A great many people believe the current crisis we are in is a direct result of the playing out of the debt-based monetary system and the scourge of Central Banks in our society.
It has pitted capitalists against populists who feared the wealthy few would hog power and crush liberty. The skirmishing has resurfaced amid the current credit crackup, with book after book faulting the Federal Reserve for allowing Americans to run up some $34 trillion in domestic non-financial debt.
How did it evolve and what is their place in our economy?
To understand why there is a push to end the US Federal Reserve we must understand the history behind the Central Banks. That's what this series will be about. The content is adapted from a history written by Andrew Carrington.
It will be long and broken down into multiple parts, but I hope you will take the time to read through it all.
In this first installment we look at the period from 48 BC to the introduction of the first Central Bank in the United States in 1791, the Bank of North America.
Central Banks sprung from the money changers of the time, so we start with them.
(Click on all images to enlarge)
To simplify how they made money on this let's give an example in which a goldsmith charges the same rate of interest to creditors and debtors. In this example a goldsmith would pay interest of 6% on gold you had deposited with them, and then charge 6% interest on the paper receipts (money) you borrowed from them.
King Henry I succeeds King William II to the throne of England. During his reign he decided to take the power the money changers had over the people, and he did this by creating a completely new form of money that took the form of a stick.
This stick was called, a "talley stick," and ended up being the longest lasting form of currency, lasting 726 years until 1826 (even though other currencies came and went in that same period and ran alongside the talley sticks).
The talley stick was a stick of polished wood into which notches were cut along one side, to indicate the denomination of money the stick represented. The stick was then split lengthwise through the notches, so that both pieces had a record of the notches. The King kept one half to protect against counterfeiting and the other half was spent into the economy and circulated as money.
It was also one of the most successful money systems in history, as the King demanded that all the King's taxes had to be paid in, "talley sticks," so this increased their circulation and acceptance as a legitimate form of money. This system would work well in keeping the power away from the money changers in England.
The private investors, whose names were never revealed, were supposed to put up £1,250,000 in gold coins to buy their shares in the bank, but only £750,000 was ever received. Despite that the bank was duly chartered and began loaning out several times the money it supposedly had in reserves, all at interest... a theme that lies at the heart of every private Central Bank throughout history.
- "The Bank hath benefit of interest on all monies which it creates out of nothing.”
- "That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one."
- "In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the colonies were filled with the unemployed... The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money which created unemployment and dissatisfaction."
"The viability of the colonists to get power to issue their own money permanently out of the hands of King George III and the international bankers was the prime reason for the revolutionary war."
Next up will be Part 2 (1791 - 1865).
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