The problem with the Federal Reserve
From bartering to blockchain, the world of money - and the way we transfer it - has never stood still. Indeed, even the assets we prize have changed. Although it might be nice to have some vegetables in your fridge, using it as a form of currency has probably never crossed your mind.
Thousands of years ago, tribes of Paleolithic peoples who lived by the sea collected rare blue cowry shells.
Members of all of the tribes loved these shells. They used them for jewelry, and decorated their clothing and hair with them. They even integrated them into their crafts, weaving shells cleverly into their baskets.
The shells were so popular that the people began to use them as money. They knew that it took about an hour of searching to find a cowry shell, so each was worth about an hour of their time.
The use of these shells as money soon led to an economic boom. The money allowed the islanders to practice division of labor for the first time, where each person could specialize in tasks at which they were adept. This opened up new jobs.
Sometimes they would use other shells for money. The red cowry was very common and only took about fifteen minutes to find, so it was worth 25% of a blue cowry. The purple cowry, on the other hand, was extremely rare and could take days to find. It was worth 100 blue cowry.
The economy grew substantially as the islanders became more productive at everything they did because of their division of labor.
Within all of the tribes, there were innovative people who made new inventions.
One person came up with the fishing net. He knew that his idea would work, but it would take a lot of time and effort to turn his idea into reality.
He told a friend about the idea, explaining how time-consuming it would be to gather the fibers, weave them into string, then tie them into a net. It would take many days, and in those times, people needed to spend their time gathering food just to subsist.
The inventor’s friend thought about how to make this project work, and in the process, inadvertently invented a bank: He asked his neighbors to loan him shells for the project, and he promised to pay them back with even more shells later.
With this primitive banking system, the fishing net was developed into a working tool. And yes, it really worked—and created a boom in fishing!
Two things happened because of the fishnet invention.
The price of fish in cowry shells dropped because fish could be caught with less effort, thanks to the new technology.
The value of the cowry shells went up because people could buy more fish with them.
After buying the cheaper fish, the people had extra money to buy other things. This provided opportunities for other tribal members to create new ways for others to spend their cowry shells—other jobs and specialties were created in the economy.
The fishermen who caught the fish were getting far less per fish, but had many more fish to sell, and so were making more profit.
And since fish were cheaper, that meant some of the money that had previously gone to buying fish went instead to the people who had risked their shells to support the development of their inventions.
Soon came the professional investors, and these investors had an incentive to make investments - they wanted to get lots of shells so they too could buy lots of stuff. And soon inventive ideas all around the islands were being funded by the bankers who only needed to use their heads to work (the Capitalists).
Unfortunately, there was crime. No matter what they did, there always seemed to be someone who would try to steal someone else’s shells. The newly formed banks built vaults to help alleviate crime by providing safe places to store shells.
But then things changed.
One of the tribes was headed by a war-loving chief named Brutus. Brutus wanted to go to other tribes, attack them, and take all of their goods.
But war is expensive. He needed soldiers, weapons, and supplies.
Brutus would need the help of the other tribal members to build his army. He needed the guy who made fishing spears to make fighting spears instead, and give the spears to him.
He needed the fishing boat builder to build war boats instead of fishing vessels.
Brutus needed people who would fight - but the only way he could get men to become fighters was by offering them many shells in return.
Attacking neighbors was going to be expensive, but he could sense that it would be profitable. So he began asking the tribe members to give him some of their blue cowry shells.
But the other tribe members didn’t like the idea. They remembered how they had lost money the last time Brutus attacked their neighbors and lost.
Brutus wanted to force people to give him shells. He said it was of national importance, and that the tribe should have a tax.
But the people rebelled against Brutus, and Brutus was forced to quit taxing the tribe out of fear that he himself could be attacked.
Finally, Brutus came up with a plan to ensure that he could always have enough shells for his military adventures. He would create a Reserve Bank. This Federal Reserve Shell Bank would make certain that there were always enough shells for him to borrow anytime he wanted.
To create such a bank, he had to do some work, and he needed to get the other banks to go along with it too.
First, he had to create some paper money, which he called Paper Shells, with pictures of shells on the bills.
Then he would outlaw private ownership and trade of shells. Everyone with shells would have to exchange their shells for Paper Shells. Then all the real shells would be placed in Fort Shell Knox - a very secure location.
The banks would all become voting members of a governmentsponsored cartel, which would be called the Federal Shell Reserve.
In exchange for their cooperation, the banks would also be able to borrow as much money as they wanted, anytime they wanted.
When the banks wanted to loan money, or when Brutus wanted to borrow some - Paper Shells would simply be printed up for them at everyone else's expense.
They would need to be careful. They were smart enough to know that printing too much too quickly could cause the economy to sluck, and even give the people a reason to overthrow the banks and Brutus.
But the new Federal Shell Reserve immediately began wreaking havoc with the economy.
First there was the invention of the bow and arrow. This invention allowed a hunter to kill many more animals than the traditional spear could in the same amount of time.
Normally, without the Federal Reserve, the best hunters would be the first to receive the new technology, and it would take more time for the invention to be implemented broadly. But with the invention of the bow and arrow under the Reserve system, all the hunters in the tribe showed up on the same day wanting a loan to buy the new productivity-enhancing tool. The banks ordered more Paper Shells printed and all the hunters were given a loan for the cost of the tool on the same day.
All the hunters took their Paper Shells to the bow maker. They all wanted a bow, but the bow maker only had a few bows on hand so he boosted his price dramatically. He raised the price so much that it was hardly efficient for the hunters to buy them.
The bow maker quickly hired a bunch of people to make the bows, and they worked all day and night making bows - and they made a lot of money. But after all the hunters bought one, the entire market demand for bows collapsed, and all but a few bow makers were laid off.
Meanwhile, the hunters collected so much meat that the price of meat collapsed (which was good for everyone except the hunters). Soon many of the hunters couldn’t pay back the money they owed on the bows because the bows were now worth less than the money they had bought them for.
So the Federal Reserve had the following impact:
Markets boomed and busted much more dramatically and with huge price fluctuations.
Things that were purchased with freshly borrowed money went up in price dramatically.
As the freshly minted money circulated through the system, all things (minus the new technology) would go up in price slowly but surely.
Money was now available to pay for wars that would otherwise be unaffordable.
And that’s what’s wrong with the Federal Reserve.
Protecting our Civilization
From the Gospel of Matthew, Chapter 25:
For the kingdom of heaven is like a man traveling to a far country, who called his own servants and delivered his goods to them.
And to one he gave five talents (a talent is a type of money used by ancient Babylonians, Sumerians and Hebrews), to another two, and to another one, to each according to his own ability; and immediately he went on a journey.
Then he who had received the five talents went and traded with them, and made another five talents.
And likewise he who had received two gained two more also.
But he who had received one went and dug in the ground, and hid his lord’s money.
After a long time the lord of those servants came and settled accounts with them.
So he who had received five talents came and brought five other talents, saying, ‘Lord, you delivered to me five talents; look, I have gained five more talents besides them.’
His lord said to him, ‘Well done, good and faithful servant; you were faithful over a few things, I will make you ruler over many things. Enter into the joy of your lord.’
He also who had received two talents came and said, ‘Lord, you delivered to me two talents; look, I have gained two more talents besides them.’
His lord said to him, ‘Well done, good and faithful servant; you have been faithful over a few things, I will make you ruler over many things. Enter into the joy of your lord.’
Then he who had received the one talent came and said, ‘Lord, I knew you to be a hard man, reaping where you have not sown, and gathering where you have not scattered seed.
‘And I was afraid, and went and hid your talent in the ground. Look, there you have what is yours.’
But his lord answered and said to him, ‘You wicked and lazy servant, you knew that I reap where I have not sown, and gather where I have not scattered seed.
‘So you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.’
Therefore, he took the talent from him, and gave it to he who had ten talents.
For to everyone who has, more will be given, and he will have abundance; but from he who does not have, even what he has will be taken away.
From this parable, you can see that Jesus was a Free Market Capitalist and so is God. Without the freedom to make mistakes, we cannot do good, for those who are compelled to act are never fully responsible for their actions.
If you want to be good with God, let freedom ring. Do not let governments or banks get between you and God. Money is the Voice of God. It commands us, it tempts us, it makes us free so we may do good and so that we may do evil. It is part of the test that God puts us through here on Earth.
Use of money is our divine and sacred right. We must be willing to fight to defend it. And you must defend the rights of others to use money too, for if you will allow others to stand alone, then you can expect to stand alone yourself. And by your division from others, you will be conquered...
To be continued..........
Sean H. Worthington PhD ABD for CloudCoin Consortium.
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