----- Original Message -----
From: John
To: "Thomas Lee Abshier"
Sent: Monday, June 01, 2009 3:07 PM
Subject: Fractional Reserve Banking as fraud

Tom, I thought you might enjoy my dialog below with my lefty friend who keeps thinking that socialism is the only way.  You might want to start by watching the video he references.

- John


-----Original Message-----
From: Pat
Sent: Monday, June 01, 2009 1:57 PM
To:  John
Subject: Fractional Reserve Banking as fraud

Tell me if you agree with this "Money" explanation. I'm working thru the whole 5 parts, but the first part explained to me how this mess has occurred. I still fail to see how your explanation of money could possibly create the wealthy individuals and corporations that we have. This series makes more sense to me, please watch and see if you agree with any or all.

Money as Debt:  5 part Video
#1) http://www.youtube.com/watch?v=mIIAvdJvCes&feature=related
#2) http://www.youtube.com/watch?v=f11De4_pGnw&NR=1
#3) http://www.youtube.com/watch?v=kTv1fo6sKmo&NR=1
#4) http://www.youtube.com/watch?v=-ZU_pBvTnN4&feature=related
#5) http://www.youtube.com/watch?v=f_5J4yh3Y8w&feature=related
#1-5) http://www.youtube.com/watch?v=Dc3sKwwAaCU&feature=related

Money as Debt: Promises Unleashed: Full Length Documentary
http://www.youtube.com/watch?v=rCu3fpg83TY&feature=related

Pat


-----Original Message-----
From: John
Sent: Monday, June 01, 2009 2:55 PM
To: Pat
Subject: RE: Fractional Reserve Banking as fraud

Pat, I just watched part 1 of this series.  What makes you think I would disagree with any of that?  I completely agree with all of it.  The bankers became crooks when they lent what they did not have -- as shown at the end of the video.

The free market answer is that depositors must be astute enough to realize there is always risk of having money.  They can put it in their mattress and have the risk of theft and not earn interest.  They can put it in stocks and watch it go up or down.  Or they can take it to a bank, or split it among several banks, and take a chance that their money will still be there. Diversification and diligent follow-up is the answer.  Don't trust anybody completely!  If the banker becomes a crook and lends more than he has, and if the bank has a RUN (which will undoubtedly be a big part of "Part 2 video") then you better get there first to pull your money out or have such a small amount of money in any one bank that the failure of one crooked bank won't hurt you.

THE PROBLEM.... Is that the bankers got together and sold the government and the public a bill of goods... Which I am sure the next videos will present....  STABILITY FOR THE LITTLE GUY with bank guarantees, etc., and risk-free returns for the bankers because the taxpayer will bail them out.

The politicians could sell it as a "public safety" measure and stay in office.  The crook bankers can pay the politician's re-election campaigns, make their windfall profits, and the public believes the whole scheme is there to protect THEM.  So, everybody is happy until the whole house of cards comes crashing down.

I completely blame our problems on the super-wealthy.  We agree on that.

THE ANSWER.... In my view is to get the government out of it... Take away the *illusion* that money anywhere is safe.  (Money inherently is not safe anywhere.)  Make the public aware of their own risk and let them make their own risk decisions accordingly.  If somebody loses his shirt, he can appeal to charity.  But failures are almost necessary to teach the rest of us numbskulls that risks are out there.  Just as occasional bloody crashes on the road remind us to put on our seatbelts and not take corners on two wheels.  There should be thousands of banks instead of a few dozen, and they should all compete and provide a backdrop so consumers can diversify the risk of picking a loser.  The consumer does not have to visit 1000 banks because there are mutual funds that will invest in 1000 banks and you invest in them only once, and there are thousands of competing mutual funds.  So, true diversification of risk is a real possibility.

Then there are the derivatives and complex financial instruments that nobody understands.  That's no big deal either.  That's just an extension of the snake oil salesman.  Buyer beware!  Don't buy what you don't understand even if everybody else is buying it.  Snake oil salesmen are not just peddlers preying on naïve farmers.  They can be brilliant dishonest bankers who prey on other less intelligent bankers who don't want to be left in the dust on the next "brilliant investment".  It's the same "greater fool" theory taken to a higher level.  There's always somebody dumber than you if you are crooked enough to screw them over.  That will never change.

The answer is that people have to learn to recognize their responsibility and not abuse others.  That's a simple principle, but it is insanely difficult because it must be enforced by each of us on ourselves.  Nobody else, no government no matter how powerful, can enforce morality on every action of others.  Honesty has to come from within.

How do we solve it?  Beats me.  Education maybe?  Setting an example?  Help stupid people with ways to protect themselves from the cruel people who are smarter?  That's the human dilemma.  It's not just bad bankers but child abuse and everything else.  The best we can do is try to protect ourselves, try to help others, and hope for the best.

John


-----Original Message-----
From: Thomas Lee Abshier, ND  
Sent: Monday, June 01, 2009 8:13 PM
To: John
Subject: Re: Fractional Reserve Banking as Fraud...

John,  I've thought a lot about this topic and this has given me another piece of the puzzle.  I'll see what I can come up with to help solve the mystery.
T.


----- Original Message -----
From: John
To: "Thomas Lee Abshier" <naturedox@qwest.net>
Sent: Monday, June 01, 2009 10:07 PM
Subject: Fractional Reserve Banking as Fraud

I think I already know that your answer is to embrace Christianity, and then the self-imposed honesty I spoke about will come as a by-product.

Perhaps you are right.

- John


-----Original Message-----
From: Thomas Lee Abshier, ND
Sent: Thursday, June 11, 2009 10:13 PM
To: John
Subject: Re: My dialog with a lefty...

Axioms re: economics, government, corporations, society, individuals and God:

Fractional Reserve Banking:
The Bankers Cartoon caused me to think about the issue of the morality of Fractional Reserve Banking, the Federal Reserve System, and the effect of the super rich on the economy.

I believe the crux of your criticism of the banking system was:

The morally questionable aspects of these banking practices are:

The morality of fractional reserve banking (FRB):
Despite the origin and sordid past of Fractional Reserve Banking, the current system of fiat money and loaning money based on the amount of deposits and debts on account is neither fraudulent nor unreasonable.  For the sake of argument (i.e. without solid proof other than the story and assertions of the “Money as Debt” cartoon) let us assume that it is true that the bankers lend money based on assets that are another man’s debt.  The real question is whether this policy and method of banking has unwanted social, political, and/or economic implications.

Are we outraged at FRB for its apparent immorality or do we fear the economic disaster it has caused, or will cause?  I submit that any moral (i.e. Right and Godly) system, whether it be economic, social, or political will bear excellent results.  I believe FRB can be administered morally.  But, there are flaws in the current execution of the Central Bank-FRB-Treasury-Government complex in the method of increasing the money supply a evidenced by the fact that the system has produced inflation, which is immoral.  By the Fed setting “a target rate of 2% inflation” they have institutionalized theft as an acceptable and desirable goal for managing the money supply.   A system that has institutionalized theft will eventually produce bad fruit.

Many call for a return to the gold standard as a solution to the steady devaluation of our currency.  While this would effectively limit the rate of expansion of the Money Supply, a return to the gold standard is not the only solution to the problem of inflation, nor is money supply the only cause of inflation.  Backing money with precious metals is not necessary to give money its value, and consumption outpacing production will naturally inflate prices.

Gold and silver are a type of wealth based upon their esthetic appeal, sensory satisfaction, and functional utility.  But, there are many other stores and types of wealth, such as: 1) production, 2) productivity, 3) promise of future production, 4) promise of future productivity, 5) good will, 6) talent, 7) beauty, and 8) patents.  These more utilitarian, dynamic, and intangible types of value can also be used as the valuable backing to give money its underlying value.  

Clearly, intangibles have value, despite not having QMS: 1) a Quantity, 2) being Measurable, or 3) having Substance.  Still intangibles have value, and are often exchanged for money, but are not well suited for “being” money.  This minor paradox  is resolved by recognizing that symbols actually used as money must meet the criteria of having QMS since money is a common denominator symbol established for the larger economy.  

Despite the fact that intangible value is subjective and varies extremely widely does not negate the fact that there is a market for intangible value.  Likewise, the “thinly traded” and large “bid ask spread” aspect of intangible value should not exclude it from being included in the ledger sheets as an asset.  And further, intangible value should be included as a type of asset against which loans can be made.  And ultimately, intangibles should be included in the pool of value against which the Money Supply is backed.

This analysis is relevant to the issue of FRB because one of the most controversial aspects of FRB is the practice of loaning money against the pool of assets that are owned by the banks.  In particular, money issued as loans is now an asset, against which more loans can be made.  Thus, the value underlying the loan is not a standard QMS asset, but rather the subjective value of a house, company, or research project, etc.  

This aspect of banking is not well known by the public, is considered controversial, and even immoral, among those critical of the fiat money, central banking system.  Keeping a small amount of reserve cash/currency in the bank is not the controversial aspect of the system, since we all realize that banks must make money, and that they do so by loaning funds.  Thus, because of the fact that the the majority of the assets (10:1) have been loaned, those assets are in the form of loans to a potpourri of tangible and intangible assets.

The controversial aspect of the banking practice is being able to then use those assets to secure loans for more borrowing of money, which can then be lent, and those assets the be used as collateral for more loans.   

Granted, that assets accumulated as loans to business and consumers are not easily quantified, measured, nor necessarily comprised of substance.  But, this does not mean that the do not have value.  It is to narrow a perspective to say there is no “money in banks” because the money has been loaned.  This is not fraud, it is an agreement that the depositor should be aware of when he puts his money in the bank for safe-keeping.  

It is reasonable to regard “commitment to produce value” as an asset, and an asset against which to borrow wealth.  Intangibles can be a valid component of the pool of wealth, and should be included in the wealth of nations.  And as such, both tangible and intangible value should be included as valid components of a potential surety.  

The intangibles, such as future production, ideas, current stores of consumable value, and potential future production of consumable value, are more functional measures of value than are currency/fiat money.  And, these functional assets can reasonably be considered “money” in a less strict sense than the QMS definition would demand, since obtaining these items is the reason why the consuming public ultimately desires to have and use money.  In short, value can be stored in goods and services, either tangible or intangible, currently manifest or committed to be produced.  Any item (tangible or intangible) that is perceived to make life more pleasant can be money in the broader sense that money and value are interchangeable.  Money in the strict sense of the word must meet the criteria of QMS, while value of any sort is the ultimate underlying wealth or utility that gives money its true value.  Gold and silver is only needed as a symbol of money to the extent that there is not sufficient trust in the society that exchange of fiat money will be honored and redeemable for utility value.

The bank with a note, contract, promise, or commitment from a reliable, trusted, hard working person to produce wealth/utility in return for money owns a true measure of wealth.  The FRB system is not a deceptive system as long as the depositors are informed of the practice.  The system is not unreasonable as long as the debtors are creditworthy, productive, and capable of repayment of value plus interest.  

FRB can be abused and cause the collapse of an entire economy if the bankers lend money to clients who are unworthy credit risks.  The Subprime Mortgage Crisis was caused by government’s attempt to put unproductive people in homes they could not afford.  The CRA (Community Reinvestment Act) forced banks by law to loan to unworthy creditors.  Eventually the system collapsed because those who had been loaned money were not able to produce the required value plus interest.  

Summary of the considerations regarding the Fractional Reserve Banking system:

The Federal Reserve:

The Super Wealthy:
The Super Wealthy are those who have attained the pinnacle of achievement of the free market system.  This statement integrates the concept of inheritance which is merely the overflow of riches from a previous generation’s efforts in the market.  They have won the trophy for the game of capitalism, the place of honor and achievement promised as the prize for running the economic rat race.  But, as noted, these winners can become the masters and lords of the land with all others becoming their serfs in this economic feudal kingdom.  The Super Wealthy can overtake the machinery of government to restrict the competition, and give competitive advantage and tax advantage to themselves.  The coalition of the government and the Super Wealthy is akin to establishing a monopoly in the market.  In response to the excessive advantage gained by the Super Wealthy, the general public or the remnant of the competition may attempt to use government to restrict the scope and influence of the Super Wealthy.  Thus begins the battle to restrict the monopolistic control of the market by erecting legal barriers that limit business.  The ultimate end of such restriction becomes a de facto government-run semi-socialistic market.

The Libertarian solution to monopoly is to let the market adjudicate the benefit or harm being caused by the monopoly, and to patronize them or not.   But obviously, the very nature of monopoly is the lack of competition, and the consuming public will patronize a monopoly if they supply a necessary product regardless of their level of service, product quality, ecological impact, or employee care.  

The Libertarian notes that monopoly can only exist in perpetuity with the help of governmental protections, since no economic stranglehold is sufficiently great to erect a barrier to competition for all time.  The Libertarian response to regulating monopolistic abuse is to allow the market to adjudicate the price, quality, ecological, and social impact of each corporate entity, and allow competitors to arise to give alternative.  And, over the grand play of history, the competitive forces will probably produce the desired effect of moderating the abuses, and the economic freedom inherent to the free market will be reflected in the general society.  

The disadvantage of the free market solution is the length of time required for the response to monopoly.  The disadvantage of the governmental solution is the blunt and unthinking intervention that will necessarily be applied by law, and the unavoidable unintended consequence of laws.  

Thus, as usual, the solution is a combination of the two extremes.  Government should pass only laws that embody general principles of goodness and excellence for group and individual conduct.  Law should not be a prescription for specific behavior in all circumstances for all people.  Rather, government should attempt to codify the best vision a society has for itself in the various fields of public and private life as a generality.  

The judging of compliance with this vision should be left to the wisdom and discernment of the courts.  Those who have complaints should bring them against individuals or corporate entities, and the arguments for and against the complaint should be heard, weighed, and judged by a wise counselor.  The field of law should be the most respected and those who practice it should be the most accomplished in life.  Each case should be heard in depth, the specifics should be argued and judged on its merits and the associated moral code.  

The enforcement of the sentence should be carried out by the executive branch.  The administrators of justice should in essence be the managers, the overlords that check and test and insure that the sentence and remedy are carried out as prescribed.  These are the managers of managers who bias the productive machine by slight interventions and subtle pressures.

As envisioned, the market will function at its best and most beneficially when the corporate entities of commerce are self governed with the goal of providing good service, and compensating its employees with a wage considered fair by comparison with the larger economy, and whose business practices are open, honoring of the environment, appeal to the general mean of the social esthetic, and provide products which enhance the general health and welfare of the constituent public.  

The system of government and economy will thus function together, not as warring factions, but as complementary aspects of the same tool of society and mankind.  The goal is the enjoyment of life, and given that life has unavoidable pain and hardship embedded within it, the goal of economy, and the law that governs it, is to optimize the excellence of function of that duo of society-directing tools.  

Embedded within this vision of a governmental-economic partnership is the implicit standard of Right which must govern the establishment of law, the judgment of circumstance in relationship to that law, and the commitment to enforce and act in a Right manner.  Which brings to bear the question of, “What is right law?”  

And of course, the religious philosophical precepts of the people, the general morality of We the People will govern and self impose its standards upon Law, Justice, and Action.  I propose that the standard of justice from which to judge the goodness of men’s actions, and one to another is best elaborated in the Holy Bible.  I believe that a nation whose measure of Right is based upon that standard will always be correcting its present position as it considers the standard of perfection as presented in the metaphor of Holy Scripture.

Some may object that operating the government under the standards of a specific religion violates the right of each man to choose his own religion.  This may be true it the sense that the individual will not be able to force the government to impose standards which reflect his particular religious bent.  The fact is, that all law is legislated morality, and it is law the dictates the patterns by which a society shall follow.  The goal of law is to produce the standard which directs the society in the best and highest behavior as regards the individual and the group.  As envisioned, there is no national religion in the sense of prescribing a form of worship or belief for the individual.  But, there is a moral standard by which government chooses to establish the patterns of law.  I propose that we use the same standard upon which this country was founded and establish law based upon the scripture and God of our Judeo-Christian heritage.  

This solution would resolve the dilemma of libertarian vs socialistic government.  The market would remain free to execute the form of service it found best, whether monopoly or unallied craftsmen.  The courts would then take their proper and honored place of making decisions based upon the principles of righteousness as dictated by the individual circumstances of business and personal taste.  The people in turn, will be constantly watched as adults by benevolent and righteous governmental parents, and will be both accountable for their actions to the God of heaven, and the law of the land and its officers.  

In this holistic vision arises the freedom of individual rights, the restriction of righteous law, and the judgment of men of comprehensive vision.  As children and adults we continue to grow in wisdom and perspective.  As such, our passage from adolescence to adulthood does not mark the time of restriction by the rules of parents to a place of unfettered expression in the fields of society.  Rather, adulthood is the time when adults should have put on the wisdom of Solomon, and self-regulated their behavior to conform to righteous standards without the watchful and dictatorial eye of parents judging and enforcing their view of right standards.  

Thus, this vision of a refinement of the Constitutional vision of the Founders incorporates more precisely the execution of their intent.  By giving government the charge to pass law which is only general, by giving the judiciary and its cohort of lawyers the domain of right judgment and counsel, and by giving the executive the domain of enforcement through upper management, the government becomes a trusted and welcomed partner in the process of producing the greatest value in the market, and thus providing the tools and substance by which men can achieve the most happiness that can be achieved by effort and consumption in the material world.