Satire on False Perspective. William Hogarth (1754).

Again, those properties

Coincidences like the licence plate number of Franz Ferdinand’s death car being a reference to the end date of World War I suggest that history is a script. Evidence of reincarnation indicates that memories can be storied outside the body. The universe may not be what is appears to be. The scientific approach is to ignore these phenomena as they can’t be reproduced in a laboratory. That doesn’t make these things go away. This universe might be a virtual reality created by an advanced civilisation. But perhaps there are other explanations for these phenomena. Most let go of time or the law of cause and effect.

Our usual way of perceiving events is that something happens on a certain place at a certain time. A place is seen as a constant as time passes. Events in the past have caused events in the present and events in the present cause events in the future. For example, the invasion of the Allies happened in Normandy on 6 June 1944. Normandy is still there but 6 June 1944 is history. The liberation of Western Europe from German occupation is seen as a consequence of D-Day. If D-Day hadn’t happened, history would have taken a different turn. We have time and cause and effect. That makes sense to us.

Some people claim that all points in time are connected in some other way than the past making the present possible and the present making the future possible. A psychiatrist named Karl Jung came up with the idea of a collective consciousness that connects all events via meaning. This could, for instance, explain the evidence of reincarnation. The collective consciousness can put the memories of a deceased person into someone else.

Others think of time as a dimension so that you travel to a time like you can travel to a place, even though nobody ever succeeded in doing that as far as we know. These ideas counter our notion of time as well as cause and effect but so does the theory of relativity. And the theory of relativity proved to be very useful so we consider it to be true.

A reference to the end date of World War I could end up on the licence plate of Franz Ferdinand’s death car because of some connection we do not yet know of. No plausible explanation is given as to what that connection that might be, but perhaps there is some property of the universe that is still unexplained. And maybe both are true. All points in time could be connected in some other way while the concept of causality also applies. Physicists have to work with queer phenomena that are hard to explain. For example, light behaves like particles but also like waves, but waves can’t be particles.

Alternatively, a time traveller could have gone back in time and put the number on the licence plate even though the theory of relativity doesn’t allow for that. Time travel to the future is possible but going back in time creates all kinds of logical problems. For instance, such an action would alter future events. Chaos theory suggests that even the slightest disturbance of the past can cause dramatic changes in the future so that the end date of World War I would change and perhaps the war wouldn’t even start.

So maybe we should let our imagination run free. Anything is possible if we can think of it and can corroborate it with experiments. That is the way science makes progress. A piece of fruit could be an apple as long as you look at it but turn into a banana as soon as you look the other way. And you can never be sure that an apple doesn’t become a banana when nobody watches. Scientists believe things like that if experiments confirm these beliefs. For instance, some particles turn into waves when you don’t observe them. And believing this can bring us energy or other things we desire.

An obvious explanation for the unexplained phenomena and peculiar coincidences like the licence plate number on Franz Ferdinand’s car is that this universe is a virtual reality created by an advanced civilisation. You don’t have to assume anything about the properties of our universe. You only have to believe that the technology to create virtual reality universes can be made cheap and that humans will use this technology once it becomes available. That makes more sense to the human mind than apples turning into bananas. But then again, it is dangerous to assume the obvious. If an apple really turns into a banana when you don’t watch then one plus one doesn’t have to equal two as long as you don’t solve the equation and this universe may be a virtual reality als long as you believe it.

Featured image: Satire on False Perspective. William Hogarth (1754). Public Domain.

The "Darnley Portrait" of Elizabeth I

History is Her story, part 2

If God is a woman and history is a script then history is Her story and the pun could be intended. In that case it is possible that God uses avatars to play a role in Her story. Several important women in history may have been avatars of God. In the previous episode, History is Her story part 1, it is explained who they might have been.

This post is part of a series called God Is A Woman And Jesus Was Her Husband. It is advised to read the other articles first in the order suggested below:

Isabella I Of Castile
Isabella I Of Castile.

Isabella I of Castile

Isabella I (1451-1504) was Queen of Castile and one of the most influential persons in history. She was the second child of King John II of Castile. He already had an heir, Henry. The king’s second wife also gave birth to a son, Alfonso, making Isabella third in line to the throne. John died in 1454 and Henry became king of Castile but he was unable to produce an heir. He remarried but when his second wife gave birth to a daughter, there were doubts about the girl’s paternity.

Henry made his daughter Joanna heir to the throne but an influential group of nobles preferred Alfonso. Isabella sided with Alfonso. Henry then came up with a compromise and named Alfonso as his heir as if Joanna was to be betrothed to him so that both would share the crown. When Henry attempted to back out of this arrangement, a group of rebels crowned Alfonso king. The rebellion failed and Alfonso died, leaving Isabella as his heir but she was savy and didn’t pursue the throne by rebellion.

Spain was divided into several small kingdoms. Marriage was a way of forging aliances. Henry forced Isabella into several betrothals because of his political needs. He attempted to marry her to King Alfonso V of Portugal but Isabella was wary of the marriage. As part of an agreement to restore peace, Isabella was to be betrothed to Pedro Giron, Master of the military Order of Calatrava. Isabella prayed that the marriage would not come to pass. Her prayers were answered when Don Pedro suddenly fell ill and died on his way to meet her, which was convenient to Isabella.

Isabella made Henry sign an agreement in which he made her his successor to the throne. Henry made another effort to arrange a marriage but Isabella refused and secretly arranged a wedding with Ferdinand of Aragon. By doing this she created Spain. After Isabella had secured the throne, she initiated a number of reforms in the areas of government, finance, legal code, and policing.

Isabella’s largest impact on history turned out to be sponsoring the mission of Christopher Columbus to reach the Indies by sailing west. In this way America was discovered. A film about this event was made 500 years later, titled “1492: Conquest of Paradise”. Apart from the word Paradise, the number 1492 is noteworthy as it is a combination of the initials and the birthdate of the lady who appeared to be God in my psychosis. This could be a clue.

Katharina Von Bora
Katharina Von Bora. Lucas Cranach the Elder (1526).

Katharina von Bora

Katharina von Bora (1499-1552) was married to Martin Luther. Luther initiated the Protestant Reformation. He disputed the claim that you could purchase freedom from God’s punishment, which was an important source of income for the Roman Catholic Church at the time. He challenged the authority of the Roman Catholic Church by claiming that the Bible is the only source of divinely revealed knowledge.

Luther’s marriage to Katharina von Bora became a model for the practice of clerical marriage in the Protestant churches. In Germany Luther is considered to be an important prophet. There are a few peculiar coincidences that might be regarded as clues. Martin Luther was named after Saint Martin. He was baptised on Saint Martin’s Day, which was 11 November, a reference to 11:11.

Another peculiar coincidence involves the assassination of Martin Luther King on 4 April 1968. The assassination happened exactly one year after King spoke out against the Vietnam War. This was on 4 April 1967. Both dates being 4 April (4/4) make an 11:11 related coincidence. His last name being King might refer to Martin Luther having been a prophet like Jesus in the sense that he was married to God.

Also in 1968 another high-profile political assassination took place in the United States. On 5 June 1968 Senator Robert Kennedy was shot. He died the next day on 6 June (6/6). The combination of both deaths makes a reference to D-Day (6/6/44). This is remarkable and a possible clue as there were some peculiar coincidences surrounding D-Day.

The
The “Darnley Portrait” of Elizabeth I

Elisabeth I

Queen Elisabeth I of England (1533-1603) was one of the most successful monarchs ever. During her reign the foundation was laid for the Anglo Saxon world domination that lasts until today. Great Britain became the dominant nation of the world until the United States took over. During her reign, the Spanish Armada was defeated and the remainder was lost in a storm, which ended the Spanish dominance over the seas.

A curious sequence of events made her Queen of England. Upon hearing of her accession to the throne, she reportedly quoted the 118th Psalm’s twenty-third line: “It is the Lord’s doing, and it is marvellous in our eyes”. Elizabeth’s unmarried status inspired a cult of virginity. She said she was married to England. This is similar to God being married to Israel. In poetry and portraits Elisabeth was sometimes depicted as a virgin goddess.

Computable article about Armada
Computable article about Armada

During a walk in 2009 I was pondering whether or not Elisabeth I had been an avatar of God. When I returned home, a magazine named Computable was in my letterbox. The frontpage featured an article about a distributed database system named Armada that operated like a 16th century Armada fleet. This could be a clue.

Françoise d'Aubigné, Marquise de Maintenon
Françoise d’Aubigné, Marquise de Maintenon

Françoise d’Aubigné

Françoise d’Aubigné (1635-1719) was the second wife of Louis XIV, who is known as the Sun King. Louis XIV was one of the most successful rulers of France. He was vain and waged many wars. He believed he had absolute power because his rule was the will of God, and that only God can judge a king and that his subjects must accept his rule.

During his first marriage Louis had a number of mistresses. He was more faithful to his second wife Françoise d’Aubigné. She never became queen but she had considerable influence in the royal court. She may have been an avatar of God.

At secondary school I was elected into the school council. That was not a great feat as there were no competitors for the position. The school council was a kind of parliament meant to bring democracy to school. Of the fifteen seats, three were reserved for pupils. The meetings gave some insight into how bureaucrats entertain themselves at their jobs.

There was a dispute about something the Cultural Board had done. I don’t remember any more what it was, but they had not followed proper procedures. The conflict was the most pointless bureaucratic fight I ever witnessed. It dragged on for months and several meetings of the School Council were spent on it. The critics of the Cultural Board called it an I-am-the-state-situation, referring to a famous statement of Louis XIV.

The critics alleged that the Cultural Board had acted like the Sun King by deciding to act without consulting all the bureaucrats they needed to consult. The Cultural Board was willing to admit that their action wasn’t chic but the critics insisted that the Cultural Board had to admit that what they had done was wrong. The clue was a bit dubious so I tossed a coin. The result was that Françoise d’Aubigné made it to the list.

Catherine II of Russia by J.B.Lampi
Catherine II of Russia

Catherine the Great

Catherine the Great (1729-1796) took power after a conspiracy deposed of her husband. Most likely she was not involved in the conspiracy. She was one of he most successful monarchs of the Age of Enlightenment. During her reign Russia became one of the leading powers of Europe. Catherine took many lovers. Her last lover Prince Zubov was 40 years younger. There is also a lack of clues on her being an avatar of God but she is an obvious candidate.

Empress Josephine in Coronation Robes
Empress Josephine in Coronation Robes. François Gérard

Empress Joséphine

Joséphine (1763-1814) was the first wife of Napoleon Bonaparte. Joséphine was Napoleon’s greatest love. After her husband was executed during the French Revolution, she had affairs with several leading political figures. Napoleon, who was six years younger, fell in love with her. He sent her many love letters. Napoleon’s love for Joséphine cooled somewhat when he found out that she had an affair while they were lovers. He then had affairs of his own but remained in love with her and married her.

Through the children from her first marriage Joséphine became the grandmother of Napoleon III and the great-grandmother of later Swedish and Danish kings and queens. The reigning houses of Belgium, Norway and Luxembourg also descend from her. She did not bear Napoleon any children, which was why they divorced. Nevertheless Napoleon’s last words on his death bed were: “France, the army, the head of the army, Joséphine.”

There are some remarkable parallels between Napoleon Bonaparte and Adolf Hitler. Napoleon Bonaparte was born on Corsica, an island that became part of France, while Napoleon Bonaparte became the leader of France. Adolf Hitler was born in Austria, a country that became part of Germany, while Adolf Hitler became the leader of Germany. Both men were involved in a coup on 9 November (9/11 in European notation). Both started a military campaign in Russia that led to their downfall.

Napoleon Bonaparte and Adolf Hitler both came to power by a coup ending an unstable republic. They both turned Europe into a battlefield. Both ventured into Africa and both were repelled in Egypt. They both waged a war on two fronts because they both attacked Russia while England had not been defeated. Adolf Hitler may have been a husband of God, my psychosis suggested, so these parallels might be a clue.

Lucretia Garfield
Lucretia Garfield. Library of Congress.

Lucretia Garfield

Lucretia Garfield (1832-1918) was the wife of US President James A. Garfield. President Garfield was assassinated in 1881 shortly after he took office. He lingered for two and half months before dying. She stayed at his bedside and received much public sympathy. They were both 26 when they married on 11 November 1858, a reference to 11:11. During the Civil War James Garfield had an affair while he was a general. He confessed this to his wife and she forgave him.

On 12 January 2010 a previously unknown life insurance policy on the life of President Garfield was discovered. It was found in a family scrap book and had a benefit amount of $10,000. It was opened 45 days before Garfield was shot and was surrendered and signed by Lucretia Garfield and the private secretary to the President. This is a bit peculiar as it might indicate foreknowledge of the assassination.

My son Rob was fond of the comic character Garfield. In 2006 a mysterious parcel addressed to him was delivered to us by mail. It contained some Garfield items including a coffee cup with lettering “It is good to be king.” The parcel was sent anonymously. We made several enquiries to reveal the sender but nobody conceded to have sent the parcel. Until today the sender has remained unknown. This incident could be a clue.

Featured image: The “Darnley Portrait” of Elizabeth I. Wikipedia. Public Domain.

Roman sculpture of Cleopatra wearing a royal diadem

History is Her story, part 1

Clue based guessing

If God is a woman and history is a script then history is Her story and the pun could be intended. In that case it is possible that God uses avatars to play a role in Her story. Several important women in history may have been avatars of God. But how can we know who they were? There may be an answer to this question.

Despite his bumbling and clumsy appearance, Chief Inspector Jacques Clouseau was always able to solve the mystery. He was guided by a hunch and some vague clues that only made sense in his mind. How could a clown like him be right while the apparently competent were not? The answer is that Jacques Clouseau was a fictional character in a story. The plot was always that Clouseau is right.

There were only vague clues for me to work with, most notably coincidences. Many of them weren’t that peculiar as they could have happened by chance. And so this investigation became a clue based guessing exercise Clouseau style. The outcome can be accurate if this is a story in which the plot is that I am right.

I am quite confident that this is a story but I am not so confident about being right. Nevertheless, mediums can be more accurate than chance allows for, even though they are often off the mark. And I could the medium for this message.

This post is part of a series called God Is A Woman And Jesus Was Her Husband. It is advised to read the other articles first in the order suggested below:

There is an overlap between the lifespans of some of the mentioned characters. That can be explained in several ways. Some of the guesses may be erroneous. Alternatively, God may be able to take over a character during her lifetime, for instance by skipping the childhood years. If this universe is a virtual reality running a script, God may be able to go back in time and play roles in any sequence. Nevertheless, the gaps are far greater than the overlaps, so most avatars may never be known.

Bust of Nefertiti
Bust of Nefertiti from the Egyptian Museum in Berlin.

Nefertiti

The Egyptian Pharaoh Akhenaten and his wife Nefertiti (1370-1330 BC) invented monotheism. They worshiped a single god, which was the sun disk named Aten. They broke with tradition and tried to annihilate the worship of other gods. For that reason Nefertiti may have been an avatar of God. After their reign, traditional beliefs were restored.

Cassandane

Cyrus the Great was one of the first universal kings who ruled many peoples. He was one of the first multicultural rulers as he respected the customs and religions of the lands he conquered. In Judaism he is considered to be a Messiah because he allowed the Jews to return to Israel and financed the building of the Second Temple.

The fate of a Messiah is often to be married to God so wife Cassandane (567-537 BC) may have been an avatar of God. Cyrus and Cassandane loved each other very much. When she died all the nations of Cyrus’ empire observed a great mourning. Their daughter Atossa later married Darius the Great and bore him Xerxes I.

Cyrus is seen as one of the greatest leaders ever. Iranians still regard him as The Father. Despite having been such a great leader and a Jewish Messiah, Cyrus died in the hands of a woman. This is a bit peculiar considering that God may be a woman. He was defeated by Queen Tomyris after he tried to invade her kingdom.

Roman medallion with Olympias
Roman medallion with Olympias, Museum of Thessaloniki.

Olympias, mother of Alexander the Great

Olympias (376-316 BC) was the mother of Alexander the Great. Alexander the Great was able to create a large empire in a short time. His lasting legacy is the spread of Greek culture. Olympias, who was married to King Philip II, insisted that Alexander was the son of Zeus, which was confirmed to Alexander by an oracle. The title Son of Zeus is similar to Son of God. If Olympias was an avatar of God, this is a remarkable coincidence.

According to the Greek historian Plutarch, Olympias dreamt that her womb was struck by a thunder bolt on the eve of the consummation of her marriage to Philip. Philip was said to have seen himself in a dream sealing up his wife’s womb with a seal. Plutarch offered several interpretations of these dreams, for example that Alexander’s father was Zeus. This story is similar to Virgin Mary giving birth to Jesus.

Jews see Alexander the Great as a Messiah. The Christians of the Near East made a saint out of him. They combined legends about Alexander with Biblical tales such as those about Gog and Magog. The Quran mentions Alexander the Great as a prophet. At primary school there was a boy named Alexander the Great in my class. With the benefit of hindsight this peculiar coincidence might be a clue.

Queen Dowager Zhao

Queen Dowager Zhao (280-228 BC) was the mother of the first emperor of China, Qin Shi Huang, a brutal ruler who unified China. Qin Shi Huang introduced reforms and projects like a central administration, a standardised script, canals and a national road system. He also standardised the Chinese units of measurements for weights and measures, the currency, and the length of the axles of carts.

Queen Dowager Zhao was a daughter of a prominent family. She was a concubine of the merchant Lü Buwei, who gave her to his protegé, Prince Yiren of Qin. Thanks to Lü’s intervention, Prince Yiren became the King of the Kingdom of Qin. He was later named King Zhuangxiang. His son succeeded him and became named Qin Shi Huang.

Queen Dowager Zhao allegedly had an affair with Lü Buwei after King Zhuangxiang died. Lü Buwei feared that the Emperor would find out so he decided to look for a replacement for the Queen. He arranged a man for her, Lao Ai, who was disguised as a eunuch. Lao Ai and the Queen got along well and had two sons together.

My son sometimes called himself ‘the Emperor of China’ as he was often ordering his parents. We were making a joke out of it and called him King Rob. He however insisted that he was the Emperor of China. “The Emperor of China demands cheese,” he said jokingly. During my psychosis I read an article about Qin Shi Huang in a magazine we were subscribed to, so I consider this to be a clue.

Roman sculpture of Cleopatra wearing a royal diadem
Roman sculpture of Cleopatra wearing a royal diadem

Cleopatra

Cleopatra (69-30 BC) was the last Pharaoh of Ancient Egypt and she presented herself as a reincarnation of the Egyptian goddess Isis. Egyptian Pharaohs were seen as deputies of the gods but Cleopatra claimed to be a goddess herself. Cleopatra was a great beauty complemented with wit, charm and a sweet voice. Cleopatra was able to conquer the world’s most powerful men. She made Julius Caesar abandon his plans to annex Egypt and back her claim to the throne.

Julius Caesar had the same initials as Jesus Christ. During the psychosis I stumbled upon an article in a magazine about some people claiming that Romans invented the story of Jesus Christ based on the life of Julius Caesar. According to them Jesus never existed. There is no historic evidence of the existence of Jesus, they claimed. That might be a clue.

Empress Theodora

Empress Theodora (500-548) was one of the most powerful and influential woman in Roman history. A contemporary official claimed that she was superior in intelligence to any man. Her husband, Emperor Justinian recognised this as well. He allowed her to share his throne and take part in decision-making.

As a young woman Theodora earned her living as an actress, which included prostitution. She gave up her former lifestyle and settled as a wool spinner near the palace in Constantinople. Her beauty, wit and amusing character drew attention from Justinian. Justinian married Theodora when she already had a daughter.

During the Nika Riots in Constantinople, rioters set public buildings on fire and proclaimed a new Emperor. Justinian and his officials prepared to flee but Theodora spoke out against this plan. Her determined speech convinced them to stay. Justinian ordered his loyal troops to attack the demonstrators. The revolt was then subdued.

After the revolt, Justinian and Theodora ordered Constantinople to be rebuilt. It became the most splendid city of the world. The works included building aqueducts, bridges and churches, including the Hagia Sophia, which is considered one of the architectural wonders of the world. Theodora participated in Justinian’s legal and spiritual reforms. She was also involved in the increase of the rights of women.

Maria, daughter of Harald III of Norway

Harald Sigurdsson was King of Norway from 1046 until 1066. When he was young, he had to flee Norway. He and his men went to Russia, where they served in the army of Yaroslav I the Wise. Later they became a mercenaries in the Byzantine army. There Harald was imprisoned because of a palace intrigue but he managed to escape. The Chronicle of the Kings of Norway Saga of Harald Hardrade mentions the following:

There was a young and beautiful girl called Maria, a brother’s daughter of the empress Zoe, and Harald had paid his addresses to her; but the empress had given him a refusal.

Based on the saga, Michael Ennis wrote a novel named Byzantium in which he speculated about a passionate love affair between Maria and Harald. They tried to escape Constantinople together but a Russian fleet attacked Constantinople at the same time. During the battle Maria died but Harald managed to get out. In 1046 he returned to Norway and became King. Because of my interest in history, and most notably the Byzantine Empire, I have read the novel somewhere around 2005.

Harald died when he invaded England in 1066. His daughter Maria died on the same day in Norway, which is a peculiar coincidence, also because of the connection of this event with D-Day. In his book Ennis suggests that she was the reincarnation of his former lover Maria who wanted to be with Harald and therefore dropped dead when he died.

If you choose to reincarnate into whom you want, and can drop dead at the time of your choosing, you have full control over your fate. In othe words, you can choose your own avatar. That could be a clue and me reading this particular novel might not have been an accident as I do not read many novels (probably one every few years).

The Finnish metal band Turisas dedicated a song named The Great Escape to Harald. The Great Escape is also the name of the lead song of Ilse DeLange’s album The Great Escape, which appears to contain a hidden message from God. What this message might be, will be discussed later on. For now, it is sufficient to notice that this too could be a clue.

Hildegard Von Bingen
Hildegard Von Bingen

Hildegard von Bingen

Hildegard von Bingen (1098-1179) was a 12th century nun. She was an author, counsellor, linguist, scientist, philosopher, physician, herbalist, poet, visionary and composer. She corresponded with Popes, statesmen and Emperors and other notable figures. Abbots and abbesses asked her for prayers and opinions on various matters. She travelled a lot during her preaching tours.

Hildegard von Bingen claimed she had visions. She said she had unusual perceptions at the age of three. By the age of five she began to understand that these were visions. Von Bingen claimed she saw all things in the light of God through the senses: sight, hearing, taste, smell, and touch. She spoke out against church practises such as simony.

Von Bingen wrote that woman may be made from man, but no man can be made without a woman. She promoted chastity but also described a female orgasm. According to Von Bingen, Adam had a pure voice and joined the angels in singing praises to God before the Fall. At the time she lived, an anonymous monk in the Netherlands wrote down the oldest known written sentence of the Dutch language:

hebban olla uogala nestas hagunnan hinase hic anda thu uuat unbidan uue nu.

The English translation for this sentence is: “Have all birds started nests except me and you. Do we start now?” At primary school a teacher told us about this old text. These lines remained in my mind since then and I later imagined a Gregorian chant based on these words when Sadeness from Enigma was a popular song.

It is peculiar that a monk would write down a love rhyme. These lines intrigued me for no apparent reason. After my psychosis I came to imagine that the monk may have had a vision about Hildegard von Bingen, also for no apparent reason. This could be a clue.

15th century miniature depicting Joan Of Arc
15th century miniature depicting Joan Of Arc

Joan of Arc

Joan of Arc (1412-1431) was an uneducated peasant girl from an obscure village in Northern France. In 1429 large parts of France were under foreign control. After years of humiliating defeats, the leadership of France was demoralised and discredited. Joan of Arc led the French army to several important victories during the Hundred Years’ War against England and its ally Burgundy.

She claimed to have divine guidance. Recent scholars explained her visions as a disease but documents from her own era indicate that she was healthy and sane. She was captured by the Burgundians and burned at the stake at the age of nineteen. Her actions changed the outcome of the war and had a major impact on history as France came out victorious from a hopeless position.

Featured image: Roman sculpture of Cleopatra wearing a royal diadem. Altes Museum in Germany. Wikipedia. Public Domain.

A goldsmith in his shop. Peter Christus (1449).

How the financial system came to be

The goldsmiths tale

The short animation film Money As Debt explains how the financial system came to be. It is an interesting story. Once upon a time when gold was internationally accepted as money, goldsmiths fabricated gold coins of standardised weight and purity. They were a trusted source of these gold coins. They owned a safe where they stored their gold. Other people wanted to store their gold there too because those safes were well guarded.

goldsmithsafe
Money As Debt: guarded safe

And so some goldsmiths began to make a business out of renting safe storage. People storing their gold with the goldsmith received a voucher certifying the amount of gold they brought in. At first these vouchers could only be collected by the original depositor.

Later this restriction was lifted so that any holder of the voucher could collect the deposit. From then on people started to use these vouchers as money because paper money was more convenient than gold coin. Depositors rarely demanded their gold and it remained in the vaults of the goldsmiths.

goldsmithmoney
Money As Debt: gold smith paper money

Modern banking

Some goldsmiths also had another business, which was lending out their gold at interest. Because depositors rarely came in to collect their gold, they discovered that they could also lend out the gold of the depositors at interest. When the depositors found out about this, they demanded interest on their deposits too. At this point modern banking started to take off and paper money became known as bank notes.

Borrowers also preferred paper money to gold coin, so the goldsmiths, who had now become bankers, found out that they could lend out more money than there was gold in their vaults. Bankers started to create money out of thin air. This is fractional reserve banking because not all deposits were backed by gold reserves. The new money was spent on new businesses and that hired new people so the economy boomed.

When depositors found out that there were more bank notes circulating than there was gold in the vaults of the goldsmith’s bank, the scheme could run into trouble, but mostly it didn’t. Depositors received interest and this enticed them to keep their deposits in the bank. People trusted their bank as long as they believed that debtors had no trouble repaying their loans.

Bank runs

Sometimes people started to have doubts about their bank and worried depositors came to the bank to exchange their bank notes for gold. This is a bank run. The bank could run out of gold and close down because not all the gold was there. The bank’s bank notes could then become worthless, even when borrowers had no problems repaying their debts. The money that the bank had created out of thin air suddenly vanished. This was a financial crisis.

bankrun
Money As Debt: bank run

As a lot of money had suddenly disappeared people had less money to spend. This could hurt sales so that some businesses could go bankrupt. Those businesses could not repay their debts at other banks. Depositors at those banks could start to fear that their bank would go bankrupt too. This could cause more bank runs and more money disappearing, so that things would become even worse. This is an economic crisis. This is the way a financial crisis could trigger an economic crisis.

centralbank
Money As Debt: central bank

Regulations and central banks

Measures have been taken to forestall financial crises and to deal with them if they occur. Banks needed to have a minimum amount of gold available in order to pay depositors. Central banks were instituted to support banks by supplying additional gold if too many depositors came in to collect their gold. Central banks could still run out of gold but this was solved when the gold backing of currencies was ended. Nowadays central banks can print new dollars or euros to cope with a shortfall.

Regulations limit the amount of loans banks make and therefore the amount of money that exists. But everyone can lend to anyone. Alternative forms of financing circumvent the regulations imposed on banks. For example, corporations can issue bonds or use crowd funding. Human imagination is the only limit to the amount of debt that can exist. As long as people expect that those debts will be repaid, even if it is with new debts, there is trust in these debts. But the financial crisis of 2008 demonstrated that trust in debts can suddenly disappear.

Featured image: A goldsmith in his shop. Peter Christus (1449). Metropolitan Museum of Art. Wikimedia Commons. Public Domain.

Other images: Money As Debt. Paul Grignon (2006).

What is the use of banks?

Turning debt into money

The previous episode about money discussed some imaginary trades between you, a hatter, a lawyer, a barber and a fisherman. It is shown that if people promise to pay this might suffice for payment. So if the fisherman promises you to pay next week for the hat you just made, you could say to the lawyer that you expect the fisherman to pay in a week, and ask her if you can pay in a week too. The lawyer could then ask the same of the barber and the barber could ask the same of the fisherman. If all these debts cancel out then no cash is needed.

In most cases debts cannot be cancelled out so easily. A hat may cost € 50, legal advice € 60, a hairdo € 30, and the fish € 20. If you are the hatter, you could lend € 10 to the barber and the lawyer could lend € 20 to the fisherman. Perhaps the lawyer doesn’t trust the fisherman because he smells fishy. But if the lawyer trusts the barber and the barber trusts the fisherman then the lawyer could lend € 20 to the barber and the barber could lend € 20 to the fisherman.

That could become complicated quite easily. And this is where banks come in. Banks can lend money because they know the financial situation of their customers. The fisherman can borrow money from his bank to make payments because the bank knows that he has an unstable but good income and a vessel that can be sold for cash if needed.

If the fisherman borrows money to pay for the hat you made, this money ends up in your account. You can use it to pay the lawyer. And so the fisherman’s debt becomes the lawyer’s money until she uses it to pay the barber. People that have a deposit lend money to the bank and the bank is lending this money to those who have a loan, in this case the fisherman. Depositors trust the bank even though they do not know the people the bank is lending money to.

Most people think of money as coins and bank notes but more than 90% of the money just exists as bookkeeping entries in banks. When a fisherman borrows money from his bank, he can spend it on a hat. This means that the bank creates money and that this money is debt. Most of our money is debt so the value of money depends on the belief that debtors pay back their debts. This seems scary and it keeps quite a few people awake at night.

Some people argue that debts and banking are a fraud because they are based on a belief. But banks and debts help to boost trade and production by creating money that doesn’t exist to start businesses that don’t yet exist to make products which will be bought by the people those businesses will hire with this newly created money. Banking and debts are at the basis of the capitalist economy.

Banking as bookkeeping

Banking is more or less just bookkeeping and balance sheets. Balance sheets can be used to explain the magic trick banks do, which is creating money. Balance sheets are simple. There are no intimidating formulas, only additions and subtractions. The important thing to remember with balance sheets is that the total of the amounts on the left side must always equal those on the right side.

On the left is the value of your stuff and your money. On the right side is the value of your debts. Your net worth is what remains when you sell all your stuff and pay off your debts. It is on the right side too in order to make it equal to the left side. Your net worth can be a negative value. If that is the case, you might be bankrupt because you can’t repay your debts by selling your assets. The left side is named debit and the right side is called credit. Your balance sheet might look like this:

debit
credit
house
€ 100,000
mortgage
€ 80,000
other stuff
€ 50,000
other loans
€ 30,000
cash, bank deposits
€ 20,000
your net worth
€ 60,000
total
€ 170,000
total
€ 170,000

When you buy a car, you own more stuff, but also another loan or fewer bank deposits as you have to pay for the car. This is because debit always equals credit. When you drive the car, it goes down in value, as does your net worth, because debit always equals credit. If your salary comes in, your bank deposits as well as your net worth rise because debit always equals credit. If you pay down a loan, the amount in your bank account as well as the amount of your loan goes down because debit always equals credit. If debit doesn’t equal credit then you have made a calculation error.

Also for a bank the total of the amounts on the left side must always equal those on the right side, so that debit always equals credit. Your debt is on the debit side of the bank’s balance sheet. You have borrowed this money from your bank. The bank owns this loan. Your bank deposits are on the credit side of the bank’s balance sheet. The loans of the bank are paid for by deposits. Banks lend money to each other. This may happen when you make a payment to someone who has a bank account at another bank. Your bank may borrow this money from the other bank until a payment comes the other way. The balance sheet of a bank may look like this:

debit
credit
mortgages and loans
€ 70,000,000
deposits
€ 60,000,000
loans to other banks
€ 10,000,000
deposits from other banks
€ 20,000,000
cash, central bank deposits
€ 10,000,000
the bank’s net worth
€ 10,000,000
total
€ 90,000,000
total
€ 90,000,000

How banks create money

Banks create money. How do they do that? It is easy if you understand balance sheets. Assume that you, the hatter, the lawyer, the barber, and the fisherman all have € 10 in cash. Together you decide to start a bank. You all bring in the € 10 you own so that you all have a deposit of € 10 and the bank has € 40 in cash. The bank allows everyone to withdraw deposits in cash. This is no problem as long as the total of deposits equal the total amount of cash. After everyone has put in the deposit, the bank’s balance sheet looks as follows:

debit
credit
cash
€ 40
your deposit
€ 10
deposit lawyer
€ 10
deposit barber
€ 10
deposit fisherman
€ 10
total
€ 40
total
€ 40

First, there was only € 40 in cash. Now there are € 40 in bank deposits too. You might think that the bank created money. Only, that isn’t true because the depositors can’t spend the cash unless they take out their deposits. In other words, the depositors don’t have more money at their disposal than before. If you look at the total, there is still € 40. This is bookkeeping. You have to write down the total twice as debit must equal credit.

But now things are going to get a bit wild. The fisherman comes to you and he wants to buy a hat. The hat costs € 50 but the fisherman has only € 10 in his account. To make the sale possible, the bank is going to do its magic. The fisherman calls the bank and asks if he can borrow some money. The bank grants him a loan of € 40 and puts the money in his deposit account so that he can spend it. And look:

debit
credit
cash
€ 40
your deposit
€ 10
loan fisherman
€ 40
deposit lawyer
€ 10
deposit barber
€ 10
deposit fisherman
€ 50
total
€ 80
total
€ 80

Who says that miracles can’t happen? The amount of deposits miraculously increased from € 40 to € 80 so € 40 is created from thin air. There is still only € 40 in cash but the fisherman’s debt created new money. This is how banks create money. And that is only because bank deposits are money. This is all there is to it. So much for the mystery. The fisherman then pays € 50 for the hat. And so it becomes your money:

debit
credit
cash
€ 40
your deposit
€ 60
loan fisherman
€ 40
deposit lawyer
€ 10
deposit barber
€ 10
deposit fisherman
€ 0
total
€ 80
total
€ 80

And now comes the dreadful part that keeps some people fretting. Everyone can take out his or her deposits in cash. There is € 80 in deposits and only € 40 in cash. If you go to the bank and demand your € 60 in cash, the bank would go bankrupt, even when the fisherman pays off his loan the next day. You could bankrupt the bank by buying € 50 in fish with cash. If you go to the bank to get € 50 in cash it would not be there so the bank would go bankrupt before the fisherman can pay off his loan with the same cash.

A bank could get into trouble in this way even when debtors repay their debts. Clever minds already figured out a solution. Central banks can print the needed cash. If the European Central Bank (ECB) prints € 20 on a piece of paper and lends this money to the bank, there would be enough cash to pay out your deposit. Banning the use of cash and only use bank deposits for payments would be another option. So, after the ECB deposited € 20 in cash, the bank’s balance sheet might look like this:

debit
credit
cash
€ 60
your deposit
€ 60
loan fisherman
€ 40
deposit lawyer
€ 10
deposit barber
€ 10
deposit fisherman
€ 0
deposit ECB
€ 20
total
€ 100
total
€ 100

After you pay the fisherman, he can pay off his loan, and the bank will have enough cash to pay out all deposits. The bank can repay the central bank and everything is fine and dandy again. In this case the bank could not meet the demand for cash but the value of cash and loans wasn’t smaller than the deposits (the bank’s debt). After the fisherman pays back his loan and the bank pays back the ECB, the bank’s balance sheet might look like this:

debit
credit
cash
€ 40
your deposit
€ 10
loan fisherman
€ 0
deposit lawyer
€ 10
deposit barber
€ 10
deposit fisherman
€ 10
deposit ECB
€ 0
total
€ 40
total
€ 40

If banks can’t create money, trade would be difficult. If the hat is € 50, the legal advice € 60, the hairdo € 30, and the fish € 20, and you, the lawyer, the barber and the fisherman all have only € 10, nothing can be bought or sold. If the bank lends € 40 to the fisherman, he can buy a hat from you, you can buy legal advice from the lawyer, the lawyer can buy a hairdo and the barber can buy fish. Debt is the basis of the capitalist economy. Nearly all money is debt, and without debt the economy would come to a standstill.

How much money can banks create?

The amount of money a bank can create is limited by the bank’s capital, which is the bank’s net worth. Regulations stipulate that banks should have a minimum amount of capital. This is the capital requirement. If the capital requirement is 10%, and the bank’s capital is € 10,000,000, it can lend € 100,000,000, provided that there are enough deposits. If the bank makes a loan, a new deposit is created. If the deposit leaves the bank, the bank must borrow it back from another bank or cut back its lending. That is because debit must always equal credit.

debit
credit
mortgages and loans
€ 70,000,000
deposits
€ 60,000,000
loans to other banks
€ 10,000,000
deposits from other banks
€ 20,000,000
cash, central bank deposits
€ 10,000,000
the bank’s net worth
€ 10,000,000
total
€ 90,000,000
total
€ 90,000,000

When a deposit leaves the bank, it ends up at another bank. The other bank can use it for lending, provided that it has sufficient capital. There may be a reserve requirement, which is a minimum of cash and central bank deposits the bank must hold. If the reserve requirement is 10%, the bank can lend out as much as ten times the amount of cash and central bank reserves it has available. In the past reserve requirements were important as people often used cash and could go to the bank to demand their deposits in cash. For that reason banks needed to hold a certain amount of cash.

Featured image: Deutsche Bank building CC BY-SA 4.0. Raimond Spekking. Wikimedia Commons. Public Domain.