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TOPIC: Seigniorage: The Illegality Of The Tax System

Seigniorage: The Illegality Of The Tax System 9 years, 2 months ago #1901

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Seigniorage: The Illegality Of The Tax System

Legal Office (branches throughout Italy)
Hon. Alfonso Luigi Marra
Telephone +39 3932039457
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DOCUMENT #134, 02/11/20 (1ST EDITION 01/01/07)

The legal reasons for suing in order NOT TO PAY TAXES, OVERDRAFTS, LOANS ON SEVERANCE PAY, ETC.

Consult us about:
- Legal actions against the Tax Commissions to contest the payment of taxes;
- Summons against commercial banks;
- Summons against the Banca d'Italia and the European Central Bank for the return of 29,000 Euros for Seigniorage + 20,000 Euros for psychological damage.

Undisturbed, under the eyes of a judiciary system that lacks a sense of honour, the central banks, including the Banca d'Italia (BdI) and the European Central Bank, incredibly private, practice the crime of primary seigniorage, while the commercial banks engage in the even more serious secondary seigniorage, and what it more, succeed in evading taxes to a greater extent than the rest of society, both in terms of paid and unpaid taxes.

After having concealed this, from the time of the Republic's birth, in the Parliament's proceedings (with the omissis, i.e. blanketed), it was "discovered" that the BdI is private (85% banks, insurance 10%, 5% anonymous), like most of the other central banks; including the ECB, 14.57% of which belongs to the BdI, and therefore to its owners.

This private ownership was discovered a few years ago, and attempts have been made to play down its importance, but it is the cause of the world's economic and financial difficulty.

Primary seigniorage in the BdI / ECB and other central banks consists of the following:

1) Ongoing printing of banknotes at the cost of paper and ink (from 1929, it no longer needed to correspond to a value in gold, and has never really done so). Banknotes whose quantity is known only to the banks, because the serial numbers are not progressive, so their meaning is not known.

2) Using them (the value in Euros, Dollars etc. printed on them) to buy from other States - Hear Ye! Hear Ye! - the same amount of the public debt in securities (BOT, CCT, BPT, CTZ).

3) Selling the securities at auction, recovering the money and leaving the State with the "public debt" invented by this crime.

4) Fraudulently entering as a debit the amount of the banknotes printed at no cost in order to "balance" the securities or the proceeds from their sales as credit, and to conceal these huge sums.

A cover-up after which (given that, as we shall see, the tax system is also unlawful), at a rate of 50%, a tax evasion then follows for an amount equal to half the banknotes issued to "buy in return for" the public debt, for whose interest payments we must allocate a large part of the budget. Notwithstanding that, many deduce from the non-progressive serial numbers of the banknotes that their quantity is out of control.

A prime phenomenon of uncontrolled production by banknote counterfeiters and
then, as we shall see, their use by commercial banks at a value multiplied by fifty (secondary seigniorage), which is the cause both of inflation and the current illegal tax system, also created for dominion over the citizens by criminalizing them as tax evaders (offenders) and money launderers etc..

These crimes, among other things, and given the obligation of the State to pay the buyers the promised interest on the already issued securities when they mature, make the BDI / ECB responsible for the "public debt," as they have already received compensation.

5) Recycling the money cheated out of the public through central banks worldwide, including many which Internet sources indicate to be Clearstream, Euroclear, Swift and others.

These phenomena have upset the world, starting with that which is defined as inflation, but is anything but what one believes it to be, because it is the result of the production of money by counterfeiters (the banks).

We observe that if, for example, the global money is 100, and a counterfeiter (the banks) creates another amount again, equal to 100, when he puts it into circulation (spends it), on the one hand he misappropriates half of the real wealth, and on the other, brings the global money to 200, so it decreases its purchasing power by 50%, resulting in a (socalled) inflation of 50%.
This inflation would not occur if the State were to produce the money instead.

This is because the State, by law, could then only dispense it in compensation for goods, services, rights etc, in other words, making it "real" (covering it) with a parallel increase in real wealth which it receives in exchange, for which reason the purchasing power of the money would remain unchanged.

-Inveramento -making something true- (a process that I defined) which does not exist when money is produced by a counterfeiter (a bank), because the counterfeiter assigns it without first covering it.

What matters, ultimately, is not that my salary of 1,936,270 euro becomes one thousand euro, or that the State brings the global money figure from 100 to 200, because, whatever the global money figure is, or however it varies, it can only correspond to the total quantity of real wealth. What matters however is the percentage of global money that some have, because it corresponds to the percentage of real global wealth that they can buy.

I then define inflation as that phenomenon that occurs when counterfeiters introduce money by spending it, thus causing a decrease (to their advantage) in the percentage of global money in the hands of citizens, which corresponds to a parallel decrease in the percentage of real wealth that can be bought.

From this we can also deduce that the citizens have the power to make money real (anyone who produces it) by the mere fact of receiving it, since there is an underlying presumption that they do not receive it at no charge, but always covered by a service, goods or rights offered in return.

A picture in which, if a counterfeiter "lends" money to a unsuspecting citizen who spends it putting it hopelessly in circulation, but learns that it is counterfeit, owes nothing to the counterfeiter, both because the counterfeiter gave him nothing, and because the citizen will obtain the compensation from society for spending that money, not from the counterfeiter, and he must make restitution to society.

These are my reasons for maintaining that overdrafts, mortgages, severance pay loans and so on, should not be repaid to banks, and that if we wish to make the citizens' "debts" with the banks "real", in order to then exact them, it is necessary to first confiscate and nationalize the banks, otherwise their uncollectible credits are the claims of counterfeiters and fraudsters.

The collection of such credits will make the State extremely wealthy also by defeating the dramatic demonetization piloted by the banks to weaken and dominate us.

In fact, when money is produced by the State, in order that its production does not cause inflation, an adequate quantity must be printed, because that increases trade and is beneficial for the economy.

Allegations of violations of the Articles of the Criminal Code 241, 283, 648 bis, 501, 501 bis, 416, 61. etc. that are not made against any known subject but the only the known, direct and hidden beneficiaries of these crimes.

Counterfeiting by the Central Banks, including the ongoing misappropriation by commercial banks (their owners) through the mechanism of the "money multiplier."

With the money multiplier, the banks, according to practices that a prone and infamous regime doctrine takes for granted, but which are the height of criminality, make loans amounting to 50 times greater than the money they possess.

In essence, if Mr. Average deposits 100,000 euro in the Banca Intesa / San Paolo (44.25% owner of the BdI), the bank will retain 2% as reserves (rounding out, it is actually 1.6%) and will loan 98% which, once deposited in another bank, in a cascade system, will be loaned at 98% indefinitely.

Until, not the individual bank, but the banking system, through a round of loans of an amount that is lower by 2% each time, will reduce the initial 100,000 euro to zero, but it will have grossed interest on loans for 5,000,000.

Using 50 times over the same money that should monetize society, but instead used by the commercial banks to unlawfully impose interest on each of these loans of other people's money, for which they should only be entitled to compensation for the service (which has already been collected) while the interests should go to the owners of the money.

The current tax system is illegal because its main function is to force citizens to finance the purchase of banknotes (which already belong to them), from central banks.

More specifically, the tax system is used to collect, through other taxes and fees, the money already made "real" (or the corresponding securities) to be used for payment of the money to be bought (made real/covered).

Fees and taxes that will no longer be needed when the State no longer has to buy money, but can print it. If it makes the community pay \ cover (back) \ realize the cost with the goods or services necessary to make the required amount.

A system in which, I believe, only one fee should be paid (we can call it "general" - without compensation between giving and taking) on the consumption of goods or services.

Fraudulent mechanisms that, between primary and secondary seigniorage, inflationary processes working to their advantage, evaded taxes and illegal taxation, spill rivers of money into the banks, whose existence is therefore based on money illegally accumulated over time.

That is why, for the same reasons that one does not repay a thief a loan made with stolen money, the lawsuits can maintain that the banks should not be repaid loans, mortgages, loans on severance pay etc., but that the real owner, the community, should be repaid.

Just as, following the same logic, one should not have to pay the current taxes and fees.

Allegations that should be made, but safeguarding oneself with every essential legal strategy, and especially in the case of mortgages and fees, continuing with the suit, if possible, while paying them.

Lawsuits that we lawyers should begin en masse, also arguing, subordinately, in lawsuits against the banks, that the rate, particularly in loans, is usually a form of usury, and therefore, at worst, only the capital should be repaid; and even more subordinately, that which the law already recognizes as the illegality of compound interest, late credit payments, commission on overdraft charges, etc..

Legal processes formulated to obtain even a partial acceptance of the subordinates, in the first instance (often for high amounts) to then go on to appeal and supreme court, awaiting the evolution of the judicial system.

How lawsuits should be brought against taxes and fees, formulating here too, as the main question, the request for a ruling on society's non obligation to pay, given the illegality of the tax system, such subordinates, and all the other revenues requested.

Gangs that have imposed their rules on the world, codifying them in the current tax system or the famous Basel Agreements, all of which are ridiculously filled with words, ignoring the fact that they are just vulgar unlawful agreements between individuals.

Things that now, in truth, following the diffusion of this document, have become so well known that, to give a small idea, there is talk of nationalizing the central banks, starting with the BdI. But without ever questioning secondary seigniorage, which is the major source of their income through interest on mortgages, loans, credit cards, and so on.

Unlawful things because the interest should go in full to the owners of the money, and the State, when it needs money, should print, on its own, the banknotes, as is the case with the metal coins, which are only 2% of the banknotes. Interest which is, however, generally a form of usury.

Usury which, consisting of secondary seigniorage as we have seen, in appropriating undue interest fifty times over on the loan of other people's money, is the extreme form (kind).

The printing of bank notes and creation of paper money by the State that requires an amendment of the Treaty of Maastricht and the European Constitution, circumventing by confiscating and nationalizing banks and eliminating the criminal factors through these actions.

The Treaty, the European Constitution and tax systems, written in hand by the banks, and with which they have attempted to rob the States of their economic sovereignty to hand it over to these gangs, but without success, because it is in opposition to all the basic principles of the Italian Constitution (bill of rights), the European Convention of Human Rights, and all other principles of the European Constitution and every other regulation.

The printing of money by the State is not essential also from various perspectives. It is sufficient that the State pay the ECB / BdI the mere typographical costs, or simply that the central banks, obviously, enter the banknotes they print as assets and pay the taxes: it does not solve the whole problem, but is just enough to give society some wealth and highlight the criminality of the present system.

Crimes whose disgraceful concealment would be useful to the lawsuits for the refund of the primary seigniorage to the tune of 29,000 euro per citizen and 20,000 euro for psychological damage.

Since those crimes are not provided for by law, there are no legal obstacles to removing them (the sentence [opinion] of the United Sections of the Supreme Court no. 16751/06 revolves around other cases because its citation in terms of primary seigniorage misses the mark.

Beyond, however, the efforts to deny the United Sections jurisdiction over economic policies of the States, here we ask for a ruling on not just banking crimes but on the breach of standard regulations as well, constitutional and international.)

It is not true that nothing can be done to oppose these practices of the ECB, like those of the Federal Reserve, the Bank of England, Bank of Japan, etc., as well as the tax systems, because as soon as the judiciary, political and information systems begin to do their duty, these monsters will be defeated in a flash. And if they do not do it they will be defeated just the same together with their pimps, thanks to the Internet: the new ally.

Alfonso Luigi Marra

The most important feature of banks: credit creation

(Extracted from: New Paradigm in Macroeconomics, Richard Werner*, Palgrave Macmillan, 2005; pp. 174-180)

Many economics textbooks that mention banks still acknowledge that they can 'create credit'. However, it appears that the original meaning of this expression has been lost. Those textbooks and authors that mention the words credit creation now give it quite a different meaning. Proponents of the present-day 'credit view' define credit creation as 'the process by which saving is channeled to alternative uses' (Bernanke, 1993, p.50). To Bernanke, 'credit creation' is therefore the 'diversion' or transfer of already existing purchasing power. This is also the understanding of the concept by economists from other persuasions, including monetarists like Meltzer (1995). They all therefore agree in classifying banks as mere financial intermediaries, providing services similar to and in parallel with non-banks and capital markets. [21] Clearly, thus defined, credit creation would not be a unique feature of banking. proponents of the credit view consequently also argue that credit aggregates are not to be considered an 'independent casual factor affecting the economy'; rather,

credit conditions - best measured, by the way, by the external finance premium and not the aggregate quantity of credit - are an endogenous factor that help shape the dynamic response of the economy to shifts in monetary policy. Thus the theory has no particular implications about the relative forecasting power of credit aggregates. (Bernanke and Gertler, 1995, pp. 43ff.)

The representation of banks as mere intermediaries is perpetuated by the explanation of credit creation in textbooks, which depict it as a process of successive lending of already existing purchasing power by intermediating banks. Figure 12.1 reproduces the textbook representation of credit creation: Bank A receives a new deposit of US$100. If the reserve requirement is 1%, textbooks say that the bank will lend out US$99, and deposit US$1 with the central bank as reserve. The US$99 will, however, be deposited with another bank, Bank B, which will also be able to lend out 99% of that amount (US$98.01) . and keep 1% as reserve. This process continues until in the end a total of US$9900 has been lent out. Textbooks represent credit creation as successive financial intermediation. According to this description, a single bank is unable to create credit.
Deposit 1% - reserve - loanable funds

Bank A US$100 US$1 US$99.00 -->

Bank B US$99 US$0.99 US$98.01 -->

Bank C US$98.01 US$0.9801 US$97.0299 -->

--> ...

--> ...

--> maximum amount eventually lent by the banking system: US$9,900.00

Figure 12.1 The textbook representation of money multiplication

While even this description does conclude that the overall banking system creates money, credit creation seems to be the result of a diffuse process, in which money 'circulates' in the economy (in line with the concept of 'velocity' in the quantity equation). Most of all, we are told that each bank can only lend 99% of the money deposited with it. This renders banks similar to fund managers who lend out savings deposited with them and thus they are considered mere financial intermediaries. Thus Bernanke's understanding of credit creation as the (successive?) 'channelling of savings' to investors is not far-fetched and most economists do consider banks merely an alternative channel to capital market or other intermediation. [22]

Phillips' (1920) 'money multiplier' concept, linking cash and reserves to bank deposits (the money supply), has not helped in resolving this misunderstanding. However, Goodhart (1989b) has clarified that the multiplier identities suffer from a 'lack of any innate theoretical, or behavioural, content' (p.133) so that accounts of the underlying dynamic processes based on them 'are at best misleading and often wrong'. [23]
Given our empirical observation of banks, such as the London goldsmiths, we conclude that the textbook representation of the actions of each bank is inaccurate (Figure 12.1 ). Firstly, the frequent description of banks' activity as 'lending' is misleading. The definition for this word according to the Oxford English Dictionary is as follow:

• verb (past and past part. lent) 1 grant to (someone) the use of (something) on the understanding that it shall be returned. 2 allow (someone) the use of (a sum of money) under an agreement to pay it back later, typically with interest. (Compact Oxford English Dictionary)

As can be seen, the standard use of the concept of lending implies that an item is physically removed from use by A and instead transferred to the use by B. Lending thus describes a transfer, a diversion of an existing commodity to the exclusive use somewhere else. Given the laws of physics, this usage is only natural. However, the credit extended by banks does not remove purchasing power or claims on resources from anywhere else in the economy. Therefore, strictly speaking, it cannot be described as 'lending'. Banks do not lend money, they create it. Meanwhile, 'credit creation' does not refer to mere 'financial intermediation', as many recent authors have argued. According to the OED:

• noun 1 the action or process of creating 2 a thing which has been made or invented, especially something showing artistic talent. 3 (the Creation) the creating of the universe regarded as an act of God.

• verb 1 bring into existence 2 make (someone) a member of the nobility.
- ORIGIN Latin creare 'produce'. (Compact Oxford English Dictionary)

The word 'creation' refers to 'the act of creating' or something that 'has been made or invented'. To create, in turn, is defined as to 'bring something into existence'. If the savings already existed, their transfer could not possibly be called 'credit creation'. Indeed, the etymology of the term 'credit creation' reveals quickly that it originally referred to the new creation of credit (or money) that did not exist before. Instead of referring to the transfer of already existing purchasing power, as Bernanke describes it, many authors recognized that it described the ability of each individual bank to create money 'out of nothing'. [24]
In line with this alternative view, a more accurate presentation of credit creation can be shown in Figure 12.2, which depicts the balance sheet of a bank that receives a new deposit of US$100, recorded as a new liability of the bank. Instead of lending out US$99, as the textbooks tell us, the bank will use the US$100 as reserve with the central bank (entered as asset on its balance sheet). The US$100 can now become the 1% on the basis of which the bank can lend out 99 times as much. Thus this very first bank can grant a new loan amounting to US$9900. The moment the loan is granted, the bank simultaneously increases its assets by US$9900 (the amount of the loan, which is an asset for the bank) and its deposits by US$9900 - the person or company who receives the loan of US$9900 in his or her deposit account - money that can now be spent on transactions. The money the bank has created, US$9900, is 99% of the increase in the bank balance sheet (US$100 new deposit plus US$9900 in loan/deposits). [25] Thus the reserve requirement is met.
Contrary to the standard depiction of the credit creation process in most textbooks, each individual bank creates credit and money when it extends a loan. The original deposit of US$100 becomes the 1% reserve on the basis of which loans 99 times as large can be granted by the same bank. Credit creation has 'lengthened' the bank's balance sheet.
Balance sheet of Bank A

Step 1 Deposit of US$100 by customer at Bank A

Assets Liabilities

Step 2 US$100 used to increase the reserve of bank A

Assets Liabilities
US$100 US$100

Step 3 Loan of US$9,900 granted, by crediting borrower's bank account with deposit

Assets Liabilities
US$100 US$100
...+ .......+
US$9,900 US$9,900

Figure 12.2 A more accurate representation of credit creation

The crucial question is: 'Where did the US$9900 come from? The money was not withdrawn by the bank from other uses. It was not diverted or transferred from any other part of the economy. Most of all, although it is shown as a deposit, it was not actually deposited by anyone. The bank simply created the money by writing the figures into its books and the customer's account book. In effect, the bank pretends that its borrower has made a deposit that was not actually made. Unlike the textbook representation, we see that each individual bank can thus create money when it extends a loan.
Showing this truth in textbooks would not only be more memorable, but it would also teach students about what banks really do: they create money out of nothing. The bank just pretends it has the US$9900, credits someone's books with them, and nobody knows the difference.

In the words of Schumpeter (1954),

this alter the analytic situation profoundly and makes it highly inadvisable to construe bank credit on the model of existing funds being withdrawn from previous uses by an entirely imaginary act of saving and then lent out by their owners. It is much more realistic to say that the banks 'create credit', that is, that they create deposits that have been entrusted to them. And the reason for insisting on this is that depositors should not be invested with the insignia of a role which they do not play. The theory to which economists clung so tenaciously makes them out to be savers when they neither save nor intend to do so; it attributes to them an influence on the 'supply of credit' which they do not have. The theory of 'credit creation' not only recognizes patent facts without obscuring them by artificial constructions; it also brings out the peculiar mechanism of saving and investment that is characteristic of fully fledged capitalist society and the true role of banks in capitalist evolution. (p.1114)

Wicksell (1898) also knew that each individual bank could create money:

The banks in their lending business are not only not limited by their own capital; they are not, at least not immediately limited by any capital whatever; by concentrating in their hands almost all payments, they themselves create the money required... (Wicksell, 1907, pp.214-215)

In a pure system of credit, where all payments were made by transference in the bank-books, the banks would be able to grant at any moment any amount of loans at any, however diminutive, rate of interest. (Wicksell, 1907, p.215)

Hahn (1920) emphasized that each bank can create money 'out of nothing' and pointed out the macroeconomic consequences. Schumpeter (1912) referred to this creation of new money as being equivalent to the issuance of new 'tickets' to a game. According to him, the banker is 'not so much primarily a middleman in the commodity "purchasing power", but instead he is 'a producer of this commodity'. Banks issue additional claims on existing resources. Bank credit creation does not channel existing money to new uses. It newly creates money that did not exist beforehand and channels it to some use.
This process was more obvious in the time when there was no central bank with a monopoly on the issuance of paper currency - such as until 1913 in the US. As Goodhart (1989c) stresses, in those days the main liabilities of banks consisted not of deposits, but issued bank notes. The latter increased on a net basis only when more loans were granted. Thus the loans were effectively paid out by printing bank notes.
What makes this 'creative accounting' possible is the other function of banks as the settlement system of all non-cash transactions in the economy. If they so wish, they can extend loans to agents not in the form of withdrawals of funds from elsewhere in the financial system, but by creating the accounting fiction that the borrower has deposited sums with the banking system. Since banks works as the accountants of record - while the rest of the economy assumes they are honest accountants - it is possible for the banks to increase the money in the accounts of some of us (those who receive a loan), by simply altering the figures. Nobody else will notice, because agents cannot distinguish between money that had actually been saved and deposited and money that has been created 'out of nothing' by the bank. [26]
This, then, is also a major distinguishing feature between credit creation in the banking system and the debasement of coinage that was implemented by monarchs in their attempts to increase the money supply: debased coins can be checked and identified as such by experienced traders or professional assayist. However, bank credit creation is impossible to distinguish from 'legitimate' deposits, especially when the majority of transactions already take place in a cashless form via the banking system.
We conclude that the feature of banks as creators of credit (what could equally be called their ability to 'create money') is what renders them special. this feature also explain why bankers quickly became powerful and influential, and could easily expand into various industries, quickly becoming the core of a network of affiliated companies that they either founded or bought up (life is much easier when one has a licence to print money).
Thanks to the special ability of banks to create credit, clear statistical demarcations between various form of fundraising can now be drawn, and an accurate description of the 'money supply' found. Only the central bank (usually allowed to engage in banking business) and banks can create new credit and money and use it to settle transactions directly via the main settlement system of the economy. This differentiates them both on the microeconomic and the macroeconomic level from other agents and renders funding from banks and the central bank 'imperfectly substitutable'. Thus when analysing the economy, banks and the central bank need to be considered separately from others. Government banks, when as usual funded from the Treasury, non-bank financial intermediaries (such as leasing firms, life insurers, mutual funds), households, corporations and the government itself all have one thing in common: they cannot (legally) fulfil this function of banks and the central bank.[27] While banks are credit creators, other financial institutions are financial intermediaries. In this, macroeconomic, sense bank credit can never be perfectly substitutable with intermediated loans. Moreover, in this sense a 'bank credit channel', defined by the creation of new credit, must not only exist, but must also dominate other transmission channels. Banks therefore also cannot but play the pivotal role in every economy.
The example of Figure 12.2, however, remains an example: for in actual practice, banks are rarely, if ever, limited in their lending by the reserve requirement. As Goodhart (1989c) has argued, central banks that set targets for inter-bank interest rates will supply any necessary amount of reserves to banks so that at the time of the monthly deadline for reserve requirements to be met, short-term interest rates do not rise precipitously. This raises issues for monetary policy, namely how bank credit creation can be most effectively controlled, especially when we recognize the existence of imperfect information.
Further, the fact that banks do not have money, but create it, explain why financial fragility is such a major issue in the banking sector. To be able to consider the issue of banking crises, how to respond to them and how to avoid them in the first place, it will next become necessary to render explicit the link between banking and the macroeconomy. This, indeed, should solve the enigma of the link between money and the economy.


* Professor Richard Werner is Director of International Development and founding Director of the Centre for Banking, Finance and Sustainable Development at the University of Southampton. Richard is also a member of the School of Management's Executive Board, as well as its Advisory Board.

21 'Intermediation' is the process by which banks and other financial institutions tailor the maturity, terms and types of financial claims to meet the demands of households and businesses' (Meltzer, 1995, p.62)

22 The exception are the endogenous money and Austrian economics school of thought, which recognize credit creation.

23 'The bank multiplier shows only that if you can observe the change in the monetary base between two occasions, and can predict the two relevant ratios, then you will be able to predict the change in the money stock with a high degree of confidence. This allow very little to be deduced about the process of adjustment. Indeed, most of the accounts of the dynamic process of adjustment which are derived from the multiplier approach are at best misleading and often wrong' (1989b, p.136). Goodhart also explains that virtually any multiplier can be construed in order to link a larger aggregate to one of its smaller components. He gives the hypothetical example of the 'potato multiplier' of total consumer expenditure to argue eloquently that such exercise do not illuminate behavioural, let alone casual relationships.

24 Evidence for this can be found in the work of Law (1705), Thornton (1802). Mueller (1816), Rau (1826, 1832), Wagner (1857, 1872), Knies (1873), Macleod (1855/56), Wicksell (1898), Spiethoff (1905), Schumpeter (1912) and Hahn (1920). A number of economists also continued to recognize this in the postwar era, though their influence remained limited. For instance, Trescott (1960) points out that to grant a loan of US$1000 to a customer, 'a bank needs only to credit his account with $1,000.00 in its books by a stroke of the pen... The process of creating deposits is obviously a simple and painless one for the banks...' (p.55).

25 As bank loans increase by US$9900, so do bank deposits. The initial deposit becomes reserve R of US$100, which allows deposits D of US$10,000. Thus the reserve requirement (R/D) of 1% is met.

26 It could even be said that the bank just 'pretends' it has money, and nobody realizes. Such action could easily be construed as fraudulent. Historically, the lending of gold that was promised to be on deposit with the goldsmiths, as well as the issuance of deposit receipts without any deposits having taken place (note issuance) could possibly be considered illegal at the time. Today, banking legislation has legalized this process. Nevertheless, there is an academic tradition, the 'Austrian School' of economics, which argues that bank credit creation remains illegal, since claims on the same resources are simultaneously issued by banks to different customers (see Hoppe et al. 1998).

27 The exception is the US government. The authors of the US Constitution ensured that the government has the right to issue money, a prerogative last used by President John F. Kennedy in one of his last executive orders (No. 11,110) on 4 June 1963.


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