Excerpted from:
The Privateer
PUBLISHER:
William A. M. Buckler
2013 Volume - Late March Issue - Number 725
THROWING SAND IN THE MONEY MACHINE
…..
Let’s Start With The Facts:
We don’t propose to go over the mechanics of the Cyprus bailout, ….......
The Cyprus bailout is officially put at 10 Billion Euros. That may increase -
to 12 or even 14 Billion Euros. Compare this paltry sum to what global
politicians and central bankers have already faced since the wheels started to
come off the global financial system in 2008. Right now, Ben Bernanke and
the US Fed are blithely injecting $US 85 Billion (about 66 Billion Euros) into
the US financial system on a monthly basis. In late 2008, facing a similar problem to the one now faced by
two banks in Cyprus, Mr Bernanke almost trebled the balance sheet of the Fed in a matter of days. This
year, he is expected to increase that already bloated balance sheet by more than $US 1 TRILLION. The
European Central Bank is embarked on a very similar procedure as is the Bank of Japan. ALL of this
funding is ultimately backed by the “taxpayers” of the central banks which are indulging in it because the
funding can be backed by nobody else. Yet in Europe, faced with a bailout sum which any major bank
would regard as a “rounding error”, it has been decided that a bank is not “too big to fail” after all. Why has
this tiny “problem” led to such a HUGE, ham fisted and draconian “solution”? That is the question.
The Privateer - Number 725 Page 2
Every “Solution” Highlights The Problem:
Whether they have done it “inadvertently” or by carefully crafted design, the “solution” which the European
finance ministers, the ECB and the IMF have come up with in regard to Cyprus has torn the lid off the fatal
flaw in the entire global financial system as it is presently constituted. It has opened the lid of the financial
version of Pandora’s box. In Greek mythology, Pandora was Eve, the first woman on earth. Her sin was
not to eat of the tree of knowledge, it was to open a box (actually a jar) which contained all the “evils” of the
world. Once opened, these evils went forth, never to be re-captured. In the case of the myth, the one
saving grace was what remained in the box to offset the “evils” now roaming free - hope. In the case of the
modern version, the effect is going to be the opposite. The only salutary event which will come from the
Cyprus bailout is that all the fiercely-held “hope” (otherwise known as “confidence”) that the financial
system can be salvaged in its present form has been dealt a blow from which it will NOT recover.
If that is true, and we are confident that it IS true, then everybody who is caught up in the global financial
system has two choices left before them. They can go on hoping that those “in charge” know what they are
doing and have the best interests of those who rely on them at “heart”. Or they can raise their heads from
the sand and take a close look at the REAL nature of the system. They can, in short, refuse to be pacified
with the financial and economic mythology which passes for “knowledge” nowadays and examine what is
really going on here. They can reject “hope” in favour of FACTS. If they do that, then the wavering of
“confidence” that is so feared by the “authorities” inside Cyprus and right around the world will inexorably
increase. The wavering will increase because the financial and economic practices which got Cyprus into its
present mess are not confined or exclusive to Cyprus. They are all pervasive everywhere in the world.
The “Alliance” At The Root Of The Problem:
This triple alliance is between
governments,
central banks and
commercial banks.
The “glue” which holds
the system together is money. In our current system, the ultimate arbiter of what is to be used as money is
government - which
passes legal tender laws and which
has first claim on every unit of money in the system.
The root and central supporting pillar of the system is government control of money. The mechanism by
which the system functions is the legally granted power of both the central and the commercial banks to lend
additional amounts of money into existence.
A bank, as a separate entity, could never enforce any of the edicts that have now been brought down on
Cyprus. A bank could not confiscate the savings entrusted to them, no matter how big the individual
amount. Nor could they block a customer’s access to his or her money deposited with them as savings.
Nor could they arbitrarily limit the amount of those savings that a customer was “permitted” to withdraw at
any given time. Nor could they decree that NONE of a customer’s savings could be moved outside the
nation in which they operate. Yet the Cypriot banks have done all of these things. So have banks in every
other nation on earth at some point in their existence. Many banks have done these things repeatedly. The
only way they can get away with it is the fact that they are backed by the power of government. Individual
banks have been allowed to fail. In rare instances, the individual directors of banks have been prosecuted
for “malfeasance” concerning the funds “entrusted” to them. But the mechanism of banking as it has
evolved today is sacrosanct. It must be sacrosanct because it is an integral part of the entire credit-creation
process by which modern governments AND those they govern spend beyond their means.
The last of the old “banks of deposit” - a bank in which the savings deposited were the property of the savers, NOT the bank - was the Bank of Hamburg. It closed its doors in 1875. Two generations before that, it had been accepted as a legal principle that money deposited in a bank becomes the property of the bank, not of the depositor. The banking “principle” of creating a multiple of the sums on deposit by means of new loans “credited” to the account of the borrower goes back centuries. The commercial banks are essential to the functioning of the modern system of credit-based finance. The perceived “legitimacy” of this system stands or falls on the “confidence” held by the public in their banks. In the eyes of the public, any bank they have deposits in is “too big to fail”. This has led to a mass blindness as to the REAL function of modern commercial banks. Any wavering of that blindness is potentially deadly to the system.
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The Banks Of Issue:
These are the central banks - the banks around which the modern system of money and banking is built.
The best definition of a central bank was given by Elgin Groseclose in his book - Money And Man: “The Bank of England, which is the parent of modern banks of issue, was created ...to provide means outside the onerous sources of taxes and public loans for the financial requirements of an impecunious government. Such has been the motivating force leading to the establishment of all the great banks of issue of modern times.” This is precise and gets right to the heart of the matter with no wasted words.
It is very difficult to say which is the most laughable professed “mission” of a central bank - fighting
“inflation” (or for that matter “deflation”) or promoting the “stability” of money. A “bank of issue” is a
much more honest term for the Fed or ECB or Bank of Japan or England or any of the others than a
“central bank”. All these banks are banks of issue - and what they issue is the currency which has been
given legal status as the ONLY permissible medium of exchange by the government. By this means, the Fed
has decreased the purchasing power of the Federal Reserve Note by about 98 percent in just under a
century. …..................................................
….................... now, the strains on the system have become so acute that it is no longer deemed sufficient just to tax and debase the currency. Now, it has become “necessary” to start to raid what the people have managed to
put aside AFTER the government has taken its cut. This is what is going to be called - “getting Cyprused”.