The Tucker Carlson Show - Richard Werner Exposes the Evils of the Fed & the Link Between Banking, War, and the CIA

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00:00:33.640 You're one of the best-known economists in the world, most significant.

00:00:37.480 But you have a story that I think that I didn't know.

00:00:40.960 And let me just summarize what I understand of it, and then I'm just going to turn it over to you to tell the whole story.

00:00:44.700 So it's the 1990s.

00:00:46.920 You're living in Japan, a consultant to the Bank of Japan.

00:00:50.700 You speak Japanese.

00:00:51.440 And in 2001, you publish a book about the banking system in Japan in Japanese.

00:01:01.380 It's not published in English.

00:01:02.320 It's only published in Japanese in Japan.

00:01:04.800 And that book about the Central Bank of Japan and explaining why the country is in this protracted recession becomes number one in Japan.

00:01:16.020 Which is kind of amazing, even in Japan, beating Harry Potter.

00:01:18.980 And then your life changes completely.

00:01:24.420 I think this is one of the more significant stories that I hadn't heard.

00:01:28.920 So if you don't mind, if you could take it from there, explain what the book was about, why people responded to it as they did, and what happened next.

00:01:37.060 Well, it's a bit of a detective story.

00:02:01.060 I was, you know, working on the book and doing the research for the book, which really was the greater part of the 1990s.

00:02:11.020 There's a lot of work that's gone into this.

00:02:12.800 By the way, the name of the book is Princess of the Yen.

00:02:15.860 Princess of the Yen.

00:02:18.060 And yeah, it's not so easily available, but I can mention that later.

00:02:21.280 I was trying to solve some puzzles.

00:02:26.700 You know, I'd come to Japan, I'd learned Japanese, and I was, you know, an economist, had studied economics at the LSE, was at Oxford, working on my graduate work and doctorate in economics.

00:02:38.580 And Japan was actually really posing some major puzzles that the world couldn't explain, and economics couldn't explain, and all the world-famous experts could not explain.

00:02:49.820 And for some reason, I decided, okay, I want to solve all these puzzles.

00:02:57.820 When really digging into it, it transpired that maybe I've bitten off a bit more than I can chew.

00:03:05.260 All the experts were shaking their heads and telling me, you know, give up, you have to change your topic.

00:03:11.020 You know, there's no solution to this, and you will never find out.

00:03:15.720 So one of the puzzles was, yeah.

00:03:17.920 I was about to ask, what was the puzzle?

00:03:20.280 Well, there's several, but one was a concrete puzzle.

00:03:23.920 I was just doing an internship at Deutsche Bank in Tokyo at the peak of this fantastic stock market bubble.

00:03:30.840 Well, it wasn't called a bubble at the time, you know.

00:03:33.320 At the time, they were just saying, this is Japanese productivity, and, you know, this is all, it's going to go up more and more and more.

00:03:39.560 You know, it's only afterwards when they sort of point out, oh, well, okay, that was a bubble.

00:03:45.160 So in this bull market of Japanese, you know, stock market in 1989, and there were some problems with the official story.

00:03:56.320 And actually, they led to, they led me to conclude also that the stock market, it was a bubble, and it's going to crash, and it's going to take the banking system with it.

00:04:06.060 That's what I then, once I found the answers, that's what I then concluded.

00:04:10.680 So in 1991, I was one of the first to very loudly and clearly state, there's a discussion paper I published at Oxford, having come back, that we should be very cautious about Japan.

00:04:25.700 The international strategists were saying, oh, the Bank of Japan is lowering interest rates, it's stimulating the economy.

00:04:32.380 Stock market has come down, but, you know, growth is 6%, 7%, and the market has become cheap.

00:04:37.820 Buy Japanese stocks, that's what they were always saying, buy Japanese stocks.

00:04:41.520 I concluded in 1991, based on this research, that's, you know, answers to some of these puzzles, that Japanese banks were likely to go bankrupt.

00:04:51.240 And you see, you have to remember that in those days, 1990, 1991, the top 20 banks in the world were Japanese, okay, and the 21st century was going to be the Japanese century. 0.67

00:05:02.340 Japan was, you know, in the 80s, buying up everything left, right, and center. 1.00

00:05:05.900 And the Japanese capital flows, flooding the world, buying Rockefeller Center, Petal Speed, Golf Course, Hawaii, California, investments in Britain, you know, you name it.

00:05:15.800 And here I was saying, no, Japanese banks are likely to go bankrupt, and Japan is likely to move into the biggest recession since the Great Depression.

00:05:24.300 That's what I concluded in 1991, in this discussion paper.

00:05:28.920 And, of course, it took a lot of investors by surprise what happened in the following years,

00:05:36.560 when to me, it was very clear that this had to happen, although there were policy responses that could prevent the worst,

00:05:45.980 which I then also proposed, so I proposed a new monetary policy concept that I called quantitative easing,

00:05:53.260 which has been used and abused and distorted and has been quite popular with central banks, but we'll come to that.

00:06:00.660 So, but back to your question, so what were the puzzles in the late 80s, which led me to all these other things?

00:06:08.460 Well, one was Japanese capital flows.

00:06:13.720 They were extraordinary.

00:06:15.420 The scale was unprecedented in modern history.

00:06:20.920 But also, not just the scale was so massive, it just was against all the economic theories.

00:06:28.100 Now, the main theories about capital flows concern, again, interest rates and interest rate differentials.

00:06:34.280 And Japanese money was flowing in the opposite direction.

00:06:38.840 Then, Japanese investors were also losing money because the yen was rising, so it was actually a losing trade to then invest abroad.

00:06:46.600 And so, no economic model could explain it.

00:06:49.820 And that was the task I set myself.

00:06:52.300 So, then I was going around talking to all experts.

00:06:56.780 I was only a student, you know.

00:06:58.140 This is my first piece of research.

00:06:59.780 I just graduated as an undergraduate from the London School of Economics.

00:07:03.040 But I had been thrust into these sort of positions and opportunity.

00:07:09.200 And, yeah, I took the challenge.

00:07:11.740 And the response was, give up.

00:07:13.880 You know, you can't find an answer.

00:07:16.960 But I also then spent a lot of time with practitioners and actually investors that were investing abroad

00:07:22.740 and looked at the, you know, the institutional investors, life insurance companies and major international investors.

00:07:30.420 And then I was searching for a link to the other phenomenon, which was pretty crazy and economists couldn't explain.

00:07:38.700 And that was land prices in Japan.

00:07:40.900 So, in 1989, Japanese land prices had reached such stratospheric proportions that if you took the central Tokyo,

00:07:51.660 and it was particularly, of course, the big cities, but the central Tokyo land price to value something like the Imperial Palace Garden,

00:08:00.680 which is a public park.

00:08:02.740 I mean, it's nice.

00:08:03.460 It's large.

00:08:03.880 But it's not, you know, on the scale of things, not that large.

00:08:06.580 So, if you valued that at standard central Tokyo market prices and then exchange rates,

00:08:12.760 it would be the same market value as all the real estate in the entire state of California,

00:08:18.880 including Los Angeles, San Francisco, you name it.

00:08:21.340 And that is the correct response.

00:08:23.380 You've got to laugh.

00:08:24.060 I mean, or cry. 0.98

00:08:24.920 I mean, this is ridiculous. 0.99

00:08:26.080 This is totally ridiculous. 0.93

00:08:27.540 Now, my idea was that, okay, there's got to be a link. 0.90

00:08:33.600 We've got these two crazy phenomena.

00:08:35.340 One is these absolutely nonsensical land prices in Japan.

00:08:39.080 And the other one is Japanese capital flows, just Japanese money seemingly fleeing the country, buying up the world. 0.98

00:08:45.480 Well, if I was a landowner, and, you know, these are the land prices, I would say, well,

00:08:50.920 let's quickly buy some land outside Japan or something else, anything outside Japan,

00:08:56.480 before people realize that the land price is overpriced, the yen is overpriced, you know, and so on, right?

00:09:03.280 So, in a sense, the intuition was there.

00:09:06.600 There had to be a link, and I was convinced of that.

00:09:09.720 And so, it was going around, and, you know, in those days, it's pre-internet.

00:09:12.380 So, I had to literally, you know, how do you do academic research pre-internet?

00:09:16.980 He had to go to the library, get all the journals indices on topics, your topic indices, keywords,

00:09:23.980 and then physically go through various journals and journals, and, you know, 20 years ago, 30 years ago.

00:09:30.360 So, I spent months doing that.

00:09:32.420 I was looking for some kind of economic model, a paper that linked capital flows and real estate,

00:09:39.380 because, you know, I thought, well, there is a link.

00:09:42.980 And there wasn't, there wasn't.

00:09:44.780 And I wasn't looking just on Japan, it could be any country, right?

00:09:47.380 I mean, you should be able to use the same analytical framework then from another country.

00:09:51.340 But there wasn't, I couldn't find anything.

00:09:53.000 So, at the time, the clock was ticking.

00:09:54.760 And actually, I was a bit in trouble, because at the time, I was the first foreign research fellow

00:10:01.540 at the Japanese government's development bank, the Development Bank of Japan.

00:10:06.520 I was the first Shimomura fellow.

00:10:09.080 If you're interested, we can talk about this, Mr. Shimomura, because he's a bit of another secret, you know.

00:10:14.080 They didn't tell me, like, okay, why is there a prize for him, and who was he?

00:10:17.660 It was, like, almost a state secret.

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00:12:18.580 Anyway, so, and they give me six months.

00:12:22.960 And I'd rashly chosen this topic as my research topic.

00:12:28.260 And I'll write a paper on that.

00:12:30.200 And that was my job.

00:12:30.940 And they treated me so well.

00:12:33.920 You know, I mean, they treat foreigners very well anyway in Japan.

00:12:37.360 But I was their first Shimomura fellow, their first foreigner. 0.73

00:12:40.940 And I was invited to all their events and all the clubs and circles.

00:12:44.260 Learning baseball, which for Europeans is kind of unusual activity.

00:12:47.920 With the other staff and, you know, Japanese calligraphy.

00:12:52.260 They give me this huge apartment in central Tokyo, which is part of this Shimomura fellowship.

00:12:58.680 And I felt like a bit of a fraud because I can't deliver my part of this deal.

00:13:02.720 Because there seems no solution.

00:13:05.540 All the experts, there was one capital flow expert in Tokyo at the Nomura Research Institute.

00:13:10.160 I knew some people there.

00:13:11.400 And they were saying, no, you can't find an answer to this.

00:13:14.420 And no.

00:13:15.260 So give up was the story.

00:13:17.140 And, well, I needed a miraculous intervention.

00:13:21.060 And actually, you know, I got my miracle.

00:13:26.000 And I got the solution.

00:13:32.360 If we have time, I can come back to that and explain how this happened.

00:13:35.560 But let me just give the answer first.

00:13:39.560 So I knew the solution.

00:13:42.660 Then, now, actually, before then, there was somebody saying, oh, there is a solution.

00:13:50.340 There's an American scholar who'd come to Japan.

00:13:54.160 His name is Professor Jeffrey Sachs.

00:13:57.940 And his, I think, PhD student.

00:14:00.440 He was in that seat about four days ago.

00:14:01.980 Oh, excellent.

00:14:02.860 Right.

00:14:03.740 Oh, I sent him the paper actually recently saying, hey, do you remember this?

00:14:06.980 You know, and so people were telling me in Japan, oh, there's this American and his collaborator, I think, Peter Boone.

00:14:16.600 They had written about this topic.

00:14:18.020 And they had actually posed the same hypothesis that there's a link between land prices and capital flows.

00:14:24.080 So they were at MITI, the Ministry of International Trade and Industry, slightly renamed it now.

00:14:30.340 It was a famous ministry supporting the economy and trade.

00:14:34.060 And go there, you know, it's pre-internet.

00:14:37.140 So they will have the physical discussion paper that they produced on this topic.

00:14:40.840 So I went there, asked around it.

00:14:42.120 Oh, yeah, yeah, yeah.

00:14:42.900 We had Professor Sachs.

00:14:44.380 Okay.

00:14:44.580 And there was the paper.

00:14:45.760 So I went back to my research institute at the Development Bank.

00:14:49.480 And same idea, which is fine, because I was just a young researcher.

00:14:55.160 I just slightly modify that.

00:14:56.940 And I'm okay.

00:14:57.960 You know, I don't need to discover the, rediscover the wheel or come up with a great insight.

00:15:02.140 But then I came to that sort of main part and conclusion.

00:15:06.160 And therefore, we conclude there is no link between real estate, you know, land market and capital flows.

00:15:14.160 What?

00:15:14.880 So, you know, at that point, I was really in trouble.

00:15:17.920 And I needed divine intervention.

00:15:21.980 Because, you know, humanly, it was impossible to make this link.

00:15:25.840 And all the experts were saying there's no link.

00:15:27.980 But there was a link.

00:15:28.820 And when I understood that, I knew exactly what data to get.

00:15:35.180 Now, what Professor Sachs and Peter Boone were arguing was that, you see, how, if you're a Japanese landowner, you own this super expensive real estate.

00:15:45.820 And now you figure out it's probably better if I buy half of California, let's say.

00:15:51.380 Which they did.

00:15:52.080 So, let's do it.

00:15:55.220 They were arguing, well, they would have to sell the land.

00:15:58.700 Now, who's going to buy Japanese land? 0.98

00:16:00.420 And it was true that foreigners were not buying Japanese land.

00:16:03.280 It was totally overpriced.

00:16:04.400 No foreigner would buy Japanese land. 1.00

00:16:06.240 So, only other Japanese would buy it.

00:16:10.000 Ah, but that means the money stays in Japan.

00:16:12.740 And that means there's no link.

00:16:14.660 So, that was their argument, you see.

00:16:16.120 But I realized that's not how it works.

00:16:20.020 Because I'd spoken to a lot of practitioners.

00:16:23.180 That's not how it works.

00:16:26.140 And the solution is, and it's the solution to many other puzzles in economics.

00:16:31.620 Essentially, almost all the big puzzles.

00:16:33.900 And there's many in macroeconomics.

00:16:35.760 Macroeconomics has not been successful for 200 years.

00:16:38.760 I've noticed.

00:16:39.380 Exactly.

00:16:39.980 It's been a failure for 200 years.

00:16:41.300 No progress.

00:16:42.380 That's actually official.

00:16:43.140 There was a study in the, what's it called, Journal of Economic Perspectives,

00:16:50.440 which is, you know, quite a highly ranked journal,

00:16:53.320 in 2019 by two Stanford University professors about progress in economics.

00:16:59.020 And they mentioned that, oh, sadly, we haven't had any progress in macroeconomics

00:17:03.980 for at least a century.

00:17:07.580 So, and why is that?

00:17:11.460 So, the solution to all this, and why economics has made no progress, is bank credit.

00:17:18.460 Now, bank credit, and actually you should say fully, bank credit creation.

00:17:22.960 This is a concept that's been a taboo or a secret in economics.

00:17:28.160 Banking has been frozen out of economics for a long time.

00:17:31.620 There's no banks in economic models and theories.

00:17:34.820 And that's, of course, also why they don't work.

00:17:36.320 Because in reality, if you ask some ordinary people in the business district of any town,

00:17:42.000 they will tell you, you know, what's important in the economy, they will mention banks.

00:17:47.080 Yes.

00:17:47.680 But ask an economist, an academic research economist, and they will not mention banks.

00:17:52.180 Well, ask any person, who do you owe money to?

00:17:54.380 The bank.

00:17:55.260 Some version of a bank.

00:17:56.360 Exactly.

00:17:56.540 Well, the reason is that the economists follow this theory that banks are just financial intermediaries.

00:18:03.840 They just, you know, gather deposits here, do their analysis, credit analysis, you know, risk assessment and all that.

00:18:12.240 And then they allocate the funds and invest.

00:18:15.600 Right.

00:18:15.780 They just take a percentage.

00:18:16.960 They're a pass.

00:18:17.340 So, they're intermediaries.

00:18:19.240 Yes.

00:18:19.560 But that's wrong.

00:18:20.500 That's not what they are.

00:18:22.200 It's one theory of banking, and it's still the one that's still dominant.

00:18:25.460 All the textbooks and the leading journals, they still use that.

00:18:29.320 But actually, if you look into it, you realize there's three theories of banking.

00:18:33.080 A second theory, slightly older, that was dominant until the 1960s, so-called fractional reserve theory.

00:18:39.100 And you may have heard this fractional reserve banking.

00:18:43.100 What is that?

00:18:43.620 Well, this theory says, and this part is similar, each bank is a financial intermediary.

00:18:48.480 It just collects deposits and then does the analysis, lends out the money.

00:18:52.840 But in aggregate, as banks interact, there's money creation.

00:18:59.580 Oh, and that's where students' ears should have pricked up money creation.

00:19:02.440 They even talk about a money multiplier.

00:19:04.400 What?

00:19:06.260 That's the second theory.

00:19:07.860 Now, there's a third theory.

00:19:09.060 And that one had been made out to be a wacky conspiracy theory.

00:19:15.360 But it is the one that was more or less quite widely known until about a century ago.

00:19:22.180 And that's the credit creation theory of banking.

00:19:24.920 And this one says, banks are not financial intermediaries.

00:19:29.600 Banks are special.

00:19:30.580 They have a unique power that no other player in the economy has.

00:19:38.140 And that is the power to create money. 0.55

00:19:42.520 And actually, that theory had been called all sorts of names like, oh, this is kooky people.

00:19:48.720 And, you know, cranks.

00:19:49.720 Cain said in his general theory, or it was the treaties on money.

00:19:53.040 You know, these are the cranks who talk about the banks creating money.

00:19:56.400 I think the average person believes the right, the ability to create money is reserved for governments alone.

00:20:02.780 That's absolutely correct.

00:20:03.820 In fact, I did a survey with my students in Frankfurt in 2011.

00:20:09.260 My audience was getting larger when I was teaching at Goethe University Frankfurt.

00:20:13.620 It was only sort of for a few years, substitute professor, optional courses.

00:20:18.380 So the first one was only 50 students, but the next one was already 150.

00:20:22.040 In the end, it was 450.

00:20:23.260 Everyone was there also from politics and law.

00:20:25.260 And so I thought, oh, this is a great audience.

00:20:27.800 Listen, guys, let's use these numbers.

00:20:30.100 Let's do a survey.

00:20:31.020 So I sent them out, you know, because you've got so many people.

00:20:34.120 Then if everyone does 10 questionnaires, you know, you're talking big numbers.

00:20:38.440 So we did a survey of central Frankfurt.

00:20:42.220 And one of the questions asked was just this question.

00:20:44.660 Who do you think creates and allocates the majority of the money supply in the economy?

00:20:49.160 And to make it easier, here's multiple choice answers.

00:20:52.160 The government, the central bank, the financial markets, the banks, and so on.

00:21:01.360 You know, give a few options or savings, you know, people through their savings, which is another economic theory.

00:21:08.300 So, and the answer was, just as you said, and, you know, you spoke the facts.

00:21:15.360 84% responded either the government or the central bank are the ones that create and allocate the majority of the money supply.

00:21:24.140 Because that's common sense, you know, it's something very important that clearly affects everything and everyone.

00:21:29.600 It should be in the hands of the government.

00:21:32.180 It's what people feel.

00:21:34.020 But it's not true.

00:21:35.160 That's not how it works.

00:21:36.960 And so what is the answer?

00:21:39.440 Well, of these three theories of banking, which one is correct?

00:21:42.040 Well, what's the scientific thing to do?

00:21:43.520 It's to do an empirical test.

00:21:45.920 That's what a scientist would do.

00:21:47.080 Well, it turns out I was the first to do an empirical test of the three theories of banking.

00:21:51.200 Empiricism and economics?

00:21:52.320 I didn't know that that happened.

00:21:53.320 And you ran experiments and replicated them?

00:21:56.820 I thought that was...

00:21:57.560 Exactly.

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00:25:27.260 More.

00:25:27.860 Well, you know, you can do empirical tests.

00:25:29.720 The replication is debated, whether you can always replicate it.

00:25:32.960 But certainly you can test.

00:25:34.000 You can do tests.

00:25:35.040 And we can certainly control for certain things.

00:25:37.420 And that's what it did.

00:25:38.100 And I thought it's crazy that, you know, you had for over a century this debate between

00:25:42.160 these two theories, but nobody had actually done the scientific thing.

00:25:45.140 Let's find out.

00:25:46.700 Let's just test with the data and observation which of the theories is in line with the

00:25:50.720 data and which is rejected by the data.

00:25:53.220 Now, to do this, I needed a bank that would cooperate.

00:25:57.260 And my plan was, well, I'm going to take out a bank loan.

00:26:00.440 And we're going to watch inside the box, inside the banking's accounting, the bank's accounting

00:26:04.340 system, how are they accounting for this and what transactions are taking place when I

00:26:11.920 take out my loan.

00:26:13.780 You know, the intermediation theory says deposits get lent out.

00:26:17.840 The fraction reserve theory says that the bank needs to have excess reserves at the central

00:26:21.020 bank and that's then used for the new loan.

00:26:22.720 Yes.

00:26:24.040 And the credit creation theory, you know what it says?

00:26:26.040 It says, when you get a loan, no money is transferred away from anywhere else and you just credited

00:26:35.440 new money out of nothing that is not transferred away anywhere inside or outside the bank, which

00:26:41.840 seems, you know, quite sort of extreme.

00:26:45.120 Like magic.

00:26:45.820 In fact, one uses, the convention is to use Latin for this.

00:26:49.220 The money is created ex nihilo, out of nothing.

00:26:51.880 So, when it did the empirical test, the conclusion was the financial intermediation theory is

00:26:58.880 rejected and the fraction reserve theory is rejected.

00:27:02.460 Banks create money out of nothing.

00:27:04.920 By the way, you can look it up.

00:27:06.100 It's the most downloaded paper of all Elsevier publications called, and it's open access.

00:27:12.260 So, can banks individually create money out of nothing?

00:27:16.200 Any bank.

00:27:17.780 Any bank.

00:27:18.080 To be clear, not just central banks.

00:27:20.140 Any bank.

00:27:20.520 In fact, that's the whole point.

00:27:21.500 We're talking about normal banks.

00:27:23.340 With central banks, it wouldn't be a surprise.

00:27:25.380 But the Bank of Omaha can just...

00:27:27.180 Yes.

00:27:27.500 Any bank creates money.

00:27:29.000 When you take out a loan, the money that you're given as the borrower didn't previously

00:27:35.860 exist.

00:27:36.500 It is net new purchasing power that has been created and added to the money supply, and

00:27:40.920 that's how the system works.

00:27:42.360 Now, to understand how the system works is a precondition for having good economic analysis

00:27:46.440 and good policy recommendations.

00:27:48.220 And that explains for over 100 years, macroeconomics has made no progress.

00:27:53.020 They have no banks in there.

00:27:53.960 They have no bank credit creation in there.

00:27:56.680 You know, when the 2008 crisis happened, and the journalists, I'm sure yourself also, you

00:28:02.820 know, want to ask some experts.

00:28:05.360 Let's go to MIT professor of economics.

00:28:07.440 What's going on?

00:28:08.640 Lehman Brothers gone bust.

00:28:09.840 Banks are going bust.

00:28:11.000 Bank of America in trouble.

00:28:12.580 Well, what's happening?

00:28:13.960 The honest answer of all the professors of economics would have been, well, I'm sorry,

00:28:18.740 I can't answer that question.

00:28:20.380 Why not?

00:28:21.020 You're the expert.

00:28:21.840 Aren't you at MIT?

00:28:22.580 Aren't you an economist?

00:28:23.420 Yes, certainly.

00:28:24.360 Well, why can't you answer?

00:28:25.940 Well, we have no banks in our models.

00:28:28.240 So, of course, I can't talk about banks.

00:28:30.060 That would be a correct answer.

00:28:31.080 Of course, they didn't give that answer.

00:28:32.380 No.

00:28:32.500 They're fudging it.

00:28:33.680 They're pretending because they don't want the public to know.

00:28:36.380 No one ever admits ignorance.

00:28:37.680 May I ask how?

00:28:40.920 I'm not an economist.

00:28:42.060 I'm interested.

00:28:42.840 But I did not know until you just told me that banks play no role in economic models.

00:28:48.240 No, they're not in there.

00:28:49.260 So, when the 2008 crisis happened, the central banks were using the so-called DSGE models.

00:28:54.200 This is a huge, complicated-sounding name.

00:28:57.540 Dynamic Stochastic General Equilibrium Models, which sounds very sophisticated.

00:29:01.500 There's some, like, super bright rocket scientists in there with complex models.

00:29:06.460 Well, the whole thing is nonsense from start to finish.

00:29:09.420 And it doesn't include any banks whatsoever.

00:29:11.960 And it's built on really pretty crazy assumptions that are true, perhaps on some remote planet

00:29:19.420 in some very far away solar system.

00:29:22.660 Certainly not in ours.

00:29:23.900 And certainly nothing to do with planet Earth.

00:29:25.740 I just think, as a non-expert, the idea that banks would play no role would not be included

00:29:34.240 in an economic model.

00:29:35.500 A macroeconomic model seems insane because the experience of every person living in the

00:29:40.460 world includes banks.

00:29:43.200 That's right.

00:29:44.120 That's right.

00:29:44.640 And the trick was to argue, well, we don't need them because, you see, they're just an

00:29:50.080 intermediary.

00:29:50.680 They're not really important.

00:29:52.040 So, yes, they exist.

00:29:53.000 And we all know there's banks.

00:29:54.320 But they don't change anything.

00:29:56.100 The money just goes through one-to-one in here, out there.

00:29:59.160 There's no reason to include them.

00:30:01.540 Oh, we include the bond market.

00:30:02.840 Oh, and we include interest rates.

00:30:04.080 So, that's all we need.

00:30:05.160 By the way, that's the second big myth I busted in economics.

00:30:11.680 You know, this idea that interest rates drive the economy.

00:30:15.320 They're the key variable.

00:30:16.340 And, of course, even today, I mean, every central banker, every market commentator,

00:30:21.080 every TV show, investor, the experts.

00:30:23.820 Every president, by the way.

00:30:24.580 And it's literally, it's a daily thing.

00:30:26.020 It's mentioned.

00:30:27.600 And it's, yeah, everyone's supposed to, it's this presupposed knowledge that if we lower

00:30:31.360 rates, this will stimulate the economy.

00:30:33.120 If we raise rates, this will slow the economy.

00:30:35.760 And it's been said in the last 50 years, I don't know how many thousand times by all

00:30:39.720 these people.

00:30:41.140 Well, I can ask you, what's your guess?

00:30:43.440 How many empirical data-based, fact-based studies exist that demonstrate this?

00:30:49.900 That actually demonstrate that, you know, look, here's the data.

00:30:52.380 Yes, we lower rates.

00:30:53.400 It leads to higher growth.

00:30:54.900 We raise rates.

00:30:56.020 It slows growth.

00:30:57.540 I would assume none because I've never met anyone who doubts it.

00:31:00.440 It's like gravity.

00:31:01.280 We just know it.

00:31:01.560 Oh, you don't even need to test it.

00:31:02.560 Of course not.

00:31:03.000 We know it's true.

00:31:03.800 It's obvious.

00:31:04.820 I thought that until right now.

00:31:07.320 Yeah.

00:31:07.820 It's so true. 0.84

00:31:08.980 This is called an axiom, by the way.

00:31:10.700 An axiom is something that is so true, we never have to check whether it is true.

00:31:15.000 And if we did check whether it's true, we'd find it's not true.

00:31:19.540 But we wouldn't believe.

00:31:20.800 We wouldn't believe the results because we know it's true.

00:31:23.580 It doesn't matter.

00:31:24.400 You can't disprove it.

00:31:25.500 Yeah.

00:31:25.620 Well, in fact, you've described now the methodology of the dominant mainstream economics, which is the hypothetical axiomatic deductive methodology, where you just pose an axiom that you know to be true, so you don't have to check whether it is true.

00:31:42.020 And if you did check it's not true, it would be the result.

00:31:44.520 And then you add assumptions, which you admit are simplifications, heroic assumptions, which are, yes, we know they're not true, but it doesn't matter.

00:31:54.840 And then you build your model on it, and that's the approach they use.

00:31:59.620 Now, this approach is particularly useful if you have a predetermined conclusion you'd like to come to, because then you can actually start out with your preferred conclusion, work backwards, then define what assumptions do I need to pose this model, what axiom do I need to present this, and then the key step, present in reverse order.

00:32:16.160 Ladies and gentlemen, let's just, for sake of argument, assume these and these things, look at this, the model is telling us, you know, interest rates, lower rates lead to higher growth, and higher rates lead to lower growth.

00:32:26.680 We don't need to look at banking, it's totally uninteresting, don't go there, move on, nothing to see here.

00:32:32.940 What you're saying is, I mean, I believe that there are a lot of people who just never thought that option three, your description of banks, the bank credit creation, could be a meaningful factor, they just never thought of it.

00:32:44.820 But there had to have been a lot of people who realized this before the 1990s, so if it's not publicly known, it sounds like it was hidden.

00:32:53.200 Absolutely. Oh, certainly. Well, actually, so I've got two papers on this. One is the can banks individually create money out of nothing.

00:32:59.260 The other one is called Lost Century in Economics, about these past 100 years.

00:33:04.620 They must hate you.

00:33:05.580 Your fellow economists, sorry, sorry to interrupt, they must hate you.

00:33:08.360 And I do go through the literature and the sort of history of economic thought, and there's some very curious things happening.

00:33:17.140 So, for example, there's John Maynard Keynes, and many people would say, well, he's certainly the most famous economist of the 20th century.

00:33:24.360 That's really the one who's quoted a lot, cited a lot, and had some policy influence, and so on.

00:33:29.420 Now, when you look at his writings with the topic of credit creation, bank credit creation, his development is kind of curious.

00:33:40.600 So, when he was young, he discovered it.

00:33:44.120 There's a book by him from 1924 in which he, the book was on something else, but he stumbled on this, and he writes, I mean, I'm paraphrasing,

00:33:52.440 something like, and, you know, look up my papers, then you'll see the exact quote, but he was writing, like, oh, the bank's actually adding to the money supply through their activities.

00:34:03.420 That's a very important fact that changes everything.

00:34:05.520 I will return to this later.

00:34:07.580 You know, that sort of thing.

00:34:08.660 It's something that will have to be examined further.

00:34:10.580 That's very important.

00:34:12.120 Well, six years later, in his important book, Treatise on Money, two volumes,

00:34:17.180 he had moved from the credit creation theory that he clearly had discovered in 1924 to the fractional reserve theory.

00:34:26.220 He was saying, oh, banks are just intermediaries, but yes, in the system, the interaction is creating some money.

00:34:33.580 Six years later, he published the famous general theory, and in that general theory, he'd moved on to the financial intermediation theory.

00:34:42.060 Now it is, again, the savers who need to save money and then deposit it, and that is then lent out by the banks.

00:34:50.120 There's no money creation at all.

00:34:51.160 So, in other words, he progressed away.

00:34:53.940 Regressed, exactly.

00:34:55.000 Regressed, thank you.

00:34:56.440 So, with each successive theory, he obscured the role of the banks ever more.

00:35:01.180 Now, interestingly, his financial wealth increased proportionately, and by the last stage—

00:35:09.680 I think people have stayed this long in the conversation.

00:35:10.920 This is really interesting, and you're a great explainer, by the way.

00:35:13.840 Thank you.

00:35:14.200 It's almost like you came—are you really an economist?

00:35:16.240 You explain it so well.

00:35:19.120 Here's a depressing but true statistic.

00:35:21.560 Nearly half of American adults say they would suffer financial hardship within six months if they lost their primary income earner.

00:35:28.560 That's a telling sign that people are living on the edge, many of them.

00:35:32.640 The economy's fragile.

00:35:34.320 That's true for millions and millions of people.

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00:36:34.760 You may have noticed this is a great country with bad food.

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00:38:02.600 Last year, we did an interview with a woman called Casey Means. 0.91

00:38:06.280 She's a surgeon educated at Stanford.

00:38:08.500 She's the nominee for Surgeon General right now. 0.99

00:38:11.940 She really is one of the most amazing people I have ever met.

00:38:15.200 The interview made me emotional.

00:38:16.400 In it, she explained how the food that we eat, produced by huge food companies in conjunction with pharma, is wrecking our health and wrecking this country, making it weak and sick.

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00:39:36.900 Well, you see, in the last few years of his life, he had been, I mean, most people don't know this, but he had been appointed director of the Bank of England.

00:39:46.600 And you have to realize the Bank of England was 100% privately owned.

00:39:50.340 And to be a director, you had to be a significant shareholder.

00:39:53.920 And that is billionaire level nowadays.

00:39:56.240 So he was doing pretty well, moving away from the truth step by step.

00:40:03.480 But you see, it's similar with some other economists.

00:40:07.420 I'll give you two more examples.

00:40:09.340 Actually, three more examples.

00:40:12.020 Economists you will have heard of.

00:40:13.400 One is Professor Ben Bernanke.

00:40:16.600 Yes, I have heard of him.

00:40:17.540 Now, he was, you know, he was a good macroeconomist.

00:40:22.560 Was he at Princeton and Yale?

00:40:25.820 Anyway, and he used to, you know, he did his research.

00:40:30.040 He started out research on the Great Depression, where he was beginning to realize banks were a factor.

00:40:36.380 I mean, he didn't write this, but actually 10,000 banks were busted.

00:40:41.160 I mean, it's one of the saddest periods of U.S. and world history.

00:40:46.500 You know, the Fed was created on the pretext, on the main argument, because there's lots of doubters who didn't want the Fed.

00:40:52.860 It's very un-American, was the general view.

00:40:56.800 And they were very sneaky to actually get the Fed and get the law passed.

00:41:00.180 They used some of the rules on how you can schedule a vote.

00:41:04.780 And they went for the most obscure procedure, which is easy to overlook, that there's actually a vote.

00:41:10.280 And the vote was on the 23rd of December.

00:41:14.000 And most congressmen actually weren't even aware.

00:41:16.900 But in any case, they're already gone for Christmas.

00:41:20.040 Yes.

00:41:20.140 And so it was just the hardcore group of insiders, and they voted the creation of the Fed.

00:41:26.760 That's how it was done.

00:41:28.040 But in terms of arguments in favor of establishing the Fed, the main argument is the lender of last resort function.

00:41:36.500 And it's true that if you have a fantastic bank, very solid, strong, conservative, is doing well, is helping many small businesses, good bank.

00:41:46.500 If a very convincing, nasty rumor is circulated, and let's say it's effective and people believe the rumor, and they just run for their deposits, they all pull out the deposits, that good bank will be in trouble.

00:41:58.360 That is true.

00:41:59.840 Of course, there's policies against that that you could do.

00:42:03.140 But the argument was, well, the best is to have a central bank, because they can provide endless liquidity through money printing, which is, you know, internal money reserves.

00:42:11.880 Or if needed, if they want cash, you know, the central bank provides the cash, paper notes, and therefore this good bank will not go bust.

00:42:20.220 And that is sort of convincing.

00:42:22.320 But when it came to that, beginning of the Great Depression, what did the Fed do?

00:42:28.200 It let more than 10,000 banks go bust.

00:42:32.940 In the most, in the nastiest way, these were banks that were small, lending to local businesses, to the farmers in particular, and they let them go bust.

00:42:45.720 Now, in the 1920s, there was mechanization of agriculture, you know, tractors and so on.

00:42:50.680 So there's expensive equipment, and banks were giving the loans, the farmers were taking the loans.

00:42:55.420 Now, these banks were bust.

00:42:56.780 Well, they were taken over by big banks, bigger banks, and banks that were part of the Fed cartel.

00:43:06.300 But to lose 10,000 banks is just such a setback for the economy.

00:43:10.780 Unbelievable.

00:43:11.600 Now, you'd think, oh, good for the farmers, you know, at least they're out of these loans.

00:43:14.720 No.

00:43:16.940 Number one, when the banks went bust, there was no deposit insurance.

00:43:20.680 These families, these farmers, these small businesses, they all lost their personal savings.

00:43:25.020 All that money they had in the bank was gone.

00:43:28.420 That wasn't refunded.

00:43:30.040 Okay.

00:43:30.600 Number two, you'd think they'd be off the hook from their loans.

00:43:35.120 No.

00:43:36.220 The banks were then taken over, bought cheaply, and they still had to repay the loans.

00:43:40.900 But they had nothing left, and they were destitute.

00:43:43.200 Wait, you lose your deposit, but keep your debt?

00:43:46.060 Yes.

00:43:47.020 How does that work?

00:43:48.100 That's a Federal Reserve policy.

00:43:50.460 Of course, the Fed could have, you know, done it very differently.

00:43:53.440 Where was President Roosevelt?

00:43:55.220 And that's the man of the people.

00:43:57.300 Well, the banking systems, once you set up a central bank that's not controlled by the people,

00:44:03.520 then, you know, you're in the hands of the central bank.

00:44:06.160 The Federal Reserve Bank of New York is 100% privately owned,

00:44:09.100 and that is really the center where all the decisions are made.

00:44:13.860 You have the Washington Board of the Fed, but, you know, that's a political shop.

00:44:18.880 The actual central bank operations are all in New York, 100% privately owned, you know.

00:44:25.520 So, and that, you know, what happened in the 1930s is, therefore, these farmers became destitute.

00:44:32.420 The land was the collateral for the loans they couldn't repay.

00:44:34.900 They lost their land.

00:44:36.020 They lost their livelihoods.

00:44:37.880 Some lucky ones became day laborer on the farms that they previously owned.

00:44:43.180 The unlucky ones starved.

00:44:44.920 There was starvation in the United States of America of honest farmers.

00:44:51.300 And it's really such a, I mean, read The Grapes of Wrath by John Steinbeck.

00:44:55.040 You know, these are better descriptions of economic reality than the economics textbooks

00:44:59.880 where they tell you banks are financially intermediary, so we don't need to talk about banks.

00:45:04.380 That's for sure.

00:45:06.580 So, the central banks, when push comes to shove,

00:45:09.580 they pursue the agenda of concentrating the banking system

00:45:13.260 and reducing the number of banks, which increases the power of the central banks.

00:45:18.500 But we were talking about the three theories of credit creation.

00:45:21.540 And so, conclusion there was, I did the empirical test.

00:45:26.640 Banks create money.

00:45:28.120 They are, therefore, the most powerful economic player in the system

00:45:33.220 because they're special.

00:45:34.120 They have a license to print money.

00:45:35.600 And the majority of the money supply is created by banks.

00:45:38.400 And knowing that changes the analysis entirely.

00:45:41.040 Where does that power come from?

00:45:42.480 How are they granted that power?

00:45:43.700 Why can't I create money out of nothing?

00:45:45.760 Oh, we should work together.

00:45:47.920 You know, I wrote a paper with that title.

00:45:49.720 Why can't I create money out of nothing?

00:45:52.580 Well, so, when I published,

00:45:54.620 Can Banks Individual Create Money Out of Nothing?

00:45:57.780 I published, at the same time, another paper,

00:46:00.500 which is entitled, How Do Banks Create Money?

00:46:05.060 And Why Can Other Firms Not Do the Same?

00:46:08.500 Google it.

00:46:09.040 It's also open access.

00:46:11.280 Great question.

00:46:11.820 Which is exactly the question you'd ask.

00:46:13.600 And it's very sensible.

00:46:15.540 And it gets very curious.

00:46:17.580 It has to do with accounting.

00:46:22.680 And, but I really wanted to get to the bottom of this accounting.

00:46:26.400 If you look at the accounting,

00:46:27.980 the difference is, you know, when a loan is granted.

00:46:32.960 And, of course, we can take a loan from a non-bank.

00:46:35.240 I mean, there's major non-bank financial institutions.

00:46:37.440 Private credit, yeah.

00:46:38.640 And companies can give you credit.

00:46:40.400 And, you know, insurers give sometimes loans.

00:46:43.180 And, you know, so why can't they do the same as the bank?

00:46:48.560 And in order to find the answer,

00:46:52.920 I realized one needs to break up this,

00:46:56.240 the accounting process into further steps.

00:47:00.800 Because it's clear, if you compare the accounting,

00:47:03.220 the bank balance sheet, when the bank lends,

00:47:06.080 it's the bank balance sheet lengthens.

00:47:08.540 You get the loan as an asset.

00:47:11.020 That's the same for everyone,

00:47:12.300 no matter whether you're a bank or not.

00:47:14.240 And on the liability side,

00:47:16.840 the borrower is credited with the money.

00:47:20.020 Now, that's true only for banks.

00:47:22.740 And non-banks,

00:47:23.980 when they pay out a loan that they give you,

00:47:26.460 they have to draw down something,

00:47:28.300 some money holding on the asset side.

00:47:30.540 So the balance sheet doesn't lengthen.

00:47:34.480 So I wanted to find out,

00:47:35.580 okay, what is the thing that allows banks to do it this way?

00:47:39.260 Yes.

00:47:40.980 And it is what in England,

00:47:43.860 which is the home of banking,

00:47:45.900 you know, the first modern bank,

00:47:47.700 it was the Bank of England.

00:47:48.620 And in the 17th century,

00:47:49.840 all the banking rules

00:47:51.760 and the laws concerning banking

00:47:53.640 came essentially about in England.

00:47:56.540 And in England,

00:47:57.340 and this is therefore most apparent,

00:48:00.040 they call it the client money rule.

00:48:03.520 And there's an equivalent in the US,

00:48:05.160 in every country,

00:48:05.880 there's a slightly different name,

00:48:06.720 but it means that if you have client money,

00:48:09.860 then this money has to be kept off your books.

00:48:13.660 You have to hold it in custody,

00:48:15.040 like a custodian,

00:48:16.440 and you have to put it in practice with a bank

00:48:19.080 and say, well, that's the client account.

00:48:21.000 That's not my money.

00:48:22.340 I'm not claiming this.

00:48:23.520 That would be fraudulent, right?

00:48:24.580 You have to be careful.

00:48:25.280 You know, it can be a criminal offense.

00:48:26.340 So everyone has to separate client money

00:48:29.340 from their own funds.

00:48:33.440 And except banks,

00:48:35.720 they're exempted from the client money rule.

00:48:38.700 And that means when we put our money with a bank,

00:48:42.320 it's on the bank balance sheet.

00:48:45.660 And the bank is the keeper of the books.

00:48:47.660 And if you're the keeper of the books,

00:48:48.960 keeper of the records,

00:48:50.500 you can fiddle the records.

00:48:52.780 Well, here's the story

00:48:53.300 you probably haven't heard a lot about.

00:48:54.400 The Chinese mafia is exploiting rural America 1.00

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00:49:00.200 This is not available on cable news.

00:49:03.320 The network's not telling you about this,

00:49:04.480 but it's totally real.

00:49:05.540 Communist-affiliated drug gangs

00:49:07.080 destroying parts of the United States,

00:49:09.200 the parts that Washington ignores,

00:49:11.260 to sell drugs,

00:49:13.080 laundering money,

00:49:13.880 and building a black market network

00:49:15.660 inside this country's most beautiful

00:49:18.800 but least served areas.

00:49:21.500 We've got a brand new documentary on this.

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00:49:24.860 the Chinese Mafia Takeover of Rural America. 0.86

00:49:28.100 It's available now on tuckercarlson.com.

00:49:30.420 It's excellent.

00:49:31.900 The purchase of churches and schools

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00:49:42.280 By the way,

00:49:43.100 one of the drug houses

00:49:43.740 is like walking distance from my house.

00:49:45.940 I didn't know that.

00:49:47.000 It's a layered and fascinating story.

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00:51:10.180 You know,

00:51:14.080 if you put money of a client

00:51:15.940 into a bank,

00:51:18.360 you can't tell the bank,

00:51:19.200 oh, can you please

00:51:19.900 just be a bit creative

00:51:21.340 with the accounting?

00:51:22.260 It's not going to happen, right?

00:51:24.120 But if you yourself,

00:51:25.540 you know,

00:51:25.740 you're the keeper of the record,

00:51:26.860 you can be slightly creative.

00:51:28.220 So what the bank does is

00:51:29.440 the loan contract,

00:51:33.560 here's how it works.

00:51:35.720 You're the borrower.

00:51:37.260 I'm the bank.

00:51:38.000 You want a loan,

00:51:39.160 mortgage,

00:51:39.700 anything.

00:51:41.840 And the important thing is

00:51:43.720 the contract that you have to sign,

00:51:45.740 you know,

00:51:45.940 in your own blood,

00:51:46.880 you have to sign it.

00:51:48.700 The loan contract,

00:51:49.860 the agreement,

00:51:50.680 the credit agreement,

00:51:52.120 mortgage,

00:51:52.560 whatever it may be.

00:51:53.960 I mean,

00:51:54.180 they're all more or less

00:51:55.480 the same type of instrument.

00:51:59.080 And actually,

00:51:59.740 I should say this,

00:52:00.480 economists classify banks

00:52:02.260 as,

00:52:02.760 they always say this,

00:52:03.700 when they mention banks,

00:52:04.880 banks are financial intermediaries,

00:52:09.620 they're deposit-taking institutions

00:52:11.500 that lend money.

00:52:13.600 But because they're intermediaries only,

00:52:15.160 we don't need to look at this.

00:52:16.260 And then,

00:52:16.520 you know,

00:52:16.780 they take deposits

00:52:18.240 and they lend money.

00:52:19.640 Well,

00:52:20.180 if you look at the legal,

00:52:22.820 you know,

00:52:23.860 situation,

00:52:24.680 it's clear that this is not true.

00:52:26.180 Banks don't take deposits

00:52:27.960 and banks don't lend money.

00:52:30.200 And there's rulings

00:52:31.480 in English courts.

00:52:33.660 What is actually a bank deposit?

00:52:35.940 Well,

00:52:36.360 that is to confuse people.

00:52:37.980 At law,

00:52:38.740 there's no such thing

00:52:39.480 as a bank deposit.

00:52:40.440 It's simply a loan.

00:52:42.080 Well,

00:52:42.200 hang on.

00:52:42.560 A deposit is a loan?

00:52:43.520 Yes.

00:52:43.980 It's a loan we give to the bank.

00:52:46.860 We give credit to the bank

00:52:48.500 when we do what is called

00:52:49.680 deposit our money.

00:52:51.440 Yes.

00:52:51.820 And that is the legal status.

00:52:53.480 So it's like the tables are turned.

00:52:55.100 So banks don't take deposits.

00:52:57.180 We lend to them.

00:52:58.380 And the deposit,

00:52:59.880 the bank deposit

00:53:00.500 at law actually is not privileged.

00:53:03.980 But surely banks lend money.

00:53:05.920 No.

00:53:06.600 Banks are in the business

00:53:07.480 of purchasing securities.

00:53:09.280 And when you sign that loan contract,

00:53:10.840 that's an IOU,

00:53:12.000 a debt instrument

00:53:12.800 that you've issued

00:53:13.680 and the bank will buy it.

00:53:15.220 That's what's happening.

00:53:16.700 Now,

00:53:17.020 it can sell it.

00:53:18.440 Well,

00:53:18.760 exactly.

00:53:19.260 It can sell it.

00:53:20.220 And also,

00:53:21.060 you will point out,

00:53:22.040 oh,

00:53:22.260 hang on.

00:53:22.760 Fine.

00:53:23.220 These are details.

00:53:24.600 This says,

00:53:25.180 I will get money.

00:53:26.300 I'm borrowing money.

00:53:27.000 So please give me the money.

00:53:27.880 I don't care about the details.

00:53:29.140 And the banker will say,

00:53:31.040 they're careful.

00:53:31.660 They will say,

00:53:32.120 you'll find this in your account with us.

00:53:34.920 They may carelessly say,

00:53:36.440 we've transferred it to your account,

00:53:37.920 which is incorrect

00:53:38.740 because no transfer happens.

00:53:40.760 Your account will be credited

00:53:42.160 because the accounts payable liability

00:53:44.840 arising from the loan contract

00:53:46.400 is represented

00:53:49.020 or misrepresented

00:53:49.820 by the bank

00:53:50.620 as another type of liability

00:53:52.420 called customer deposit.

00:53:54.020 And that is the trick

00:53:54.900 you can only do

00:53:55.800 when you're the keeper

00:53:56.820 of the records

00:53:57.480 and that's only banks

00:53:58.920 that can do that.

00:54:00.140 Others have to keep it

00:54:00.920 off their books

00:54:01.500 and they can't do this trick

00:54:02.740 of switching the type

00:54:03.980 of liability

00:54:04.600 from,

00:54:05.260 you know,

00:54:06.300 accounts payable liability

00:54:08.140 from the loan contract

00:54:09.220 present that

00:54:10.940 or misrepresented

00:54:12.500 as

00:54:13.020 another type of liability

00:54:15.440 called

00:54:15.940 client deposit.

00:54:17.780 That's how money is created.

00:54:18.660 So the conclusion is

00:54:19.600 when you borrow money,

00:54:22.160 the bank just

00:54:22.880 writes the number

00:54:24.460 in your account.

00:54:25.700 And that's what I could

00:54:26.380 empirically confirm

00:54:27.500 because at the bank

00:54:28.680 that I finally found

00:54:29.960 which was happy to do this

00:54:31.720 and let me look inside

00:54:32.880 their books

00:54:33.360 and their transactions

00:54:34.220 and their system

00:54:35.000 and we had all the bankers

00:54:36.080 there so we literally

00:54:36.940 were watching

00:54:37.360 what everyone is doing.

00:54:38.900 The BBC was filming this

00:54:40.020 by the way.

00:54:40.320 They haven't used

00:54:40.800 the actual footage yet

00:54:43.380 but they were there.

00:54:44.480 This was in 2014.

00:54:46.840 We should turn this

00:54:47.900 into a proper documentary.

00:54:49.020 So they've had it

00:54:49.200 for 11 years

00:54:49.820 and haven't aired it?

00:54:50.520 Yes, no.

00:54:51.440 Well, they're close

00:54:51.980 to the City of London Corporation

00:54:53.460 which is the banker's state,

00:54:55.800 a sovereign state

00:54:56.580 inside the United Kingdom

00:54:58.000 or outside the United Kingdom

00:54:59.200 you can't even say

00:54:59.860 because the king

00:55:00.360 is not allowed to enter

00:55:01.160 without permission

00:55:01.820 so it's not part

00:55:02.760 of his sovereign territory.

00:55:04.960 And I guess

00:55:05.420 maybe it wasn't

00:55:06.820 considered convenient

00:55:07.640 to air this documentary

00:55:08.760 but it's on the record

00:55:10.200 with the BBC.

00:55:11.340 So when I did

00:55:12.560 this empirical test

00:55:13.520 which is published

00:55:14.320 in a peer-reviewed journal.

00:55:16.860 So this is what happens.

00:55:18.260 The banks create the money

00:55:19.580 and others can't do it

00:55:20.820 because

00:55:21.360 the banking license

00:55:23.620 gives you this power

00:55:25.300 to invent money.

00:55:28.440 And so that's why

00:55:29.440 it's very important

00:55:30.020 to actually have

00:55:31.000 the right type of banks

00:55:31.880 in your country.

00:55:32.640 Now what type of banks

00:55:33.460 would we want?

00:55:35.140 And here's an important principle

00:55:36.380 I need to explain.

00:55:39.240 It's very important

00:55:41.740 who a bank is lending to

00:55:44.460 and for what purpose.

00:55:46.680 And that is because

00:55:47.980 it's money creation.

00:55:49.360 If it was just an intermediary

00:55:50.740 it wouldn't be so important

00:55:51.620 because it's a zero-sum game.

00:55:53.000 You now have money

00:55:53.620 but somebody else

00:55:54.180 is less plus minus zero

00:55:55.320 not a big impact.

00:55:56.780 If you use it more efficiently

00:55:57.700 maybe a small impact

00:55:58.700 but basically

00:55:59.500 not a big impact.

00:56:00.240 But if it's money creation

00:56:01.640 there will be an impact

00:56:03.560 on all of us.

00:56:05.000 Therefore

00:56:05.320 it's really a public privilege

00:56:06.700 that the banks have

00:56:07.860 to create money.

00:56:08.740 And the question is

00:56:10.040 how should that be used?

00:56:11.060 Now

00:56:11.180 hopefully it's used

00:56:13.060 you know

00:56:13.700 in favor of the people

00:56:15.300 and it can be

00:56:16.860 you know

00:56:17.400 bank credit

00:56:17.940 can be a marvelous

00:56:19.040 engine of

00:56:20.240 enormous economic growth

00:56:22.760 prosperity

00:56:23.360 and in fact

00:56:24.240 abundance.

00:56:24.940 And that's one message

00:56:26.140 I want to get across.

00:56:27.420 We can have high

00:56:28.680 sustainable economic growth

00:56:30.420 which is very stable

00:56:32.780 and smooth

00:56:33.280 but very high

00:56:34.180 creating a lot of wealth

00:56:35.520 for the majority of us.

00:56:37.460 prosperity

00:56:38.700 without inflation

00:56:39.920 and without crises.

00:56:41.640 This can be done

00:56:42.760 but we're not getting it.

00:56:45.540 Why?

00:56:46.120 Why?

00:56:47.020 Yeah why?

00:56:48.300 And I'll explain

00:56:50.060 the mechanism.

00:56:51.180 So

00:56:51.320 there's three scenarios

00:56:52.880 when a bank

00:56:53.640 creates credit

00:56:54.980 there's three possibilities.

00:56:57.860 What has been happening

00:56:58.920 since the 1980s

00:57:00.600 in most industrialized countries

00:57:02.720 most western countries

00:57:03.860 is that

00:57:04.460 banks

00:57:05.260 encouraged by the regulators

00:57:06.740 by the way

00:57:07.200 the BIS in Basel

00:57:08.660 bank regulation

00:57:09.780 international bank regulation

00:57:11.180 the Basel framework

00:57:12.280 they've been encouraging

00:57:13.740 that the banks lend

00:57:17.060 for

00:57:17.800 unproductive

00:57:20.200 asset purchases

00:57:23.000 for the purchase

00:57:23.980 of ownership rights

00:57:25.160 mostly in real estate

00:57:26.640 but it could also be

00:57:27.380 financial assets

00:57:28.340 any type of asset.

00:57:29.680 Now that doesn't contribute

00:57:30.620 to national income

00:57:31.340 it doesn't contribute

00:57:32.120 to GDP

00:57:32.620 and if you look at

00:57:33.320 the definition of GDP

00:57:34.360 it's not in there

00:57:35.820 because

00:57:36.580 hang on

00:57:37.180 you're buying this asset

00:57:38.260 somebody else is selling it

00:57:39.320 well that doesn't add value

00:57:40.280 GDP is a value added concept

00:57:41.880 so it's not in there

00:57:43.280 and that's

00:57:43.780 real estate is not

00:57:44.780 real estate itself

00:57:46.820 is not a productive asset.

00:57:48.080 Exactly.

00:57:48.420 Well

00:57:48.520 you know

00:57:49.120 the transfer of the ownership

00:57:50.640 in real estate

00:57:51.480 you know

00:57:52.100 that doesn't affect

00:57:53.220 that shouldn't affect GDP

00:57:54.800 and that's why

00:57:55.700 it's not in GDP.

00:57:57.100 Of course

00:57:57.400 the real estate

00:57:58.220 agent business

00:57:59.820 is a business

00:58:00.500 and that is part of GDP

00:58:01.700 but that's you know

00:58:02.340 that's just a fraction

00:58:03.260 when we're talking

00:58:04.020 about the actual

00:58:04.680 full transaction

00:58:05.540 that's much larger

00:58:07.280 and that's not in GDP.

00:58:09.840 So when banks

00:58:10.740 lend for asset purchases

00:58:13.200 like real estate purchases

00:58:14.840 financial asset purchases

00:58:17.340 because it's money creation

00:58:20.180 it has an impact.

00:58:21.380 Now what impact is that?

00:58:22.760 Let's look at Japan 0.98

00:58:23.840 1980s

00:58:25.080 the banks were doing what?

00:58:26.160 They were lending

00:58:26.840 massively

00:58:27.820 to people

00:58:29.260 to buy property

00:58:31.340 real estate.

00:58:32.340 if they were just

00:58:34.460 financial intermediaries

00:58:35.440 it wouldn't be a big deal

00:58:36.960 but it's money creation.

00:58:38.740 So actually

00:58:39.220 the banks are creating

00:58:40.540 a lot of money

00:58:41.400 and they're pumping it

00:58:42.300 into the real estate market

00:58:43.360 and now you don't have

00:58:44.040 to have studied economics

00:58:44.940 to tell me

00:58:45.580 what's going to happen

00:58:46.120 with real estate prices.

00:58:48.620 When all the banks

00:58:49.440 are creating new money

00:58:50.480 and they're pumping it

00:58:51.580 into the real estate market

00:58:52.780 through their real estate lending.

00:58:54.880 What's going to happen

00:58:55.380 is what's happening

00:58:56.100 in the United States

00:58:56.980 where real estate

00:58:58.260 becomes unaffordable.

00:58:59.860 Exactly.

00:59:00.080 It's not rocket science

00:59:03.100 real estate prices

00:59:03.900 are pushed up.

00:59:04.760 This is true for all assets

00:59:05.800 so when banks lend a lot

00:59:07.280 for financial assets

00:59:08.640 the prices

00:59:09.780 the values of these

00:59:10.520 financial assets

00:59:11.140 will be pushed up.

00:59:12.820 But it's a Ponzi scheme

00:59:13.880 because it works

00:59:15.580 only as long as

00:59:17.900 the banks continue

00:59:20.400 to create more credit

00:59:21.560 for others

00:59:22.460 to join the game

00:59:23.460 and buy

00:59:24.020 these assets.

00:59:25.580 and the moment

00:59:27.440 the music stops

00:59:28.980 the banks

00:59:29.600 don't increase credit

00:59:31.380 for asset purchases

00:59:32.420 then asset prices

00:59:33.720 won't rise anymore.

00:59:35.460 Because with this

00:59:36.100 I found

00:59:36.500 when I discovered this

00:59:37.300 I found the causal factor

00:59:38.660 behind the land price rises

00:59:40.280 and I tested it

00:59:41.240 and it's true.

00:59:42.180 It's the real estate lending

00:59:43.360 explains the real estate

00:59:44.480 price movement

00:59:45.240 very nicely.

00:59:47.260 And that's of course

00:59:48.880 that has many consequences.

00:59:50.860 So big picture

00:59:52.780 I think what you're

00:59:53.600 please correct me

00:59:54.160 but I think what you're saying

00:59:55.320 is that

00:59:56.180 most of us assume

00:59:57.940 prices are set by markets

00:59:59.740 which is a product of

01:00:01.500 supply and demand.

01:00:03.100 A lot of people want something

01:00:04.380 it becomes a lot more valuable

01:00:05.740 relative to its abundance.

01:00:10.260 You're saying

01:00:11.300 that actually

01:00:12.100 prices are determined

01:00:13.340 by banks.

01:00:15.360 Yes

01:00:15.520 and actually it's more than that

01:00:16.660 because your question implies

01:00:18.320 you're still

01:00:19.140 you know

01:00:20.340 we're all influenced

01:00:21.420 by what's mainstream

01:00:22.280 and your question

01:00:23.360 is about prices

01:00:24.300 and then of course

01:00:25.660 the price of money

01:00:26.540 the interest rate

01:00:27.260 and that is

01:00:28.100 what we're being taught.

01:00:29.440 Think about prices

01:00:30.340 it's all about prices

01:00:31.420 the economy

01:00:32.060 equilibrium

01:00:33.000 markets

01:00:33.940 demand supply

01:00:34.460 prices prices

01:00:35.380 quantities are much more important

01:00:37.980 and that's because

01:00:39.960 there's no equilibrium

01:00:41.800 that's one of these other 0.87

01:00:42.940 ridiculous assumptions 0.94

01:00:44.460 they just assume equilibrium 0.97

01:00:45.840 there's never been any evidence

01:00:46.920 of any equilibrium

01:00:47.720 so markets are rationed

01:00:48.940 ration markets

01:00:49.580 is determined

01:00:49.940 by the short side principle

01:00:51.300 whichever quantity

01:00:52.160 of demand

01:00:52.600 is supply smaller

01:00:53.300 that's the common denominator

01:00:54.580 that determines outcomes

01:00:56.040 it's quantities

01:00:56.760 and what's the most important

01:00:58.060 quantity

01:00:58.560 in the whole system

01:00:59.660 the quantity of money

01:01:00.860 and where does it come from

01:01:02.120 created by banks

01:01:03.320 and then it's important

01:01:04.560 what is the money

01:01:05.980 being used for

01:01:06.660 so when

01:01:07.060 so I told you

01:01:07.980 one of the three scenarios

01:01:09.280 so far

01:01:09.700 when banks create credit

01:01:11.420 for asset purchases

01:01:13.560 you get asset inflation

01:01:15.020 that by the way

01:01:16.700 will always lead

01:01:17.480 to a banking crisis

01:01:18.300 when it's large enough

01:01:19.340 because once then

01:01:20.760 say after five years

01:01:21.900 of banks doing that

01:01:22.980 they then for some reason

01:01:24.420 maybe the central bank

01:01:25.780 other external shock

01:01:27.240 they stop increasing

01:01:29.420 credit for asset purchases

01:01:31.060 these asset prices collapse

01:01:32.640 but they're the collateral

01:01:33.780 for the loans

01:01:34.600 and because bank equity

01:01:36.940 is very small

01:01:37.680 10%

01:01:38.700 and you've pushed up

01:01:41.060 asset prices by 300-400%

01:01:42.800 if from the peak

01:01:43.900 they fall by say 20%

01:01:45.880 the banking system is bust

01:01:47.700 and that's why

01:01:48.120 we have banking crises

01:01:49.060 and that's of course

01:01:49.760 also what happened

01:01:50.360 in Japan in the 90s

01:01:51.500 once you analyze this

01:01:52.360 and you understand

01:01:52.860 credit creation

01:01:53.520 what banks really do

01:01:54.480 they create money

01:01:55.180 they create this Ponzi scheme

01:01:56.640 then it's very easy

01:01:57.520 to forecast

01:01:58.100 okay the banking system

01:01:59.200 is bust

01:01:59.740 and they

01:02:01.040 you know

01:02:01.460 they're bust very often

01:02:02.700 we have these

01:02:03.180 recurring banking crises

01:02:04.540 but there's also ways

01:02:06.340 to get out of it

01:02:07.040 I'll come to that

01:02:07.880 but just before

01:02:09.040 I want to tell you

01:02:09.660 the other two scenarios

01:02:10.580 so when banks create credit

01:02:12.960 for GDP transactions

01:02:15.780 for the real economy

01:02:17.040 it will affect GDP growth

01:02:19.320 because asset prices

01:02:20.640 asset transactions

01:02:21.540 are not part of GDP

01:02:22.360 so that bank

01:02:24.000 these bank loans

01:02:25.300 don't even contribute

01:02:26.080 to national income

01:02:26.980 you know

01:02:28.300 the real estate lending

01:02:29.280 and asset lending

01:02:29.900 but when banks

01:02:31.000 lend to the economy

01:02:33.400 to the real economy

01:02:34.320 we have two possibilities

01:02:36.120 number one

01:02:36.800 if banks lend

01:02:38.040 for consumption

01:02:38.900 consumer loans

01:02:40.400 what happens is

01:02:42.220 these consumers

01:02:42.940 now have suddenly

01:02:43.620 purchasing power

01:02:44.440 and of course

01:02:44.880 they're taking out

01:02:45.800 the loan to spend

01:02:46.660 that's why it's called

01:02:47.640 the consumer loan

01:02:48.220 so we get more

01:02:49.140 consumer spending

01:02:49.860 but have we increased

01:02:51.320 the quantity of goods

01:02:52.500 and services

01:02:52.980 in the system

01:02:53.500 no

01:02:53.800 so this creates inflation

01:02:56.000 so bank credit

01:02:57.660 for consumption

01:02:58.540 is inflationary

01:02:59.800 and that's what we had

01:03:01.100 of course

01:03:01.480 2021-22

01:03:03.280 I had the data

01:03:04.720 data from the Fed

01:03:05.620 was out

01:03:06.160 already in 2020

01:03:07.400 so I was one of the

01:03:09.380 first to warn

01:03:10.560 very accurately

01:03:11.620 it was in May 2020

01:03:13.260 on my Twitter

01:03:14.320 sending out messages

01:03:15.520 well based on this data

01:03:16.600 it was shocking data

01:03:18.440 we have to expect

01:03:20.860 significant inflation

01:03:22.660 18 months down the road

01:03:24.000 which is exactly

01:03:24.900 what happened

01:03:25.480 nothing to do with

01:03:26.980 the war in Ukraine

01:03:28.560 nothing whatsoever

01:03:29.680 nothing to do with

01:03:30.700 you know

01:03:31.680 oil prices

01:03:32.540 gas prices

01:03:33.360 and all that

01:03:34.000 supply shock

01:03:35.060 by the way

01:03:36.300 when you go back

01:03:36.840 to the 70s

01:03:37.680 it's the same

01:03:38.420 they told us

01:03:40.280 oh that was an oil shock

01:03:41.600 the inflation

01:03:42.300 that was the Yom Kippur war

01:03:43.720 of 1973

01:03:44.620 that OPEC shut down

01:03:46.280 production

01:03:47.420 I mean that's

01:03:48.040 that's the story

01:03:48.680 I mean I vaguely

01:03:50.100 I remember adults

01:03:50.980 talking about it

01:03:51.740 but look

01:03:52.120 I know

01:03:52.680 and all the media coverage

01:03:53.940 is very consistent on this

01:03:55.080 but the facts

01:03:56.560 already don't add up

01:03:57.620 because

01:03:58.380 when did

01:03:59.540 the oil price

01:04:00.800 quadruple

01:04:01.640 from 3 to 12 dollars

01:04:03.380 that was in January 1974

01:04:06.060 when did

01:04:07.700 this

01:04:08.380 there were two bouts

01:04:09.060 of inflation

01:04:09.520 in the 70s

01:04:10.160 you know

01:04:10.380 early and late

01:04:11.420 of the decade

01:04:12.440 so in this first bout

01:04:13.960 of inflation

01:04:14.440 when did inflation peak

01:04:15.880 well in Germany

01:04:16.720 in June 1973

01:04:18.020 June 1973

01:04:19.760 when did oil prices

01:04:20.720 go up

01:04:21.060 in January 74

01:04:22.240 something wrong

01:04:23.900 with that story

01:04:24.500 that's not cause or effect

01:04:25.740 in fact

01:04:26.760 when you look at

01:04:27.680 bank credit creation

01:04:28.780 and central bank policies

01:04:30.400 quantity of credit policies

01:04:32.200 they created it

01:04:33.880 from 71 onward

01:04:35.520 71 72

01:04:36.620 ballooning credit creation

01:04:38.740 in the US

01:04:39.620 in Germany

01:04:40.460 in Japan

01:04:41.300 and it's a fascinating story

01:04:43.000 because

01:04:43.840 and we're sort of

01:04:45.340 going off on a tangent

01:04:46.460 but it's

01:04:46.980 it's another

01:04:47.380 amazing story

01:04:48.300 because

01:04:48.580 and it's a very relevant one

01:04:51.640 because what happened was

01:04:53.200 I mean this

01:04:55.160 this goes back to

01:04:56.000 before

01:04:56.720 President Nixon

01:04:58.140 detached the dollar

01:04:59.860 from gold

01:05:00.500 which is a very

01:05:01.100 euphemistic way

01:05:02.740 of putting it

01:05:03.280 before America

01:05:04.740 defaulted on its

01:05:05.740 international obligations

01:05:06.860 August 1971

01:05:08.040 we had the

01:05:10.540 Bretton Woods system

01:05:11.280 from 1944

01:05:12.060 where the dollar

01:05:14.200 was linked to gold

01:05:15.820 and all the central banks

01:05:17.640 participating

01:05:18.320 could at any time

01:05:20.000 switch US dollars

01:05:21.420 dollar balances

01:05:22.620 in their accounts

01:05:24.060 with the Fed

01:05:24.560 into gold

01:05:25.460 that was the system

01:05:26.520 because you weren't

01:05:27.440 sort of encouraged

01:05:28.640 to do it

01:05:29.140 but it was possible

01:05:30.000 now

01:05:31.760 all the currencies

01:05:33.380 were in a fixed exchange rate

01:05:34.580 to the US dollar

01:05:35.500 and the US

01:05:38.220 as some people

01:05:39.340 had warned

01:05:39.920 were beginning to

01:05:41.120 take advantage

01:05:41.960 of the system

01:05:42.660 the Fed

01:05:44.180 was creating

01:05:44.880 a lot of dollars

01:05:45.880 the banking system

01:05:47.400 was creating

01:05:47.780 a lot of dollars

01:05:48.380 they were exported

01:05:49.080 at the fixed exchange rate

01:05:50.180 you were printing dollars

01:05:51.640 and buying up the world

01:05:52.780 and by the

01:05:53.600 late 60s

01:05:54.540 in France

01:05:55.180 because France

01:05:55.680 wasn't part of NATO

01:05:56.460 it was not

01:05:58.520 an occupied country

01:05:59.580 the French

01:06:01.180 were speaking up

01:06:01.900 Germany

01:06:02.420 was being

01:06:03.000 keeping quiet

01:06:04.220 and Japan

01:06:05.660 was keeping quiet

01:06:06.640 you know

01:06:06.940 they've got

01:06:07.260 US troops

01:06:07.840 US military bases

01:06:08.800 in their countries

01:06:10.320 but the French

01:06:10.860 were speaking up

01:06:11.480 for all of us

01:06:12.060 and they said

01:06:12.580 well hang on

01:06:13.080 you're just printing dollars

01:06:14.080 and buying up

01:06:14.720 French companies

01:06:15.560 and French real estate

01:06:16.760 are you perhaps

01:06:17.940 slightly abusing

01:06:18.980 the system

01:06:19.540 is this how

01:06:20.200 it's meant to be

01:06:20.740 and it just continued

01:06:22.860 so then the French 0.71

01:06:23.920 literally sent

01:06:25.240 well first they said

01:06:26.900 to the Fed

01:06:27.560 okay we're going to

01:06:28.180 change these dollars

01:06:28.960 into gold

01:06:29.640 and initially

01:06:30.400 Fed reaction

01:06:30.940 well certainly

01:06:31.520 it's not a problem

01:06:32.240 it's all above board

01:06:34.080 very transparent

01:06:34.820 we will

01:06:35.840 okay how much

01:06:36.580 how much you want to switch

01:06:37.440 just say the number

01:06:38.420 okay this much

01:06:39.280 fine

01:06:39.620 we will now switch it

01:06:41.200 with this gold

01:06:42.620 from our gold reserves

01:06:43.860 into your account

01:06:45.000 with us

01:06:45.620 your account

01:06:47.420 in other words

01:06:48.360 it's just another

01:06:49.140 bank transaction

01:06:50.100 okay you know

01:06:51.280 this is your gold now

01:06:52.640 of course we'll keep it

01:06:53.780 it's very safe with us

01:06:54.860 you know we'll keep it

01:06:55.740 in custody

01:06:56.200 so step number two

01:06:58.260 was then when the French 0.93

01:06:59.280 decided

01:06:59.820 you know there's Pompidou

01:07:01.620 there's Charles de Gaulle

01:07:02.320 they decided

01:07:02.880 well hang on

01:07:03.440 we better get the gold

01:07:05.000 because kind of

01:07:05.820 it doesn't really change much

01:07:07.080 if they just switch the name

01:07:08.820 the label of the account

01:07:09.980 who's holding the gold

01:07:11.080 you know so

01:07:11.580 and they literally sent

01:07:13.620 their navy battleships

01:07:15.700 to Manhattan

01:07:17.560 they docked in Manhattan

01:07:18.720 and they

01:07:19.200 you know

01:07:19.980 captain and his sailors

01:07:21.120 walked to the

01:07:21.960 to the Federal Reserve Bank

01:07:23.240 of New York

01:07:23.740 and they took out

01:07:24.960 the gold

01:07:25.480 now this

01:07:26.780 they couldn't allow

01:07:27.900 the Americans

01:07:28.260 couldn't allow

01:07:28.740 to happen

01:07:29.260 too often

01:07:30.800 no

01:07:31.480 no

01:07:32.080 and it was kept

01:07:33.540 low profile

01:07:34.000 but you know

01:07:34.660 it was beginning

01:07:35.240 to become a story

01:07:36.620 and if others followed

01:07:37.480 so then

01:07:38.000 August

01:07:38.780 1971

01:07:40.000 President Richard

01:07:41.080 did the French

01:07:41.440 get the gold

01:07:42.020 they got some gold

01:07:43.280 yeah

01:07:43.460 this is

01:07:44.040 this really happened

01:07:45.080 this did happen

01:07:45.840 they sent their ships

01:07:46.700 they walked to the

01:07:47.760 Federal Reserve

01:07:48.300 and from their dock

01:07:49.680 in Manhattan

01:07:50.220 they got the gold

01:07:51.560 I guess they had

01:07:51.980 some trolleys

01:07:52.500 because it's really

01:07:53.260 heavy that stuff

01:07:54.060 and they wheeled it

01:07:56.460 back to their ship

01:07:57.180 but not long after

01:07:59.980 the Treasury

01:08:02.660 the Fed

01:08:03.100 and the Treasury

01:08:03.640 advised

01:08:04.220 President Nixon

01:08:05.060 look you better

01:08:06.060 make an announcement

01:08:06.760 what announcement

01:08:07.440 well that

01:08:08.720 we have to protect

01:08:09.760 the dollar

01:08:10.140 from speculators

01:08:11.160 is what he announced

01:08:12.500 we're gonna

01:08:13.680 strengthen the dollar

01:08:14.760 by protecting it

01:08:15.840 against speculation

01:08:17.360 by severing

01:08:19.460 now how did you say

01:08:20.480 we're

01:08:21.040 oh I love this

01:08:22.000 we're temporarily

01:08:23.080 suspending

01:08:24.060 the convertibility

01:08:25.180 of the dollar

01:08:25.940 into gold

01:08:26.680 temporarily

01:08:27.500 of course

01:08:28.080 you know

01:08:28.480 it's now what

01:08:29.760 51 years

01:08:30.840 54

01:08:32.560 54 years

01:08:33.620 yes

01:08:33.880 crazy

01:08:35.380 amazing

01:08:37.220 did

01:08:40.900 the introduction

01:08:43.740 speaking of gold

01:08:44.920 of fiat currency

01:08:46.060 into the West

01:08:47.140 did it make

01:08:47.580 all of this

01:08:47.980 possible

01:08:48.480 like could a bank

01:08:49.520 create

01:08:50.860 money

01:08:52.040 if it wasn't

01:08:53.140 fiat

01:08:53.480 money

01:08:54.280 banks have always

01:08:55.340 created money

01:08:56.040 if you go back

01:08:57.380 into the history

01:08:57.920 of banking

01:08:58.400 it's always been

01:08:59.340 about money creation

01:09:00.400 that is the secret

01:09:01.960 of banking

01:09:02.500 and that's also

01:09:03.160 why it's been

01:09:04.040 kept secret

01:09:04.580 until my paper

01:09:05.420 proving it

01:09:06.080 how do you do

01:09:06.800 that if you

01:09:07.740 can't print

01:09:09.080 something worthless

01:09:09.960 and call it valuable

01:09:10.860 if it's tied to

01:09:13.020 a commodity

01:09:13.700 whose price is set

01:09:14.760 by people

01:09:15.620 you can't control

01:09:16.360 yeah but that's just

01:09:16.860 marketing

01:09:17.300 that is just

01:09:18.040 you know

01:09:18.840 to build the credibility

01:09:19.980 it's a marketing tool

01:09:21.640 I mean it goes back to

01:09:23.600 in my books

01:09:24.520 you know

01:09:24.800 I've got this story

01:09:25.940 in there

01:09:26.480 princes of the yen

01:09:27.540 also

01:09:27.840 it goes back to

01:09:30.280 what happened

01:09:30.960 several times

01:09:31.580 throughout history

01:09:32.240 and a good example

01:09:33.060 is

01:09:33.480 when it happened

01:09:34.340 again in England

01:09:35.160 in the

01:09:35.860 16th and 17th century

01:09:38.100 I mean in China

01:09:41.820 from the 10th century

01:09:43.200 they had paper money

01:09:44.000 which is a smart system

01:09:45.300 especially because the government

01:09:47.260 was creating the money

01:09:48.880 as western people

01:09:50.860 the public thinks

01:09:51.840 is happening with us

01:09:52.720 but it's not

01:09:53.500 right

01:09:53.840 so what was the difference

01:09:55.400 so while the Chinese 0.99

01:09:56.660 had paper money

01:09:57.280 in Europe

01:09:57.800 the rulers

01:09:58.620 the governments

01:09:59.500 the princes

01:10:00.140 and principalities

01:10:01.260 thought gold

01:10:02.580 is money

01:10:03.200 so what do you do

01:10:04.980 when you're the government

01:10:05.720 and gold is money

01:10:06.960 well you try to create

01:10:07.860 some gold

01:10:08.440 well certainly in Europe

01:10:09.920 and particularly in Germany

01:10:10.860 where there were

01:10:11.360 355 principalities

01:10:13.400 as part of the

01:10:13.920 Holy Roman Empire

01:10:14.640 of German nation

01:10:15.360 each one of them

01:10:16.660 had a court alchemist

01:10:18.220 given a lot of

01:10:19.340 R&D money

01:10:20.200 to create gold

01:10:22.800 turn any other

01:10:24.720 base metal

01:10:25.420 or mercury

01:10:26.540 or whatever

01:10:26.900 into gold

01:10:27.620 which is why of course

01:10:28.960 in Germany

01:10:29.500 in Germany

01:10:29.920 became leading in chemistry

01:10:31.140 because of that

01:10:31.920 massive over investment

01:10:33.680 in what

01:10:35.160 you know

01:10:35.440 alchemy

01:10:36.060 what was early chemistry

01:10:37.360 but yeah

01:10:38.180 but it never succeeded

01:10:39.180 so BASF

01:10:41.120 is actually a

01:10:42.320 sort of

01:10:42.900 product over time

01:10:44.160 of

01:10:44.720 the alchemy

01:10:45.920 of course

01:10:46.360 that's why in Germany

01:10:47.180 you had so much

01:10:47.980 knowledge

01:10:48.540 and you know

01:10:49.740 in chemistry

01:10:50.460 it was the

01:10:51.140 yeah alchemy

01:10:52.260 I mean

01:10:53.920 did it work

01:10:54.940 was there

01:10:55.360 was alchemy ever successful

01:10:56.720 in a

01:10:57.900 well not directly

01:10:59.280 in a sense

01:11:00.440 it was successful

01:11:01.240 because

01:11:01.820 the alchemists 1.00

01:11:03.080 concluded

01:11:03.560 mercury can be

01:11:04.520 turned into gold

01:11:05.080 and we know

01:11:05.480 with nuclear physics

01:11:06.380 this is true

01:11:07.220 it's just so expensive

01:11:08.300 today we can do it

01:11:09.440 but it's pointless

01:11:10.300 it's too expensive

01:11:11.300 so it's

01:11:11.960 you know

01:11:12.400 better buy some gold

01:11:13.320 or dig for some gold

01:11:14.860 so

01:11:15.960 also

01:11:16.760 Newton

01:11:18.420 who's

01:11:19.280 famous physicist

01:11:20.140 from England

01:11:21.080 he was very interested

01:11:22.860 in alchemy

01:11:23.360 and he wrote a lot

01:11:23.940 on alchemy

01:11:24.560 and then

01:11:26.560 the Bank of England

01:11:27.740 was created

01:11:29.320 and Newton

01:11:30.660 was very interested

01:11:31.520 in that

01:11:32.040 because basically

01:11:34.700 the Bank of England

01:11:35.780 was alchemy

01:11:37.900 at work

01:11:38.400 you're creating

01:11:39.380 money out of nothing

01:11:40.440 but not through

01:11:41.780 the actual

01:11:42.440 you know

01:11:43.420 physical alchemy

01:11:44.560 process

01:11:45.000 it is the

01:11:46.120 credit creation

01:11:47.120 alchemy

01:11:48.100 because banks

01:11:51.660 create money

01:11:52.140 out of nothing

01:11:52.560 but it's

01:11:53.180 it's a trick

01:11:53.760 so

01:11:54.160 what happened

01:11:54.820 is this

01:11:55.220 when gold

01:11:56.280 is money

01:11:56.720 and people

01:11:57.860 think we need

01:11:58.860 gold for transactions

01:11:59.800 one thing was

01:12:00.760 the government's

01:12:01.580 investing in

01:12:02.340 you know

01:12:03.220 creating gold

01:12:04.240 but you know

01:12:05.180 that was

01:12:05.820 of limited success

01:12:07.420 now the reality

01:12:09.400 is though

01:12:09.800 that people

01:12:10.260 don't want

01:12:10.920 for their

01:12:11.300 transaction

01:12:11.700 to carry

01:12:12.220 gold

01:12:13.120 around

01:12:13.680 because it's

01:12:15.920 dangerous

01:12:16.180 I mean even

01:12:16.580 today

01:12:17.020 if you go

01:12:17.700 around

01:12:17.960 New York

01:12:18.400 City

01:12:18.780 Manhattan

01:12:19.540 you don't

01:12:20.260 really want

01:12:20.600 to walk

01:12:20.860 around

01:12:21.060 with too

01:12:21.500 much

01:12:21.780 visible

01:12:22.260 gold

01:12:22.920 hanging

01:12:23.680 around

01:12:24.020 you

01:12:24.240 you know

01:12:24.500 it's kind

01:12:25.140 of

01:12:25.260 in London

01:12:26.000 you wouldn't

01:12:26.340 want to do

01:12:26.720 it

01:12:26.820 and that's

01:12:27.160 21st century

01:12:28.000 so imagine

01:12:28.840 you know

01:12:29.180 15th

01:12:29.620 16th century

01:12:30.400 17th century

01:12:31.760 you don't

01:12:32.220 really want

01:12:32.600 to do that

01:12:32.900 and it's

01:12:33.200 on the roads

01:12:33.820 no not a good

01:12:34.560 idea

01:12:34.740 so what do

01:12:34.980 you do

01:12:35.300 well you

01:12:36.040 put your

01:12:36.820 money

01:12:37.160 your gold

01:12:38.300 where it's

01:12:38.940 safe

01:12:39.320 turns out

01:12:40.860 there's some

01:12:41.400 professions

01:12:42.120 that were working

01:12:42.900 with gold

01:12:43.440 and therefore

01:12:43.880 they had

01:12:44.220 safe places

01:12:44.860 they had

01:12:45.120 their own

01:12:45.320 little private

01:12:45.840 security team

01:12:46.680 private army

01:12:47.420 to watch

01:12:48.380 their safe

01:12:49.140 with the gold

01:12:49.820 and these

01:12:50.700 are the gold

01:12:51.080 smiths

01:12:51.380 you know

01:12:51.520 they make

01:12:51.880 gold jewelry

01:12:52.560 for the

01:12:53.100 the king

01:12:54.060 and the aristocrats

01:12:55.020 and the rich people

01:12:55.800 and so people

01:12:56.900 started to deposit

01:12:57.780 their gold

01:12:58.600 with the gold

01:12:59.300 smith

01:12:59.480 obviously you need

01:13:00.240 evidence

01:13:00.780 like what if

01:13:01.600 something happens

01:13:02.040 to the gold

01:13:02.460 smith

01:13:02.800 and his son

01:13:04.000 taking over

01:13:04.480 the business

01:13:04.960 denies that

01:13:05.680 that's your

01:13:06.060 gold

01:13:06.280 so clearly

01:13:06.580 you need

01:13:07.000 some receipt

01:13:07.980 okay so

01:13:08.660 that was the

01:13:09.400 convention

01:13:09.740 they got a

01:13:10.200 little fee

01:13:10.640 for safeguarding

01:13:11.780 the gold

01:13:12.200 fine

01:13:12.680 everyone's happy

01:13:13.380 but the next

01:13:14.540 step is this

01:13:15.080 let's say

01:13:15.520 i'm you know

01:13:16.340 in the province

01:13:17.080 somewhere in

01:13:19.000 hampshire

01:13:19.460 in england

01:13:20.860 and we're

01:13:21.940 neighbors

01:13:22.260 and we agree

01:13:22.940 i'm buying

01:13:23.660 this plot

01:13:24.120 of land

01:13:24.480 from you

01:13:24.920 and we

01:13:25.920 agree on

01:13:26.280 the price

01:13:26.760 and okay

01:13:27.440 how much

01:13:27.760 gold

01:13:28.080 fine

01:13:28.500 so what

01:13:30.500 what are we

01:13:30.620 going to do

01:13:30.900 next

01:13:31.120 well i've

01:13:31.580 got the

01:13:31.840 gold

01:13:32.060 with the

01:13:32.320 gold

01:13:32.460 smith

01:13:32.640 in london

01:13:33.260 you know

01:13:34.400 okay

01:13:34.760 i will

01:13:35.820 go and

01:13:36.320 get the

01:13:36.600 gold

01:13:36.940 by the way

01:13:37.620 what are you

01:13:38.200 going to do

01:13:38.580 with the

01:13:38.860 gold

01:13:39.080 because if

01:13:40.740 you're not

01:13:40.980 going to

01:13:41.180 keep it

01:13:41.480 here

01:13:41.640 then

01:13:41.860 it's

01:13:43.080 kind of

01:13:43.300 dangerous

01:13:43.560 like i'm

01:13:44.040 risking my

01:13:44.620 life going

01:13:45.060 to get

01:13:45.400 the gold

01:13:45.780 bring it

01:13:46.140 here

01:13:46.300 and then

01:13:46.560 you bring

01:13:46.940 it back

01:13:47.220 to the

01:13:47.480 gold

01:13:47.660 smith

01:13:47.980 might as

01:13:48.800 well

01:13:48.920 leave it

01:13:49.280 in the

01:13:49.420 gold

01:13:49.580 smith

01:13:49.760 and i

01:13:50.000 give you

01:13:50.360 my deposit

01:13:51.040 receipt

01:13:51.620 and that's

01:13:53.360 what happened

01:13:53.780 so the

01:13:54.180 the receipts

01:13:55.640 of deposited

01:13:56.480 gold

01:13:57.740 of deposited

01:13:58.380 money

01:13:58.640 became the

01:13:59.400 first paper

01:13:59.900 money in

01:14:00.320 europe

01:14:00.540 gold

01:14:00.800 certificates

01:14:01.360 yes

01:14:01.960 exactly

01:14:03.880 that's how

01:14:04.960 it works

01:14:05.380 now

01:14:06.200 so the

01:14:07.960 goldsmiths

01:14:08.380 of course

01:14:08.600 realized

01:14:09.060 what's

01:14:09.320 happening

01:14:09.680 oh nobody's

01:14:10.360 coming to

01:14:10.660 pick up

01:14:10.940 the gold

01:14:11.280 that's

01:14:11.500 kind of

01:14:11.760 convenient

01:14:12.080 and because

01:14:13.160 and this

01:14:13.840 already explains

01:14:14.720 the secrecy

01:14:15.400 that suddenly

01:14:15.960 then engulfed

01:14:16.580 the whole

01:14:16.840 thing

01:14:17.180 because people

01:14:18.720 also realize

01:14:19.220 well the

01:14:19.560 goldsmiths

01:14:20.000 have the

01:14:20.360 money

01:14:20.580 they have

01:14:20.860 the gold

01:14:21.320 and if

01:14:21.720 you suddenly

01:14:22.140 you get

01:14:22.460 into trouble

01:14:23.020 or you

01:14:23.380 lose your

01:14:23.720 job

01:14:23.960 you need

01:14:24.680 money

01:14:25.260 where do

01:14:25.700 you go

01:14:26.060 well the

01:14:26.540 goldsmiths

01:14:27.060 have money

01:14:27.580 so people

01:14:28.540 came there

01:14:29.260 begging for

01:14:29.960 money and

01:14:30.340 asking for

01:14:30.900 loans

01:14:31.400 here's where

01:14:32.900 the secrecy

01:14:33.400 comes in

01:14:33.900 until around

01:14:35.440 350 years

01:14:38.000 ago in

01:14:38.620 almost all

01:14:39.260 european

01:14:39.860 countries

01:14:40.520 it was

01:14:42.500 illegal to

01:14:43.300 lend it

01:14:43.660 interest

01:14:44.180 that's

01:14:45.480 christian

01:14:46.020 christian

01:14:47.240 rules

01:14:47.560 you know

01:14:47.960 the bible

01:14:48.360 was against

01:14:48.960 interest

01:14:49.480 and interest

01:14:50.520 was everywhere

01:14:51.260 forbidden

01:14:51.820 so the

01:14:53.800 goldsmiths

01:14:54.700 would say

01:14:55.320 oh well

01:14:55.980 yeah maybe

01:14:57.540 i can lend

01:14:58.080 you some

01:14:58.380 money but

01:14:59.360 we have to

01:14:59.880 keep this

01:15:00.180 very secret

01:15:00.780 because you

01:15:02.640 know of

01:15:03.160 course i'm

01:15:03.420 going to

01:15:03.640 charge you

01:15:03.960 interest

01:15:04.200 yeah i'll

01:15:04.900 pay interest

01:15:05.420 yeah yeah

01:15:06.120 we'll keep

01:15:06.660 it secret

01:15:07.040 and this

01:15:07.760 is what

01:15:08.000 happened

01:15:08.320 now so

01:15:09.560 the goldsmiths

01:15:10.200 realized we

01:15:10.660 can lend

01:15:11.160 out this

01:15:11.600 gold that

01:15:12.180 everyone is

01:15:12.640 depositing with

01:15:13.240 us some

01:15:13.540 of it

01:15:13.760 particularly

01:15:14.060 the one

01:15:14.360 that's

01:15:14.980 like

01:15:15.220 bullion in

01:15:15.920 a standardized

01:15:16.440 size and

01:15:17.600 whatever

01:15:17.940 we can

01:15:19.620 lend out

01:15:19.960 nobody will

01:15:20.360 realize

01:15:20.720 and we

01:15:22.720 keep it

01:15:23.000 secret

01:15:23.200 everyone's

01:15:23.780 sworn to

01:15:24.100 secrecy

01:15:24.580 because you

01:15:26.200 know we're

01:15:26.620 doing something

01:15:27.100 illegal here

01:15:27.600 with the

01:15:27.900 interest we're

01:15:28.440 charging interest

01:15:29.140 that's by the

01:15:30.380 way how the

01:15:30.680 bond market

01:15:31.180 was was

01:15:31.760 created because

01:15:32.600 it's pretending

01:15:33.800 not to charge

01:15:34.420 interest

01:15:34.940 you know

01:15:36.720 discount bonds

01:15:37.620 where you have

01:15:39.120 no coupon

01:15:39.800 you come in

01:15:40.820 and you want

01:15:41.540 to borrow

01:15:41.840 money okay

01:15:42.340 i'll give you

01:15:42.920 i'll give you

01:15:43.600 90 and you

01:15:44.300 pay back

01:15:44.640 100 you

01:15:46.140 know which

01:15:46.460 is the bond

01:15:46.900 calculation of

01:15:47.740 the that is

01:15:49.140 the interest

01:15:49.680 really but

01:15:50.180 anyway so

01:15:50.780 all these

01:15:51.400 tricks came

01:15:51.880 about because

01:15:52.480 of the

01:15:52.800 prohibition

01:15:53.380 of of

01:15:54.780 interest but

01:15:56.000 the goldsmiths

01:15:57.240 then realized

01:15:58.020 next well hang

01:15:58.820 on maybe we

01:16:00.180 don't even need

01:16:00.980 to lend the

01:16:01.540 gold and

01:16:03.660 of course like

01:16:04.240 every guild

01:16:05.040 any trade

01:16:06.880 association they

01:16:07.580 were meeting

01:16:07.960 regularly they

01:16:08.480 were talking

01:16:08.900 shop and

01:16:10.380 you know how

01:16:10.820 do we deal

01:16:11.220 this with this

01:16:12.260 issue of

01:16:12.600 course we

01:16:12.820 don't want

01:16:13.060 to lend

01:16:13.300 out too

01:16:13.620 much gold

01:16:14.080 we might

01:16:14.400 get into

01:16:14.720 trouble also

01:16:15.560 we need to

01:16:16.000 collaborate if

01:16:16.780 some goldsmith

01:16:17.300 suddenly needs

01:16:17.860 more gold we

01:16:18.460 have to help

01:16:18.860 each other

01:16:19.240 otherwise

01:16:19.620 everything will

01:16:20.840 come up and

01:16:21.440 we'll all get

01:16:21.940 arrested for

01:16:22.540 lending an

01:16:22.920 interest you

01:16:24.000 know so they

01:16:24.440 were sworn to

01:16:25.500 secrecy and

01:16:27.120 one goldsmith

01:16:28.280 probably the

01:16:28.760 first one to

01:16:29.220 have this idea

01:16:29.720 said hang on

01:16:30.240 guys i've got

01:16:30.720 an idea we

01:16:31.320 don't need to

01:16:32.180 lend out gold i'll

01:16:33.020 show you so

01:16:34.260 next there's always

01:16:35.020 this guy coming

01:16:35.600 every monday

01:16:36.100 morning okay so

01:16:37.620 let's wait he's

01:16:38.120 coming probably in

01:16:38.740 20 minutes they always

01:16:39.820 want to borrow money

01:16:40.660 i've turned him

01:16:41.120 down i'll lend him

01:16:41.800 money to show

01:16:42.460 you so he

01:16:43.680 comes around oh

01:16:44.300 please oh you

01:16:45.880 know dear goldsmith i

01:16:47.040 need to borrow this

01:16:47.720 money all right

01:16:49.320 today i've decided i'll

01:16:50.640 lend it to you

01:16:51.840 here's the standard

01:16:52.860 contract you know all

01:16:53.920 the small print the

01:16:54.800 interest your

01:16:56.080 daughters will be

01:16:56.680 sown in slavery if

01:16:57.380 you can't repay you

01:16:58.200 know it's a standard

01:16:58.880 practice and all that

01:16:59.880 small print don't

01:17:01.100 worry about it yeah i

01:17:01.940 know okay it's fine

01:17:02.720 just one more thing

01:17:04.940 before i give you the

01:17:06.300 gold okay we said

01:17:07.260 300 grams of gold

01:17:08.740 here it is i will

01:17:10.480 you know you sign

01:17:11.820 there i sign and i

01:17:12.800 lend it to you but i

01:17:15.280 want you to deposit

01:17:16.300 the gold immediately

01:17:17.280 with me well i need

01:17:20.060 the gold i need the

01:17:20.900 money yeah but you get

01:17:21.980 the deposit receipt and

01:17:23.260 oh yes of course yeah

01:17:25.140 that's all i need i need

01:17:26.320 the receipt

01:17:26.860 get it so what happened

01:17:30.500 was the goldsmith loan

01:17:32.940 contract signed and the

01:17:34.720 goldsmith buying that

01:17:35.940 loan contract that's an

01:17:36.980 asset on the balance

01:17:37.780 sheet hands out the

01:17:39.740 300 grams of gold now

01:17:41.020 you see it now you

01:17:41.740 don't you've deposited

01:17:42.600 it here's your deposit

01:17:43.580 receipt it's all very

01:17:44.840 transparent and with

01:17:45.700 double entry accounting

01:17:46.700 which was created for

01:17:48.800 banking to hide the

01:17:50.000 truth of banking it

01:17:51.560 looks all very

01:17:52.260 transparent because you

01:17:53.600 can't see the money

01:17:54.460 creation at first sight in

01:17:56.340 double entry accounting

01:17:57.340 so why is all it's all

01:18:00.120 correct he the borrower

01:18:01.520 deposited the money didn't

01:18:02.880 you see it just deposited

01:18:03.820 it

01:18:04.120 ah but it is still

01:18:05.780 fraudulent it's fraud

01:18:06.980 and you can prove this

01:18:08.340 because did this person

01:18:11.360 the borrower when they

01:18:12.840 walked to the goldsmith did

01:18:14.060 they have gold with them

01:18:14.940 no but they're leaving the

01:18:17.600 goldsmith with a document

01:18:19.700 that confirms they've

01:18:20.880 deposited gold well how did

01:18:22.080 that happen

01:18:22.580 and also secondly if you

01:18:25.460 measure the amount of gold

01:18:26.460 at the goldsmith did that

01:18:27.320 increase

01:18:27.720 no so that's fraud

01:18:29.860 now that's also modern

01:18:32.240 banking that's how it came

01:18:33.300 about historically

01:18:34.120 that's that's an amazing

01:18:37.000 and that was your your

01:18:37.740 question there you know

01:18:38.520 how did this come about

01:18:39.360 this is how it came about

01:18:40.420 so how um did central

01:18:42.480 banking come about what

01:18:43.640 is the in layman's terms

01:18:45.160 difference between a bank

01:18:46.140 and a central bank

01:18:46.880 it's just it's the bank of

01:18:49.300 the other banks

01:18:50.040 um and they that's how they

01:18:52.220 came about it's the the

01:18:53.300 bigger banks and the bigger

01:18:54.500 bank owners getting

01:18:55.520 together well really we

01:18:56.840 should have for stability

01:18:58.060 and if there's a crisis

01:18:59.520 we should have our own sort

01:19:02.200 of maybe government

01:19:03.920 sanctioned or somehow

01:19:05.220 being given the halo of

01:19:07.020 the government um we

01:19:09.760 should have this bank of

01:19:11.520 banks because then we have

01:19:13.740 no more problem bob's your 0.65

01:19:14.700 uncle you know if you get

01:19:15.620 into trouble well that bank

01:19:17.360 with government authority can

01:19:19.100 then also create money but

01:19:20.880 it's different it has the

01:19:21.580 government authority and

01:19:23.980 then we'll never go bust and

01:19:25.660 that's how central banks were

01:19:26.560 created and they were all

01:19:27.220 created originally privately

01:19:28.920 owned and of course to own a

01:19:30.740 central bank is kind of

01:19:32.000 useful isn't it kind of

01:19:33.800 profitable

01:19:34.220 how do um let me ask a very 0.97

01:19:38.040 dumb question oh by the way 0.95

01:19:39.800 yes actually tucker i always 0.98

01:19:42.080 tell my student there's no

01:19:43.060 such thing as a silly question

01:19:45.040 well you have to do me the 0.65

01:19:46.640 favor for the sake of the

01:19:48.360 audience pretend you know

01:19:50.140 nothing about economics because

01:19:51.560 you must ask very simple

01:19:53.000 questions because you see in

01:19:55.080 finance in particular there's

01:19:56.740 this this um macho idea never

01:20:00.060 to admit if you said it

01:20:01.200 earlier the experts never

01:20:02.220 admit ignorance so they will

01:20:04.180 never ask like when they don't

01:20:05.900 understand something and that's

01:20:07.020 how in financial markets you get

01:20:08.160 some very major mistakes because

01:20:10.900 no one wants to ask what a

01:20:12.120 derivative is but they don't

01:20:13.260 want to admit that actually they

01:20:14.520 don't understand yeah for

01:20:15.420 example these you know credit

01:20:17.080 derivative sliced and diced uh

01:20:19.480 mortgages credit strategy so 0.79

01:20:21.120 anyway so there's no no silly

01:20:22.880 question well i'm actually a 0.96

01:20:24.080 little bit more ignorant than i 0.87

01:20:25.240 realized that i was before our 0.98

01:20:26.960 conversation um how does a bank

01:20:30.940 get so rich you said it's it's

01:20:33.620 just the course of things that when

01:20:36.760 you are a part owner of a central

01:20:38.260 bank you're going to wind up

01:20:39.100 extremely rich how how does a banker

01:20:42.680 get rich um well i mean the the

01:20:46.540 money creation creates money for the

01:20:50.380 bank through the return on the

01:20:52.940 equity so that's in a way it's a

01:20:56.000 traditional way it's just that it's

01:20:57.660 because of this privilege that you're

01:20:59.920 creating money that it's much easier

01:21:01.600 than other companies to have that

01:21:03.580 return and particularly if you're a

01:21:05.400 that's for a normal bank but if you're

01:21:06.980 a central bank then it's almost

01:21:09.000 unavoidable that it's extremely

01:21:11.060 profitable so in principle banks get

01:21:13.380 their return from the the difference

01:21:15.240 between the interest they pay on

01:21:16.800 deposits and the interest they earn on

01:21:19.620 their lending but the key thing is that

01:21:22.380 for the actual lending they're not

01:21:23.940 really giving up intrinsic resources

01:21:26.040 because they're creating new money

01:21:27.420 so it's actually easy for them to earn

01:21:30.180 this all fake but but it is you know

01:21:32.400 it's there's technicalities and you

01:21:34.400 have to do it properly it doesn't mean

01:21:36.220 you know you can be careless and

01:21:38.000 sometimes when they are careless it

01:21:39.340 blows up and we have banking

01:21:40.640 problems you know and banking crisis

01:21:42.060 but the the regular banking crisis are

01:21:44.960 mainly when banks create credit for

01:21:46.800 asset purchases and that's what

01:21:48.400 creates these boom bust cycles in the

01:21:50.380 UK bank credit 85% of bank credit is

01:21:54.700 for asset purchases and so you get

01:21:56.820 these asset boom bust cycles banking

01:21:58.760 crisis in regular intervals in some

01:22:01.500 other countries I haven't mentioned the

01:22:04.360 third scenario now so bank credit for

01:22:06.460 asset purchases no good it's not

01:22:08.820 sustainable it's not productive credit

01:22:11.860 creation for consumption is it's for the

01:22:16.220 real economy but it's for consumption

01:22:17.400 therefore inflationary is also no good

01:22:19.320 it's not sustainable the third

01:22:22.020 possibility is the redeeming feature of

01:22:24.180 banking and that's why we can turn

01:22:26.440 banking into a very positive very

01:22:29.360 powerful positive force for creating

01:22:31.660 prosperity and abundance namely when

01:22:33.600 banks create credit for productive

01:22:38.340 business in investment for the

01:22:41.260 investment in the production of goods and

01:22:43.600 services implementing new technologies

01:22:45.720 implementing new ideas it's actually the

01:22:49.160 driving factor for growth and prosperity

01:22:51.840 when banking supports entrepreneurs that

01:22:54.760 implement new things and that's when you

01:22:57.420 get very high economic growth without

01:22:59.540 inflation without asset inflation and so

01:23:02.500 really what we should do is bank credit

01:23:04.460 creation should be mainly only for business

01:23:06.780 investment but this this is not what

01:23:09.700 regulators do regulators now have not just

01:23:12.300 hundreds they have thousands of rules for

01:23:14.700 banks and banking is the most regulated

01:23:17.320 industry on the planet most of them are

01:23:20.200 useless they don't achieve the goal of

01:23:21.740 preventing banking crisis for that we can

01:23:24.720 scrap all these rules we just need one rule

01:23:26.820 that banks should only be allowed to create

01:23:28.380 credit if it contributes to to national

01:23:32.600 income through business investment if banks

01:23:36.540 focus on that you get very steep economic

01:23:39.000 growth that is by the way the solution to

01:23:42.140 the puzzle of how some countries have had the

01:23:47.440 most amazing economic growth taking off like

01:23:50.720 a rocket you know this is another measure of

01:23:54.900 success of macroeconomics is how many

01:23:56.960 countries you know we've had this macroeconomics

01:23:59.080 development economics for 100 200 years

01:24:02.000 mainstream economics coming from English

01:24:04.560 classical economics neoclassical is more or

01:24:06.800 less the same and the IMF and the World Bank have

01:24:10.620 implemented this now globally since you know since

01:24:13.740 1945 developing countries forced to more or less

01:24:16.860 carrot and stick you know to implement these

01:24:19.400 policies that are considered orthodox deregulate

01:24:22.560 liberalize privatize and allow foreign investment to

01:24:25.740 come in and you know follow the orthodoxy then

01:24:28.860 interest rate policies so how many countries using this

01:24:33.000 IMF World Bank approach to economic development have

01:24:36.360 actually succeeded and have developed you know we've

01:24:39.480 had 80 years of that so it's you know it's

01:24:41.720 enough time to actually say okay let's take stock

01:24:44.400 it's a longitudinal study yeah yeah so how many

01:24:47.840 countries have decisively moved from developing

01:24:50.680 country status to develop country status as a result

01:24:53.140 of these policies well there isn't one none what

01:24:57.520 about Haiti well is that industrialized no no that's so

01:25:03.900 what I thought you're gonna say what about China for

01:25:06.860 example India what about well you see we do have some

01:25:10.660 countries that have developed the ones you can count

01:25:13.460 them on on on five fingers of one hand the countries

01:25:17.820 that in the 20th century and perhaps early 21st century

01:25:20.940 included have moved decisively from developing country

01:25:24.260 to develop country status namely in that sequence Japan

01:25:29.220 Korea Singapore Taiwan and China now with China if you want 0.90

01:25:36.540 to quibble some because it's such a huge country some parts

01:25:39.440 of it have not yet made that transition but you know key parts

01:25:44.200 of China have actually and and so I think we can include China

01:25:48.680 in this list in fact China is the best example of how this was

01:25:52.780 achieved they all achieved in the same way Japan was the first 0.94

01:25:56.060 in the Japanese model which is also what I found in my long

01:25:59.140 research on Japan and which is described in detail in the book

01:26:02.220 princes of the yen you know what is this high growth system it's a magic system

01:26:06.920 for having high growth and prosperity well China is the best example because

01:26:12.060 they most of the time in the post-war era they didn't follow this model on the

01:26:16.620 Mao it was Soviet Stalinist planned economy and of course also looking at banks how

01:26:25.220 how many banks did they have one the central bank the people's bank of China okay now after

01:26:32.840 Mao died there's some to and fro but then a new leader came to power Deng Xiaoping in

01:26:40.060 November 1978 Deng and he was a smart guy and he gave a speech very early on it's the first

01:26:50.260 speech where he was you know rising to power and he said that I mean I'm paraphrasing essentially

01:26:56.040 he said let's forget about all this ideological stuff I had to be careful obviously because

01:27:00.200 there was still hardcore Mao is probably in the room but let's not talk about ideology why don't

01:27:05.940 we focus on what delivers growth and prosperity essentially what he's saying you know it's a

01:27:11.520 famous expression it's like it doesn't matter the cut the color of the cat whether it's a red cat

01:27:16.100 or a or a black cat is what he should have said as long as it catches the mice it's a good cat

01:27:21.200 yes and he was talking about the economy you know it doesn't matter what we call the system as long

01:27:25.900 as it delivers and achieves what we want which is high growth prosperity which of course strengthens

01:27:31.240 China so everyone wants that let's do it that's what he was saying now and he was switching from

01:27:37.340 ideology to practical empirical work and he had there's another expression learn truth from facts you know

01:27:45.100 where you get these four Chinese characters yes proverbs made up of four characters so

01:27:49.760 seek truth from facts that's the empirical methodology not ideology which dominates economics

01:27:58.340 so it was pretty radical for China it remains revolutionary for western economics where they

01:28:04.400 still have ideology dominating and essentially their western type of Mao's little red book is still

01:28:10.540 dominating things in economics whereas the Chinese decided okay we've done that cultural revolution 0.86

01:28:16.260 great leap forward which was greatly backward I mean this all seems to be happening now in Europe you

01:28:21.740 know all this ideology and de-industrialization which is what they tried and didn't really work wasn't

01:28:27.880 really good so let's look at empirical facts what works now he had a neighboring country that was

01:28:33.960 performing really well Japan and what did he do he went to Japan already before he was appointed but in the same year 1978 he traveled to Japan with his experts

01:28:46.680 and he knew I think his because a lot of when I was I was in Japan for 12 years and

01:28:52.800 when I was a student initially you realize the large majority the biggest majority of foreigners in Japan is Chinese there's many Chinese and the you know among the students so many Chinese students so they know Japan well this generation generation they've studied in Japan speak Japanese very fluently

01:29:10.180 really know everything about it so he came with his experts and I'm sure they knew one charming feature which I also discovered of the of the Japanese people who are very kind

01:29:20.800 to foreigners i mean kind to everyone but you know very friendly and kind people um they have

01:29:26.280 this additional charming feature that they want to tell you the truth but culturally in japan

01:29:32.700 there's this interesting thing and you when you go to japan and you read some book about japanese

01:29:36.980 culture what are the difference usually it's mentioned oh in japan there's two truths two

01:29:42.360 truths what is that yes the official truth and the real truth oh yeah well that's true everywhere

01:29:48.420 isn't it but in japan it's culturally recognized and so what happened to me a lot of time when i was

01:29:53.940 in formal meetings during the day trying to ask questions about you know how does this work with

01:29:57.720 this foreign investment real estate transaction bank credit they would give me answers and several

01:30:03.120 times on the way out one of the group speaking to me would say richard that was of course the official

01:30:09.660 story well let's meet for dinner i'll tell you the real story you know the official story is called

01:30:15.340 tatemai which means the facade the front the outside the outer appearance and the true

01:30:21.680 truth is is hone the the real intrinsic truth and this happened many times because japanese people want

01:30:30.240 to tell you the truth and because it's recognized that what you hear in official meetings government

01:30:34.480 announcements or even business meetings during the day that's you know that's just the official

01:30:39.060 narrative but it's not true there's a gap and that's by the way also why they have to work such

01:30:44.240 long hours because there's a rule that after six o'clock it's off the record and you can speak the

01:30:51.040 truth in informal setting for dinner and so on so there's an honest part of the day yes but in fact

01:30:56.820 that's so important as you can imagine that's why they work so long you know they have to because

01:31:00.920 that's finally i would show up at 5 30 just to like get it out of the way so i'm sure things are

01:31:05.940 being new about that and i checked the records they did have some banquets some dinners with sake

01:31:10.340 and motai flowing and that's when they tell you the truth and he did ask the question he said i

01:31:16.540 have come you know here's the chinese leader coming to japan these countries were at war second second 0.90

01:31:20.620 world war and it was it was not just making peace it was literally he was saying thank you for for

01:31:27.260 receiving me i have come to you to seek the elixir of high economic growth he was alluding to this

01:31:35.400 legend that both the chinese people know and the japanese people know namely that there's this legend

01:31:39.940 there was an ancient scholar one of the sages with a long beard and the flowing gowns from china

01:31:45.680 going to japan seeking the elixir of life which is a bit like the you know philosopher's stone the

01:31:52.900 alchemy you know which you know is probably the link to money creation but anyway and it's a famous

01:31:58.340 story now he didn't find the elixir of life in japan but you know this chinese scholar seeking it so he

01:32:04.780 was alluding to that when he used that expression everyone knows and you know of course the japanese

01:32:09.780 know that that culture that the writing you know there's so much is from china that actually there

01:32:14.960 is a close relationship you know yes and i think both peoples actually quite appreciate each other

01:32:20.760 it's usually i must say you know it's it's like foreign policy neocons from the u.s who want these

01:32:26.580 countries to be apart it's like germany and russia must be apart but anyway um so um and he told him

01:32:36.280 that you know what that how the japanese reacted when he said i've come to you to to to ask you what

01:32:41.840 is the secret of high economic growth the elixir of high growth they told him now what did they tell

01:32:47.580 him well it's not recorded you know there's no transcript of this of this dinner um but we do know

01:32:55.020 what he did after that and i can imagine the conversation probably the first question these

01:33:00.400 were all senior people from the ministry of finance bank of japan um bank leaders um i can imagine they

01:33:07.420 will have asked okay so how many banks do you have in china with your i don't know at the time maybe

01:33:11.320 five six hundred million people already a multiple of japan um and of course now beyond a billion but

01:33:18.300 so how many banks do you have oh one

01:33:21.940 you think with one bank deciding the creation allocation of money you can get prosperity for

01:33:30.600 everyone think again you need to have many many banks you need small local banks you haven't even

01:33:37.760 finished your explanation of the meeting between dung xiaoping and the japanese leadership and you

01:33:43.640 you've just here's what i think you're saying we're about to say that the problem one of the

01:33:50.060 problems with china's economy was that one bank could never efficiently allocate credit which is the driver

01:33:58.360 of the economy you've made that case i think really um powerfully and so you said what you really need

01:34:06.200 are smaller banks because they can more precisely allocate credit to different parts of the country

01:34:13.460 that have different needs and um and if you don't have that you have like stagnation and

01:34:20.400 inefficiency and like death and that kind of describes what's happening in the united states i'm

01:34:26.420 sorry to ask you to pause that's that is that what you're saying am i following yes yes no you're not

01:34:31.820 just following you're that's exactly the next point um in fact i did a study on the u.s with my

01:34:38.100 collaborator former phd student of mine um because america still has just about the largest number

01:34:44.460 of banks in the world um although the the number used to be a multiple yes the fed killed 10 000 banks

01:34:50.740 in the 30s it killed 10 000 banks 50 almost 15 000 banks in the post-war era central banks want to

01:34:56.740 consolidate and reduce the number of banks but the more banks the better uh for an economy for the

01:35:02.200 country for the middle class what we found in the study is we looked at what is the link between

01:35:06.460 the uh the size of the bank and the size of the borrower and then and you know um and what we found

01:35:14.120 i mean it's it makes common sense but it wasn't really demonstrated properly in the in the uh in the

01:35:20.060 research by others yet it's a simple fact in banking big banks want to do big deals with big

01:35:26.180 customers makes sense that's how they earn big money who lends to small firms only small banks

01:35:33.100 now why are small firms important they're the biggest employer small and medium-sized enterprises

01:35:38.640 employ 65 70 percent of everyone in every country in the world in some countries it's 70 80 percent of

01:35:45.520 employment you know in when you study finance and i'm teaching finance in some at several universities

01:35:52.880 you know um basically um they focus on companies that issue stocks and shares well that's such a

01:36:00.940 minority 99.9 percent of companies don't issue and publicly trade stocks they're not listed in the

01:36:08.160 stock exchange they are small firms where do they get money from small firms you know 99 of the

01:36:15.560 companies are small medium-sized enterprises they get their money from i mean internal money friends and

01:36:21.440 family yes but external money is only from banks now which banks if you have an economy that's mostly

01:36:29.140 dominated by large banks extreme case is the uk five big banks dominate you know the the banking system

01:36:36.400 85 percent of deposits with five banks the big five then because they want to do big deals they

01:36:43.440 don't lend to small firms small firms don't get money and that means only big cities survive

01:36:47.800 yes everything becomes concentrated now germany it's reflected in demographic trends it's reflected

01:36:54.620 exactly wealth allocation exactly so because this is a trend like when i was born 1969 like there was a

01:37:01.800 lot of wealth in grand rapids michigan there was a lot of wealth in des moines iowa there was

01:37:06.500 portland oregon i mean there were it was more diffuse because there were more banks more local banks

01:37:12.220 everything is affected even fertility because if everyone you know has to move to the big cities

01:37:16.800 where property is more expensive smaller apartments small dwellings you know can't have another child

01:37:22.980 you know so many things in in society are actually affected directly by this trend and this trend has been

01:37:29.820 driven very hard by the central banks they want to reduce the number of banks sometimes it's official

01:37:34.040 like the ecb we think europe is overbanked there's too many banks and the ecb is the youngest

01:37:40.040 major central banks only founded around 2000 and it's already managed to kill 6 000 banks in europe

01:37:45.580 wow well done so it's very sad now germany in europe used to be the country with by far the largest

01:37:52.160 number of banks and still is the one with the largest number of banks but in the last 20 years

01:37:58.100 under ecb pressure through their policies of reducing banks profit margins you know zero interest

01:38:04.900 negative interest rate policy and then this over regulation made life so hard for small banks

01:38:10.080 they had no choice but to merge that was the goal and that was achieved so the number of small banks

01:38:14.640 goes down and that means banks lend less for productive business investment the best way to make sure that

01:38:21.820 banks create credit for the best of these three scenarios you know to make sure they don't lend for real

01:38:27.460 estate or for consumption but mainly for productive business investment is to have many many small

01:38:34.340 banks that lend locally to small firms and that was the system in germany but it's been under threat

01:38:43.240 but it also you know while germany was doing well until a few years ago germany produced the largest

01:38:50.580 number of hidden champions do you know what these are these are special small firms that that's why

01:38:57.380 hidden because basically we don't know the names of all these small firms they may be dominant in

01:39:02.080 their market niche but you know they're so small we don't know the names and you can look

01:39:07.840 internationally where these hidden champions champion because they have top one two three market share

01:39:13.860 gold silver bronze like a champion in the olympics that's where this concept comes from and if you look

01:39:19.220 internationally germany had by far the largest number of hidden champions of any country in the world

01:39:24.920 much more than china japan even the us and it's because of this extremely decentralized banking system

01:39:33.380 with all these thousands of small local community banks but by now the numbers already dropped a lot in

01:39:39.900 the in the last particularly under the ecb last 20 years um but that explains why germany in the past did

01:39:47.500 very well but that's now being eroded and it's the same in the us the us has been in the past a very

01:39:52.660 strong economy because there were so many small banks local banks so let's put it in political

01:39:57.360 terms i'm starting i'm not a genius this is taking a while to figure this out but it does seem like

01:40:02.680 there's a direct connection between the way credit is allocated and by whom and your political system

01:40:09.100 so yes a totalitarian system has a smaller number of institutions providing credit because they can

01:40:15.800 control the country more and therefore a smaller number of beneficiaries of the system exactly exactly

01:40:22.640 so the fewer sources of bank credit you have the more centralized your society is the more control

01:40:31.100 there is in a smaller number of hands the less democratic your country is exactly that's exactly it

01:40:36.000 okay and of course this is also what immediately deng soping realized for speaking to the japanese because

01:40:40.580 they told him well it's all about banking banks create great credit and credit is needed for growth

01:40:47.400 because what is growth growth means more transactions this year than last year that means more money is

01:40:51.520 changing hands for transactions this year than last year that's in our system only possible if there's

01:40:56.380 been more credit because that is the money supply expansion and of course then it depends what where's the

01:41:01.880 credit going is it going for asset purchases that's no good asset inflation consumption that creates

01:41:08.040 because you're blowing my mind so i mean again i've spent my whole life imagining that the m's

01:41:13.340 you know that's what they want you to be m1 m2 and all that um that the federal reserve was you know the

01:41:18.640 source of the money supply just the the fed but it's all banks of course it's true that the central banks

01:41:26.380 are powerful but they're powerful through their control of the banking system and they have power of the banks

01:41:32.520 uh and you know those who control these central banks is it's a small number of insiders you know

01:41:38.800 historically you know probably some big banking dynasties and so on um and of course they exert

01:41:44.240 the power they they reduce the power of everyone else all these other banks and the central banks can

01:41:49.240 manipulate banks for example to lend more for unproductive um unsustainable asset purchases create the

01:41:55.380 boom bust cycles that's what my my book princes of the yen shows that the bank of japan

01:42:00.240 created the acid bubble of the 1980s on purpose and i could even show that it was intentional

01:42:07.180 and it's it's demonstrated in in several dimensions of proof both eyewitness accounts the data um the

01:42:15.120 um anecdotal evidence um you know it's all there um essentially they've the bank of japan is admitted

01:42:23.720 that was the goal why would they want to do that in order to have what follows a massive long 0.80

01:42:29.900 recession i didn't expect to be a 20-year recession i mean that's pretty brutal and crazy

01:42:34.800 um but that's what they wanted why did they want in order to blow up the successful system

01:42:42.060 japan was far too successful it had to be destroyed just like the german economy and others in the past 0.99

01:42:49.200 who wanted it destroyed and why well you know if you if you go back to um japan's relationships

01:42:58.020 with other countries in the world in the in the 60s and 70s particularly 70s and then early 80s

01:43:03.300 it became clear the one country that was most unhappy about japan was the united states of america

01:43:08.740 they had one political initiative about after another to try to force the japanese to change their

01:43:15.620 economic system yeah slow down structural impediments initiative this that and the other no no this is

01:43:21.100 unfair you must change all your business practices now officially in terms of the economics the argument

01:43:26.860 was always we want to help you become a stronger economy are you sure

01:43:32.360 um and and you know that's it didn't work politically so the central bank was used essentially as a traitor

01:43:42.240 to blow up the system it's the same in the asian crisis you know the asian crisis i was sent i was 0.88

01:43:48.520 at the time at the officially um at the asian development bank and i was sent as an official

01:43:53.020 representative to the government and central bank of thailand to analyze what's going on with this

01:43:58.100 asian crisis and what are the right policies and it so quickly emerged the same mechanism the same

01:44:03.340 goals as in japan this was to destroy the success blow up the system create a crash create a crisis

01:44:09.360 then and then also imf forcing them to open up to foreign investment and because there was so much

01:44:16.580 strong growth and prosperity but the western um big um owners and banks didn't have any ownership

01:44:23.660 in this and the asian crisis and japan in crisis korean crisis was a way to force it open

01:44:29.840 and then the west could buy it up very cheaply so you think that the japanese recession was created

01:44:36.900 well by the bank of japan but with the encouragement of the west in order to slow down yes the u.s and

01:44:43.160 the fed yeah absolutely that's what i show in the book there's there's no there's no doubt about it

01:44:48.480 and there's no no been no contrary evidence um or that anything in my book was incorrect so you write

01:44:54.920 this book published only in japanese at least yes and it as i said at the outset rockets to the top

01:45:03.100 of the bestseller list in japan beating harry potter which is amazing and then what happens

01:45:09.500 yes what happened next why haven't i read this book and why is it not on our bestseller list

01:45:14.500 well yeah it's um what happened next was of course in japan i was constantly being interviewed i was in

01:45:23.460 the by the daily press by the weekly magazines by the monthly magazines i was given uh monthly columns

01:45:30.300 i was writing for years every month in the japanese economist the japanese newsweek i was on their

01:45:35.900 television there's some big japanese yeah it's all in japanese there was some big live show your

01:45:41.340 japanese is good enough to do to explain economics i wonder how many of our viewers will know what

01:45:50.660 you're saying um that's impressive um and so but it was all in japanese you know so it was you know in

01:45:57.760 the media there was some way you could see there's some pressure being applied some high profile live

01:46:02.640 sunday uh tv shows uh like canceled on the day and then the you know the senior executives inviting

01:46:10.420 me around embarrassed to try to explain and you know the japanese love the truth so they would

01:46:14.840 they did tell me the truth well sorry you know we it wasn't we had no choice you see our advertisers

01:46:22.800 you know the advertising revenue is very important and it was one of them it was our biggest advertiser

01:46:28.600 and told us richard verner can't be on this show so you mean a company like toyota canon or something

01:46:34.900 yeah i can't say the name but a company like that well hang on they have nothing against me i have

01:46:40.120 nothing against them why would they say that yeah of course it's not them and they also said that they

01:46:44.400 have nothing against you you know and i'm you know we're all really sorry about this but you know

01:46:48.540 is their bank saying that that they have to say this but hang on i don't even criticize the banks

01:46:53.920 because i show that it was the central well yeah you see that the bank had to say that because the

01:46:58.720 central bank asked to do so so that's the chain of command you know and so then i was canceled in

01:47:06.440 that show or some magazine editions even there was one it was one of the top um weekly magazines

01:47:12.960 i was interviewed in that you know it was very proper and formal they came with several uh photographers

01:47:19.540 and recorded i checked the script you know they everything was a big deal and they even then

01:47:26.380 sent me the actual copy of the magazine but there was no article of me it was like last minute they

01:47:33.480 even forgot to take me off the distribution list um so i called them thanks for sending this but

01:47:40.280 where's the article where's the interview

01:47:42.660 and they explained well we yeah we had to kill it because of pressure so um so that happened on the

01:47:55.220 one hand but you know still i mean i would say more than half of the time i you know my interviews

01:48:00.980 got through i thought at the time wow that's pretty controlled i now realize with hindsight that was

01:48:05.780 pretty open because once i went to the uk it was like fully controlled and you know i did not have

01:48:12.200 this media access anymore but it was only in japanese so one day i got a call from a reuters journalist

01:48:19.840 from reuters this and this name british guy on the phone apparently and and he mentions my book oh so i

01:48:26.580 thought oh that's impressive because it's all in japanese and usually you know the foreign journalists

01:48:30.460 they don't speak japanese so i was quite curious so and i expected you know he wants to interview me

01:48:35.580 on the book and then he's oh no no it's um no sorry it's this is uh it's about your book but it's a

01:48:40.360 personal matter really personal matter yes i'm calling it's a private matter um i want i want you to

01:48:49.220 to help my wife right well i'm confused can you explain well you see her job is to translate your book

01:48:58.480 well hang on this book has been translated it's a great translation i helped with it the publisher we

01:49:04.380 sat together we you know we're really uh word smithing every sentence to make sure it's got

01:49:11.720 the right nuance i wrote in english yes but it's it's a it's a very good translation what do you mean

01:49:15.720 her job is to translate my book yes her job is to translate it back into english she's given a very

01:49:21.160 tight deadline and you know if you give us the manuscript the original english then she's done with

01:49:29.080 her job excuse me what you know i own all the language rights i've sent it to some american 0.99

01:49:35.120 publishers i'm still waiting for the result this is like a pirated translation i'm sorry i mean i'd

01:49:40.000 love to help you and your wife but i can't do this against my own interests so it's a decline now he did

01:49:47.200 say where she worked and it was one of the major i don't want to say i don't want them to get in

01:49:51.580 trouble even after even though it's 20 24 years ago but it was one of the major places in japan

01:49:59.400 that are more considered um official where you where you also think well hang on why do they need

01:50:07.360 to read need to read this in english because the japanese people are quite happy if something is in

01:50:13.100 japanese they will only read the japanese you know you've got a choice nobody will say okay i'll read

01:50:17.400 the english so it was clear there's somebody outside japan who wants to read this but who could use

01:50:25.540 one of the major was considered government institutions as a translation bureau well the puzzle was solved a

01:50:36.140 few months later when somebody came to visit me from america from washington head of one of the think

01:50:45.220 thanks and he constantly had met him before he knows me when you know he's doing japan he wanted

01:50:48.640 to a lot of people came through to see me on japan and ask me on my analysis and so you know um we met

01:50:56.280 and and first thing he says richard great book you wrote in japan princess of the yen well hang on you

01:51:02.900 don't read japanese no of course not no i don't but you know the translation is circulating in washington

01:51:10.220 and and and then um and then you know uh a few months later i got the call from the u.s embassy

01:51:22.260 it was you know clearly a japanese lady working there very polite as you'd expect professor warner 1.00

01:51:29.120 um we have a request from the u.s state department it's like okay um there is a there's a senior person

01:51:40.260 from the state department who wants to arrange a meeting with you uh well i guess that's in

01:51:45.560 washington i have no plans to go to washington at the moment sorry no he's coming to tokyo to see you

01:51:51.560 so i thought okay let's um meet in a public place as opposed to a dark alley

01:52:00.600 um and sure enough um when we met the main message was you know the cia is watching you

01:52:12.420 that was the message that was the main message it's like there was no there's no quizzing or trying to

01:52:20.420 manipulate me or get me out you know it's just the cia is watching now what you're doing

01:52:25.780 they weren't trying to learn from you they were trying to tell you something

01:52:28.620 no no actually somebody suggested when i told him the story that that also was my opportunity to ask

01:52:36.800 for something like you know be president of one of the federal reserve banks in the u.s

01:52:42.420 as part of the deal to stop talking about credit creation actually it reminds me i need to

01:52:47.960 uh finish another story i started you know i told you about canes moving away from the truth

01:52:53.480 i just want to pause and savor this from a moment so you publish this book in japan in japanese

01:52:58.720 explaining the japanese recession and within a few months you get a visit from the cia

01:53:03.880 yeah yeah well i i spilled the beans on what is the most powerful mechanism for both economic growth

01:53:11.920 and prosperity or arranging for the boom bust cycles and of course this is something that's been

01:53:17.100 happening across the globe in the last 200 years uh quite a lot and i was mentioning names and i did

01:53:25.500 okay i need to tell you to finish that before we come back to the uh to ben benanke and and colleagues

01:53:31.320 um i after that visit all the u.s publishers sent back their polite letters turning down my book

01:53:38.880 i mean imagine this is a book that was the number one bestseller in japan it did have a chapter in it

01:53:44.200 on the u.s there was a link i had a chapter on asia the asian crisis same story and i had a chapter

01:53:49.360 on my encounter with alan greenspan and based on that encounter and some analysis i concluded that

01:53:57.940 was in that chapter that actually the federal reserve was on track and alan greenspan was still

01:54:02.680 um hitting it at the time um was on track to create the biggest asset bubble in history

01:54:12.400 and they will do likely the same as in japan and it will be a crisis uh it will be a bust but because

01:54:19.140 it's america it's going to be a global financial crisis that was in my book in the it's published in

01:54:25.340 original japanese in 2001 um now this this i then found one publisher that has a i don't want to

01:54:32.480 mention the name is a very good name um and they have international offices global uh excellent top

01:54:41.020 reputation and their u.s um operation is quite independent has editorial independence and i met to

01:54:47.780 i sent the the whole manuscript to the ceo of the you know their u.s side and their excellent

01:54:56.000 distribution in the u.s and then i i went to new york and i called him and said i happen to go through

01:55:03.080 new york can we meet oh of course uh we met um in the four seasons the first thing he said when he

01:55:10.120 he saw me is richard thanks for sending me your book i read your book it's the best business book

01:55:16.400 i've ever read that's what he said of course we'll publish it so that's how the lunch started and i

01:55:22.060 thought well this is good this is starting good i better immunize him a little bit on the what's

01:55:26.480 going to happen next people will approach him and i experienced this in japan they will say that

01:55:30.840 this is a dangerous book that phrase was used some particular journalist working at the new york

01:55:36.400 times but probably also rather you know in the mockingbird style perhaps working for some of the

01:55:41.440 agencies um they did some um some sort of uh activism against my book because i wanted a book

01:55:49.780 launch on the japanese book for the foreigners and foreign journalists in japan at the foreign

01:55:54.980 correspondence club and the head of the foreign correspondence told me that these u.s journalists

01:55:59.920 were really trying to block that anyway so i told him you know they will say this is dangerous and

01:56:05.360 and he was just laughing it off you know nobody can stop me i have total editorial

01:56:09.780 independence and this is a brilliant book it was best selling japan you're kidding me

01:56:14.520 of course we'll publish this so two weeks later i was back in tokyo email from this guy um

01:56:23.620 dear richard it's great to meet you in new york i love your book unfortunately we can't publish it

01:56:29.160 he don't i guess he also got a visit from from the the cia people was it ever published in the u.s yes

01:56:39.180 so then i was i was getting to be honest a little bit frustrated because i wanted the message out it

01:56:45.700 was already more than a year that i couldn't find a publisher for a book that's a bestseller

01:56:50.000 so i thought okay what what what is it that in the u.s they're particularly upset about and i

01:56:56.580 concluded it must be that chapter with alan greenspan and i need to now tell you the background

01:57:00.680 of that and what happened when i met alan greenspan you see my first article after you know after i

01:57:07.900 published this paper in japan for the development bank in japan solving the puzzle of capital flows

01:57:12.880 was credit creation was the answer and you know it's still the only paper to explain japanese capital

01:57:19.900 flows with credit creation for asset purchases explains capital flows and also this huge outflow and the

01:57:25.420 collapse it's published then it takes years with these academic journals published in 1994

01:57:29.880 land prices in the japanese asset bubble and and and um and capital flows and so um that i'd sent to

01:57:41.540 the economist at the time because i'd also i'd taken the next step because i realized this is so

01:57:46.620 powerful i can explain capital flows but i realized with this i can explain almost everything i can

01:57:51.280 explain explain japanese gdp growth and that worked i can explain you know the ups and downs of of the

01:57:57.820 business cycle uh i'm now expecting a credit crunch and a banking crisis so because i linked it into a

01:58:06.120 macro model there is one um very simple macro model that links money in the economy which is quite famous

01:58:12.100 throughout modern economics in the last three four hundred years actually so-called the so-called

01:58:16.980 quantity equation mv equals py py py is prices times some reason they use y for real gdp real income

01:58:25.260 because the i had been used for investment by canes already then used y for income real income

01:58:31.320 times prices is nominal gps really we're saying money m times a constant velocity equals nominal gdp

01:58:38.520 that's what it says so there's a direct link between money supply and gdp but the relationship broke down

01:58:43.840 because velocity wasn't constant and it was all over the place and that's when monetarism failed

01:58:50.440 in the 80s and people thought it's not working but what i realized was that that equation is wrong it's

01:58:56.620 a special case and because it's basically wrong on two counts number one is it assumes that all money

01:59:04.220 creation is used for gdp transactions but what about credit creation money creation used for asset

01:59:09.460 purchases yeah it's just which of course since the 80s has ballooned and that explains the velocity

01:59:14.280 decline you see that explains it so i realized we have to have two equations one is the money going

01:59:18.960 into gdp the real economy money going into asset markets and i did that and it worked well how could

01:59:23.480 i do that milton friedman himself at one stage said oh i wish we could divide money into its use

01:59:29.040 well we can if we understand the money creation process which is credit creation the credit data you can

01:59:34.820 disaggregate credit for the real economy credit for asset purchase and that's what i did so i call it

01:59:40.320 the quantity theory of disaggregated credit it's really the general quantity theory because it turns

01:59:45.840 out the ancient mv equals py is a special case i've got the general case which is credit as money and

01:59:52.880 divide it into the two flows money for the real economy money for asset prices anyway so that's what i what

01:59:58.440 i did at the time i sent this to the economist they wrote a brilliant write-up a whole page on my

02:00:03.680 uh on my work this was the economics editor at the time and because this is pre-internet now anyone

02:00:10.740 who wants to read this i i actually it was in the public domain i'd give a presented this as various

02:00:15.480 conferences economic royal society economic conference and an asia pacific conference anyway

02:00:21.100 but people had to write to me who wrote to me it was the bank of england um ross childs jp morgan

02:00:29.280 and oh the fed now they were like there was a fax there was a phone call at oxford where i was in

02:00:37.520 the institute of economic statistics and it was like urgent everyone's telling the fed the senior

02:00:42.180 people from the fed they need the paper we needed yesterday so okay and i sent it to all of them

02:00:48.740 um i never heard back from anyone but they were all clearly curious about because you know the in

02:00:54.220 the write-up um the keywords credit creation were mentioned and you know my whole approach was

02:01:00.180 mentioned and the author who's a good economist clive crook you know he wrote you will hear more

02:01:05.920 about this or perhaps he expected it to spread faster he perhaps um underestimated the resistance

02:01:11.980 against the truth spilling out he may be at some other me i think he's still writing maybe for forbes

02:01:18.860 or i i don't remember yeah anyway so um there was this write-up i sent it out and then the fed

02:01:26.640 had wanted to see it so later when i was actually also thanks to that write-up i got job offers from

02:01:33.080 various investment banks to be their chief economist in tokyo i was interviewing with

02:01:37.720 goldman sachs had an offer from swiss bank corporation to be head of research and then jardine

02:01:42.320 fleming offered me that job as chief economist which i thought that's not bad you know for my

02:01:46.740 young age of what was a 25 years old so i took that went to tokyo because they gave me the leeway

02:01:53.100 to implement my credit creation model and so quickly rose to being one of the top economists

02:01:57.400 in the various surveys institution investor survey granite survey a top three economist on japan

02:02:02.780 because my forecast worked if you look if you use credit creation it works you know you can

02:02:07.200 forecast what's happening what's going to happen um and um but so they sent in and you know these

02:02:15.220 these firms send you around the world you sing and dance for the institutional investors you're

02:02:18.580 on the sell side um presenting and you know you get some really tough questions it's a good way to

02:02:23.560 um to get feedback and get critiques of your theories and models so they've been pretty much

02:02:29.620 you know tested against a lot of resistance and when i was um and of course you go to places where

02:02:34.840 there's money so new york boston was also part of the itinerary usually going around the world

02:02:38.920 but i managed to arrange an afternoon in washington and then i i went to see the fed

02:02:46.400 and the senior economist at the time wanted the paper we had a good meeting and so i asked him at

02:02:51.760 the end so you know who was that senior senior board member you had mentioned wanted to read my paper

02:02:58.820 oh that was alan of course oh okay alan greenspan great so made my day and then another two years

02:03:06.240 later there was the annual you know biannual meeting of the imf and the world bank is outside

02:03:11.100 washington is somewhere in the world and happened to be in hong kong and my investment bank the asian

02:03:16.080 headquarters was in hong kong so they had a big dinner with all the big cheese people there and i

02:03:22.180 managed to get myself to come over from tokyo and there was alan greenspan usually crowds around

02:03:27.560 him and you know all the top guys you know finance ministers central bank governors everyone there

02:03:32.180 and at one moment crowds had receded okay my chance i'll go and talk to alan greenspan introduce

02:03:40.000 myself and i'd prepared this chat up line which i then immediately used may i excuse me may i introduce

02:03:45.900 myself my name is richard verner i believe you've read some of my research of course you'd expect this

02:03:51.880 is four years later you'd expect him to say your research like what was that about tell me more

02:03:58.580 which is sort of what i was expecting you know what he said richard verner credit creation

02:04:06.400 the paper on japan yeah i read it twice in the economist and then the actual paper

02:04:12.960 it's like four years later and i'm like uh

02:04:17.700 would you venture to comment on my paper next surprise you know what he says

02:04:26.300 can't remember turns around and walks away

02:04:31.560 hang on it's just proven that he remembers every single detail of this but he clearly didn't want

02:04:41.320 to talk to me so that was that was kind of scary and so when i got back to tokyo we had the system

02:04:47.340 called reuters 3000 uh you know it's all sort of pre-internet or very early stages so i looked up

02:04:55.440 greenspan's publications his speeches anything written anything uttered by him because you know

02:05:03.620 he said it richard verner credit creation the key words so you know when and how and how often has he

02:05:12.720 used credit creation in his and he you know he was central bank um chairman of the board of governors

02:05:18.720 for what 18 years so you know and you know he's been prolific in his in his utterings and speeches

02:05:25.940 and publications you know how many times he's used credit creation i did this keyword search

02:05:31.380 zero never

02:05:34.880 now of course i knew through this encounter that he knew extremely well

02:05:42.340 why this is so important so powerful he knew this very well that was very clear

02:05:49.020 but he was playing ball this is a taboo he's never used it and i thought that can't be there must be

02:05:55.520 i kept searching and then i discovered there's a book um edited by ayn rand and he wrote a chapter in

02:06:03.940 it in 1967 when he was not yet at the fed and it's about oh credit creation and how gold is a much

02:06:14.440 better way to run the system because once you give central banks this much power they will create too

02:06:19.500 much credit he basically when you read it he criticized the fed for creating the um the asset

02:06:25.780 bubble of the 1920s in the u.s and then the great depression in the 1930s which was the fed's job

02:06:31.660 they did that and it wasn't an accident and of course the bank of japan was doing the same thing in japan

02:06:37.580 so i realized wow this is how it works he then was offered a job at the fed but he was he was basically

02:06:44.420 told never to talk about this again and the same is true now back to ben benanke he started to work

02:06:50.680 on credit when he wrote about the great depression and you know there's some papers but he hadn't

02:06:57.540 discovered the credit creation aspect like banks create money out of nothing he'd never written about

02:07:03.420 that and but you know he's more and more writing like oh we need to look more at credit and banks

02:07:09.400 why do we drop out banks we need to understand what's happening there this sort of thing you know that

02:07:13.240 was his work until 1993 this is already after my first paper was out and i think the fed decided

02:07:19.880 we need a counter argument now and there was this paper by benanke with a headline credit creation and

02:07:28.260 the macroeconomy wow that's like wow this is what i'm talking about so i read it and you know what he

02:07:35.280 says oh credit creation is the financial intermediation of banks gathering deposits and then lending them out

02:07:43.000 he's defined it away there was no credit creation and then he also writes oh i used to write a lot

02:07:48.280 about bank credit but it's not so important mea culpa even in a footnote i was wrong writing about

02:07:53.880 bank credit it's not so important and where was this thing published federal reserve federal reserve

02:07:57.900 publication that's where his career started and his career then took off and he became chairman of the

02:08:02.820 board of governors of the fed but he would never talk about it now when he did use the knowledge was

02:08:07.900 when he copied my quantitative easing and i must mention this because of course you know i said

02:08:13.500 earlier once you create this asset bubble you get a banking crisis but it doesn't need to be a

02:08:19.040 20-year recession it doesn't need to be a 10-year recession as a result it doesn't even need to be a

02:08:24.140 one-year recession you can have an immediate recovery and you can get rid of the non-performing

02:08:29.660 assets in the banking system just like that at zero cost to society so whenever they say oh we need to

02:08:35.320 use fiscal money we need to have national debt now based on this bailing out the banks and now we

02:08:39.860 need austerity all the ordinary people need to you know tighten their belts now this is all a lie we

02:08:45.720 don't need any of that it's just an accounting problem and the central bank has the tools to legally

02:08:51.360 just change the accounting such that there's no more problem namely and this is my original proposal

02:08:57.700 so i published this in the nikkei nihon kese shimbo in the main um newspaper financial newspaper daily

02:09:03.120 highly respected big article second of september 1995 headline we can have a recovery and high

02:09:12.500 growth through quantitative easing which was my proposal i explained i explained bank credit

02:09:17.400 creation so the first thing is you know we have to boost bank credit creation for the real economy

02:09:22.280 and here's how to do it and i have basically there's three things the government could do and

02:09:27.140 so you know simplistically calling it just qe1 is the first thing qe2 second type and then

02:09:32.420 the third measure qe1 is for the central bank when you have a bus banking system with all these

02:09:37.640 non-performing loans the central bank just buy them up of course at face value as if they were still

02:09:43.780 valued at 100 at par and the banks clearly will be very happy about this their balance sheet will be

02:09:50.800 very strong they will be more liquid than ever in their whole history you've solved the banking

02:09:55.860 crisis there's no more banking crisis now you could say well hang on aren't we just shifting the

02:09:59.780 problem to the central bank well no because the central bank doesn't have to mark the market

02:10:05.200 you can just forget about these holdings but hang on isn't the central bank now creating money aren't

02:10:10.660 we paying for this through inflation and a weaker currency no because it doesn't create money

02:10:16.420 because money creation is when the banking system creates credit and injects it into a non-banking

02:10:21.980 system but this isn't a transaction within the banking system between the banks and the central

02:10:27.080 bank the central bank buying non-forming assets from banks it doesn't create money at all it just

02:10:33.080 cleans up the bank balance sheets at zero cost to society there's no need to use tax money why not do

02:10:39.300 that exactly well whenever now listen to this whenever the central banks don't want a banking crisis

02:10:47.440 to turn into a major thing and recession that's when they do it i'll give you two examples

02:10:53.860 august 1914 the united kingdom of great britain and ireland declared war on germany and her allies

02:11:03.800 which meant austro-hungarian empire ottoman empire yeah okay so that's how the first world war started

02:11:10.400 britain declared war just like with the second world war um the trouble was on i think the next

02:11:17.620 day the treasury the bank of england and the government got visitors from the british banks

02:11:25.420 and they said maybe clutching some balance sheets and documents uh sorry uh you've declared war

02:11:32.660 war were bust well how did that happen the british banks were bust not all of them but quite a lot of

02:11:38.640 them well london was the number one financial center for everything so even for bills of trade bills of

02:11:46.660 exchange and financial settlement between ottoman empire and hungary often it would go through

02:11:53.300 london london was the place and and of course often also pound denominated that was the most liquid

02:11:58.120 international currency you know and because now all these countries these are major countries germany

02:12:05.100 ottoman uh austria-hungary they're now considered enemy country all the paper held by british banks were

02:12:14.820 deemed non-performing because irredeemable enemy how do you get the money exactly so and it was large

02:12:22.940 enough for the banks to be bust because capital is not high in banking 10 or less so you quickly reach

02:12:28.060 that point where your equity is wiped out and you bust now because britain had just declared war on

02:12:33.980 all these countries was it a good moment to have a prolonged banking crisis recession economic depression

02:12:40.820 no so this was a situation where the central bankers did not want this to turn into a big thing and so

02:12:47.140 what did they do my qe1 the bank of england just bought those up at face value they had also another

02:12:52.560 policy where the treasury issued paper money actually because they felt we need to somehow protect the

02:12:57.480 credibility so we'll we'll have this measure as well so people look at the treasury they don't look at

02:13:01.940 the bank of england buying these assets at face value but anyway that was the key thing second

02:13:06.440 example and and so yeah the problem is gone no banking crisis may i ask you since you brought up

02:13:10.940 the first world war and we're on the cusp of a war right now potentially a global war what is the view

02:13:17.620 of war uh by the banks like what do the banks think but you've described the banks as the single

02:13:23.660 greatest um control mechanism of human behavior in a society i think particularly the central banks

02:13:30.940 because they have the bigger the bank the more the power but their power extends beyond just like

02:13:35.740 their relations with other banks their power like determines a lot of what happens in your country

02:13:40.160 yeah and they're not under the control of voters right so it's a it's an extra democratic institution

02:13:46.120 which happens to be the most powerful which is like crazy i'd love to know how that happened but

02:13:49.520 how do they feel about war well central banking and warfare are very closely linked the as i said i mean

02:13:59.460 the the modern um major bank the first modern major bank and central bank was the bank of england of

02:14:05.760 course and in the very um act law act of parliament the law founding it it says this um institution and

02:14:18.740 mechanism because they they didn't want resistance they don't mention bank of england what we're doing

02:14:22.700 here is establishing the bank they kept that secret we're doing a mechanism a new mechanism by these

02:14:27.360 investors to raise and lend a lot of money to the government namely by establishing a company

02:14:34.800 will be allowed to establish a company that's the bank of england in order for what in order to wage war

02:14:40.560 it was in order to make war so they're closely linked and of course if you look at its founding

02:14:46.680 documents in the in exactly the act of parliament establishing the bank of england it said the

02:14:51.960 purpose is to make war do you know why the federal reserve was established and there was a rush to

02:14:57.040 establish it for 1914 the year the first world war started exactly destroyed europe and again it was

02:15:03.820 done with subterfuge i mean you know the gathering everyone yes on the 23rd of december 1913

02:15:10.820 when nobody was there and then also introducing income tax that's also the bank of england it was

02:15:17.460 established together in the same act um calling for establishing new taxes why because when when

02:15:25.080 you have these central banks privately owned central banks established especially this trick where

02:15:29.640 these entrepreneurs persuade the government oh you don't want to make you know you don't want to

02:15:34.540 issue money issuing money we'll issue money for you what that's what they're essentially saying

02:15:39.860 without being so direct about it but that's what they want to persuade governments to give up the

02:15:44.320 power to create money themselves we'll do it for you and we'll lend you the money and henceforth well

02:15:51.360 how do we get our money back well we love to lend to the government because you can raise taxes

02:15:55.800 and that's why taxes were introduced the federal income tax didn't exist before the creation of the fed

02:16:01.120 it's also great you couldn't have one without the other well whenever central banks created they

02:16:07.980 introduce new taxes one way another yes and the the central bank of the united states the fed

02:16:18.240 was created during right before the war i mean yes and right before the war exactly months before the

02:16:23.780 war what was the role of the central banks during that war the most important war in the last thousand

02:16:29.860 years yeah well it was it was really at the pinnacle of the war economy there's no doubt about that

02:16:36.720 it's very clear and the same is true of course for the other side and now from 1917 the us and germany

02:16:44.320 were at war which is very sad a lot of americans of german descent and germans didn't really want to be

02:16:51.040 at war with germany but that's what happened so we've got these two countries at war sad the soldiers dying

02:16:57.620 the trenches and their economies organized as war economies at the pinnacle of the war economies

02:17:04.820 are the central banks so who were the key players in the german central bank the reichsbank which is

02:17:10.820 100 privately owned was somebody called max warburg or max warburg you might say in english and who was

02:17:19.460 at the pinnacle in fact was a founder um of the federal reserve and who was the key person there

02:17:27.940 it was somebody called paul warburg paul warburg his brother but of course the soldiers have to kill

02:17:35.180 each other and these two countries are wait wait wait the head of the german central bank and the head

02:17:39.960 of the american central bank were run by brothers during a war between the u.s and germany yes now i have to

02:17:46.740 qualify they weren't the formal governors but they were the key people did anyone notice this

02:17:52.420 well some people did i mean probably encouraged i mean with with paul warburg it was obvious because

02:17:58.960 until 1911 he was a german citizen he'd only just come over for that purpose to set up the fed

02:18:05.140 and he was speaking i mean half german basically when he spoke english so you know um it wasn't i mean if

02:18:12.460 you were looking for some details you'd quickly find this how did the the brothers do during the war

02:18:18.620 were they destroyed were their fortunes taken away oh no no no of course um max warburg stayed in power

02:18:24.940 at the at the reichsbank he was the one who who signed off on hitler's proposed head of the central bank

02:18:34.100 even the 1930s it was also max warburg still

02:18:36.900 they were those i can't believe brothers were at absolutely yeah yeah those banks yes and of course

02:18:46.600 i don't want to just you know pinpoint the warburg family but you know i mean there's other families

02:18:52.120 and there's many families there's jp morgan you know and there are various backgrounds and and you

02:18:56.980 know uh ethnic backgrounds and whatever but the principle is we we do have um that it's an inside

02:19:03.380 game well yeah bankers particularly those that are close to central banks and maybe are private

02:19:08.600 owners of these central banks and the reichsbank was 100 privately owned and you know when i mentioned

02:19:14.140 keynes you know when he became a director he must have been an owner of this privately on center because

02:19:17.980 they have these rules if you're a leading person well you must be a leading shareholder you know

02:19:21.920 that's how it works so now i just want to give you the other example of you know to prove this

02:19:28.140 point that you don't need to have a crisis and a recession even when the banks are bust because the

02:19:33.760 second key example is 1945 japan even japan so the bank of japan knew very well how to get out of

02:19:40.840 these problems because in 1945 it was much worse the banks were 100 percent bust they were lending to

02:19:48.000 the government east asian greater prosperity bonds basically war bonds of a country just defeated

02:19:53.000 you know you could trade them in the flea market for almost nothing and secondly um forced ammunition

02:20:00.760 loans to you know the the the military industry um most of which was also bankrupt or was not even in

02:20:11.200 japan any longer the country of japan shrank a lot right after 45 the whole of manchuria no longer

02:20:17.840 under japanese influence taiwan and korea were intrinsic parts of japan until 1945 for half a

02:20:24.100 century philippines vietnam of course these were added um you know during the second world war but

02:20:30.800 you know korea and taiwan were already for 50 years were part of japan in 1905 um exactly so um

02:20:38.360 so these banks were bust because all these loans had no value it's like 100 non-performing loans what do

02:20:46.560 you do is 1945 a good moment to have a big banking crisis and long recession no because they had

02:20:51.920 bigger problems you know that most cities were devastated by these incendiary bombs and the

02:20:57.040 carpet bombing of civilians also like in germany so then you don't want a banking crisis and recession

02:21:02.700 what do you do you don't need to have one the central bank buys the non-performing assets face value

02:21:08.680 and the problem is solved and that's what they did so you can't tell me the bank of japan didn't know

02:21:13.860 what to do that's qe1 now i was quite convinced that even if in you know say uh i proposed this in

02:21:21.840 1995 even if at that time the bank of japan were to buy all these non-performing assets most people

02:21:27.580 at the time were still saying oh it's not so big a problem these non-performing assets richard

02:21:30.680 verner always talking about i was quite clear that they would rise to 25 of all bank assets non-performing

02:21:37.160 because you just look in the 80s what was you know the real estate lending how much did it increase

02:21:41.400 and you got the numbers and that turned out to be a very correct estimate so i was convinced that

02:21:47.760 even if the bank of japan just wiped that clean by buying it up at face value you would still

02:21:52.920 not get a recovery in bank credit but you need that for an economic recovery because the loan

02:21:59.000 office is a shell shock they see what happened and you know it's human nature and even if you get

02:22:03.240 bailed out you're not going to immediately increase lending so i came up with this proposal

02:22:07.640 on how the central bank can force banks to increase credit which you know we can call qe2

02:22:14.520 so qe1 is the central bank buys non-performing assets from banks okay qe2 is the central bank

02:22:22.300 buys performing assets from non-banks and i gave the example in my report at the time for investors

02:22:30.040 i wrote well the central bank needs needs just to buy real estate in tokyo because all this is going

02:22:35.900 to turn into non-performing assets dud loans and the real estate is the collateral the central bank

02:22:41.760 should buy it up the loans the real estate therefore coming with it and turn it into parks

02:22:47.000 because we don't have enough park space in central tokyo it's not such a green city as it could be

02:22:52.560 and that is a very simple thing to do which improves quality of life but also it creates

02:22:59.260 money it forces banks to create credit why is that it's because normally let's say here's a property

02:23:05.240 owner they don't have an account with the central bank so when the central bank buys their land

02:23:10.640 they will tell the center well please pay me okay what's your bank account number okay they give the

02:23:16.940 central bank his you know their bank account number what happens next on the balance sheets is the

02:23:22.100 central bank instructs the bank to pay this client of the bank and because this is between the central

02:23:29.660 bank the bank this is unusual right um the bank gets reserves from the central bank on the asset side

02:23:36.700 and it must now credit the account of this customer with those deposits which is deposit creation that

02:23:45.300 is the credit creation as we discussed earlier that's how the central bank can always force banks to

02:23:50.160 push up bank credit now for and and then you get a massive within six months you get a massive economic

02:23:56.000 recovery there's just no way around that because japan was in deflation the economy is shrinking credit

02:24:00.780 was shrinking negative credit growth it was really bad for many many years and so this proposal would

02:24:06.880 have solved the problem i i actually contacted in greece later after the european sovereign debt crisis

02:24:12.300 and greek credit creation was negative same game always spain credit creation negative huge

02:24:17.800 recession uh vast youth unemployment 50 percent dying population yes and and and the whole cost of

02:24:24.160 this is the human cost and you know the young generation basically their future wiped out you know

02:24:29.280 no job prospect so i i went to greece to speak to the treasury and um because there's even when the

02:24:37.800 central bank is not playing ball and the ecb was clearly trying to create this problem it wasn't was

02:24:43.120 not trying to help there's something the government can do that's the third form of of qe without the 1.00

02:24:48.660 central bank treasury qe which is again something we have to look at in the us i think there'll be

02:24:53.200 treasury qe as well this is where you know if you look at the bond markets with this crisis the bond

02:24:59.680 yields jumped in greece you know double digit 50 percent 60 percent spain approaching seven percent which

02:25:06.240 was quite crisis level ireland double digit 20 percent why would they even issue bonds and i told

02:25:12.860 all these great question don't issue bonds what is the interest rate borrowing from banks in your

02:25:19.600 country oh it's only four percent yeah and when you borrow from banks unlike the bond market you're

02:25:25.520 creating credit directly but you're in a shrinking economy credit creation is shrinking that's the

02:25:29.860 solution that's the third way you can reflate the economy now they all refuse to do it not because

02:25:35.280 it wasn't possible it was legal i checked with an expert on ecb law it's perfectly legal they could

02:25:42.000 have done it um that's where the political power comes in they were um essentially scared into not

02:25:48.640 trying these policies the bank of japan for years said oh no we can't do this qe1 qe2 we can't do it

02:25:56.260 it's like no no no well came 2020 march 2020 they all suddenly could do it and that's the next

02:26:05.060 surprise so what happened actually in march 2020 was the federal reserve implemented qe2 and i should

02:26:13.820 also add in 2008 so actually bernanke you know he implemented my qe1 he made actually a speech at that

02:26:21.640 time in january 2009 saying well i'm not doing the what the bank of japan had done because they used

02:26:26.520 my expression qe but they were faking it they were just buying performing assets from banks which

02:26:31.920 doesn't really do anything you have to buy non-performing assets from banks or performing

02:26:36.900 assets from non-banks that works exactly but he the bank of japan didn't do that but bernanke did in

02:26:43.220 2008 that's why the u.s recovered first from the global financial crisis even though it started in the

02:26:48.620 u.s it's because he he borrowed my proposal of uh purchasing the non-performing assets from banks

02:26:56.280 he didn't credit me when he gave country is a bank bailout yeah yes but who pays for it you see

02:27:02.120 it shouldn't be the taxpayer it should be those who messed up that's the federal reserve so they

02:27:06.220 should pay for it and they did so that was fair that's to to tackle the moral hazard problem

02:27:11.380 those who mess up have to pay up which is uh one of the main problems in the united states

02:27:16.000 so the last area i want to get i mean i could go on forever this is like you've totally overturned my

02:27:21.920 primitive understanding of economics um thank you you're first welcome what given your your record

02:27:29.120 of prescience in assessing you know where economies are going you look at the united states what's your

02:27:35.500 tenure projection for the u.s well it depends on so many factors um actually before we come to that

02:27:43.840 can i just tie together some loose ends we have they'll be very very brief so on greenspan

02:27:50.880 the reason why i talk about bananke and greenspan because we were saying princess of the yen

02:27:55.960 the publisher's turning down the book uh it wasn't published in english and you see

02:28:03.020 i'd concluded at the time how did i get this published uh by a you know good u.s publisher

02:28:09.700 it's probably that chapter where i write about alan greenspan my encounter but credit creation he said

02:28:16.040 the words so he knows credit creation are his chapter um and i concluded he's doing the same

02:28:21.520 thing as the bank of japan that's why he doesn't talk about it secret so it's going to be a global

02:28:25.480 financial crisis that was my prediction it's probably that chapter so i took it out

02:28:30.820 it's the last chapter send it to the next publisher an academic publisher that they also had some

02:28:37.820 books on asia i thought they could be interested they immediately accepted it and it was published

02:28:44.040 without that chapter later that publisher was bought up by a british publisher i wrote to them

02:28:49.000 the new owner i want my copyright back oh yeah of course they thought it's just some academic book

02:28:54.300 okay fine got it back so i've now republished it with quantum publishers.com including the long lost

02:29:02.040 last chapter so it's back in there and one can get it um that was on that one on on deng xiao ping

02:29:10.180 so once he found out the secret the elixir of high economic growth he went back to china and what did

02:29:17.780 he do he founded thousands of banks small banks local banks regional banks provincial banks village

02:29:26.140 banks savings banks thousands is almost as many now in china as in america almost 5 000 banks

02:29:33.580 and economic growth took off and of course their job was to lend to small firms and the logic is very

02:29:39.660 clear if you compare the soviet system that he had previously with one bank that's maybe let's say

02:29:45.860 there's five people at the board making the decision how much money to create and who to give it to

02:29:49.920 well the japanese must have laughed at that and told him look why don't you have 5 000 banks which is what

02:29:56.360 we have now almost in china 5 000 banks with 35 branches each with 30 loan offices each branch lending to

02:30:07.620 small firms checking millions literally of loan applicants checking them kicking the tires does it make

02:30:14.100 sense can this be repaid you know then you have more than five million decision makers if you do the

02:30:20.520 calculation these loan offices is more than five million deciding how to create and allocate this

02:30:27.200 money and who to give it to and it will be used for productive purposes business investment so which

02:30:32.180 system is better those five guys at the central bank trying to do this for 600 million people or the

02:30:38.160 five million loan offices and of course i think denxiaoping was smart enough to realize okay this

02:30:43.540 is a no-brainer we'll have these banks and economic growth took off china delivered double-digit economic

02:30:48.780 growth for four decades you know when you have 15 15 growth then every four and a half years you double

02:30:56.800 national income and that tells you we can all have prosperity all we need is for bank credit creation to be

02:31:04.260 mainly used for productive business investment and can be done and has been done all the high growth

02:31:09.040 economies we can have in the u.s we can have it in any european country we can have it in any

02:31:14.700 developing country a lot of our credit creation has gone to asset purchases exactly and boy does it show

02:31:21.400 exactly um it's a whether it's counted as inflation or not it is inflationary i mean it just things are

02:31:28.260 more expensive well asset inflation and then derivative from that you get right all sorts of other

02:31:32.480 prices going up so um given that like where does the u.s stand right now exactly so exactly and it's

02:31:40.720 good to contrast this to what is possible because the fact is every country in the world can have

02:31:46.440 high sustainable equitable economic growth without crisis and without inflation and wouldn't any

02:31:51.680 politician want to deliver that you'd think but and and i think they would actually like to deliver it

02:31:57.300 but they realize the steps to achieve that are just not allowed and they they quickly reach the

02:32:04.720 limits of their power and they get whispered in the air which steps are not allowed in one well

02:32:08.720 to create many small banks you know our research on the u.s shows that even the small banks as they

02:32:14.300 merge as they do naturally as they do under central bank pressure to merge and the number of banks goes

02:32:18.880 down as it has in the u.s dramatically yeah um thousands have disappeared already but even the

02:32:25.480 small bank and so then banks stop lending to the smallest firms as they get bigger they lend only to

02:32:30.660 the bigger firms and you already get less economic growth and secondly even the smallest banks as they

02:32:37.400 merge you know they they reduce their lending to to the smallest company so we constantly need to

02:32:45.160 create new banks actually just to stay at the same level of having money going to the small firms and

02:32:51.440 the small firms are the productive job creators you know give five hundred thousand dollars to a large

02:32:56.440 firm it's not going to create jobs no give it to a small firm oh there'll be three four new jobs you

02:33:01.180 know exactly and and that's what people need to understand so we need a decentralized banking system but

02:33:06.360 that also gives power purchasing power and prosperity to the middle class to local communities and that's what

02:33:13.840 the central planners don't like no and so it is actually a war against the middle class that's

02:33:18.620 happening it means autonomy i mean a country with a strong middle class is an independent minded country

02:33:24.400 because you've got self-reliant people in it exactly country that's rich and poor very easily control

02:33:31.220 exactly the latin american model um exactly and sadly that seems to be where we're heading so with

02:33:36.380 this background back to your question if you look at you know long-term historical charts

02:33:43.880 it's very sad how economic growth has been declining in the post-war era in the u.s most european

02:33:51.100 countries now we're being told oh that's because of demography and you know aging societies climate

02:33:58.040 change and exactly climate change and the need in fact to lower growth because of the limits of growth

02:34:04.760 i quickly want to address that point because you know there are many people out there who seriously

02:34:09.760 you know they have good intentions and they think well hang on richard's talking about trying to have

02:34:14.760 higher growth but isn't that a bad thing isn't growth bad aren't we destroying the environment

02:34:19.640 well hang on i am all for protecting environment i love nature i think you love nature and and we want

02:34:26.140 to protect the environment yes but economic growth is not the problem absolutely not it's not the enemy

02:34:33.440 of the environment of nature no and the quickest way to explain why is to actually to analyze what is

02:34:42.760 economic growth well ask a physicist who studies physics what is economic growth and they'll say

02:34:49.640 well i don't know it in physics there is no growth what are you talking about you see it's nothing

02:34:56.280 tangible and therefore there is no limit to economic growth in physics there's no growth you can only

02:35:04.020 transform energy from one state to another matter is neither created nor destroyed exactly so what is

02:35:09.340 this economic well it's economic growth and where does it come from well it's a statistical illusion

02:35:14.500 created by statisticians now i looked into the history of this sure enough you hit on the same you know

02:35:22.440 you find the same answers so when did this start the way we calculate national income and gdp when it

02:35:27.920 used to be gnps gmp and national income what's the history of that where did it start you know it

02:35:33.520 started just before the creation of the bank of england why because the bankers were going to lend to

02:35:39.820 england and they wanted to figure out what is the ability to pay of these people in england

02:35:45.980 we need some statisticians to measure this and that's what national income accounting was created for

02:35:53.140 and that also yes exactly to assess the credit worthiness of the borrowers it's the ability to service

02:35:58.340 national debt wow and that explains the other puzzle and actually again tying uh together loose end here

02:36:04.320 you know i told you that that when we talked about how the the interest theory is the main propaganda

02:36:10.400 you know lower rates lead to higher growth higher rates low growth well and i told you there's zero

02:36:15.520 studies showing that there's no empirical evidence whatsoever for that and so i did the first empirical

02:36:21.780 study on that it's published again open access you can look it up it's it's called reconsidering

02:36:28.480 monetary policy and then something interest rates and growth and we know what we found is together

02:36:36.540 with a very good statistician from korea um and it's it's you know it's it's state-of-the-art

02:36:42.380 econometrics you've got to do this properly because and it took years to get this published because

02:36:47.080 everyone hated this because i'm what we found is that the relationship between interest rates and

02:36:52.380 economic growth is the opposite of what they tell us in two dimensions it's the opposite the correlation

02:36:59.780 is supposed to be inverse negative yes of course low rates high growth and no one questions that

02:37:05.840 and the causation is supposed to be from interest rates to growth yes interest rates are supposed to

02:37:11.700 affect growth of course well we found that both are not true and it's the opposite the correlation is

02:37:18.740 positive and the causation as far as statistics can prove it you know granger causality statistical

02:37:25.220 causality is from growth to interest rates so instead of the official story low rates lead to high growth

02:37:31.400 the real true narrative is the hone the real truth as the japanese would say is high growth leads to high

02:37:40.060 rates low growth leads to low rates it's the other way around that's the true story and now actually what we

02:37:49.500 also found is that i found this much earlier ready that long-term interest rate 10-year government bond yields

02:37:54.940 they follow gdp i mean sometimes coincidental of course but they don't lead gdp okay and it's roughly

02:38:02.100 always the same and i'm always puzzled about that why is you know 10-year government bond yields usually

02:38:08.360 similar to nominal gdp growth which of course was therefore also why i was forecasting when i was

02:38:13.260 forecasting inflation for 21 22 you know huge bond market crash because rates will have to come up with

02:38:19.600 such high nominal gdp growth due to inflation um but why is it that bond yields usually very nicely

02:38:27.580 track in the u.s very nicely track gdp growth why and you see it's the same answer it's because what is

02:38:35.140 gdp it was created by the bankers to gauge the ability to service national debt so think in those

02:38:42.880 terms now you've created gdp to figure out how much can they pay yeah then what is the interest rate

02:38:50.540 you're going to charge well you want to charge the maximum without blowing up the system which what is

02:38:56.740 that well it is the the same as the as the economic growth rate because that is the income generation

02:39:03.380 right if you charge too much it becomes a debt trap exactly your debt spirals out of control and

02:39:08.560 i'll mention that in a moment and if you charge too little that means below growth you're leaving

02:39:13.840 money on the table which they don't want to do so that explains it you see so to to address the debt

02:39:20.980 trap for a second well when interest rates um are higher than the economic growth rate which is your

02:39:29.980 you know economic growth national income growth is the ability to service and repay the debt but if the

02:39:35.460 debt rises faster then you can never get out of it right and it compounds it will spiral out of

02:39:41.200 that's what they did to developing countries that's the imf world bank system to exploit developing

02:39:48.240 countries because what the imf world have done over the last 80 years is tell them based on this

02:39:53.580 economics which is true and very scientific axiomatic deductive made up equilibrium stuff there's no

02:39:59.800 equilibrium um that's heresy by the way to suggest there's no equilibrium but it's just ordinary you

02:40:06.320 need a food taster um and so they're told well you need to deregulate liberalize privatize um you want

02:40:12.920 growth well you need savings sorry oh you don't have enough savings well will you you need to get

02:40:18.660 you need to borrow foreign savings the world bank is willing to lend you some the imf will they're

02:40:24.960 claiming that the loans they're delivering from the west are the product of western savings yes

02:40:29.340 exactly exactly and so there's a moral cast to all of this you certainly see it here

02:40:34.460 just blaming fat working class people at walmart for all of america's problems yeah yeah yeah yeah i mean

02:40:40.500 they there is a sense in which they turn the the culpability the moral responsibility onto the

02:40:46.320 victims of the scam yeah it's your fault exactly exactly and and so these countries have been

02:40:52.980 encouraged to borrow from abroad when it's it's a scam because who are the foreign lenders getting

02:40:59.140 the money from they created out of nothing the foreign banks create out nothing which is something

02:41:03.020 but the argument is the vert you know the we virtuous people have just saved a lot of money

02:41:07.740 well we know the savings rate is pretty low in the u.s it's not negative so but yes there's still

02:41:13.280 that's the argument they use so it's a trick because developing countries can have their own banking

02:41:17.080 system based on many small local banks they will have growth and prosperity and you don't need

02:41:22.400 foreign money because actually foreign money never enters the borrowing country so it's always a

02:41:28.660 trick it's one of the rules of banking you know let's say there's a developing country let's say

02:41:32.800 south africa yeah and they're they they they're told oh we need we need money we don't have enough

02:41:38.600 savings we need the savings from abroad okay we'll take a loan from barclays in london for half a

02:41:43.560 billion pounds okay they tell us that's what we need okay well where does barclays get this half a billion

02:41:51.500 pounds worth of money from it creates it out of nothing credit creation through the banks

02:41:55.480 um now that south african finance ministry says well actually we want to use this money in south

02:42:01.980 africa so barclays send over the money oh you mean you want south african rand uh yeah yeah sure

02:42:09.280 well we can arrange for that there'll be some costs you know and fx and whatever fees but we're happy to

02:42:15.100 do it so what happens next is barclays calls around south african banks and one of them may be a

02:42:24.060 subsidiary of barclays it doesn't matter but south african authorized licensed south african banks you

02:42:29.680 see why because they're the ones that have their accounts in south african rand

02:42:33.960 barclays can't create south african rand um so and they will ask for a quote we want to sell pound

02:42:41.800 and buy south african rand what happens next the south african bank will create that money out of

02:42:48.440 nothing which is something south african banks could have done without the round trip abroad which

02:42:53.980 indebts the country and usually you debt for equity swap or you can't pay your debt well we own you now

02:42:59.400 we own your assets exactly right and that's been the trick so it's been a terrible system to

02:43:05.760 keep growth low prevent countries from developing and even industrialized countries you know we're

02:43:13.040 also victims here it's not as if oh the the rich countries they're exploiting the poor that's not

02:43:17.180 exactly true because we're also being exploited in the rich countries and the middle class is being

02:43:20.800 exploited and it's being drained off of of wealth we could have prosperity and abundance this is what

02:43:27.040 people need to realize everywhere in the world we can have peace and abundance but we must address

02:43:32.960 the financial system the banking system and the best system is when you decentralize the power

02:43:38.560 as lord acton said a long time ago in britain power corrupts and absolute power corrupts absolutely

02:43:46.540 when you are this powerful central planner central banker power creates temptations and human nature

02:43:54.660 tells us and history tells us most people can't handle this these temptations and that's when you get the

02:44:00.200 abuse and in the end it's all about maximizing that power for the central uh central forces and of

02:44:06.100 course so what we need to do is create many small local banks also in the u.s in every country in the

02:44:10.880 world we should create state banks state sovereign banks as they have in in north dakota because

02:44:17.900 there's only one state-owned um sovereign bank uh in the united states in in north dakota as a result

02:44:25.040 because that basically protects the local chartered banks it's it's so it's they're not so dependent on

02:44:31.560 the federal reserve or on on the fdic and and therefore they can make sure that these banks

02:44:37.820 stay in business and thrive and therefore the economy and the small firms will thrive and therefore job

02:44:43.120 creation will thrive we need more of that particularly in this day and age where the central planners

02:44:47.560 want to do the opposite they don't want these many small banks they want to force them to

02:44:51.520 to merge and the biggest club they have they're wielding now to to get rid of the small banks is

02:44:58.200 actually the introduction of central bank digital currencies and since you ask about the next 10

02:45:03.180 years ahead we have to talk about it because that's definitely top of their agenda to introduce central

02:45:11.040 bank digital currencies now what is that how does that fit in well first of all again it's it's marketed

02:45:16.000 in a very devious way they're telling us oh it's the digital aspect that's new

02:45:20.440 we used to have cash paper that's old-fashioned now we need digital central bank money well hang on

02:45:25.160 we've been using digital money for many decades of course and there's no problem really it works

02:45:31.080 yeah maybe some fees could be lower but you know for that we need more competition not less

02:45:36.220 competition so um so what's the problem what's actually new you know we've been using bdc

02:45:42.160 bank digital currency for for half a century almost yeah so that's not new what is new about cbdc

02:45:51.360 was the c central the centralization it's about centralizing things central banks are about to break

02:45:58.880 this old contract this deal between the banks and the central bank the deal was central banks supposed

02:46:05.760 to be specialized to stand behind the banks back them up when needed but not replace the banks

02:46:14.640 and that's also why we need now state level sovereign banks because they will stand behind

02:46:20.560 the banks in their state and the federal reserve has failed in standing behind banks and doesn't

02:46:25.200 back banks even silicon valley bank you know they only injected liquidity after it was bust and changed

02:46:30.320 ownership well that's kind of funny isn't it and the fed now system meant that more money left the

02:46:37.280 silicon valley bank in one day than ever before in history from from any bank giving a blood transfusion

02:46:42.720 to a corpse well it yeah it was exactly it was afterwards so um cbdc is the central banks opening accounts

02:46:51.840 for the general public at the central bank which means that you just need to create the next banking crisis

02:46:57.440 and the central banks are very good at doing that and all the money will leave the banks the banking

02:47:01.840 system will shut down and it will all be in the central bank and we have hey presto we've gone backwards

02:47:07.920 china moved from the soviet mono banking system to thousands of small local banks and thrived

02:47:15.360 you know doubling national income every four and a half years for 40 years becoming the most powerful

02:47:21.120 economic power you know in such a short time actually faster than germany america before in history

02:47:26.160 uh and lifting more people out of poverty than anywhere else before in history

02:47:31.840 but we are moving in the opposite direction our central planners in europe in brussels and

02:47:36.720 and at the ecb they are killing banks and they want to now introduce cbdc's which means they want to

02:47:42.160 move to central planning and the same you know as any country in the us at the moment the fed is saying

02:47:47.520 fortunately no we we're not going to do this but of course they're studying it and they're preparing for it

02:47:52.160 it so when the time is right you know i'm sure they'll wheel it out because central bankers

02:47:58.000 they're human they're tempted by the temptations of power they already have so much power de facto

02:48:03.520 no accountability i mean when are central banks held to account for their actions no you can't audit

02:48:08.400 them you can't really know what they're doing and they think just giving a speech in parliament

02:48:12.080 or some committee we're being questioned you know that's good enough that's accountability

02:48:16.000 no it's like you you wanted to have two percent inflation now we have 10 inflation uh shouldn't

02:48:21.680 you lose your job oh no that never happens i don't think it's ever happened exactly so um

02:48:28.880 so we need to oppose the introduction of cbdc's and of course it's it's not just that what i mentioned

02:48:35.360 it's much worse because it's a programmable control tool of course and um the programmability

02:48:42.720 is really scary instant compliance and they have they have said this you know central bankers have

02:48:47.680 said this that they can then write the rules and they have the technology to enforce those rules

02:48:54.800 and that's what's going to happen with cbdc so it's not really money it's potential money

02:48:58.800 you have to apply may i please use it to buy x y say oh sorry you know your carbon footprint has

02:49:03.680 been used up or whatever the excuse may be you're outside the 15 minutes or you criticize the central

02:49:08.560 banks or you've been a critic criticizing central banks very sinister so so that final question if

02:49:15.840 people have made it this far into this remarkable interview and want to learn more

02:49:22.400 about this topic so much has been written about central banking so little of it bears any resembles

02:49:28.960 to what you just said you're thinking about it in a very different way it sounds to me like a much

02:49:33.040 more accurate way what uh where do people go to to learn more on this topic i think the best

02:49:38.320 is to get also my very up-to-date shorter reports and analysis on particular markets just now i

02:49:44.640 finished one on the bond markets um is my sub stack which is our werner dot sub stack dot com

02:49:53.200 um and there's a small monthly fee of i think nine dollars or something like that um and otherwise get

02:49:59.920 my book princess of the yen um also i have a prince of the yen at quantum publishers dot com

02:50:07.280 that's where you get it cheaply it's on amazon sometimes they have horrendous prices and it's

02:50:12.800 or in many countries not available strangely um and otherwise i'm uh sort of growing my youtube channel

02:50:21.280 werner economics how many languages do you speak well fluently and able to give lectures and presentations

02:50:28.000 is uh is three only so german english and japanese three yeah um i've i i can partly get by in in french

02:50:36.160 and i did latin in school and my chinese is is very passive and only you know the writing from japanese the chinese

02:50:45.120 characters which you use in japanese um but you can write in japanese yes yes yeah although it's time

02:50:52.800 consuming you know um but yeah interesting well i love those chinese characters there's lots of

02:50:59.280 truth and information in there because they're they're like messages from 5000 years ago how people

02:51:04.560 thought and how they lived it's all in the chinese characters professor i can't thank you enough for

02:51:11.920 this i hope you'll come back i'd love to thank you very much thanks for having me thank you very much

02:51:25.760 you

The Tucker Carlson Show - July 28, 2025

Richard Werner Exposes the Evils of the Fed & the Link Between Banking, War, and the CIA

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