by Iain Davis
Imagine the power you would soon gain if you could create money from nothing. The parasite class have had this power for centuries.
Fractional reserve banking tied the amount that could be created to reserve levels and paying the bearer of a bank note the redeemable value in gold or silver also limited the percentage increase in new money. But the principle was the same. Bankers create money from nothing.
This gives the banking industry, especially the controllers of central banks, command over practically everything. This authoritarian system certainly isn't new. Speaking in 1925 then Chairman of the Midlands Bank Reginald McKenna, the former First Lord of the Admiralty, Home Secretary and UK Chancellor of the Exchequer, said:
"I am afraid the ordinary citizen will not like to be told that banks can and do create money."
We pay tax using the broad money banks create out of thin air. It pays for hospitals, roads, wars and the pseudopandemic. The only other way the GPPP State franchise can raise money is through borrowing. This too is paid in fairy dust and is a debt the taxpayer must go to work to repay.
As long as we allow such a monetary system to exist we will remain debt slaves [12]. There is a reason the word mortgage derives from the french "mort," meaning death, and the old English word "gage," meaning pledge. "Mortgage" means death pledge [13].
Central bank's supposedly have three ways to control monetary policy [14]. They can increase or decrease the money supply by adjusting short term interest rates. Higher rates will allegedly dissuade commercial banks from creating money and lower rates will encourage them. Changing the reserve requirements, with higher requirements theoretically reducing the monetisation of debt, is another claimed control mechanism.
Prof. Werner demonstrated that the impact of these two monetary policy levers is minimal and close to non existent. Commercial banks monetisation of debt creates base money reserves and they have little need to borrow when they create money. Setting a minimum reserve requirement barely restrains them at all because they create their own reserves from nothing.
The Bank of International Settlements (BIS), more on them shortly, created three consecutive sets of banking guidelines call the Basel Accords [15] established in 1988, 2004 and 2010. The Accords were intended to act sequentially, gradually reducing the risk exposure of banks, particularly in a possible financial crisis.
They weren't mandatory and were not implemented immediately, but many financial regulators eventually adopted them in some form or another. The general idea was to strengthen capital requirements (the capital adequacy rule) by compelling banks to rate the risk of their assets with central banks. For example a commercial loan agreement with a small business might be considered a high risk asset while cash would be low risk. The higher the risk the more equity the bank was required to retain.
In broad terms equity is the value of a business. It is the amount a business would be worth if it sold all of its assets and paid all liabilities. In practice the only time a business would ever do this is if it went into liquidation. Calculating equity is crucial in mergers and acquisitions.
The Basel accords solely considered the calculated relative risk of assets, based upon their ability to be traded in the markets. This is the liquidity risk of an asset. The capital adequacy of a commercial bank is often referred to as its liquidity. However, commercial banks create capital (equity) when they monetise debt by creating deposits. The Basel Accords took no account of money (capital) created as deposits. They had little effect upon the money creation melee. All they could do was slightly reduce the pace of money creation. They had no impact on its scale.
The only remaining and only marginally effective monetary policy lever is the trading of securities. State franchises borrow by selling government bonds. In the UK the primary dealers (GEMM's) are the investment banks who bid for the bonds in the primary market, thus theoretically maximising the bond price for the tax payer.
The GEMM's can then trade the bonds (securities) in the secondary market. Other investors such as banks, pension funds, hedge funds and other private investors are able to purchase government bonds. This money can then be used by State franchises to fund services, invest in infrastructure, wars and pseudopandemic propaganda campaigns. In return the private investors receive a yield.
When the bond matures the State franchise (the tax payer) has to repay the loan in full. This element of the parasite class's monetary system ensures future generations are also condemned to be debt slavery.
You may have spotted the problem with this idea of UK government (State franchise) borrowing. The primary dealers [16], and subsequent investors in the secondary market, are monetising debt by making loans and storing assets, in the form of gilts (bonds).
Just as commercial banks create money from nothing when they loan money to a private individuals or businesses, the process is identical when they "purchase" gilts and lend money to the State franchise. It is the same creation of fairy dust.
The BoE claim [17]:
"Monetary policy affects how much prices are rising – called the rate of inflation. We set monetary policy.. Low and stable inflation is good for the UK’s economy and it is our main monetary policy aim."
The BoE suggest that inflation is good and that inflation is the primary objective of its monetary policy. However they are somewhat disingenuous when they define inflation as "a measure of how much the prices of goods and services have gone up over time."
It is true that a basic tenet of free market economics is that prices are set by supply and demand. This also holds true for stocks and assets. Where demand outstrips supply prices will rise and when supply exceeds demand prices will fall. According to the BoE (and all other central banks) it is rising prices alone that define inflation. However, they also claim that they can control inflation via monetary policy. How can this be the case?
The BoE are telling us that inflation is not independent of money creation which is the monetisation of debt. They are also declaring that we do not live, and never have, in a free market economy. This is self evident from market regulation but also from the fact that the central banks control monetary policy which, in turn, affects prices (inflation) through a mechanism entirely alien to free markets.
As noted by the central bank of Sri Lanka [18] "there is a general agreement among economists in relation to the long run relationship between money, output and inflation." Inflation occurs due to both monetary inflation and price inflation, the two are interdependent. History proves that an expansion of the money supply frequently produces inflation [19]. This is because an increase in the money supply decreases its unit value. Consequently, a better way to think of inflation is a reduction in the purchasing power of money.
The BoE offers a tool to see how the value of money has declined [20]. In 1970 £10 would have purchased goods or services which in 2020 would be valued at £158.19. Another way of saying this is that the Pound has devalued by more than 93% in 50 years.
The BoE claim: "Our mission is to maintain monetary and financial stability for the good of the people of the United Kingdom." It is difficult to see how almost completely destroying the national currency achieves that aim. All it accomplishes is the transfer of wealth from the people to the hoarders of capital.
Sources:
[1] - https://archive.org/stream/CarrolQuigleyOnTheNWO/Professor-Carroll-Quigley-and-the-Article-That-Said-Too-Little-Reclaiming-History-From-Omission-and-Partisan-Straw-Men-by-Kevin-Cole-2014-9_djvu.txt
[2] - https://archive.org/details/TragedyAndHope_501
[3] - https://web.archive.org/web/20190403074516/https://www.voltairenet.org/IMG/pdf/Quigley_Anglo_American_Establishment.pdf
[4] - https://in-this-together.com/the-new-world-order-and-the-european-union/
[5] - https://web.archive.org/web/20210213124811/https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654
[6] -
https://www.ecb.europa.eu/explainers/tell-me/html/seigniorage.en.html
[7] - https://web.archive.org/web/20200927173640/https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/authorisations/which-firms-does-the-pra-regulate/2020/list-of-banks/bank-list-2007.pdf
[8] - https://archive.is/ADxbM
[9] - https://web.archive.org/web/20210120070211/https://www.bankofengland.co.uk/ccbs/professional-development-opportunities
[10] - https://professorwerner.org/
[11] - https://web.archive.org/web/20210524103720/https://dora.dmu.ac.uk/bitstream/handle/2086/17269/IRFA%202014%20Werner%20Can%20banks%20individually%20create%20money%20out%20of%20nothing.pdf?sequence=1&isAllowed=y
[12] - https://web.archive.org/web/20210204073830/https://www.britannica.com/topic/debt-slavery
[13] - https://archive.is/s2V0K
[14] - https://archive.is/PwxgT
[15] - https://archive.is/tjRSb
[16] - https://archive.is/z0adQ
[17] - https://archive.is/32Zgh
[18] - https://web.archive.org/web/20180722164050/https://mpra.ub.uni-muenchen.de/64866/1/MPRA_paper_64866.pdf
[19] - https://archive.is/dL9Jv
[20] - https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator
Chapter 26 - Private Wealth Transfer
While incomes appear to broadly keep pace with inflation we generally don't notice how it gradually drains our wealth. Inflation bleeds wealth from us into the financial system which profits those who monetise debt, enabling them to hoard capital. We feel it more acutely when wage increases fall short of the base rate.
For example, the heroes and heroines of the UK pseudopandemic, the nurses who were on the front line, received a derisory 1% pay rise. The base rate at the time was 1.5% and unsurprisingly this corresponded to an underlying 1.5% rate rise in the consumer prices index [1]. This means the nurse's ability to purchase goods in the real economy was reduced. The nurse's "pay rise" was actually a pay cut of 0.5%.
For most of us, incomes consistently lag behind the rise in prices caused by inflation. Economists use the term "nominal wage" to mean the amount of currency we earn and "real wage" to indicate what goods and services our nominal wage will afford us. Our real wage is a more accurate reflection of what our income is worth.
Between 2004 and 2018 statistics from the Office of National Statistics (ONS) show that while the UK nominal wage continued to increase, the real wage trend showed a decline [2]. This was particularly marked after the 2008 financial crash and the impact was more severe for workers reliant upon salaries.
The 18th Century economist Richard Cantillion identified what is now called the Cantillion Effect [3]. He recognised that money creation and inflation benefits those who access money first. When the GPPP's favoured partners use new money, the inflation it will cause hasn't begun. A $1000 loan for them buys, typically, $1000 of long-term investments.
As the money supply expands, inflation kicks in, asset and commodity prices start to rise. The next group who access $1000 of the new money may only be able to buy the equivalent of $900 worth of assets. By the time working people get the new money in their wage packets a $1000 may only buy $750 worth of goods and services. Meanwhile, the first recipients have seen the value of their original asset increase to $1250 as a result of inflation.
In reality the relative gains and losses are measured in fractions of percentage points not hundreds of dollars. However, due to the scale of the global economy, this facilitates a Cantillion Effect measured in billions. The early recipients of new money are relatively few and trade in hundreds of millions and often billions of new dollars. By the time this new money trickles down to us, we number in the billions and are buying goods and services typically valued in tens of dollars.
To illustrate this point, as the pseudopandemic progressed the US Federal Reserve Bank stepped up debt monetisation by buying a type of security called exchange traded funds [4] (ETFs). Almost half of these ETFs were in the investment portfolio of BlackRock [5]. This isn't surprising given that the Fed outsourced its debt buying programs to BlackRock. BlackRock received a cash injection from the tax payer with which to buy long term investments at current prices.
The market distortion caused by debt monetisation and an expanding monetary supply enables the parasite class to select who wins and who loses from their monetary system. In this way they maintain their authority as the chosen GPPP stakeholders stay loyal. BlackRock will profit from inflation and we will lose. In effect we are paying for BlackRock's profits. The is the most consistent wealth transfer mechanism operated by the GPPP.
New money is not distributed evenly. Those who are able to access it first have an advantage over those who have to wait for it to trickle down through the economy. With each investor taking a profitable cut along the way, by the time it has "trickled down" to the lower paid there isn't much left.
This is done at scale when the State franchise sells bonds to investors. The bond holders (the owners of the debt) have a practically guaranteed above inflation income stream from those bonds until they mature, at which point their original investment will be returned in full. When banks, including central banks, buy these assets they do so with money created from nothing. The holders of capital can simply generate more capital virtually at whim. This is a debt the rest of us must pay.
In 1912 Italian statistician Corrado Gini developed the Gini Index (or Gini coefficient) to illustrate societal wealth distribution by measuring disposable income. ONS statistics show that from the 1970's to the 2010 income inequality rose consistently [6]. Following it's 2010 peak it has barely improved at all.
The effect of monetary expansion is inflation and ever rising income inequality. The rich always get richer and the poor get poorer [7].
In 1919 the economist John Maynard Keynes [8], in his strong criticism of the Treaty of Versailles [9] wrote his agreement with Lenin's observations on inflation. He said:
"By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some . . . There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
Inflation is a stealth tax. Monetary inflation enriches those to whom the debt is owed and benefits those who first access credit. It isn't State franchises (governments - tax payers) who receive the benefit of debt monetisation but rather the banks, especially the central banks, investment banks, private financiers and and other early investors.
Within the GPPP, State franchises are stakeholder partners of the banks but it is the banks who control the credit of the nation and they determine the policy trajectory. Without their fairy dust the magic of the mythical democratic state cannot function.
Throughout the 20th and 21st centuries there have been recessions and depressions which have punctuated a general trend of economic growth. A recession is when gross domestic product contracts for at least two quarters, a depression lasts for years. This cyclical pattern is often referred to as the boom and bust cycle.
This is an inevitable consequence of creating money from nothing. When banks monetise debt they cause monetary inflation and subsequent price inflation, when debt is repaid it causes monetary contraction and deflation, which is a decline in the debt monetisation and the price of goods and services. This is the economic growth and respective slow downs that leading economists (experts) explain with evermore convoluted and complex narratives.
Contrary to what they would have you believe it is not difficult to understand. It is the consequence of debt monetisation.
It is important to note that banks, including central banks, are private businesses c
ontrolled by individuals. These individuals hold in the hollow of their hand the destiny of the people.
You do not elect them and they run their business to make a profit for themselves and their shareholders. Speaking in 2010, Alexander Dielius, then CEO of Goldman Sachs in Germany, who are among the UK's GEMM's, said [10]:
"Banks do not have an obligation to promote the public good."
It is an irony that influential GPPP representatives have openly stated that they have no interests in the public good. Yet the pseudopandemic itself was predicated upon the idea that we must all change our behaviour for the public good. It is obvious who the pseudopandemic served.
The BoE is run as a corporation. In the 2019 Governance of the Bank [11] report they stated:
"The Court of Directors manages the affairs of the Bank as a corporation, while specific policy responsibilities are reserved to the policy committees."
The Court of Directors has GPPP ties to Goldman Sachs, Grovepoint Capital LLP, Investec Bank plc, McKinsey, Amadeus Capital, TalkTalk Telecom Group plc, Permira, Reed Elsevier, The Clinton Foundation, The Trade Union's Congress (TUC), Tullow Oil plc, Intergen, Powergen, Merrill Lynch, Citibank, CitiGroup and Starling Bank among others.
Around the world central banks have various management models. The BoE is supposedly publicly owned, the US Federal Reserve is an independent entity, the Bank of Japan is meant to be part publicly and part privately owned.
The question of ownership is a moot point. Often we imagine that the shareholders (those who hold company stock) own the company. This is not true [12].
The 1948 UK law lords ruling in the case of Short v Treasury Commissioners [13] clarified the situation. This was reaffirmed in the 2003 ruling in the case of the Inland Revenue v Laird Group plc. The Short ruling stated: