The material world exists in the eternal Present.

I was going to write: “The real material world exists in the eternal Present”, but the word “real” would be superflous, because there cannot exist an “unreal” material world.

For St. Thomas Aquinas (1225 - 1274) Reality and Truth are one and the same. There cannot be a “false Reality” just as there cannot be a “false Truth”.

This now brings me to the subject of the Future. Since all reality – all existence – is in the Present, what can be said about “the Future”?

Only humans can conceive “the Future”. The fact is, only humans are aware of Time and only humans can act to adjust their behavior to provide for expected conditions in the Future.

Relations between humans in which the Future is involved comprise the human, conceptual world of the Future, and these relations deal with the world of Promises – actions that will take place in the Future.

The world of Promises is the World of Credit or Finance.

Thus, humans live and act in two worlds, because of the consciousness of Time: the real world of the Present, and the conceptual world of the Future, in which Credit and Finance have such an important place in our times.

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I frequently find statements to the effect that “future generations will have to pay our debts.”

Here arises an important intellectual confusion.

Everything that we do, all our actions take place in the Present, and so do their effects. If we bake a chocolate cake and eat it all ourselves, we are not depriving a “future generation” of a chocolate cake. We are depriving our own children, in our own household of eating any portion of the cake. The action takes place in the Present, and the effects likewise are effects in the Present.

The idea that “future generations will pay for our extravagance” in borrowing and financing by our governments is pernicious because it allows us to procrastinate. We can shrug our shoulders and say to ourselves, “Well, sorry kids, but you will have to pay our bills!” We can always find imperious reasons for comitting this deed. “Conditions were dire, we simply had to do it.”

What I am getting at, is that our actions always take place in the Present and the effects are always in the Present. Whatever we do here and now, has effects here and now. The idea that we can do something now, and that the effects will come later, thanks to “Finance”, is totally false.

What we see going on in the world of Finance today, is simply fantastic in its unreality and unreality is the same as falsity.

So, since our world is so fantastically unreal, allow me to present an equally fantastic illustration which may clarify what I am trying to explain. (If we can imagine trillions of dollars in bail-out money, I think we can also imagine the following “thought experiment”, as Einstein would call it.)

Imagine that a popular President has a dream one night, and wakes up to announce to the American People, a general vacation. “My fellow Americans, we are living in very hard times; you deserve a break today, and the Government is going to give you a break: We have devised a War on Mental Depression and this War means that all Americans are going to go on a one month's free vacation, all expenses paid.”

So one July, all the US closes down for the month, and everyone goes on vacation. Who will pay for it? Why, the US Treasury will fund it! 300 million people will go on vacation for a month, and the expense will be, say, $500 billion. No problema! We will be laying a “further burden on future generations” but Hey! times are really tough. We deserve a break today!

But would the cost really fall on the “future generations”? Of course not. All American production would come to a halt for one month. That missing production would be the cost and it would be felt, that is to say paid immediately.

Americans would be that much poorer, immediately. Everything normally produced by working people during the month would be missing.

But, wasn't this deal “financed”? Why would Americans be poorer? They would be poorer because all actions have effects in the Present. Food and clothing and housing and everything we need to live, would not have been produced during the month. That would be the cost , and Americans returning from vacation would be that much poorer.

But what about the “finance”? Didn't that take care of the problem?

What the finance did, was to lay an obligation upon a future, unborn generation, to replace the present loss. Their future payments would restore the Present loss. The loss would be in the here and now; the “Government finance” would only provide a promise (from those yet unborn) to replace in the Future , what was lost in the here and now.

Will future generations restore the present loss, due to extravagant spending and living beyond our means today? Frankly, I do not see any reason why they should. They did not participate in the “Great Vacation”, why should they restore the loss incurred in that mass holiday? There is no reason at all why they should do so. They did not vote for it. They will not stand for “taxation without representation.” So the Government debt to finance the Great Vacation will be defaulted upon, and quite rightly so.

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The idea that the effects of what we do in the Present can be delayed into the Future is at the heart of that mysterious humbug science called “Fractional Banking”.

There are real savings, and there is Fractional Banking.

Real savings are what we have when we have not spent all our income. We could have spent, but we did not because we were planning for future needs. We gave up purchasing stuff, going on vacation or eating out, because we wanted to have a nest egg for old age or sickness or hard times. Savings means giving up something today, with the Future in mind.

Building up savings means sacrifice. A nation's savings are the product of national sacrifice of Present satisfactions, with the Future in mind. Building national savings is a slow and arduous process, it takes many years of constant effort to create a fund of national savings.

Where do people put their savings? Why, in the banks, of course.

The problem is that bankers have lost their way. I do not think they are such a wretched lot as many would think. They are ordinary business people who want to get rich, something most people want but cannot attain.

There is a lot of power associated with being a banker, because you have the savings of thousands - perhaps millions – at your disposal. With power comes arrogance. Arrogance opens the door to greed. Greed opens the door to advisers who will find ways to make the banker rich, richer, always richer. How? By cutting corners.

There are in banking certain rules, tried and tested rules, which allow a Bank to endure in business. But these rules obstruct the banker that wants to get rich as fast as possible and then to get even richer.

A good banker lends out Savings. But savings take a long time to accumulate. So, how can the banker make things go faster, how can he make a fortune quickly? The advisers, the “economists” are paid to find ways that he can do that – and they all involve cutting corners.

And so, Central Banks and Fractional Banking were invented. They go against the tried and tested rules of sound banking, but they are guaranteed to produce fortunes for the bankers. And when the system comes to grief, why the bankers are either dead or retired and enjoying their palatial mansions.

Fractional Reserve banking means that real savings are not the only funds that bankers can lend out and charge interest for.

As long as Present Savings are the only source of Present Loans, the present sacrifices of the savers are equal to the present expenditures of consumers and investors. New factories are built in the Present, with Savings existent in the Present. Production rises and the standard of living can increase, or savings can increase even more.

This is sound banking, and it has not satisfied the last few generations of bankers. It produces profits slowly, and bankers are people in a hurry to get rich.

So the bankers have invented false savings, to make more loans and get things moving. Prosperity without the pain of savings! The bankers have bought the idea, and the world has accepted it. The theory of creating false savings which can be lent out is the only one seriously considered at all schools of finance all over the world. All banking all over the world, is based on fictitious savings, on air – that's what is called inflation, because it is air.

Those who point out the glaring flaws in the System, are laughed at.

On the books of the banks, real savings are mixed up with false savings, savings invented by Fractional Banking. (Maybe “Fictional Banking” would be a better name for the System?) More of these “savings” means more loans can be made, more interest income for the banker, and more people are happy because they got a loan and were able to do what they wanted with the loan. Mostly, in recent years, they have decided to spend the loan on consumption.

Now, as I say, all action takes place in the Present. What the mixture of real and fictitious savings means in the Present, is that those who borrow and spend, obtain things and services that exist in the Present, and since there is a limited amount of such things available, they get to take home what someone else, who did not borrow, cannot take home. In other words, there is a redistribution of wealth .

When the bankers loan out funds – most of them created by the Fractional Reserve system of banking, and not real savings – they are not increasing wealth, they are just shuffling it around. The borrowers get the stuff and services, but those who do not borrow are left out.

And if that is not bad enough, the borrowers in the US in recent years have mostly been borrowing just to live an enjoyable life. They have been consuming their borrowings. “Marble countertops” and that sort of thing. When funds borrowed are consumed – how can the borrower pay the loan back? He cannot. The funds are gone. He consumed the loan, burnt it up.

All expenditure is paid in the Present . If you spend your savings, you have paid your expenditure. If you borrowed the money for the expenditure, and spend it, someone else is immediately paying for your expenditure. You don't know who it is, and whoever is paying may not even be aware that he is paying, but Present expenditure is paid for in the Present, not in the Future.

“Financing expenditure” is a myth. All actions in the Present have effects in the Present. If a nation decides to live beyond its means, the result is not delayed into the future by “financing”. That nation becomes poorer in the here and now, as it spends and spends and spends. “Financing” is supposed to obligate future generations to repair the damage, to restore the vanished wealth. It is highly doubtful that they will be willing or able to do so.