Deflation Made Simple (Part I)

A falsely vilified phenomenon (Image 023)

We have now considered five legitimate functions of the banking trade:

  1. The trading of different monies at political borders set up to keep good money from leaving and bad money from entering depending on which side of the border you stood.

  2. The warehouse function that shelters the fungible liquid wealth of depositors against the temptation of others to steal it while its rightful owners are out in the field or away on a business trip.

  3. Letters of credit that obviate the need to ship money over long distances and thereby facilitate trade by reducing the risk of theft.

  4. The lending of one’s own money for the purpose of helping others to overcome temporary short-falls in income that would could result in unkept promises, failed obligations, or even hunger.

  5. The selling of one’s right of use to one’s wealth in the form of time deposits so that private others can engage in entrepreneurial ventures previously available only to good and bad feudal lords and the thieves against whom the lords offered protection.

All of the aforementioned activities were, and remain today, legitimate banking functions conducted in the spirit of protecting the integrity of the value of the medium-of-exchange and store-of-wealth necessary to conduct trade across time and place so that private property can be acquired, developed, exchanged, and distributed in the context of a healthy, voluntary, fair, and growing, free-market economy.

Now, in order to sustain the many kinds of activities necessary to make La Casa a successful monopoly enterprise bankers were needed. These bankers came from all over the world. Most prominent among them were from the free city-state of Genoa located along the Italian Mediterranean Coast half-way between Rome, Italy and Barcelona, Spain and Das Haus Fugger — the same Austrian mining and banking house that had lent the majority of the money required to pay the bribes that enabled Charles V, King of Spain, to be elected as Holy Roman Emperor.

Without going into a lot of detail while still noting an important fact with important consequences for the future of Europe and the great economic powers who would dominate Europe until the 20th century, the Habsburg Dynasty — a large family network of landholding aristocrats — sat on the imperial thrown of the Holy Roman Empire for most of its existence. Bribery, war, and diplomatic intrigue were three of the most important means to keep the throne in Hapsburg hands.

Not only was Das Haus Fugger close to the imperial throne, but it brought to Seville mining knowledge vital to the exploitation of the American mines that supplied the massive, but unsteady flow of new real-money into the Spanish Empire and other European economies.

We are now ready to explain King Charles’ banking intervention and the pernicious precedent that he created for the monetary systems of Europe and eventually the world.

In liberty, or not at all,
Roddy A. Stegemann