Fractional reserve banking and the fraud that came with it is at the core of the present-day financial system. In order to grasp an understanding of the ongoing dilemma, and why Federal Reserve Banks are at fault, it is essential to understand the concept of Fractional Reserve Banking and why it is more than just counterfeiting.
Contrary to what is believed, the American dollars in your bank account are not the same dollars in the form of cash (Federal Reserve Notes) in your wallet. The dollars in the banks are make believe paper dollars, or numbers on a computer created by the bank an obligation or promissory note to pay you a certain dollars in Federal Reserve Notes. Simply stated, the bank backs the dollars in your bank account while the Federal Reserve backs the Federal Reserve Notes.
Throughout time, gold was the only existing currency. Purchasing your daily loaf of bread with pure gold did not seem practical and for that reason, goldsmiths served as early bankers. Goldsmiths would issue certificates that were backed by gold and this allowed people to purchase things with paper money. This paper money was represented by pure physical gold bullion and was stored in the goldsmith's vaults.
Producing certificates to look after gold meant that a significant amount of cash (gold) was just sitting around in storage. So the goldsmiths decided to start a fraud. When this happened, they became the bankers we know today.
Creating this fraud was really simple. Given that people did not know how much gold was actually stored, it was easy for goldsmiths to issue out more certificates than the gold being stored. By doing this, they attempted to earn more interest than would have been possible if they would have limited themselves to loan based on the gold stored. These goldsmiths relied on the assumption that not all of the certificates would be cashed in at the same time and therefore nobody would find out.
This is a critical explanation of the fraud that is fractional reserve banking. In the time of goldsmiths, it was easy to distinguish between right and wrong. The promissory notes were backed by the gold in the vaults. The moment the goldsmiths decided to issue notes that were backed by nothing (aside from the supposition that they would have enough gold inventory to pay, assuming not everyone demanded their physical gold at the same time)thus the process of fraud began.
How is it possible that bankers were allowed to get away with something like this? How could no one say anything about the false creation of gold?
Enter the government. Corruption can stem from power, and absolute power corrupts absolutely. So indeed, the government knew the trick of the goldsmiths' scam. However, the world's ruling classes knew it was not convenient to stop it. Instead, they saw it advantageous to perpetuate the scam. Why? Because by taxing and regulating the issue of money, they could keep a system in place where both could profit. This inevitably led to what we know as Fractional Reserve Banking.
If you move forward in time 500 yearsthe US Dollar is the world's reserve currency and serving like the world's goldsmith. Privately owned by several mysterious group banks, the Federal Reserve System illustrates the jaded relationship banks and governments have developed in the last 500 years. For some reason, world economies fall in the same trap of the same scam.
The interest rate banks operate under and lend are controlled by the Federal Reserve. In addition, the Federal Reserve controls the fractional reserve ratios banks are required to maintain (as a percentage of their reserves held in Federal Reserve Notes). What does this mean? The money supply and the new money' being created are controlled by privately owned company comprised of banks allowed to counterfeit' money. There is also the interest charge on those dollars created out of thin air!
For those reasons, I have a nickname for Fractional Reserve Banking: I refer to them as Fictional Reserve Banking. How long will you allow yourself to be fooled by this fraud? Will you take the steps necessary to protect yourself and stay ahead of the crowd?
Here are some suggestions for further reading: It is essential to understand the Fractional Reserve Banking in order to find or create positive banking solutions for your family and future. Solutions like these are the ones author Peter Macfarlane writes about in his blog on offshore banking. Peter also writes several articles on the topic of Wealth Creation for The Q Wealth Report which is a leading quarterly journal dedicated to financial privacy and individual liberty, as well as offshore asset protection. He is also a well-known authority and speaker at offshore living events.