on Money, Government, Banks, Usury, Part Two
Notes in progress on Money, Government, Banks, Usury.
2. How Banks Create Money
The Bank of England
got its start
when a Scot named Paterson
made a deal with the King,
William of Orange, who needed money because
of an altercation with France.
Paterson conceived a bank, with a royal charter.
He sold shares in the bank to raise a million pounds
of capital: this he lent to the King, who gave him a royal IOU-
as good as they come for such things-that Paterson deposited
in his vault. On that basis, he lent out another million pounds,
as notes, to public borrowers, collecting high interest
on both loans.
Some went further: used their own notes as capital-
to loan more. Or even a note on the possible future value
of a note-all underwritten
by someone else’s note. Modern times.
The word “millionaire” came from France in the early eighteenth century
to describe the speculators in John Law’s Mississippi Company,
when the stock appreciated a thousand-fold.
That capital enabled Law and the Banque Royal
to loan yet more money, which was used to buy more stock.
No gold was ever mined,
and the company and the Royal Bank both soon crashed.
As early as the fourteenth century, it was noted by Copernicus
that it was always the least viable currency
(the most debased coins, or the shakiest paper)
that was used first, and hence the most circulated.
It also became clear that when there was an increase
in money, as when galleons loaded
with New World silver began
arriving in Europe, prices of goods went up.
In Andalusia, between 1500 and 1600, prices rose five fold.
(J. K. Galbraith: Money)
The mines today pump oil,
and supertankers have replaced the galleons.
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