their coins were being used fraudulently.

The Federal Reserve operates in the same way as these early goldsmiths. They lend out money that is not theirs, charge interest to put it into circulation, and pay out very little, if any, of the profits from the interest collected to the depositors.

Using today's Federal Reserve Banking System, here's a very simple example of what happens with a $100 deposit. If you deposit $100 in your bank, your bank can legally loan up to 10 times the amount on deposit minus no less than 10% kept in reserve. That means that they can loan up to $900 and keep $10 in reserve on a $100 deposit. The bank charges interest on that $900 loan. Let's say the interest on the loan is 4%, so 4% of $900 equals $36. Remember, your deposit isn't really their money, but they're in possession of it, just like the goldsmiths of early Europe, and just like the goldsmiths, they loan out more than is deposited. What's your share of their $36 profit from that loan? Let's say that the bank pays you a whopping 1% on your deposit of $100. That's $1. The bank earns $36 dollars off of $900 in loans and pays you only $1 for your $100 deposit. Multiply this example by millions, billions and even trillions of dollars held on deposit in this country or even in the world. You can now see how bankers can make out like bandits and acquire vast amounts of wealth from the American People using fractional-reserve banking practices. When a person has all the money he can possibly want or spend for the pleasures of life, what is left for him to acquire?

POWER! And they're using power, right now, against the American People and the Nations of the world.

How do Central Bankers or the Federal Reserve (Feds) use the vast wealth they have acquired from the American People, against the American People?

“...this is where that money has been going...to acquire control over these groups and institutions by buying up influence and control over the people who run them. That means that they're buying up politicians, political parties, [judges—the author's addition to this list], television networks, cable networks, newspapers, magazines, publishing houses, wire services, motion picture studios, universities, labor unions, church organizations, trade associations, church organizations, tax exempt foundations, multinational corporations, boy scouts, girl scouts,you name it. Any group, any institution, which exercises influence, has been a target for control, and they have a lot of money to spend to acquire that control.

—G. Edward Griffin, “How Banks Control and Rob Americans” (CD)

This, my friends, is the “Shadow Government” I talked about in the first blog post.

Until next time, keep your powder dry and your “coins” out of banks!

Gus

P.S. The next several posts will feature a history of Central Banking Systems and their negative effect on every economy they touched.