Banking is a Pyramid Scheme

Dear reader, I find myself this week in a place more and more to my liking. It is the feeling that the argument—that money as we have it must go—is won. I have prodded and cut it from every conceivable angle, read for and against arguments from all sides, slept on it, dreamed about it, shouted it, endured setbacks and periods of doubt, and my conclusion is, its logic is unassailable. My intuition is in full agreement. Head and heart are one on this. The only other time in my entire life I have experienced such a feeling of inner unity was when I knew I wanted to marry my wife.

My growing acquaintance with the work of Franz Hoermann has contributed mightily to this, but I would not have been able to appreciate his work as deeply and easily as I do had it not been for others, for example Jacque Fresco, Peter Joseph, and Charles Eisenstein, to name three of many. A corollary of this quiet confidence that the logic is sound and the direction clear, is that my own work at this blog is more or less done. Actually I have used Econosophy not so much as a blog, but as a smithy for my book on money's effects on society, to which I must now turn my attention more fully.

Subsequent to today I shall use Econosophy as the place where I translate those of Professor Hoermann's Internet-based publications I feel should be available in English. Of course, should I want to do anything else here, I shall. Today's translation is not of Prof. Hoermann's own work, but of part of a letter he links to. It was written by a concerned Austrian citizen, one Dr. Guenther Hoppenberger, and sent to the Public Attorney's Office on the 3rd February 2009, inquiring into the legality of fractional reserve banking, which he calls a pyramid scheme. It is available on Franz Hoermann's website as a PDF, with the note, “As far as I know the Public Attorney's Office has not responded.”

So, without further ado:

“Statement of grounds and facts of the case.

Discussions of the financial crisis have given me cause to acquaint myself with the state-tolerated, indeed state-established—that is, secured by relevant laws and protected by state oversight—system of money creation and the mechanisms with which that money is then circulated. I quickly came to the conclusion (detailed below), that this system is a blatant violation of §168a (2), Criminal Penal Code, and urge the Public Attorney's Office to intervene accordingly.

The elements of the crime are effected in two ways:

1. The bank promises a property gain (interest) against a deposit, a promise based on the condition that this system (bank system) enjoys an increase of customers, whom it can only serve based on the condition of further increases of customers. This condition for the acquittance of the promise of property gain is kept secret from the system's customers. The guarantee shown, when such is stubbornly demanded, is itself based upon the very same conditions of a parallel system of similar legality, which is nothing more than the offsetting of the crime and obfuscation of the actual rules of the game.

2. Even the claimed promise—the source of money creation and extension of credit—that the bank can itself earn interest, is only met on the condition that ever more customers take on, in total, ever more loans, since otherwise the interest not created alongside the credit—though nevertheless the bank's property gain from this bank-demanded and debtor covenanted interest—does not exist. And even if the conditions for individual contracts appear satisfiable, because the crime, pursuant to §168a of the Criminal Penal Code, is made difficult to detect by splitting it up into subsystems, a systemic assessment of the total system (bank system as single bank) must be made.

Especially disconcerting is the fact that the promises of property gain described in both 1. and 2. appear to be sanctioned by existing laws, even though they clearly contravene § 168a of the Criminal Penal Code.

[… snip … ]

In light of the complaint I have brought to the attention of the state attorney's office regarding the crime pursuant to § 168a(2), I urge an investigation into the unjustifiable, ongoing continuance of the pyramid scheme by responsible bodies, and of the policy-level persons therein, and remain

yours respectfully,

Dr. Guenther Hoppenberger

A concerned citizen.”


The letter was written in very convoluted German which I have struggled to simplify without sacrificing its rather scholarly tone. I hope I have succeeded.

For those who might have stumbled upon this post and find its logical content impossible or untrue, consider the following. The banks/financial sector were rescued by the state because they were in financial difficulties. No one was borrowing, no one was lending. So the state steps up as borrower of last resort. From whom does the state borrow? From the bankrupt banks/financial sector. The state creates trillions of dollars by borrowing them into existence from the banks to rescue the banks. The state is the last sound borrower because of future taxes. That is, we tax payers have bailed out a financial sector addicted to gambling. We have borrowed from ourselves and our children, unasked, and have been so used for centuries, to sustain the perpetual raping of our future wellbeing for the benefit of a tiny minority.

And if, as is claimed, the banks have 'paid back' that 'money', why then austerity? Why the belt-tightening?

The system is so absurd it simply cannot be understood. We cannot process the evil done in its name. It makes no sense because it cannot make sense. It is a con, a trick, a mix of jargon, propaganda and mass hypnosis perpetrated by a psychopathic elite terrified the rabble is going to wake up and spoil their party. Well, we are waking up.

So, dear beneficiaries of this criminal system, you had better make best efforts to put things right, or you will likely be ripped to pieces by the monstrous rage of the dangerous crowd you have purposefully kept dumb for so long. Your time is running out.

Demote money, promote wealth.