Portugal - same folly again

Another European country is declaring bankruptcy and asking for a bail-out, yet the real issues remain hidden from the public eye. All nations of the world are deeply in debt, so it would be legitimate to ask who this fantastic lender is, who owns more assets than all the peoples of the world put together. There isn't one, of course. Fractional reserve banking by the banks or debt merchants is the greatest fraud ever committed in recent history. In the case of Portugal, we are told the state can only raise more money on the financial markets by paying higher interest rates. Why should the state have to pay anything for money which the banks issue as credit without anything to underwrite its value other than the creditworthiness of the nation itself? The state should issue its own currency and the function of the banks should be restricted to accounting and book-keeping.

What happens, when a state like Portugal raises money? They issue government securities which are bought by the banks. A government security is a promise to pay, in other words, a promise that the banks will have a claim on tax revenue collected from the working population. The banks add these securities to their assets as deposits and, by the ludicrous system of fractional reserve banking, they are permitted to issue tenfold of their deposits in new credits. And it is this new money, created out of nothing on the basis of the state's promise to pay them back, which they then land to the government for its expenditure and charge interest on top of it! And so the vicious cycle continues: The state allows the banks to create credit and charge the cost to the state until the state can no longer bear the costs. Now if a bank overstretches itself and goes broke, the state (through the national bank as lender of last resort) bails it out. If the state consequently goes broke, as it must, other states in the Confederation, in this case the European Union, come to its rescue. They attach so-called austerity measures, measures designed to make sure that the banks get their illegitimate gain for the money they never had, no matter how tough it will be for the people to raise the revenue.

In the UK we had the same twisted logic: banks were failing. In the past it was always justified that they charge interest because of the risks they take. In fact, they take no risks at all as every credit they issue is new money at no cost to them. So what did the government do? It bailed out the banks with a rescue package. Where did it get the money from for bailing out the banks? By borrowing from those very same banks! Makes sense, doesn't it? And then there was quantitative easing, in other words, expanding the money supply. But instead of injecting new cash in the economy pay for education or health care, the government gave the increase to the banks as government securities to allow them to issue the very same money and multiples of it with an interest charge attached to it. Heads, the people loose and the banks win. Tails, the banks win and the people loose.

For centuries now, governments have been the servants not of the people but of the banks. They have permitted those financial institutions to defraud whole nations for their private gain, laying claim to a nation's resources and real assets through foreclosures on loans they issued without putting up any real assets of their own. Portugal is not needing a bail-out because of some natural disaster, or having lost all its working manpower in a war, or having had a bad harvest or lost all its natural resources. It is going to the wall because the banking system of compound interest on credit created based on the empty promises of repayments of earlier credits is bound to self-destruct, and instead of taking the blame, the banks want the government to carry the can. We're going to see a lot more misery until common sense returns and governments represent their own people and issue their nations' money supply free of interest charges to facilitate trade, ultimately to be cancelled out again by taxation. But then, common sense is in particularly short supply at the moment, whereas bank-created money abounds.