Conspiracy fact: Actual proof that banks create money out of nothing (Part 1)


Here at LRM, I have written a great deal about the fact that banks create money out of nothing, ex nihilo, out of thin air.  This assertion was made after extensive research into the money-creation process, and I found that this information was not only not secret, but also that the information is common knowledge among economists and those like me who take an interest in such matters.  In fact, the only group which seems surprised to hear and then resists the fact that money is created out of nothing is, well, a rather large group—the general public.

This surprise and resistance of the general public is due to any number of possible reasons—misinformation, mis-education, apathy, lack of interest, genuine support for the current system, etc.  But perhaps the biggest reason people tend to be surprised by and resistant to the idea—in the unfortunately unlikely event that they ever even presented with the idea—is that they think it can’t be true because there’s no proof that it’s true.  They think that anyone who says that banks create money out of thin air is just a conspiracy theorist, a communist who hates banks and capitalism, a sufferer of paranoid delusions, or some combination of all of those.

Except they’re wrong that there’s no proof—in 2014, noted economist Richard Werner proved beyond a shadow of a doubt that any run-of-the-mill, local bank (not just the central banks of the world) can and does, as a matter of course, create money out of nothing.  The only problem is that Werner’s findings are almost completely unknown–not just to the general public, but also to people like myself who actively seek out this information.  Indeed, Werner’s case study was published in “The International Review of Financial Analysis” in December 2014 and I heard nothing about it at all until I stumbled upon it earlier this year.  If it weren’t online, I likely would still have never heard about it.

Published under the title “Can banks individually create money out of nothing?—The theories and the empirical evidence,” Werner’s paper needs to become the new common knowledge.  This article seeks to amplify Werner’s extremely important findings, and I am making this a series in order to keep the length of the articles to a bare minimum in order to avoid the dreaded “TL;DR” syndrome.

So let’s get to it.

How it was proven

Let’s begin with Werner’s conclusion: yes, banks can individually create money out of nothing.  Here’s how he puts it (section 5.2 of the article):

“Thus it can now be said with confidence for the first time – possibly in the 5000 years’ history of banking – that it has been empirically demonstrated that each individual bank creates credit and money out of nothing, when it extends what is called a ‘bank loan’. The bank does not loan any existing money, but instead creates new money. The money supply is created as ‘fairy dust’ produced by the banks out of thin air.32 The implications are far-reaching.”

It sounds unbelievable, but Werner proved it: any time you were “lent” money from a bank, the bank created the money out of thin air.   “What’s the problem with that?”  is a question I’m sure some readers will be asking in their heads.  Well, here’s a few:

1) The bank took no risk to “loan” you the money, because it just literally made up the money—so there’s really nothing to “repay” and there’s really no justification to charge interest because the bank is not having to do without the amount it “loaned” you.

2) Some people are turned away by banks when they ask for “loans” to start a business, buy a house or car, or go to college (or they’re charged exorbitant interest) and so banks are therefore allowed to pick winners and losers in society.

3) Banks are stealing money from you as a “borrower” because they’re charging you a rental fee (i.e. “interest”) on money which they a) didn’t have before you asked to borrow it, b) “created” by a few keystrokes into a computer, and c) therefore never really exists at all.  In other words, you’re being charged money you actually have to perform labor for in order to “pay them back” money which certainly didn’t exist before you “borrowed it” and only exists—to the extent that it can be said to exist at all—as binary code in a computer database.  If that’s not theft by fraud, then there is no such thing.

4) You can only get money by performing labor, whereas banks are allowed to just will it into being.  It’s pretty easy to see who has the advantage in such a situation, and it isn’t you or me that has the advantage.

In the simplest possible terms, the problem is that banks get free, infinite money, and you don’t (hence the meme at the beginning of the article).  They get something for nothing while trying their damnedest to make sure no one else does.

So how did Werner prove it? Pretty simple, really, yet quite revolutionary.  He found a bank that would give him a loan and then let him see their books the day before and the day he got his “loan.”  Werner’s summary (section 5.2):

“It was examined whether in the process of making money available to the borrower the bank transfers these funds from other accounts (within or outside the bank). In the process of making loaned money available in the borrower’s bank account, it was found that the bank did not transfer the money away from other internal or external accounts, resulting in a rejection of both the fractional reserve theory and the financial intermediation theory. Instead, it was found that the bank newly ‘invented’ the funds by crediting the borrower’s account with a deposit, although no such deposit had taken place. This is in line with the claims of the credit creation theory.”

Long story short, Werner asked for a loan.  The bank created an account in his name and deposited €200,000 into it.  The bank did not check to see whether or not it had that amount on hand to give to him, nor did they inquire of any central bank or other banking authority whether or not they had that amount to spare in reserves.  They just made it up and put it into his account and Werner was in fact able to spend that money.  The bank director admitted it in a signed letter to Werner:

“…neither I as director of Raiffeisenbank Wildenberg eG, nor our staff checked either before or during the granting of the loan to you, whether we keep sufficient funds with our central bank, DZ Bank AG, or the Bundesbank. We also did not engage in any such related transaction, nor did we undertake any transfers or account bookings in order to finance the credit balance in your account. Therefore we did not engage in any checks or transactions in order to provide liquidity.”

We’ll look at what all this means a little more in depth in Part 2.

About eggsistense

Writer, musician, cartoonist, human being
This entry was posted in Crap-italism, Debt Slavery, Everything Is Rigged, fiat currency, Paper terrorism, Redistribution, Reverse socialism, Too big to fail, Wealth transfer and tagged , , , , , , , . Bookmark the permalink.

7 Responses to Conspiracy fact: Actual proof that banks create money out of nothing (Part 1)

  1. Sunman says:

    Wouldn’t YOU like this arrangement?
    Let’s see…I would make up the money out of thick air (that way it is worth MORE!) …Then I would find other very creative ways to extort more money from unwary borrowers by making sure they could not make repayments… Then… Bet against the loans so when the loans went south I would WIN again! THEN! I would make the borrowers loan (without their knowing) into a TRUST so it could be turned into stock to sell on Wall Street! And the BEST part is…. There were never any TRUSTS to begin with! HA! But the banks and wall street would never do such a thing…

  2. Andrew Mackinnon says:

    Congratulations, eggsistense. You are the thin edge of the wedge (which is destined to fracture this fraud and blow it wide open). Thanks a lot for caring enough about your fellow man to expose this fraud. If there are 100 people like you, we can change the USA. If there are 1,000 like you, we can change the world.

    You’re a legend. God bless you.

    Actually, in all honesty, I stumbled across this research that you reference in this post just a few weeks ago and realised its significance. What is particularly disturbing is that the media, the banks and the universities (eg. economics faculties) are all united in their effort to bury the truth that banks create money out of nothing when they lend (and then charge interest on it).

    One aspect of banks creating money when they lend is that they create the principal but not the interest. Therefore, at any given point in time, there is not enough money in circulation for everybody to repay their debts. So everybody works with bended back and competes with each other in a mad scramble for the insufficient amount of money in circulation in an effort to pay the interest on their debts.

  3. Ric G says:

    Welcome to the bankers swindle of ‘rolling the pea.’

  4. algistd says:

    In Lies We Trust

    “it’s easy to fool someone, but it’s much harder to convince someone they’ve been fooled.”

    ˙ǝıl ɐ uɐɥʇ ǝɹoɯ ƃuıɥʇou sı ǝnɹʇ ǝq oʇ ǝʌǝılǝq noʎ ƃuıɥʇʎɹǝʌǝ ʇsoɯ ǝɹǝɥʍ plɹoʍ uʍop ǝpısdn uɐ uı ǝʌıl ǝʍ

    When truth becomes conspiracy, reality becomes an illusion.
    The world as we know it, is an illusion based on lies and deceit.
    If the world seems insane, it’s because it is run by insane people.
    Good guys finish last, so where do you think all the bad guys are.
    Money makes the world go round, so money talks and people can be bought.
    Jobs at all cost, cost us all.
    So stop going along to get along, because it is wrong and it does cost us all.
    They say (the psychopaths) there is a sucker born everyday.
    Blind trust will be humanities undoing, so stop be-LIE-ving blindly and question everything.
    They lie and we be-LIE-ve, because we trust.
    Stop trusting and be-LIE-ving anything that is mainstream. It’s all being manipulated.
    To be-LIE-ve is to not know. So start knowing and stop be-LIE-ving. Do your own research.
    You may think you are free, but really you are only free to conform.
    We were all born into slavery. Freedom is nothing more than an illusion.
    Truth is knowledge. Knowledge is power. Knowing the truth will set you free.
    Ignorance is not bliss, it is how we are all being used and abused.
    People say they love their (grand)children.
    Talk is cheap. Actions speak louder than words.
    This world is in a sad state of affairs and needs fixing.
    We all have free will and you are not powerless.
    We can choose to sit idly by, while the world crumbles around us
    or we can all grab a cause and get involved.
    If we all joined in one cause, we could change the world overnight.
    Be the change you want to see.
    “It does not take an army to fight evil.
    All it takes is for individuals to do one good deed at the time.”
    “All that is necessary for the triumph of evil is that good people do nothing”
    So if you do nothing, nothing will happen.
    Alone we have the power of none, but together we have the power of “ONE”
    You can make a difference now by sharing this message.
    Deal with reality, before it deals with you.
    “I’m trying to free your mind… But I can only show you the door. You’re the one that has to walk through it.” — Morpheus

    The Hidden Evil is a psychopathic program which exists in a society controlled by psychopaths. The World Is Run By Real Psychopaths

    “The eyes of a psychopath will deceive you, they will destroy you. They will take from you, your innocence, your pride and eventually your soul. These eyes do not see what you and I can see. Behind these eyes, one finds only blackness, the absence of light. These are of a psychopath.” ― Dr. Samuel Loomis

    Twenty years ago, a newspaper headline asked the question: “What’s the difference between a politician and a psychopath?” The answer, then and now, remains the same: None. There is no difference between psychopaths and politicians.
    Nor is there much of a difference between the havoc wreaked on innocent lives by uncaring, unfeeling, selfish, irresponsible, parasitic criminals and elected officials who lie to their constituents,

    Psychopaths in Power – The Elephant in the Living Room


  5. Pingback: Conspiracy fact: Actual proof that banks create money out of nothing | Help save our kids future

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