Posts Tagged ‘Transparency’


April 9, 2012


Why Are Banks Dealt With As If They Were Private? When They Are Not?

An Obvious Corruption Of The Constitution?


Abstract: I track the genesis of Fractional Reserve Banking, all the way down to imperial Rome (a full 14 centuries before Wikipedia has it, nota bene). Rome developed a serious money problem, a Fractional Reserve System, properly done, would have solved it. Instead Rome invented other useful institutions: central planing, feudalism, and a notional currency (a few centuries later the Song dynasty used another notional currency, paper money; Rome could afford the luxury of diluting more precious metals in copper coins).

A slight problem that our contemporary plutocrats have succeeded to hide, is that the power and advantage of Fractional Reserve Banking lays in the fact that it is state controlled. The state can change the money supply, as needed. Up or down. What the Roman Principate could not do. Rome had run out of money, unlike the Fed, or now, the ECB.

In this enormous power, notional currency, that is, fractional reserve, great opportunity, but also the risk of enormous corruption. China, which did not have enough silver and gold, used copper and paper currency. That led, after centuries, to a terrible inflation that destroyed the value of money (contributing to the fall of the Yuan dynasty). China soon became dependent upon Spanish provided South American silver.  

Thus it is no wonder that Big Banking has turned into organized crime, thanks to Fractional Reserve banking. Corrupting the state through money fabrication gifted to friends, is a not a new crime, as cybercrime is. But its extent is new (by the way, early American presidents feared this, and took strong measures against it; president Jackson, not a shrinking violet, called it its “proudest achievement“, on his deathbed).

Nor is that crime unlawful as two of my smart interlocutors have pointed out. When a plutocratically minded Principate rises, it is careful to change the laws to suit its evil ends. A principate we have. Each time American media celebrates the “first lady” and “first family”, they celebrate the first man in Rome, the Princeps (as one says in Latin). Then Obama sends the first daughter to Mexico with a private army. At this point he implicitly tells the banksters: “I am one of yours! We are first! We own the world! welcome me in your arms! I need money!” It may not be conscious, but it is deliberate, at the subconscious level. Otherwise, why the outrage, when Angela Merkel herself flies not just in a common airline, but a low cost one?

However, differently from old Rome, and West County Men friendly England, France and the USA have WRITTEN constitutions. The first words in those Constitutions are the most important. There are six. Three in the USA, three in France. Those are clearly violated. (Could Obama understand that?)

The politicians, who have been in cahoots with the financiers, have been unwilling to turn against their accomplices (politicians get instantaneously punished, at least in financing: Obama, having raised his voice a bit against the financial conspiracy is running at 25% of the funding he got at the same point in 2008, when the banks thought he was in their pocket).

So, what to do? Very simple, having exposed the problem, one can actually roll out a solution. Democracy has to be transparent. Taxes are transparent, at least to the state. There is a reason to hide taxes from the public eye: income is a private matter, and so is spending… As long as they involve only private money.

However, if they involve credit, it is another matter entirely. Credit is the extension to private entities of public money. I will indeed argue that credit, when it involves banks enjoying the Fractional Reserve System, is actually PEOPLE money.

To keep CREDIT FROM THE PEOPLE clean and ethical, make that spending of PEOPLE money, public and transparent.

If not, it’s civilization itself, that will keep on going down the drain.



They are different notions. The Islamist civilization evolved a very complex financial system, with most of the characteristics of Western banking… But without charging interest.

What’s a bank? Originally, it was an organization B that pooled otherwise unused capital, and then gave said capital to some other entity C that could make use of it. The capital was lent, and that means, that it was reimbursed slowly, according to the creditor C’s capability.

One may wonder why bank B would lend money.

For doing so, interest was invented. However, after a few generations of free interest rates, the Roman republic observed that interest made the rich richer. Interest was restricted to 10%, then 5%, and finally outlawed interest in 342 BCE (that’s not long after the writing of the Bible’s Old Testament, although at the time Rome knew nothing of the Jews). By contrast, the European Union has allowed recently money changers charge states of the Union interest over 30%.

Otherwise said, today’s Europeans are like the Romans of 26 centuries ago, before the Roman revolution, rather than as enlightened as those of 23 centuries ago… 

Abrahamist faith declared that banks would lend to co-religionists out of the goodness of their heart. Lending money to heathens and miscreants could be done against interest, a supplementary payment or tax, well in line with scripture.

Scripture mercifully envisioned the survival of miscreants, as long as they paid interest. Thus banks, complete with lending against interest, could exist. They were obviously private enterprises.

So far, so good. Then something happened that even the perverse writers of the Bible and Qur’an had not anticipated, even though, their delirium, they generally get all the angles covered.  

The Fractional Reserve System was created. The preceding link, to Wikipedia, does not go in the mathematical details. I have already explained in Fractional Reserve Gouging, and many other essays, that Fractional Reserve Banking (FRB) is intrinsically unjust, and an engine for constructing neo-feudalism.



American Wikipedia, as a faithful servant of New York finance, starts the history of Fractional Reserve Banking, FRB, with the Dutch: New York started as New Amsterdam, and the Netherlands, having been created by… France (to a great extent), then conquered England (!), inventing the highly leverage finance tied into the state that we observe now in the USA.

Immediately after inventing astronomical leverage, the hyperactive Netherlands turned against its creator, mightily arrogant France, the greatest land power… That is why highly leveraged finance had been invented, to start with: to give the Dutch armies power much beyond the tiny size of the Netherlands. That financial power went into an enormous Navy, soon duplicated in England, and the Bank Of England was created to finance it!

In truth it did not dawn on Wikipedia that FBR was a solution to a problem that was in full evidence in imperial Rome. Naturally enough, the solution was found in the Italian republics, a millennium after Rome only partly solved its financial quandary.   

To fully understand FRB, one has to go back to the Third Century of imperial Rome, the Third century of the Principate, which started with the Libyan Septimus Severus, imperator of the Illyricum armies (“Balkans”),  sending back the Praetorian Guard to its barracks, and becoming Princeps in its stead.

So it started well, but it ended with catastrophe: constant coups, “barrack emperors”, a massive plague killing much of the population… And a collapse of the financial system. There was basically not enough currency for the empire’s growing economy.

That was caused by a lack of precious metals. Rome used a three tiered system; copper, silver, gold (China had mostly only copper, making the currency impossible). Rome ran out of silver and gold. Five centuries later, the Franks got the precious metals, lots of silver, in newly conquered Eastern Europe, to feed their free market.

The Roman government reacted in two ways:

1) by creating a notional currency with a fictional relationship to the gold currency they kept on using (the latter was to stay in use in the Imperium Francorum/Romanum through the Middle Ages until 1,000 CE).

2) by setting up a government regulated barter system. That was a further step in the instauration of feudalism. By the way, such a system is basically in force between the West and the feudal lords of the Middle East, as many an enraged Muslim fundamentalist will tell you, while foaming at the mouth).

While doing this, the organization of the empire switched from the Principate to the Dominate (although I give references to Wikipedia, that does not mean I agree with all what’s there; it’s just a rough, and raw idea of the referred notion. In particular that article evoked that the “Western empire formally collapsed in 476 CE” is simply, and formally, false).

The switch to the Dominate corresponded, to some extend to the switch towards a command and control economy (paradoxically, there is no contradiction between the growth of command and control and the growth of plutocracy; plutocracy crowded out the free market, as did the dwindling technological options, due to the faltering of timely technological progress).

After 1,000 CE, as Western Europe, propelled by beans and other scientifico-technological advances, became richer than the Roman world had ever been, more determined efforts were made to reconstitute the Roman republic. The Franks had protected the reconstituted republics, such as Venice (after all the Imperium Francorum was supposed to be a republic, with elected heads of states). So:

3) Banking appeared fully, in an addition to the Roman system (1) money backed by the armed force of the government and 2) mandated state enterprises, above). The Italian republic created government bonds (to pay the armies), and Fractional Reserve Banking.



Paper notes representing the precious minerals in the vaults of banks, were themselves traded. It was soon realized that this was identical to the main Roman monetary system of notional currency, and, that, just as in Rome more of these notes could be traded than the precious minerals they represented.  

So, instead of using fake precious coins as Rome did, the Middle Ages switched to promissory notes, paper money, and the like. Before soon, the governments, whose armies protected the bank vaults, came to use those notes as currency.



From the preceding, it is hopefully clear that banks, even private banks are actually STATE enterprises. All they have that is private is who manage and exploit them. But they are on a mandate from the state to create credit, that is, money.

Some will scream as they read this, and tell me that I understand nought. Yet, I do, and they don’t. There is total lack of understanding, true, but it’s on their part.  The only way to have really private banks is with no leverage, whatsover, and no back-up from the state. I would say that, when a big bank uses 97% leverage, it’s at least 97% people owned. (It’s more than 97% because of the back-up of the bank from the state.)

In 2008, the “Fed” would lend 50 billion dollar to Lehman Brothers in the morning. Every morning. The three top guys at Lehman walked away with 5 billion dollars between them, or so. The money was never recovered, nor do the fat cats want us to think of it this way. Your money is their money, end of the story.

Thus I believe that, as banks are actually public enterprises, they ought to be people controlled, instead of being milked by a few individuals who golf with the political chiefs. Instead of having bankers buy politicians, we should have the people, checking them both, under scrupulous laws.

How to do this? Make all and any bank transaction public, and pass laws to insure that any extension of credit from any bank is economically justified. Moreover use the Internet to publish the whole thing, so that everybody can have a look, check, and report to the government, if they spot any deviation between the official reasoning to support some investment, and the reality of what is going on.


BECAUSE BANKS ARE PEOPLE OWNED, THEY SHOULD BE PEOPLE CONTROLLED. That does not mean they should people managed. Air Traffic control, or the Army are people controlled, but they are not people managed (that was the point that eluded Plato and Socrates!)

The preamble of the Constitution of the USA is very clear. It starts with three words:


(yes, in capital letters). It does not start with: we the politicians, we the bankers, we the plutocrats, we the conspirators of the United States of America, we the republicans, we the fat cats of America, we the free marketers (not to be confused with the three musketeers).

The French Constitution starts with “LIBERTY EQUALITY FRATERNITY”, not “Slavery Inequality Inequity”. Actually the Article Two of the French Constitution says the French government is “par le Peuple, pour le Peuple“. It is not a government by the bankers, for the bankers.

The bankers reply that they are somehow uniquely qualified, but their only apparent qualification is the greatest misallocation of capital, ever. And the fact they stayed out of jail or the scaffolds, while doing so, is also unique in history.

All other constitutions are a mix of the French or American ones, that is why fixing France and the USA is key. (Britannia does not know how to write, apparently, so it is hard to know what it is about, and that is why nations around the globe have inspired themselves from the French and American idea, from 1789, to sit down, and write a constitution).



After I wrote a shorter version of the preceding paragraph in the Wall Street Journal’s comments, in an article which exposed president Obama’s love for a fat cat, Mr. Wolf, the head of UBS. Somebody working in the finance industry, John Crocker, replied scathingly that we you do not understand anything … certainly not banking. If you’d like to think you do … well, what color is the sky in the universe where you live? Banks should be “people controlled”? …  we do not live in a “Democracy” .. we live in a representative republic. And also one that happens to be based on free market principles… In many ways, the US Government is now more of a “criminal enterprise” than any bank has ever been. Only because the government itself decides what is “legal” or not, they will never be arrested. Yeah … bankers cultivate and form relationships with federal politicians … Why? They have to.”

I think the response is pretty telling. Fat cats on Wall Street see, in the preamble of the constitution of the USA: “We The Free market of America Have A Republic Where We Are Represented” Old Geezer Pilot on this site concurred:

It is not organized crime.

It is not even disorganized crime.

Because during the past 30 years, those banking operations and financial transactions have been made PERFECTLY LEGAL by our Congress. The best politicians money can buy.”



From above, one can see that Congress has strayed from the Constitution. The Constitution is about a “PEOPLE” regime. Unfortunately, when the Constitution of the USA was written, it was not thought to create a Constitutional Court. France has one, so now does Germany. Both courts have come out with interesting decisions the Supreme Court of the USA (SCOTUS) could never have come up with. SCOTUS has traditionally adopted a small role of pseudo Constitutional Court, but was unable to stop the multi-generational march to the American Civil War. That war was absolutely devastating. Scholars have revisited the number of dead. Upwards.

In New Estimate Raises Civil War Death Toll, the New York Times

For 110 years, the numbers stood as gospel: 618,222 men died in the Civil War, 360,222 from the North and 258,000 from the South — by far the greatest toll of any war in American history.

But new research shows that the numbers were far too low. By combing through newly digitized census data from the 19th century, J. David Hacker, a demographic historian from Binghamton University in New York, has recalculated the death toll and increased it by more than 20 percent — to 750,000.

The new figure is already winning acceptance from scholars… A pre-eminent authority on the era, Eric Foner, a historian at Columbia University, said:

“It even further elevates the significance of the Civil War and makes a dramatic statement about how the war is a central moment in American history. It helps you understand, particularly in the South with a much smaller population, what a devastating experience this was.”

Well, it ought to have been a devastating lesson. What was the lesson? That, when one let festers an unconstitutional situation, an infection of civilization by infamy, gangrene sets in.  

However, the leaders of the USA, did not learn their lesson. When American plutocrats ran away with Hitler, Stalin and company, even president Franklin D. Roosevelt did not pay attention to the problem that “We The PEOPLE” was threatened with.

FDR may have talked loudly against Hitler, but he let American banks finance him, Wall Street organize its largest companies. And when it came to stopping Hitler, FDR never stopped encouraging the few fascist French collaborating with Hitler. (As the southern front was opened from Africa, and turned into a disaster for Hitler by Spring 1942, this was of great military import, as Churchill kept on pointing out.)

Companies such as IBM or Ford were allowed to collaborate with the Nazis throughout the war. That means they did not just kill European Jews, French, and the like, but also American GIs, and bomber crews. IBM had the monopoly of computing all over the Reich. That meant that the backbone of any serious organization in Hitlerland, from trains to directing fighters towards Allied aircraft, was Made In America.

What we are confronting now is exactly the same syndrome: banking is grossly violating the spirit of the Constitution, and the political leadership is out there, golfing with the miscreants.

Banking needs to be completely changed. Banking needs to made democratic. It was done with the military, it can be done for the money changers.

Better a look within the machine that fabricates money, rather than letting the crooks have it. Better a look than a crook.



Yes, banking is devouring civilization. The capability of finding Earth like planets exists. Now. It is just a matter of placing in space a football sized telescope, and making a spectral analysis of small planets. Seeing a lot of methane would be an indicator of life. Seeing oxygen would prove photosynthesis is going on.

NASA and ESA had two such space telescopes, ready to go. NASA had its Terrestrial Planet Finder. Europe had its Darwin telescope. But the money was cut off. Why? Bankers. Not only they steal us, and they make us stupid, but they are making us blind. And they want us NOT to think of the grander poetry of another Earth. If we are too elevated, we may find them too base.

One has also to understand we have only one chance at advanced civilization. This is it. The technological tricks we have been using have depended on accessible oil, gas, and coal, for energy, and accessible metals, thanks to all that accessible energy.

When Rome could not access metals anymore, because they were too deep, and Rome did not have enough energy to get to them, it was a disaster. Roman armies could not build the weapons they needed, from lack of metals. Ultimately, around 660 CE, the Roman emperor decided to strip the metal from all the roofs of Rome, to get the metal needed to fight the Muslims. He went to Rome to oversee the operation.

Our situation would be worse: Rome depended on burning wood. we came to depend upon burning fossils. If the fossils are too deep, or hard to get to, or have been exhausted, we cannot wait for them to regrow. Forests can regrow, not fossils.

We have to use that opportunity we have now, to access higher magic (advanced forms of solar and nuclear energy, including fusion; maybe unanticipated forms such as vacuum energy, plus designing materials atom by atom).

If we do not, the world economy will hit dwindling resources. That could be as early as 2016.

The solution that will then impose itself will be war, and unimaginable forms of exploitation. Think Genghis Khan, with the caveat that Genghis was acting out of a mix of indignation, vengeance, opportunity, and the necessity to keep the 200,000 men Mongol army on a mission. Genghis Khan was not acting out of despair, because he was a cornered rat. Still, he caused terrible wars.

Now we have states, such as Israel, that reason like cornered rats, and fidget with their nuclear weapons, while mumbling about annihilation. Not a good symptom (as Gunter Grass rudely remarked).

In a way, we are threatened to all turn into cornered rats. If we let the bankers eat all the cheese, we sure will.


Patrice Ayme

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