Stunning Facts About How the Banking System Really Works … And How It Is Destroying America

Paintings by Anthony Freda:

Reclaiming the Founding Fathers’ Vision of Prosperity

To understand the core problem in America today, we have to look back to the very founding of our country.

The Founding Fathers fought for liberty and justice. But they also fought for a sound economy and freedom from the tyranny of big banks:

“[It was] the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.”
– Benjamin Franklin

“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”
– John Adams

“All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.”
– John Adams

“If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied”.
— Thomas Jefferson

“I believe that banking institutions are more dangerous to our liberties than standing armies…The issuing power should be taken from the banks and restored to the Government, to whom it properly belongs.”

– Thomas Jefferson

“The Founding Fathers of this great land had no difficulty whatsoever understanding the agenda of bankers, and they frequently referred to them and their kind as, quote, ‘friends of paper money. They hated the Bank of England, in particular, and felt that even were we successful in winning our independence from England and King George, we could never truly be a nation of freemen, unless we had an honest money system. ”
-Peter Kershaw, author of the 1994 booklet “Economic Solutions”

Indeed, everyone knows that the American colonists revolted largely because of taxation without representation and related forms of oppression by the British. See this and this. But – according to Benjamin Franklin and others in the thick of the action – a little-known factor was actually the main reason for the revolution.

To give some background on the issue, when Benjamin Franklin went to London in 1764, this is what he observed:

When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes… Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:

“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”

In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.

Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was “the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.” This, he said, was the real reason for the Revolution: “the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction.”

(for more on the Currency Act, see this.)

Alexander Hamilton echoed similar sentiments:

Alexander Hamilton, the nation’s first treasury secretary, said that paper money had composed three-fourths of the total money supply before the American Revolution. When the colonists could not issue their own currency, the money supply had suddenly shrunk, leaving widespread unemployment, hunger and poverty in its wake. Unlike the Great Depression of the 1930s, people in the 1770s were keenly aware of who was responsible for their distress.

As historian Alexander Del Mar wrote in 1895:

[T]he creation and circulation of bills of credit by revolutionary assemblies…coming as they did upon the heels of the strenuous efforts made by the Crown to suppress paper money in America [were] acts of defiance so contemptuous and insulting to the Crown that forgiveness was thereafter impossible . . . [T]here was but one course for the crown to pursue and that was to suppress and punish these acts of rebellion…Thus the Bills of Credit of this era, which ignorance and prejudice have attempted to belittle into the mere instruments of a reckless financial policy were really the standards of the Revolution. they were more than this: they were the Revolution itself!

And British historian John Twells said the same thing:

The British Parliament took away from America its representative money, forbade any further issue of bills of credit, these bills ceasing to be legal tender, and ordered that all taxes should be paid in coins … Ruin took place in these once flourishing Colonies . . . discontent became desperation, and reached a point . . . when human nature rises up and asserts itself.

In fact, the Americans ignored the British ban on American currency, and:

“Succeeded in financing a war against a major power, with virtually no ‘hard’ currency of their own, without taxing the people.”

Indeed, the first act of the New Continental Congress was to issue its own paper scrip, popularly called the Continental.

Franklin and Thomas Paine later praised the local currency as a “corner stone” of the Revolution. And Franklin consistently wrote that the American ability to create its own credit led to prosperity, as it allowed the creation of ample credit, with low interest rates to borrowers, and no interest to pay to private or foreign bankers .

Not Ancient History … One of the Most Vital Issues of Today

Is this just ancient history?


The ability for America and the 50 states to create its own credit has largely been lost to private bankers. The lion’s share of new credit creation is done by private banks, so – instead of being able to itself create money without owing interest – the government owes unfathomable trillions in interest to private banks.

Read this background to understand how money is really created in our crazy current banking system. And read this and this to learn why we are paying trillions of dollars to the big banks in unnecessary interest costs.

America may have won the Revolutionary War, but it has since lost one of the main things it fought for: the freedom to create its own credit instead of having to beg for credit from private banks at a usurious cost.

No More Federal than Federal Express

While many Americans assume that the Federal Reserve is a federal agency, the Fed itself admits that the 12 Federal Reserve banks are private. See this, this, this and this.

Indeed, the money-center banks in New York control the New York Fed, the most powerful Fed bank. Until recently, Jamie Dimon – the head of JP Morgan Chase – was a Director of the New York Fed. Everyone knows that the Fed is riddled with conflicts of interest and corruption.

The long-time Chairman of the House Banking and Currency Committee (Charles McFadden) said on June 10, 1932:

Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies ….

And congressman Dennis Kucinich said:

The Federal Reserve is no more federal than Federal Express!

The Fed Is Owned By – And Is Enabling – The Worst Behavior of the Big Banks

Most people now realize that the big banks have become little more than criminal enterprises.

No wonder a stunning list of economists, financial experts and bankers are calling for them to be broken up.

But the Federal Reserve is enabling the banks. Indeed, the giant banks and the Fed are part of a malignant, symbiotic relationship.


The corrupt, giant banks would never have gotten so big and powerful on their own. In a free market, the leaner banks with sounder business models would be growing, while the giants who made reckless speculative gambles would have gone bust. See this, this and this.

It is the Federal Reserve, Treasury and Congress who have repeatedly bailed out the big banks, ensured they make money at taxpayer expense, exempted them from standard accounting practices and the criminal and fraud laws which govern the little guy, encouraged insane amounts of leverage, and enabled the too big to fail banks – through “moral hazard” – to become even more reckless.

Indeed, the government made them big in the first place. As I noted in 2009:

As MIT economics professor and former IMF chief economist Simon Johnson points out today, the official White House position is that:

(1) The government created the mega-giants, and they are not the product of free market competition


(3) Giant banks are good for the economy


The [corrupt, captured government “regulators”] and the giant banks are part of a single malignant, symbiotic relationship.

Indeed, the Fed and their big bank owners form a crony capitalist cartel that is destroying the economy for most Americans. The Fed has been bailing out the giant banks while shafting the little guy.

Fed boss Bernanke falsely stated that the big banks receiving bailout money were healthy, when they were not. They were insolvent. By choosing the big banks over the little guy, the Fed is dooming both.

No wonder many top economists say that we should end – or strip most of the powers from – the Federal Reserve.

Even long-time Fed Chairman Alan Greenspan says that we should end the Fed.

A Better Alternative

Conservative and liberal economists both point out that the big banks are already state-sponsored institutions … so the government should create a little competition through public banking.

State-owned public banks – like North Dakota has – would take the power away from the big banks, and give it back to the people … as the Founding Fathers intended.

Even a 12-year old sees the wisdom of public banking.

And see this.

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  • nveric

    “A Better Alternative” … “so the government should create a little competition…”

    Yes, but in their own area, government. The People so concerned must compete against these established governments with their own. Let’s take the free market idea to the next level. Let’s take it further and just create our own country.

    • Charlie Primero

      Exactly. Instead of Greenbacker Government banks, or private banks that run the government, what we need is Separation of Banks and State, a.k.a. Free Banking.

  • mmckinl

    Great post …

  • gozounlimited

    Santelli On The End Of Paper Gold’s ReignSubmitted by Tyler Durden

    Central Banks remain aggressive accumulators of the precious metal as we noted last night,
    as their actions outweigh their words; but as CNBC’s Rick Santelli
    notes today, there is a big difference between the physical bullion they
    are buying and the ‘gold bug’ trading currently going on in our

    I don’t even look at gold as gold anymore since they securitized it.
    If things [went] badly in the world that I used to observe (as a gold
    bug); the gold would end up in the hands of the gold bugs. If things go badly now, they’re going to end up with checks from ETFs! Sorry, it’s not the same. The reign of [paper] gold as the Ayn Rand endgame, to me, that’s over. Game, Set, Match.

    Which likely explains the incessant demand for precious metals from the US Mint over the past few months – as the other great rotation (from paper to physical) proceeds. ….. read here …

    • gozounlimited

      Who Destroyed America? – America’s Top Sellouts…… see here:

      Meltdown …. The men who crashed the world – Doc Zone Documentary
      Published on Feb 9, 2013

      Greed and recklessness by the titans of Wall Street triggers the largest financial crash since the Great Depression. It’s left to US Treasury Secretary Hank Paulson, himself a former Wall Street banker, to try and avert further disaster. Meltdown is a four part investigation into a world of greed and recklessness that brought down the financial world. The show begins with the 2008 crash that pushed 30 million people into unemployment, brought countries to the edge of insolvency and turned the clock back to 1929. Doc Zone has traveled the world – from Wall Street to Dubai to China – to investigate The Secret History of the Global Financial Collapse. Meltdown is the story of the bankers who crashed the world, the leaders who struggled to save it and the ordinary families who got crushed.

      see documentary here:

      • gozounlimited
      • nveric

        The US is far from extinction. As with other countries, it’s an idea, a state of mind, shared by people willing to be together for common reasons.

    • nveric

      Uh? Gold’s value is with the buyer, as are all ‘things’ being sold.

      Seeds are more important. Gold won’t grow when watered.

  • Frenky

    Gres tso nice psot! THX


  • قراءة مفيدة لموضوع البنوك.. قصدي الكازينوهات!!

  • Honest Harry’s Used Cars

    Wherever there is money lent at interest, there is wanton corruption. There is wanton corruption because the temptation to upend the debtor’s plans to repay a loan is simply too great for some people.

    • leoeris

      Lesson: don’t buy a car from this guy.

  • alan2102

    “The corrupt, giant banks would never have gotten so big and powerful on their own. In a free market, the leaner banks with sounder business models would be growing, while the giants who made reckless speculative gambles would have gone bust.”

    What, exactly, is a “free market”? What is the relationship of a “free market” to the deregulation that is/was the cause of the banking disaster? We had a (relatively) free market — deregulated — that led to the disaster. Then, adding insult to injury, massive bailouts were undertaken with public money. The worst of both worlds. But do not allow the second fact — the bailouts — to obscure the first, the initial cause of the problem. The whole matter of public bailouts would not even have come up if there had not been radical deregulation, prior (“free”-ing of the banksters), leading to catastrophe.

    I recommend this sobering interview with Paul Craig Roberts, former undersecretary of the treasury under Reagan. He has changed his views radically since those days; he just wrote a book titled “The Failure of Laissez Faire Capitalism”. In this interview he discusses the looting of the world by the elites and banksters, the feudalization of societies, the destruction of the middle class, the coming theft of pension funds, the disaster of deregulation of the financial system and resulting crony capitalism, the coming tripartite mega-bubble collapse (bonds, the dollar, the stock market), the destruction of the constitution, the fed’s manipulation of the gold and silver markets, and more:

    • Bri 3d

      What free market?
      50% of every transaction is money. Money is completely controlled by the banks. Therefore, we have no free market. You can’t have a free market economy without free market money.

      I listened to that interview and even though I like Paul, I have to completely disagree with him blaming deregulation for the reason I stated above.

      I would also agree with the author that if we had a free market, these speculative banks would crumble. If the people actually knew that paper is not money then the banks would not be able to just print themselves out of the holes they dig.

      Time and time again, the free market has chosen gold & silver as money. When you deposit coins and the bank gambles them away then the people would know they got ripped off and the bank would fail.

      Also, in a free market, there would be no deposit insurance. If your bank lost your money then that should be your problem, not mine. This would make banks be a little more careful with their deposits as their customers would be much more interested in the solvency of the bank they use.

      Nothing regulates better than the free market. The problem is we don’t have one.

  • Fellow Traveler

    Bitcoin can set us free.

    • Amenemhat1

      bitcoin is still funny money because the only real way to acquire it is through debt currency. Even mining bitcoins is bleak at best. Group miners yield better results, yes, but still long way to go. But I do agree that it has some potential…

  • Essential Intel

    TBTF: To Big To Fail i.e. Financially, for bankruptcy.
    TBTJ: To Big To Jail.
    The Basic definition of a Monarchy is TBTF+TBTJ, because only the Monarch cannot be Jailed and only the Monarch cannot be declared bankrupt.
    Add to that:
    1. Foreclosures, in many cases unjustified, illegal, thus broad daylight robberies.
    2. Interest rate apartheid
    3. Loan approval apartheid
    4. Insider information apartheid
    5. The Fed’s self-serving.
    6. The Dodd-Frank act definition of “special entity”.

    …JPM & GS may be then financial sovereigns, rather not financial terrorists,
    i.e. an accomplished coup-d’etat. When Banks are allowed to tax the population, then banks have become sovereigns, thus it is no surprise banks have been declared by the Dodd-Frank act special entities,which then in turn already implies at least a nobility. Banking nobility is employed chiefly across the Angloshpere since it wouldn’t subject itself to other countries to do their internal bidding of wealth confiscation. That’s while over western Europe, which is essentially militarily occupied by Anglo-America, hierarchical constellations are employed in order to hide the true masters, thus drowning the public anger and retribution away from the true masters.
    Read all about it here:

  • Washington76

    European Parliament might shift bailout burden from taxpayers to depositors March 26, 2013

    • nveric

      This and the other economic problems are artificial in that systems require inputs to sustain themselves. Just as a body needs food, a country needs outside inputs to fulfill its obligations. These cycles of cycles keep cycling as does a dog chasing its tail.

      Start at the beginning with a set number of people, and see how their economy works. Where does the money come from? How is profit generated without someone loosing that same amount? We are talking about gambling when we say Capitalism. Growth comes from where? Who grows and how?

      Looking at today, people are seeing a long movie playing and they have no idea of when it started or how. The credits were thousands of years ago. The director is dead, the writers too. This cast of billions, all not getting union wages for their parts in this World-Wide extravaganza, don’t realize what’s going on backstage, because they don’t know that they’re in this movie. They don’t fully or partially comprehend the scope of the enterprise.

      Business for profit creates losers. All profit is at someone’s expense, because the World is one unit with no economic inputs from the outside.

      What the hell?

      How can one person make a profit? They get it from the outside World. But, of course, price, cost, value, exchange, labor, materials, and so forth cloud the equation and obfuscate understanding as economic theory is not a science. I’ve never heard of computer simulations running to prove any theory will do what the salesman says it will.

  • No offence intended to anyone. America is a nation founded by crooks and convicts.

    Insider Trading is the American Way: The Founding Scam

    Soon, Hamilton’s associates — bankers, agents, and speculators — got wind of the government’s secret plans to pay off the debt in full and bought up the supposedly worthless Continentals at 10% of their face value, letting the rubes believe that they’d starve before there would ever be a government capable of paying them off, or that they’d never be able to prove that their claims on the government were valid.

    But Hamilton’s circle knew they stood to make ten times their money when Hamilton’s clever plans were implemented. The main opposition to Hamilton was Thomas Jefferson who thought that Hamilton’s financial schemes were too royal, too British, and therefore too corrupt. Jefferson and James Madison hoped that the nascent government would be less centralized and more democratic.

    Hamilton had General Washington in his hip pocket, but he had to get Jefferson’s agreement on the scheme before the (mostly southern) states and their representatives would buy in. So Hamilton arrogantly promised Jefferson that if Jefferson agreed to the financial system of centralized banks, credits, and paper money, the capitol of the new country would be in Jefferson’s backyard in Virginia, making it more accessible to Virginia and other southern states, putting them in a better position to profit from the access.

  • Samuel Johnson on Americans.

    Sir, they are a race of convicts, and ought to be thankful for anything we allow them short of hanging.”

    “How is it that we hear the loudest yelps for liberty among the drivers of negroes?”

  • This (French written) article reveals a a more plausible motive for the (elite) colonists enthusiasm for independence and their decision to betray the country that gave birth to them and protected them from the French and the Native Americans.

    “However, the 1763 Treaty of Paris removed the French from North America; and might have opened the West for the American colonists, had not George III prevented them from expanding by preserving the trans-Appalachian West for the native Americans. This made the colonists angry at the British this time. As the colonial quarrel grew in the late 1760s and 1770s, French authorities were keen observers out of geopolitical rivalry with Great Britain in the region, and in general. Here was an opportunity to get back at Britain by contributing to the break-up of its empire. Such was French anticipation upon their official involvement in the conflict. ”

    • Danae

      Fascinating information, much of it new to me. Many thanks.

  • The title is “Forget too-big-to-fail: Kill the fractional reserve banking system”

  • Ares

    STEP 1: military counter-coup

    STEP 2: launch Hellfire missiles from Predator Drones into Rothschild Castle

    STEP 3: Issue interest free currency and new no debt, non usury baking system

    STEP 4: Hunt down all bankers and minions with shoot to kill orders

  • None Ofit

    Write off the All the Phoney Debt.
    Repatriate the real wealth stolen by the house of Rothschilds and their agents over the centuries. All the Gold, Silver, Diamonds, Land, Stock and each country is then free to issue there own currency back by this real wealth once returned.

    Done –

    No Collapse
    No Need for war