Free · Chapter 2 of 3 free

The View from Up Here Is Genuinely Terrible

“We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men.”

—Franklin Delano Roosevelt, January 11, 1944

Since I was a kid, I’ve had this dream about being on the International Space Station. I’ve always wanted to be up there with a high-powered telescope—and not even to look up at the stars, but instead, to look down at Earth. Imagine being in a place where you can see anything on the entire planet at will.

Okay, so let’s do that. Put yourself there. We’re on the ISS, looking down at our own planet through a high-powered telescope. This is a special telescope, though, in that it doesn’t just let us see what’s happening but understand what’s happening. This telescope allows us to determine exactly what people are doing, and just as importantly, why they’re doing these things. As a result, we can see any society we want and really get to the bottom of what makes it tick.

The first thing we’ll notice, no matter where we look, is that this society is really, really interconnected. The whole world operates as a single unit now, even if it doesn’t operate in any semblance of harmony.

Because of this interconnectedness, we encounter a series of unexpected questions. For instance, why are some of these people just sitting around doing nothing, even when they’re young and full of vigor? Why are other people migrating thousands of miles just to work or survive? Why are soldiers fighting wars on the opposite side of the planet from the country they’re supposedly defending? Why are people spending the best years of their lives getting an education, only to spend the second-best years of their lives slaving at a desk to pay off all that tuition debt, their mortgage, and their car loans and leases? Why are so many people spending the last years of their lives doing very little because they have no money to spend even though they worked for decades and decades to earn money?

The next thing we’ll notice is that there’s a ton of disparity between rich and poor—both in terms of countries and individuals. Some have, and some have not. Our telescope allows us to see and understand that this is because of money. It doesn’t flow evenly between the countries and people. Some are able to collect quite a lot more, while some quite a bit less. Some are able to ship tons of “paper” money overseas, year after year, and receive goods and services in return. Some are left out of these transactions.

So, why is that? If we adjust the lens on our telescope slightly, we get the answer. It’s not governments. It’s not billionaires hoarding money. It’s not even the gigantic mega-corporations we’re seeing all over the planet. It’s this, and I quote: “We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it.” This rather unsubtle quote is from Congressman Louis T. McFadden, spoken way back in 1932.

To simplify the above: It’s banks. Now, don’t get me wrong; I’m not here to take it to Congressman McFadden extremes and say that banks are evil organizations. I’m just saying that the rules they follow lead to some really unnatural disparities. They can’t help it. Thems the rules.

Introducing a Brand-New -Ism

Thanks for the space-walk, Evan. Now let’s get started, and let’s start at the top of the food chain.

What kind of -ism does the United States subscribe to? Capitalism. Easy. How about China? Communism. Denmark? Socialism. How about Iran? Not really an -ism, necessarily, but you could describe them as a monarchy, or in some circles, a dictatorship. Pick any country in the world, and we can probably align their supposed economic system into one of these categories.

If you’re a sharp-eyed reader—and I know you are—you’ll have spotted that I used the word “supposed” in that last sentence. I used it because these are the terms, we all lean on to describe a country’s government, even if these words are related directly to their economies.

Let’s quit beating around the bush, shall we? None of those so called -isms actually matter much in a world with a homogenous banking system. Because of a pair of agreements from back in the 1940s (agreements that we’ll discuss in greater detail in a later chapter), and because of all the rules and regulations that resulted, the entire planet is run by a single -ism. I call it Bankism. The definition of this word is “A world run by and for the benefit of banks.”

If you’re from China, you might sit back and watch your country manipulate its currency and call itself communist, but because every activity your country’s government commits to requires money, and because every shred of money in the world is loaned out from central banks, your country is in fact dictated by Bankism. The real ruling force, no matter where you are in the world, is banks.

It all hinges on the way the money flows through the global economy. Today’s definition of currency is that it is the only asset that does not exist. It is, after all, only printed into existence whenever someone demonstrates a need to borrow it. In other words, there is no money currently in circulation that is not owed to a debt. No wonder private, corporate, and national debts are exploding! Under the current system, for every dollar of additional spending, a few dollars are borrowed.

Money makes the world go round, right? Well, that’s because the root of all power is the money in our economic system. So…what happens if you give certain people all the leverage to control all the money? By default, they will control everything a government can or cannot do, which in turn puts them in control (whether directly or indirectly) of the levers of the law. But that’s not the problem; it’s merely a symptom.

Think about how the US, whose banks are very much in the driver’s seat of this arrangement, runs its economic policy. When the economy starts drifting too far in one direction or the other, the Federal Reserve either raises or lowers interest rates in an effort to bring things under control.

Who benefits most from this interest rate manipulation, though? It’s not you or me. It’s not even the US government or any of its representatives. It’s banks. Banks benefit the most. These interest rate moves are in fact designed to directly benefit commercial banks by stabilizing markets, inflation, and the availability of cash it uses to make loans (which in turn make those banks money, which they in turn lend out in the form of more loans).

Bankism controls the US economy. And since we live on a planet with a homogenous global banking system, this means that Bankism controls the global economy. The people who run the world aren’t in the White House or the Kremlin or Zhongnanhai; they’re in the Eccles Building in Washington, and they’re on Wall Street.

“Democratic socialism means that we must create an economy that works for all.”

—Bernie Sanders

The best trick to Bankism is how very subtle and unseen it is. Few people recognize how much impact banking policy has on their lives. We blame the governments and their leaders. We blame war and the unstable economy. But because everything in the world—and all the work that any of us do—turns on the loans banks choose or do not choose to give, banks sit on top of the world. So when Bernie Sanders says that an economy must work for all, he’s not really paying attention. The economy must work so the banking system can survive. It has nothing to do with the welfare of anyone, and it certainly cannot “work for all.”

Put another way, people on both sides of the political aisle, including Bernie Sanders, believe that the government controls the economy. This is a very important falsehood I need you, the reader, to understand and accept in order for the rest of this book to add up.

To begin, let’s consider a question that has always puzzled me: How it is possible that, in the US, $1 trillion is owed to the Federal Reserve (this number does not include Quantitative Easing, by the way), with another $77 trillion owed to commercial banks or their financial products like mortgages and T-bills (and this is just a pre-COVID number!)? This is possible because, essentially, banks take money from the Fed and then loan it out over and over again. And they’ve done this at least 77 times, if my math is correct; Evan, can you check and make sure my math is correct?

Evan: Yeah, that checks out.

Thank you, Evan. It looks the same in China too. They might be currency manipulators, but even though they seem to be breaking the rules, they’re also kind of following them. Their money all flows by way of loans from central banks, as well. Their communist-sponsored banks or government-owned banks make loans to local cities so they can build homes for all their people, using these massive loans to devalue their currency. If these loans don’t work out, well, they just go into default. Put simply, their behavior looks different, but it’s really all the same. They’re every bit as debt-driven as the US and every other country on the planet. They’re still playing the Bankism game, just like the rest of us.

Not Exactly Free

It is time to wake up to the reality that all those best-laid plans from back in the 1940s have led to some seriously enormous unintended consequences. Namely, banks have taken over the world.

If you’re American, then you’re told you live in the Land of the Free, and yet, if you’re like the overwhelming majority of people in this country, my guess is that you don’t exactly feel free. You likely feel as if your hands are tied by your financial situation. It’s that old adage that you’re not truly free unless you’re financially free.

Think about it. You’re free to choose, but your choices are not that good. You can go to college and have tremendous debt before you start life, or you can choose not to go to college, leaving yourself to an array of extremely limited choices for a career. In other words, all through life, you have choices between bad and really bad. Sure, some people get lucky. Some people are born with a silver spoon in their mouths. Others somehow manage to strike it big as entrepreneurs. Some people win the lottery. But for most people, the majority of choices are really poor.

“Today, there is an increasing number [of people] who can’t see a fat man standing beside a thin one without automatically coming to the conclusion that the fat man got that way by taking advantage of the thin one. So they would seek the answer to all fifteen problems of human need through government.

“Howard K. Smith of television fame has written, ‘The profit motive is outmoded. It must be replaced by the incentives of the welfare state.’ He says, ‘The distribution of goods must be effected by a planned economy.’”

—Ronald Reagan - Rendezvous with Destiny October 27, 1964

I am throwing this timeless Reagan quote in here to prove that this is not some socialist propaganda. Let’s just say it outright: The rich are not taking from the poor. Just because some kids are born into rich families does not mean that they are making tuition go through the roof. The banks are doing that, so let’s leave the rich kids alone.

Back to old adages: Money is not the root of all evil. Bankism is the root of all evil.

You’re probably thinking, Bold claim, J-Dub. You’re right. It is bold. So I guess I should back that up, yeah?

Okay cool. Let’s have some story-time again, shall we? Gather round on your carpet squares, children, for I have a story to share.

Let’s imagine a little village in the middle of nowhere America. Most people live in little huts or something—or perhaps they all live in those woodsman/woodswoman shacks that have been all the rage so far in this book. The roads in this town are all glorified goat paths, and there’s no public sewer or electricity. This is a straight-out-of-a-spaghetti-western village.

Now, let’s imagine that in this random village in the middle of nowhere America, a forward-thinking numbers guy (maybe we should just call him Evan White) came up with a brilliant idea. He was going to call this idea a bank.

This forward-thinking numbers guy saw a problem, you see. He saw that all these woodsmen/woodswomen were making money for their furs or whatever and were just sort of piling it up in their shacks. These villagers needed a safe place to keep their money. So, in all his creative glory, the numbers guy invented the safe. He invited all the villagers to keep their money safe in the, well, safe.

All the villagers were like, “Well that makes sense! The appeal of your product is right there in the name!”

So everyone in town deposited their money in the safe at the bank.

“All right,” they said. “My money is safe now. I can go back out and earn some more.”

Meanwhile, the banker turned around and said, “Hey, wait. It doesn’t make any sense to leave all this beautiful money in the safe, collecting dust. Why don’t I take this money and loan it out to someone so they can do something to better their lives?” He probably tented his fingers together as he added, “And I’ll collect a nice interest rate on the loan. How about ten percent?”

That first ever person who took the first ever loan decided not to use that money to buy any goods, and instead used it to pay some skilled laborers to build him a house.

That first borrower was happy. “Now I’ve got this nice beautiful house,” he said, and then he got back to work so he could pay off the loan.

Here’s where the banker had himself a pleasant surprise. Where do you think all those skilled laborers took their money after the job was done and they’d been paid? Straight back to the bank and its nice safe safe. So here the banker realized that, hey, he could loan out money, make money on that loan, and then lo and behold, the original money he loaned out came right back to him.

What a grand system! he thought.

But that night, he tossed and turned. Couldn’t sleep. Just something he couldn’t seem to get out of his mind. Then, he leapt up in bed, startling his poor wife from sleep.

“Hey!” the banker rather hollered. “I’m not just going to let all that beautiful money sit there collecting dust in the safe. I’m going to make another loan with it.”

Fortunately for the banker, everyone in town was envious of the first borrower’s fancy new house. So there was no shortage of people to loan money to. The loans started with all the skilled laborers who had built the first borrower’s house. They’d seen the luxury firsthand, so now they wanted houses like that too. Word spread so quickly that soon everyone in the village was taking out a loan to upgrade their woodsy shacks into luxury homes.

Whew! Now everyone in the whole village had a new house. Now all the money had been loaned out and everyone had a debt to pay. And, wow, all that money had returned to the bank because all those builders had been earning it back and they needed a place to keep it safe.

The banker, though, now he’s got troubles. He doesn’t have anyone else to loan to. The system he created won’t work properly if he doesn’t have anyone else to loan to. That beautiful money will just sit there, collecting dust. And if it just sits there, collecting dust, there won’t be any work for people to do, and if there’s no work for people to do, those people won’t be able to pay back their debts.

The banker just had to find someone else to loan to. Fortunately, his wife—who was herself a shrewd numbers-woman, which was a truly foundational reason for why these two had such a famously lovely marriage—came up with an idea in no time. “You should approach all the small businesses in town and suggest they take out loans to improve their businesses and grow.”

“That’s brilliant, my dear wife!” the banker said. “I’ll go out and do that right now.”

So he did. And now, boom, he’s making all these small business loans. One by one, the businesses in town started renovating their shops, marketing their services, and so on and so forth.

But hoo-boy, here we go again. Now all the businesses in town have loans and they need to work so hard to pay their bills that they can’t afford to take out new loans. Now the banker is really in a pickle. He has to find more ways to loan money or the economy will slow down.

“What we need, my dear wife, is a true and genuine sucker,” he said. The famously lovely couple shared a rare moment of awkward silence. But then it occurred to the banker that he knew just such a sucker.

The next day, he went down to the municipal building and pitched some of his ideas to the decision makers in the local government. “Oh my gosh, you guys,” the banker said, “all the people and businesses have borrowed money, and have you noticed how beautiful our little town is starting to look?”

“I have been noticing that,” said one of the true and genuine suckers at the municipal building.

“Well you know,” the banker said out of the side of his mouth, “it seems to me there’s something missing around here. You know what we should do?” He looked back over one shoulder and then the other, for effect. “You should borrow some money from my bank so you can pave the goat paths into proper roads and maybe put in some sidewalks. How pretty would that be?”

It took all of five seconds for the true and genuine suckers at the municipal building to sign the paperwork, thereby saddling the town up to its eyeballs in debt.

This brilliant strategy kept the economy turning and growing, kept people in jobs, and kept the money the banker loaned out flowing right back into the bank, where he would loan it out again.

Uh oh, though. Now the banker had loaned to all the people, all the business, and to the municipality. Now there’s definitely no one else to loan to. Whatever was he to do?

The system doesn’t work without loans! he thought. Loans build houses, grow businesses, create jobs, and pave roads. What on earth will we do without loans?

This was where the banker and his wife really put their heads together and got down into the weeds. They hatched a plan where they would lower the interest rates on loans, which compelled the people who originally borrowed money to refinance their home loans or take out home equity lines of credit for home improvement projects. These lower interest rates also made new loans more affordable for the businesses and municipalities.

And for a while at least, the system kept turning and the economy kept growing. Almost without realizing it, that once idyllic little town had become a debt-driven, Bankism-owned economic quagmire.

This town, fictional though it may be, was not unique. It was just one of many, many towns that operate the same way.

The first moral of the story: modern life is driven by debt, and since banks are the peddlers of debt, the activity and work we do is therefore determined by banks.

And the second moral of the story: It has never been safe to put money in banks because banks lend it out again and again. Every time the economy suffers a financial shock, we receive more proof of how unsafe it is.

The third moral of the story: Banks always run out of people who want to borrow money. In response, they keep coming up with new products to sell. But it’s like a black hole; eventually, debt will just swallow up everything.

And the fourth moral of the story is that before banks, money had to be earned through work. When banks loan out money, they are essentially loaning out work that someone else did and someone else will do. They are creating work that otherwise would not have happened because there wasn’t enough money. Banks essentially create more work.

If I could just overexplain this point about Bankism…

Bankism causes the loss of an individual’s freedom because the borrower is indebted, legally, which means that not making payments can put you in jail or out on the street. A community, municipality, or government loses its sovereignty or ability to make decisions for itself, as its decision-making must first consider its payment of debt. Just look at what happened to Greece during the Great Recession.

“Forget the politicians. The politicians are put there to give you the idea you have freedom of choice. You don’t. You have no choice.”

—George Carlin

A decerning reader like you might say that Bankism seems to be worth it—after all, look at the new houses, streets, and businesses. But discern a little deeper and you’ll find that there is no choice once the Bankism quagmire has properly set its teeth into society. People are forced to take loans just to get by. And no, the guy who leased a BMW he couldn’t afford is not who we are talking about. We are talking about people using credit cards to pay the rent and put food on the table.

Let’s also recognize that the bank loan to the municipality is not free, and in order to pay back the debt, property taxes have to go up. This means a higher cost of living, and everyone in town having to work even harder. Here is where we find ourselves at the opposite end of the woodsmen spectrum, where an unfortunate neighbor loses everything, and it simply isn’t in the interest of his/her/their neighbors to take care of him/her/them because to get back the house they lost and the wages they lost is just not possible. This is how a homeless, starving person winds up in an alley behind a restaurant full of patrons paying $150 for a dinner most likely payed for by credit card.

Since everyone is busy paying off their debts, taking care of all the unfortunate people is just not possible. That job is left to the government. And the only way the government can pay for taking care of these people is either through higher taxes or taking on further debt from banks. Well, taxpayers hate taxes because they already have enough bills as it is; and the rich who can afford high taxes already pay the vast majority of taxes and can easily claim they are not getting their money’s worth. Meanwhile, banks love issuing debt, as that’s how they make money. So, debt winds up being the only option left to a politician who wants to be reelected, and this is not actually a choice at all. With Bankism, there is no choice.

Okay. Storytime over! Pack up your carpet squares in a neat little pile in the corner, please. And while you’re doing that, I should probably stand up and stretch my legs for a second and share an important caveat: I’m actually not blaming banks for their behavior here. They’re just playing by the rules. And what reasonable business that plays by the rules would pass up the opportunity to completely control the market they find themselves in? I own a few businesses, and I can tell you truthfully that this is my goal in all of them. It’s how a successful business works; you see an opportunity, and you capitalize on it.

No, the banks and their leaders themselves are not to blame. The system is to blame, and that system is Bankism. The system is all-pervasive. It impacts everything we discussed in chapter one and will continue to discuss in the chapters to come. It is the cause of the rise in cost of living while income and standards of living stagnate; it is the reason governments are so overwhelmed with debt; it is the reason our leaders seem to have no effect on things like global warming or even healthcare and its laundry list of issues, including cancer, diabetes, and obesity; and it is the reason we all feel so handcuffed in our daily lives.

Perhaps you’re harboring the notion that Bankism is a factual reality and progress would not be possible without it. To you, I would point out that the first bank in the world was established in 1472, and it still exists today (like a vampire that drinks blood from its victims and never dies). So if banks are the source of all progress, are we to assume that mankind made no progress prior to 1472? Then, conversely, after 1472, did progress just completely explode? The answer to both questions is “hell no.” Prior to that first bank, we advanced from living in caves all the way to just about the halfway point of the Renaissance. And the modern-day acceleration of progress only started a hundred years ago, and it went slowly at first.

The Big Solution is really about this: debunking the belief that society has to be controlled by banks. And okay, fine. Bankism is in charge. It makes our lives a little worse, but so what? What’s the worst that could happen?

Good questions, my friend. The worst that could happen is that the whole system could collapse. And let me assure you, it will eventually collapse, because a system based on debt is always (always always) doomed to fail. Even worse is its persistence, because it is fundamentally flawed. In fact, if it failed and just went away, progress could be made. But without the awareness that comes with complete and total collapse, it would likely be replaced by a similar flawed and doomed construct. Actually, you know what? We’ve already seen this happen. Very recently, in fact. More than once, if the pandemic counts.

The first time it happened, you might remember it… What was it called again? It’s right on the tip of my tongue. Something about Great Recession-y something or other.

I don’t know. Maybe there’s something about it in chapter 3…