Page 2 of
3 SPEAKING
FREELY Who
really holds the gun? By Darius
Guppy
Moreover, the people, who are not as
stupid as their leaders would like them to be,
work out very quickly that they are being made to
pay for things which have nothing to do with them.
Not surprisingly, they revolt.
But
movements such as Occupy Wall Street can go only
so far. Currently, apart from the odd ineffective
riot or encampment at some monument, the protestor
is armed with only one weapon: to strike. Not
surprisingly he feels weak.
However, the
beast is more vulnerable than he imagines, for the
very alchemy which gives
it so much power - to make money from air - is in
fact what will kill it.
Thus, because of
the fractional reserve system, if the banks lend
out more than 10 times what they actually hold in
reserves it follows that the critical level of
default required to break them will be much lower
(under 10% in value terms) than if reserve
requirements were set at 100%.
Instead of
thinking in terms of not working, therefore, our
protestor should think in terms of not paying.
If, for example, well under 10% of
mortgage holders in terms of value were simply to
refuse to service the debts on their homes, the
mortgage market would collapse and monetary reform
would be far more likely to be brought about.
Moreover, this collapse would occur within a very
short period, since banks have to balance their
books at the end of each working day.
To
co-ordinate such defaults a mechanism would be
required. I envisage the creation of debtors'
unions.
Imagine therefore if we begin with
a district in a Midlands town in England for
example or its equivalent in any other European
country such as Greece - preferably a district in
which negative equity in homes is frequent and
where people are struggling to fund their
mortgages. A handful of banks and building
societies will be the mortgage holders for the
majority of the residential properties in
question. Now imagine the population of this
district coming together in a debtors' union to
default on thousands of mortgages, en masse.
If, in the United States, where the
national average of foreclosures on residential
properties is 2%, virtual financial Armageddon has
been the result - and it was precisely here, in
America's housing market, that the financial
system began its implosion - then think what a
choreographed default of 10% could achieve. The
banks could not re-possess more than a minuscule
fraction of the properties against which they have
lent without wiping out their security and thereby
bringing about their own destruction.
And
what could the authorities do, especially in a
country like Britain where there is still a social
welfare system in place? Expel thousands of
families from their homes only to have to pay to
re-house them elsewhere? Moreover, there would be
a domino effect with other districts replicating
the process.
If workers can club together
and refuse to work I see no reason why debtors
cannot club together and refuse to pay, and it is
exactly along these lines that they should begin
to organize themselves.
Now imagine such
action occurring throughout the nation in question
- not by means of a general strike but rather a
general default - a default which, to repeat,
would require the participation of only a small
percentage of the population because of the high
level of the banks' leverage - a general default
not just on mortgages either but on all manner of
loans including credit card debt.
Or think
of students who, instead of rioting in the
streets, now study diligently and refuse, in
unison, to pay back the loans that funded formerly
state-funded educations. In such a scenario, the
principal accounting sleight of hand to which the
banks have had recourse over the years vanishes.
Bad or dubious debts can no longer be described on
the banks' books as "assets" and rolled over.
Their balance sheets are annihilated and the
system collapses - and all within the blink of an
eye.
In short, as the old saying goes: owe
the bank a pound and the bank owns you, owe it a
million pounds and you own the bank.
Moreover, the general default referred to
above need occur in the first instance for only a
24-hour period and the effect would be
devastating. At last the powers to be would
realize who it is that really holds the gun: not
the creditors, but the debtors.
The simple
threat of further default would, on its own,
catapult our experts out of their dreamworld.
Realizing that the banks' greatest
strength - the multiplier effect of the fractional
reserve system - was now their greatest weakness,
governments would have no choice but to end this
mechanism and to re-align money once more with the
real. Fractional reserve banking would become a
thing of the past and the power to create money
would be re-vested where it belongs: in the state
and therefore, in theory at least, with us.
Furthermore, with a union there is a
structure - a structure that has a juridical
personality of its own.
As these debtors'
unions default therefore, simultaneously they must
bring legal actions against their governments and
the banks. For this some sort of legal
hook will be required on which to hang these
cases. I am no barrister but it seems to me that
strong cases for all manner of fraud could be
mounted - including trading while insolvent, a
serious criminal offence which would capture the
large majority of the Western world's banks.
And, there would be numerous benefits to
attaching legal actions to co-ordinated defaults
as I have proposed.
First, it would buy
the debtors' unions a lot of time before
creditors, namely the banks, could enforce
judgements (if indeed they ever obtained them).
The "squatters" of Dale Farm in the United
Kingdom, for example, were able to delay eviction
for some 10 years. But it would never come to
this. Because of the way in which they report
their finances, the banks and by extension their
governments would not have 10 weeks, let alone 10
years.
Second, we would be spared the
sickening spectacle of delinquent politicians
lecturing us about "unacceptable behavior". The
approach I have suggested is entirely non-violent.
No damage to property or individuals is required.
People would be exercising their rights to seek
recourse in the courts and no-one would be sent to
jail because they had called for people to default
on Facebook.
Third, it would allow the
whole issue of who exactly manufactures our money
and how they do so to be scrutinized by the
courts. In my view, the judiciary would very
quickly grasp the conceptual similarities between
the practices of counterfeiters and the banks.
Moreover, a defense that relied upon the argument
that at least the banker, unlike the
counterfeiter, has a license for his activities,
would beg far more questions than it answers.
In short, the debate would quickly morph
from a strictly legal question into a
constitutional one. And, with the media spotlight
upon this debate, the public would at last be
educated about the massive swindle that has been
perpetrated against it.
In this regard,
Article 105a of the Treaty on European Union (the
Maastricht Treaty) is interesting.
It
reads: "The ECB (European Central Bank) shall have
the exclusive right to authorize the issue of bank
notes within the Community. The ECB and the
national central banks may issue such notes. The
bank notes issued by the ECB and the national
central banks shall be the only such notes to have
the status of legal tender within the Community."
An action brought in Europe that was hung
on this particular legal hook, therefore, would
put the European Court in a very invidious
position it seems to me. For it would bring into
focus the distinction between "legal tender" and
"money" as a whole, highlighting how the ECB's
role in the creation of money within the Community
is in fact far smaller than that of the banks.
If the court found that the banks had
acted un-constitutionally, it would spell the end
of banking as it is currently practiced within the
European Union. But if, through casuistic
reasoning, it found that the banks had acted
within the terms of the Maastricht Treaty and of
the broader European Union constitution - on the
narrow grounds that while they were indeed
responsible for lending the vast majority of the
Union's money into existence, strictly speaking
they had created no "bank notes" - then this too
would have profound implications. The floodgates
would be open for anyone or any institution to
create money in the manner of the banks.
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