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August 28, 2007

Why Do We Trade "Paper Receipts" with Each Other?
by Ceri Shepherd

Looking at how the stock market "bubble" imploded and now looking at the same situation in housing. It sure makes you wonder how the banking system really works.

A long time ago people used to trade physical Gold and Silver coins for all transactions, if you want to buy a horse a price would be negotiated and the deal would be settled using real physical Gold & Silver coin or bar. The problem was that it was risky for many reasons to carry a lot of Gold & Silver it could be stolen, or it could be lost, and it was bulky. Goldsmiths came up with the idea that "paper receipts" could be given for your Gold and Silver that would then be held in safe storage for you. These receipts because of there convenience were soon trading as if they were the real Gold and Silver because in reality they were a "bearer receipt" if I buy a horse from you and I pay with a "paper receipt" this receipt is perceived to be as good as the Gold or Silver that backs it, so a deal can be made based on this form of payment, as the physical Gold & Silver could always be collected.

The Goldsmiths or "new bankers" soon realised that these receipts were rarely given in and the physical Gold or Silver reclaimed, it simply languished in the vaults. What if they were to issue more "paper receipts" than the actual Gold & Silver that they held on behalf of there customers? They could charge interest for the use of these "Paper Receipts" for Gold and Silver that actually does not exist, it would be very profitable and no actual work was required.

This is what they did for many years; the problem was that there was always the risk that people would want the physical Gold & Silver that was behind the "Paper receipts", commonly known as a bank run. It is why an air of affluence and confidence always had to be maintained. People held there Gold & Silver in the "reputable" and "secure" banks, which always had some of the most prominent buildings to be found in any city; So it stood to reason that they had customers Gold & Silver to back all the "Paper Receipts" issued. We even call them "institutions"!

Real Banking nirvana was always going to be, what would happen if they could get rid of the actual asset that was backing the "paper receipts". It would mean the following:

1 No bank runs because "Paper Receipts" can effectively be produced in infinite quantity at virtually no cost. So if people no longer trust the bank, they can close there account and collect there "paper receipts"

2 No limit to how many "Paper receipts" can be loaned out for interest. The limiting factor before was that an aggressive lending policy of "Paper receipts" for Gold and Silver that did not exist could render the bank liable to a run if confidence was lost.

3 To put more "paper receipts" into the economy lower the rate of interest charged. The problem is that this will lower the value of the "paper receipts" already in circulation PRICES INFLATE as the "Paper Receipts" DEFLATE in value because of there increased quantity, or reduced scarcity. To decrease the amount of new "paper receipts" in circulation simply raise the rate of interest charged for them. Booms and Busts could be artificially created at will by the bankers. Real tangible assets could be seized if the interest on the "Paper Receipts" or the "Paper Receipts" themselves were not repaid in full.

To do this effectively a Central Bank was required; I will talk about the Federal Reserve which is neither Federal nor a Reserve in my next article.

So we started with a system whereby "paper receipts" were issued against physical Gold & Silver, this was perverted to a system whereby "Paper receipts" were issued in far greater numbers than the customers actual Gold & Silver a scam, a fraud whose only motivation was profit for the bankers. Now the system has been perverted yet again to where we simply trade "paper receipts" that are not actually a receipt for anything, and are produced in unlimited quantity at virtually no cost, BUT ALLWAYS CHARGED AT INTEREST.

If you look at today's British £10 note it clearly states "I promise to pay the bearer upon demand the sum of ten pounds"

Ten pounds of what? IT IS ACTUALLY TEN POUNDS OF SILVER

This is a disgraceful lie; any other corporation that lied like this would very quickly find themselves in court as it breaches all advertising standards. They are clearly promising something that is just not true. What they are trying to do is give the British public the illusion that their Pounds a simple "Paper Receipt" actually have some intrinsic worth, some form of backing. I have news for the British Public your Pound is worthless and backed by precisely NOTHING.

You can trust my word a simple writer or you can trust the word of the Bank of England who makes such a grandiose promise on each and every bank note. Please remember these are the same bankers who years ago sat on top of a system whereby "Paper Receipts" were lent out at interest, for profit in far greater quantities than the actual Gold & Silver that they held on behalf of there customers. You really trust these people?

The real question is how we have ended up with a system that simply trades NOTHING, worthless paper, it is simply a sham that we trade what once were "Paper Receipts" for real physical Gold and Silver and call it "currency" or "money". When Honda make a car in Japan a physical product made of metal, and plastic and glass and send it to America or Britain or any other "paper receipt" country (Actually a receipt for NOTHING) they actually do not get paid anything, just coloured paper. In the old days they would have received a "Paper Receipt" for actual physical Gold & Silver that they could claim and have shipped to Japan. Today they receive nothing.

The whole banking system is a gigantic fraud, a ponzi scheme, a sophisticated confidence trick. The bankers are the purveyors of NOTHING apart from misery and economic destruction and all charged at Interest, they are simply parasites who prey off the real economy that produces real products and real services.

Ceri Shepherd
www.trendinvestor.info
http://trendinvestor.blogspot.com/