No one is immune to debt, and the majority of us are in some form of financial debt (1, 2, 3). Studies show that not having enough money, and especially being in debt, causes serious physical and mental distress (1, 2, 3). This article investigates why banks put people into debt, and uncovers why a world without any debt is completely possible.
The modern word ‘bank’ stems from the word ‘banca‘ used in Italy during the Middle Ages, but the goldsmiths of 17th Century England are often cited as where contemporary banking began (1, 2, 3, 4).
In those days, people would deposit their gold for safe keeping with the goldsmiths who issued a piece of paper (or promissory note) for the gold stored. The goldsmiths then loaned the depositor’s gold out to others in the form of further promissory notes, making good profits from the interest they charged (source).
Today, when you deposit money in your chosen commercial bank, the bank also loans out your deposited money to others. This clever system of making profits out of nothing is called fractional reserve lending and is explained simply in our video here:
However, the very first sophisticated banks can actually be traced back to the very first known civilization, the 6000-year-old ancient culture of Sumer in the area of Mesopotamia, where the Sumerian kings used a kingdom’s bank which issued clay tokens as receipts, or promissory notes, for interest repayments made with silver (1, 2, 3).
Kings using banks as a tool to rule over people obviously paints a much more negative picture of our monetary system than evolution from barter; yet if we critique the use of money from this perspective, it becomes clear that it is now the world’s central banks that have this sovereign power of control over kingdoms, or nations, today.
This is because central banks do not carry out fractional reserve lending of money stored in their vaults like commercial banks; instead, their role is to actually create a nation’s official money (or legal tender).
Central banks then loan out that money to the nation’s government, and the people pay back the government’s debt, as well as the interest the government incurs when it borrows the money, via income tax on wages.
The government’s debt is then expanded by commercial banks through loans to the public with further interest. Since the extra money needed to pay back all this interest does not exist, central banks need to keep creating more money so there is enough money in circulation.
This causes the value of each individual bank note to decrease, so prices go up (inflation) and people now have to work even more hours — not just to pay all the interest back, but now also to buy the things they could afford before.
The central banking system is explained in more detail in our short documentary here:
It was in 1694, when the King of England required funds for a war against France, that incredibly wealthy private individuals provided that money in return for the formation of the Bank of England.
In this instance, private banking families first gained huge direct influence over king and government (1, 2), and by 1783, when America won its independence from England, the Founding Fathers were well aware of the perils of private central banks (1, 2); for the Bank of England had outlawed the interest-free independent currency that had brought prosperity to the colonies, thus creating the hardship and despair that Benjamin Franklin claimed was the true cause of the American Revolution.
Yet the power and influence of the dominant (also inbreeding) banking families had now become immense (1, 2, 3), and investigations into the causes of the Panic of 1907 suggest that they deliberately triggered bank runs on some of the increasingly successful and profitable smaller trustsby spreading insolvency rumors that would cause several of them to fail (1, 2, 3, 4, 5).
In 1910, a secret meeting between these banking elites, Senator Nelson Aldrich, and Assistant Secretary of the Treasury Department A.P. Andrews, was held on Jekyll Island off the coast of Georgia. It was there that the central banking bill called the Federal Reserve Act was drawn up (1, 2, 3, 4, 5, 6).
Then, only 16 years after the Federal Reserve was instated, it substantially increased the money supply, increasing unsustainable lending and borrowing. Just like 1907, bank runs, bankruptcy, and systemic collapse occurred (source), but as the USA experienced the Great Depression, the elite “Money Trust” bankers had already pulled their money out of the stock market, using it to buy up cheap stocks and smaller failing banks (1, 2).
As technology develops, the techniques for loaning out and gambling with money have become more convoluted, but the pump and dump scheme continues to consolidate wealth and power with those in the know, while the ordinary working person is literally paying the price (1, 2).
Today, the richest 1% own more than the other 99% put together, and 62 people own as much wealth as the poorest half of the entire world’s population (1, 2); it is essential then to consider, since a person can only spend so much money in one lifetime, why these people are accumulating all this wealth.
What can we do?
It is important to note that the central bank of all central banks is the Bank for International Settlements (1, 2) with its 60 member central banks which work to establish “monetary and financial stability” while also intrinsically involved in the International Monetary Fund along with 189 member countries, as well as the World Bank, whose goal is to “end extreme poverty.”
But the facts demonstrate that the aim of the world’s wealthiest and most secretive individuals has never been to create stability or to end poverty, but rather to control governments and monopolize hunger, deciding who eats and who does not (1, 2).
Not only that, but studies repeatedly show that people are not born greedy, but rather those people who seek wealth and power suffer from psychological personality disorders, including psychopathology and narcissism (1, 2, 3, 4, 5).
But the most important fact of all is perhaps that this central banking elite can only rule over people as long we allow them to do so (1, 2, 3, 4).
The money that central banks produce today is fiat money, or ‘faith’ promissory notes, meaning it is not backed by gold or silver, it cannot be redeemed in any material form, and it actually has no material value.
In other words, the value of money comes entirely from the central banks’ promise that the money itself has some intrinsic value. The use of fiat money, and the necessity to pay bank debt, depends entirely on the people’s belief that they need to actually do so.