A discussion taking place among the Social Credit discussion group is centred on the idea that the banking system’s credit creation system (creating money out of thin air) is fraud or theft by conversion? Most of the participants are in America and Canada so the discussion centres around the laws of those two countries.

D…. writes:

“As for fraud, I said it is theft by conversion. What is Theft by Conversion?
Theft by conversion occurs when a person lawfully obtains possession to the personal property or funds of another, and then converts the property into funds for their own use and without the person’s permission.
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When money is backed up by our labour – our property – and then apprehended by banks for their own use and without our permission, that is theft by conversion. Just because the general public is generally too ignorant of the truth to see it, that does not make it not true and that does not make it not a crime.

Have you watched Michael Moore’s latest film about him conquering the world for America? He has interviews with CEOs and government leaders from Iceland who site 50 American bankers who would have gone to jail in Iceland. Indeed, they put many of their own bankers in jail for much lesser crimes.

As for our laws, the only problem is the lack of will of our corrupted Department of Justice to prosecute these criminals with the laws that are already on the books. Do you think that turning a blind eye to these crimes is acceptable? I sure as heck don’t.”

Now why would D… equate ‘Theft by Conversion’ with the banking system’s practice of creating credit (money) out of thin air, claiming it as its own and demanding its repayment with interest?
Well, let’s first look again at Richard A. Werner’s
A lost century in economics: Three theories of banking and the conclusive evidence, Wednesday, 08 March 2017

Banking and Finance
Richard A. Werner, Centre for Banking, Finance and Sustainable Development, Southampton Business School, University of Southampton, United Kingdom

How do banks operate and where does the money supply come from? The financial crisis has heightened awareness that these questions have been unduly neglected by many researchers. During the past century, three different theories of banking were dominant at different times:

(1) The currently prevalent financial intermediation theory of banking says that banks collect deposits and then lend these out, just like other non-bank financial intermediaries.
(2) The older fractional reserve theory of banking says that each individual bank is a financial intermediary without the power to create money, but the banking system collectively is able to create money through the process of ‘multiple deposit expansion’ (the ‘money multiplier’).
(3) The credit creation theory of banking, predominant a century ago, does not consider banks as financial intermediaries that gather deposits to lend out, but instead argues that each individual bank creates credit and money newly when granting a bank loan.

The theories differ in their accounting treatment of bank lending as well as in their policy implications. Since according to the dominant financial intermediation theory banks are virtually identical with other non-bank financial intermediaries, they are not usually included in the economic models used in economics or by central bankers.

Moreover, the theory of banks as intermediaries provides the rationale for capital adequacy-based bank regulation. Should this theory not be correct, currently prevailing economics modelling and policy-making would be without empirical foundation.

Despite the importance of this question, so far only one empirical test of the three theories has been reported in learned journals. This paper presents a second empirical test, using an alternative methodology, which allows control for all other factors.

The financial intermediation and the fractional reserve theories of banking are rejected by the evidence. This finding throws doubt on the rationale for regulating bank capital adequacy to avoid banking crises, as the case study of Credit Suisse during the crisis illustrates.

The finding indicates that advice to encourage developing countries to borrow from abroad is misguided. The question is considered why the economics profession has failed over most of the past century to make any progress concerning knowledge of the monetary system, and why it instead moved ever further away from the truth as already recognised by the credit creation theory well over a century ago.

The role of conflicts of interest and interested parties in shaping the current bank-free academic consensus is discussed. A number of avenues for needed further research are indicated.”

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