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·         One who habitually takes advantage of the generosity of others without making any useful return.

·         A person who habitually lives at the expense of others; sponger [Greek para- beside + sitos grain].

·         A follower who hangs around a host (without benefit to the host) in hope of gain or advantage.

·         An animal or plant that lives on another animal or plant without giving anything in return.

·         Parasites are generally harmful to their hosts.


No matter how I view society these days, no matter what opinion is being expressed by so called economic experts in the media I cannot shake my conclusion that the financial woes of the world are the result of the avarice and ineptitude of the financial institutions, in particular the banks.


It seems to me that recent generations, raised and educated in a credit-based economy base all their opinions and perceptions on the status quo, disregarding the possibility that the system itself is flawed.


As a precursor to what I am about to talk about let me say first that all the wealth that exists is created by the makers of things.


Each productive member of society that has an innate skill is able to produce many items or part of an item based on that skill. In other words, someone with a particular skill is able to produce far more items than required for his or her own needs.


To deal with this situation society created mechanisms to exchange the surplus things. For example, a carpenter who makes chairs can barter his surplus chairs for food and other items outside or beyond his skill level.


To ease the unwieldy practicalities of the direct exchange or bartering of things, society created a neutral commodity called money. Originally, everything that is made was to be represented by money.


What a simple system, exquisite you might say, everyone making things and exchanging the fruits of their labors in a balanced society through the medium of the neutral (and technically worthless) commodity, money. Everyone is a winner.


Until that is, the bankers came along.


The Rise and Rise of the Bankers


I opened this narrative with some definitions of the word ‘parasite’, for there is no other way to describe that element of today’s society that operates in the financial services sector. Their actions and effect on society cannot be described any other way than as a parasite upon those who create society’s wealth.


Before I go any further, I would say that in a society where the wealth created is represented by money there is a need for a benevolent financial institution that:

1.     Determines the amount of money to be printed based on the wealth being created.

2.     Acts as a depository for money that is surplus to the requirements of individuals or companies.

3.     Acts as intermediary in the exchange of money between individuals or companies.

4.     Lends money up to the maximum amount it has in reserve from deposits, investors and profit.


Such a financial institution would be beneficial to society.


Unfortunately, in all my research I have not yet found any financial institution in the world operating this way. The reason is not hard to find, there is far more money to be made by creating schemes that maximize the extraction of wealth from society and diverting it into the coffers of a minority who create absolutely no wealth at all. OK, they become wealthy, but at the expense of those who create the wealth in the first place. They steal wealth they don’t create it.


Now you might say; so what? If they are clever enough to trick people into parting with their wealth then good luck to them.


Well, there was a time when these tricksters represented just a small proportion of society, given the vast amount of wealth being created their economically suspect antics, went unnoticed.


In today’s world of unlimited false credit, plastic and electronic money, electronic dealing and banking and a belief by many people in society that it’s cool to make money from nothing and where there are perhaps too many over-educated people, then there are now just too many people on the ‘money for nothing’ bandwagon. That’s why we have a so called ‘credit crunch’ and the financial services meltdown circa 2008/9.


During the last hundred years or so, the banks and other financial institutions have coerced Governments into accepting changes to the financial system that has maximized their wealth stripping mechanisms in every country worthy of their attention. I will not dwell here on what these mechanisms are because that is a whole other chapter. I will just say that the current corrupt, fraudulent financial system has been around for so long that whole generations have grown up to accept it as normal. Several generations of economists have studied the causes and effects of a financial system flawed at its root, accepting it as being the only system. They argue left, right, up and down about a system that is innately flawed, it’s no wonder they never agree.


We need to break the mould, it’s time to step outside the box and see the whole corrupt system for what it is, flawed, fraudulent and above all a parasite on the body of society that create or provide support in the creation of wealth.


Having said all that and with a President in the White House who appears to be sympathetic to the cause of ‘financial reform’, I do not expect to see any fundamental changes. The symptoms of the financial disease society is suffering from are now all too obvious but unfortunately, though we now know the cause, the number of parasites is just too overwhelming. The powerful strain of parasite that’s now in control is unstoppable. We just don’t have anything in the medicine cabinet.

As 2008 draws to a close its legacy is a year of financial chicanery, theft and misdemeanor by the banks and financial institutions around the world.  

What better time than to issue a somber warning that the financial institutions are unlikely to ‘mend their ways’ of their own volition. Unless fast action is taken by Governments to impose strict controls over the handling of savings, investments and credit availability for ordinary people then 2009 will undoubtedly go the way of 2008.

Perhaps it’s also time to uncover the ‘pyramid-selling-like’ antics of the banking system. Another relatively uncontrolled mechanism the banks have installed over time as a means of creating unlimited amounts of credit that turn into vast mountains of profit for them derived from interest.

I’m talking specifically about Fractional Reserve Banking, which in my opinion is probably a far greater crime against modern society than all the mis-doings of the F-May, F-Mac, Lehman Bros, Bernie-M, et al brigade.

While usury in times past and in its original form was a crime against society and currently remains a heinous crime in Islam (riba), it’s now used only to describe excessive charging of interest. Despite that, charging interest or excessive interest it is not a criminal offence under the law of most countries.

In fact, most people would accept the principle that banks charge a higher rate of interest to their debtors than they pay in interest to their depositors, the difference being a more than reasonable profit for doing next to nothing. Banks obviously also cover their operating expenses and make a profit by charging for other bank services.

So, let’s come back to the ‘pyramid-like’ instrument installed by the banks that creates a geometrically increasing amount of credit based on nothing, but that nets the banks as much in interest income annually as the total value of their reserves.

I will say that again because a single sentence is not worthy of the magnitude and consequences of such a fraud.

The banks have a mandate that allows them receive as much in interest income annually as the total value of their reserves.

Unbelievable, yes. So how do they do it? And why if it is so obvious is the practice apparently condoned by Governments?

Well, the mechanism is a little difficult to explain without getting too complicated, but basically the creation of Central Banks and the formation of a banking cartel overseen by the Central Bank allows the banks to work in unison with the express aim of maximizing their excessive profits.

As for why Fractional Reserve Banking is condoned by Governments, well I’ll leave that to you to figure out. The money making mechanism works like this:


  1. Depositors lend Bank-A $10,000, the bank becomes a debtor to its depositors.

  2. Bank-A promises to pay the depositors 5% per year interest.

  3. A member of the public who has no money asks Bank-A for a loan to buy a car.

  4. Bank-A  gets the member of the public to sign a loan agreement to pay back $11,000, the amount borrowed plus 10% interest, over a specific period of time.

  5. Bank-A deposits $10,000 in the member of the public’s checking account.

  6. The member of the public goes to a car showroom, writes out a check for $10,000 and drives away in his new car.

  7. The car showroom owner banks the cheque in his account in Bank-B.

Now, quite by chance another member of the public went into Bank-B at the same time and arranged exactly the same deal. He went to another car dealer and bought a car for $10,000 with a check drawn on his previously arranged loan account.

By another chance, the second car dealer happens to bank with Bank-A. So Bank B now has a check for $10,000 drawn on Bank-A and Bank-A has a check for $10,000 drawn on bank B. So what do they do? Well they simply exchange checks, after all they are both members of the Central Bank Club.

You will notice that neither bank, the member of the public or the car dealer actually saw any real money. The banks just sit back now and receive monthly payments that do now consist of real money totaling $11,000 for the duration of the loan term.

Now, if that was all there was to it, the status quo while not perfect, would be acceptable to most people.

But, and it’s a very big and geometrically explosive but.


Both Bank A and Bank B, having secured a ‘promise to pay’ in the form of a signed document from their respective members of the public, now have the potential to lend up to 10 times more than the face value of the promissory document ($11,000) in further loans ($110,000), backed by the Central Bank . Furthermore, each of these new promissory loan documents can in turn be used in exactly the same way to generate a further 10 times volume of credit, and so on.

As you have seen the money lent does not have to exist, no matter how many banks are involved in the credit/spending roundabout of fake money it always ends up back at the bank that lent it in the first place. And as long as the banks creditors don’t all ask for their money back at the same time the fraud can continue to grow almost in perpetuity.

The amount of credit available is limited only by the supply of goods and services, and that calculation is no longer the preserve of Government but completely under the control of privately owned Central Banks. By introducing the volume of credit available slowly the supply of goods and services available is balanced by inflating the cost of all goods and services to match credit supply, much in the same way as money used to match gold reserves and later GDP in the good old days when Governments controlled the money supply.

Fractional Reserve Banking, as the name implies is the dubious practice of maintaining a reserve ratio of real depositors money that is just a fraction of the amount of virtual money that is lent, usually around 10% of the amount lent.

It’s no wonder then that the banking system goes through such turmoil every 10-15 years or so, like a snake shedding a skin that it’s outgrown, writhing itself into the next grubby money making phase.

It’s also no wonder that the very people who enter the banks premises cap in hand to beg for credit, do so simply to purchase the very things they helped create in the first place. The real wealth they created having been diverted into the coffers of the banks. Again, it’s no wonder that it takes 30 years of debt commitment for the average family to buy a home that’s worth only a fraction of the cost to build due to the inflationary effect of unlimited, un-backed mega-credit.

The clever can hoodwink the not-so-clever for a time, but as populations become more educated and the clever continue to make unforced errors due to their avarice and greed, a time will come when there will be a social revolution of sorts mounted against the financial sector. In fact, if things continue the way they have developed during 2008, then 2008 may yet prove to have been the turning point.

I have followed the US election campaign with some interest, since the outcome will have worldwide implications.

Unfortunately I am not able to comment on the 30 minute Obama ad because it appears to be hosted only on YouTube. Access to YouTube is censored in Turkey.

If anyone knows of an another source for the ad, or a download, it would be much appreciated.

A personal view from Turkey by a Brit who lives there.


It makes me so angry when I see countless financial pundits on television warning the US public that unless they agree with the Seven Hundred Thousand Million dollar bailout of the financial system there will be mass unemployment, and companies stifled by lack of credit.


Have these pundits completely forgotten where all the money lent as credit comes from in the first place? Alternatively, are they so embroiled in the system that feeds them so diligently they’ve never really thought about it?


If all the people the pundits were talking to stopped building, growing and making things there would eventually be no money in the system. If the financial institutions of the world want to maintain their lifestyles, they have to look after the people who create all the real wealth very well indeed. The financial institutions, by allowing a situation to develop whereby the wealth creators became aware that they are at their mercy was definitely not a good move.


I can’t believe how so many people, wealth producers as well as wealth manipulators, are duped into believing that modern society cannot function without credit.


Credit is an invention of the banks; the money they lend created out of nothing by siphoning off the real wealth from those who create it. No mystery here, all the things we judge our wealth by, buildings, cars, the very clothes we wear, in fact everything made by man, was made by a relatively small number of people, supported only by designers, distributors and retailers, not by financial institutions. See my cartoon.


In fact, there should be little if no requirement in a just society for any credit at all.


Whoa!, don’t all shout at once, did I hear someone shout ‘naïve’, ‘the world economy would collapse without credit, people would starve, companies would not be able to operate’, blah, blah, blah.


However, as long as there is a vast army of people in the financial industry supported by so few, I agree a credit society is necessary. (I use the word ‘industry’ here with tongue placed firmly in cheek)


Yes, of course, the world economy would collapse, the incumbent credit system took the banks hundreds of years to install, it would take many years of reform for it to be reorganized into the socially benevolent financial system it should be.


For the past 15 years, I have lived in Turkey. When I came here mortgages and credit cards were virtually non-existent, and surprise-surprise almost everyone lives very well in their own, paid for homes.


It’s with a sad heart that I have observed during the last few years the creeping cancer of bank driven credit spread its tentative tendrils into the Turkish economy. Homegrown banks are learning the fundamentals of ‘stealthy wealth extraction’ from their foreign cousins as well as an influx of foreign banks that see Turkey as a piece of prime meat, ripe for infection.


Of course, creating a credit reliant society is not something that can be done overnight, first the banks have to issue credit cards indiscriminately, offer larger and larger loans over ever extending periods of time and initiate systems that inject money into the financial system not backed by real wealth.


Gradually, in time, the intrinsic cost of everything will rise. Credit driven inflation (not to be confused with the day-to-day inflation percentage bandied about by governments), is the ‘built in’ inflation that is part of the cost of everything, this only evolves after many years of careful nurturing by the banks. Once installed it becomes almost impossible for most people to buy anything without resorting to credit.


Fortunately, Turkey is still in its infancy when it comes to being a credit driven society, though it’s obvious from observation today that the foundation stone for a future Turkish credit society has been laid, its eventual arrival is inevitable.


In the meantime, despite financial turmoil in many other countries, Turkey is still able to say, what credit crunch?

In the light of the current world financial crisis, my first blog on WordPress has to be my personal view of the so-called ‘Credit Crunch’, ‘Credit Quake’ or more correctly, ‘Credit Scam’.


For some time I have been unhappy with the rise and rise of the credit society. The financiers would say the current situation came about because of the inability of an inordinate number of ordinary Americans to pay their mortgages. No doubt, that may be true.


However, this and a number of other financial crises are the inevitable consequence of a system built upon a bit of financial chicanery that should in my opinion, be considered fraudulent.


The problem is that the financial system that exists today has been around for so long most people consider it normal and take it for granted.


What I am about to suggest may seem outlandish, and if I were criticizing some religion or other I would be called a heretic. Nevertheless, in order to begin to understand how a financial crisis of the magnitude that currently exists could come about, it’s necessary to take quite a few steps back in order to see the bigger picture.


On the way to taking those few steps back, I would just mention that it should not be necessary for most ordinary people to incur so much debt. The cost of raw materials, labor, distribution and retailing are not so great as to justify the inordinately high price of everything.


I will keep this as brief and as simple as possible. I know I run the risk of being accused of oversimplification, but I want this message to be understood by as large a percentage of the population as possible. In particular, to those duped into accepting a financial system that, unlike the fabled Robin Hood, steals from the poor and gives to the rich. I am not being condescending and I don’t purport to understand myself many of the financial mechanisms that are in place to divert the real wealth from the people into the hands of the financial institutions.


However, one mechanism is fundamental to the wealth extraction process and that is ‘fractional reserve banking’. Three innocent enough words in themselves, but together, dynamite in the hands of the bankers.


And this is how it works:

  1. A bank borrows money from the public or companies, places it in its vault for safe keeping and promises to return the money on request.
  2. The bank pays the depositor interest on the amount held on deposit.
  3. The bank then lends the money it has on deposit to the public or companies at a higher rate of interest. The difference is the banks profit.


OK up until now you might say, though even this practice (known as usury) was illegal in times gone by.


This is where things start to go a little astray.

  1. When the bank gets a borrower to sign a pledge to repay the amount borrowed plus interest the bank uses the debt agreement to lend further amounts, up to 10 times or more the value of the original loan, to the public or companies.
  2. The bank now receives interest not only from the original loan but also from the additional loans financed by money created out of thin air thus earning the banks a profit 10 times larger than that received from the original loan. And so on.


The net effect of all this over a period of hundreds of years is to maintain all products at artificially high price levels in order to perpetuate the credit society.


Now we’ll take another step back to a time when bartering was the way people went about their business. In order to survive you had to make or produce something that other people wanted. If bankers had existed at this time, either they would have been beggars or they would have starved.


The point I’m making is that the ‘banker types’ in society had to create a system whereby they could survive in a world where they produced absolutely nothing. I’m sorry to beleaguer the bankers, but they started the whole sorry state of affairs, and my comments apply equally to all financial institutions.


As I mentioned before I’m not going to criticize the many mechanisms used by the financial institutions, mainly because I don’t know what they all are, it’s really only necessary to try and find the root cause of the perpetual financial crises.


All the real wealth created in the world comes only from the production of ‘things’, all the things we see around us that are manmade, all the things that everyone judges their wealth by. Money is not a measure of real wealth it’s just supposed to ‘represent’ the wealth that’s created. I say supposed, because the amount of money in circulation usually exceeds the amount of wealth created.


This is where it gets a little complicated, and I am not sure I fully understand it myself, but as far as I can deduce there are two fundamental types of inflation.

  1. The first is inflation that is immediate, that caused by too much paper and plastic money in the system and not enough goods, (one of many factors of course). This is the inflation percentage bandied about by Governments and quoted on financial television programs.
  2. The other is inherent or background inflation, this is inflation that has built up over centuries as a way of maintaining the price of all goods at higher than justified prices in order to underpin the need for a credit society.


In other words, to give just one example, there is absolutely no justification for the fact that Joe Bloggs the building worker has to sign up to 30 years of debt in order to buy a house he and no more than twelve of his colleagues built in 8 weeks. The price of materials is roughly equivalent to labor costs. The reason it takes 30 years for Joe to pay for his house is that as well as his family he has to help support the vast army of people in the financial institutions.


In follows in conclusion, that society is split broadly into two types of people.

  1. Those who produce real wealth and those people who support them such as designers, distributors, marketers, wholesalers, retailers etc.
  2. Those who divert the real wealth from the producers by a variety of sophisticated and complicated financial mechanisms and then continually manipulate it for their own profit and gain.


The financial institutions now have so much power that it’s very unlikely the system will change anytime soon. The recent ineptitude of Wall Street has highlighted just how highly strung and fragile the current system is. Modern technology allows stocks to be traded non-stop around the world minute by minute. Wealth extraction from the producers has never been so efficient, nor have there been so many people on the financial institution bandwagon.


It was obvious to anyone interested in macroeconomics that a collapse of the financial bubble was inevitable. What should ‘not be inevitable’ is the bailing out of the financial institutions when their possibly criminal actions cause such havoc and misery. The US Congress should not be discussing limits to chief executives ‘Golden Parachutes’ they should be discussing criminal penalties and drastic reform of the financial institutions.