• The Incredible Story of the Goldsmiths Miracle

    "Let me issue and control a nation's money and I care not who writes its laws."
    (Amscel Rothschild)
    Once upon a time, before politicians and economists were born, life was somewhat simpler. The only money in existence were coins. You either had it or you didn't, and that was about the sum of the matter.

    But times were bad. Highwaymen and robbers helped create an environment that prompted the townspeople to leave their money with the local goldsmith. They were the logical choice - they had the best vaults, by virtue of their trade.

    In return, the goldsmith would issue a receipt, which was kept by the grateful depositor until he wanted to give it back in order to re-obtain his gold. But in the process of time the community began to trade with the paper receipts instead of withdrawing the actual money. The merchants and shopkeepers didn't mind because it had become customary that whoever held the receipt was able to claim the real thing, though few ever bothered.

    Inevitably the strong rooms became choked with gold and silver coins that were rarely asked for, so it was not surprising that the goldsmiths conspired to lend a little on the side. They would never be found out. By the time the owners came to get their money it would be back, and a tidy heap of interest to boot!

    The goldsmiths prospered, but what came next exceeded their wildest dreams. One day the amount of the loan was so large that the borrower didn't want to carry the gold away. Could he simply re-deposit it and have receipts instead? The lender benevolently agreed. After his client left, the goldsmith smiled broadly. He could have his cake and eat it too. He had made the loan; he was receiving the interest; and he still had the gold! The possibilities were well nigh limitless.

    The following day another borrower arrived. The goldsmith was ready to oblige. He lent the same money a second time. He tactfully suggested the advantages of a paper receipt. He bade the thankful client goodbye. Then he contemplated the miracle unfolding before his eyes. For the gold was still lying on his strong-room floor and yet another borrower respectfully standing at his door!

    In this manner the goldsmiths discovered a simple key. It was inconceivable, indeed punishable by death, that an individual should illegally mint the nation’s coins. This was unquestionably the prerogative of the crown. But their receipts had become money in its own right, not because it was legal tender, but because that people believed it as good as such. Now they could create money with the stroke of a pen, up to 10 or 20 times that was in their vaults, and on the basis of a gold reserve which was not theirs anyway.

    The goldsmiths rose to unusual prominence in the community. Their humble businesses moved to premises more magnificent. No longer were they goldsmiths, but BANKERS - a title more fitting to their new-found role. Powerful family dynasties arose, their wealth and influence stretching far and wide. To them the representatives of governments stooped in reverent awe. Entire nations were indebted to them. For theirs was an economic dominion. Yet their power was usurped from government and their basis of operation, not a miracle, but in truth, a wicked fraud.
    Comments 9 Comments
    1. bdh's Avatar
      bdh -
      What an amazingly simple way of explaining the fraud that is banking. Excellent article!
    1. Cyberseeker's Avatar
      Cyberseeker -
      Thanks bdh. Creation of money by the banks is not well understood because it has become so sophisticated. However, banks do it much the same way now (same principle) as the early goldsmiths did. They created 'paper money' on the basis of a gold reserve. Today banks created 'credit money' on the basis of a cash reserve.

      I'm no economist so I have see it through a simple story. Otherwise I'd go cross-eyed
    1. decrumpit's Avatar
      decrumpit -
      I'm no economist so I have see it through a simple story. Otherwise I'd go cross-eyed
      Economists got us into this mess. By virtue of not being an economist you are qualified to write about economics. Great piece!
    1. Ceegen's Avatar
      Ceegen -
      It's really not that sophisticated!

      Banks still print notes, out of thin air. In turn the government prints "bonds" out of thin air, also. They exchange notes for bonds, and ta-da! Money. At least, that is exactly how it works here in the United States, backed by the law of government.

      Usury is illegal by biblical standards, and yet Jesus has a parable that somehow allows it in Matthew 25. (But I can guarantee that Jesus isn't talking about money, as it is a parable...).

      God bless, and great article!
    1. bdh's Avatar
      bdh -
      Quote Originally Posted by Ceegen View Post
      It's really not that sophisticated!
      You're absolutely correct. When you get down to it, it's a case of "heads the banks win, tails you loose" - very simple actually. The game is rigged and we all have to play.
    1. Saved7's Avatar
      Saved7 -
      Great job Cyberseeker, and as bdh said, "an amazingly simple way" to explain the fraud.
    1. Sojourner's Avatar
      Sojourner -
      Good stuff, Cyber. You did a great job of tracing the power of the international banksters back to it's beginnings. It's truly amazing how a simple concept so profoundly changed the course of human history.
    1. konroh's Avatar
      konroh -
      This is why Dave Ramses says you shouldn't have credit cards, no point in it. But I wonder if we could ever get out of a mortgage payment. You end up paying over 200% of your principal no matter if you get the lowest interest rate and a 15 year loan, how to get out of that one?
    1. brakelite's Avatar
      brakelite -
      Hello Cyber, hope all is well with you and your family. Very good piece, simple but utterly profound. I now see the forest much more clearly, where previously most of what I saw was the detritus under my feet on the forest floor as I focused too intently on the blackberry and slapping the mossies.
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