Follow The Money

Hello ATS,

I've been doing some research into the origins of banking and found some interesting tidbits of knowledge that shed some clarity on the subject. Go to www.thesavagekhan.net for images and links to my sources.



FOLLOW THE MONEY

In the 14th Century, Italian poet Dante Alighieri penned his masterpiece Commedia, known today as The Divine Comedy. In the first part of the poem Inferno, Dante is guided by the Roman poet Virgil through the 9 circles of hell.

Each concentric ring leads deeper and deeper into hell culminating in the center of the Earth where Satan himself awaits those who commit the greatest sin, treason against god. The first circle is for those "virtuous pagans", who led noble lives but had not yet accepted Christ as their savior. The next four rings are the passive, self-indulgent sins. The greedy, lustful, gluttonous and wrathful spend eternity here punished in a fashion fitting their crimes.

In the sixth ring we pass through the Walls of Dis, the city of the dead. From here down we get into the mortal or active sinners; Murderers, traitors, panderers, seducers, hypocrites etc. The seventh ring is broken into three parts, those who sin against their neighbor, those that sin against themselves and those who sin against god. At the inner most ring of the seventh circle, are those who have sinned against god, nature and order. Here, sitting in a desert of flaming sand, we find a lesser known group of sinners, the usurers. When Dante asks Vigil about usury Virgil replies;

"If you remember in Genesis at the beginning, it behooves man to gain his bread and prosper. But because the usurer takes another way, he contemns Nature in herself and her follower, for he puts his hope elsewhere."

Usury is simply the act of lending money at interest, or at least it was. Modern definitions have updated it to lending at high rates or above the legal limit. It comes from the Latin Usura which means to "use". The act of using money to make money, was once deemed a mortal sin. Now it is a way of life. Most people cannot buy a home or go to school without taking out a loan at interest. In fact our entire monetary system is based on borrowing money at interest, but I'll get to that shortly.

AN EPIC STRUGGLE

The Code of Hammurabi is the most well-preserved and comprehensive lists of ancient laws in existence. Only one example is cited in the academic world and it sits in the Louvre museum in Paris. On a 7 foot slab of diorite dated 1750 BC, 282 laws are carved into stone in the Akkadian language of ancient Mesopotamia. Most English translations are missing laws 66-99, about 34 paragraphs which have been deliberately removed from the stone. The laws before and after the missing piece focus on commerce and agriculture, and practices between creditor and debtor, may of which seem fair and just (e.g. if bad weather ruins your crops you won't have to pay your creditors or if you cannot sell your crops you can pay your debts in grain.) The partially in tact 100th law states;

"...interest for the money, as much as he has received, he shall give a note therefor, and on the day, when they settle, pay to the merchant."

According to historian James B Pritchard a majority of those missing codes dealt with usury. Code 88 for example was supposedly a direct limit on the interest rate.

As an interesting aside, the stone was discovered by Jacques de Morgan in 1901 on an expedition funded by wealthy gold digger turned oil baron William Knox D'Arcy. That same year, the company that would become British Petroleum was founded. You can read more about that in my last blog "Black Blood".

In Politics Book 1 Chapter 10 Aristotle has this to say about usury;

“There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of any modes of getting wealth this is the most unnatural.” -Aristotle

In 49 BC, Julius Caesar returned to Rome after years of war to find the empire in social and economic disorder. The total outstanding debt had exceeded the amount of coinage in circulation. The Senators, who were generally unpaid public servants, were living lavish lives in states of perpetual indebtedness.

The Roman capitalists were also lending money at usurious rates. For instance, according to and analysis of Cicero's letters around 50 BC, Senator Brutus had loaned money to Salamis at 48% interest which was way over the legal limit. He even went as far as passing a measure in the senate to make his transaction legal.

Caesar's proposed economic reform resolved to bring about “tranquility for Italy and peace for the provinces". He allowed debts to be paid in goods since money was scarce. He canceled all interest accrued during the war and canceled rent for a year. He also reinforced the previous interest rate cap to 12% and forbade anyone to possess more than fifteen thousand coins of silver or gold as a way to prevent illegal hoarding of wealth. He did all this without consent of the Senate. The Senate, led by Brutus and Cassius, responded less than 3 years later by stabbing Caesar to death.

In Inferno, Dante finds Brutus and Cassius along with Judas Iscariot in the center of hell being eternally torn apart in in the 3 mouths of Satan.


Usury is a common concept in western religious texts. The Jewish in particular have a long history with usury. In the Old testament Ezekiel condemns usurers alongside robbers and murderers;

"A righteous man...does not lend at usury or take excessive interest....a violent son... who lends at usury and takes excessive interest. Will such a man live? He will not!...he will surely be put to death and his blood will be on his own head." -Ezekiel 18:5-13

Jews were forbidden to lend at interest to other Jews;

"Do not take interest of any kind [a] from him, but fear your God, so that your countryman may continue to live among you." -Leviticus 25:36

But were allowed to charge interest to foreigners;

"You may charge a foreigner interest, but not a brother Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess." -Deuteronomy 23:20

Usury is also cited in the Qur'an in a similar manner;

"O you who believe, you shall not take usury, compounded over and over. Observe GOD, that you may succeed"-The Amramites 3:130]

"Those who charge usury are in the same position as those controlled by the devil's influence. This is because they claim that usury is the same as commerce. However, GOD permits commerce, and prohibits usury. Thus, whoever heeds this commandment from his Lord, and refrains from usury, he may keep his past earnings, and his judgment rests with GOD. As for those who persist in usury, they incur Hell, wherein they abide forever." - The Heifer 2:275

In the New Testament Jesus becomes enraged when he finds people exchanging money at Herod's Temple. He casts them out, calling them thieves and whipping them in a rare moment of violence . The temple had gone from a "house of prayer and worship" to a business market. Lambs were being sold for slaughter and donations were also collected but only in the temple's chosen currency, one of the oldest still in existence, the shekel. Foreign money could be exchanged at the temple but the exchange rates weren't always fair.

In Web of Debt by Ellen Brown, the author describes the monetary practices of the temple as the basis for banking;

"The temples also acted as central banks. Sacrificial coins inscribed “debt to the Gods” were paid to farmers in acknowledgment that wheat had been contributed to the temple. These coins were also lent to borrowers. When interest was paid on the loans, it went back to the temple to fund the community’s economic and social programs and to cover losses from bad loans.

In the temple system, the community extended credit and received the money back with interest. In the system that displaced it, interest on debts went into private vaults to build the private fortunes of the moneychangers. Interest was thus transformed from a source of income for the community into a tool for impoverishing and enslaving people and nations. When there was insufficient money in circulation to cover operating expenses, farmers had to borrow until harvest time; and the odd man out in the musical chairs of finding eleven coins to repay ten wound up in debtor’s prison. Historically, most slavery originated from debt."

The author also cites the documentary The Money Masters which I recommend for a detailed history on the subject of banking.

THE FIRST BANKERS

The word Bank originates from the Italian word Banca which means "table" or "pile". According to the book by Arthur Crump, Banking, Currency and the Exchanges published in 1866, this is because of the low tables the money changers set up in the marketplace to exchange foreign currencies.

"The Lombard Jews were the first to practice this exchange business, the first bench having been established in Italy a.d. 808."- Arthur Crump

The Lombards (also Longobardi or Langobardts) were a Germanic tribe who conquered northern Italy in in the late 6th century (568-572 AD). They were a warrior-race known for their long beards from which it is speculated they got their name. By the 8th century they spread to nearly all of Italy.

It was at this time in Northern Italy (a place known today as Lombardy) that the Bavarian House of Welf settled into a great and lasting power. In 1167 the northern Italian nations would band together and form the Lombard League, bearing the simple crest of a red cross on white. With the support of Pope Alexander III the league successfully gained governmental independence from the Emperor of the Holy Roman Empire in exchange for an exorbitant sum of money.

In later decades the Welf or Guelphs would succeed in crushing the Holy Roman Empire and advancing the Roman Catholic Church into the seat of power it fills today. Dante touches upon this victory in Inferno when he mentions Mosca Dei Lamberti, a man who contested the Welf power only to end up suffering in hell for his "sins". Currently, the House of Welf still exists. The head of the house of Hanover Ernst August is also head of the House of Welf. He holds many titles including "Prince of Great Britain and Ireland".

In old French, Lombard meant pawn-broker. This is in reference to the method of money-lending used by the Lombards of England in the 13th and 14th century in which personal assets were offered by the recipient as collateral. This was referred to as a pledge. In later years the popes would promote this form of lending as a charitable alternative to usury. Similar practices existed in China and Persia.

The Lombard pawn shops were marked with three circles or
spheres. It is believed to have been a tribute to the traditional symbol of Saint Nicholas used as a sign of charity but also a warning. St Nicholas was the gift giver but also the patron saint of thieves and pirates. The symbol is now synonymous with
pawnbroking. There is a similar symbol on the shekel although it is most likely a depiction of barley, as the shekel did represent a certain amount of the crop.

One could also argue the spheres are reminiscent of the holy trinity. The early Lombards were for the most part Arians. Much of the Arian beliefs have been destroyed but judging by the many condemning articles that remain the teachings of Arius dealt mostly with the holy trinity, specifically the question of whether Jesus was a creation of God or God incarnate to which Arius argued the former. When the Lombard League joined forces with the Roman Catholic church they converted, bringing many of their myths with them.

The blossoming Roman Catholic church and it's condemnation of the mortal sins made usury among Christians a crime during the middle ages. The loophole that allowed usury between religions would make the Jew the defacto money lender to any would be Christian merchant. As a result early trading and banking was dominated by the Jewish.

In William Shakespeare's The Merchant of Venice, a Jewish usurer is the main antagonist. The protagonist for whom the play is named angers the moneylender by offering loans at zero interest. But when the merchant is forced to borrow from the moneylender, the collateral or "usance" is not money but a pound of flesh. In the end the story is a lesson in mercy and morality and an accurate social commentary on the general opinion of usury practices at the time.

The Lombards and Franks are also credited with first using bills of exchange instead of gold or silver to facilitate their transactions, another practice that would become common place worldwide in just a few centuries. Whether it be a receipt for a trade transaction or for a loan, the bills were easier and safer than dealing with large sums of gold.

It was in Venice that the first known "bank" emerged in 1157. The Bank of St. George of Venice was established to handle the war debt accumulated between competing port cities. The bank issued bills of exchange to pay merchants since gold was in short supply. In the following centuries many more spring up throughout Italy, Spain and Amsterdam.

At about the time the fist bank appeared, just before the Lombard League was formed William the Conqueror and the Normans invaded England. William brought with him a large group of Jewish settlers from the city of Rouen. They were considered property of the king and under his protection, they were immune from prosecution. Because of the special religious relationship that allowed usury, the Jews were given permission to lend to the people and collect interest and the monarchy would tax this interest at leisure. Antisemitism began to spread as the taxes bled the people dry. The Jews once again received the blame. In 1290 they were cast out of England. But the practice lived on. Not long after the Jewish exile the Lombards took their place establishing a lasting financial base in the center of London on what would be dubbed Lombard street.

By the Renaissance, trade in Italy was flourishing and banking was at the center, facilitating these foreign transactions. The infusion of credit stimulated commerce and growth. One of the most booming cultures at the time was in Florence. Banks like the Strozzi and Medici bank developed a new type of banking, keeping two sets of books to balance their assets and liabilities. Many wealthy traders began to store their money in the banks vault and use the bills of exchange to facilitate exchanges much like we use checks today. The Medici crest bore 6 spheres similar to the symbol Lombardi pawnbrokers and the Jewish star of David. The Medici were known Jewish supporters.

The bankers soon realized that depositors would rarely withdraw their deposits and started using the gold as the basis for new loans. Soon they were lending more money than they actually had and charging interest on top of it. As long as all the depositors didn't withdraw all their money at once (a run on the bank) the bankers could make a fortune on the interest alone, without any effort on their part. The fine for charging interest was negligible when compared to the amount of money the banks brought in. The fine acted as a tax and afforded the lender a license to break usury laws. Instead of outlawing the practice, the governments and bankers shook hands and made it into law.

When William and Mary came to the throne in 1688 the nation was heavily in debt. They were persuaded by financiers to create a national bank. The Bank of England was founded in 1694 to act as the Government's banker and debt-manager. It is located, coincidentally right off of Lombard Street in the center of London.

Soon it was in the business of lending out several times the money it supposedly had in reserves, all at interest. In exchange the new bank would lend British politicians as much as they wanted to fund more wars and expand the growing British Empire. Instead of ending the debt, through greed it created more. By the mid-1700s the British Government's debt had reached £140 million. This is a large sum by today's standards, 300 years ago it was staggering. Consequently, the government embarked on a program of trying to raise revenues from its American colonies in order to make the interest payments to the bank. The result was higher taxes in the colonies leading to economic turmoil and eventually revolution.

FAST FORWARD

The story continues into the American financial saga but I'll leave that for another blog. As it stands today, making money from money is a standard practice in most of the world. Capitalism after all is the pursuit of capital as a way of life. Interest is also a common way of life; student loans, home mortgages and credit cards all survive on interest. Banks today require little to no reserve to lend to the public and thanks to the practice of Fractional Reserve banking, they can lend out as much as 9X the amount they actually have.

In the United States, the Federal Reserve is a privately owned but publicly governed central bank. It's purpose is to "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Since the Fed's creation in 1913 the dollar's worth has been in an almost steady decline. The result is a staggering increase in prices. Today's dollar has 20X LESS the worth it had in 1913. Every 4-5 years recessions cause companies to cut hundreds of jobs as is the case in the current mega recession. Whether the Fed is the cause of this is a hot bed of debate but it is plain to see it is not the solution.

In this society money IS debt. When anyone borrows money from a bank whether it is an individual borrowing from a commercial bank or a government borrowing from a central bank, there is an immediate equal amount of debt created. When interest is added on top, the only way to pay all the money back in full is through labor or by creating more money.

In the case of the recent global financial crisis, a large amount of toxic assets caused a ripple in the stock market that effected the economies all around the world. The solution created by the Federal Reserve was to inject more money into the system to keep it from collapsing. By increasing the money supply they have decreased the buying power of the dollar. Just one glance at the total outstanding debt of the US is enough to show how flawed our money system is. It isn't just the US that has suffered.

Global banks like the US borne World Bank or the UK borne IMF lend money to nations looking to expand or just in need of a "helping hand". These entities often charge interest rates of 19% to 50% even 67%! For a bank whose motto is "Working for a world free of poverty" they sure have done a great job of impoverishing dozens of nations worldwide. Often in the past, debts have been paid for in resources making bank economics a new weapon in the silent exploitation of nations.

So how did a practice go from mortal sin to business as usual? Conspiracy theorists will tell you it was an insidious plan concocted by a round-table of tycoons and elitists. Perhaps. More than likely, the incentive money creates to free a person from the drudges of society was an all to seductive idea and difficult for any man to pass up. Compounded is the fact that what the average person knows about money is taught to us by the banks. Check out this link from the USgov website for kids.

Money brings out the worst traits in man; laziness, greed and competition to name a few. Luckily we have stronger and more virtuous traits like love, cooperation and intelligence. Imagine a society built around our virtuous strengths rather than exploiting our weaknesses. Imagine a world where money doesn't exist. Could such a society really work? The question is, does the current system work?

K