- Published on Wednesday, 07 October 2015 10:13
When the Occupy movement erupted across the globe in the autumn of 2011, money creation was barely discussed and claims that banks create money from nothing were ridiculed or met stunned disbelief. Although fractional reserve banking was understood by some, that understanding was tainted by a fundamental misapprehension; that banks lend money that they already have; ie, before they lend, banks need deposits - giving rise to the lie that banks are mere intermediaries in lending/borrowing transactions.
The ground of perception shifted with the publication of papers from both the IMF and Bank of England confirming that banks do indeed create money from thin air - some 97% of UK money supply for example is created as debt by banks. Andrew Conio's Savage Money, which considers the oppressive, abusive nature of bank created money, has just been published in a book of essays Occupy, A People Yet To Come, .
Now we have empirical evidence that banks are indeed financial alchemists, creating money from nothing.
Can banks individually create money out of nothing? — The theories and the empirical evidence by Richard A. Werner
According to the financial intermediation theory of banking, banks are merely intermediaries like other non-bank financial institutions, collecting deposits that are then lent out. According to the fractional reserve theory of banking, individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction. A third theory maintains that each individual bank has the power to create money ‘out of nothing’ and does so when it extends credit (the credit creation theory of banking). The question which of the theories is correct has far-reaching implications for research and policy. Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper. An empirical test is conducted, whereby money is borrowed from a cooperating bank, while its internal records are being monitored, to establish whether in the process of making the loan available to the borrower, the bank transfers these funds from other accounts within or outside the bank, or whether they are newly created. This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, "out of thin air".
Princes of the Yen demonstrates with stunning clarity how the Japanese economy was deliberately crashed by the central bank (BoJ) to achieve "structural reform" - ie. open up Japan to global banks and corporations to acquire assets and enslave the population in debt.
Over the last 100 years, the Structural Elite have expanded their reach globally via a web of central banks, coordinated through the privately owned Bank of International Settlements (BIS) in Basel, Switzerland. They want the world and unless we remove the power of banks to create money, they will get it.