How Banks Create Money Out Of Thin Air

“The credit creation theory was something I intuitively grasped before from other alt-media sites, John nailed it down.” – Comment from someone who watched the podcast below

The “money supply” number as provided by official Federal Reserve statistics, it turns out, is not the true money supply. The fractional banking system allows banks to lend money on its reserve capital at a rate of 90 cents for every $1 of reserve capital. Technically, a loan is not considered “money creation” because of the legal provision that a loan has to be paid back. Because of this legal “glitch,” the creation of credit is not considered to be part of the money supply.

Yet, borrowed money behaves in the economy exactly like printed money until that point in time at which the borrow must pay back the loan. The spending power created by the creation of credit is identical to the spending power of printed money. The person or entity doing the spending does not know the difference.

This means that the amount of debt issued and outstanding by the U.S. Treasury should be added to the “official” money supply number (for example, M2) in order to calculate the true supply of money circulating in the system.  This especially true because the amount of debt issued by the U.S. Government increases in quantity on a daily basis – it’s never repaid (anything considered “repaid” has been repaid with new debt).

In this podcast, which is the latest segment of John Titus’ “Mafiacracy” series, Titus explains how and why it is that banks create money out of thin air. Once you understand the principles reviewed in this podcast, you’ll understand how the U.S. became a giant Ponzi Scheme:

10 thoughts on “How Banks Create Money Out Of Thin Air

  1. Dammit Everything was proceeding to plan until that tiny bit of the sentence
    ‘until that point in time when the borrower is expected to pay back the loan’ is slipped into this scholarly tract

    If the money is created out of thin air, not even seen as ‘real money’, something that has a shred of responsibility attached to it until the time comes to pay it back, I simply cannot conceive as to why the borrower must pay back something that was not real, not accounted for, not added to the money supply, not even something tangible, this reminds me of my father saying to me

    “Don’t do as I do, do as I say do”

    Being a recalcitrant little shit as a child, I never did what my father or mother told me what to do. I did what they did. They did the fun stuff, the things that made every one laugh, where everyone was having a good time. Alcohol might have been involved. I certainly tested that out during my misspent yoot. They were right. They were having all the fun and expected the little ones to behave.
    Why can’t we borrowed a bunch of digital funny money, piss it down the drain, borrow to pay of our prior debt and its interest and have some fun. The big people do it all the time.
    Paying it back seems so antediluvian, so dark ages. Eat drink and be merry I say. Eff the debt and tell the bankers to go to hell. Being a former banker I couldn’t tell people that back then and expect to keep my job. Today I tell them all the time to ‘Eff the bankers’.
    There are 100,000 of us for every banker. What are they doing to do. Tell mommy and daddy we’re being bad. I ROLFLMFAO Bankers have printed, written and spent themselves into the DIGIFIAT equivalent of a corner with a 10 foot high wall of gooey paint threatening to drown them in Sherwin Williams best; in a color so hideous that it makes baby crap green look good.

    Kind of like that crayon in your box of Crayolas that everyone tossed in the trash. Burnt umber meets asparagus comes to mind. It simultaneously stinks and shines, like the body of a banker who fell from a 33 story building during a moon lit night.

    Anyhoo, I digress but there will be a reckoning and reset. I plan to be there when it begins raining bankers while the bonfire of monetary vanities goes up in a FIAT funeral fire so large it will dwarf the Notre Dame flames.

  2. “Criminals are now running the system”. This is the best statement of this entire presentation and, unfortunately, a reality that few realize. The greatest, ongoing theft in the history of the world continues undetected by the vast majority, which is why when it ends, will be like a nuclear detonation – unanticipated and an economic extinction event.

  3. Yes, the video and the study demonstrate that “the emperor has no clothes. He’s not wearing anything at all.” Shouldn’t this be obvious to any run of the mill accountant or bookkeeper? And if that is so, how can anyone truly interested in determining the truth of money creation question the thin air theory? That includes even the dim witted in Congress. Regardless, when it all hits the fan again they will likely provide more bail outs and bail ins at the expense of everyone else.

  4. Some anecdotal evidence:

    Driving on the freeway, there were two dealerships whose back lots (behind their showroom/maintenance buildings) are very large. one dealer was a Lexus/Toyota dealer and the other an Infinity dealer. Both lots were filled with new cars/vehicles that they were parking them every which way where they literally have no more room. Filled to the gills where they can’t take any more inventory on. Is this another untold story across the nation.

  5. John Titus is magnificent in plainly explaining and verifying THE TRUTH. So much truth that the system will always and forever reject the truth – until natural economic and monetary law smashes everyone in the face. The I guess the fires begin, quickly.

    A very, very professional and well created video and lesson. Thank you John!

  6. This piece is fundamentally incorrect. People like to think of money in terms of currency, but is not currency per se. Most of it is bank entry “money”. Most of the “money” is created by the banking system and that makes up roughly 95% of what we call money. The only institution that can create “money” out of “thin air” is the Federal Reserve. Recently, under QE (“Quantitative Easing”) they created billions of (‘book entry”)dollars with which they bought a like amount of debt securities held by the banks. Since, the banks were not in a lending mode, much of this money was redeposited with the Federal Reserve. However, it was still part of the money supply and its existence helped keep interest rates low (albeit creating asset inflation). Now that the economy is on sounder footing, the Federal Reserve is trying to destroy much of the money that they created. This reduces the money supply and puts upward pressure on interest rates. So far, so good, but eventually they are going to have to destroy all of the “money” that they created out of thin air.

  7. This essential knowledge is well presented, well done John Titus. However, be aware of what happens after the banks’ invented loan money is repaid. To the best of my knowledge, it doesn’t go to money heaven ! It counts as reserves which can be loaned out, pay shareholders dividends or banker Christmas bonuses etc.

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