BUBBLENOMICS 2

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“DISARM THE PEOPLE, THAT IS THE BEST AND MOST EFFECTIVE WAY TO ENSLAVE THEM.”

JAMES MADISON

“THERE NEVER WAS A GOOD WAR OR A BAD PEACE.”

BENJAMIN FRANKLIN

“THE EXECUTIVE SHOULD BE ABLE TO REPEL AND NOT COMMENCE WAR.”

ROGER SHERMAN

“A CONSTITUTION OF GOVERNMENT ONCE CHANGED FROM FREEDOM, CAN NEVER BE RESTORED.”

JOHN ADAMS

“FEW MEN HAVE VIRTUE TO WITHSTAND THE HIGHEST BIDDER.”

GEORGE WASHINGTON

“HISTORY, IN GENERAL, ONLY INFORMS US WHAT BAD GOVERNMENT IS.”

THOMAS JEFFERSON

“ONE GREAT ERROR IS THAT WE SUPPOSE MANKIND MORE HONEST THAN THEY ARE.”

ALEXANDER HAMILTON

“THE RICH WILL STRIVE TO ESTABLISH THEIR DOMINION AND ENSLAVE THE REST. THEY ALWAYS DID. THEY ALWAYS WILL.”

GOVERNEUR MORRIS

“THE BRITISH ARE COMING!”

PAUL REVERE

“ONE GREAT ERROR IS THAT WE SUPPOSE MANKIND MORE HONEST THAN THEY ARE.”

ALEXANDER HAMILTON

“THE RICH WILL STRIVE TO ESTABLISH THEIR DOMINION AND ENSLAVE THE REST. THEY ALWAYS DID. THEY ALWAYS WILL.”

GOVERNEUR MORRIS

“THE BRITISH ARE COMING!”

PAUL REVERE

“DISARM THE PEOPLE, THAT IS THE BEST AND MOST EFFECTIVE WAY TO ENSLAVE THEM.”

JAMES MADISON

“A CONSTITUTION OF GOVERNMENT ONCE CHANGED FROM FREEDOM, CAN NEVER BE RESTORED.”

JOHN ADAMS

“FEW MEN HAVE VIRTUE TO WITHSTAND THE HIGHEST BIDDER.”

GEORGE WASHINGTON

“HISTORY, IN GENERAL, ONLY INFORMS US WHAT BAD GOVERNMENT IS.”

THOMAS JEFFERSON

“THERE NEVER WAS A GOOD WAR OR A BAD PEACE.”

BENJAMIN FRANKLIN

“A CONSTITUTION OF GOVERNMENT ONCE CHANGED FROM FREEDOM, CAN NEVER BE RESTORED.”

JOHN ADAMS

“FEW MEN HAVE VIRTUE TO WITHSTAND THE HIGHEST BIDDER.”

GEORGE WASHINGTON

“HISTORY, IN GENERAL, ONLY INFORMS US WHAT BAD GOVERNMENT IS.”

THOMAS JEFFERSON

“THERE NEVER WAS A GOOD WAR OR A BAD PEACE.”

BENJAMIN FRANKLIN

“ONE GREAT ERROR IS THAT WE SUPPOSE MANKIND MORE HONEST THAN THEY ARE.”

ALEXANDER HAMILTON

“THE RICH WILL STRIVE TO ESTABLISH THEIR DOMINION AND ENSLAVE THE REST. THEY ALWAYS DID. THEY ALWAYS WILL.”

GOVERNEUR MORRIS

“THE BRITISH ARE COMING!”

PAUL REVERE

“DISARM THE PEOPLE, THAT IS THE BEST AND MOST EFFECTIVE WAY TO ENSLAVE THEM.”

JAMES MADISON

“THE EXECUTIVE SHOULD BE ABLE TO REPEL AND NOT COMMENCE WAR.”

ROGER SHERMAN

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SYNOPSIS

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Bubblenomics 2

Banking Demystified

Bubblenomics 2 is an exposé of the most fundamental problem facing modern civilization, the one problem which underlies most other political and economic problems. The nature of our banking and money system is the most important subject intelligent persons can investigate and reflect upon.

The modern banking system is not just corrupt in practice, it is corrupt by design. The corruption persists because the design is understood by so few. The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. Bubblenomics 2 takes you under the hood of the banking system, reveals its fraudulent processes and their insidious consequences, and provides real solutions. Bubblenomics 2 is the most illuminating exposé of our banking and money system ever written.

If you have ever wondered why the world remains such a madhouse, why war, depressions and suffering seem to be endemic human conditions, and why politics is incessantly corrupt, this book provides the missing pieces. It explains the tools used by the sociopaths who run the world to ferment suffering and discord to enrich themselves and perpetuate their power. A sane, peaceful world is impossible until the problems identified in this book are understood by everyone and reformed. Lawrence Rowe considers Bubblenomics 2 the most important book he will ever write.

EXCERPT

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Chapter 2

Cybersmiths

“Our national circulating medium [money supply] is now at the mercy of loan transactions of banks; and our thousands of checking banks are, in effect, so many irresponsible private mints. What makes the trouble is the fact that the bank lends not money but merely a promise to furnish money on demand—money it doesn’t possess. The banks can build upon their meager cash reserves an inverted pyramid of such ‘credit,’ that is, checkbook money, the volume of which can be inflated and deflated.”

—Irving Fisher
Economist

“Checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.”

Modern Money Mechanics
Federal Reserve Publication

“Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower’s IOU.”

I Bet You Thought
Federal Reserve Pamphlet

“Banks lend by creating credit. They create the means of payment out of nothing.”

—Ralph Hawtrey
Economist

Most people think that banks loan pre-existing money. This is incorrect. Each bank is a private mint that creates the money it loans. Bank loans are made with money conjured out of thin air. Most people are completely ignorant of this fundamental fraud at the heart of our banking system.

Many writers criticize bank money creation without documenting the nuts and bolts of the actual money creation, which makes it difficult to accept the validity of their claims. The author adheres to the scientific method and demands proof of claims before accepting their validity. As Carl Sagan noted, extraordinary claims require extraordinary evidence. The claim that trillions of dollars of mortgages and loans are simply conjured out of thin air by commercial banks is extraordinary. To accept the validity of this extraordinary claim, extraordinary proof is required. Unfortunately, most people criticizing banks provide paltry proof. This was a significant problem that the author encountered when first researching our banking & money system. Vague claims about money creation were not sufficient evidence for the author. The author wanted a precise enumeration of the methodology banks use to create money and the rules that govern their money creation. Sharing this extraordinary evidence is the reason the author wrote this book and especially this chapter.

To limber the mind for the fraud that follows, it may be helpful to restate the goldsmith scam which was explained in Bubblenomics. A goldsmith—a medieval banker—accepted a deposit of gold, stored the gold deposit in his vault, and issued a paper promissory note, which was a promise to redeem the gold anytime the depositor demanded it. Gold was money. People trusted the goldsmith, so the goldsmith’s paper promissory notes were considered as good as gold, accepted in lieu of gold as payment for goods & services, and became the first modern paper money.

Goldsmiths realized that only about 10% of deposits were ever redeemed. That is, only 10% of depositors ever showed up at the goldsmith’s vault, handed him a paper promissory note, and demanded their gold. If a goldsmith accepted 100 ounces of gold deposits, and issued 100 one-ounce promissory notes, he knew that only 10% of those notes or 10 one-ounce promissory notes would be redeemed.

Everyone knew that the goldsmith was wealthy, so many people asked him for loans. The 10% redemption rate meant that the goldsmith could create 900 additional one-ounce promissory notes, lend them out, and charge interest on these loans. 1,000 paper promissory notes would then be circulating, each supposedly representing an ounce of gold in the goldsmith’s vault. There were only 100 ounces of gold in the goldsmith’s vault. Thus 100 ounces of gold reserves backed 1,000 paper promises to redeem an ounce of gold, which is a 10% reserve ratio (100 ÷ 1,000 = 0.10 = 10%). At this 10% reserve ratio, 90% of paper promissory notes could not be honored. 900 of the 1,000 circulating promissory notes could not be honored.

Usually, less than 10% of the 1,000 one-ounce promissory notes were redeemed, so the goldsmith’s 100 ounces of gold were sufficient to honor these redemption demands. The goldsmith was therefore able to run his scam indefinitely as long as he didn’t get greedy and circulate too many promissory notes. If he got greedy and circulated too many promissory notes, prices increased, people grew suspicious, redemption demands exceeded his gold reserves, and his fraud was discovered. The goldsmith had to be careful.

The goldsmith produced no honest goods & services, but the promissory notes he received as interest payments on his loans could be used to buy goods & services. The goldsmith was a parasite who scammed members of the community that accepted his promissory notes as money. By creating fraudulent deposit claims which exceeded reserves, the goldsmith was able to earn something for nothing and bilk an entire community.

All things evolve. With the advent of computers and the information age, goldsmiths became cybersmiths. . .

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