Colin's Cornucopia

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The Source of Money

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As an inquisitive young man I spent some time wondering where money came from. You could not just create it – that would be totally unfair on the people who did not create it. It was clear to me that there must be some control by government. I never did solve this problem and later was too busy building my own business and bringing up a family. Now that I am retired, my uncle has educated me and I have at last found out where money comes from. I was quite right about the involvement of the government but what I have discovered, or should I say uncovered, alarms and annoys me. This is the story.

Money and wealth.

Firstly we should understand the difference between money and wealth. This distinction is essential to the correct understanding of money and is almost totally ignored by every “authority” on the subject. Wealth is the things we manufacture or grow by taking the 92 elemental materials from the earth and converting them into usable products. The artefacts we produce enable us to lead a civilised life and without them we would be savages in the jungle scrabbling for roots and berries. The products we make range from food and cartwheels through to jet planes, electron microscopes and the latest computers and television sets. All of them are useful to our civilisation although each has a varying utility within any particular society.

To make such products requires generations of accumulated knowledge, education and learning. If each man were to produce only his own goods his standard of living would be very low. Such was life in the best villages in medieval times. The butcher, the baker and the candlestick maker led the way to specialisation and the division of labour. This led rapidly to the need for money as a simple replacement for barter. Very early money consisted of stones, teeth, shells, feathers, beads and later metal tokens which developed to be coins. The division of labour and the use of money allowed mass production and the accumulation of money as a token of wealth.

Artefacts as Money.

Eventually the main form of money became gold and silver coins. These were the most practical because they packed the largest value into the smallest space and were therefore the easiest to carry around. Eventually a few people became so rich that they needed a place to store their money safely. We still regularly dig up hoards of Roman coins buried two thousand years ago for safe-keeping in times of danger.

In medieval times the need for coins and storage of wealth escalated and the goldsmith became a leading figure in society. The goldsmith had to have a means of guarding his wealth and he developed safes and strong-rooms and various security methods and devices. It was not long before others asked to use the safes and the goldsmiths developed another business guarding the accumulated wealth of other people.

It soon developed that people did not like to keep coming every day to take their gold out of the safe and put it back every night. This was highly inconvenient and even dangerous. The goldsmiths had given receipts for the gold they had stored and the receipts became “as good as gold”. They bore a promise to pay the bearer on demand the amount equivalent to the gold stored. They soon developed into what became promissory notes and are now known as bank notes. Thus coins were relegated to small change and serious wealth was exchanged using notes. The goldsmiths developed into banks.

The development of banks and notes.

The next development was that the bankers now discovered that they held large amounts of gold more-or-less permanently and it was rare that more than ten percent of their depositors would wish to withdraw their gold at the same time. The bankers could now issue promissory notes to nearly ten times greater value than the gold that they held as they were very unlikely to have to deliver more than ten percent of their commitments at any one time.

The amount of money in circulation increased rapidly and was partly responsible for the industrial revolution. The revolution was essentially technical but could not have advanced without the massive increase in funds made available by paper money. The printing of money in this fashion was clearly a confidence trick – a sort of Ponzi scheme - and if you or I tried it today we would be rapidly thrown in jail. In the nineteenth century there were many runs on the banks when people got scared by some rumour of bad luck and they flocked to withdraw their funds. The banks then had to close until confidence was restored and we saw an identical run as late as 2008. A lot of people lost a lot of money for no good reason. There was clearly a need for regulation of what is essentially a confidence trick.

Regulation and control.

The Bank of England was formed in 1694 as a private company to act to stabilise banking and make sensible rules and act as banker of last resort. It still performs these, or similar functions, to this day. The bank was subordinated to the treasury in 1931 and nationalised in 1946. It sets and handles much financial policy for the government and the nation. Most other nations also have National Banks performing similar functions.

The operations of the banks, the Bank of England, the treasury, the World bank, the City, stock exchange, merchant banks and a host of subsidiary functions has become an extremely complicated business but the essence is that the banks are licensed by the state on behalf of the people to provide banking services and keep the tokens of our accumulated wealth safe. The 1844 Bank Charter Act gave the Bank of England a monopoly in the printing of money in exchange for providing an essential service. A secure repository for money is as essential now as it was in medieval times – indeed, probably more so.

In the two hundred years after 1700 this system turned Britain from a modest nation into the mightiest empire the world has ever seen. There were, of course many other factors but easily available finance was the single most important. The banks could print and issue money with the agreement of the government who together set interest rates that ensured the availability of sufficient money to finance an expanding economy and insufficient to cause high inflation. While the system was by no means perfect it did sustain Britain well until two massive World Wars bankrupted the nation.

Private and Merchant banks.

Around the time of the Napoleonic wars at the turn of the 17th century Nathan Rothschild and others in his large family dealt with a European-wide gold trading network. They eventually established banks in almost every important European country and became the richest family ever on earth. They started and owned, and ran for the next two centuries, a large part of the world banking system.

They spread Britain’s success across Europe and the United States. But they also carved for themselves an almost impregnable fortress of money. They controlled the creation of money in the majority of the ‘first world’. Nathan Rothschild was alleged to have said “Allow me to control a nation’s money supply and I give not one whit for its laws”. The holder of the monopoly to create money obviously has enormous power over the nation that grants that monopoly.


The next most significant change in the money system came in the later part of the twentieth century with the growth of credit. The banks spent fifty years educating the people to accept credit cards which were the antithesis of proud Victorian thrift and stability. This started with the easy availability of house mortgages in the 1930’s and gradually new generations, after 1980, came to accept debt as a way of life.

The banks now create money out of nothing in the form of credit – or debt. Their scrip has little or no backing beyond around ten percent of ‘deposits’ which are not now even in gold. If you borrow money from your bank for your house or small business they simply create the money they lend you in the form of a loan deposited in your account. The promise you make to repay this loan immediately appears on the bank’s ledgers as an asset against ninety percent of which they can draw other loans to other people. Each new loan they create can generate further new loans. Thus if a bank has £100,000 in actual cash deposits (not likely to be gold) it can generate £900,000 in new loans. This process can go on to infinity – and is tending to do so. There is effectively no limit on the ability of the banks to create new money.

The serious trick here is that it costs the banks virtually nothing to create this new money or to hold your collateral promise but they get to lend the money to you at very high interest rates. You are paying through the nose for a service that costs almost nothing to perform. That is, indeed, a neat trick. If you or I did it we would be branded as con-men, forgers and loan sharks and thrown in jail.

So how do the bankers get away with it? It’s simple. They have been awarded a monopoly by the state – the representatives of the people – and have often renegotiated the deal over three hundred years always to ensure the terms are ever more favourable to the bankers and ever more onerous to the people. The deal now is – quite literally – a license to print money – but for their ultimate benefit and not ours. As Nathan Rothschild foresaw nearly three hundred year ago the bankers control the supply of money and give not one whit for our laws.


The original source of the banks’ power is the monopoly granted by the people – and the people should determine the conditions of that monopoly – not the bankers. To own one’s earned wealth – and its tokens – is a fundamental right and the ability to store it safely is a necessary corollary of that right.


So now you know how and why money was invented and how it is created, firstly by artefacts, then gold and silver, then by tokens and promissory notes and latterly by credit backed by nothing but the productive work of the people who incur the burden of the resultant debts.

The bankers get you four times. Firstly they have betrayed the purpose and spirit of the granting of monopoly and they then have abused grossly their power by charging extortionate rates on a product they create for free and they then stick obscene salaries and bonuses in their own pockets. Finally they throw all the liability back on the taxpayer - the granter of their monopoly.


When the meltdown came in 2008 you will remember Gordon Brown as Prime Minister standing in parliament to tell us he must save the banks as ‘we need them’. The bankers had been on a huge betting spree with our deposits and lost the bet. The people had to pick up the tab because it was our money they had been gambling with. When they had been winning they stuffed the gains directly into their pockets but when they lost, they came to us cap-in-hand.

Now they are at it again. They are threatening to leave Britain. Good. They are miserable failures. They cannot even win a bet when they are using someone else’s money. They are hopeless failures. Anyone could do that job – even me. Let them go to Singapore or Taiwan and let those people pick up the bill for the banker’s nasty greed and profligacy with other people’s money.

There should clearly be a very firm division between the deposits of the people that should be ring-fenced and the money used by bankers in their betting games. I am quite happy to accept small returns but I do expect my deposits to be 100% safe. If I want to gamble I can buy shares on the stock exchange and take the risk and rewards for myself. I certainly do not want my banker to do this with my deposits. And I hold his licence - Ha!!

But there is more – much more.

Most of the history of the last three hundred years has been about the fight between bankers and the people for control of the supply of money. You will rarely see this history in any written form as very few people have ever understood it and even fewer have dared to write about it in detail. It also tends to become very detailed and rather boring. The bankers have guarded their privileges jealously and forcibly. Two of the presidents of the United States to be assassinated were engaged in monetary reform at the time of their assassinations and there is reason to believe President Kennedy might have suffered his fate for a similar reason.

The supply of money is the personification of power. Politicians might believe, and even act, as though they wield power but the real power is in the hands of those who control the supply of money. Nathan Rothschild became the richest man ever on earth because he was right. He controlled the supply of money and he cared not one whit for our laws.


The other source of power on this earth is the supply of energy – quite literally power. Coal powered the nineteenth century and oil powered the twentieth. We have tried nuclear, water and wind and sun but none has come even near the ease of recovery and use of coal and oil. To a first approximation the others can be ignored. Our fate will be determined by coal and oil, not wind or water, sun or nuclear power. The supply of money and the supply of coal and oil will determine the future of our civilisation. Nothing else is really relevant at this time.

(Some people are strangely pinning much hope in Nuclear Fusion but that seems to be as far away now as it was fifty years ago. Those wise enough to understand the consequences of unlimited energy continue to breathe a sigh of relief. Unlimited energy would simply result in unlimited population growth.)

Man and Rights.

The world economic system has recently (2008) suffered a serious economic melt- down. The primary cause for this is that the banks, and many of our most productive corporate organisations, have become far too large to be controlled by individual nation states. Yet the repository of philosophy and civilisation and law has, for the last several thousand years been the nation state. We know of no other form of organisation that will satisfy the need and demand of men for freedom, rights and justice.

The finest achievement that England has given to the world is a set of constitutional documents from Magna Carta onwards that culminated in the Declaration of Independence of the United States of America. That document was written by men who declared themselves to be Englishmen who would have preferred to have remained so but for a mad king. While the US Constitution has been perverted by over two centuries of inappropriate amendments, the original document is still the finest expression of the rights of man ever made. all of these documents were firmly based on the nation state.

Economic melt down.

These rights are now under constant attack from big business, big banks, big bureaucracy, big money and a relatively very small number of extremely wealthy individuals who determine everything that happens on this planet - mainly by financial manipulation. The power of the individual nation states has been undercut in every way. If the companies do not like conditions in one country they simply move to another which offers easier terms. The nation states are effectively being set at each other’s throats.

Most of the third world countries have been brought to heel by the combined operations of the World Bank and the International Monetary Fund. The World Bank was formed by the Bretton Woods conference after WW2 when the United States set the stage for its takeover of power from Britain and the promotion of itself to the world’s first military superpower. The headquarters of the World Bank is in Washington. Its purpose is to regulate and control and act as lender of last resort to the National Banks. By this means, and many others, it effectively controls the World’s banking systems and the world’s money and most of the third world’s governments.

The International Monetary Fund (IMF), whose headquarters are also in Washington, oversees the development of ‘third world’ countries. The methods of development used are many and varied but most follow a similar pattern. When a small country seeks to develop it applies to the IMF which provides a business development plan and guarantees development loans provided by the World Bank. The business plans invariably require the loans to be spent with western companies to develop businesses which provide for the growing of food or production of goods that are supplied to western companies. The loans often contain an expensive hidden sweetener.

The size of the projects invariably affects the balance of supply of whatever good is selected so that the bottom is knocked out of the world market and the workers are effectively enslaved to the project. Their land and facilities are usurped by long-term contracts and they are unable to use their own resources to maintain their own lives. In short they are enslaved and their country raped. The promised profits never materialise and the projects never pay for themselves. The pattern is well established which is why the western consumer has been able for the last thirty years to buy foreign goods at remarkably low prices. Virtually every third world country now has a completely unsustainable debt which has been used to fund first world greed.

This method has now proceeded so far that Britain and much of the United States has been turned into a ‘Rust Belt’ by huge international finance taking jobs from these countries and moving them to whichever country will offer the best terms. This is a Dutch Auction with the workers in almost every country suffering reduced living standards and a small number of international companies making ever-increasing profits and growing ever more powerful. Now even western countries have unsustainable debts.

This, in essence, is one of the causes of the present melt-down in the world economy. Another cause is the simple abuse of the system by banks of various types that have sought to make profit above all else with no regard at all for sustainability, good sense, or simple sound business practice. The annual bottom line, with its resulting huge bonuses for a favoured few, is king and damn the consequences.

Big business, in league with banking, has turned the world into a single workshop within which the main players can choose at will their sites and strategies. By this means they have completely undermined the fundamental purpose and conditions of the nation state and thereby rendered the principles of civilisation invalid. Freedom and justice now have nowhere to live. All we have is an endless stream of consumer goods of doubtful value and an endless stream of mindless, mind-numbing, debilitating and soporific entertainment blaring from a huge number of captive newspapers and radio and television stations across the world. Aldous Huxley’s awful vision has come true and a huge number of uncomprehending people actually like it. The big corporations have stolen our rights and substituted endless glittering pap that dazzles idiots. With the start of the economic decline of this system caused by over-exploitation of the world’s resources, the people are now beginning to feel the consequences on their own hides and that they do not like.


Essentially, there is no solution. I have written elsewhere about exponential economic expansion into a finite world. It must end at some point and it is highly likely that we have reached that point.

The first thing to do is for the people to take back control of their basic right to exist. This is now under the control of the big corporations and banks. The very purpose of these organisations was to serve the people as creators and guardians of our wealth but they have become our masters simply by becoming uncontrollable giants. The organisations have taken on a life of their own and they have become self-sustaining organisations far beyond the power of any man or group of men to modify or destroy. Even the directors and managers who stuff their pockets full of ill-earned money are merely slaves to the system. They dare not deviate from the need to sustain their corporation for fear of the severe consequences to themselves. They may be ‘rich’ but they are still slaves to the company.

The separation of the world into large corporations is a kind of precipitation process where groups of people settle out into agglomerations that deny individuality. Every individual gets included within a group and disappears. The groupings keep getting bigger and bigger. The end result must be mass sclerosis. It is no accident that a serious characteristic of corporate existence is the takeover of small groups by larger ones. It is also no accident that government has grossly increased its self-sustaining bureaucracy. This is the governmental – essentially useless – response to the growth in the power of the corporations. The government, recognising its loss of control, has attempted to restore control by increasing the size and scope of its bureaucracy. Hence we have finished up with monstrocities like Health and Safety and around 100,000 new laws from the European Community aimed at appeasing unions and individuals and taming the big corporations.

The reality is that this monstrous labyrinth of perfidious control, masquerading under the guise of law, has done nothing to limit the power of big corporations. They have simply moved abroad to more favourable climes or hired fancy lawyers to help them evade the law. In many cases they have simply paid off the politicians and bureaucrats. The sector that has really suffered is the small and medium enterprises that cannot afford fancy lawyers and have to spend huge amounts of time, money and effort trying unsuccessfully to conform to this evil regime and to prevent themselves being branded as criminals by 100,000 unknowable laws.

Small businesses are not just the seed-corn of our economy but also the repository of men of independent mind and thought – the men who have the most to lose from their loss of freedom and the men who are most likely to fight hard against this all-encompassing strangulation of honesty. They are the main victims of this welter of evil legislation.

The very essence of Rights and Freedom are deposited within the nation state and its people. The banker, bosses, politicians and bureaucrats might not like it but that is reality. No other form of human organisation has ever come anywhere near offering the benefits that once flowed, for a mere two hundred and fifty years, from that method of organising civilisation. If we desire our freedom then we must restore that form of organisation. The banks, corporations and bureaucracies must be tamed and brought within the natural philosophical limits imposed by the nature of man and his rights. The alternative is to continue as we are now and see, before long, a bigger blood bath than anybody could presently imagine. There is no other likely exit strategy. Indeed, at the moment there is no exit strategy.

28th March 2011

Colin Walker

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