The Hidden Sovereign - The Banking System

 

The current banking model is based on banks being a private entity that benefits its owners and shareholders. The new banking model that the republic is creating is based on banking being a public utility that benefits the people. To render the existing banking model obsolete and create a new model, one must understand how both models work.

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When you go to the bank to deposit cash or you go to the bank to borrow money, and you do not accept the ready-made ideas that come to you from the culture, then you can discover the truth about banking. What we think is happening with money and banks is not what is actually happening.  The deception is so profound and the consequences are so far reaching that it is difficult to comprehend.  However, comprehending the role that the banking system plays in our society will liberate us to do money in such a way that we can manifest the better world we know in our hearts is possible.

 

The culture says you deposit your money in the bank. But that is not true. The culture says you borrow money from the bank.  But that is not true. 

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So, if you don't deposit money in the bank and you don't borrow money from the bank, but your life is based on thinking that you do, what might your life be like if you understood how money, how banking, actually works and if we, the people, issued the money for what we agree would be good?

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How Banking Actually Works:

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Let us examine what happens when you bring five 100 dollar bills to the bank that someone paid you for goods or services.

 

1. Those Five 100 dollar bills are Cash, Federal Reserve Notes.  They are legal tender for all debts public and private; it says so on the bills.  This is what you have to use to settle debts.

2. This is what we think of as money: Money is cash backed by the law that makes it legal tender, what you have to use to make payments and what you have to accept in payment.  Even if it is represented as just numbers in a bank's database, we think of it as cash, legal tender.

3. To "deposit" the money in your bank account, you make out a "deposit slip".  It has the bank's number on it and your bank account number on it.

4. You hand the cash (five One Hundred Dollar bills) and deposit slip to the teller. See where she "deposits" the cash.  In your bank account?  Or in the cash drawer?  Whose $500 in cash is it now?  Whatever the bank put in your bank account, it is not your five $100 bills which are legal tender.

5. If the $500 in cash is no longer yours, what did the bank put in your bank account that looks as though it is the same $500 you brought to the bank, but obviously isn't?

6. There is only one possibility, and it is the possibility that we are very familiar with when it is our money but someone else decides what to do with it.  It is called a loan. 

7. Now if I lend someone money, there are usually terms the borrower and I agree to, a legally binding contract. The fact that you don't remember signing a loan contract when you opened your bank account does not mean that you didn't sign such a contract. Of course you did, when you opened the bank account and didn't read the loan agreement.  You signed a loan agreement in which the terms were that when you "deposit" money, you are making a demand loan to the bank. A demand loan is one in which the bank has to pay you when you demand it with a check, ATM withdrawal, or debit card swipe. 

8. If your "deposit" or demand loan is made to your savings account, the bank even pays you interest at a variable rate determined by the bank. 

9. The $500 in cash you lent to the bank based on the terms (demand loan) in your bank account agreement with the bank goes on the balance sheet of the bank as an asset of the bank, and the $500 "accounting entry" they put in your bank account goes on the balance sheet of the bank as a liability of the bank.  Liability means what is owed.  The bank owes you $500 in cash.

10. The bank puts in your account their liability, what they owe you.

11. What difference does this make? Why is this relevant? Why does it matter that the bank owes you your "deposit" or demand loan in your bank account? 

12. First: It looks like you deposited money in the bank since you can demand the bank repay you in cash (legal tender). But you did not make a cash deposit into your account at the bank, you made a demand loan to the bank on terms you did not understand. 

13. Second: The bank put in your account their liability, what they owe you, not cash.

14. Third: The $500 of cash entered as an asset on the balance sheet of the bank is valuable to the bank. 

15. Fourth: When you borrow "money" from the bank, what does the bank lend? The cash in the bank made up of all our "deposits"?  No. The bank issues credit based on your "promissory note"; your promise to pay "principal" plus interest on what the bank terms a "loan".

16. The promissory note you sign when you "borrow money" from the bank is just like cash to the bank since it is based on your promise to pay money representing real value, plus interest! In other words, just as your cash deposit is valuable to the bank, so too is your promissory note.

17. The promissory note is entered as an asset on the balance sheet of the bank. In other words, the bank "monetizes", as an accounting entry, your credit, your promise to pay; your signature when you "borrow money" from the bank. 

18. What the bank "owes" you based on what you thought you "borrowed" is entered as a liability on the balance sheet of the bank. Again, liability means what is owed.  

19. What do you actually receive when you "borrow money" from the bank? The bank does the same thing it does when you make a demand loan to the bank.  It puts in your account their liability, what they owe you.

20. You did not "borrow money" from the bank when you took out what you think of as a loan; you accepted what the bank owes you, its liability, as though it were valuable cash.

21. Further, based on the banks accounting entry of their liability into your bank account, you now are obligated through your promissory note to make good on this accounting entry with real money, plus interest!

22. Banking = accounting entries that benefit banks at borrowers' expense.

23. Banking based on accounting entries is actually an acceptable form of record keeping and of managing the money supply.  What is unacceptable is that instead of this being a public utility for the benefit of the people, it is a mechanism used to profit the banks.  

24. The classical definition of credit is the provision of money, goods, or services with the expectation of future payment. 

25. Bank Credit is currently based on monetizing, as an accounting entry, a borrower's credit, a borrower's promise to pay with money  representing real value.

26. This demonstrates that money is an accounting system. In reality, the borrower, the so-called debtor, is actually the creditor, the one providing the value. 

27. Bank credit - what the bank owes us - is how all the money, except coins, comes into circulation. 

28. What would your life be like if you could lend people what you owe them and charge interest?

29. What did the banking system do to acquire this power to issue what you think of as legal tender cash but is simply credit based on an accounting entry?

30. It may not be obvious at first, but the banking system must have created this culture in which you do not understand something so fundamental to our existence.

31. If you doubt this, consider why the Congress genuflected to the banks when they needed to be bailed out?  If Congress worked for the people, it would have bailed out the victims of the banking fraud and brought the criminal bankers to justice.  How could banks be too big to fail?  How could bankers be so powerful they can't be tried and convicted of financial crimes? 

32. Why did you not learn in school how banking really works?  Why does the media not report on how banking really works?  How is the whole profession of economics so controlled that in spite of the evidence, they think of banks as intermediaries, and money as a neutral factor?Finally, how could the banking system have so much money that they could create and maintain this system?

33. The banking system is automatically transferring the wealth we all create together from the vast majority of people who pay more interest than they receive to the very small minority of people who receive more interest than they pay. 

34. For more on this, there is an excellent video called Money as Debt 2, Promises Unleashed. 

35. The consequence of money only being issued for what will be profitable to the owners of the banks is that we are all in debt to the banks and must do whatever is necessary to make the payments, no matter how detrimental to the individual, society, or the environment. 

36. The government is unfortunately subservient to the banking system, which controls the money, the primary tool of the sovereign.  With money as an interest bearing debt that transfers the wealth from 'borrowers' to private banks, the owners of the banks become increasingly wealthy, giving them the power to shape society. 

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There are numerous books about the monetary system, and among the best of them is Ellen Brown's "The Web of Debt" and Stephen Zarlenga's "The Lost Science of Money".  Thomas Greco's book "The End of Money and the Future of Civilization" is the bible on mutual credit and credit clearing.  Bernard Lietaer's book "The Future of Money" gives a good insight into complementary currencies, and Charles Eisenstein's book "Sacred Economics" heads us in the direction of a gift economy.