A Short History of Banking

In the old days there was no paper money. The accepted token of
exchange was precious metal minted into coins by the Church and the
Crown. Because there was only a limited amount of gold and silver
available, the economic life of the nation had a certain regularity.

An even greater restriction existed throughout Christendom. This was a
prohibition against usury, or charging interest. The Church held it to
be a grave sin and the code was upheld by the civil powers. There were
harsh penalties for those who broke the law.

The regulation of usury was to prevent the separation of money from
reality. Money is not a good, it is a measure. It is fraud to pretend
otherwise, and constitutes theft. Usury is making money from lending
money; it is making money from nothing. This is exactly what is
happening today on a colossal scale.

Several important things arose from the prohibition of usury in
medieval Christendom. Firstly Jews, who had taken to wandering around
Europe in the Middle Ages, began to specialize in money-lending and
other practices which were forbidden to Christians. Exploited
Christians, both peasants and aristocracy, found themselves being bled
dry by usurers, which is why there were sporadic uprisings,
imprisonments and expulsions of Jews throughout Europe. It is one
reason why King Edward I expelled these perfidious people from England
in 1290. Oliver Cromwell allowed them back when the moral authority of
the Church was undermined and the King was beheaded in 1649.

Secondly, gold coins, jewels and other valuables were deposited with
people who held strongboxes. This was usually with goldsmiths and
money-lenders who, more often than not, were one and the same. These
loan-sharks and scriveners realized that, without much chance of being
found out, they could charge people for looking after their deposits
and then use those deposits - which did not belong to them - to make
loans to other people at interest. They soon became rich and powerful.

Gold coins are heavy and awkward to carry around so the custom arose
whereby the money-lenders would issue credit notes to depositors who
began to trade these notes between themselves in commercial
transactions. Paper money had come into existence.

A new form of usury developed as the swindling money-lenders realized
the immoral benefits that could be obtained from such a situation. It
became apparent to these thieves that they could go one step further
than dishonestly using other people's money for financial advantage at
no cost to themselves. They could invent money from absolutely
nothing. They could issue credit notes with nothing to back them up
and put them into circulation as interest-bearing debts. No-one would
be any the wiser. They calculated that they could safely issue notes
for up to ten times more than the gold deposits they held, because the
depositors would never ask for their deposits back all at the same
time.

The principle of modern banking was thus established: invent money
from nothing, put it into circulation as "running cash notes" that
have to be paid back with real wealth that is produced from our
labour, sit back and become unbelievably wealthy and powerful men:
hidden rulers of nations.

In England this deceitful system was officially sanctioned in 1694.
The usurper of the throne, William of Orange, had overthrown the
legitimate King James II with the financial backing and plotting of
powerful Jewish financiers in Amsterdam. In return he gave the
sovereignty of England to a group of financiers by means of a Charter
allowing them to call themselves the Bank of England. The Charter made
no mention of issuing the nation's money, but within minutes of
signing the new Bank officials were discussing the form of their
"running cash notes." The same system was adopted in every country by
a process of Masonic revolution and manipulation.
FREEMASONRY AND COMMUNISM

Socialist theorists and ideologues have never attacked the essential
mechanism of capitalism. Although the injustices of the capitalist
system have been attacked in volume after volume, and rightly so, they
have never even hinted at the usury upon which the whole system is
built and from which all the other injustices stem.

Perhaps this is because so many Communist leaders are Jewish. Most of
the 'Russian Revolutionists' of 1917 were actually Jews from the lower
east side of New York City. Two hundred and seventy-five of them were
conveyed to Russia aboard the S.S. Christiana, led by Trotsky and
financed by Kuhns, Loebs, Schiffs and Warburgs. This cosy circle of
Jews and Freemasons financed both sides of the Great War.

Marx and Engels, two more Jews, wrote the Communist Manifesto on
behalf of a secret society calling themselves 'The League of Just
Men.' This secret society was an arm of the Illuminati, whose power
and influence was the catalyst of the French Revolution. One of the
founding members of the Illuminati was the House of Rothschild, the
Jewish banking house which practically invented supra-nationalism for
personal profit.
THE SITUATION TODAY

Nowadays banking has become extremely sophisticated but the hidden and
usurious mechanism behind it remains the same. After a big enquiry,
hushed up as much as possible, the Bank of England was nationalised in
1946. In theory control of the Bank of England should then have passed
from a group of private individuals to the British Government, but
this is still not the case. Nationalisation only added a thin veneer
of respectability.

The British Treasury, in conjunction with the Bank of England's
advisers to the Government, determine how much paper money and coin
will be issued each year. This has to accord with the wealth of the
nation for that year. But because banknotes and coins only account for
a tiny percentage of financial transactions, it makes no difference to
the bankers at all. Most financial transactions are carried out with
abstract figures on a computer screen that have no relationship to
real wealth. Everything has to be paid for at interest though - even
when it doesn't exist!

The Government still has to pay interest on old and new loans from the
Bank. Only a few years ago it was announced that the interest debt on
a loan taken during the Napoleonic War had just been paid off! This is
where much of our tax money goes.
THE NEXT STAGE

The next stage of development for international finance is to get rid
of cash altogether. Then the token accountability of the bankers will
disappear along with the cash. Their intention is that everyone will
have to use credit/debit cards for every type of commercial
transaction.

Electronic technology, when used this way, and when it is not merely
widespread but compulsory, will give them complete control of every
man, woman and child in the world. If you cannot buy or sell - food,
petrol, clothes - without a card you are completely at their mercy. If
you lose the card or it doesn't work for some reason you will suffer
until issued with a replacement. If you make a protest against some
particular injustice they could invalidate your card. The next time
you go to the supermarket your card may not work. You won't officially
exist!

Who benefits from such a scheme? The politicians or the bankers? To
ask the question is to answer it. The Bank of England is the real, but
hidden, government of the country. The Government and the politicians
are merely puppets controlled by the Bank - or, more accurately, the
international banking families. None of our cowardly politicians dare
stand up to these hidden and unelected rulers of the world, so
powerful have they become. Two American presidents, possibly three,
were assassinated for attempting to do so. It is far easier for them
to submit to the system and enjoy a rich life than expose the real
tyrants: tyrants who cause high taxes, unemployment, war, famine and
misery for the rest of us. But these despots of the New World Order
forget that Truth is more powerful than they could ever become. And
Truth brings Justice!

maidenmerch@googlemail.com wrote:
> A Short History of Banking
>
> In the old days there was no paper money. The accepted token of
> exchange was precious metal minted into coins by the Church and the
> Crown. Because there was only a limited amount of gold and silver
> available, the economic life of the nation had a certain regularity.
[SNIP]

On 30 Sep, maidenmerch@googlemail.com wrote:

> A Short History of Banking
>
> In the old days there was no paper money. The accepted token of
> exchange was precious metal minted into coins by the Church and the
> Crown. Because there was only a limited amount of gold and silver
> available, the economic life of the nation had a certain regularity.
[SNIP]

Stephen Zarlenga gave this talk on usury to Lord Sudeley's "Monday
Club"
discussion group at London's Carlton House on May 5th, 2004:

THE USURY PROBLEM REMAINS

We've been to the moon; were on the verge of artificially creating
life,
yet we have made almost no progress on a question which most societies
considered a great danger - a destroyer of nations - the question of
usury. Even bringing up the matter invites pre-judgement. What should
civilized society's attitude be toward usury?

Lets start today with Solon's Reform In Athens about 600 BC shortly
after the introduction of coinage. The class of free small farmers was
vanishing, with land becoming concentrated into the hands of the
Oligarchy. Professor Clahoun identified the problem:

"Before the introduction of coined money the peasant farmer borrowed
 commodities and repaid the loan in kind, and ... was probably able to
 meet the obligation without great difficulty; but after the
 introduction of coined money the situation became decidedly more
 difficult ...he must take a loan of money to purchase his necessary
 supplies at a time when money was cheap and commodities dear. When a
 year of plenty came and he undertook to repay the loan, commodities
 were cheap and money was dear."

Unable to get out of debt, eventually bad weather or a poor harvest
would bring foreclosure on their land and even bind them into slavery.
This enslavement grew to crisis proportions, when Solon came to Athens
rescue with his "Seisachtheia" or "shaking off" of burdens. Personal
slavery was no longer allowed as security for debts. He canceled such
existing debt contracts; and gave back land which had been seized.
Farmers who had been sold into slavery abroad by those to whom they
owed
money were "bought" back and returned to Athens.

SOLON ALSO DECLARED A MINIMUM MONETARY VALUE FOR EACH AGRICULTURAL
PRODUCT SETTING FLOOR PRICES FOR THEM (Heichelheim presents the
ancient
source for this). He switched from the "Aeginatic" to the lighter
weight
"Attic" monetary standard reducing coinage weights and increased the
amount of coinage in circulation.

Several Hundred Years Later Aristotle (384-322 Bc) Formulated The
Classical View Against Usury. Aristotle understood that money is
sterile; it doesn't beget more money the way cows beget more cows. He
knew that "Money exists not by nature but by law":

"The most hated sort (of wealth getting) 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 (tokos),
which
 means the birth of money from money is applied to the breeding of
 money because the offspring resembles the parent. Wherefore of all
 modes of getting wealth, this is the most unnatural." (1258b,
 POLITICS)

And Aristotle really disliked usurers:

"...those who ply sordid trades, pimps and all such people, and those
 who lend small sums at high rates. For all these take more than they
 ought, and from the wrong sources. What is common to them is
evidently
 a sordid love of gain..." (1122a, ETHICS)

THE CHRISTIAN SCHOLASTICS DIFFERENTIATED BETWEEN USURY AND INTEREST

The Scholastics (1100 -1500 AD), the Church scholars familiar with the
available writings in existence, echoed Aristotle. Acquinas argued
that
money is a measure, and usury "diversifys the measure" placing extra
demands on the money mechanism which harmed its function as a measure.
Henry of Ghent wrote: "Money is medium in exchange, and not terminus."
Alexander Lombard noted: "Money should not be able to be bought and
sold
for it is not extremum in selling or buying, but medium."

The Scholastics made the first attempt at a science of economics and
their main concern was usury; but this was not the same as just
charging
interest. It was generally not forbidden to earn interest if the
lender
was actually taking some risk, without a guaranteed gain. Interest
could
also be charged when the lender suffered some loss or passed up some
opportunity by extending the loan. Venice used advanced financial
forms
for centuries without violating the Scholastic usury bans.

TWO TYPES OF LOANS WERE ALWAYS EXEMPT FROM BANS ON INTEREST: the
"Societas", where the lender assumed some portion of the risk of the
enterprise. Also exempt was the "Census" - an obligation to pay an
annual return based on some "fruitful" property. At first it was paid
in
real produce, later in money.

The Census was normally capitalized at 8 times the annual return, but
the risk of the "fruitful" base was on the lender not the borrower,
for
if the crop were destroyed by weather, the borrower had no obligation
that year. Later cities issued "census" obligations based an tax
revenues, which came to be called "rents".

Usury was much more than charging interest - it was taking unfair
advantage; USURY WAS AN ANTI-SOCIAL MISUSE OF THE MONEY MECHANISM.
Similar to the term Riba in the Islamic world.

THE CHURCH'S CONDEMNATION OF USURY:

Observation of its bad effects-

Pope Innocent IV (1250-1261) noted that if usury were permitted rich
people would prefer to put their money in a usurious loan rather than
invest in agriculture. Only the poor would do the farming and they
didn't have the animals and tools to do it. Famine would result.
Burudian (d.1358), a professor at the University of Paris wrote that:
"Usury is evil ...because the usurer seeks avariciously what has no
finite limits". This places its results outside of nature - often
outside of the possible. St. Bernardine of Siena (1380-1444) observed
that usury concentrates the money of the community into the hands of
the
few.

DIVINE AND HUMAN LAW-

All mankind's moral/legal codes censured usury, normally with mild
limits on interest rates. But the Old Testament strictly forbade Jews
from taking usury from their "brothers" (other Jews), and discouraged
taking it from strangers.

The Scholastics looked on all mankind as brothers. Other codes
restricted usury:

 * Code Of Hammurabi (2130-2088 BC) limited usury to 33%;
 * Hindoo Law - Damdupat - limited interest to the full amount of
   the loan;
 * Roman Law limited interest; Justinian's 6th century Code reduced
   the 12½% limit of Constantine the Great, to 4-8%, and accumulated
   interest could not exceed principal.
 * The Koran totally forbids usury, from the 7th century;
 * Charlemagne's laws flatly forbade usury in 806 AD.
 * As you know your own Magna Carta placed limits on usury in 1215 AD.
 * Most States of the United States enforced usury limits until 1981.

ACTION AGAINST USURERS

Pope Leo the Great (440-461) laid the cornerstone for later usury laws
when he forbade clerics from taking usury and condemned laymen for it.
In 850 the Synod of Paris excommunicated all usurers. The 2nd Lateran
Council (1139) declared that unrepentant usurers were condemned by
both
the Old and New Testaments. Pope Urban III (1185-87) cited Christ's
words "lend freely, hoping nothing thereby" (Luke 6:35).

Judicial action was taken against those openly practicing usury and
the
Church never condoned Jewish usury activity. Christian usurers who
used
semantic tricks in making loans were worried about excommunication and
being denied the sacraments, especially burial in sacred ground. They
used every word trick to avoid the usury label. Goods were sold on
credit at a higher price which factored interest in. "Dry Exchange"
bills in foreign currency were not sent for collection but resold to
the
borrower for a higher amount, reflecting interest.

Usurers were required to make monetary restitution to their "victims",
and if they couldn't be found, to the poor through the Church. Vast
amounts of such moneys were involved in death bequests. The heirs of
usurers were also required to make restitution.

FALL OF THE USURY PROHIBITION-

Conrad Summenhart, of Thubingen University put aside Aristotle's view,
declaring it was OK to use something in a way that wasn't intended.
The
Fuggers of Augsburg, vying with Florence to financially dominate
Europe,
financed Summenhart's student John Eck to argue the permissibility of
certain loans for five hours before the full assembled University of
Bologna in 1515. Eck assured them that the method of charging interest
had been in use for 40 years with no-one being excommunicated.

As economies became more dynamic, with real growth possibilities, it
became clear that charging interest on business loans where the
borrowing merchant prospered, couldn't be condemned as greed or lack
of
charity and by 1516 the idea of a lending institution charging
interest
for its services had been overwhelming accepted.

CALVIN'S REFORMATION-

John Calvin finished off the usury ban in 1536. But his arguments were
shallow compared to the Scholastics: "When I buy a field does not
money
breed money?", he asked rhetorically. For centuries the Scholastics
had
demonstrated the correct answer is no - it is the field not the money
which grows products.

Calvin wasn't enthusiastic about usury: "Calvin deals with usurie as
the
apothecaire doth with poison" wrote Roger Fenton. He considered usury
sinful only if it hurt ones neighbor and that it was generally
legitimate in business loans.

HOW CAPITALISM VIEWED INTEREST

The justification for charging interest evolved historically in works
promoting capitalism. One recurring theme was to attack Aristotle.
Francis Bacon's WORKS (1610) thrashed the Scholastics for: "almost
having incorporated the contentious philosophy of Aristotle into the
body of Christian religion ...Aristotle...full of ostentation...so
confident and dogmatical ...barren of the production of works for the
benefit of the life of man."

Yet Bacon's rationale fell flat:

"Usury is a thing allowed by reason of the hardness of men's hearts.
 For since there must be borrowing and lending, and men are so hard of
 heart as they will not lend freely, usury must be permitted..."
and Bacon was aware of usury's problems:

"... It makes fewer merchants... (and) makes poor merchants.
 It bringeth the treasure of a realm or state into few hands."

In William Petty's 1682 QUANTULUMCUNQUE CONCERNING MONEY usury is
redefined as: "A reward for forbearing the use of your own money for a
term of time agreed upon, whatsoever need your self may have of it in
the meanwhile."

This ascetic rewarding of self denial, with religious overtones, is
still used by some in the 20th century, but Adam Smith's 1776 WEALTH
OF
NATIONS, capitalism's "bible," put aside these earlier rationales, and
justified usury in economic terms:

"The interest or the use of money ...is the compensation which the
 borrower pays to the lender, for the profit which he has an
 opportunity of making by the use of the money. Part of that profit
 naturally belongs to the borrower who runs the risk and takes the
 trouble of employing it; and part to the lender, who affords him the
 opportunity of making this profit."

This is how interest is popularly viewed today. But Smith overlooked
that the lender gets his profit even when the enterprise loses; he
ignored the successful business structures used by Venice for
centuries,
where the lender's return was based on actual profits. Smith's
endorsement did not remove the stigma against usury; and the debate
continued.

Eleven years later Jeremy Bentham's IN DEFENCE OF USURY (1787) created
the present mis-definition of usury as: "The taking of a greater
interest than the law allows... (or) the taking of greater interest
than
is usual."

He dismissed the harmful effects of usury on the common man: "Simple
people will be robbed more in buying goods than in borrowing money."
And then he really bared his teeth:

"If our ancestors have been all along under a mistake... how came the
 dominion of authority over our minds?" Is he going to cite the strong
Old Testament admonitions against usury? No - he ignores them and
attacks Aristotle:

"Aristotle: that celebrated heathen, who ... had established a
 despotic empire over the Christian world. ...with all his industry
and
 all his penetration, notwithstanding the great number of pieces of
 money that had passed through his hands ... had never been able to
 discover in any one piece of money any organs for generating any
other
 such piece. Emboldened by so strong a body of negative proof he
 ventured at last to usher into the world the results of his
 observation in the form of an universal proposition, that all money
is
 in nature barren. ...he didn't consider ... (from) a Daric which a
man
 borrowed he might get a ram or an ewe ... and that the ewes would
 probably not be barren."

It's the same argument Calvin used. But the Scholastics had shown it
was
the "ewes" not the coins that create more ewes. Humanity would have
been
better served if these fellows had only been able (and willing) to
understand Aristotle.

Despite continuous pressure and support from the financial community,
the various justifications for usury proved inadequate in 1836 when
John
Whipple, an American lawyer wrote THE IMPORTANCE OF USURY LAWS -AN
ANSWER TO JEREMY BENTHAM. Whipple proved the impossibility of
sustaining
long term metallic usury:

"If 5 English pennies... had been... at 5 per cent compound interest
 from the beginning of the Christian era until the present time, it
 would amount in gold of standard fineness to 32,366,648,157 spheres
of
 gold each eight thousand miles in diameter, or as large as the
earth."

Whipple knew that answering the usury question required an accurate
view
of the nature of money, and he echoed Aristotle:

"(the purpose of money is to facilitate exchange) It was never
 intended as an article of trade, as an article possessing an inherent
 value in itself, (but) as a representative or test of the value of
all
 other articles. It undoubtedly admits of private ownership but of an
 ownership that is not absolute, like the product of individual
 industry, but qualified and limited by the special use for which it
 was designed...."

This view is clearly drawn from Aristotle's Concept of money that
money
exists not by nature but by law. Aristotle clearly identifies the
essence of money as an abstract legal institution invented by society
-
a creature of the law.

One can imagine how advanced the world of finance would be today if
someone like Whipple were present at the Constitutional Convention in
1787. Had his viewpoint been distilled into law many unnecessary
hardships (and wars?) could have been avoided. Instead the delegates
operated under a primitive commodity concept of money, similar to that
of the ancient oriental system and ignored the crucial monetary
questions.

20TH CENTURY ECONOMISTS HAVE RE-OPENED THE USURY QUESTION

Modern research is re-examining the Scholastic's work and conclusions.
John Noonan writes that they "had an intuitive insight into the
problem
only now becoming apparent." Noonan agreed with Pope Innocent's
arguments that usury would lead to the abandonment of industry:
"Innocent's argument ...may seem naive or exaggerated at first, but
the
experiences of agricultural communities, such as ancient Greece, or
China throughout most of its history offer considerable
corroboration."

Historian Henri Pirenne noted in MEDIEVAL CITIES that: "The scourge of
debts which in Greek and Roman antiquity so sorely afflicted the
people,
was spared the social order of the middle ages and it may be that the
Church contributed to that happy result."

Despite the omnipresence of charging interest in our lives today, this
question is not really settled. Furthermore, the modern world is now
getting a taste of real usury. Up to 1981, interest limits (usually
under 10%) were in effect in most of the USA. Today credit card debt
is
very high and growing, along with personal bankruptcy rates. Most
people
are paying 21 - 25% "interest" on their credit cards each year. Money
they really can't afford to pay. Some economists actually favor
letting
the market charge whatever interest rates people can be forced to pay.
But this should not continue - it will do so much harm to society that
all the free market economists in the world chanting in unison won't
be
able to hide the damage.

MONEY'S NATURE MUST BE EXAMINED

Approaching the usury question intelligently requires a better
understanding of the nature of money. The Scholastics maintained that
there was a distinction between money, and productive capital.
Calvin's
Reformation argued against this. But the Scholastic view has been
re-affirmed, for example by Knut Wicksell, the father of modern day
interest rate theory who wrote in INTEREST AND PRICES: "It is not true
that money is only one form of capital; that the lending of money
constitutes the lending of real capital in the form of money. Money
does
not enter into the process of production, it is in itself as Aristotle
showed, quite sterile."

Re-examining these questions will also require more candor from the
English speaking economics profession. For example in the English
translation of Wicksell's book, that last sentence on Aristotle is
significantly left out! Thus the English audience are denied the full
benefit of his work and thought.

SO WE RETURN TO OUR INITIAL QUESTION: How should civilized society
view
usury? First I think we have to admit that we don't have the full
answer. But we do know parts of it. We can see from Whipple's example
the impossibility of long term usury. Let's reconsider some ideas from
past wisdom on the matter. Don't allow the interest to ever exceed the
principle. Ban compound interest. Require that the interest taker be
undertaking some real risk.

As far as a complete ban on usury, I'm not sure that is the answer
either. I expect that loans will continue to be made and interest will
continue to be charged. But the cannibalism as exists in the present
system must stop. Perhaps we should remember Solon's great admonition
in
viewing this question: Nothing too much - all things in moderation.

But there is one area that appears clear: I especially ask you to
consider removing all usury from the money creation process.

This means carrying Archbishop of Canterbury's William Temple's 1942
initiative to Fruition. Using typical English understatement, but
making
one of the most morally important public pronouncements on the Money
Power of this or any other century, the Archbishop accurately wrote:

"In the case of money, we are dealing with something which is handled
 in our generation by methods that are extremely different from those
 in vogue a century or half century ago ....we have now reached a
stage
 where something universally needed - namely money, or credit which
 does duty for money - has become in effect a monopoly ...

"The private issue of new credit should be regarded in the modern
 world in just the same way in which the private minting of money was
 regarded in earlier times. The banks should be limited in their
 lending power to the amount deposited by their clients, while the
 issue of newer credit should be the function of public authority.

"This is not in any way to censure the banks or bankers. They have
 administered the system entrusted to them with singular uprightness
 and ability and public spirit. But the system has become anomalous,
 and, as so often happens when anomaly has persisted through a long
 period of time, the result is to make into the master what ought to
be
 the servant." (as quoted in Ch. 20, The Lost Science of Money)

Aside from considerations of morality and propriety, such action would
now bring in an estimated extra 40 billion pounds into the British
Government to pay for necessary programs now being hampered. There is
now an early day motion to Study this problem in detail. To do a world
class public study of this situation, as now exists in this world
class
private study - The Lost Science of Money book, which is available
here
at a discount, and I'll be happy to autograph them.

Thank you for your attention.
=====================================================
http://www.monetary.org/usurytalk.htm
(c) 2004 AMERICAN MONETARY INSTITUTE
Stephen Zarlenga, Director
Dedicated to the independent study of
monetary history, theory, and reform.