His name is Chris

Remebering "Occupy Wall Street"
Probably one of the greatest speachs in American histroy by this young man. His name is Chris and he should stand next to JFK's great speach to the American people.

The Global Mortgage Scam

Critique: Richard A. Werner. 2014. “Can banks individually create money out of nothing?” International Review of Financial Analysis 36 (2014) 1–19

Misuse of the term "money"

Professor Werner uses the term “money” indiscriminately including bank-created deposits which are not money. The misapplication of the term “money” is not saved by the public’s misconception which treats bank deposits as money, or as Irving Fisher (1935) writes, “check book money”.1

Money is legal tender, not bank-created deposits by way of double-entry bookkeeping. Only central banks create legal tender. Bank-created deposits are also known as quasi-money as opposed to high-powered central bank money. Quasi-money cannot leave a bank that created it. The so called payment systems in its daily clearing only offsets incoming requests for deposit against outgoing requests for deposit which is not a transfer of money but a netting of each bank’s position against the clearing house which conducts the so called payment system. During the global financial crisis 2007 and beyond, the payment clearing broke down and was maintained my massive loans by the central banks to individual systemic banks of legal tender to the tune of $10 trillion in dollars, pounds and euros as well as currency swaps between the central banks.

The indiscriminate use of the term “money” for bank deposits sanctifies bookkeeping entries with settlement powers in the nature of legal tender which they are not, except that part of bank deposits which is covered by legal tender, normally around 5% not more.

Would I be happy to receive my million euro lottery winnings in the form of a bank deposit. Of course, I would, like a fish flocking to water, and so does every participant in the day-to-day economy.

The point of discussion, however, more serious, is whether a system of producing quasi-money is sustainable, or does it benefit the quasi-money creating banks at the expense of the public and the public purse which must go and borrow their fictitious trash to cover budget deficits, resulting in unsustainable national debts, resulting in the so called euro crisis and austerity programs in Ireland and the South of Europe, where unemployment among a lost generation of young peoples is 50%. And if the banks fail, why must their losses be socialized instead of changing the unworkable system which has caused ongoing financial crises for the past 300 years without any hope of ever ending. 2

Political economist are entrusted with running our central banks, bank regulators, and populate the Basel Committee on Banking Supervision, creating capital adequacy requirements under ancient misconceived textbook notions of what is money, what protects deposits, and since 1988 have not

1 Irving Fisher. 1935. “100% Money: Designed to keep checking banks 100% liquid; to prevent inflation and deflation; largely to cure or prevent depression; and to wipe out much of the National Debt.” New York: Adelphi Press; reprinted 2011 ThaiSunset Publications ISBN 9781463553357.
2 Michael Schemmann. 2014. “The Ten Day Banker. Professional Guide.” IICPA Publications. 2

prevented any of the world’s disastrous financial crises, asset bubbles, and currency collapses including the so called euro crisis.

We are still in the Global Financial Crisis of 2007 and beyond. Nothing has been fixed while our economists dream the dream of a thousand years in their cozy quarters, their ivory towers. They are not professional accountants, bankers, financial analysts; have no grasp on banking realities which they bathe in their own illustrious theories.

Let’s hear:

To his credit, Professor Werner laments that “there has been no progress in scientific knowledge in economics, finance and banking in the 20th century concerning one of the most important and fundamental facts for these disciplines. Instead, there has been a regressive development. The known facts were unlearned and have become unknown. This phenomenon deserves further research. For now it can be mentioned that this process of unlearning the facts of banking could not possibly have taken place without the leading economists of the day having played a significant role in it. The most influential and famous of all 20th century economists, as we saw, was a sequential adherent of all three theories, which is a surprising phenomenon.” The name Keynes is mentioned who “used his considerable clout to slow scientific analysis of the question whether banks could create money, as he instead engaged in ad hominem attacks on followers of the credit creation theory. Despite his enthusiastic early support for the credit creation theory…”

The three theories on the functioning of the banking sector

Werner writes “The three theories are based on a different description of how money and banking work and they differ in their policy implications. Intriguingly, the controversy about which theory is correct has never been settled. As a result, confusion reigns: Today we find central banks – sometimes the very same central bank – supporting different theories; in the case of the Bank of England, central bank staff are on record supporting each one of the three mutually exclusive theories at the same time…”

Banking is accounting by (1) recognition of a transaction, (2) determining a value on the transaction, (3) recording the transaction, and (4) reporting the transaction as it affects the entity’s results of operations (income statement), financial position (balance sheet), and liquidity (cash flow statement), in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).

IFRS and GAAP are the concept, the framework, the principles, rules and regulations. That is the theory and nothing else. If there is a discord between the creation of bank deposits and the concepts, framework and principles, then the creation constitutes a breach, if serious a fraud, and has its resolution in professional disciplinary proceedings and eventually the criminal justice system. Now comes academe and turns the underlying simplicity into complexity by describing bank practices and giving them the names of theories. Even if bankers did care to know, which they don’t, which theory is the right one, the credit creation, fractional banking or intermediary theories, none of the three being mutually exclusive may in fact co-exist.

Regarding fractional reserve banking: The central banks’ minimum reserves of legal tender, as a matter of fact, impose a fractional reserve system. Minimum reserves have not been abandoned except in Canada, the UK and Sweden.

Regarding the intermediary theory: In the daily payment clearing, banks may obtain claims against the central bank or the payment clearing house and credit deposit accounts as instructed. If banks then go and make deposits for others by way of loans, these are in addition to the deposit made upon receipt as instructed. If the amount of liquid assets held by the banks remains unchanged, then the additional deposits created by the banks increase the risk of illiquidity in case of demands for redemption of the deposits. Depositors’ rights of redemption can be slowed by requiring notice to the bank which is the idea behind time deposits including savings deposits.

The fractional reserve theory, and for that matter also the intermediary theory, highlights the received assets without, or without sufficient, regard of the corresponding liabilities simultaneously incurred with the receipt of assets. It is not even a theory, but an expression of wishful thinking of a multiplier effect (or intermediation by relocation), in that a bank receiving assets for deposit could create deposits (intermediary theory), or additional deposits (fractional reserve theory, unless received in the form of central bank reserves) that it could not previously create.

Basel capital adequacy requirements

Werner writes that the Basel I and II are based on the financial intermediary theory, and “If the financial intermediation theory is not an accurate description of reality, it would throw doubt on the suitability of Basel III and similar national approaches to bank regulation, such as in the UK.”

A banking theory is a thought model developed by economists in the ivory tower not on the floor of reality. Banking’s reality is accounting and nothing else. Under GAAP and IFRS bank capital is not a protector of deposits which the Basel Accords aim to achieve, because liquid assets are required to redeem deposits, while capital is a residual of total assets minus total liabilities and is shown on the liability side of the balance sheet. How can one liability pay another?

Werner admits that Basel I and II have not prevented banking crises, let alone the Global Financial Crisis. Only the massive injection of trillions of dollars/pounds/euros of high powered central bank money prevented the world’s payment system collapse if one disregards the refusal of the central banks to save Lehman Brothers, an inexcusable blunder of economists misplaced at the switches of monetary power (Professors Ben Bernanke US Fed and Mervyn King, Bank of England and their ministers of finance Hank Paul, US, and Alistair Darling, UK).

All in all, it is NOT important “for research and policy to determine which of the three theories is an accurate description of reality.”

Underlying complexity is simplicity promulgated by GAAP and IFRS, both of which are massively violated by the reporting banks creating deposits by monetizing promises and recording the corresponding assets as loans receivable.3 Complexity created by economic theories masquerading as descriptions of reality may lead us to some very remote places.

John Kenneth Galbraith (1975) in “Money. Whence It Came, Where It Went,” Chapter 1, “Money”:

“A word must be said about the frame of mind in which one wishes the reader to approach a book [on money] such as this. Much discussion of money involves a heavy overlay of

3 Michael Schemmann. 2015. “Putting a Stop to Fictitious Bank Accounting. With a Plan to Redeem the US and Euro Area National Debts.” IICPA Publications; — 2012. “Accounting Perversion in Bank Financial Statements: Root Cause of the Ongoing Global Financial Crisis.” IICPA Publications.

priestly incantation. Some of this is deliberate. Those who talk of money and teach about it and make their living by it gain prestige, esteem, and pecuniary return, as does a doctor or a witch doctor, from cultivating the belief that they are in privileged association with the occult – that they have insights that are not available to the ordinary person. Though professionally rewarding and on occasion personally profitable, this too is a well-established form of fraud. There is nothing about money that cannot be understood by the person of reasonable curiosity, diligence and intelligence.”

Werner refers to Keynes who argued that a bank with excess reserves at the Bank of England can make an additional loan which creates an additional deposit on the balance sheet of this or some other bank, referring the reader to the “ECB's proposal to introduce negative interest rates on banks' reserve holdings at the central bank, as an incentive for them to ‘move’ their money from the central bank and increase lending.” Money created by a bank including the EC cannot leave the bank or ECB, only transfer by way of offset. Negative interest is therefore a punitive charge if not on the one bank holding the reserves or on another receiving the reserves, the ECB punishing the hindmost. Negative interest on central bank reserves cannot be avoided by the banking system as a whole through lending. Once again, economic theory by the learned economist from MIT, Professor Mario Draghi, is utterly misconceived, including Richard Werner, who apparently accepts.

Werner’s “Empirical test”

Professor Werner’s empirical study with a population of 1 is a case study from which inferences are made that cannot be generalized.

When I was a young banker in training, fresh out of high school, I went to the Landeszentralbank of the Deutsche Bundesbank in Kassel, Germany, on a daily, sometimes hourly, basis, depositing and withdrawing large amounts of cash. Every morning, we sent a telex to Frankfurt head office’s treasury desk, advising our cash position in the Postal Chequing Account, saying “dispose of XXX amounts of Deutsche Mark postal chequing”. The Commerzbank Frankfurt’s central treasury desk was very keen of knowing the bank’s overall liquidity in order to lend or borrow excess reserves within the banking system, one bank’s shortages always ending as an other bank’s surpluses.

It should be noted that of Werner’s local Raiffeisenbank, the bank being a member of the 100 times larger Raiffeisen banking system, was large holding interbank loans receivable that act as the slush fund for interbank payment imbalances, presumably within the Raiffeisen System. A statement by the lending officer in writing, that the bank did not inquire of its reserve position to guard against illiquidity before making a demand loan of only 200,000 euros is a very small matter to support any conclusion.

I spent the first 15 years of my life-long career in commercial and investment banking in Germany, Switzerland under the illustrious best-selling author Paul E. Erdman, and Canada moving up the ranks from apprentice to accountant, to credit officer and eventually controller at corporate credit in charge of three Canadian provinces, taking out an MBA and PhD in California before becoming a licensed Certified Public Accountant in the State of Washington, eventually retiring as an author and professor of accounting & finance and department chair in South East and Central Asia. I would think I have seen it all: fixed foreign exchange rates, the closing of the London Gold Pool, the Savings & Loan debacle in the United States, the rise of Microsoft and the IT revolution, the introduction of the euro, and then the Global Financial Crisis, the failure of Lehman Brothers, General Motors, and now what—Volkswagen?

The face of your Mother, my Mother and tomorrow our Daughters. "Banking Cartel Jekyll Island Depressions," deliberate by design, are only equaled by the deliberate, revolting disdain for "mankind" displayed by your treasonous, Zionist payroll-lying politicians, who keep their dirty "fake money mortgage scam" well and truly alive, and all of it with your pathetic help because you are so stupid...