Saturday, April 10, 2010

1968 Minnesota Credit River Case

The most cynical (but not necessarily inaccurate) view of debt I've seen is that banks loan out imaginary money they don't really have, which was "collateralized" by capital they did not really have, based upon central bank printing presses which create money out of thin air which they don't really have. But then when debtors have trouble repaying onerous loans, the bankers seize real assets.

In First National Bank v. Daly (often referred to as the "Credit River" case) the court found that the bank created money "out of thin air":

[The president of the First National Bank of Montgomery] admitted that all of the money or credit which was used as a consideration [for the mortgage loan given to the defendant] was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneaopolis, another private bank, further that he knew of no United States statute or law that gave the Plaintiff [bank] the authority to do this.
The court also held:

The money and credit first came into existence when they [the bank] created it.

Justice courts are just local courts, and not as powerful or prestigious as state supreme courts, for example. And it was not a judge, but a justice of the peace who made the decision.

But what is important is that the president of the First National Bank of Montgomery apparently admitted that his bank created money by simply making an entry in its book ...
The judge voided the mortgage, since he found that the bank hadn't given any real consideration, but simply created money out of thin air.

In other words, according to the most cynical view, the entire debt-money system is a scam ... and should be repudiated.


The Great Gazoo said...

Strange things happen in small town courtrooms that have nothing to do with the law. The court later refused to accept $1 bills as court costs because the money meant nothing. You and this judge live in a fairy land. It is fine to discuss economic theories in a classroom -- to try and imagine their application in the real world is another story. Start discussing the practical application of these theories to our lives; come back to planet Earth. GFY

Trader Bob said...

I do not realize why you love to live on your knees.