HOW THE ARGUMENT THAT MONEY IS PRINTED OUT OF THIN AIR CAN WIN A COURT CASE
The Unhived Mind
HOW THE ARGUMENT THAT MONEY IS PRINTED OUT OF THIN AIR CAN WIN A COURT CASE
https://birdflu666.wordpress.com/2015/06/18/10802/#more-10802
An argument used by Jerome Daly in 1968 to win his foreclosure case can be applied to all dealings with banks today, from a micro loan for an individual mortgage, for example, to a macro loan for Greece from the IMF.
Central to Daly’s argument was the fact that banks create money out of thin air using the fractional reserve banking system. As a result, he argued that any loan which banks make does not consist of real capital or collateral. It is, in fact, just an entry in their book keeping system.
Therefore, Daly argued the contract he made with the bank was invalid in as far as the bank never fulfilled its side of the contract by putting up something of value, any capital or collateral in return for the mortgage in the first place. All the banks put up as their sid eof the contract was fiat money created out of thin air by an accounting entry.
Greece can use the same argument today when rejecting repayments of its debts as illegal. Greece never received any money from the IMF, the ECB or any private bank. The loan only existed as an accounting entry. There is nothing in the European Constitution which says money can be created in this way.
Read the judgement in the Daly case where the bank manager was forced to admit that the bank’s money was created out of thin air with the help of the Federal Reserve and this was an unconstitutional way of creating money here:
http://mn.gov/lawlib/CreditRiver/1968-12-09judgmentanddecree.pdf
http://mn.gov/lawlib/CreditRiver/1969-01-23findingsoffactconclusionsoflawandjudgment.pdf
The German central bank, the Bundesbank, admitted that money is created out of thin air and has even explained it in a text book for school children.
http://www.bundesbank.de/Redaktion/DE/Downloads/Veroeffentlichungen/Buch_Broschuere_Flyer/geld_und_geldpolitik.pdf?__blob=publicationFile
http://www.bundesbank.de/Redaktion/DE/Dossier/Service/schule_und_bildung_kapitel_3.html?notFirst=true&docId=147694#chap
In the meantime, even the Bank of England has admitted they create money out of thin air as an IOU or debt on its books in a report in 2014.
“When a bank makes a loan to one of its customers it simply credits
the customer’s account with a higher deposit balance.
At that instant, new money is created.
Banks can create new money because bank deposits are
just IOUs of the bank; banks’ ability to create IOUs is no
different to anyone else in the economy. When the bank
makes a loan, the borrower has also created an IOU of
their own to the bank. The only difference is that for the
reasons discussed earlier, the bank’s IOU (the deposit) is
widely accepted as a medium of exchange — it is money,” says the Bank of England report.
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf.
http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity
http://simonthorpesideas.blogspot.ie/2014/03/victory-bank-of-england-admits-that.html
Standard &Poor’s top economist, Paul Sheard, has also written the fact that banks don t lend capital in a piece called ”Repeat After Me: Banks Cannot And Do Not “Lend Out”
http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf
Jerome Daly applied these facts to his particular case and won.
“Most importantly, banks cannot cause the amount of reserves at the central bank to fall by “lending them out” to customers. That possibility is not allowed for in the identity because bank lending does not enter into it. Assuming that the public does not change its demand for cash and the government does not make any net payments to the private sector (two things that are both beyond the direct control of the banks and the central bank), bank reserves have to remain “parked” at the central bank.”
“Mr Daly explained that the money was in fact not the property of the bank, for it was created out of nothing as soon as the loan agreement was signed. Remember what Modern Money Mechanics stated about loans? What they do, when they make loans is to accept promissory notes in exchange for credits. Reserves are unchanged by the loan transactions, but deposit credits constitute new additions to the total deposits of the banking system. In other words: The money doesn’t come out of their existing assets, the bank is simply inventing it, putting up nothing of it’s own, except for a theoretical liability on paper.”
The Banks president ,Mr. Morgan, took the stand and affirmed that ,in collusion with, the Federal Reserve Bank Inc., did create the money out of nothing.
Justice Martin V Mahoney personal memorandum ….”in the judge’s personal memorandum he recalled that “the Plaintiff (banks president) admitted that in combination with the Federal Reserve Bank did create the money and credits upon its books by bookkeeping entry. The money and credit first came into existence when they created it. Mr Morgan admitted that no US Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. The Jury found that there was no lawful consideration and I agree.” He also poetically added: “Only God can create something of value out of nothing.”
And upon this revelation the court rejected the bank’s claim for foreclosure and Daly kept his home.”
theunhivedmind
Almost every one of the world’s currencies are debt instruments. You cannot pay a debt with debt so ask yourself how can you pay your so-called debts with any currency which is a debt instrument. Its all a giant con game.
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`·-☆ The Unhived Mind
theunhivedmind
Victory! The Bank of England admits that commerical banks create money out of thin air!
15 Mar 2014
http://simonthorpesideas.blogspot.ie/2014/03/victory-bank-of-england-admits-that.html
This is truly an event worth celebrating. The Bank of England has just published two articles in its Quarterly Bulletin that lay bare the truth of how the money system works. There’s one called “Money in the modern economy: an introduction” which was written by Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate.
Try this for starters:
“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves… When a bank makes a loan to one of its customers it simply credits the customer’s account with a higher deposit balance. At that instant, new money is created…”
You can actually watch Ryland Thomas from the Bank of England, the author of the article, in a video on Youtube say the following (at 0m50s):
“Broad money… includes all the bank deposits of households and companies. And one of the key points of the article is that banks create additional broad money whenever they make a loan. Now while this is nothing new, it is sometimes overlooked as the main way in which money is created. And it runs contrary to the view sometimes put forward that banks can only lend out deposits that they already have. In fact loans create deposits – not the other way round. “
Here’s the bit where he reveals all:
The other paper, also by the same three authors is called “Money creation in the modern economy”.
There you can find the following statements:
“Whenever a bank mades a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
The reality of how money is created today differs from the description found in some economics textbooks:
Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits
Later on in the article you can read:
“Broad money is made up of bank deposits – which are essentially IOUs from commercial banks and companies – and currency – mostly IOUs from the central banks. Of the two types of broad money, bank deposits make up the vast majority – 97% of the amount currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themsleves.”
And how about this?
“Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. “
Not bad eh? Anyone out there still doubting that commercial banks can create money out of thin air?
They also make it very clear how money can be destroyed.
“Just as taking out a new loan creates new money, the repayment of bank loans destroys money. For example, suppose a consumer has spent money in the supermarket throughout the month using a credit card. Each purchase made using the credit card will have increased the outstanding loans on the consumer’s balance sheet and the deposits on the supermarket’s balance sheet… If the consumer were then to pay their credit card bill in full at the end of the month, its banks bank woudl reduce the amount of deposits in the consumer’s account by the value of the credit card bill, thus destroying all of the newly created money.”
The Bank of England also lays to rest another long standing myth – that Central Banks can control the money supply by the so-called Money Multiplier mechanism.
“…the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them…It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.”
All this is really a remarkably victory for the people at Positive Money – and they are rightly claiming some credit for progress in this area. When they started out in 2010 arguing that the vast majority of the money in the economy is created out of thin air by commercial banks, many people ignored them, saying that it couldn’t possibly work that way. But they published the book “Where does Money come from?” which has now become a standard text at some universities.
And now, the Bank of England has essentially said that, yes, they were right.
Congratulations Positive Money!
theunhivedmind
The truth is out: money is just an IOU, and the banks are rolling in it
David Graeber
The Bank of England’s dose of honesty throws the theoretical basis for austerity out the window
British banknotes – money
Tuesday 18 March 2014 10.47 GMT Last modified on Tuesday 3 June 2014 08.51 BST
http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity
Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn’t know how banking really works, because if they did, “there’d be a revolution before tomorrow morning”.
Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy”, co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.
To get a sense of how radical the Bank’s new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don’t suffice, private banks can seek to borrow more from the central bank.
The central bank can print as much money as it wishes. But it is also careful not to print too much. In fact, we are often told this is why independent central banks exist in the first place. If governments could print money themselves, they would surely put out too much of it, and the resulting inflation would throw the economy into chaos. Institutions such as the Bank of England or US Federal Reserve were created to carefully regulate the money supply to prevent inflation. This is why they are forbidden to directly fund the government, say, by buying treasury bonds, but instead fund private economic activity that the government merely taxes.
It’s this understanding that allows us to continue to talk about money as if it were a limited resource like bauxite or petroleum, to say “there’s just not enough money” to fund social programmes, to speak of the immorality of government debt or of public spending “crowding out” the private sector. What the Bank of England admitted this week is that none of this is really true. To quote from its own initial summary: “Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits” … “In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.”
In other words, everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There’s really no limit on how much banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What’s more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity. Since the beginning of the recession, the US and British central banks have reduced that cost to almost nothing. In fact, with “quantitative easing” they’ve been effectively pumping as much money as they can into the banks, without producing any inflationary effects.
What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there’s no question of public spending “crowding out” private investment. It’s exactly the opposite.
Why did the Bank of England suddenly admit all this? Well, one reason is because it’s obviously true. The Bank’s job is to actually run the system, and of late, the system has not been running especially well. It’s possible that it decided that maintaining the fantasy-land version of economics that has proved so convenient to the rich is simply a luxury it can no longer afford.
But politically, this is taking an enormous risk. Just consider what might happen if mortgage holders realised the money the bank lent them is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand which we, the public, handed over to it.
Historically, the Bank of England has tended to be a bellwether, staking out seeming radical positions that ultimately become new orthodoxies. If that’s what’s happening here, we might soon be in a position to learn if Henry Ford was right.