The Tale of Money Creation

The process whereby banks create a nations money supply through fake loans is perhaps the most astounding sleight-of-hand ever developed.  It is clearly revealed in the following fable, written by the late Robert Hemphill and embellished slightly by L.E. Fleischer:

Once upon a time to the Temple of the Thirteen Suns came the rich and powerful Chief Oomah the Third, who said to the goldsmith of the temple, Hansen L. Roschab, I have much gold and am about the depart to a far country.  Wilt keep this gold safely for me against my return a year hence?  I will pay thee well.

The wily Hansen coughed loudly and covered his countenance with a cloth lest the rich Oomah the Third observe his joy to have this treasure in his possession.  When he was clam and could look serious he said to Oomah, It is a very great responsibility and risk but I will undertake it for a tithe which will be one shekel in every ten.

Then said the Chief Oomah, It is a deal. And forthwith his slaves delivered many bags containing in all a thousand shekels of gold for which Hansen L. Roschab, the goldsmith, gave the chief a parchment deposit writing payable to whomsoever, and thereupon Chief Oomah departed happily upon his journey.

As soon as he was well out of the country, the shrewd Hansen called his confidential scribe and bade him thus: Go thee to the merchants whom I tell thee of and secretly say to each that thy master hath a little gold for hire upon good security.  And the servant departed swiftly.

Soon there came to him a great merchant who said, Hansen, you old crook, I am in a jam for a few shekels of gold.  Wilt lend me?  And Hansen replied, Money is very tight these days, but it might be arranged.  What is thy need?  The merchant answered, Two hundred shekels.

Then said Hansen, It is much money.  What security couldst thou pledge for so great a sum? Then the merchant shewed Hansen a writing of his possessions of merchandise to the amount of a thousand shekels. Hansen said, It is not enough.  Thou must also pledge they dwelling and they slaves and they raiment.  Whereupon the merchant, after much protest, pledged all his possessions, even unto his innermost raiment. Then said he to Hansen, I have no place to store so much gold.  Keep it safe for me and give me a writing, give me a deposit writing, which I may deliver to whomsoever I will.  And Hansen did even so.  (NOTE: Lender and borrower owe each other equally, so NO DEBT EXIST BETWEEN THEM.)

The next day came another merchant, and another, and still another.  And to each Hansen loaned a portion of the gold of Chief Oomah the Third, taking from each a security his entire possessions, including his innermost personal raiment, and have to each a writing upon parchment showing that each had on deposit the gold he had borrowed, until upon the tenth day he had given parchment deposit writings for the whole of the thousand shekels.  But he still had all the gold.

Hansen reflected much upon this curious state of affairs, and said to himself, These birds know not how much gold I possess.  They don't want the actual gold itself; what they really want is credit, that is, a deposit writing which they may pass from hand to hand as money. Actually, all they need is the figure that appears on the gold just a figure to pass from buyer to seller.  I have a grand idea!

On the next day came another merchant, and another, and still another. And to each Hansen shewed the great store of gold of Oomah the Third, and to each he pretended to loan a portion, although he had previously loaned it all to the first ones who came.

And it came to pass that at the end of another ten days Hansen had pretended to loan to many more merchants and had given writings of deposit for a second thousand shekels, making 2,000 shekels in all, although he had only 1,000 shekels of Oomah the Third.

And still he had all the gold.

Whereupon Hansen reflected to himself, What a cinch; what a leaden pipe cinch!  I wonder I did not think of this before.  I can collect just as much interest, just as much usury, for the phony deposit writings as for the genuine.  Verily, I am a financial wizard.

Thereupon Hansen caused to be noised about that he possessed a vast store of gold for hire, and many more merchants came to borrow.  And to each Hansen delivered writings of deposit and collected generous usury and demanded pledges from each of all his possessions, even unto his innermost raiment, until he had issued writings of deposit for 10,000 shekels and held mortgages on substantially the whole city.

Then went Hansen to the wise man of the city and said unto him, Verily, I have discovered the greatest of all time.  I have learned the magic of making gold out of baloney through fake loans and incidentally creating the nations money supply.  The process is as follows:

A man cometh unto me to borrow.  I give him a writing upon parchment which sheweth how much money I owe unto him.  He likewise giveth me a writing which sheweth how much money he owes unto me.  My writings then passes from hand to hand as money, gathering for me (through him) a perpetual ransom in usury.  Meanwhile his writing lies in my strongbox, gathering for him only dust.

This is my fake-loan formula.  And if I can keep it secret for a few years, I'll collect a fortune that will make Solomon's treasury look like a second-hand store.  Now tell me how I may keep secret this bonanza for mine own profit.

Then said the wise man, Look wise and say little and only upon little known matters afar off.  Obtain the ear of the town crier.  Engage him to spread the impression that money is a mysterious Subject which no one understands save thee alone.  Be friendly with the king's councilors and grant their favours, that the king may smile upon thee.

And Hansen did as he was bid and collected much usury from the phoney loans and built for himself a mansion, collected works of art, and clothed his wives and concubines in fine linen and jewels.  And  when his fake-loan business had grown to many times its humble beginnings, he took over the entire temple and by way of a sly joke called it The First International Bank, the same being from an obscure language and meaning place of imaginary money.

And that is the reason most banks have great marble pillars and bronze doors, so they may resemble outside as well as internally the place of imaginary money which Hansen L. Roschab, the goldsmith, built with phoney loans on the gold of Oomah the Third in the Temple of the Thirteen Suns.

P.S: Hansen L. Roschab eventually discovered an even more potent method of dispossessing the public on a grand scale; he learned how to create the fleecing cycle known as the Business Cycle.  Here is how he explained it to his sons:

By increasing or decreasing the flow of fake loans to the public, I increase or decrease the volume of money and cause a boom or a depression.  I buy up and foreclose on property during the depression, then sell out later at high inflation prices during the following boom which I create by rapidly increasing the flow of fake loans, thus expanding the money supply.  I repeat the cycle again and again, alternatively granting and then withholding the phoney loans.  The public is like unto a great flock of sheep, which I thus periodically fleece.

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