Power of fake money

For millennia the money was a product as another: in general were used precious metals like gold, silver, copper, iron, which were used to make pots or swords. Other peoples may have considered much more valuable shells, or tobacco, or salt.

In any case, MONEY, was always a thing, a material thing, something real to be used for something and Gold and Silver were precious, worldwide, for the scarcity and for the beauty.

Everything was quite clear in the system isn’t it?
It start to become more abstract just in 1700 when new Banks (that guaranteed the safety of gold or silver deposited with them) began to issue certificates, NOTES, that since then are called banknotes.

Instead of lead the gold or silver necessary to make the payments, was sufficient the certificate issued by the Bank.
The bill, the note, was guaranteed by a Nation or by a Crown, and not by a private subject.
From money as goods to money of paper, it was the first step to the financial nightmare we are facing today.
However, even if was represented by a piece of paper, as we all must consider the banknotes, there was always a certain correspondence between the goods described in banknote and those submitted to the Bank or to the Prince.

Here it started the gap, the bankers realized that all the depositors operated continuously on their own accounts and so A SUBSTANTIAL PART OF THE TOTAL OF THE SUMS deposited remained at their coffers.
Therefore was possible to OPERATE WITH THAT PART lending money to third parties collecting interest; of course always taking into account a reserve to allow depositors to continue to operate.
In other words, through this mechanism banks began to create money because the total of banknotes in circulation was more of the total of gold and other real precious metals deposited in their coffers.
Holding a reserve of just 20% of the deposits banks was able to multiply by five the money deposited in their coffers.

Of course the game works only if all depositors all together do not ask for the return of their deposits in gold, something that happened often in times of economic crisis and that was the reason of the failure of many Banks, until it was prohibited by law after the 1929 crisis and the subsequent failure to about half of the banks in America.
It was the beginning of the biggest and legal Ponzi’s scheme in history.

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