Money Without Boundaries

Chapter 3Banking – An Overview

“I sincerely believe…that banking establishments are more dangerous than standing armies.”

– Thomas Jefferson

“We should not have a system that's this fragile, that causes this much risk to the economy.”

– Tim Geithner

One of our founding fathers, Thomas Jefferson, believed banking was an inherently dangerous establishment, one he hardly put any faith into. He would be appalled, then, if he could see the global banking system today, a house of cards so fragile that a Treasury Secretary some 200 years later would declare it a risk to the economy. Since humans learned to institutionalize transactions with each other's money, the practice of banking has been marked by cunning and ignorance, reverence and revolt.

Banking is an institutional pillar in virtually every culture on this planet, older than most religions and often more revered, practiced in some form since the earliest civilizations. In ancient Mesopotamia, repayments for commodities that had been deposited at palaces and temples were recorded on transferable clay tablets that paid (sometimes compounded) interest with rates based on agricultural measures.¹ In the eighth century in China, shops that stored people's valuables for safekeeping issued deposit receipts that eventually became circulated like money. By the ninth century, unscrupulous shopkeepers had discovered they could issue and hand out more of these receipts than they had valuables on deposit,² and they invented one of the ...