The Myths That Keep You in Debt
Debt and Credit Myth: “No bank ever lends its deposits”
by Mickey Paoletta
October 3, 2009

According to Federal Rules of Evidence (Self-Authentication) 902(1), (5), “Any document bearing a seal purporting to be that of the United States” is automatically admissible evidence and cannot be easily challenged.

Therefore, the following is true, being a document produced under seal of the United States House of Representatives:

A Primer On Money, Subcommittee on Domestic Finance, Committee on Banking and Currency, United States House of Representatives, 88th Congress Second Session, August 6, 1964, p.19, on the question of who issues “checkbook money”; Congressman Pattman explains:

“Imagine there is only one bank in the country and that it has two private depositors, each with $50 in his checking account. Total bank demand deposits would then be $100. Suppose John Jones asked for a $50 loan from the bank, and the bank approved the loan. The bank would then lend the money to Jones by simply opening a checking account for him and then depositing $50 in it. This is what ordinarily happens when anyone - business or private - borrows from a bank. The bank deposits the amount of the loan in the relevant checking account.”

The Primer then states:

“In making the loan to John Jones, the bank did not reduce anyone's previous bank balance. It simply credited the Jones account with $50. The total amount now held in bank demand deposits now becomes $150. The bank has therefore, issued $50 in checkbook money.”

The Primer concludes:

"The natural question to ask is, where does the bank get the additional $50 to issue and lend to Jones? The answer… is that the bank did not ‘get’ the money at all. Money has been created."

“Alleged Credit”: 3 Myths Dispelled

1. Myth: Jones did not ask for a checking account. Jones asked for a loan. What the banks do today in mortgage “loans”, "credit cards", and others is to take your alleged debt agreement and convert it into a negotiable instrument, while creating a Demand Deposit on their ledgers. Demand Deposits are checking accounts. Each time you pay on mortgages or credit cards, you are replenishing your own Demand Deposit (Checking) Account. The banks “loaned” nothing out of their own assets. That is monetization.

2. Myth: “If that’s true, how would banks get paid?” A bank converts your paper and sells it as a security. It is sold on the massive Securitization Market. Put simply, the banks got paid by selling your note.

Let that sink in. The banks got paid on the Open Market. In an honest system, if you had a debt and I paid it, the law recognizes you owe nothing. Thus, the State of Kansas Supreme Court agreed in September when they decided, “’Foreclosure’ has no standing in Kansas courts.” Why? Because the bill is paid.


Banks create Demand Deposits. No credit is ever loaned. Each payment you make is replenishing the Demand Deposit you were “given”. Since they have already been paid, why require further payments… while charging interest too? In other words, they are getting 3 payments for the price of one:

- They sold the original paper, after they “converted” it through a trust agreement authorized by the Fed. This is the payment very few people know anything about. If so, you should owe nothing. Your “bill” is paid by others and you have no contract with the “others”.
- They are paid by you for alleged “credit”, which they never “loaned” in the first place.
- They are paid on top of that payment in interest. The first 10 years or so pays only the interest first on a 30 year mortgage.

3. Myth: The bank never used its own assets. It never loaned anything. In honest loans, banks would take money out of their own assets and loan to you, affecting their Owners Equity, as per General Accepted Accounting Principles (GAAP). Today, they do not affect their Owners Equity. They only credit the Liabilities T-account.

DO SOMETHING ABOUT IT NOW

The banks will not allow their ledgers to be examined in court because they didn’t loan you anything. If you did bookkeeping this way, you would be charged with “cooking the books.” They’re not charged. Judges won’t allow it.
Inflation then shows up, eroding purchasing power in addition to the “3-Pay System” inflicted already. So…

- Debt: You lose by paying 3 times.
- Debt: You lose by the hidden tax of inflation (See my Part I - Inflation and Debt: Stealing People’s Wealth)
- Debt: Inflation disrupts markets, “capturing all the laws of economics on the side of destruction”, as Keynes wrote.

Here’s what you do NOT do. You will not prevail in any court by crying “Unfair, they didn’t really loan me anything.” The diabolical people who engineered this façade of wealth entrapment (yours), also anticipated the need to protect their “Golden egg”.

“The Bankers Manifesto of 1934”

“Capital must protect itself in every way, through combination and through legislation. Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law, the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of wealth, under control of leading financiers. People without homes will not quarrel with their leaders…”

Defend yourself properly, legally. Learn how now.

1Disclaimer: This information is not legal counsel and is for educational purposes only. In legal issues, you must seek qualified counsel. The use of Rules regarding credit/money has been badly mishandled by well-meaning folks in courts, bringing it into ridicule by the banking industry.