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Chapter 7: Secrets, Ignorance and Lies: Money, Credit and Debt


“The tyranny of fraud is not less oppressive than that of force.” John Taylor of Caroline, Virginia (1814).

Our money system relies on people not understanding it. If people understood it, they would demand reform.[1]

The most outrageous falsehoods are propagated daily about money and banking. Here are one or two examples:

‘A commercial bank is fundamentally nothing more than a middleman to put these two groups of people (investors and entrepreneurs) together in an efficient way’.[2]

This untruth is repeated regularly in education and the media, and most people believe it. The ‘middleman’ story is denied repeatedly and explicitly by authorities who know about the system, and are honest.

Here are some authoritative denials of the ‘middleman’ narrative:

The Bank of England: “One common misconception is that banks act simply as intermediaries, lending out the deposits that savers place with them…[this] ignores the fact that, in reality in the modern economy, commercial banks are the creators of deposit money. …Rather than banks lending out deposits that are placed with them, the act of lending creates deposits – the reverse of the sequence typically described in textbooks.”[3]

Abbott Payson Usher (20th century banking historian): ‘The essential function of a banking system is the creation of credit, whether in the form of the current accounts of depositors, or in the form of notes. The form of credit is less important than the fact of credit creation.’[4]

Joseph Schumpeter (economist): ‘It is much more realistic to say that the banks ‘create credit’, that is, that they create deposits in their act of lending, than to say they lend the deposits that have been entrusted to them.’[5]

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Olduvai IV: Courage
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Olduvai II: Exodus
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