All week long I've been reading about the history of banks in the U.S
The idea of doing business without using, touching, or carrying actual gold or silver came about this way:
At a certain point in history, trading and barter became very burdensome.
Coining valuable metal into portable currency seemed a better alternative. Not ideal, but better than barter.
Local lending institutions with trusted operators became necessary.
Poor people did NOT trust a National Bank over a Local Bank for a long time. Why?
Because they were run by strangers and the opportunity for locals to keep an eye on the bankers was not possible or to judge their character.
Local banks were run by people they knew.
The eventual solution? FREE BANKING ERA.
Local Banks could do as they pleased as long as funds were backed by an equal amount of gold on hand and on demand. Free banking spread rapidly to other states, and from 1840 to 1863 all banking business was done by state-chartered institutions.
The legitimacy of any bank was solely determined by the LAWS passed locally or nationally to monitor and control operations.
“Wildcat” banking appeared because local laws could be “relaxed” by local politicians, cronies, and double-dipping investors!
NOTE: Banknotes were issued against little or no security, and credit was over-expanded. The borrower couldn’t pay back the loan and the local economy became depressed (the payback funds were necessary for the Bank to make new loans).
What remedy was possible?
Federal Laws were enacted to examine and regulate all banks and bring currencies in use into harmony.
THE NATIONAL BANK ACT radically changed how banks operated.
Local banks which refused to abide were taxed until they came in line and agreed.
To compete with National Banks, State Banks created a new invention: the Checking Account. Customers could pay their bills and buy goods WITHOUT DEMANDING GOLD from the local bank’s on hand reserves.
During the Civil War, the Federal need for funds to fight the war led to the selling of Government Bonds (I.O.U.’s + interest) citizens purchased on promise of repayment and profit.
As the Age of Industry began, banks began investing in commercial enterprises by lending money to entrepreneurs for startup, equipment, etc. The interest charged added to the bank reserves on hand.
The whole idea of using paper money, Bonds, IOU's, promissory notes made "cashless" transaction possible as more and more people began to TRUST that somewhere somebody had gold or silver on hand to back up the transactions.
Human beings are not trustworthy when they get the chance to steal or gain advantage.
So?
So, after banks failed, the Federal Government stepped in and guaranteed local banks up to a certain amount. This was to instill trust (even when trust was illusory)
The big financial meltdown in 2008 came because untrustworthy people did untrustworthy things such as selling houses to customers without enough collateral.
Why would Lenders do that?
2 reasons
1. An act of Congress made them do it
2. Banks could sell the "bad paper" to Wall Street
Who went to prison for any of this?
I don't know--you tell me? Nobody is what I'd say.
Why nobody? Because Congress made it possible and Congress jumped in and supported the Too Big To Fail stop gap financing. TRUST was purchased. CONFIDENCE was purchased. With what money and from where? From future taxpayers.
That's right. People who aren't yet born.
Money from nothing.
Who do we owe all those TRILLIONS to? Each other.
We pay taxes. The government spends tax money not yet collected by borrowing.
Banks, the Treasury, the Fed all participate in a mostly illusory leveraging of the future to pay for the present.
Those who get angry fall into two categories.
1. Those who see nothing wrong with this and say it will all be okay, so shut the hell up.
2. Those who become convinced a vast conspiracy is involved.
What do I think? I think no conspiracy is necessary when most of what happens is made
legal by politicians acting in public (getting voter approval) who are paid to grease the wheels of fiat money and future leveraging.
The so-called 1% is enabled by voters, if you come right down to it.
If regular civilians could spend like crazy and not pay their bills--(Big Brother will step in and pay) almost everybody would. But hey--a great many citizens live beyond their means using credit to purchase goods and services--all on a PROMISE to PAY.
In other words: we all do it--"money for nothing and the chicks are free."
