The story you are about to read is, of course, fiction. But if you found it to be disturbingly close to the truth and would like to know who Fabian was in real life, a good starting point is a study on the activities of the English goldsmiths in the 16th & 17th centuries.
Fabian was excited as he once more rehearsed his speech for the crowd certain to turn up tomorrow. He had always wanted prestige and power and now his dreams were going to come true.
He was a craftsman working with silver and gold, making jewelry and ornaments, but he became dissatisfied with working for a living. He needed excitement, a challenge, and now his plan was ready to begin.
For generations the people used the barter system. A man supported his own family by providing all their needs or else he specialized in a particular trade. Whatever surpluses he might have from his own production, he exchanged or swapped for the surplus of others.
Market day was always noisy and dusty, yet people looked forward to the shouting and waving, and especially the companionship. It used to be a happy place, but now there were too many people, too much arguing. There was no time for chatting – a better system was needed.
Generally, the people had been happy, and enjoyed the fruits of their work.
This was the Government’s one and only purpose…
In each community a simple Government had been formed to make sure that each person’s freedoms and rights were protected and that no man was forced to do anything against his will by any other man, or any group of men.
This was the Government’s one and only purpose and each Governor was voluntarily supported by the local community who elected him.
However, market day was the one problem they could not solve. Was a knife worth one or two baskets of corn? Was a cow worth more than a wagon … and so on. No one could think of a better system.
Fabian had advertised, “I have the solution to our bartering problems, and I invite everyone to a public meeting tomorrow.”
The next day there was a great assembly in the town square and Fabian explained all about the new system which he called “money”. It sounded good. “How are we to start?” the people asked.
“The gold which I fashion into ornaments and jewelry is an excellent metal. It does not tarnish or rust, and will last a long time. I will make some gold into coins and we shall call each coin a dollar.”
He explained how values would work, and that “money” would be really a medium for exchange – a much better system than bartering.
One of the Governors questioned, “Some people can dig gold and make coins for themselves”, he said, “This would be most unfair”.
Fabian was ready with the answer. “Only those coins approved by the Government can be used, and these will have special markings stamped on them.” This seemed reasonable and it was proposed that each man be given an equal number. “But I deserve the most,” said the candle-maker. “Everyone uses my candles.” “No”, said the farmer, “without food there is no life, surely we should get the most.” And so the bickering continued.
Fabian let them argue for a while and finally he said, “Since none of you can agree, I suggest you obtain the number you require from me. There will be no limit, except for your ability to repay. The more you obtain, the more you must repay in one year’s time. “And what will you receive?” the people asked.
“Since I am providing a service, that is, the money supply, I am entitled to payment for my work. Let us say that for every 100 pieces you obtain, you repay me 105 for every year that you owe the debt. The 5 will be my charge, and I shall call this charge interest.”
There seemed to be no other way, and besides, 5% seemed little enough charge. “Come back next Friday and we will begin.”
Fabian wasted no time. He made coins day and night, and at the end of the week he was ready. The people were queued up at his shop, and after the coins were inspected and approved by the Governors the system commenced. Some borrowed only a few and they went off to try the new system.
They found money to be marvelous, and they soon valued everything in gold coins or dollars. The value they placed on everything was called a “price”, and the price mainly depended on the amount of work required to produce it. If it took a lot of work the price was high, but if it was produced with little effort it was quite inexpensive.
In one town lived Alan, who was the only watchmaker. His prices were high because the customers were willing to pay just to own one of his watches.
Then another man began making watches and offered them at a lower price in order to get sales. Alan was forced to lower his prices, and in no time at all prices came down, so that both men were striving to give the best quality at the lowest price. This was genuine free competition.
It was the same with builders, transport operators, accountants, farmers, in fact, in every endeavor. The customers always chose what they felt was the best deal – they had freedom of choice. There was no artificial protection such as licenses or tariffs to prevent other people from going into business. The standard of living rose, and before long the people wondered how they had ever done without money.
At the end of the year, Fabian left his shop and visited all the people who owed him money. Some had more than they borrowed, but this meant that others had less, since there were only a certain number of coins issued in the first place. Those who had more than they borrowed paid back each 100 plus the extra 5, but still had to borrow again to carry on.
The others discovered for the first time that they had a debt. Before he would lend them more money, Fabian took a mortgage over some of their assets, and everyone went away once more to try and get those extra 5 coins which always seemed so hard to find.
No one realized that as a whole, the country could never get out of debt until all the coins were repaid, but even then, there were those extra 5 on each 100 which had never been lent out at all. No one but Fabian could see that it was impossible to pay the interest – the extra money had never been issued, therefore someone had to miss out.
It was true that Fabian spent some coins, but he couldn’t possibly spend anything like 5% of the total economy on himself. There were thousands of people and Fabian was only one.
Besides, he was still a goldsmith making a comfortable living.
At the back of his shop Fabian had a strongroom and people found it convenient to leave some of their coins with him for safekeeping. He charged a small fee depending on the amount of money, and the time it was left with him. He would give the owner receipts for the deposit.
When a person went shopping, he did not normally carry a lot of gold coins. He would give the shopkeeper one of the receipts to the value of the goods he wanted to buy.
Shopkeepers recognized the receipt as being genuine and accepted it with the idea of taking it to Fabian and collecting the appropriate amount in coins. The receipts passed from hand to hand instead of the gold itself being transferred. The people had great faith in the receipts – they accepted them as being as good as coins.
Before long, Fabian noticed that it was quite unusual for anyone to actually call for their gold coins.
He thought to himself, “Here I am in possession of all this gold and I am still a hard working craftsman. It doesn’t make sense. Why, there are dozens of people who would be glad to pay me interest for the use of this gold which is lying here and rarely called for.
It is true, the gold is not mine – but it is in my possession, which is all that matters. I hardly need to make any coins at all, I can use some of the coins stored in the vault.”
At first he was very cautious, only loaning a few at a time, and then only on tremendous security. But gradually he became bolder, and larger amounts were loaned.
One day, a large loan was requested. Fabian suggested, “Instead of carrying all these coins we can make a deposit in your name, and then I shall give you several receipts to the value of the coins.” The borrower agreed, and off he went with a bunch of receipts. He had obtained a loan, yet the gold remained in the strong-room. After the client left, Fabian smiled. He could have his cake and eat it too. He could “lend” gold and still keep it in his possession.
Friends, strangers and even enemies needed funds to carry out their businesses – and so long as they could produce security, they could borrow as much as they needed. By simply writing out receipts Fabian was able to “lend” money to several times the value of gold in his strong-room, and he was not even the owner of it. Everything was safe so long as the real owners didn’t call for their gold and the confidence of the people was maintained.
He kept a book showing the debits and credits for each person. The lending business was proving to be very lucrative indeed.
His social standing in the community was increasing almost as fast as his wealth. He was becoming a man of importance, he commanded respect. In matters of finance, his very word was like a sacred pronouncement.
To be continued…
About the author:
This story was written by Larry Hannigan in 1971 – The sole purpose is to explain the simple maths of reality and the current Banking System – that is – 100 plus NOTHING does NOT equal 105 – and that charging interest on something that is created out of nothing, makes it impossible to repay, giving great power to those who do create money out of nothing – ie the Banks.
It will look like this: Give Me The Earth Plus 5% – Part I