"History has to be rewritten with the understanding of who is creating the money supply and who's buying those politicians. Otherwise historians just study the frontmen... why are they in power? Who's funded their rise? Follow the money and you find out." - Richard Werner (On the necessity of analyzing monetary origins in history) 00:00:00
" The Federal Reserve is supposed to be the expert in this question... their official view is "we don't know what money is"... that's been used essentially to hide the real answers." - Richard Werner (Discussing the intentional obfuscation by central banks) [00:04:19]()
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"Bernard, you know you keep going on about money. Haven't they told you? Don't touch the money thing, you won't get invited to the important dinners; it's not going to be good for your career." - Paul Krugman (Quoted by Werner regarding the academic "money taboo") [00:16:47](https://youtu.be/o9nSmSvV0K4?t=1007)
"Banks are creators of the money supply and each bank creates money... when it gives out a loan." - Richard Werner (Defining the Credit Creation Theory of Banking) [00:58:51](https://youtu.be/o9nSmSvV0K4?t=3531)
"At law in England... there is no such thing as a bank deposit. It doesn't exist at law. The status of a depositor is simply a general creditor; it's a loan to the bank." - Richard Werner (Explaining the legal reality of customer funds) [01:05:00](https://youtu.be/o9nSmSvV0K4?t=3900)
"We don't need to have a recession and unemployment for an accounting problem." - Richard Werner (On solving banking crises through balance sheet repair) [01:56:05](https://youtu.be/o9nSmSvV0K4?t=6965)
"Central banking being like the arsonist pretending to be the firefighter... they create this catastrophe and then they come in and say "Here's the way to clean it up." And of course the way to clean it up completely favors further centralization of their power." - Richard Werner (On the cycle of engineered economic crises) [02:14:31](https://youtu.be/o9nSmSvV0K4?t=8071)
2. Executive Summary
Professor Richard Werner argues that the history and definition of money have been intentionally obscured to hide the reality that private banks, not central banks or governments, create 97% of the money supply through lending. He details the historical evolution of this power—from Babylonian temple ledger tricks to the English tally stick system—and contrasts "official" economic narratives with the legal reality that bank deposits are actually loans to banks. Werner presents his "Quantity Theory of Disaggregated Credit," explaining that economic crises are engineered by central planners who direct credit into unproductive asset purchases rather than productive business investment. The discussion concludes with a warning about Central Bank Digital Currencies (CBDCs) as tools for totalitarian control and advocates for decentralized systems like small local banks, gold, and Bitcoin.
3. Chronological Table of Contents
[00:02:20] - The fundamental question: "What is Money?" and academic silence.
[00:11:08] - The "Mystery of the Missing Money" and velocity decline.
[00:18:33] - Historical Case Study: The Norman Exchequer and Tally Sticks.
[00:27:12] - Historical Case Study: Babylonian Temples and the first "bank notes."
[00:32:55] - The Three Theories of Banking: Intermediation vs. Fractional Reserve vs. Credit Creation.
[00:50:00] - The Goldsmith Bankers: The origin of modern banking fraud.
[01:13:56] - The Norman Tax System: How the state legitimized its own credit.
[01:33:47] - The Three Uses of Credit (GDP vs. Asset Inflation).
[01:45:00] - The Japanese Bubble: A manufactured crisis by the Bank of Japan.
[01:55:29] - True Quantitative Easing (Werner’s original proposal) vs. Central Bank QE.
[02:09:08] - Future Threats: CBDCs, Digital ID, and the "Digital Prison."
[02:15:56] - Solutions: Gold, Bitcoin, and decentralized banking.
4. Key Takeaways
Banks Create Money, Not Intermediaries: Banks do not lend out existing deposits. They create new money (Credit) when they extend a loan, expanding the money supply instantly.
Legal Reality of Deposits: Legally, a "deposit" is a loan from the customer to the bank. You are a creditor, and the bank is a borrower.
Productive vs. Unproductive Credit: Credit creation only causes inflation if used for consumption. If used for "productive business investment," it creates growth without inflation. If used for "asset purchases," it creates bubbles.
The "Arsonist Firefighter" Model: Central banks engineer asset bubbles to cause crises, which they then "solve" by consolidating power and reducing the number of small banks.
Decentralization is Stability: An economy with thousands of small, local banks is more stable and egalitarian than one dominated by a few "Too Big To Fail" mega-banks.
Werner’s QE Proposal: True Quantitative Easing was designed to clean up bank balance sheets by having central banks buy non-performing loans at face value, preventing recession without taxpayer burden.
Tally Sticks as Sovereign Money: The English Tally Stick system proved a government can issue its own debt-free money (Tax Credits) for centuries, bypassing private interest.
Werner explains that central banks intentionally claim they cannot define money. By confusing definitions (M0, M1, M2, etc.), they hide the mechanism of creation. He highlights the "Mystery of the Missing Money" in the 1970s where the relationship between money supply and GDP broke down because money was flowing into asset markets (financialization) rather than the real economy.
Historical Roots: Babylon and the Normans [00:18:33]
Babylon: Werner cites a clay tablet receipt for gold deposited by an official of King Nebuchadnezzar. He deduces these receipts existed because Temples (banks) were lending out gold and issuing receipts as circulating credit [00:29:10].
Marco Polo & China: Polo observed the first paper money system in the 10th century, which allowed the Emperor to amass gold by issuing "fiat" paper receipts [00:19:10].
Financial Intermediation Theory: (Current Mainstream) Banks gather deposits and lend them out. No new money is created.
Fractional Reserve Theory: The system creates money, but individual banks do not.
Credit Creation Theory: (Werner’s Proven View) Each individual bank creates money out of nothing when lending.
The Goldsmith Story & Modern Banking Fraud [00:50:00]
Modern banking evolved from medieval goldsmiths who realized they could issue "fictitious" deposit receipts for gold they didn't have [00:54:11]. This is a breach of contract and legal fraud, hidden by "Double Entry Accounting" which makes the created asset and liability appear balanced on the books.
Werner conducted the first empirical test of banking at a German cooperative bank. He borrowed €200,000 and monitored the bank's internal systems. The bank did not transfer funds from anywhere; it simply typed the amount into his account, proving credit is created out of nothing.
The English Exchequer issued "Tally Sticks" (split wooden sticks) as tax receipts.
The Stock and the Foil: One half was kept by the treasury (Foil), and the other circulated as money (Stock). If they matched, they "Tallied" [01:21:07].
Significance: This was a debt-free sovereign currency that lasted for centuries until the Bank of England (a private entity) phased them out to force the government to borrow at interest [01:29:41].
Disaggregated Quantity Theory of Credit [01:33:47]
Werner splits credit into two streams:
Real Economy Credit (CR): For GDP transactions. Leads to growth or consumer inflation.
Financial Credit (CF): For asset purchases. Leads to asset bubbles and wealth disparity [01:40:53].
The Solution: Use "Window Guidance" to ensure credit is only created for productive investment [01:42:10].
The Japanese Bubble & "Princes of the Yen" [01:45:00]
The Bank of Japan (BoJ) intentionally engineered the 1980s bubble using "Window Guidance" to force banks to lend for real estate. The goal was to cause a crisis that would allow for structural reform and the centralization of central bank power. Werner identifies the officials involved as the "Princes of the Yen" [02:00:23].
Werner’s QE: Central bank buys non-performing assets from banks at face value to fix the balance sheet without inflation.
Current QE: Printing money to buy government bonds or assets from banks, which often ends up pumping asset markets or causing consumer inflation if given as "helicopter money" [02:07:34].
Future Threats: CBDCs and the Digital Prison [02:09:08]
Central planners are aiming for CBDCs and "Digital IDs" to create a total control system. Werner warns this is a "Digital Prison" that allows the state to monitor and restrict spending [02:15:23]. He also highlights the "Arsonist Firefighter" trope where central banks cause crises to justify consolidation.
6. Data & Figures
Data Point
Value
Context
Timestamp
Money Created by Private Banks
97%
Percentage of money supply created through bank lending.
The "Prince" of the Yen [02:00:29]: Werner describes how Toshihiko Fukui was selected as a future governor 30 years in advance, illustrating a "cartel" system of loyalty within the Bank of Japan.
The BBC Experiment [01:03:56]: Werner had a BBC film crew record the process of him taking out a loan to provide visual proof that no money was transferred from existing deposits to fund the loan.
William the Conqueror and London [01:10:28]: William conquered England but left the "City of London" as a sovereign territory, separate from his rule. Even today, the King of England must ask permission to enter the City of London Corporation [01:11:46].
The Tokyo Imperial Palace Garden [01:48:08]: During the 1980s bubble, the small plot of land of the Imperial Palace had the same market value as the entire state of California.
8. References & Recommendations
Books:
Princes of the Yen by Richard Werner - Reveals the hidden history of the Bank of Japan and its engineered crises [02:01:40].
The Travels by Marco Polo - Referenced for the description of 13th-century Mongolian/Chinese paper money [01:19:10].
General Theory by John Maynard Keynes - Referenced for Keynes' shifting and misleading views on banking [01:00:02].
Articles/Papers:
"How the Fed Bought the Economics Profession" - Huffington Post (2009) [00:14:36].
"Can Banks Individually Create Money Out of Nothing?" - Richard Werner (2014) [01:01:50].
"A Lost Century in Economics" - Richard Werner (2016) [01:02:12].
People:
Bernard Lietaer: Former central banker and PhD student who was warned not to discuss the "money thing" [00:15:31].
Mark Carney: Former Bank of England Governor and fellow student of Werner's at Oxford [00:15:46].
Jeffrey Sachs: Economist whose analysis of the Japanese bubble was challenged by Werner [01:49:03].
Websites:
rwer.substack.com - Richard Werner's Substack [02:22:15].
professorwerner.org - Academic research site [02:22:36].
9. Speakers & Credentials
Robert Breedlove: Host of the "What is Money?" show, focused on the intersection of economics, history, and Bitcoin.
Professor Richard Werner:
PhD in Economics from the University of Oxford.
Former Chief Economist at Jardine Fleming Securities (Tokyo).
Author of the bestseller Princes of the Yen.
Credited with coining the term "Quantitative Easing" in 1995.
Known for the first empirical proof of the credit creation theory of banking.
10. Actionable Next Steps
Explore Small Banks: Support decentralized money creation by using local cooperative banks or credit unions instead of big "money center" banks [01:31:34].
Diversify into Hard Assets: Hold Gold and Bitcoin as a hedge against the centralization and potential collapse of the banking system [02:15:56].
Oppose CBDCs: Be vocal against Central Bank Digital Currencies and Digital IDs to avoid the "Digital Prison" of total state control [02:15:23].
Study Monetary History: Read Princes of the Yen to understand how central planners use credit to engineer social and political shifts.
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