Banks steal from borrowers by deliberately changing the rules of loans when they can get away with it. Here is how they do it with borrowers who take out loans.
The rule of loans is that a loan account keeps track of the money the lender provides the borrower. When a bank enters $1,000 into a loan account, it records that it has provided the borrower with $1,000 in another account of their choosing. If it is a credit card, when a borrower uses the credit card to buy goods from a merchant, the bank debits the credit card loan account with the cost of the goods and supplies the merchant with the money.
How Banks Steal from Borrowers
A bank is a merchant that supplies banking services, including loans. For this, they charge interest on money, also known as rent. This is a service charge, something other than the money earned.
Each month, banks increase the loan amount by the interest amount in the loan account, extend the loan like a credit card loan, and give the money to themselves. They pay the interest to themselves, leaving the loan account debited with the interest. They DO NOT recognise that the interest was paid and require the borrower to pay it again.
They take money from the loan account and give it to themselves but still say the borrower owes it. To add insult to injury, they charge interest on the stolen interest.
Even worse, the money they give to themselves is new money, as they do not lend existing money but new government money that the government owns. The interest is taken but not reflected in the interest banks pay their depositors.
How do they get away with Robbery?
They have been doing this since their invention. It became accepted as a "natural" practice because it demonstrated that money generates more money, and wealthy individuals, bookkeepers, central banks, and economists believed in the approach or found it convenient to do so.
Debiting interest and bank fees appears natural and sensible and “looks” ok, so it has become accepted and is unlikely to be deemed a crime. However, advertising an interest rate while charging double is misleading. Charging 20% + 20% on credit cards is extortionate lending. Not sharing all the interest with depositors is misleading.
However, governments condoning it through the supervision of a Central Bank and for government regulators to have ignored it for decades would make it difficult to prosecute.
What should happen
All existing housing and credit card loans should immediately be converted to single-interest payments. This simple accounting change will not affect banks' immediate profitability. In the longer term, it will reduce the bank's profitability, and the lost funds will appear as lower bank share prices and dividends. No one will be immediately hurt, and banks can find new business in monitoring the distribution of new money to community organisations.
Banks do not invest. They are intermediaries between governments that print money and borrowers who need cash today that they will pay back tomorrow. All the money banks lend is new, and most is used to buy existing assets — not invest in building new assets. Banks do not care to whom they lend or why — provided the money gets repaid.
Creation of New Money
Governments should shift from introducing new money through loans to introducing new money to businesses and community groups that introduce new assets for community purposes, where the assets remain in the community receiving the money and the money is not repaid. New money should not be used to transfer existing assets, and instead of loans to transfer existing assets, communities should explore other methods.
