Before we get to the Origin of Banking I would like to spend a post discussing a few concepts regarding money and exchange in the economy more generally… And to illustrate these concepts I will use a set of quotes from some great Classical Liberal French Economists, much neglected by the history of economic thought… These Economists wrote during the Industrial Revolution (1750-1850) and before, during and after the disastrous French Revolution (1789-1799) and its poisonous legacy for Human Freedom, the rise of Democracy, and the Rise of the State and Central Banking… The period between money as regulated by the market, and money as “regulated” by private banks given public control of the money supply…
Antoine Destutt de Tracy (1754-1836)
“Society is purely and solely a continual series of exchanges. It is never anything else in any applicable duration, and this is the greatest eulogy we can give to it, for exchange is an admirable transaction, contract parties always both gain, consequently society is an uninterrupted succession of advantages unceasingly renewed for all its members.”
Humans are social creatures… They tend to prefer human interaction to self sufficient solitude… That’s why we have Hamlets, Villages, Towns, Cities… These people find it more desirable to live with other humans than not to, and for obvious reasons… Apart from family, friends and community ties, you find it desirable to exchange property with these people… You have certain needs and wants, as do they… In your local village you might find a Pub, a Butcher, a Baker, a Grocer… Why brew your own beer, butcher your own animals, bake your own bread, grow your own food, when someone else can do it for you? That is why most people don’t, because they find it desirable to satisfy these needs and wants by voluntary exchange… And in a voluntary exchange both parties automatically gain, otherwise the exchange would not take place… I have discussed the inherent limitations of Barter in my previous post, and that is what leads Human Action to indirect exchange and the Origin of Money… This will universally be the most sale-able good in society, which is usually precious metals… Lightweight, compact, value dense, a perfect medium of exchange that increases in value over time, and that allows beer, meat, bread, and groceries to be priced in the same weights and measures of coinage… When you can calculate your daily, weekly and monthly costs of living in ounces of gold or silver, then you know how many ounces of gold and silver you need to exchange from your produce to maintain your living standard, and knowing that whatever you can produce and exchange for money over and above your costs of living, i.e saving; will be a stable and increasing store of value over time… Deflation is a zero sum game, it benefits rich and poor alike in reducing living costs and increasing living standards…
“The different ways of producing all consist of taking a product in one state, and putting it in another state or condition in which it has more utility and value. In one way or another from the moment that one creates or augments the utility of things, one augments their value. One is exercising an industry, and one is producing wealth.”
When you create something with your God given talents and give it utility, you are creating value… The more utility you create the more value you create, which is stored in the money you exchange for your produce… The more the market desires your produce, the more of their own money they are willing to exchange for it… The more successful a producer you are the wealthier you become, and the higher a standard of living you are able to provide for you and your family… The market is giving you a signal, and telling you that you are a productive member of society… And market monies given they are scarce will over an extended period of time become scarcer, further protecting and enhancing your savings and the inheritance of your children and descendants… The market incentivizes production and saving…
On the other hand if you are not providing utility, if the market does not desire your produce, you start consuming more than you produce… You cannot cover your living costs… You are losing money… The market is also giving you a signal, it is telling you that you are doing something wrong… Losing money hurts… Getting poorer hurts… It’s supposed to… You have two choices from here on in; you either identify your mistakes and make the changes so that you do once again augment utility and value, or you can persist in creating less value than you consume… However, you have the added incentive to change your ways in that in persisting to operate at a loss, you are at threat of going bankrupt and losing your property, and not being able to provide for your family, squandering their inheritance… Again the money, the market, is telling you that you are threatening your own future if you carry on down this path… The market is a quite beautiful self correcting mechanism incentivizing productive behaviour and punishing unproductive behaviour…
Claude Frédéric Bastiat (1801-1850)
“There are some persons who imagine that capital is money, and this is precisely the reason why they deny its productiveness; for as John Ruskin and others say, dollars are not endowed with the power of reproducing themselves. But it is not true that capital and money are the same thing. What is capital, then? It is composed of three things: First of the materials upon which men operate, when these materials have already a value communicated by human effort, which has bestowed upon them the property of exchange-ability – wool, flax leather, silk wood, etc. Second, instruments that are used for working – tools, machines, ships, carriages, etc. Third, provisions that are consumed during labour – victuals, fabrics, houses, etc. Without these things the labour of man would be unproductive and almost void; yet these very things have required much work, especially at first. This is the reason that so much value has been attached to the possession of them, and also that it is perfectly lawful to exchange and to sell them, to make a profit off them if used, to gain remuneration from them if lent.”
Capital is not a filthy word… Capitalist is not a filthy word… Capitalism is not a filthy word… Capital is private property… Capitalism is the voluntary exchange of private property… A Capitalist is an owner and a creator of private property through voluntary exchange… The whole reason for the Legal System (supposedly) is to protect Private Property Rights and enforce Justice… The whole reason for the existence of the State (supposedly) is to protect our freedoms and private property from each other, to protect society from the Bellum Omnium Contra Omnes… Western Civilization is founded on the sovereignty of private property… Private property simply means that it has an owner, it means you can own your own stuff exclusively, and it gives you security and freedom… Within the boundaries of your own private property you are sovereign, even over your Rulers… Private property is Human Freedom; it is the sovereign freedom of the family, it allows you to open the door of your home to your friends and to shut it to your enemies, it allows you privacy and solitude from the rest of the world… Private property is what it means to be human… Socialism is the abolition of all that… Socialism is the abolition of privacy and property… Socialism is the abolition of what it means to be human… Take a look around Modern Society…
Money is property… If it is the money of the market, gold and silver, it is private property… It is the most elegant ingenious way of storing wealth in a compact form… Ten ounces of gold could be exchanged for a car, a hundred ounces of gold could be exchanged for a home, and so on… The Market buys in it and sells in it, everyone understands and recognizes it as the common medium of exchange… Securely held as private property, precious metals are not affected by banking busts and crashes, as it is valued subjectively outside the Decree of Despots and Demagogues… Sound money is private money, as provided by the market… Socialism is the abolition of all that… Socialism is the abolition of private money, replaced with Legal Tender Laws, Fiat decree over the control of money… Socialism is Central Banking… The Central Banks may be indeed be private institutions, but they have public control of the money supply, which is de facto Socialism… Your money is no longer private property, but publicly counterfeited property of Central Banks… Your money is now controlled by private bankers and subject to Fiat inflation, deliberately engineered to lose purchasing power over time punishing prudent savers and rewarding profligate borrowers (Governments), impoverishing gradually those who are compelled to hold it, stealing the future of your children… If you require further proof that Central Banking is Socialism, I would point to the fifth plank of the Communist Manifesto (1848) by Karl Marx (1818-1883); 5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly… Which begs the further question; who exactly was Karl Marx, and who was he working for?
“The productive power of industry is limited only by the ignorance and bad administration of States. Spread enlightenment and improve governments, or rather prevent them from doing harm, and there will be no limit to the multiplication of wealth.” Unknown, Student of Jean-Baptiste Say
As long as money can stay free of Fiat Decree and monopoly issue by Central Banks, then the above would hold true… The market solution is always correct, and precious metals were near universally the solution of the the market as money, due to intrinsic utility and intrinsic scarcity… A strong natural deflation as money becomes scarcer over time translates to the sum of the individuals of that economy, in lower prices and a rising standard of living… Starkly contrast this with the fraud of Fiat Central Banking where the US Dollar has lost 98% of its value since 1913, and other Countries probably even worse than that; is it any wonder that there is mass suffering, poverty and falling standards of living over the West and beyond? This is Communism of the essential lifeblood of the “Market” Economy after all…
“Industry will divest power of its revenues by offering at less cost the services which power gets itself paid for. Federations will replace States, the loose but indissoluble chains of interest will succeed the despotism of men and of the Laws. The tendency towards government, the first passion of the Human Race, will cede to the free community the requirement of Civilized Men. The Era of Empire is over, the Era of Association begins.”
Seeing how History played out was Thierry deluded to write this quotation? I don’t think he was… He just underestimated the deviousness and cunning of the Men Behind The Curtain to enslave the world with Public Monopoly Money, and therefore de facto control of the economy, from where they can control Law, Politics, Media, Education, Health, Agriculture, every part of the Market Economy that can, and has been, corrupted… That Debt Slavery System that has been used to rape the world of its resources and created Human misery on an Epic Scale for the last hundred years, is about to collapse… We are about to repeat what happened in Sumeria, Egypt, Babylon, Greece, Rome, and more recently the Soviet Union; collapse of “Civilization” through debasement of the money… It works exactly the same, and collapses the same… The inherent problem with Socialism is that, sooner or later, you run out of other people’s money… That is a necessary truth… You can print as much money as you want, but you can’t print wealth… Was Thierry wrong, or was he just two hundred years ahead of his time?
Socialism is a Scheme designed in the shadows and expounded by easily bribable Intellectual dupes and useful idiots to rob people of their property and to bring around the Tragedy of The Commons, essentially an Elitist Landgrab of scarce resources by abolishing the property rights of everyone else… You can abolish private property and nationalize it in one fell swoop as happened in Russia after the Russian Civil War (1917-1922), or it can be done in small increments through the insidious farce of Social Democracy, where first the money is nationalized, then The Law, Education, Health, Agriculture, Industry, Broadcasting… The reason I persist with banging on about money is because it is half of an economy… For every good bought or sold, the exchange takes place in money… By abolishing private property and instituting Legal Tender Laws mandating the use of Fiat money, half the wealth of the economy is de facto communized… From there it is simply a matter of engineering booms and busts by “virtue” of control of the money supply to begin with, front-running them, and collecting property from the devastating bankruptcies that wipe out millions of innocents, further enslaving the populace in the spiders web of the Welfare State all the while inflating away the value of your mandated public property to pay for this Utopia! 98% of the value of the Dollar stolen in just over a hundred years… Fiat money simply put is a Crime against Humanity… Under true capitalism your money, the most sale-able good that lets you exchange with the rest of the market, is your sovereign Private Property… Precious metals (unless in a bank) don’t have counter-party risk, they just are what they are… Central Bank inked counterfeit notes on the other hand do have counter-party risk, because they are the Public Property of the owners of the Printing Press that issues and mandates its use through Legal Tender Laws, de facto instituting Nationalization (Communism) of the money supply and abolishing Private Property (Gold and Silver) as money… I will end this post with a quote from Thomas Jefferson (1743-1826) also writing within the same period as the Classical Liberal French Economists above, and purported to have been said in the debate over the Re-charter of the Bank Bill (1809), with Jefferson advocating the abolition of the First National Bank because he knew what would happen otherwise… Prophetic, or what?
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around (these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs.”
And now we have Blockchain Technology…
Recommended Background Information For This Post (And Source of Quotes)
Classical-Liberal Roots of Marxist Class Analysis – Ralph Raico
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