Banks as Legal Thieves (VIDEO)

(CALGARY, Alberta) - In the 1960s Sam Bronfman, who grew the Seagram’s name into a world-wide liquor empire worth billions, was asked what he thought was mankind’s most important invention. His reply, in one word: Interest.

Bill Abram, a retired high school teacher, began by wondering why so many of his students were caught up on drugs, so he started to investigate the money system. It took him into areas no one would have thought of: Privatization gone amok.

He looked at Canada’s national debt, accumulated since this nation’s founding as an independent Dominion in 1867. The National Debt in 1993 was at $423 billion. Of that, he says, only $37 billion was actually borrowed for goods and services. The remaining $386 billion is simply interest and interest on interest over the previous 125 years or so. Government handed over to private enterprise, the role of creating money. Here’s how they do it.

A bank has $100 in capital. Regulated by government, (in Canada by the Bank of Canada, in the US, by the Federal Reserve) they are allowed to have outstanding loans to a certain ratio, say in this case, two to one. This means they are allowed to have $200 in debt on that amount of capital.

You apply for a loan and they loan you $200 at an interest rate of, say, 10%/annum. Over the next year you make your payments and the bank now has capital of $120 (the $20 addition is the interest you paid). In other words, they created $20 out of nothing. They do this on an immense scale, year in and year out.

I don’t have any US figures, but the growth of Canadian assets will obviously be mirrored across the border.

In 2008, the assets totalled: $2.5 trillion an increase of nearly twenty times over 30 years.

This is the most egregious example of privatization as a crime against the national interest (Canada, the US, whoever). Only governments are allowed to create money, legal tender, but in the old tradition of “private good, public bad” the role of creating money was handed over to the private banking system.

This is also why the banking crisis hit the US so hard. Canada was virtually untouched because we have one of the most stable banking systems in the world. They are tightly regulated and, while they still create billions every year, they do it within parameters that are under control. In the US, the free wheeling deregulation of recent decades has allowed the banks to loan out money to such an extent, that when the loans were called, they had almost no reserve capital (as in the example above) to back the loans. This is what the bailouts were and are essentially about.

Daniel Johnson was born near the midpoint of the twentieth century in Calgary, Alberta. In his teens he knew he was going to be a writer, which explains why he was one of only a handful of boys in his high school typing class—a skill he knew was going to be necessary. He defines himself as a social reformer, not a left winger, the latter being an ideological label which, he says, is why he is not an ideologue, although a lot of his views could be described as left-wing. He understands that who he is, is largely defined by where he came from. The focus for Daniel’s writing came in 1972. After a trip to Europe he moved to Vancouver, British Columbia. Alberta, and Calgary in particular, was extremely conservative Bible Belt country, more like Houston than any other Canadian city (a direct influence of the oil industry). Two successive Premiers of the province, from 1935 to 1971, had been Baptist evangelicals with their own weekly Sunday radio program—Back to the Bible Hour, while in office. In Alberta everything was distorted by religion.

Although he had published a few pieces (unpaid) in the local daily, the Calgary Herald, it was not until 1975 that he could actually make a living from journalism when, from 1975 to 1981 he was reporter, photographer, then editor of the weekly Airdrie Echo. For more than ten years after that he worked with Peter C. Newman (1979-1993), Canada’s top business writer (notably a series of books, The Canadian Establishment). Through this period Daniel also did some national radio and TV broadcasting with the CBC. You can write to Daniel at: Salem-News@gravityshadow.com

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Daniel August 6, 2009 3:07 pm (Pacific time)

Correction Its Mondays show on Democracy now.org

Daniel August 6, 2009 1:56 pm (Pacific time)

Henry profit off the suffering of people thru over priced health care is criminal . Selling products that cause health problems from poisoned tobacco products to unhealthy foods is also criminal . TWO THIRDS of premature deaths in the USA are from poor diet , there is much documentation to support this . On Democracy now ,Wednesdays show , there is a great piece on the American food industry . Please view it at www.democracynow.org

Daniel August 6, 2009 1:33 pm (Pacific time)

MBH the vast wealth produced TODAY is on the backs of exploited children , prison workers and the grossly underpaid in CHINA , and thru out the third world . The most repressive and inhuman conditions still exist and most Americans take advantage at their local walmart and their cheep prices . The industrialist in the north, before and after the civil war found a better model than slavery , instead of providing food , clothing , shelter plus the original purchase price , you use cheeper immigrants . You charge for the food , housing and clothing and pay just enough to cover their bills to you . This coal mining model still exist today , being much worse in places like Africa . The horror of slavery and slave like conditions still exists and many people in the USA support it thru buying what they produce . One the other hand there are now over 300 million unemployed in China , you lose your job , you also lose your flop and sleep on cardboard on the street . America has to demand better working conditions for all world wide that produce for us .

Henry Ruark August 6, 2009 12:56 pm (Pacific time)

DOD et al: Au contraire, sir ! You wrote: "But it did not involve interest. It was instead deregulation that, believe it or not, that occurred during the Clinton administration." Initiation and impact of the current worldwide economic crisis traces direectly, by consensus of most trained economists, to early era than Clinton's, and definitely does includ interest impacts per story here. Current information in other recent reliable major national magazine sources adds depth and detail to this report. Deregulation deeply invoked by Reagan cabal, including Cheney and others, was the first widespread, deeply damaging and desperately distorted attack on what was returning to solid economic action and honestly-founded growth until desperate world events shaped and further distorted U.S. hopes, attitudes and frustrations. Recent recap by some of those involved makes clear not only impacts-known but open intention to make it happen, as new examination of Cheney is making clear already. Coupled with perverted tax slashes, identified openly at time by Reagan's own main man and chief counselor, these impacts finally began to sink all ships after time enough for full consequences striking home and other nations, too. Full documentation in depth and detail in prior Op Eds, or by request with full ID and working phone to Editor Tim. But let's not delude ourselves on whence cometh the current desperate debacle. Tha would be stupid, to use a recently familiar word, and deprive us of solid knowledge already on public record, as in that incident, too.

MBH August 6, 2009 1:08 am (Pacific time)

The vast wealth that holds up the USA was produced from the blood, sweat and crime of Slavery. Seems like something should be done to right that wrong but....that would be WAY too much to answer to, least of all repay.

Vic August 6, 2009 9:01 am (Pacific time)

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson

Vic August 5, 2009 7:55 pm (Pacific time)

Great article !! And I totally agree with Daniels comment re war profiteers..the damned "defense" industry vampires that build their fortunes on the death and suffering of poor people they will never see or care to.

Dod August 5, 2009 6:38 pm (Pacific time)

To Daniel Johnson: I agree with you about 80% of the time. But in regards to the United States banking crisis, I believe you are wrong about the source of the problem. You are not wrong if you believe that the banks did a bunch of horribly risky and oftentimes unethical or even illegal actions. But it did not involve interest. It was instead deregulation that, believe it or not, that occurred during the Clinton administration. Up to Clinton's administration, banks, insurance companies, brokerage firms, etc. were legally separated by regulations. In very many ways Bill Clinton was an excellent president (compared to the idiot child GW Bush, he looks like God!), but this is something that the rich and powerful got through during his watch. With this deregulation, along with the failures of the Bush administration apparent failure to do any oversight whatsoever, brought us to this mess. It used to be if you wanted to buy a house you have to prove you had the income to pay the mortgage and you had to have a down payment. That changed and they started handing out mortgages. See the Washington Post story found out www.washingtonpost.com/wp-dyn/content/article/2009/08/05/AR2009080503427.html) Wall Street then packaged those crappy loans as if they were AAA investments and sold them mostly to institutional investors. The initial mortgage brokers made a lot of money, as well as the geniuses on Wall Street. But when those unqualified buyers were not able to pay their houseplants and the operatives of AIG in the special unit in London crashed that company, we ended up with the bailout. Which I would point out to the Conservatives the bailout WAS PASSED AND SIGNED UNDER BUSH; so please don't call it the Obama bailout! It should also be pointed out that Goldman Sachs is both ethically compromised and deeply connected to the Democrats. Politics is getting more disgusting all the time. At this point the Republicans are by far the ‘biggest pricks.’ Sometimes it is the Democrats. As the Prince pointed out at the end of Shakespeare's Romeo and Juliet: "We are all punished." BTW--Last fiscal year the United States paid about $500 billion in interest service on about $11 trillion in debt. It was the third-largest budget item (close to the amount of military expenditures), and the current year's deficit may approach $2 trillion, approximately an 18% increase. Military spending is going up approximately 6% over last year. So the probability is the national debt servicing will surpass military spending. If the deficit increases by about the same next fiscal year, the debt servicing will probably be our largest budget spending item.

Henry Ruark August 5, 2009 6:05 pm (Pacific time)

Daniel: War criminals score high in both blood and loot... But now we have those purveying healthcare as an even more lavish levy on the lives and blood of millions... Check out billions being spent to kill off for still another time anything even close to real reform, and then check out very high return ratios recently cited for profits in many segments of that "industry" --perhaps better described with other more penetrating (no pun !) characterizations.

Daniel August 5, 2009 5:15 pm (Pacific time)

I forgot the mention the biggest criminals WAR PROFITEERS !

Daniel Johnson August 5, 2009 2:31 pm (Pacific time)

Daniel: I quoted Sam Bronfman at the outset. The Seagram's fortune began with bootlegging, then going on to sell booze across the border, during Prohibition. Apparently McCain's wife's fortune began with her father's connection to alcohol and organized crime in Arizona.

Daniel August 5, 2009 12:45 pm (Pacific time)

Daniel J this gets back to last weeks post about wealth and crime . How much of todays wealth was started by or has been made thru crime . From rum running to shady dealings , selling bogus and harmful products , to loan shark interest rates, and playing on peoples vices ! I would have to say the real way to make great wealth is thru crime, and thats a crime !

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