Central banking is the most ingenious scam in the world. Here’s how the scam works. Firstly, let’s look at a situation where the fiat currency system is just starting. The government needs money. It goes to the bankers who create the money out of thin air by taking some pieces of paper and putting a lot of official looking writing on them. This writing is called a government bond or gilt. It basically means that the government promises to pay the bankers the money back, with some interest, let’s say 5% per annum. The government sends the notes over to the central bank and the central bank sends back a suitcase full of other printed pieces of paper called banknotes equal in amount to the bond they were sent by the government. All that has happened is that a few pieces of paper have changed hands. This is basically the start of the money creation process.

Now…if this was the start of a fiat money system and the government wanted to make their first transaction with the central bank or let’s say £100m, they would send £100m of bonds to the central banks and the central bank would send them £100m in notes…with an interest understanding attached to each of those notes.

Now….the government deposits this money into their bank account and the money is then available to the retail financial world to make loans with. The financial system, the retail banks, know that they can lend out 9 times the amount of this deposit, so they lend £900m to customers who want to borrow for businesses, cars and homes etc. This is how money is created, out of thin air, from the central bank.

Now….I DO wish I was a central bank…because this is a great business. What the central bank does is that it gets interest each year from the government who collect it from the banks who collect it from the borrowers. The people who own the central bank can then go out and buy houses, cars or anything else they want with the interest on the money they create out of thin air! How cool is that!

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Bank Account, Central Bank, Fiat Money System, Money