Teaching You How to Fish the Markets, Part II

21 | By Shah Gilani

Chapter One, on how money came into being, ended with, “Governments made legal tender laws to make it illegal not to use their paper money – backed by nothing but promises.”

There’s a partial truth in that sentence. Can you spot it?

Don’t worry if you can’t. You’re not supposed to. It’s part of an orchestrated deception.

It’s the part about “their paper money.” The truth is that governments, and by extension, the countries they govern, don’t issue their own money.

The twist is, while government agencies print their currency’s bills and stamp their coins, it’s not always “their” money.

Countries throughout the free world don’t actually own their money.

Guess who does?

The money that we think of as bills and coins is actually created and owned by banks.

Governments manufacture the physical medium we exchange, but it’s not their money.

Here’s that deception I was talking about: you’re supposed to believe that the government, and by extension, a country, issues its own currency because you’re supposed to believe in government’s implied promise to back its money.

Governments print and coin their currency, so people trust it. But it’s not their money.

Here’s how the great deception works – and how banks create money, how they got governments to work for them and protect them, and how they created central banks to leverage their control of their government partners.

The early modern history of banking starts in 12th Century Venice and goes on to the establishment of the first central bank, the Bank of England, in 1694, and it is fascinating. But, we’re going to uncover the truth about banks and central banks by unearthing the roots of the most powerful and deceptive banking cartel in the world.

The American model, which is in fact an alliance between America’s big banks and the American government, is the hub around which most world banking systems revolve.

America’s colonies had their own banks. Fractional reserve banking was widely practiced by all the banks in the colonies. So it wasn’t long before America’s banks overextend themselves – and imploded.

What made matters worse was that there were so many different currencies. Banks in different colonies – and different banks in the same colonies – were free to print their own bills of currency.

In 1781, before the U.S. Constitution was drafted, the Continental Congress granted a charter to Robert Morris, a member of Congress, to establish the Bank of North America, the nation’s first central bank.

It was hoped that the new bank, which was granted a monopoly to issue bank notes, and became the official depository for all federal funds, would facilitate commerce and create some order out of fractured banking schemes plaguing the country.

But, this new Bank of North America was no different than any other bank. It was grossly undercapitalized, and, through the magic of fractional reserve banking, loaned out more than it had in reserves.

Its paper money was technically redeemable in specie; however the public lost confidence in the bank and aggressively began discounting its notes because of the vast quantity the bank had issued. The nation’s first central bank had its charter revoked and reverted to a struggling commercial bank only two years after it opened.

Then along comes the Constitution.

The Constitution makes no direct mention of paper money or banks, but the Founding Fathers were intimately aware of banking problems in all the states.

To ensure that States wouldn’t ruin themselves like banks were doing, in its address of the limitations on the power of the states in Article 1, Section 10, the Constitution says, “No States shall emit Bills of Credit.”

In other words, the states couldn’t issue paper money that wasn’t redeemable in gold or silver. They couldn’t just print money to pay their bills.

The question quickly arose: Could the Federal Government issue bills of credit?

While that debate raged, Alexander Hamilton, one of the nation’s Founding Fathers, the Country’s first Secretary of the Treasury, and a former aide to Robert Morris, came up with an extraordinary Constitutional end-around in order to pay the country’s Revolutionary War debts,

In 1791 Hamilton’s brainchild, the First Bank of the United States was chartered by Congress to lend money to the Federal Government so it didn’t have to print money itself.

Bankers got the blessing of the government to create money out of thin air, not just by way of issuing credit to the public, by catering to the biggest borrower of all – the nation.

The government got all the money it needed from the bank by issuing bonds which the Bank bought with their freshly printed paper money.

But, banks being what they are, it wasn’t long before the First Bank of the United States was in trouble.

Just like its predecessor, the Bank of North America, the new central bank was granted a monopoly on the issuance of bank notes. And just as before, all federal funds were deposited in the Bank. The public wasn’t forced by legal tender laws to accept or use the Banks’ notes this time, either. And like before, the Bank was supposed to redeem all its notes in gold and silver. Of course, the Bank was badly undercapitalized. And through the magic of fractional reserve banking, against no real reserves, it printed so much money that it quickly lost its purchasing power.

The Bank had an important effect on all the banks in the country, in spite of its problems, the debate about its constitutionality, and the expiration of its charter, twenty years later, in 1811.

The First Bank of the United States was believed to be the strongest, the best-backed and most trusted bank in the country. But if they wouldn’t accept another bank’s notes, for fear they weren’t able to redeem their notes against the gold and silver supposedly in their vaults, the public viewed those other banks as suspect. In other words, the central bank forced other banks to be more restrained in their lending and note issuance practices.

Not long after the second central bank experiment had expired, banks were quickly back in the business of ruining themselves and their depositors.

And that meant it was time for another central bank.

In 1816 the Second Bank of the United States was chartered.

There were no surprises. The new bank was a mirror image of the First Bank of the United States, including their refusal to accept other bank’s suspect notes.

However, a different problem quickly arose. To battle the new central bank, other banks began refusing its notes, in essence questioning whether the central bank has the gold and silver reserves that it said it had. It didn’t.

The history of the Second Bank of the United States is no less colorful than the history of its predecessor. Political battle lines – which led to the creation of entirely new political parties – were drawn on one side of the banking issue or the other.

The Second Bank was bitterly opposed by President Andrew Jackson, who made the existence of the Bank, and its power over the people, a central issue in his campaign.

Jackson won, and in 1836 the Second Bank of the United States’ charter expired, along with another central banking experiment.

What happened next in the United States set the stage for the conception and creation of the Federal Reserve System, the world’s most powerful central bank. The Fed’s “original sin” is evidenced by the fact that it won’t call itself a central bank – let alone a central bank for all central banks.

Stay tuned. You won’t want to miss the next chapter.



21 Responses to Teaching You How to Fish the Markets, Part II

  1. fallingman says:

    The fact that the Fed puts that bastard Hamilton’s picture on the $10 bill is fitting.

    That they put Andy Jackson’s on the $20 is a crime.

    Thanks for uncovering the central bank con.

  2. Andys says:

    You neglected to state the fact that England began harassing the US navy and eventually invaded the young US Republic in the war of 1812 when congress dragged their feet in approving the Bank of the United States charter. It was clear that this was not a domestically run operation but represented the interests of the int’l. banking families.

    Once President Andrew Jackson defeated the effort to renew the bank’s charter, a strange thing happened. A deranged lone assasin approached President Jackson with two loaded pistols. Luckily for our President, both misfired. Jack Kennedy was not so lucky in 1963 when another deranged lone assasin shot him from the Dallas School Depository building. You may recall that President Kennedy had signed an executive order fifty years ago authorizing the US Treasury to issue US Silver Certificate notes (backed by the extensive silver stored in the Treasury) in direct competition with Federal Reserve notes. These coincidences are uncanny!


  3. Les Henderson says:

    Again, my eighteen y/o is devouring your commentary and schooling, and I can’t thank you enough…especially at this time of incredibly idiotic governance by our elected officials. It is so relevant. Thanks again for inspiring one of our young to be a more responsible citizen!

  4. kiku says:

    All US Citizens are bribed by way of so called benefits of social security and Medicare and shackled by the need to maintain good credit score or else suffer by way of not getting loans to purchase house, car etc.That is why even though they know all the misdeeds of the Govt and Mega corporations there is no one out protesting against all the crimes committed by those in position to do so.That is why Neo Cons have the false issues of illegals and welfare queens etc to draw energy of Joe Six pack away from the real problems.
    Shah given these facts just come up with solutions to save our day.No use not knowing where we are going with the knowledge of their misdeeds. We need to create our own future!

  5. Peter David Hunter says:

    Thanks, Shah…

    Never stop telling it like it is…. and was. The United States Government owns no gold. They sold it all to the Federal Reserve in exchange for Federal Reserve notes. So! The U.S. government will not default. The Federal Reserve will default. Then, as in the past that you so lucidly describe, the U.S. Government will take away the charter of the failed central bank and take its gold and charter a new central bank who will print up a brand new pink currency backed fractionally by gold. Rumor has it that the new currency is already ready. Now… This will not happen until the central bank actually fails. But that could happen over a weekend when China and Japan start selling their U.S. paper holdings and there are no buyers.

  6. Terry says:

    The money that we think of as bills and coins is actually created and owned by banks.


    No,No,No. No one “owns” money, not even the banks. It is a case where someone “has” it. Once it is spent or lent, then someone else has it, but because it is no longer in X’s hands does not mean it is destroyed,

    The really important questions are where does money come from, and how much is in circulation. Secondary questions are not who has it, but does everyone have some since everyone needs some and what is the min amount in circulation or is there a max amount needed?

    Answers to questions. Money comes from the govt and the national debt is the authorized legal amount in circulation. It does not, according to fed res bank myth or probably plain old naked deception, come from the economy, The economy only determines who has the money put into circulation by the govt. Originally all money is put into circulation by the govt when the govt spends it. I thnk there should be a min amount in circulation as well as a max amount and even an optimum amount? These amounts, to be effective, should be based on a per capita amount of nation’s population. (Obviously the amount of money in circulation needed in 1835 would have been much less than what is needed today since our population is far greater now. People are the only “animals” that use money and it was invented by people as well, i.e.–God did not create money otherwise it would grow on trees, you could mine for it, fish for it, drill for it. I know for a fact that money dfoes not grow on trees since as a kid my mother told me many times, some with great empahsis, that money does not grow on trees! Who am I to dispute my mother???)

    The fair distribution of money is always the cutting edge, the proper interface between govt and the citizens. You don’t want to have a court, legal, interface with the govt!

  7. erich k says:

    You are describing the shortcomings of competing currencies leading to attempts at central control.
    Congress controls the Federal Reserve System, and Congress causes money printing to fund its excessive spending. Let’s not put the cart before the horse.

  8. Terry says:

    Since it is a known fact the fed res banks do not have and never have had the triollions the govt has “borrowed” from them,why is the govt borrowing money? I don’t have that much money either but they are sure not borrowing trillions from me? I would be glad to take their IOU and especially take the interest they will pay on the money, or is actually just credit I give, and get the interest like anyother banking transaction.

    But don’t worry. It is only money we are talking about and only a paper moon. Oops, only paper money.

  9. Dennis Harford says:

    Once again professor…..”The Creature from Jeckyll Island” has got to be assighned reading for a complete historical understanding of banking and thieves….opps, I mean of course bankers.

    • Tom C says:

      Absolutely – This book, which gets updated every few years, is a revelation to all the behind the scenes financial activities for many centuries.

      And it fits in the socialists and others who promote the use of debt and fiat currency to establish the “One World Order” by the use of debt.

  10. Mike says:

    I suggest people read “Gods of Money, Wall Street and the death of the American Century” by F William Engdahl. The owners of the Wall Street banks and major oil companies control political power, not voters. Democracy is an illusion..

  11. Aaron Beck says:

    Hi Shah,

    As always I read your information with avid interest. Please keep it coming (provided someone doesn’t arrange for you to have a ‘little accident…’!)

    As a Canadian I am interested to know how the Canadian banking system compares to that in the US. While I realize that Canada is kind of irrelevant, perhaps you could comment on this at some point for the benefit of your Northern neighbors.

    Cheers, Aaron

  12. DaveL says:

    Not sure if the word “deception” is the correct word here. More than 50 years ago I took a college course in Money and Banking; there in plain words for all to see in this college text book, was explained the means by which banks “create” money by loaning out the deposits of others. It’s pretty clear. This does not seem like a deception when it is explained in a college text that anyone could read decades ago.

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