A Scientology Canberra Layman's Blog

And That Is Banking

By L. Ron Hubbard

An Article

You might be interested to know something about banking and money that bankers and governments don’t know. BASICS!

These are very simple basics. They are also very, very O — L — D basics.

Money can be said to be a lot of things. It can be said to be an idea backed by confidence. It can be said to be a system of exchange. It can be said to be something easier to carry around that a side of beef or a bushel of wheat. Money can be said to be a lot of other things.

      But from the viewpoint of a banker and solid facts, you get the Basic Law of banking and the basic definition of banking and money.

      MONEY IS A NEGOTIABLE RECEIPT FOR DEPOSITED GOODS.

      In order to understand this, you have to understand the original function and practices of (surprise!) goldsmiths! You see, goldsmiths simply used gold as a commodity. It went like this:

      The goldsmith took in a commodity of one unit of gold. He gave a receipt to the person who gave him the gold. He did this several ways. He then had, let us say, six receipts – six guys had given him gold to hold and he gave them each a receipt. These six guys could then use those receipts as currency since it was gold on deposit with the goldsmith. This is a one-to-one basis. One receipt given out for one unit of gold taken in.

      Now the goldsmith, because he assumed and hoped that all six wouldn’t want their gold all the same time, could then issue additional receipts against the gold – against the same gold for which he issued the first six receipts. So he would issue receipts on, let’s say, a three-to-one basis – he issued three receipts for every one unit of gold he had on deposit. These receipts were trusted because people knew he had gold on deposit.

       So you see the goldsmith issued more receipts than he had gold on deposit. He could then loan out these receipts (currency) that he had created. People “borrowed money” from him by obtaining one of these receipts and now they would owe him what they borrowed plus interest. AND NOW THE GOLDSMITH WAS INTO BANKING. IT WAS THAT STEP THAT PUT HIM INTO BANKING. You see, there were other things this goldsmith could do. He could issue receipts and buy property or keep his business running or something. but the moment he issued and handed out a receipt to people who used that for currently, why, he was now into banking.

      And that is banking.

      Now you can do the same thing with commodities. You have a warehouse and your into banking. If everybody puts his commodity in the warehouse and the banker issues a receipt for it, he can now issue on a three-to-one basis, as the goldsmith did, or twelve-to-one, which is getting pretty risky but they did that. But, you see, he can do the same thing with commodities. I don’t care if they’re shoes or whatever. Now, because he’s got shoes (and other things) in the warehouse, he can issue general receipts against these goods on a basis of one-to-one, which is just the depositors, on up to twelve-to-one.

      And he can take those receipts and he can issue them to a manufacturer who canthen buy with those receipts the equipment necessary to set up his plant. But everything the manufacturer makes is a commodity deposit. The manufacturer makes something and now he has a commodity deposit. When you realize that the banker is not taking in all this commodity, you realize it starts sitting all over the place in all kinds of different warehouses and so forth. But it is consigned to the bank. It belongs to the bank. It backs up the receipts. The guy who the banker loaned out money (a commodity receipt) to a guy without any commodity. Well, that guy has got to put a commodity there. And this is the basis of banking. If that guy now doesn’t manufacture a commodity, the banker is out of luck. In other words, he doesn’t produce the commodity’s he’s loaned money to produce. The banker now only has the plant.

      So now we’re off into the bank loaning against the plant. We’ve extended it from the deposited goods to what makes the goods.

      And that is banking. And that’s all there is to banking.

    And that’s why you see bankers favoring short-term loans. They’re not interested really in a real estate loan. That’s a second stage. They’re interested in cars sitting on the lot at Chrysler.

      I noticed that when a European automaker recently went to blazes, a fleet of their cars turned as being sold in a bank in America, after that company went defunct. In other words, their manufactured car became, just as Chrysler’s would become, the property of the bank.

      Now what is inflation? INFLATION IS DETERMINED BY THE RATIO BETWEEN THE DEPOSITED GOOD AND THE NUMBER OF RECEIPTS ISSUED. This present society has got it up to several thousand to one. In banking, I would never go above three to one. That is sound banking.

L. RON HUBBARD 
2 SEPTEMBER 1982

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