Ok so my mind is blown. I'm a lowly off-grid rapper who grows vegies but have been aware of Werner's work for many years. I knew of his development of quantative easing for the BoJ but not this!!!
Thank you sooo much for this very enlightening article.
My music features an enduring loathing of banking fraud but now I have more to ponder and turns over to the muse
Thumbnail Green, I found accounting soporific at university. Never continued with it. But I too found the article very interesting! I sometimes struggle with understanding numerical stuff in text form and I found this cartoon animation helped: https://www.youtube.com/watch?v=3N7oD5zrBnc
And if I’m not mistaken, this is what the article is critiquing slightly in terms of the terminology Werner uses and the way he talks about it. But I still think worthwhile watching the video, you will like it!
Thumbnail! Nice to see you here, where LoWa sent me. I just posted a video looking at whether Werner is a WEF sheepdog, leaking the information we were already finding out in order to claim leadership of the opposition and lead us back to the slaughterhouse by a different route: https://www.youtube.com/watch?v=N-XgbEBLgXM.
I don't come to this lightly, since Werner is speaking my language and is the only credentialed economist making these points, who can be quoted. But it's a question we should be asking, given his status as a WEF Global Leaders of Tomorrow, the predecessor of their Young Global Leaders or WEFfie YuGLs, as I call them.
It's possible but unlikely. I've followed him on and off since well before 2020. I think what is difficult with Werner is that he is a money guy. He literally invented quantative easing and all banking products are serving, well bankers.
He is at loggerheads with BoE and that makes him one of the rare good guys in his industry and yes they do exist. Ernst Wolfe was a fucking legend in 2020 and called banking bullshit!
Hi Pat, I tried to summarise this article for myself - have I done it right?
If I’m not mistaken, you are saying (in a grossly oversimplified version):
“How can a bank pay Richard for a promissory note / security using money that belongs to Richard? Therefore, how can the bank be said to be “in the business of purchasing securities”? It can’t demand payment back from Richard for money that was Richard’s to begin with. So it never “paid” Richard anything (as it was Richard’s money in the first place) therefore it doesn’t make sense that Richard “owes” the bank anything. Therefore we cannot consider this a loan at all.”
Am I on the right track?
And if this is true…why are there no mass protests ?
Spot on, LoWa. You surpass my expectations! Brilliantly summarised. I'm on Richard Werner's side of the argument, just tidying up a "loose end" in his terminology, which you understand correctly.
With your perception, you will discover the answer to your question on your own.
I say we are dealing with "master magicians", who are necessarily professional deceivers; they tell us what they want us to believe they are doing, when we know what they are doing is IMPOSSIBLE and ILLEGAL.
We are dealing with sociopaths at the top levels of banking. They know exactly how they are defrauding us and could not be happier. Lower down the banking tree, we have "trained underlings" acting under strict in-house rules they have probably never thought about.
I'm hoping Werner will take my article as constructive criticism and adapt his public descriptions accordingly. The need for wider public understanding of an ancient, global accounting fraud by banks is crucial, and Werner has a very large audience that could make a huge difference in that regard.
Werner "broke the logjam" of economics in 2013 with his experimental loan and forensic examination of the Raiffeisenbank's balance sheet, but missed the subtle deception they played on him. I can't blame him for that, as it took me over 70 years to reach this point in my understanding, largely due to his input.
Thank you, LoWa, for sending me to Pat's stellar article. As I mentioned to Thumbnail, I'm writing the text to accompany my YT on FBI Tucker & WEF Werner, and will have the Substack out today. I'll include Pat's article in it, so it's perfect timing.
Pat, what you add in your reply to LoWa that I've never heard Werner say is intent. You call the bankers master magicians, professional deceivers and sociopaths. I agree. In my book, How to Dismantle an Empire, I show how this goes back 3500 years to the creation of money, which was never a unit of trade but was always to usurp ownership of the land and our labor--usury means usurping ownership, not interest.
Werner's solution to this was quantitative easing. What that really solved was the insolvency of banks when there wasn't enough money in circulation to repay the mortgages. If they foreclosed, they had to show the loss of those loans as assets on their balance sheets, putting them under the required 1:10 capital/ deposit ratio. They would have had to declare bankruptcy.
What would happen to all of our homes under mortgage? That's an interesting question, isn't it? Certainly the police wouldn't have enforced mass evictions, since they've got mortgaged homes too. We would have figured out this scam, perhaps, and done something different.
Werner's solution now is more banks lending for productive activity--local businesses. Doesn't that give the bankers free ownership of the businesses, if they're creating credit out of thin air the business owner needs to labor to repay?
So who should have ownership of the assets? I don't agree that the buyer of a home then owns both the home and the money that was created to pay the seller. Under my system, the community is the default owner of all the property within its borders when it's changing hands. They, through the commonwealth bank, have the exclusive privilege of issuing the credit.
The collective mortgages are distributed in advance equally to all commoners as dividends targeted to what the community wants to promote: locally produced food, wellcare, education, home improvements and community projects. Long time residents and natives have a 2:1 advantage in buying or renting housing. Money for local goods and services is not taxed but money extracted is taxed at 50%. It provides a supplemental means of making a living equal to the cost of housing by serving the community.
I'll come back and post the Substack link when I have it up, and I look forward to your thoughts, Pat and LoWa!
Welcome, Tereza. Thank you for linking to this article on your site, and thanks, LoWa, for introducing us. I sense great possibilities arising from collaborative discussions ahead. Having just listened to your 2024 video of how you became who you are and the genesis of your book, "How to Dismantle an Empire" [bad cat!], I struggle to find words to describe my mixed reactions. Where to start?
At 82, my forensic focus is aimed squarely at correcting the operation of the global banking "machine". My engineer's view of its basic accounting mechanism is now so clear that I can see precisely how its operation has been subverted by criminals (i.e., master magicians, professional deceivers and sociopaths) and used as a weapon of social control, their clear purpose and objective being to “own the whole world” by continuously replaying a magical “debt deception”.
My objective is to convert banking from the dangerous weapon it now is to a beneficial public utility, which simply keeps accurate records of “promises made” and reminds us that HONESTY is the basic glue that holds societies together.
I don’t see money as “taking” the products of other people’s labour, Tereza, but labourers “giving” their labour to earn money. But then, I see all forms of money - whether gold or silver coin, fiat paper notes (plastic, in Australia), or credit balances in bank accounts - as physical evidence of the [perceived?] value of “promises made, but not yet kept”.
Having not yet read your book, I struggle to understand your concept of “carets” as “mortgages of the commonwealth” (that word “mortgage” troubles me). Are your “targeted dividends” perhaps based on the ideas of C.H. Douglas’ Social Credit?
In brief, I see the “keeping of our promises” as the ethical foundation for rebuilding from your “dismantled empire”, but we must restore the useful banking machine carefully. Removing its current operators must not endanger innocent bystanders during the envisaged “restoration”. Training the millions of “new operators” needed for all banks (or retraining the current crop) will be a massive task, but I’m ready to help with that.
Thank you for responding, Pat, and for subbing my stack! We certainly have a lot in common regarding our definition of the problem in banking. And I also sense great possibilities from collaborative discussions ahead! @LoWa has really added to the depth of my analysis and being able to talk through the details with someone who isn't afraid of numbers has been extremely valuable.
The example I use for money as legalized theft is the label in the shirt you're wearing right now. Without a doubt, your labor has never done anything for the person who made your shirt. Likely, not for anyone living in that country or anyone in the producer class throughout the world. It's a one-way migration of labor. The money you paid for it trickles down, possibly 1% of it, so that person can buy the labor of people who make even less than they do.
We are only the sum of our time. When the time of a person equally skilled in another country is worth a fraction of our time in another, it's valuing people as worth more or less. That's a form of slavery but instead of chattel slavery, it's slavery in place that rents a slave by the hour. Their labor serves our interests but there is no reciprocity--if you take away the money, since it's just a symbol, the reality behind it is extraction.
I agree with you about converting banking into a beneficial public utility. There's someone else who has a similar concept to you, I think, who says we should be creating our own banks to create that money out of nothing. I forget his name but he has a big following. I wrote an extensive comment on an interview with him questioning how that would work. In his plan, I don't think there was any repayment, however, just a number created by a person that issued credit to the seller at no obligation to the buyer. You can see why he's popular.
Under your system, the buyer extends a promise to repay with no limit based on current income. Is that right? This creates the credit in the seller's account. If two people want the same house, the one who promises the bigger number gets it. Yes? What happens if they don't repay? And when they do make a payment, where does it go? Does it evaporate, like the repaid principal? Is there interest or not? Does the credit that goes to the seller become the only money in circulation? Who creates the 97% of money once the bankers do not?
I haven't read Douglas and can blame my ideas on no one but myself ;-) You're right that we need a different word (that doesn't mean death grip) for the social debt that's incurred by living in a house you didn't build, in a community whose infrastructure you didn't construct, using knowledge given by a prior generation, fed by the soil another generation cultivated. I think this is a legacy that belongs equally to those born into that community and incurs an obligation of gratitude, to make sure the previous generation can live out their lives in comfort and security, and to pass on the gift in a better form to the next generation.
Using Werner's ideas, as you do, I would revoke the exception for private banks to the rule that financial institutions can't hold deposits. That ends the ability of private banks to create new money. Only the public bank at the level of a few thousand people, which I call the hamlet, can issue the credit to the seller that changes ownership of a property within their borders. The public banks, representing all natives and long-time residents within their borders, is the default owner of the property until the debt is repaid.
Your promise is to them. And every month, they get an equal share of your promise to repay, with which they can buy your labor or the labor of others in the commonwealth--which is two levels surrounding the hamlet for a few hundred thousand people. All housing is priced in carets, which is the local credit. They decide the exchange rate for dollars and whether to allow residents an amount they can exchange monthly at a 1:1 ratio.
So if you're a hedge fund buying up property for foreign investors, you might be paying twice the amount for it or more. And if you rent it to extract the profits, they may be taxed so that you'll only receive half. But if you're moving to an impoverished area like my Appalachian hometown, where I am now, they may welcome homeowners from elsewhere to put more money into circulation. So they may offer a 1.2:1 exchange so locals still have an advantage but not as much.
Here are my answers to the excellent questions Tereza asked about this article:
• “Who creates the 97% of money [in the form of credit] once the bankers do not?”
I didn’t say they would stop doing it. They can still create it, but when they do, we’ll own it, as their creditors. I only proved they don’t OWN any of those credit balances. Since that means there were no loans in the first place, no DEBT attaches to our DEBIT balances; they simply represent the value of our deposited promises. And that means a bank can’t take a mortgage over anything we own, and *can’t charge interest* on those debit balances. Banks must revert to fees-for-service ONLY!
• “Is there interest or not?”
See above! In fact, all interest taken under false pretences in the past could (should?) be refunded.
• “Does the credit that goes to the seller [of the house] become the only money in circulation?”
No!! Money (cash) and credit can and should coexist, but on a level playing field. Each has its advantages and disadvantages. They manifest the same measurement unit ($), but serve different functions.
• “[Can] the [bank customer] extend … a promise to [pay] with no limit based on current income[?]
Within reason, yes. There is no loan to "RE-pay", just a promise to KEEP, and it's a “naked” promise to pay, meaning no *existing* assets are involved, only *future potential* assets. Do you think there should be such a limit on *future potential* assets, Tereza? If your concern is based on fear of currency devaluation due to “too much” credit being created, how much would be “enough”, and who will make that decision? Do we limit the total number of clocks to control the duration of “an hour”, or of tape measures and rulers to control the length of “an inch”?
• “… when they do make a payment, where does it go? Does it evaporate, like the repaid principal?”
If it’s made with existing credit, the credit returns to its source: into the “thin air” from which it “appeared”. The “disappearance” of the credit payment will reduce the total amount of credit in circulation. If it’s made in cash, the cash still exists to be reused by the bank. Of course, the debit balance is reduced by either form of payment.
• “What happens if they don't [keep their promise]?"
First, I’d need to ask, “Why don’t they keep their promise?” For example, did they die, or are they just temporarily out of work, sick, etc.? If they died, their promise literally “died” with them, and their outstanding debit balance must be adjusted to $0.00. If they are out of work, etc., their monthly fees will continue to accrue, as usual, and no payments will be deducted from their debit balance. No problem. Accumulating fees-for-service gives the proper incentive to honour the promise as soon as possible. If it is difficult to keep a promise (for valid reasons), it can ‘circulate’ indefinitely as a form of exchange medium until it is redeemed or “written off”. That’s what happens now: all existing forms of money are circulating evidence of somebody’s “promise to pay”. The cost of doing so is simply the ongoing expense of maintaining accurate accounting records for all credit and monetary transactions made through the bank.
• “If two people want the same house …?”
The higher offeror wins. But you already knew that.
An economic system starts with purpose and a way of measuring progress towards it. My purpose in representing the pov of mothers, is to enable families to stay together, if they wish, and raise the next generation in the same community. This is an easy metric to measure. I also have the goal of enabling people to live where they work and work where they live, providing goods and services to the community.
Who has priority in owning a particular home? Under my system, those who were born into the community, are long-term residents, or work in the community have the ability to transfer their savings into carets at a one-to-one ratio to dollars or another imperial currency. Those providing goods or services to the community can earn carets. This gives them a 2:1 advantage over outsiders.
Your system would reward liars and force others to become liars. The penalty for honesty would be the inability to own a home. If others are making up numbers and can never be evicted if they don't pay, I'd be a fool not to do the same. But I'd also be a fool to sell my house for a number that's being credited to my account that's not backed by labor, with the penalty of losing the house if that labor isn't repaid.
Your caret system seems to focus (almost exclusively?) on securing “home ownership” and promoting “local labour”, Tereza, and if that’s correct, I applaud such a public-spirited purpose and respect the goals you have set. But it remains unclear how you will set or enforce different exchange rates between $s and your new caret currency, and how new carets will be created and distributed equitably. The structure of your “Commonwealth” bank and its mode of operation are not yet clear to me.
I’m not promoting any “economic system”. I’m exploring what might follow from widespread exposure of the fraudulent technique ALL banks have been using to acquire mortgages and charge usury for “pretending to lend” people something those people already own: their own newly created credit. I don’t think it’s unreasonable to anticipate something like a Global Jubilee of unprecedented scope that will enable and promote *secure home ownership* for more people than ever before.
So, I fail to see how exposing that criminality, or the enforced abolition of mortgages and usury, or withdrawing from banks their “fraudulently claimed ownership” of all existing credit (95% of the “money supply”!) could possibly “reward liars” or somehow tempt you to become one. The world has unwittingly handed over all that “money power” to a sociopathic cartel, forcing us to “borrow” it back from the cartel at interest, and I want to reverse that mistake.
Thanks Tereza, look forward to your upcoming piece! I remember thinking - Quantitative Easing?!?! This was the stuff of jokes back in the day…https://www.youtube.com/watch?v=j2AvU2cfXRk
But listening to Werner, I thought, oh ok even he is saying it’s not the “ultimate” solution, it’s just a handy stop-gap solution (according to Werner)…and he proposes a few things as better long-term solutions including:
- banks only being able to create credit for productive purposes
- encouraging proliferation of many small banks that know their local customers well rather than aggregation into large banks
- have more government oversight of central banks instead of them operating at arms length / more sensible central bank policies so as not to precipitate more crashes
- separating money lending and deposit taking functions so banks can’t do creative accounting
- and probably other stuff I’ve forgotten (eg he seems wary of CBDCs)
That’s a good point about lending only for productive purpose - and who at the bank gets to decide what’s “productive”? If I wanted to work with my neighbours to restore our local stream and forest, and bring back the birds and fishies…and we needed $, is that “unproductive” because it’s not generating profit or creating new “value” that can be quantified/monetised (although I suppose it can if people sell fish they catch or charge for eco-tourism…)
Under my system, everyone has carets representing community projects, that can be used for nothing else. You can pitch your stream and forest project, either to pay workers or to supply volunteers with the equipment they need. It would also match whatever was donated in addition--so if things needed to be bought outside the area or experts brought in, it could fund the tax-free exchange of dollars.
If there is no passive way to invest, beyond the long-term savings limit for retirement, etc, that gets a 4% return, then people would need to invest actively. They might put their money into helping someone start a business, also adding their time and skill, for a share of the profit. The commonwealth bank can also create business loans, particularly to buy out foreign (non-local) owners. The amount they issue for the purchase becomes a debt to themselves. This can be distributed in carets with community ownership of the property or a lease for local use. Obviously details to be worked out but I think that Keynes is right that being removed from our investments makes both entities irresponsible.
Some valid points here, but the matter of ownership is still confused.
When the bank creates new units of money as ‘credit’, the purchasing power of those new units is not the property of the bank or of the ‘borrower’, but is expropriated from all money holders by inflating the money supply, in the same way as counterfeit money inflates the money supply and thus expropriates value from all money holders. Another way, the credit issued (an asset claimed by the bank to justify charging interest) does not belong to the bank but to all money holders whose purchasing power of savings was diluted by the new credit tokens.
Once the customer spends the credit amount on goods and services, then pays back the principal plus interest, thus extinguishing the credit tokens, the interest paid still belongs to all money holders from whom the purchasing power of the loan was covertly ‘borrowed’. But the process does not end there: the banks must now issue even more credit to sustain their scam, that is, to enable the payment of future interest, so in effect the purchasing power expropriated from all money holders is not ‘borrowed’ but taken permanently, and in ever increasing quantities. This has the secondary effect of inflating some asset prices, especially real estate, so any profits derived from credit-driven asset ‘value’ growth are also fraudulent. The people who got rich from the growth in real estate are actually driving YOUR Mercedes; the banking system stole it from you, little by little over the years, and gave it to them:)
I am not confused about the ownership of credit created by banks, Michael; the customer owns it, and there is a clear-cut legal issue of fraud by the banks. Its ownership is not related to the “purchasing power” of the currency unit or inflation.
Your comment mixes unusual ownership propositions with arguments about inflation in a way that I will not try to untangle here. Suffice it to say, “purchasing power” of currency units cannot be owned, borrowed, or expropriated separately from the pieces of currency in which that “power” resides, and issues related to changes in the “exchange value” of currency units [inflation] are unrelated to who owns any item of credit.
The ‘empirical’ observation that new units of money appear only after a credit contract is signed does not demonstrate anything about ownership. The banks take the value represented by money from everyone else in the same manner as counterfeiting or coin clipping, whenever they need it to start charging interest. The idea that the borrower owns the credit amount and need not repay it is delusional sovereign citizen ideology that existed for decades. The problem is that repayments and interest go to the wrong party; they should go to everyone else.
Thanks for that scholarly link, but the "gratuitous promises, promises of gifts, which [the authours] put aside" are the very promises I call "naked" promises, made for no consideration.
Correct. I mis-understood that you argued that naked promises are contractually binding, even in the face of the other party making fraudulent representations.
A promise to give is not legally binding unless it involves a valuable consideration being exchanged. I can promise but change my mind any time, if i did not get something in exchange for that promise, which only then would constitute a valid contract. This is the foundation of contract law. Also, the promise is nulled by any fraudulent representation in regard to the consideration. https://www.pandadoc.com/blog/what-makes-a-contract-valid/
The bank's alleged "valuable consideration" in a $200,000 "bank loan" contract is a $200,000 credit balance, which is the accounting reflection (in the bank's "Magic Mirror") of the value of your promise to pay it $200,000, which you deposited (represented by the initiating $200,000 debit balance).
Deposit $100 and you get a $100 credit. That deposit also causes the bank to "debit" $100 to its Cash account, bearing your name. But that $100 DEBIT does not represent a "$100 DEBT owed to the bank"; it simply identifies YOU as the depositor of the valuable piece of paper.
This is an incomplete view, which ignores that the 200,000 is a claim on the property of other people that neither the borrower nor the creditor has the right to use.
When I keep a promise, Michael, I'm not RE-paying a DEBT. A debt implies someone gave me something of their own and I have not yet returned it, or it's equivalent "value".
A promise made on the basis of false representation does not constitute a valid contract. For example, you agree to use and then return someone’s car, and pay them a fee for that use, because they made a representation that they are the owner of that car. If it turns out that the car in fact belongs to someone else, from who it was taken without their consent, it simultaneously invalidates the contract with the thief but preserves the full rights of the owner and therefore the obligation to return the car to the owner, including any expenses and agreed on fees. It is then not the promise that binds the borrower, but the ownership rights of the owner of the appropriated value.
Your comment is correct, and banks are the ones making promises [credit balances in their liability accounts] based on "false representations" in their account statements. My published evidence is clear on that point. So, you will agree that all mortgage contracts are now void?
Not entirely. The obligation of the borrower remains, with respect to the rightful owner of the principal (as in the example of the stolen car), whereas the claim of the bank on the principal and interest is invalid in virtue of the fact that the bank does not own the property on which the principal and interest make a claim.
New units of money are a claim on the property of others. There are no terns of credit, no magic contract between customer and a bank, that allows either party to claim the property of others.
Again, we agree. As Professor Perry Mehrling argues, a credit contract with a bank is a swap of "equal promises", which I say are both "naked" promises. That means neither party can claim the property of the other because no existing asset of either party was given for those promises.
The promises in a credit contract are not naked because they include valuable consideration. The borrower receives a claim on the property of others, but the bank does not have the right to offer that claim. The valuable consideration belongs all along to all money holders and wage earners, who suffer a material loss to their property (debasement of savings and wages).
Very true, however the bank is authorizing you to use credits in their system. All the other banks agree to the rules of the federal reserve system. You can’t demand credit without agreeing to the rules. Try exchanging a signature for physical gold and get back to us.
Thanks for your comment, Kevin. Getting to the truth is my objective.
Exchanging a “signature” for physical gold is not my idea; it’s yours. My idea would be to offer a “solemn promise” to pay the “value of it” in exchange for “anything of value”; it could be food, clothing, shelter, or even physical gold. Provided the owner of the food, clothing, shelter or gold trusts me, and I am honest, my promise can achieve my goal.
Your apparent scepticism seems to be based on a misconception. I’ve published evidence showing that it is the banks that have not been obeying “the rules” for centuries; the same rules they enforce ruthlessly against us, the not-so-well-known rules of double-entry accounting. They have broken the tacit social contract that we will all obey “the rules”.
In my opinion, they have been getting away with it for far too long, and I invite you to join me in demanding that they make that “small” change. How say you?
I could add to the list of three linked videos in this article, Tucker Carlson's recent interview with Prof. Werner (29 July 25), in which he repeats his mistaken claim that "Banks are in the business of purchasing securities” [starting about 43:50]. https://www.youtube.com/watch?v=StTKHskg5Tg
First, there is no money in the system… it’s all fiat currency of no value. For the practice of usury on a fiat currency is fraud and so the grand illusion of ownership continues to fool.
A fiat currency is fine and useful, but never confused the reality of real money over fiat currencies!
Ok so my mind is blown. I'm a lowly off-grid rapper who grows vegies but have been aware of Werner's work for many years. I knew of his development of quantative easing for the BoJ but not this!!!
Thank you sooo much for this very enlightening article.
My music features an enduring loathing of banking fraud but now I have more to ponder and turns over to the muse
Glad that "struck a chord" with a lowly off-grid rapper. See why I say "SHARE"!! The more who 'get it' the stronger each of us becomes.
Thumbnail Green, I found accounting soporific at university. Never continued with it. But I too found the article very interesting! I sometimes struggle with understanding numerical stuff in text form and I found this cartoon animation helped: https://www.youtube.com/watch?v=3N7oD5zrBnc
It is basically saying the same thing as this paper, which I also found easier to understand as it had the credit/debit ledgers in it. https://www.sciencedirect.com/science/article/pii/S1057521914001434
And if I’m not mistaken, this is what the article is critiquing slightly in terms of the terminology Werner uses and the way he talks about it. But I still think worthwhile watching the video, you will like it!
Absolutely Pat. Thank you again it's really got me thinking
Thumbnail! Nice to see you here, where LoWa sent me. I just posted a video looking at whether Werner is a WEF sheepdog, leaking the information we were already finding out in order to claim leadership of the opposition and lead us back to the slaughterhouse by a different route: https://www.youtube.com/watch?v=N-XgbEBLgXM.
I don't come to this lightly, since Werner is speaking my language and is the only credentialed economist making these points, who can be quoted. But it's a question we should be asking, given his status as a WEF Global Leaders of Tomorrow, the predecessor of their Young Global Leaders or WEFfie YuGLs, as I call them.
I'll have the Substack version up later today.
It's possible but unlikely. I've followed him on and off since well before 2020. I think what is difficult with Werner is that he is a money guy. He literally invented quantative easing and all banking products are serving, well bankers.
He is at loggerheads with BoE and that makes him one of the rare good guys in his industry and yes they do exist. Ernst Wolfe was a fucking legend in 2020 and called banking bullshit!
WEF connections deserve inspection though.
X
Hi Pat, I tried to summarise this article for myself - have I done it right?
If I’m not mistaken, you are saying (in a grossly oversimplified version):
“How can a bank pay Richard for a promissory note / security using money that belongs to Richard? Therefore, how can the bank be said to be “in the business of purchasing securities”? It can’t demand payment back from Richard for money that was Richard’s to begin with. So it never “paid” Richard anything (as it was Richard’s money in the first place) therefore it doesn’t make sense that Richard “owes” the bank anything. Therefore we cannot consider this a loan at all.”
Am I on the right track?
And if this is true…why are there no mass protests ?
Spot on, LoWa. You surpass my expectations! Brilliantly summarised. I'm on Richard Werner's side of the argument, just tidying up a "loose end" in his terminology, which you understand correctly.
With your perception, you will discover the answer to your question on your own.
I say we are dealing with "master magicians", who are necessarily professional deceivers; they tell us what they want us to believe they are doing, when we know what they are doing is IMPOSSIBLE and ILLEGAL.
We are dealing with sociopaths at the top levels of banking. They know exactly how they are defrauding us and could not be happier. Lower down the banking tree, we have "trained underlings" acting under strict in-house rules they have probably never thought about.
I'm hoping Werner will take my article as constructive criticism and adapt his public descriptions accordingly. The need for wider public understanding of an ancient, global accounting fraud by banks is crucial, and Werner has a very large audience that could make a huge difference in that regard.
Werner "broke the logjam" of economics in 2013 with his experimental loan and forensic examination of the Raiffeisenbank's balance sheet, but missed the subtle deception they played on him. I can't blame him for that, as it took me over 70 years to reach this point in my understanding, largely due to his input.
Thank you, LoWa, for sending me to Pat's stellar article. As I mentioned to Thumbnail, I'm writing the text to accompany my YT on FBI Tucker & WEF Werner, and will have the Substack out today. I'll include Pat's article in it, so it's perfect timing.
Pat, what you add in your reply to LoWa that I've never heard Werner say is intent. You call the bankers master magicians, professional deceivers and sociopaths. I agree. In my book, How to Dismantle an Empire, I show how this goes back 3500 years to the creation of money, which was never a unit of trade but was always to usurp ownership of the land and our labor--usury means usurping ownership, not interest.
Werner's solution to this was quantitative easing. What that really solved was the insolvency of banks when there wasn't enough money in circulation to repay the mortgages. If they foreclosed, they had to show the loss of those loans as assets on their balance sheets, putting them under the required 1:10 capital/ deposit ratio. They would have had to declare bankruptcy.
What would happen to all of our homes under mortgage? That's an interesting question, isn't it? Certainly the police wouldn't have enforced mass evictions, since they've got mortgaged homes too. We would have figured out this scam, perhaps, and done something different.
Werner's solution now is more banks lending for productive activity--local businesses. Doesn't that give the bankers free ownership of the businesses, if they're creating credit out of thin air the business owner needs to labor to repay?
So who should have ownership of the assets? I don't agree that the buyer of a home then owns both the home and the money that was created to pay the seller. Under my system, the community is the default owner of all the property within its borders when it's changing hands. They, through the commonwealth bank, have the exclusive privilege of issuing the credit.
The collective mortgages are distributed in advance equally to all commoners as dividends targeted to what the community wants to promote: locally produced food, wellcare, education, home improvements and community projects. Long time residents and natives have a 2:1 advantage in buying or renting housing. Money for local goods and services is not taxed but money extracted is taxed at 50%. It provides a supplemental means of making a living equal to the cost of housing by serving the community.
I'll come back and post the Substack link when I have it up, and I look forward to your thoughts, Pat and LoWa!
Welcome, Tereza. Thank you for linking to this article on your site, and thanks, LoWa, for introducing us. I sense great possibilities arising from collaborative discussions ahead. Having just listened to your 2024 video of how you became who you are and the genesis of your book, "How to Dismantle an Empire" [bad cat!], I struggle to find words to describe my mixed reactions. Where to start?
At 82, my forensic focus is aimed squarely at correcting the operation of the global banking "machine". My engineer's view of its basic accounting mechanism is now so clear that I can see precisely how its operation has been subverted by criminals (i.e., master magicians, professional deceivers and sociopaths) and used as a weapon of social control, their clear purpose and objective being to “own the whole world” by continuously replaying a magical “debt deception”.
My objective is to convert banking from the dangerous weapon it now is to a beneficial public utility, which simply keeps accurate records of “promises made” and reminds us that HONESTY is the basic glue that holds societies together.
I don’t see money as “taking” the products of other people’s labour, Tereza, but labourers “giving” their labour to earn money. But then, I see all forms of money - whether gold or silver coin, fiat paper notes (plastic, in Australia), or credit balances in bank accounts - as physical evidence of the [perceived?] value of “promises made, but not yet kept”.
Having not yet read your book, I struggle to understand your concept of “carets” as “mortgages of the commonwealth” (that word “mortgage” troubles me). Are your “targeted dividends” perhaps based on the ideas of C.H. Douglas’ Social Credit?
In brief, I see the “keeping of our promises” as the ethical foundation for rebuilding from your “dismantled empire”, but we must restore the useful banking machine carefully. Removing its current operators must not endanger innocent bystanders during the envisaged “restoration”. Training the millions of “new operators” needed for all banks (or retraining the current crop) will be a massive task, but I’m ready to help with that.
Thank you for responding, Pat, and for subbing my stack! We certainly have a lot in common regarding our definition of the problem in banking. And I also sense great possibilities from collaborative discussions ahead! @LoWa has really added to the depth of my analysis and being able to talk through the details with someone who isn't afraid of numbers has been extremely valuable.
The example I use for money as legalized theft is the label in the shirt you're wearing right now. Without a doubt, your labor has never done anything for the person who made your shirt. Likely, not for anyone living in that country or anyone in the producer class throughout the world. It's a one-way migration of labor. The money you paid for it trickles down, possibly 1% of it, so that person can buy the labor of people who make even less than they do.
We are only the sum of our time. When the time of a person equally skilled in another country is worth a fraction of our time in another, it's valuing people as worth more or less. That's a form of slavery but instead of chattel slavery, it's slavery in place that rents a slave by the hour. Their labor serves our interests but there is no reciprocity--if you take away the money, since it's just a symbol, the reality behind it is extraction.
I agree with you about converting banking into a beneficial public utility. There's someone else who has a similar concept to you, I think, who says we should be creating our own banks to create that money out of nothing. I forget his name but he has a big following. I wrote an extensive comment on an interview with him questioning how that would work. In his plan, I don't think there was any repayment, however, just a number created by a person that issued credit to the seller at no obligation to the buyer. You can see why he's popular.
Under your system, the buyer extends a promise to repay with no limit based on current income. Is that right? This creates the credit in the seller's account. If two people want the same house, the one who promises the bigger number gets it. Yes? What happens if they don't repay? And when they do make a payment, where does it go? Does it evaporate, like the repaid principal? Is there interest or not? Does the credit that goes to the seller become the only money in circulation? Who creates the 97% of money once the bankers do not?
I haven't read Douglas and can blame my ideas on no one but myself ;-) You're right that we need a different word (that doesn't mean death grip) for the social debt that's incurred by living in a house you didn't build, in a community whose infrastructure you didn't construct, using knowledge given by a prior generation, fed by the soil another generation cultivated. I think this is a legacy that belongs equally to those born into that community and incurs an obligation of gratitude, to make sure the previous generation can live out their lives in comfort and security, and to pass on the gift in a better form to the next generation.
Using Werner's ideas, as you do, I would revoke the exception for private banks to the rule that financial institutions can't hold deposits. That ends the ability of private banks to create new money. Only the public bank at the level of a few thousand people, which I call the hamlet, can issue the credit to the seller that changes ownership of a property within their borders. The public banks, representing all natives and long-time residents within their borders, is the default owner of the property until the debt is repaid.
Your promise is to them. And every month, they get an equal share of your promise to repay, with which they can buy your labor or the labor of others in the commonwealth--which is two levels surrounding the hamlet for a few hundred thousand people. All housing is priced in carets, which is the local credit. They decide the exchange rate for dollars and whether to allow residents an amount they can exchange monthly at a 1:1 ratio.
So if you're a hedge fund buying up property for foreign investors, you might be paying twice the amount for it or more. And if you rent it to extract the profits, they may be taxed so that you'll only receive half. But if you're moving to an impoverished area like my Appalachian hometown, where I am now, they may welcome homeowners from elsewhere to put more money into circulation. So they may offer a 1.2:1 exchange so locals still have an advantage but not as much.
Here's one that explains the concept: https://thirdparadigm.substack.com/p/caretology. And this one asks people what they'd like to do, so that the system can attract with its benefits: https://thirdparadigm.substack.com/p/state-of-disunion-2030.
Thank you for watching my 2024 video, Pat! I look forward to our continued conversation.
Here are my answers to the excellent questions Tereza asked about this article:
• “Who creates the 97% of money [in the form of credit] once the bankers do not?”
I didn’t say they would stop doing it. They can still create it, but when they do, we’ll own it, as their creditors. I only proved they don’t OWN any of those credit balances. Since that means there were no loans in the first place, no DEBT attaches to our DEBIT balances; they simply represent the value of our deposited promises. And that means a bank can’t take a mortgage over anything we own, and *can’t charge interest* on those debit balances. Banks must revert to fees-for-service ONLY!
• “Is there interest or not?”
See above! In fact, all interest taken under false pretences in the past could (should?) be refunded.
• “Does the credit that goes to the seller [of the house] become the only money in circulation?”
No!! Money (cash) and credit can and should coexist, but on a level playing field. Each has its advantages and disadvantages. They manifest the same measurement unit ($), but serve different functions.
• “[Can] the [bank customer] extend … a promise to [pay] with no limit based on current income[?]
Within reason, yes. There is no loan to "RE-pay", just a promise to KEEP, and it's a “naked” promise to pay, meaning no *existing* assets are involved, only *future potential* assets. Do you think there should be such a limit on *future potential* assets, Tereza? If your concern is based on fear of currency devaluation due to “too much” credit being created, how much would be “enough”, and who will make that decision? Do we limit the total number of clocks to control the duration of “an hour”, or of tape measures and rulers to control the length of “an inch”?
• “… when they do make a payment, where does it go? Does it evaporate, like the repaid principal?”
If it’s made with existing credit, the credit returns to its source: into the “thin air” from which it “appeared”. The “disappearance” of the credit payment will reduce the total amount of credit in circulation. If it’s made in cash, the cash still exists to be reused by the bank. Of course, the debit balance is reduced by either form of payment.
• “What happens if they don't [keep their promise]?"
First, I’d need to ask, “Why don’t they keep their promise?” For example, did they die, or are they just temporarily out of work, sick, etc.? If they died, their promise literally “died” with them, and their outstanding debit balance must be adjusted to $0.00. If they are out of work, etc., their monthly fees will continue to accrue, as usual, and no payments will be deducted from their debit balance. No problem. Accumulating fees-for-service gives the proper incentive to honour the promise as soon as possible. If it is difficult to keep a promise (for valid reasons), it can ‘circulate’ indefinitely as a form of exchange medium until it is redeemed or “written off”. That’s what happens now: all existing forms of money are circulating evidence of somebody’s “promise to pay”. The cost of doing so is simply the ongoing expense of maintaining accurate accounting records for all credit and monetary transactions made through the bank.
• “If two people want the same house …?”
The higher offeror wins. But you already knew that.
An economic system starts with purpose and a way of measuring progress towards it. My purpose in representing the pov of mothers, is to enable families to stay together, if they wish, and raise the next generation in the same community. This is an easy metric to measure. I also have the goal of enabling people to live where they work and work where they live, providing goods and services to the community.
Who has priority in owning a particular home? Under my system, those who were born into the community, are long-term residents, or work in the community have the ability to transfer their savings into carets at a one-to-one ratio to dollars or another imperial currency. Those providing goods or services to the community can earn carets. This gives them a 2:1 advantage over outsiders.
Your system would reward liars and force others to become liars. The penalty for honesty would be the inability to own a home. If others are making up numbers and can never be evicted if they don't pay, I'd be a fool not to do the same. But I'd also be a fool to sell my house for a number that's being credited to my account that's not backed by labor, with the penalty of losing the house if that labor isn't repaid.
Your caret system seems to focus (almost exclusively?) on securing “home ownership” and promoting “local labour”, Tereza, and if that’s correct, I applaud such a public-spirited purpose and respect the goals you have set. But it remains unclear how you will set or enforce different exchange rates between $s and your new caret currency, and how new carets will be created and distributed equitably. The structure of your “Commonwealth” bank and its mode of operation are not yet clear to me.
I’m not promoting any “economic system”. I’m exploring what might follow from widespread exposure of the fraudulent technique ALL banks have been using to acquire mortgages and charge usury for “pretending to lend” people something those people already own: their own newly created credit. I don’t think it’s unreasonable to anticipate something like a Global Jubilee of unprecedented scope that will enable and promote *secure home ownership* for more people than ever before.
So, I fail to see how exposing that criminality, or the enforced abolition of mortgages and usury, or withdrawing from banks their “fraudulently claimed ownership” of all existing credit (95% of the “money supply”!) could possibly “reward liars” or somehow tempt you to become one. The world has unwittingly handed over all that “money power” to a sociopathic cartel, forcing us to “borrow” it back from the cartel at interest, and I want to reverse that mistake.
Thanks Tereza, look forward to your upcoming piece! I remember thinking - Quantitative Easing?!?! This was the stuff of jokes back in the day…https://www.youtube.com/watch?v=j2AvU2cfXRk
But listening to Werner, I thought, oh ok even he is saying it’s not the “ultimate” solution, it’s just a handy stop-gap solution (according to Werner)…and he proposes a few things as better long-term solutions including:
- banks only being able to create credit for productive purposes
- encouraging proliferation of many small banks that know their local customers well rather than aggregation into large banks
- have more government oversight of central banks instead of them operating at arms length / more sensible central bank policies so as not to precipitate more crashes
- separating money lending and deposit taking functions so banks can’t do creative accounting
- and probably other stuff I’ve forgotten (eg he seems wary of CBDCs)
That’s a good point about lending only for productive purpose - and who at the bank gets to decide what’s “productive”? If I wanted to work with my neighbours to restore our local stream and forest, and bring back the birds and fishies…and we needed $, is that “unproductive” because it’s not generating profit or creating new “value” that can be quantified/monetised (although I suppose it can if people sell fish they catch or charge for eco-tourism…)
As you and Pat have already seen, I posted the Substack here: https://thirdparadigm.substack.com/p/tucker-carlson-and-richard-werner.
Under my system, everyone has carets representing community projects, that can be used for nothing else. You can pitch your stream and forest project, either to pay workers or to supply volunteers with the equipment they need. It would also match whatever was donated in addition--so if things needed to be bought outside the area or experts brought in, it could fund the tax-free exchange of dollars.
If there is no passive way to invest, beyond the long-term savings limit for retirement, etc, that gets a 4% return, then people would need to invest actively. They might put their money into helping someone start a business, also adding their time and skill, for a share of the profit. The commonwealth bank can also create business loans, particularly to buy out foreign (non-local) owners. The amount they issue for the purchase becomes a debt to themselves. This can be distributed in carets with community ownership of the property or a lease for local use. Obviously details to be worked out but I think that Keynes is right that being removed from our investments makes both entities irresponsible.
Thanks Pat.
My pleasure, Sunface.
Some valid points here, but the matter of ownership is still confused.
When the bank creates new units of money as ‘credit’, the purchasing power of those new units is not the property of the bank or of the ‘borrower’, but is expropriated from all money holders by inflating the money supply, in the same way as counterfeit money inflates the money supply and thus expropriates value from all money holders. Another way, the credit issued (an asset claimed by the bank to justify charging interest) does not belong to the bank but to all money holders whose purchasing power of savings was diluted by the new credit tokens.
Once the customer spends the credit amount on goods and services, then pays back the principal plus interest, thus extinguishing the credit tokens, the interest paid still belongs to all money holders from whom the purchasing power of the loan was covertly ‘borrowed’. But the process does not end there: the banks must now issue even more credit to sustain their scam, that is, to enable the payment of future interest, so in effect the purchasing power expropriated from all money holders is not ‘borrowed’ but taken permanently, and in ever increasing quantities. This has the secondary effect of inflating some asset prices, especially real estate, so any profits derived from credit-driven asset ‘value’ growth are also fraudulent. The people who got rich from the growth in real estate are actually driving YOUR Mercedes; the banking system stole it from you, little by little over the years, and gave it to them:)
I am not confused about the ownership of credit created by banks, Michael; the customer owns it, and there is a clear-cut legal issue of fraud by the banks. Its ownership is not related to the “purchasing power” of the currency unit or inflation.
Your comment mixes unusual ownership propositions with arguments about inflation in a way that I will not try to untangle here. Suffice it to say, “purchasing power” of currency units cannot be owned, borrowed, or expropriated separately from the pieces of currency in which that “power” resides, and issues related to changes in the “exchange value” of currency units [inflation] are unrelated to who owns any item of credit.
The ‘empirical’ observation that new units of money appear only after a credit contract is signed does not demonstrate anything about ownership. The banks take the value represented by money from everyone else in the same manner as counterfeiting or coin clipping, whenever they need it to start charging interest. The idea that the borrower owns the credit amount and need not repay it is delusional sovereign citizen ideology that existed for decades. The problem is that repayments and interest go to the wrong party; they should go to everyone else.
"Borrowing" and "promising to give" are almost exactly opposite processes.
Here’s a good piece on binding vs non-binding promises: http://classic.austlii.edu.au/au/journals/UWALawRw/1988/3.pdf
Thanks for that scholarly link, but the "gratuitous promises, promises of gifts, which [the authours] put aside" are the very promises I call "naked" promises, made for no consideration.
Correct. I mis-understood that you argued that naked promises are contractually binding, even in the face of the other party making fraudulent representations.
A promise to give is not legally binding unless it involves a valuable consideration being exchanged. I can promise but change my mind any time, if i did not get something in exchange for that promise, which only then would constitute a valid contract. This is the foundation of contract law. Also, the promise is nulled by any fraudulent representation in regard to the consideration. https://www.pandadoc.com/blog/what-makes-a-contract-valid/
That is my argument in a nutshell, Michael.
The bank's alleged "valuable consideration" in a $200,000 "bank loan" contract is a $200,000 credit balance, which is the accounting reflection (in the bank's "Magic Mirror") of the value of your promise to pay it $200,000, which you deposited (represented by the initiating $200,000 debit balance).
Deposit $100 and you get a $100 credit. That deposit also causes the bank to "debit" $100 to its Cash account, bearing your name. But that $100 DEBIT does not represent a "$100 DEBT owed to the bank"; it simply identifies YOU as the depositor of the valuable piece of paper.
This is an incomplete view, which ignores that the 200,000 is a claim on the property of other people that neither the borrower nor the creditor has the right to use.
When I keep a promise, Michael, I'm not RE-paying a DEBT. A debt implies someone gave me something of their own and I have not yet returned it, or it's equivalent "value".
A promise made on the basis of false representation does not constitute a valid contract. For example, you agree to use and then return someone’s car, and pay them a fee for that use, because they made a representation that they are the owner of that car. If it turns out that the car in fact belongs to someone else, from who it was taken without their consent, it simultaneously invalidates the contract with the thief but preserves the full rights of the owner and therefore the obligation to return the car to the owner, including any expenses and agreed on fees. It is then not the promise that binds the borrower, but the ownership rights of the owner of the appropriated value.
Your comment is correct, and banks are the ones making promises [credit balances in their liability accounts] based on "false representations" in their account statements. My published evidence is clear on that point. So, you will agree that all mortgage contracts are now void?
Not entirely. The obligation of the borrower remains, with respect to the rightful owner of the principal (as in the example of the stolen car), whereas the claim of the bank on the principal and interest is invalid in virtue of the fact that the bank does not own the property on which the principal and interest make a claim.
New units of money are a claim on the property of others. There are no terns of credit, no magic contract between customer and a bank, that allows either party to claim the property of others.
Again, we agree. As Professor Perry Mehrling argues, a credit contract with a bank is a swap of "equal promises", which I say are both "naked" promises. That means neither party can claim the property of the other because no existing asset of either party was given for those promises.
The promises in a credit contract are not naked because they include valuable consideration. The borrower receives a claim on the property of others, but the bank does not have the right to offer that claim. The valuable consideration belongs all along to all money holders and wage earners, who suffer a material loss to their property (debasement of savings and wages).
Very true, however the bank is authorizing you to use credits in their system. All the other banks agree to the rules of the federal reserve system. You can’t demand credit without agreeing to the rules. Try exchanging a signature for physical gold and get back to us.
Thanks for your comment, Kevin. Getting to the truth is my objective.
Exchanging a “signature” for physical gold is not my idea; it’s yours. My idea would be to offer a “solemn promise” to pay the “value of it” in exchange for “anything of value”; it could be food, clothing, shelter, or even physical gold. Provided the owner of the food, clothing, shelter or gold trusts me, and I am honest, my promise can achieve my goal.
Your apparent scepticism seems to be based on a misconception. I’ve published evidence showing that it is the banks that have not been obeying “the rules” for centuries; the same rules they enforce ruthlessly against us, the not-so-well-known rules of double-entry accounting. They have broken the tacit social contract that we will all obey “the rules”.
In my opinion, they have been getting away with it for far too long, and I invite you to join me in demanding that they make that “small” change. How say you?
Guess who invented this system????
Forensic investigators don’t guess, they look at the evidence. What does the evidence tell you?
I could add to the list of three linked videos in this article, Tucker Carlson's recent interview with Prof. Werner (29 July 25), in which he repeats his mistaken claim that "Banks are in the business of purchasing securities” [starting about 43:50]. https://www.youtube.com/watch?v=StTKHskg5Tg
First, there is no money in the system… it’s all fiat currency of no value. For the practice of usury on a fiat currency is fraud and so the grand illusion of ownership continues to fool.
A fiat currency is fine and useful, but never confused the reality of real money over fiat currencies!