Did you ever care what this number represents? PhP4,719,013,000,000.00

That’s neither Bill Gates’ nor Henry Sy’s and that is not my projected income this year either (in my dreams)…

That’s our Philippine national debt! Clap! Clap! Clap! Both foreign and domestic combined.

As November 2010 our National Debt is at a staggering PhP4,719,013,000,000.00 and with the current population of 94,000,000.00 every Filipino is indebted PhP50,202.00!

Nah! They have no plans of lowering it. The Bankers own this country. And I am not happy about it. Imagine, my kid who turns two on her next birthday, who knows nothing but to ask for lollipops and still pees on her pants has ALREADY owed the bankers and creditors PhP50,202.00 and COUNTING!

I have a intelligent and handy plans how to erase the PhP50,202.00 per capita debt over my head.

– to make the per capita debt to a very manageable level of PhP1.00 only, increase the current Philippine population 50 thousand folds, that is by easy arithmetic of current population “taymis” current per capita debt (94 million X 50,202). getting couples to do the ultimate ultra active procreation activity is by way the easiest part. yeeppee! feeding the new breed is the hardest thing though (shrugs). but don’t worry folks, our government can do the things they are very excellent at doing: more utang for welfare. 😛

– have my things packed and go to sierra madre where I can hide from government tax collectors for life. i may get muds on my feet, stinky odor, plant camote, but I will be happy giving those tax collectors headaches guessing where i am. you see guys? i love tax evaders. =) i have a lot less to worry about these things.

– wish upon a shooting star that good mother fairy would come and wave her magic wand. POOOOFFF!!! here’s your PhP50,202.00 children. nah! it ain’t happening soon. good mother fairy never trusts Filipinos when it comes to money.

– pray for an earth-bound gigantic asteroid to hit earth fast and see whats happens next. OUCH! that’s horrible.

Anyway, when the government successfully sold $1,000,000,000.00 global bonds in October 2010, never ever feel happy about it. Your good government has just successfully borrowed PhP440,000,000,000.00 in your name and they’ll gonna collect the share of payment from you soon. And if ever you can’t repay it your lifetime, your children will. Also when you see this “treasury offering bonds blah blah blah” never feel proud about it. Your government is selling your soul to creditors through bottomless borrowings.

Or do we care anything about these things at all?

START WAKING UP PEOPLE!!!! We never had a hand on these debts. Mind what our government do in our behalf. I pray this lovely country will be spared from economic woes happening in Middle East. Be prepared because news of looming food shortage and hyperinflation is too loud to ignore.

Or am I just paranoid? =)

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Pres Noynoy Aquino Porsche – a chance of enlightenment

I respond to the boring and monotonous reaction towards Pnoy’s Porsche.

I want to defend Pnoy. If I am Pnoy, I’ll buy another Porsche, this time a brand new one! I don’t care what those silly people say. I tell you why. Because the hatred towards him is based on a very wrong and misled premise that Pnoy is not an ordinary citizen. PNoy is just like me, and ordinary citizen. Why?

The anger felt is attributed to the long standing belief of government idolatry. We look to governments and the people in there as greats – a mindset akin at the times of Kings and emperors where leaders were idolized and the people were treated as slaves. Because of that impressed thinking, we usually looked upon them and we depend on them in order to survive. And anything they do that don’t sit well on populist sentiment and taste should cause hatred among the people and consequently losing the impression of their greatness.

Now, who said governments and leaders are that great that we must be obliged to look upon like the one that gives paternal care? Let us all learn that the existence of government and its eventual expansion begun not on noble ideals but started by a shameful act coercion. Government maliciously existed when some rag-tag and incompetent entrepreneurs, literally, colludes to drive off tract competent ones to promote their selfish interests of dominating the lives of the rest of the population. Being the government or the leader of that group should not cause us to lose the simple truth that government did not exist out of noble intentions. I found no greatness in there.

So because there is no greatness in being associated with this kind of group, the government, PNoy though elected as leader, should not be looked upon as an extraordinary citizen with assumed greatness as a leader that must always go along with the people’s sentiments. He has a right not lesser or greater than anyone. Being President, as a respect to his right to own a property, should be left alone at his own choosing. That does not affect his job, in anyway. Government is not a godly entity but a group of fellows who are lucky enough to run such group. The problem only came about when some erroneously thinking minds, with ill-impressed thoughts suddenly felt jealous of not having, by the sheer incapacity to buy, his or her own Porsche.

If there is something we must change, it must be our consciousness.

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Rage? – Pres Noynoy Aquino has a new Porsche

The media and the people subscribing them are feasting on the latest Pnoy act of giving gift to himself. I am amazed these people have collective feeling that Pnoy should have not done that while the Filipino majority is in hunger. They suddenly hate Pnoy when the latter bought a four-wheeled, well-polished metallic glossy box.

Pnoy can afford it. He used his own money just like any rich individual can. Period. What if Pnoy bought an owner-type jeep instead of a Yacht? Does that make the rest of the population stupidly happier just because the president projects a populist taste like eating tuyu and kamatis instead of frequent fine dining?

Feelings are affected by two things, the one we see and the one we don’t. What makes us angry are only those things we stupidly wished shouldn’t have seen. So if P-noy bought a Porsche for himself, it is just fine to feel angry because we idiotically unexpected it. However, please realized that the hatred felt is not because P-noy had a new Porsche, but because you can’t buy it for yourself. Don’t consume yourself thinking of the superficial things. There are numerous things we should know which worth more than just what we are seeing and hearing from the media.

Focus more on things that we still don’t know. I take my case to the unending suffering of the Filipino poor. The poverty is caused by no other than the reckless inflation of the money supply by the government through Bangko Sentral ng Pilipinas. By creating easy money and promoting easy credit, massive transfer of wealth and labor is occurring to the detriment of the middle class and the poor. Inflation, or over creation of money and credit, devalues our money everyday.That is why the number of poor is growing.

I think, we should be more focusing on far more important topics, like how BSP destroys the buying power of our nation’s money. Not all people know this disgusting truth. Right now, what people know is that Pnoy bought a 3rd-hand Porsche and stupidly raging over that. It is nonsense while majority of the population are ignorant as to what is the real cause of poverty. And that is the central economic planning intervention on the supposedly free market.

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Milton Friedman on Spending Money – four ways to spend

Four Ways to Spend Money

Here is a Milton Friedman valuable insight. Four ways to spend money:

1. Spend your own money for yourself
2. Spend your money for sombody else
3. Spend somebody else’s money for yourself
4. Spend somebody else’s money for somebody else

Of all these, what our government is very good at is the fourth way.

Anyway, let’s begin with the first item. When you spend your own money for yourself, the tendency would be, which is true all the time, you want to have the best services and goods in exchange for every cent you have. Meanwhile, what is ‘own money’? In practical sense, an equity, an asset, a penny that does not belong to anybody but you is what we call “own money”. It is sometimes a proceed for yourself derived or earned while doing some risk, like going out for work everyday. Because of that, having the knowledge that you spend substantial effort to acquire it, it is somehow unavoidable that your mind requires the maximum satisfactory return for the least possible amount of money you can shell out. You want to eat the most delicious food your available money can buy, the best clothes for yourself at a discounted rate, acquire the highest rebates, maximizing the rewards you earned, etc… (highest quality for least cost)

The second way is quite the same with the first. However, we spend our own money for another party, like buying a gift for someone. Quite the same with the first one but there is a difference we must clearly understand when it comes to the satisfaction we felt from doing it. In here, you clearly derived your self satisfaction not from the direct consumption of the goods you bought but from the belief that the gift was well-received and that the person who received it is happy. In strict sense, it is a satisfaction derived from a perceived satisfaction of another person. When you buy someone a gift, however, you may not long for the goods as you desired it when you buy it for yourself but still you have to spend the least possible money to acquire it. The intensity of your desire to have the merchandise then be given to someone is not as great as it when you buy it for yourself. You buy the goods having in mind that the quality is enough not to be disliked by the receiver at the same time not costing you so much. (not highest quality for a least cost)

The third one will be spending other’s money for yourself. In here, a visible difference from the first two is palpable. When someone gave you money to be spent for yourself, the tendency would be: you buy everything you want no matter what the cost is. However, provided that the quality of the merchandise is still there and you know you will be satisfied. After all, you still consume it for yourself. (still highest quality but for whatever cost)

The fourth is very different. When somebody gave you money to spend for somebody else, lot of different things happen. First, no matter how much you try to, you will not be concerned how much will be spent and also not concerned with what the quality of the merchadise or service would be. Economizing is the least of your concern and, as derived from number 2, you will not be so concerned on whatever you will get in return because after all it will be given to sombody else. Second, because you have nothing at stake both on cost and satisfaction, the only thing you have to think about is to facilitate spending. (i-don’t-care-quality for whatever cost)

Again, of all these, what our government is very good at is the fourth one. SOCIAL WELFARES. All these welfares has cost of course. And we come to ask at this point, where will they get the funding? We dont have to think hard where. A very small but hugely significant portion of it is reflected in anyone’s payslips. Later on we will learn why the fourth item is dubbed i-don’t care quality….

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Unmasking the Thief (how modern banking steal from you)

Unmasking the Thief

By: GoldenErro

Let us be frank and consider this thesis: Centrals Banks own us and our ignorance is their cheese for the rats.

Deceit by the deceiver and ignorance of the deceived is always an excellent and deadly mix – excellent for those who have know hows and deadly for those who are fooled. Unfortunately, we are all amazed, though none in his sane mind would ever accept being one of the fools (since it requires quite an intelligence and honesty to recognize oneself as one of the fooled), majority of the population are so.

One economist said that the creation of money is so simple that in its very simplicity, paradoxically, lies the very reason why the mind deferred the understanding of it. Men unknowingly created web of tangled principles about it and at the same time developed strict adherence to these principles and from time to time slowly forgot the very basic principles that governs all about money. What is it that we need to know about money then? Is it not enough we are able to acquire money then save it or spend it?

Let us face the truth. INFLATION KILLS! There is nothing in it but robbing the middle class and anyone below that line… then eventually killing us. Every time the prices of goods increase, majority of the population hurts. If the prices of good jumps 10% it means that the price of your money, which is the purchasing power, is reduced by same extent. And all savings you have has lost 10% of its value. Saving on a bank account or investing on a profitable business is encouraged by the prospective incentive that you will get the principal back plus the interest or profit it makes. However with inflation or prices soaring up, when the time of profit taking comes, though your money seemingly increased in amount, its value is substantially less than when it was first invested. Its purchasing power simply declined over time. That is the mess we all need to recognize. Failing to do so will further add up to the mess created against our well beings. How did it come about is a very much less understood phenomenon. People like to ask but not persistent enough to really seek and at least understand the cause of the problem.

Unmasking the thief means knowing the truth how money is created, who creates it, why there is inflation (and deflation), how does it affect every level of society (the lower and middle and the elite).

We must understand the nature of money. Forget once and for all religious myths demonizing money, ergo money is the root of all evil. Money is firmly a lifeless object or representation of something subjected to our own and varying perceptions.  How then MONEY came into being? 

And the gods said…. “Let there be money!”

Say, you were cast in a faraway island with Wilson. You don’t need money in there for you’re not concerned buying anything. And because you have no one else around to exchange with, survival just needs you to have the skill to climb a coconut or an ability not to drown in the sea easily while catching a fish. But if you are in a community of people, exchange is inevitable. Exchange, therefore, is as paramount as survival.

So the system of barter came into being. But then again, out of convenience and practicality, barter can not stay for very long. Barter or direct exchange is an awkward way for larger and more complex trade. So as time passed, human cleverly adopted a more convenient system of exchange, called indirect exchange. An indirect exchange uses a medium for exchange, which is called money. Earlier monies were metals of any shapes, honey, rare stones and gems, feathers, tobacco and ivories. Obviously no one eats metals but anyone can use it to buy food. You’ve got to have one of these, depending what the society prominently uses to avail other commodities or services desired. Money is any commodity which is rare, naturally produced, difficult to counterfeit and commonly acknowledged in the market as a medium of exchange. It is inconvenient and quite a joke, therefore, to carry rice grains, since it is not considered money, to pay for your daily jeepney rides or when you pay fuel for your car. You’ve got to have with you the accepted medium of indirect exchange to avail such service.

As for gold and silver, those requirements of money are met. Gold is rare and it is malleable that jewelry can be made out of it and most importantly, it is naturally produced and impossible to fake. Through the ages, gold and silver, broken into desired shapes and pieces, served the very purpose of money. Because of the inherent value these metals contain, attributed mainly to their physical properties and rarity, humans promoted these commodities as money.

Money’s existence was necessitated by the inside drive of human self to be as convenient as possible whenever he trades. It never came into being by a single snap of fingers or a good fairy waving her wand. Money evolved in centuries through human desire of easy and convenient way of exchange. In fact, technological advancements were made possible by the ability of human to initiate trade with money just carried in their pockets. An advance civilized society is quite impossible if we still trade in barter.

We must understand the most important thing about money: that money serves only one purpose in human civilizations: as a medium of exchange. It means that money is just a representation of something like human labor, services, or other goods. A carpenter and his family need food and clothing but he can not acquire food and clothes if you give him, say, a toilet bowl as payment for his labor, unless he can sell it right away to a person who doesn’t have a toilet bowl. However, in anyways it should be burdensome to pay him that way. You have to pay him money right away.
Short History of Banking and the Grand Deceit

The propensity of human mind to innovate more convenient ways of trade has brought him into the age of banking.

How banks came to being is amazingly a very simple story.

In the beginning, long time ago, when it was just usual to carry a bag full of real gold and silver without the fear of being robbed and killed, people eventually somehow became too lazy carrying real gold and silver around. The merchant grew too tired having ‘bulky’ metals in his pockets. The miner became too anxious where to keep his new gold. With these problems in mind, luckily someone, a very intelligent lender, came up with a very bright idea to solve the problem. Just one word he said: VAULTS! Yes, vaults for safekeeping or warehousing. That was how banking begun…

So the miner, weary keeping his gold in his own house,  visited the vault owner and had an agreement to keep his gold in the latter’s vault. And as a proof of safekeeping, the vault owner shall give the miner a warehouse certificate or a proof of receipt that a certain volume of gold was delegated upon agreeing on a certain service charge. The miner, at any time, can also pull out his gold upon showing the proof of safekeeping whenever he needs the actual gold. The lender-keeper being a trustworthy person, upon receiving fees, stood on his promise to give back the actual gold whenever the gold owner needed it provided the gold owner can surrender back the warehouse receipt held. The business was a success that not few miners came to deposit their gold. As a lender-keeper, people also came to him to borrow capital. The debtors may choose to have the actual gold or just certificates. The number of miners wanting to have their metals kept in the lender’s vault grew. And the market of warehousing grew. That was how banking flourished…

The only purpose of gold certificate or gold receipt is to attest the existence of real gold in the vault and be a gold substitute. Anyone who can issue such certificate should adhere to that rule in extreme care and must be so strict that the issued paper receipts were genuine and the gold backing it really exists. The receipts or certificates issued by the trustworthy lender-keeper became usable in the market. More and more people accepted that the circulating certificates as if they were literal gold. Why not? They are certificates of actual gold and they trust the lender-keeper when redeeming time comes. Instead of using the ‘cumbersome’ gold to buy goods, trade became easier and more convenient using these certificates since these certificates or receipts were also light weights. The certificates were then eventually used as money substitute in the market since the gold in the vault, which is itself money, provided the valid existence of the certificates. And of course the people must continue to believe that the lender-keeper stays trustworthy. From time to time, the people developed the habit of using paper receipts, or paper money, as a medium of exchange. They got used to the convenience of using paper money. That was how paper money begun…

The incentive of doing business is profit. The profit of the lender-keeper basically comes from the fees he charged from the miners/depositors and the from the collateral and interest payments he acquired from the borrowers. However, the lender-keeper, somehow, was not satisfied by his earnings. After a quite sometimes, he came into the most important realization of his life and business: that fewer and fewer miners come back to redeem their receipts and while more and more debtors/borrowers demand certificates or paper receipts instead of the actual gold. And realizing also that all the miners never come back at the same time to get their gold and that the debtors trusted the certificates, the lender-keeper was amazed on how far he can prop up his profits. And so, aha! a unique scheme suddenly came to him: since no one knew the actual gold in his vault,  he could then create more receipts than the amount of the actual gold kept. He can then increase his profits by only doing one thing: creating bogus certificates! He can use the bogus certificates to expand his lending business. The borrowers never had the smallest hint that the certificate on their hands is an empty certificate and created out of nothing. They never knew that the supposedly trustworthy lender-keeper is cheating on them by giving them fraudulent and counterfeit certificates. Counterfeiting is the word you need to remember all through out. That was how modern-day banking started…

Fraud is implicit stealing. Counterfeiting is a kind of fraudulent act. Creating a bogus certificate is a fraud since it deceivingly deprives the holder of the certificate the actual property the certificate represents. As long as the lender-keeper is greedy and the people can not sense something is wrong, the lender-keeper will keep creating fake or bogus certificates. These certificates, fake or not does not show distinctions since they look the same, will be loaned out to debtors, and these will circulate in the market. For example, in strict rule, if he keeps on his vault a total of 1000 oz of gold, the amount of certificate given out should be 1000 oz only. The ratio of gold to certificate should be 1:1. But if he is tempted to create fake receipts, say, 1000 oz more of empty certificates, then he is increasing the certificate supply to the ratio of 1:2. The only time that this swindling is exposed is when the lender-keeper can not meet his obligation to give all back the actual gold to all the certificate holders. It happens if and only if all certificate holders demand their actual gold from the lender-keeper at the same time. Obviously a “run” or bankruptcy occurs. In fact, the moment the lender-keeper created the first bogus certificate, his business is already practically bankrupt. Since there is more certificates circulating in the market than the actual gold in the vault, the lender-keeper’s greatest problem would be how to come up with the same amount of gold as the amount of certificates he printed when all the certificate holders demand the actual gold. The ones who are first in the line to redeem their gold will have no problem. But the ones who came last will get nothing. He can only muster out 1000 oz worth of certificates and the remaining 1000 oz worth certificates are worth zero, much less than the value of a used toilet paper. This kind of fraud is punishable by death a century back then.

The Grand Deceit (and the real definition of Money and Currency)

Before we go on, we have to make a very important distinction this early in order to understand what we are going to talk about. Above discussions mentioned the word money numerous times but not currency. Unless we understand the difference between money and currency we will be having hard time grasping the truth. Why? What is the difference between currency and money?

Money, as stated previously, is the medium of exchange. This means that it is just a representation of something like human labor, services, or all other goods. It can not be created. It can not be printed. Gold and silver are monies. But they are not Currencies. Gold and silver cannot be printed and cannot be created. Currency, on the other hand, is just a representation of money, a representation of gold or silver. Currency is not the actual money. It is just a substitute for the real money. In the case of the lender-keeper, the gold in his vault is the money and the receipts and certificates he issued are the currencies.

But today money and currency is used interchangeably. But money = currency is not right. And in this misconception alone lies the very problem why we the people have hard times understanding what is really happening around. Bankers wanted it that way. They want the populace not to know what money is and what currency is. Mass media men are doing a hell of a very good job of promoting that misunderstanding maybe because they, too, are part of the grand scheme or maybe, just like the majority of us, know little about the matter. All they wanted is for us to accept the lie that currency is money and money is currency. A very clever way to impede the people’s awareness and consciousness as to what is the truth, that money is not currency and currency is not money in order for them to continue their dirty work.

Knowing real money is the very first key needed to unmask the thief. Only by this knowledge that you will be enabled to teach yourself that currency is the very tool the deceiver, the central bank and the banks, uses to steal from you. On how they use this tool will be discussed in the following sections.


There is a tale that one night, a good fairy came to visit every citizen, and slipped into their pockets and every bank deposit an additional one million cash each thus increasing the supply of money big time! In the morning, there was huge commotion and excitement and all people rush to every mall, bought all they wish to have, made love with anyone, dined lavishly and got drunk 24/7. But sadly the frenzy lasted only for a week and all their money was gone, all used up. And as their money slowly drying up, the people idly expected another visit by the good fairy. But the good fairy never came back. Eventually, the people became destitute because they can no longer sustain the lavish lifestyle they created in one week. No more fine dining, no more expensive wine, no more attractive ladies, and no more money to pay bills and credits for acquired house and cars. But more painful truth is that because the supply of money increased tenfold, so as all the prices of goods and the people can no longer afford the tenfold increase of commodity prices. And the saddest truth is that there is no more money left in the pockets.

INFLATION is thought to be the price increase of commodities and services. However, to fully believe in that kind of meaning is a grave mistake. It is incomplete and it is deceiving. That is the definition the banks and the mass media cohorts want us to believe – that inflation is just rising of prices, period. They purposely and zealously propagated that definition because they do not want us to learn what the real problem behind inflation is. Educating the citizenry is the least of their concerns. They remove a very essential part on the definition of inflation itself, which should be known even to a first grader and for all of us – that is the part of increased supply of money.

So what is inflation? Inflation, as defined by honest economists, is an economic condition where in there is an increase of supply of money (or currency) that bids against goods and services. Prices of goods are governed by the law of supply and demand. When prices fell for a certain commodity maybe there is a surplus volume/overproduction of that commodity or maybe that commodity is not in demand and the supply of money is the same. And increasing prices of goods is brought either by the scarcity of the commodity and high demand of it and the supply of money increased. Please take note, however, of the both supply of commodity and supply of money, the one that is easier to manipulate is the supply of money or currency since, not like commodities, currency is much easier to counterfeit. Consumer commodity is much harder to overproduce, not like currency.

Rising of prices of a commodity does not mean entirely that the commodity became more valuable or in demand, though they want us to believe that way. Rising of prices just signifies one very important and unsung fact – that the purchasing power or the price of money was reduced. There is too much money in circulation bidding against a limited number of goods and services and as a result, prices of goods increase. So how do they come up with inflation? How do they do it? Answer: Fractional reserve banking.

Fractional Reserve Banking

We now introduce a new term called ‘Fractional Reserve Banking’. We are in the age of fractional reserve banking folks, the modern way of banking.

Fractional reserve banking is simple. Today’s banks are fractional reserve banks. What does this mean? Any business ought to have some capital to start business. Plain and simple. But a bank’s capital, as required by today’s law is very different. Fractional reserve banking law requires a bank, say Bank A, just to maintain in its reserves a fraction of its total assets or deposits, thus the name fractional reserve, in which the other fraction of the bank’s asset will be made available for potential borrowers. It is opposed to the full or 100% reserve banking wherein a bank is required all its assets as reserve, not just a fraction of it.

For example, depositor Maria opened a savings account on Bank A and deposited P1,000.00 pesos. Bank A’s asset grew by P1,000.00 after Maria’s deposit. By law, Bank A is allowed to keep a fraction of the 1,000.00 pesos as a reserve and loan out the remaining part. For simplicity, let us use 10% rate of allowable fractional reserve requirement. By this rate, Bank A is allowed to keep just 10% of Maria’s deposit, which is 100 pesos and the other 900 pesos will be available for the prospective borrowers. But the story does not end there. Bank A found a debtor named Juan. Juan borrowed all the allowable maximum amount of P900.00. But debtor Juan decided to defer using the loaned amount immediately and instead saved temporarily on his account at Bank A. The cycle of the fractional reserve scheme again commences. Bank A’s asset now grew by P900.00 after Juan’s deposit. This sums up to P1,900.00 of Bank A’s new asset. At this time, at 10% percent, the fractional reserve made would be, by the same computation, 10% of P1,900.00, is P190.00 and the maximum allowable amount to be loaned out would be PhP1,710.00. After just three identical transactions, Bank A’s asset, starting from Maria’s P1000.00 deposit, will become P13,032.1! And the cycle goes on and on as long as debtors line up and the certain amount of deposits stays in Bank A. This cycle increments the supply of money or currency indefinitely.

Let’s get serious! Fractional reserve banking is a big, big, big counterfeiting machine, just like the good fairy. Fractional reserve banking is just as fine for those who benefit from it and those who have no knowledge about it. But to the minds who understand it, fractional reserve banking system is huge fraudulent and stealing scheme. It is strictly a counterfeiting of currency since the supply of currency is created by some defined multiplier and not by actual savings and hard commodities.

Fractional reserve banking is swindling since it enables bank to multiply the amount of currency by creating it out of nothing. It is just as phony as the lender-keeper creating bogus certificates. But people do not question this disgusting scheme since the law provides the legality of it. And people, for a long time tend to believe that when it is a law, it must be just fine. In short, fractional reserve banking is a legalized counterfeiting after all.

The supply of money is maliciously created by the act of lending. The more debts subscribed by borrowers, the more money will be in circulation. Thus a very valuable insight: that the money you are holding right now is a product of debt transactions. So no wonder why banks are happier when unsuspecting citizens engage in more debts. That is why big bankers rake billions of profits, while the middle class and ordinary citizens are getting more hapless. Bank’s motto: more debts, a merrier would it be!

Effects of Inflation

We must realize that inflation is the number one result of fractional reserve banking. By using some rate of fractional reserve requirements, the banks can create unlimited amount of “money”. But because people tend to be happier with more money on their hands, there is no time to be annoyed at all.  Little do they know that when all money created evenly distributed in the whole system, the purchasing power of the money on their hands, no matter how plentiful it is, is substantially reduced. The value of the newly created currency forcefully takes its value from the already circulating currency. Thus, the value of every cent in circulation is diluted.

Inflation discourages investments and savings. Increasing cost of business operation is one of the biggest reasons why businesses close. People who understand inflation and the havocs it brings are too cautious to engage in business since they expect of very little return value or profit value of their investment. For those who are maintaining saving accounts are also hesitant to sustain frugality since their saving are of little value over time. And the bad effect is large scale. There will be large number of middle class or employer forced to close business and consequently leaving many people jobless. Inflation worsens poverty.

This increase of supply of money is the main reason why prices go up. And what it makes difficult for everyone, specially the wage earners, to survive is that wages doesn’t increase at the extent of inflation rate. Commodity prices go up steadily and frequently while wages and salaries go up rarely. It is a mistake therefore to put blame on your employer why your salary doesn’t increase at inflation rate.  The wage earner and the employers are both victims of inflation.

Surplus in consumer goods, say enough rice production, brings social benefit for it makes the entire community not worrying of any scarcity of needed commodities. It is the basis of wealth. The availability of these goods satisfies the need and demand of all. What about money? Is increasing the supply of money makes everyone happy? Unfortunately, it is different. Expanding the money supply doesn’t bring any social benefit. What is the difference? Take note that survival depends on the availability of goods like food. Survival never depends on the availability of money but solely on the availability of the goods you are going to buy. Consumer goods are consumable, like rice that can be cooked and eaten. Money is not. As pointed out earlier, money does one thing and one thing only – as a medium of exchange. Increasing the supply of the medium of exchange only decreases the value or buying power of it. Though it may seem that having plentiful of money in one’s hands shows prosperity, in entirety it is not. Large part of the community suffers every time inflation occurs.

Inflation has another disgusting effect. Massive transfers of wealth. What does this mean? When the lender-keeper finally decided to produce the very first bogus certificate, he unintentionally (or intentionally), created a machinery for a fraudulent transfer of wealth. Since the purpose of money is to buy goods or to acquire tangible assets like land, appliances, house, car etc, the seller and the buyer entered into a seemingly fine but very anomalous exchange. How? Simple. The assets were acquired by using currency created out of thin air, out of fractional reserve banking. In this sense, a transfer of wealth from a currency, that was printed out of nothing or a gold certificate which has no real gold, in exchange for a tangible asset like a peace of land. The dirty scheme is much more visible when a person borrowed some amount from a bank involving a collateral like land title. Imagine a land title which certifies the existence of an owned land in exchange for a currency produced from nothing. If the borrower defaulted on his debt, the bank will get the collateral. Whew! If I am the banker, that would be a massive acquisition of somebody else’s property. But wait. You might say, the borrower got the money and spent it on something he felt valuable so losing the land worth it. At first glance, this seems so right. But with the same misunderstanding we were brought to so much mess and blindness. We must then stop awhile and think about it. How come it was a very wrong impression to think that it worth it? Because, please understand, with this scheme, eventually at the end of the day all the people’s assets and properties previously owned will be possessed by the very bank who issued the currency. The lender-keeper always gains! And by that time, all ‘money’ you got in exchange for those properties worth just a cup of coffee with no sugar. And you will be left of nothing but a paper money that worth lesser and lesser everyday.  

So don’t be ever too complacent that you are able to keep savings in the bank for your future. Though it is commendable for someone to be thrifty, never let your money sit idly in the bank for long. Every second of the day, there is someone big stealing it. And also, knowing these knowledge, though it might be unacceptable at first, never aspire for frequent salary hike because in the long run everyone might just well end up losing his own job when the hapless employer decided to close business because of bankruptcy.


“Power corrupts and absolute power corrupts absolutely.” – Lord Acton (1834-1902)

I hope the thesis presented at the beginning of this discussion is proven and well understood. The one who had been given the sole power to print or create money has the enormous power over our lives.

Paper money or electronic balance sheets are not wealth. They are illusions. As long as we are using money not backed by real commodity like gold and silver, as long as we are owned by central banking and fractional reserve banking, as long as the lender-keeper produces bogus certificates, as long as we are pacified by smiling celebrities on huge billboards, as long as noontime television shows and trivia news and unnecessary showbiz news of somebody else’s life dominate our attention we will be forever held as slaves of the ones who control the currency supply.

Money is indispensable item in human life and exchange. Maintaining a sustainable life or ruining it depends mainly on the soundness of the financial base. Financial base depends on the stability of monetary unit. A healthy monetary system makes every citizen prosper. Ruining it means ruining every life while making very few influential individuals feasting on fruits of our daily sweat.

I am so optimistic that our consciousness will awaken and eventually notice that we are living in a broken and printing press monetary system. Ending our complacence that everything is fine is a very big and the most vital step towards understanding our self worth. And eventually, in the near future, if we could teach well ourselves, our children, friends, neighbors, relatives, everyone on this planet will live in dignity and liberty when all those thieves will be finally exposed and gone.

***For comprehensive study please Google or Youtube the names Ron Paul, Murray Rothbard, Ludwig von Mises, Austrian Economics, US Federal Reserve System, fiat money etc

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