Let’s go back in time for a moment, let us consider an isolated society of say one hundred people.

It’s a self contained society with producers of food and goods and builders, who for the sake of this story we will call ‘Producers’. In any such complete society there will of course be people who don’t actually produce anything at all but do contribute to the society in other ways. A musician for example produces nothing that relates to the real wealth of our hypothetical society but does provide a service that makes the Producers happy and for that they are prepared to share some of the ‘real wealth’ they have created. The same applies to many other useful service providers such as the distributers and sellers of the goods produced by the producers. So what becomes of the people in our society who have no ability to produce anything or are unable to provide any useful service that people are prepared to pay for?

In our hypothetical society the Producers and useful service providers live in harmony exchanging the things they make with each other and paying for services with the things they produce. However, it’s not long before the limitations of this simple bartering system become impractical and another form of money becomes necessary. A currency is needed that represents exactly the value of the goods being produced in the society, but what to use? Stones, shells, beads? Not very practical since anyone walking along the beach would soon be ‘rich’. It has to be something relatively rare that is in limited supply and of course gold and silver are the obvious candidates. Not an ideal monetary standard but good enough for most needs. But what price to put on the gold, after all its value is arbitrary. Well obviously, since the financial balance in our society is based on what is being produced and exchanged, then the value of the gold must be equivalent to the value of the wealth being produced by the Producers for the system to work.

Again, hauling around lumps of gold, checking purity and weight not to mention the opportunities for forgery (like scraping the edge off gold coins), also make this system impractical.

So we come back to the small number of people in our hypothetical society that do not have the ability to produce anything or to provide any kind of useful service. What can these inevitable beggars do to survive? Well the not so clever ones will of course become our society’s professional beggars; the clever and more devious ones on the other hand are destined to become bankers.

Seeing the need in our hypothetical society for a monetary system that is more practical than bartering or carrying around bags of gold, these ‘bright beggars’ hit on the idea of acquiring a secure building in which to house all the gold. The idea being to issue promissory notes (money) to the gold depositors that was equivalent to the value of the gold they placed in the depository (which was in turn equivalent to the value of the food and goods being produced). Not exactly a difficult job and the leaders of our hypothetical community were grateful that a modicum of gainful employment had been found for this small group of people incapable of producing any real wealth.

And so you would think that was that and our little community lived happily ever after.

Well think again.

It wasn’t too long before the bankers, with little else to do other than to receive gold deposits, transfer gold between accounts, re-value gold to match fluctuating production levels and print (or destroy) money to maintain the balance. It was at this point that they hit on the idea of just printing more money.

This for them was not difficult, and since most of the gold stayed in the vault from year to year with very little moving in and out, who was to know that there was more paper money in circulation than there was gold in the communities vault? By printing a little more money, lending it to the Producers and charging them interest they were able to make a great deal of money, from nothing. [Unthinkable, socially immoral, illegal to say the very least, but they did it anyway and the same system is still with us].

But of course in our little hypothetical (and closed) society there's only a limited amount of food and products available, only those that are produced by the Producers. The bankers are now lending money to Producers who want to borrow who can now in turn afford to buy more than they would otherwise be able to afford. And with the inevitable increased demand and a limit to amount of goods available what happens? Well you don’t have to be an economics professor to know that the price of everything has to go up. Eureka! the bankers have initiated the creation of inflation and the 'Debt Society'. By creating false money they have developed a means of siphoning off some of the real wealth from the Producers and pocketing it, the Nett effect? Well, since the introduction of easy and almost unlimited credit the Producers now have less than they had before and the bankers are becoming richer having still produced nothing other than false credit.

A scheme that is clever, devious and immoral, but brilliant, why? The answer is, because the Producers are completely oblivious to the perennial self perpetuating fraud . 

And you would be forgiven for thinking that this must now be the end of our little tale, that with such a successful fraud, money for nothing created out of thin air, gainful employment for the useless and not a Government, career bureaucrat or Law Enforcement Agency in sight, that they all (particularly the bankers) lived happily ever after.

Well you’re not forgiven.

A few years earlier one of our little community’s leaders did see where things might be heading and initiated a return to the real money backed by gold standard, he issued new currency notes based on an audit of the real wealth of the community. But by now the bankers had too much to lose and wielded a power that far exceed that of mere [short term] leaders, it was time to flex that power, the errant leader was dealt with in the time honored way [assassination] and the system was restored to ‘normal’.

The Producers now only receive a small proportion of the real wealth they produce, most have to sign up for 35 years of debt just to put a roof over their heads and the bankers and their hangers-on are set to take over the world.

If you consider yourself to be a Producer or useful service provider just ask yourself this, why is it that even though you work so hard, help produce all the things people judge their wealth by you end up in debt for most of your life buying back the very things you helped produce in the first place?

So here we are, nearing the end of our little tale. The bankers are happy (why wouldn’t they be?), the Producers are reasonably happy, oblivious to the fraud and duped into the illusion that they now have more, because they were able to buy more with the extra money the kind bankers lent to them.

But, not content with fraud number one and on a roll of sorts, the bankers decided to test the waters and to see just how much ‘funny money’ they could actually inject into the system before the Producers really started to squeal. Not content with issuing just a little more money into the system than was justified by the amount of gold on deposit the bankers now set about getting our society’s leaders to agree to limit the amount they could lend to the Producers to an amount equivalent to 10 times more than the amount of gold in the depository. Fraud number two.

Does this strike you as absurd? Of course it does, but our bankers decided to call this latest fraud ‘Fractional Reserve Banking’ and with the backing of our little community’s leaders (we won’t analyze why the leaders would agree to such an absurdity here) a law was enacted that not only allowed the bankers to do just this but also to establish a ‘Central Bank’ to oversee a budding banking cartel and to legitimize the printing of money by the banks. The Central Bank was to be the community’s bank, but in reality it was owned and controlled by the privately owned banks. The bankers final ‘coup de gras’ was to now offer some of their 'funny money' to our leaders council, of course only if they paid interest on the debt. Since, the leaders council had no real wealth of its own the only way it could raise the money to pay the interest on the loans was to introduce a tax on the labor of the Producers, and so income tax was created. More real wealth diverted from the Producers to the bankers. Fraud number three.

So our little society is now in the 21st century, a myriad of financial institutions have developed around the bankers, computers have allowed them to hone their ‘real wealth’ extraction techniques into a very fine art and the ratio between non-producers [leeches] and Producers in our society has reached epidemic proportions.

You hear it on the news without explanation, its bandied about on financial and business programs like it’s always existed and you may even have lost your home as a result of it, but what is the Credit Crunch?

Well the bankers just overstepped the mark, they got just a little too greedy too fast and the Producers really are squealing now. It appears there really is a limit to how much money can be siphoned off before the people who produce the real wealth in the first place just don’t have enough money left to support the excesses of the bankers.

Overheard at the depository…

"Just relax, back off a bit, let unemployment run its course, print a little more money for the short term, and before the store shelves are empty make the necessary re-adjustments, but for the god’s sake keep all the frauds' going.

To see how our little tale relates to the real world - wherever you live - just Google ‘Fractional Reserve Banking’.

It's absolutely amazing how many people don't know the extent to which their lives are being controlled by an elite group of bankers. I hope the day will come when a brave (and very careful) political party gains power on a platform of banking reform.

All political party electioneering promises of ‘lower tax rates’, ‘improved education’ etc pall into insignificance at the vast amount of real wealth that would be available if Governments just took over responsibility for the money supply again (paper, plastic and electronic) and imposed very strict credit limits.

The main problem is that the current corrupt system has been in place for so long that most people, including most politicians and economists think it’s 'normal'. Reform would not be easy but if enacted, the net effect would be that the real wealth would be distributed more fairly, the prices of products would become affordable without the need for excessive borrowing. Hopefully Governments will maintain a balance between the money supply and the real wealth produced.

And most importantly the incentives for those working in the financial services sector would be outweighed by the rewards that would become available to those employed in the 'wealth creation' sector thus initiating a migration of workers towards the wealth creation sector. Pie in the sky I know, but its a nice thought.

If all this sounds simplistic then I will have succeeded, for in my opinion it's the false and purposefully created complexity of the current financial systems that allows the financial elite to continue their systematic diversion of an unrealistically high proportion of the real wealth that's produced into the pockets of a very rich, parasitic minority.

The bankers and all companies in the financial sector have a great deal to answer for...