Money is produced in the form of credit, which means it comes with an interest rate on it. The result is an economic system mired in structural usury.
(LifeSiteNews) — The general public has been kept in the dark about how money is created because of a deliberate deception by economists, central banks and banks. That is the claim Richard Werner, professor of economics at the University of Winchester, made in a recent interview. He describes how nearly all the money in modern capitalist systems is created by banks rather than the government or central banks. That money is produced in the form of credit, which means it comes with an interest rate on it. The result is an economic system that is mired in structural usury.
“We don’t have a solution to the inequality that compound interest creates,” says Werner. “You are essentially taking from the many, giving to the few, who receive coupons and government bonds … The usurers and rentiers living off [those] coupons and government bonds – they love it.”
Werner makes the startling observation that economists and central bankers have purposely hidden what is really happening in the financial system by avoiding defining what money is. The usual definitions cited by economists—that money is a store of value, a way of exchanging or a way of valuing things—describe what money does, not what it is.
It is not difficult to identify what money is. It is a transaction based on an agreed set of rules. The word ‘transaction’ means ‘an action across.’ Across what? Rules that create the necessary levels of trust.
That is why the ‘financial deregulation’ of the 1980s was nonsensical. You cannot take the regulations out of regulations. What happened is that the rule setting was shifted from governments to banks and other private actors.
According to Werner, economists actively avoid defining what money is, instead getting involved in questions of how to measure it, especially with money supply metrics such as M1, M2, and M3. He believes this is done to hide the fact that it is the private banks creating most of the money. “They have dropped banks from the economic model,” Warner states. Central banks, he adds, create only 3 percent of money supply.
Werner believes the discipline of economics has been intellectually corrupted by the central banks who have been able to control the economics profession, academic economics, and the teaching of economics. “The truth about money has been very much hidden,” he says.
By way of demonstration, he recounts an interaction at the Massachusetts Institute of Technology (MIT) between Belgian economist Bernard Lietaer and Paul Krugman, a Nobel Prize laureate. Both were PhD students at the time.
Lietaer was focusing his work on how money is defined and how financial institutions should be constructed. Krugman reportedly said to Lietaer: “Bernard, you keep going on about money. Haven’t they told you? Don’t touch the money thing. You won’t get invited to the important dinners. It is not good for your career.”
The reality, says Werner, is that “if you toe the party line and don’t question the money thing, then you will have a great career.”
False ideas about how banks behave are also used to cover up the truth. The first is that banks are just intermediaries and do not have an active role. That is demonstrably untrue, says Werner. The second is “Fractional Reserve Theory,” the idea that banks create some money from interacting. This also does not explain what is happening.
The third, correct, theory is that banks create money out of nothing when they engage in lending. “They are not intermediaries,” Werner says. “They create lending which creates deposits. (People do not deposit money in a bank which is then loaned;) it is actually the other way round.”
Surveys have consistently shown that about 85 percent of the population in the West think either the government or central bank creates money. “The system we have is not what people believe we have,” Werner observes.
Governments have created money in the past; the practice can be seen in Babylonian and Chinese records. “People think that is what happens now, but it is not,” he says.
What Werner is pointing to is not mere semantics. Avoiding a definition of money in economics is like ignoring gravity in physics. It is so basic there has to be an ulterior motive – to hide how banks are creating a system of debt-driven control.
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In that system, instead of money being a tool, it becomes a mechanism of suppression. Worse, it is inherently unstable. Debt-based systems, as the economic historian Michael Hudson has shown, always fail, requiring a cancellation of the debt and a reset. Interest costs compound and outpace economic growth, causing the system to fail.
For the last two decades monetary authorities have tried to keep the debt-based system intact by either creating more debt to pay the interest on the debt – in effect kicking the can down the street – dropping interest rates to almost zero for a time and getting the central banks to create liquidity (create money from their balance sheets) to save the system.
As the finance analyst Michael Howell notes, the finance markets are no longer mainly concerned with businesses going to the capital market and getting funding. “We are in a world dominated by debt and debt refinancing. Three quarters of transactions in the markets today involve a debt refinancing.”
That is the mess the banks and their debt-based system have created, and it is not surprising that they want to keep it hidden from public. They also do not want it known that it is quite possible to have a system in which governments issue money without an interest rate on it. Werner describes a number of societies that did this. He notes also that 330 years ago most European societies forbade the charging of interest.
History is repeating itself. Once again, a debt-based system predicated on the use of compound interest is teetering on the edge of collapse, especially in Europe. The great historian Lord Acton (1834 – 1902) wrote that it has become perennial battle: "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
As Werner explains, the only way to see the tyranny of banks clearly is to assume that whatever the economics profession, central bankers, and monetary authorities say is a lie designed to keep the population in the dark.
