The Case Against Fractional-Reserve Banking
Posted by Orrin Woodward on February 19, 2016
Perhaps the best way to explain fractional-reserve banking is by analogy. Just as a bank note was originally a metaphysical paper representation of a specific physical amount of precious metal money so too is a property title a metaphysical paper representation of a physical plot of land. Imagine the indignation a person would feel if he had exchanged his money for the title believing he had purchased a plot of land only to discover later that the unethical seller had copied the title and sold the paper title to ten other people. What was actually sold? Eleven people cannot own the same physical piece of land but they can own identical metaphysical paper representations of the land. The fraud, as a result, begins the moment the metaphysical representation no longer matches the physical reality. Legally, the seller is guilty of violating property laws and would face severe sanctions for his crime.
Curiously, however, when a bank behaves in a similar fashion and prints numerous banknotes representing titles to the same specific physical precious metals money, it is not considered a violation of property laws. Paradoxically, the same fraudulent behavior where multiple metaphysical copies a one physical item receives severe penalties in every other area, somehow is considered “legal” practices in banking and is termed fractional-reserve banking (FRB). For how can the same physical precious metals be sold (loaned) to numerous parties via its metaphysical paper representation anymore than the same physical land can be sold to numerous parties using the identical scheme? How, in essence, can several parties own the same property at the same time? The answer is a physical impossibility and a metaphysical fraud.
Another example conveying the injustice of FRB is to picture a person who decides to sell his motorcycle. He places an ad in the paper and receives a call with a strange request. The potential buyer states his wife is against him owning a bike, but he really wants one. He offers to purchase the bike if the seller will store the motorbike in his garage. The buyer will only use the bike on Saturdays and he even offers to pay a small storage fee. The seller agrees and the title is exchanged for the cash. After several months, the seller realizes the bike is just sitting there the other six days. At first, he casually takes the bike for a ride personally, realizing he practically owns the bike even though he sold it and receives a monthly fee to store it. Finally, however, he conceptualizes and even more devious plan. Why, he asks himself, not copy the title for the bike six more times (since there is seven days in the week and the “owner” needs his bike only one of the days) and sell the bike again to other unsuspecting “owners”? Not only would I seven times my profit but I would also be able to charge a storage fee to each “owner”.
The fraudulent seller proceeds to run the motorcycle ad specifically looking for husbands with limited time and protective wives. To the seller’s delight, over the next several months he identified six more buyers. The seller was careful to only select buyers who asked to store the bike and who only desired to use the bike on a specific day. Although each person believed he owned the motorcycle in full, the seller defrauded all of them for his illicit gains. Now, the storage owner had a new “owner” for each day of the week and received seven times the profit on the sale of his bike and still received storage fees on top of that! Is this fraud or an innovative fractional-reserve motorcycle selling system?
True, if each owner knew he was only buying one day’s ownership then its physically possible and metaphysically permissible because the titles would represent only a fraction of ownership. This, however, wasn’t true in this case nor is it true with FRB loans. Each owner believes he owns 100% of the bike title and paid for it in full. Accordingly, the seller has committed fraud by metaphysically representing he had seven bikes to sell even though he actually owned only one physically. The pragmatic argument that since the bike owners were not using their property the other six days of the week that the storage facility had a right to sell someone’s else’s property the other six days is simply ludicrous. Especially when the owner’s property was sold without his knowledge or consent.
The banks, however, systematically practice the same thing. For instead of storing society’s money (like most people believe they do) they actually sell (loan) the owner’s money to numerous third parties while acting like the money is available to the original owner on demand. How can the same money be loaned out to ten separate parties while still being available to the actual owners all at the same time? This simply is not possible in the physical world but as shown above it is possible when practicing a metaphysical fraud. Amazingly, the motorcycle seller’s fraud would be punished severely, but the bankers similar fraud is blessed by the State.
The Bank of England (one of the first central banks) utilized FRB to print over ten times as many banknotes as the actual precious metals stored in England’s vaults. As a result, the Bank of England quickly captured the English Empire’s money supply and called the shots as Master of the Puppets. However, the issuance of paper bank notes led to one further innovation in money creation that, strangely enough, was developed in colonial America, namely State fiat-paper. Colonial America lacked precious metal money and did not like the control the Bank of England had on colonial commerce. Naturally, the question was asked, why not have the colonies issue their own paper notes and promise to redeem them with future tax revenues? In this way the government, businesses, and individuals would not have to pay the Bank of England interest on their paper notes.
The new Sovereign State backed money was a huge success (its still Fiat Money and has its problems but at least the public State does not pay interest to private international financiers) in usurping the need for the Bank of England notes. In fact, Ben Franklin was so impressed by the new innovation that he wrote a treatise in defense of the public Sovereign State backed paper money. Of course, the international bankers who controlled the Bank of England were not amused with the colonial upstarts cheekiness. The Bank of England restored its profits by applying pressure to King George III who forced the colonies to shutdown the colonial paper and return to the Bank of England notes. This, in reality, and not the infinitesimal taxes on colonial merchandise was the real cause of the American Revolution. No less an authority than Ben Franklin himself (considered by many, including me, to be the greatest diplomat in American history because of his keen understanding of humanity) believed this when he observed, “The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.”
In closing, one of the best principles I learned from economist Dr. Murray Rothbard was FTM – Follow the Money. For every one person motivated by ideals, there are a thousand who are bought and sold. Unfortunately, the more history I read with an eye on Cui Bono (who benefits) the more I realize that most of the history I thought I had learned is simply not so. LIFE Leadership is a company designed to help people learn the truth, escape The Financial Matrix, and live a life that matter. I promise to play my part and continue my quest for truth by helping the people understand the dangers of enslaving themselves body, mind, and spirit into the matrix.
Sincerely,
26 Responses to “The Case Against Fractional-Reserve Banking”
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Chad Palmer said
I find it ironic and sad that instead of being taught the truth in public school, we were given a watered down version so as to protect the banks from generations of people who would not knowingly sell themselves into debt. Thanks Orrin for your extensive research into our countries financial history and for making the setting people free video and prezi. Turns out that the man behind the curtain in the wizard of oz was uncle sam.
Scott Ballah said
What?!! The conveyor belt education system taught me the wrong history (note heavy sarcasm). That is a total truth cannon across the bow of the financial matrix ship!!
Thank you for the research and sharing!!!
Scott
Stephen Del Castillo said
Amazing Orrin! I am always so impressed by your ability to explain the complex with simplicity. It was an amazing honor to meet you in person at the last Life major, and i am proud to be on the mission with you. My first task, of course, is to get my wife and i free, but we are also dedicated to helping others do the same. Thanks for all you do and for leading the way!
Ken and Joan Hendon said
Great analogies.
Kirk Birtles said
Orrin, Following the trail of ‘Cui Bono’… I like that! I’ve been on a program of getting financially free for a while now and have followed the principle of paying ‘You Inc’ (myself) first! I was just at my bank a few days ago transferring 10% of my monthly profit sharing to a separate ‘savings account’. The teller was having a difficult time finding the right account. I told her, ‘it is the one with X number of thousands in it’. She said, it’s actually X number of thousands and three cents.’ Made me laugh. This is a savings account, at a major bank, and the interest doesn’t even keep up with the banking fees! I just realized that they are making money from my savings account and at the same time lending out my money and making interest from someone else’s loan! Talk about a win/lose situation! I’m thinking about going back to the coffee can under my bed my method of method?! At least there won’t be any fees! Lol. Thanks for sharing my friend! KB
Shane Krauser said
Thanks for this great explanation, Orrin. Inflation is the great tax on the American people, all of which is perpetuated through the fraudulent actions of the Federal Reserve. Your explanation reminded me of Thomas Jefferson’s concern that the banking system is more dangerous than even standing armies – one you can fight, while the other operates in such secrecy that it is almost impossible to stop. Your mission and vision of liberating the masses through education is absolutely refreshing. Thank you for what you do!
Michelle Mielke said
Orrin, thank you for this blog…a true genius taking the “complex” and making it “simple” to understand! Michelle
Randy Robson said
I knew I saw someone driving my motorcycle!
Elaine Mallios said
Interesting to know the real cause of the Revolutionary War! Follow the Money! Same is true in our “Big Ag” (agriculture) industry and Health Care (sickness care) industries. Laughed at Kirk’s comment.
Jim Wilspon said
Awesome analogy, Orrin.
I’ll be sure to credit you when I use it and I will use it. I often try to explain FRB.
Thanks so much for your insight.
Jim Wilson
Andrew LaFleur said
Orrin,
Very easily understood explanation! Thank you!
Another economic/monetary norm is “inflation is good”.
Jim Wilspon said
One other comment, Orrin. Back in the earlier 1950”s There was the infamous case of Billy Sol Estes in Texas who sold “fractional reserve” ammonia tanks (fertilizer tanks) to Texas farmers. He did go to prison.
Jim Wilson
Nathan Lowis said
WOW! I am blown away by this article Orrin! I especially love the part about the founding of this great country. It wasn’t the measly tax that bothered the colonists. It was the frauded fiat money system! Wow how valuable history is.. I am right with you in helping educate EVERYONE to the truth. If we don’t learn from our past history, we are doomed to repeat it. Let’s fight this!
Steve Duba said
Thanks O Just read an article on the Americans budget on USA Today. I think they just may be beginning to catch up. I also asked a banker in a small group we meet with on a weekly basis what Fractional reserve banking was and she said ” I’ll have to look into that. She has been in the banking industry for twenty years.Hmmmm. Thanks for your diligence. God Bless. P.S. Just watched a DVD done by Kirk Cameron called ” MONUMENTAL”. They actually talked about a MATRIX of a different kind in that documentary.
Orrin Woodward said
Steve, I’ll have to check it Monumental! 🙂 thanks, Orrin
Danny Kellenberger said
Orrin,
Love the analogy!! Makes it easy to see in my mind and understand. My 10 year old son just took a test on the American Revolutionary War and they didn’t mention any of this!
Danny
Steve Meixner said
Orrin, Another Great article!!
Steve
Ross Goldsmith said
Thanks for shedding some light on this subject. I have never heard of this before meeting the Leaders of Life! Thanks again.
Joel said
Hi Orrin,
You continue to do God’s work. May He continue to bless you, your family, and our Life community. Thank you.
Outside of what I learn in Life, I continue to learn on my own. FRB also applies to precious metals (PM), as you know. The price of gold and silver are established NOT by the actual physical metal, but by paper gold and paper silver. And I’m sure you’re aware of this as well.
What boggles my mind is how the banks continue to manipulate and suppress the real price of PMs and nobody is in jail yet.. LOL.. As of now, for every ounce of physical gold, there are 500 paper gold. So for every 500 kids playing the musical chair, there is only ONE CHAIR!
Moreover, and as you know, nature’s gold to silver ratio is around 1:15; therefore, the price should also be 1:15. But because of these criminal banksters, the price ratio is actually 1:80!
COMEX is running out of PMs. Their days are numbered. Thanks to the BRICS nation hoarding gold and silver, eventually the West will not have any ‘real money’ left. In fact, some experts believe Fort Knox has no gold!
This is one of the 5 Laws of Decline you teach. Bad money (fiat currency) drives away good money (gold and silver).
April 2016 is going to be interesting. The Shanghai Exchange plans to lift the curtain and they will set the price of gold based on real market and not paper gold.
Thanks to what I learned from Life, I started exchanging some of my fiat currency (dollar) into PMs a year ago.
Thank you and God Bless!
Orrin Woodward said
Excellent information Joel! 🙂
Byron Barnes said
Another great idea spawned by this article……why not form a “Virtual Nation” within a nation? All who know the truths about life and its complexities will be citizens. This method will satisfy the peaceniks and all the outraged great Americans (like yourselves) See it’s like this my friends- the truth is like water, it will find its way in and find its way out and there’s nothing anyone can do about it. Thoroughly enjoyed all the comments and the article. “ouidapeeple”
Jason Fredrick said
Hi Orrin
I was listening to your new cd today, LIFE 211 “Money, Media, and the Military Matrix”. Do you think you, or you and Oliver DeMille will put together a talk about the other control used in the Financial Matrix: The Education System?
I know you have hit on it a little in different talks, but I don’t know that I’ve heard you give a talk dedicated entirely to it.
Thank you for all that you are doing. I am praying for your safety, we all know how the banks do buisenss (JFK, Andrew Jackson)
God bless
Jason Fredrick
Orrin Woodward said
Jason, yes, education is part of the Media matrix. I am working on research for all of this now. 🙂 thanks, Orrin
mike kusbel said
Orrin, i was having a discussion with a friend about Frac. banking and i said the banks magically can turn 1mil in to 10 mil. with nothing really backing it up the other 10 and his response was no they don’t do that because they have tradeable instruments which to me is nothing hard or tangible. he said well there is still something there but that really doesn’t make sense to me. i know you’ve spoke extensively on this subject but there really is nothing hard covering the other 10 would that be correct to say nothing really tangible or hard assets. is true in what i’m thinking. any how thanks for all you do for all of us in LIFE.
Orrin Woodward said
Mike, it’s fiat money. For example, say the bank loans you money (actually just credits your account), you buy the house and the seller receives a credit when he puts the money in his bank and you are debited the amount of the house in your account. The whole transactions were merely digits in a computer; however, if you do not make your monthly payments, the bank can physically repossess the house even though they haven’t paid for it anymore than the person who defaulted did. After all, the banks created the money out of thin air (which isn’t productive work) and still repossess the house while the person who lost his job (who isn’t productively working either) is punished because he cannot pay for it. In other words neither party, in this example has paid for anything, but one (the bank) is rewarded with the property to sell again, while the other entity (the person who bought the house on mortgage) lost any principle, payments and fees he put to the house along with the physical house. The bank can credit and debit an account all it wants but that doesn’t produce real value. Only production to meet consumer needs creates wealth and the current FRB banking system is parasitical and robs society of wealth while providing little real value to society. Kill FRB and enforce 100% reserve banking and the boom/bust cycle would end and the parasitical aspect of banking would end also. Watch the Big Short to see just how bad the current banking system is for house mortgages. thanks, Orrin
mike kusbel said
thanks for your prompt reply in spite of you super busy schedule.
sincerely,mike kusbel