It is important to understand the banking system in order to take full advantage of the process you will be utilizing for your protection. The banking system is vastly different than the simplistic view that is typically "understood." It is much more than "you give banks deposits, they pay you interest and lend out the money you have given them." This is far from the modern reality with the federal reserve and fractional banking system that is utilized today. Understanding it will enhance your understanding of the defenses and tactics used with your creditors while allowing you to realize this process is surprisingly similar to what banks utilize to protect themselves in working with the Central Banks. Of course, modified and scaled down to the individual. The key is understanding the laws that exist for your protection and simply allowing them to do their job.

DEBT

Understanding the nature of "debts" as it pertains to the bank is a good starting point. According to the United States Congress and the Federal Reserve, banks today that provide credit do not lend money but actually create money from promissory notes and credit applications. This, in essence, redefines your relationship with banks as you are the lender and they the borrower. The note or application is used to actually make the purchase, not money that was in the bank's possession. They are able to utilize your good name to charge you for credit and money they did not have prior to your application.

The Federal Reserve Bank of Chicago publishes “Two Faces of Debt” which explains the process:

“. . . a money creation function

Debt does more than simply transfer idle funds to where they can be put to use -- merely reshuffling existing funds in the form of credit. It also provides a means of creating entirely new funds -- funds needed to finance the greater volume of new projects and spending that contribute to economic growth.

Again, checkable deposits in commercial banks and savings institutions are debts -- liabilities of these depository institutions to their depositors. But checkable deposits are also the money used for most expenditures. How do these deposit liabilities arise?

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For an individual institution, they arise typically when a depositor brings in currency or checks drawn on other institutions. The depositor's balance rises, but the currency he or she holds or the deposits someone else holds are reduced a corresponding amount. The public's total money supply is not changed.

But a depositor's balance also rises when the depository institution extends credit -- either by granting a loan to or buying securities from the depositor. In exchange for the note or security, the lending or investing institution credits the depositor's account or gives a check that can be deposited at yet another depository institution. In this case, no one else loses a deposit. The total of currency and checkable deposits -- the money supply -- is increased. New money has been brought into existence by expansion of depository institution credit. Such newly created funds are in addition to funds that all financial institutions provide in their operations as intermediaries between savers and users of savings.”

A Congressional Subcommittee on Domestic Finance explains the process in very much the same manner, in its publication “Money Facts.”

“33. Do private banks issue money today?

Yes. Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities. The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they ‘create’ it...

45. Where did the commercial banks obtain their reserves?

By and large the bulk of commercial bank reserves were created by the Federal Reserve and credited to the account of the various commercial banks which are Federal Reserve ‘member’ banks. The Federal Reserve creates these reserves just as a bank creates checkbook money. By various devices, either loans or other means, the Federal Reserve credits a bank with bankers deposits—‘reserves’...

47. Where does the Federal Reserve get the money with which to create bank reserves?

It doesn’t ‘get’ the money, it creates it. When the Federal Reserve writes a check, it is creating money. This can result in an increase in bank reserves—a demand deposit—or in cash; if the customer prefers cash he can demand Federal Reserve notes, and the Federal Reserve will have the Treasury Department print them. The Federal Reserve is a total moneymaking machine. It can issue money or checks. And it never has a problem of making its checks good because it can obtain the $5 and $10 bills necessary to cover its check simply by asking the Treasury Department’s Bureau of Engraving to print them”...

Resources on Banking:

Some other books and resources we have found valuable in understanding the banking system, its strengths, weaknesses, and corruption, include:

Book - "The Creature from Jekyll Island: a Second Look at the Federal Reserve" by G. Edward Griffin.