Richard Werner recounts his journey of uncovering the truth about banking and credit creation. He began in Japan, where his book, "Princes of the Yen," became a bestseller by challenging conventional economic wisdom. Werner's research revealed that banks are not merely intermediaries but creators of money, a concept largely ignored or suppressed in mainstream economics.

Werner's findings exposed how central banks and commercial banks manipulate credit to drive asset inflation, boom-bust cycles, and ultimately, economic control. He advocates for a decentralized banking system with many small, local banks focused on lending for productive business investment, as opposed to asset purchases or consumption, to foster sustainable and equitable economic growth. He also warns against the dangers of CBDCs, which he believes will further centralize power and control over the economy.

I miss the days where I could wander into a saloon…..slap down a coin for a whiskey and a beer.

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have.

Your point in the second paragraph that banks should stop lending to asset purchases and consumption - is that the point of the guy in the video or a poorly worded summary? Most banks are lending almost all of their funds to businesses. Consumer credit is usually a pretty damn small portion.

---

but what fraction?

1/10 ,1/100 , 1/1000?

The concept can get out of hand, for example with the issuance of derivatives between institutions backed by everything under the Sun as was done in the 2000's.

He's not exposing anything. This has been known for decades. And he's right. We need to collectively move our deposits away from the too big to fail global banks and into locally owned community banks. Diversify the risk. And digital currencies are a communist dream. They can turn it on and off, give and take as they please with the click of a button. We need to resist all that mess.

Today's Credit Unions are another mutant child of what they were envisioned to be. They have moved way beyond their fields of membership and basically operate as commercial banks that don't pay any income tax. Their executives laugh at us from their beach houses and euro vacations.

Tokenization of all asset classes on a blockchain along with stable coins used to backstop government bonds and/or treasuries is where it all gets weird for me. It feels like we are headed for a financial system that has way more control over people, property, and economy than most truly understand or realize. Some will advocate for this new system because they believe it will increase institutional transaction speed; velocity of "money" which can spur lending, growth, and innovation. And all of that may be true but, there is always a downside which involves corruption and tyranny over people furthest from the money spigot.

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

It's ok that you think so.

I'm not going to argue with you.

HarleySpoon said:

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So, he's explaining the money multiplier that is usually the third chapter of the textbook for the last 50 years in every junior finance major's 300 level "Introduction to Money and Banking" course?

Also, if you look at the US coins minted in 1837, 1847, 1853, 1857, 1873, 1883, and 1891 you will see arrows by the date. They denote when the mint had to adjust the amount of silver in the coins to adapt to the banking panics that occurred. Huge, devastating financial panics were considered normal and are why citizens would not trust banks…and is incidentally why the most determined posse's were the ones formed in reaction to the robbery of the local banks. Along with a predictable rule of law, a stable banking system is extremely important in a well-functioning capitalist economy.

---

If you listen to the podcast, you'll see Werner disagrees with your first sentence. There is a lot in the two-hour interview that I did not know. The powers that be prevented his book from being translated from Japanese into English for over a decade.

I've become a fan of www.youtubetotranscipt.com lately. I can scan a long podcast and dip into parts that are interesting without having to burn two hours.

I guess the bottom line as I see it is that it is unfair that another man, whether a central banker or a commercial banker, can create money for free while I have to work for it. If I were to try to do it, they would put me in a box for a long time for counterfeiting.

I am curious what you guys think the best alternative is?

Our assets are already all digital.

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

FriendlyAg said:

---

I am curious what you guys think the best alternative is?

Our assets are already all digital.

---

Sound money that cannot be printed out of nothing. Read The Big Print by Larry Lepard.

Its Texas Aggies, dammit said:

---

HarleySpoon said:

---

So, he's explaining the money multiplier that is usually the third chapter of the textbook for the last 50 years in every junior finance major's 300 level "Introduction to Money and Banking" course?

Also, if you look at the US coins minted in 1837, 1847, 1853, 1857, 1873, 1883, and 1891 you will see arrows by the date. They denote when the mint had to adjust the amount of silver in the coins to adapt to the banking panics that occurred. Huge, devastating financial panics were considered normal and are why citizens would not trust banks…and is incidentally why the most determined posse's were the ones formed in reaction to the robbery of the local banks. Along with a predictable rule of law, a stable banking system is extremely important in a well-functioning capitalist economy.

---

If you listen to the podcast, you'll see Werner disagrees with your first sentence. There is a lot in the two-hour interview that I did not know. The powers that be prevented his book from being translated from Japanese into English for over a decade.

I've become a fan of www.youtubetotranscipt.com lately. I can scan a long podcast and dip into parts that are interesting without having to burn two hours.

I guess the bottom line as I see it is that it is unfair that another man, whether a central banker or a commercial banker, can create money for free while I have to work for it. If I were to try to do it, they would put me in a box for a long time for counterfeiting.

---

Oh my god that last paragraph. Wow.

Maybe I'm misunderstanding (I didn't watch the video), but this is not a new concept. Fractional reserve banking creates money and then it gets sucked back out of the system when you pay back the loan. The same thing happens on a micro level when you swipe a credit card and then pay the bill at the end of the month.

TTUArmy said:

---

Tokenization of all asset classes on a blockchain along with stable coins used to backstop government bonds and/or treasuries is where it all gets weird for me. It feels like we are headed for a financial system that has way more control over people, property, and economy than most truly understand or realize. Some will advocate for this new system because they believe it will increase institutional transaction speed; velocity of "money" which can spur lending, growth, and innovation. And all of that may be true but, there is always a downside which involves corruption and tyranny over people furthest from the money spigot.

---

This guy gets it.....

FriendlyAg said:

---

Its Texas Aggies, dammit said:

---

I guess the bottom line as I see it is that it is unfair that another man, whether a central banker or a commercial banker, can create money for free while I have to work for it. If I were to try to do it, they would put me in a box for a long time for counterfeiting.

---

Oh my god that last paragraph. Wow.

---

What's wrong with that paragraph? Please explain.

[It's ok to debate a topic, but when you insult others in the course of it you are stepping over the line. You've shown a pattern of it in this thread and have a track record for it -- Staff]

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

I listened to this podcast a few days ago. I found it interesting and helpful, though some of what he described as novel seemed like it had been discussed before, just not widely known/accepted.

It did make me finally start Creature From Jekylll Island, which I have been meaning to read for years. I had shied away because I thought it would be a dry slog and too complex. It's neither of those, but it is a slog - you can only hear so many stories of croynsim and malefesanace before you have to take a break. It's just too maddening otherwise.

I lost faith in "we need the Fed to protect us from financial crises" a long while back, but man what an eye opener.

The big banks and some of the big corporations have done a number on us. I may turn into my grandad and stuff money under my mattress...but I'd still get hosed by inflation.

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

So many good points above.

If fractional reserve banking is so good, I wonder why the Fed denied Custodia Bank's application for a Fed master account.

Custodia uses a bailment model in which customer deposits are 100%-backed by the bank. I think a lot of customers would be willing to have Custodia be their bank for a fee since their deposits would not be vulnerable to a bank run. A master account would have plugged Custodia directly into the Fed's payment rails, letting it settle dollar obligations instantly like any national bank.

The Fed claimed the bank's business model conflicted with "safety and soundness." This is utter BS. They did not want fractional-reserve banks to have competition from a bank in which customers' deposits were safe.

Quote:

---

Fractional reserve banking creates money and then it gets sucked back out of the system when you pay back the loan.

---

I thought fractional banking was the main scheme, too - turns out it is much worse than that.

sam callahan said:

---

Quote:

---

Fractional reserve banking creates money and then it gets sucked back out of the system when you pay back the loan.

---

I thought fractional banking was the main scheme, too - turns out it is much worse than that.

---

We don't have a fractional reserve requirement anymore.

It's zero reserves.

Quote:

---

Reserve Requirements
As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

---

Keeping the ponzi going as long as they can......

sam callahan said:

---

I listened to this podcast a few days ago. I found it interesting and helpful, though some of what he described as novel seemed like it had been discussed before, just not widely known/accepted.

It did make me finally start Creature From Jekylll Island, which I have been meaning to read for years. I had shied away because I thought it would be a dry slog and too complex. It's neither of those, but it is a slog - you can only hear so many stories of croynsim and malefesanace before you have to take a break. It's just too maddening otherwise.

I lost faith in "we need the Fed to protect us from financial crises" a long while back, but man what an eye opener.

The big banks and some of the big corporations have done a number on us. I may turn into my grandad and stuff money under my mattress...but I'd still get hosed by inflation.

---

Lots of people who did not study business have no idea. I did not until the last few years. For example, I had no idea that money I deposit in the bank is no longer mine but becomes an unsecured loan to the bank.

"It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford

Krombopulos Michael said:

---

sam callahan said:

---

Quote:

---

Fractional reserve banking creates money and then it gets sucked back out of the system when you pay back the loan.

---

I thought fractional banking was the main scheme, too - turns out it is much worse than that.

---

We don't have a fractional reserve requirement anymore.

It's zero reserves.

Quote:

---

Reserve Requirements
As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

---

Keeping the ponzi going as long as they can......

---

Holy crap is this real!? I'll admit I haven't been paying close attention lately to fed policy other than interest rate changes. It seems pointless since there's no indication that they will do anything to correct course. At this point, any action taken by the fed is clearly only intended to keep the house of cards propped up.

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

This is the correct answer but I get tired of arguing with people about it. It's the definition of insanity.

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

You can really see populism at work in this thread. There are clearly people that feel the system has failed them.

Lotta class anomosity too.

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But I then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

This is a guy with having constructive conversation with. It this wasnt Texags F16 I bet we could have a really nice conversation

Skip the guy who says he will leave you in his wake of embarrassed fools that have questioned him before and talk with this guy.

Simple accounting.

-Depositor deposits $100
-Bank invests in Fed Funds $100
-Bank loans $50; Bank liquidates $50 of Fed Funds to fund loan

Final Balances:
Depositor Account = $100
Loan to Borrower = $50
Bank Fed Funds Acct = $50

No money "created"

FriendlyAg said:

---

You can really see populism at work in this thread. There are clearly people that feel the system has failed them.

Lotta class anomosity too.

---

Lots of people who have done well financially think our monetary system is corrupt. FWIW, a country is the people, not the government or the corporations. The welfare of the people should be prioritized. If that makes me a populist, so be it.

Central banks and the fiat monetary system have screwed a lot of people over during the last 100 years. Mainly the poor and middle class.

The Cantillon Effect benefits the few at the expense of the rest. Whoever's nearest the money-printer spigot gets to spend before prices rise, while those downstream pay higher prices for the same stuff. Those who have assets benefit. Those who live paycheck-to-paycheck have their purchasing power decimated.

It essentially works like this:
[ol]
Money enters at a point. Central bank prints commercial banks government contractors / asset markets / favored borrowers. Proximity matters Asset traders, Wall Street, politically-connected firms: cash in hand, bid up stocks, real estate, etc. . . Main Street & wage earners: see the price hikes first (gasoline, groceries, rent), then if ever pay raises trail inflation. Prices ripple outward. The first recipients' purchasing power soars; later recipients' wages and savings get diluted. Net effect: wealth transfer without overt taxation. Inflation becomes a stealth tax funneled to whoever touched the new money first.[/ol]

This is just one of the negative effects of the current system. As another, imagine how many fewer people would have died in wars in the 20th century if governments could not just borrow money printed out of thin air to fund war after war after war.