Recessions are caused by an unstable money supply. Recessions, like the one that we have been in for the last three years, are not the result of a lack of consumer confidence and they are not cured by deficit government spending. Regardless of what the primitive Keynesian economists tell us, the unemployment that characterizes a recession is simply the result of a money supply that makes employees a bargain during a period of monetary expansion (inflation) and an intolerable burden during a period of monetary contraction (deflation). One of the goals of the following posts to this blog will be to demonstrate the necessary connection between recessions and an unstable money supply.
So, the question has to be asked, if a recession can be avoided by a stable money supply, why can’t a government simply keep the money supply constant and make its citizens happy and employed. The answer to such a question is simply that governments do not have control of the supplies of their own money because they support and protect banking systems that are inherently corrupt, fraudulent, and economically destructive – banking systems that allow banks to produce their own form of counterfeit money – what is called fractional reserve banking. It is another goal of the following posts to this blog to educate the readers, in plain language, how banks inflate the economy by creating their own money from nothing and then deflate the economy by destroying that same money and returning it to nothing. Employees are a bargain during inflationary periods and are a problem when money again becomes relatively scarce (deflation).
Fractional reserve banking cannot be justified legally on any grounds, nor can it endure the moral scrutiny of an informed people. It is simply fraudulent in that it is founded upon false pretenses and has the effect of taking people’s wealth without their knowledge or consent. Fractional reserve banking is simply the result of greedy bankers and dishonest or ignorant politicians and judges. A third goal of the following posts here will be to show how fractional reserve banking is inherently criminal in nature and in its effects upon innocent people.
There is a wonderful book on the damaging effects and underlying illegality of our federal reserve banking system. Money, Bank Credit, and Economic Cycles, by Jesus Huerta de Soto. It is a scholarly (yet readable) work that is perhaps worthy of a Nobel Prize for its author. This wonderful work describes in accurate detail the criminal nature of fractional reserve banking, how it necessarily leads to recessions, and how governments are powerless to protect us from its effects. Unfortunately, it is a tome of nearly 900 pages and will therefore not be read by the people who need its information the greatest – the average voter. Its basic premises, however, are relatively simple and can be published in blogs such as this one.
It is the intent of this blog, therefore, to show clearly and in plain language the following three truths that can not only prevent further recessions, but can help protect hardworking people from having their savings diluted and destroyed by greedy and irresponsible bankers:
- Recessions and high unemployment are the result of a money supply made unstable by fractional reserve banking;
- Banks create money from nothing by fractional reserve banking, rendering the government unable to stabilize its own currency; and
- Fractional reserve banking is inherently deceitful, destructive, and criminal in nature.
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