The basics - part one - Banking

First of all, we all 'know' that banks lend out ten times more 'money' than they have. Society calls this fractional reserve banking. Apparently, this is how it works and there is no need to waste any effort thinking about it. This is how things work in the 'real world'.

First problem is one of credibility. How can I borrow 'money' from a bank that has already lent out ten times more 'money' than it started with?

This puzzle is easily solved. The bank does not lend out 'money'. It extends bank credit. Thus the puzzle is one of perception. We believe that we are borrowing 'money'. Even the bank staff believe they are loaning us 'money'. We all use the word money in our everyday speech but we are all mistaken. The stuff we call 'money' is actually bank credit.

This is a very significant but subtle difference in perception.

Banks have the permission of government to create bank credit. A bank can create bank credit for close to zero cost and can 'loan' this bank credit to us and charge us fees and interest payments.

As you may appreciate, 'loaning' out something that costs close to nothing can be very profitable. So, what stops one bank from extending vast amounts of bank credit and destroying its competitors?

Normally, the central bank controls the rate at which banks can increase their bank credit creation. Nodding and winking from those at the central bank can guide how much bank credit flows into housing, industries and retail. Currently, in the UK, the banks are reducing peoples overdraft facilities and other bank credit facilities. This unspoken ability to guide bank credit flow gives a few people a vast amount of power over the rest of us. This makes the act of voting similar to re-arranging deck chairs on the titanic.

Anyway, the central banks lost control of their ability to guide the rate of bank credit creation. Q.E. gave the banks the ability to create as much bank credit as they liked. The fractional reserve banking rules were only ever a basic cover story for the curious few who ever asked questions.

Despite losing their ability to synchronise bank credit expansion, the central banks have kept their credibility. Most people still believe that banks offer loans of 'money', rather than simply issuing bank credit.

Is this important? Yes and no. It is very slowly becoming important. When the perception change does occur, it will be perceived to be an abrupt change of great importance.

The perception change is known to me. I will share it with you. For free. You read about it here, don't forget that. In fact, you already read it. You read it at the start of this block of text.

Are you ready for the 'truth'?

Can you handle the 'truth'?

The stuff we call money is actually zero cost to issue bank credit.
The stuff in our bank accounts is bank credit.
The stuff in our pensions is bank credit.

I very much doubt that I have just rocked your world.



Your 'real world' feels very real. At least to you. It isn't. It is a fairy tale. It does not have a happy ending.

This bank credit scam manages to skim vast amounts of wealth from us, the people.

In part two I reveal who else uses this scam to skim vast fortunes from us the people.

In part three, I reveal how to reduce the amount of wealth that is taken from you.

I also suggest reading my three very short books.

However, reading is a mechanical skill. Understanding is something else entirely.

Expect one of these every three months, all five have been written. Then please lower your expectations of me to zero.

Thanks for your enduring patience and all the effort you have expended attempting to understand my non-linear perception of this particular physical plane.