As a Zon Buddhist, I feel fortunate to have found a wealth of knowledge on a huge variety of topics from Scionics Philosophy. The following is an excerpt from "The Protocols of Scionics," which specifically deals with the topic of Money and Banking. It's fairly long, but it does spell out the problem in perfect detail, as well as offering solutions to the problem.
Money and Banking
Part 1: A Brief History of Money
Governments have historically claimed and exercised their power through many aspects of the economy. They create the currency, regulate banking and financial institutions, and impose taxation. This absolute monopoly upon such vital aspects of the economic system has proven to be a true breeding ground for corruption, abuse and exploitation. To understand how scio-anarchy would dispense with all of this, and what would be implemented in its place, it is first necessary to understand the full scope of, and methodology behind, the current government-run system.
To begin with, there is the physical currency itself. Before such currency existed, people simply traded goods and services by barter. This works to a point in relatively simple societies, but it does have certain inherent limitations. There is the difficulty of having to carry around a bunch of items for trade, rather than the relative ease of simply carrying currency. There is the problem that the particular items which one owns or happens to be carrying around will not be desired for trade with those with whom one wants to barter. There is also the problem that there is not one universal standard by which to value and compare all items.
One of the earliest solutions for this was to use some precious metal such as gold as a sort of universal medium of exchange. Each item for sale could then simply be equated with a certain weight of gold. Each item could then be valued in terms of one thing – a certain amount of gold – and the different values of various items could then be compared according to a single standard. Other metals of varying rarity could also be used, such as silver, copper, nickel and iron, by setting a certain weight of each of these less-rare metals to be equal in value to a certain smaller weight of the more-rare gold. This made it possible for an individual to simply carry around relatively small weights of various metals, sufficient for most ordinary, day-to-day purchases.
The use of precious metals as a medium of exchange was much more efficient than direct barter, but even this had its problems. One problem was related to the scales which were used to weigh the metals: different scales could indicate two different weights for the same piece of metal, resulting in all sorts of conflicts and disagreements between people. Furthermore, it would often happen that the pieces of metal which one had on hand could not be combined in such a way as to equal the exact value required to make some purchase, creating a need to cut the pieces of metal into even smaller pieces – an inconvenient task.
This lead to a further innovation: the sizing of pieces of metals into standard weights and values. Governments seized upon this innovation, and began to issue standardized coins made of these metals. Since the coins were all of standard weights and values, there was no longer any need to weigh them. Now commerce could take place even more fluidly than before – except that other problems soon arose. Individuals soon realized that they could shave bits of metal from the coins, and use those bits to make new counterfeit coins of their own; this is called “coin clipping.” The clipped coins thus each contained less metal than they should have, as typically did the counterfeit coins. Even the state engaged in essentially the same process, although on a much larger scale. They would substitute the rare metals in their coins for less-rare alloys or metals, while “declaring” that the new (essentially cheaper) coins were worth the same as the older coins, thus “debasing” the currency. In some cases they dispensed with metal currency altogether, in favor of paper currency. All of these factors serve to increase the available money supply (debased though the supply may be) to create inflation and to decrease the general confidence in the actual value of the money.
In the modern world, this is just what exists: coins made of metals which are worth far less by weight than their own face values, and paper currency which was initially “backed” by gold or silver, but which today is backed by nothing physical at all. By simply printing more currency, which governments do all the time, the amount of currency in circulation is increased and the result is “inflation:” a rise in the prices of items across the board and the corresponding decrease in the real value of the hard-earned savings of each individual.
While all of the above should rightfully make one angry – after all, it is completely unethical for governments to continually debase the money supply, causing inflation, increased prices and decreased buying power – it is easy to understand how things got this way, from barter on through precious metals and coins being used as a medium of exchange, and then to the government issuance of paper money with no real correspondence to anything of physical value at all. It was a simple combination of the need or desire for ever more efficient financial transactions, coupled with the unchecked power of the state (whether in the form of monarchs, politicians, or anything else) and its desire to increase its own wealth, and willingness to do so at the expense of its citizens.
(The story doesn't end there, however it does get more complex, and it is not really necessary to understand this extra complexity to understand that any economic system in which money can simply be created by one entity – whether it be a monarch, the government, or whatever – at the expense of others is ultimately unsustainable and doomed to fail. If the reader would like to skip over this extra complexity and simply begin reading about the scio-anarchistic solutions to these and other problems with the world monetary system currently in place, one may simply skip ahead to Part 3: The Scio-anarchistic Future of Money. If, however, one would like to delve into the complex and insidious world of privately owned national central banks, and their system of “fractional reserve banking,” the intrepid reader is urged to push forward right into Part 2: The Current Hijacking of Money. The reward will be a much deeper understanding of the world economic system and a much deeper insight into the evil grip which a small banking cartel has on the world; sadly, such things are almost never taught anywhere, and hardly anyone is even aware of them at all.) anarchistic
Part 2: The Current Hijacking of Money
The way that money is created in much of the current world is somewhat different that it was for most of the past. We live in an age of privately controlled central national banking, a system which simply defies all common sense whatsoever. This system, as will be explained, is bad for the state and bad for the citizens – but really, really good for a very small group of bankers. This system is world-wide, and this small group of bankers has the entire global economy – which really means all the people of the earth, and not only those alive today, but even unborn future generations – essentially held hostage within its evil grip, through the “monetization of debt” and the manipulation of inflation and deflation. To understand this system, one first must understand the concept of “fractional reserve banking,” which is another way in which the effective money supply can be debased and inflated (and confidence thereby decreased) besides those already mentioned in Part 1: A Brief History of Money.
It is not always practical or even safe for one to carry all of one's money around, or even to store it in one's own home, so people typically deposit their money in a bank. In the “old days” when gold was used as a means of exchange one would often store one's gold for safekeeping with a goldsmith. The goldsmith would issue the depositor of the gold a “note” – essentially a form of “I Owe You” – which the depositor could later redeem with the goldsmith in return for the gold itself. These notes eventually became a sort of de facto currency in their own right, as the holders of the notes knew they could be redeemed at will for the actual gold which the notes represented. In more modern times this came to be called “fractional reserve banking,” because the amounts on deposit represented only a fraction of the value of the notes issued.
This system worked fine, until the goldsmiths realized that, in general, most depositors will simply leave most of their gold on deposit most of the time. It would be very rare for so many depositors to want to withdraw so much gold at the same time as to deplete the amount actually kept on hand with the goldsmith. This lead the goldsmiths to begin to issue more in terms of notes than the actual value of the gold they had on deposit. Unlike the direct printing, debasing or counterfeiting of currency itself, this was a different sort of fraud which also served to debase and inflate the “effective” supply of money. This fraud would be discovered at such times as the general confidence in the goldsmith's notes began to fail and there was a “run” on the goldsmith: people would begin to attempt to redeem their notes en masse, and would quickly find that there was not enough gold to back their notes.
While it was illegal for goldsmiths to engage in this fraudulent practice in their time (and rightfully so) this is very similar to the way banking is done throughout the world today: in the modern world, fractional reserve banking is done with legal sanction, and really benefits a small banking cartel while being really, really bad for both the state and its citizens. This system is world-wide, and this small banking cartel has the entire global economy – which really means all the people of the earth, and not only those alive today, but even unborn future generations – essentially held hostage within its evil grip. To understand how the modern system came to be requires looking back into history again.
England was in debt in the late seventeenth century; in addition, its navy at the time very badly needed to be rebuilt. King William III lacked the necessary money or even the credit for the rebuilding of the navy. Since there was no other source of funding, and the King himself could not raise the necessary capital by obtaining a loan due to his poor credit at the time, on July 27th, 1694, the Bank of England was created to fulfill this purpose. The Bank of England (originally called the “Governor and Company of the Bank of England”) was not a part of the government, but was created as a private, limited liability corporation. This private corporation was chartered to raise a loan of £1,200,000 in gold for King William, to be paid back to the bank at 8% interest. It was additionally allowed to accept deposits (in addition to the initial £1,200,000 in gold) for which the depositors would receive bank notes and also be paid 4% interest. (Thus the amount received by the bank in interest from the King would be double the amount paid out in interest to the depositors.) The bank notes would be used as a form of currency (in other words, they would “circulate” as money) and would be redeemable at the bank for gold. Due to fractional reserve banking, however, it was only necessary to actually keep a small fraction of the total value of the deposits “in reserve” in gold.
The amount of bank notes which the Bank of England could issue would be equal to the amount of gold it loaned to the government. In this way, it essentially turned the government's debt into money; this is known as the “monetization of debt.” One very important aspect of the monetization of debt is that the more debt that England incurred, the greater the profit made by the Bank of England! In other words, it was actually in the interests of the bank's stockholders to promote government spending, and since the greatest government expenditures take place in times of war, it would be in their interest to promote war. (As such private national banks began to consolidate their power, this is just what they did, as shall be shown later.)
An interesting tthis whole system is that the bank was completely superfluous: the government itself could have printed the notes, without the need to pay any interest to the bank or to any other depositors. The Bank of England seems to owe its origin to the fact that its operation was just complex enough to obscure the fact that its very existence was unnecessary and even counter-productive!
The creation of money through the monetization of debt and fractional reserve banking, implemented by private banks masquerading behind a governmental façade, as described above, are hardly understood by anyone, although this information is available to everyone. In truth, it is not money, but the general ignorance of the common man, which is the greatest asset to the banking cartel which has hijacked the world's economy. Thanks to this general ignorance, combined with the incredible wealth and power generated by this scheme, almost every nation in the world is now under the control of similarly structured, privately owned central banks (with names which deceptively make them seem to be part of the government) which engage in fractional reserve banking and the monetization of debt, all under the control of the very same international banking cartel.
The monetization of debt essentially makes wage slaves of us all, as the payment of this debt is always put on the backs of innocent citizens through taxation. In the United States, the private national bank, under the control of the same international banking cartel, is called the Federal Reserve Bank. This name, however, is a ruse: it is not “federal” and it has no “reserves.” It was started in 1913, the very same year as the I.R.S. – the Internal Revenue Service, whose very function is to collect taxes to pay the debt to the Federal Reserve. Like the Bank of England, the Federal Reserve is both unnecessary and even harmful to the government and the citizens, and without the Federal Reserve there would literally be no need at all for the I.R.S. at all!
It should be noted that there were actually three private national central banks prior to the 1913 inception of the Federal Reserve: in brief, these were the Bank of North America (chartered 1781, operated as the central bank from 1782-1791) the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836). These were all operated in much the same manner as the Federal Reserve, and by essentially the same international banking cartel. It was also this cartel who used its vast financial and political influence to push for the creation of these central banks in the first place. The fact that they were each relatively short-lived because the people and politicians came to understand the needlessness and the very danger of such banks gives one hope that the same fate will ultimately befall the current Federal Reserve.
It is also particularly illuminating to understand that the United States had no central bank of any sort at all during the 77-year period between 1836 to 1913. The abolition of the hidden economic slavery of the the nation to these central banks, combined with the abolition of the much more visible and direct form of slavery practiced in the southern states upon the end of the Civil War (1861-1865) saw the greatest period of economic expansion in American history. Slavery, in any form, direct or indirect, is never as productive as freedom, except for the slave-owners. There can be no slavery of any sort in a scio-anarchistic society.
This is not to say that there were no “ups-and-downs” in the economy, even during this period, or that everything was perfect; then again, the same can be said of the economy under the various central banks. Furthermore, the central banks themselves, with their monetization of debt, creates a great addition drain upon the economies of nations and their people. And because this system of private central banks, controlled by a single international banking cartel, profits from the debt of nations, they wield their vast global financial and political power to create policies and situations which put every nation possible into debt. This evil cartel knows that the greatest method for creating nation debt is to pit nation against nation in military conflict, so they work to do just that, albeit in places far from where they themselves actually live. Soldiers go off to fight and die, and nations of people work themselves into a patriotic frenzy to support the war effort, never realizing that the real enemy is hardly ever the nation they are fighting, but the very cartel which controls the purse-strings of the world.
Although the early operation of the Bank of England has been discussed, it is more relevant to today's world to now discuss the modern operation of the Federal Reserve; other privately owned central banks around the world today operate according to very similar principles. When the government of the United States needs to raise money, it has essentially two options: it can raise taxes, or it can simply print money. Both options are coercive and unethical, but that tends not to be a great consideration, since government itself is coercive and unethical. The first option is politically unpopular with taxpayers because of its very direct and overt nature, and is therefore often perilous to political careers. The second option is a more covert and indirect way of fleecing the public and therefore less likely to adversely affect voting behavior, so it is safer to political careers.
Simply printing more money would have the adverse effect of creating inflation: increasing the money supply, raising prices, and lowering the purchasing power of one's savings. In reality, however, the government does not simply print money; instead, in defiance of all logic, it has delegated that power to the Federal Reserve. The Federal Reserve, a private bank controlled by an international cartel of bankers, therefore has the power to print money “out of thin air,” backed by absolutely nothing at all – not gold, not silver, and not anything else. (If the reader hasn't already noticed, take a quick look at the front of any dollar bill, or any larger bill for that matter: the words “Federal Reserve Note” are right on top.)
Let's imagine that the government wants $1,000,000 from the Federal Reserve. The government essentially borrows this money from the Federal Reserve. To be even more precise, the government will sell $1,000,000 worth of treasury bonds to the Federal Reserve, which the Federal Reserve pays for by simply having the money printed – again, “out of thin air,” and backed by absolutely nothing. The government pays interest to the bearer of a treasury bond (which in this case is the Federal Reserve) and returns the principle at maturity. To put it simply, the Federal Reserve loans money to the government, and the government pays back the loan with interest.
It is very important to realize, however, that as long as this system remains in place the government can never pay off its debt to the Federal Reserve. This is because the payment of the interest would require more money than the Federal Reserve has loaned the government in the first place, and ultimately that money would also have to come from the Federal Reserve! In this way, the entire nation and even future generations will forever be in debt to the Federal Reserve.
As if this weren't enough, there is also the matter of fractional reserve banking. Every bank in the United States operates according to Federal Reserve regulations; these regulations permit fractional reserve banking. This means that banks are only required to keep a fraction of the amount of the money that they loan out in reserve at the bank. To understand how this is another method of creating money “out of thin air,” and for drastically inflating the money supply, imagine a situation where the required fractional reserve is 10%. Someone deposits $1000 in a bank; the bank then can and does issue a loan to someone else for $900. This person then spends the loan, and the receiver of this money then deposits it in some other bank. This bank can and does then issue a loan to someone else for $810. In this way the original $1000 can be “multiplied” up to a maximum of $10,000, although the real amount will typically be less.
It may seem that nothing is actually being “multiplied” in the above example, and that what is actually happening is that the money is simply being moved around from person to person and bank to bank. In reality, however, there is another factor at work. Only about 3% or so of the “money” in the economy is in the form of actual paper “cash.” The rest is in various forms of “non-cash:” electronic records, checks, etc. When a bank gives out a loan, they are typically not handing actual paper cash to the borrower, but issuing credit in some form of “non-cash,” and this is the form which the money “created” by fractional reserve banking takes.
Isn't it ironic that the dollars in your wallet, the Federal Reserve notes, are imprinted with the words, “In God We Trust?” Is this an attempt to prop up the public's perception of the soundness of the monetary system, by invoking the supernatural? Unfortunately, the truth is that the whole system is so flawed and actually evil that it has much more in common with something profane rather than anything divine.
Part 3: The Scio-anarchistic Future of Money
Any system which allows money to be created by one entity (a monarch, the government, a banking cartel, or whatever) at the expense of everyone else is coercive and unethical. Any system which is vulnerable to “coin clipping,” the debasement of metals, counterfeiting, inflation, or mis-calibrated scales is fatally flawed and therefore unsuitable for use.
The ideal medium of exchange for a scio-anarchistic society would need to be free of all of the above problems. In addition, there should be a means whereby transactions could be conducted globally by electronic means, ideally without the need for any sort of “middleman” such as a banker or other financial institution. All of this is necessary if the medium of exchange is to be accepted voluntarily and widely, in the absence of some government coercively forcing its use and acceptance.
One obvious and very promising candidate for such a medium of exchange is some form of “cryptocurrency.” Cryptocurrency may be thought of as something like a form of “electronic cash,” or even more precisely, like “electronic gold.” While cryptocurrency is like modern paper currency in that it is not backed by gold, silver, or anything else, there are some very important differences. Unlike paper currency, it cannot simply be created at will by one entity at the expense of others. It also can be made strictly limited in supply, so that only a certain amount can ever be produced; in this way its value comes from both its rarity and the willingness of individuals to accept it as a medium of exchange, much like precious metals.
Here is an explanation of the revolutionary technology of cryptocurrency, for those readers who may not already be familiar with it. Cryptocurrency relies on a peer-to-peer network of multiple computers; in practice, this simply means a group of computers connected together via the internet. Each computer is able to create any number of randomly generated “addresses,” each of which is associated with a secret “private key.” Only the computer which generated the address has access to this private key. The addresses and private keys are simply really long numbers. The addresses are used to store virtual “cryptocoins.”
One way of obtaining a cryptocoin is to simply generate it, in a process known as “mining.” Each computer is in competition with all of the others to solve some difficult mathematical problem, where part of the process of solving the problem involves randomly generated numbers. The computer which solves the problem first is considered to have mined some predetermined number of cryptocoins. The process then starts over, with all the computers again competing to earn the next cryptocoins.
Each computer also keeps an identical ongoing history containing a record of each mined cryptocoin; this ongoing history is known as the “blockchain.” As coins are mined, the computer which mined them broadcasts the proof that it has done so to all the others, and it also broadcasts that the cryptocoins are now associated with one of the addresses which it has created. All of the other computers check the proof, and then also associate the cryptocoins with the address stipulated by the computer which mined them.
A second way of obtaining a cryptocoin is to simply transfer it from one computer on the network to another. The computer sending the cryptocoin generates a “transaction” from one of the addresses which it “owns” (by virtue of having its private key) to an address owned by another computer on the network. This transaction is also stored in the blockchain.
In order to limit the number of cryptocoins generated, the difficulty of the mining “problems” are adjusted over time so that it takes approximately the same amount of time for some computer to solve the problem. The “payout,” or the amount of coins mined each time the mining problem is solved, is also typically adjusted so that less cryptocoins are generated each time. There also typically comes a point at which no more cryptocoins can be generated. This ultimately limits the maximum number of cryptocoins which can ever exist, making them have a rarity akin to something like gold or silver.
It is important to note that the generation of addresses, private keys, cryptocoins, transactions, and so on, is not a process which is protected by passwords or the like, but by time-tested “cryptographic” mathematical algorithms. They are essentially mathematically impossible to “break.” (To be more precise, breaking one of these algorithms just once, would be like randomly selecting one grain of sand from all the beaches on the earth, and have it be the same grain of sand selected by another person. Technically this is not impossible, but it is so unlikely that it might as well be. Furthermore, to break the same algorithm again would again require exactly the same “impossible” odds.) This makes it impossible to “counterfeit” coins. It is also impossible to “hack” the program in some way, because one would essentially have to “hack” or have control of over 50% of the computers on the network – and even in such a case, anything “fishy” would be publicly visible by looking at the blockchain, and could then be dealt with appropriately.
There are already a number of cryptocurrencies in existence. The first and most widely used (as of the time of this writing) is “Bitcoin.” One of Bitcoin's main problems, however, is the fact that all of the transactions are stored in the blockchain in such a way that one can tell where the coins came from when they are received. The is a very real threat to privacy because it then becomes possible to track the movement of cryptocurrency from address to address, and if someone's address becomes publicly known (as it typically does, by virtue of the way addresses are used) or even just known to the wrong entity, it then becomes possible to track where someone is receiving and spending Bitcoins.
Another problem with Bitcoin is the transaction time. Bitcoin transactions typically take 10 minutes at the minimum for one “confirmation.” For maximum security, however, it is typically recommended that one require 6 confirmations before the transaction is considered complete. It is simply not practical to have to wait an hour – or even 10 minutes – to complete a transaction.
There are other cryptocurrencies, however, which have solved these problems. The most notable among these is Dash (previously known as Darkcoin). Dash has a features called “Darksend” which anonymizes transactions. It also has a feature called “InstantX” which enables instant transactions, so that the effective transaction time is only a few seconds, very much like using a credit or debit card.
Of course, since no one would be coerced to use any particular medium of exchange, there would be nothing to prevent individuals from using different cryptocurrencies, or even other things altogether such as gold and silver; for most purposes, however, it would be most convenient and sensible to use the most widely accepted medium of exchange. It seems highly likely that for real-world usage in a scio-anarchistic society, where both privacy and convenience will have a high priority, a cryptocurrency such as Dash or something very similar will become the de facto medium of exchange.
