Excerpts from an interview with Richard Werner by Tucker Carlson in July 2025
How banks create money out of thin air. Economics has made no progress in a century, why is that? The answer is bank credit creation. This is a subject that is taboo in modern economics. Banks have been frozen out of economic theory. But if you ask business practitioners in any town what is important in the economy, they will mention banks. An academic economist, if asked the same question, will not mention banks. The reason is that the economists follow the theory that banks are merely intermediaries, that they just gather deposits, do their credit analysis, risk assessment and all that, then they allocate the funds to investors, just taking a percentage. But that’s wrong. That’s a theory of banking that’s still dominant in all the textbooks and leading journals.
There are actually three theories of banking. An older one is fractional reserve theory. Same intermediary function, but it posits that banks draw down deposits to make loans, hence reserve ratios can be used to regulate the scale of lending.
Then there is a third theory, and that one has been made out to be a wacky conspiracy theory. It was actually well known until about a century ago. That one is the credit creation theory of banking. This one says banks are not intermediaries. They are unique. They have a special power that no other player in the economy has, and that is the power to create money. Most people think this power is exclusively reserved to government. But it’s not true. That’s not how it works. The majority of the money supply is created by banks. Knowing that changes the analysis entirely.
What makes banks unique is the Client Money Rule [UK]. Something similar exists in the U.S. and other countries. If you have client money, this money has to be kept off your books. You have to hold it in custody, like a custodian. Everyone has to separate client money from their own funds — except banks. Banks are exempted from the Client Money Rule.
At law, there is no such thing as a bank deposit. It’s simply a loan. We give credit to the bank when we do what is called depositing our money. A bank deposit at law is not privileged. When you take out a loan, you issue an IOU and the bank will buy it. Then, when you want to take possession of the money the bank is lending you, the banker says ‘You’ll find this in your account with us‘. No transfer is made. Your account is credited because the accounts payable liability that arises from the loan contract is represented, or misrepresented, as another type of liability called a customer deposit. That is the trick you can only do when you [the bank] are the keeper of the record. Only banks can do that. Others have to keep it off their books. They can’t do this trick, of switching the type of liability between loan-contract accounts payable and another type of liability called client funds.
If the banks are engaged in money creation, that has great public impact. It’s very important who a bank is lending to and what is the purpose of the loan. If the bank were merely an intermediary, it wouldn’t matter so much. But because the bank is actually creating credit, there will be an impact on all of us. Bank credit can be a marvelous engine of enormous economic growth, prosperity, and in fact abundance. We can have stable economic growth and prosperity for the majority of us, without inflation and without crises. But we’re not getting it.
The Basel framework has been encouraging banks to lend for unproductive purposes such as asset purchases. That doesn’t contribute to GDP or national income. You’re merely purchasing an asset from someone else who owns it, not adding value. GDP is a value-added concept, and it [asset purchase] is not in there. When banks lend for asset purchases or financial asset purchases, they are creating money for unproductive purposes.
Now look at what Japan was doing in the 1980s. They were lending massively to people to buy real estate. If banks were merely intermediaries, it would not be a big deal. But the banks are creating money and pumping it into the real estate market. You don’t have to study economics to tell me what’s going to happen to real estate prices. But it’s a Ponzi scheme, because it works only as long as the banks create credit for others to join the game and buy these assets. And the moment the music stops, the banks don’t increase credit for asset purchases, then asset prices won’t rise anymore.
These asset prices collapse. But they’re the collateral for the loans. And because bank equity is very small, 10 percent, and you’ve pushed up asset prices 300 percent or 400 percent. If from the peak they fall by 20 percent, the banking system is bust, and that’s why we have banking crises. That’s what happened in Japan in the 1990s. We have these recurring banking crises.
Engineering a banking crisis. The Bank of Japan created the asset bubble of the 1980s intentionally. There are eyewitness accounts by insiders, data, anecdotal evidence. Why did they want to do that? In order to blow up a successful system. Japan was far too successful, it had to be destroyed.
TC: Who wanted it destroyed and why?
The one country that was most unhappy about Japan was the United States of America. They had one political initiative after another to try to force the Japanese to change their economic system. Structural impediments initiative, etc. Unfair, you must change all your business practices. Officially it was ‘we want to help you become a stronger economy‘. It didn’t work politically. So the central bank was used as a traitor. The Asian Financial Crisis [of 1987], it was clear the goal was to blow up the system, create a crisis, then use the IMF to force them to open up to foreign investment. The Asian crisis, the Korean crisis, the Japanese crisis, this was all to force them open so that Western investors could buy assets cheaply and participate in this growth.
The book Princes of the Yen, published only in Japanese, rocketed to the top of the best-seller lists in Japan. I was constantly interviewed on TV, wrote columns for the popular and economic press, became very widely known in Japan. Then one of the biggest advertisers told a broadcaster that Richard Werner cannot be on the show. They had nothing against me, they’re very sorry about it, but it was their bank saying that. The bank had to say that because the central bank (BOJ) asked them to do so. So I was cancelled. A magazine also had to not publish an interview, killed it at the last minute because of the pressure.
Recall, the book was published only in Japanese. Some years later, someone asked me to help translate it into English. The puzzle [of this request] was solved when someone came to visit me, said ‘Great book on Japan, Princes of the Yen‘. Well, hang on, you don’t read Japanese. No, of course not, but the translation is circulating in Washington. A few months later, I got the call from the U.S. Embassy. We have a request from the U.S. State Department. A senior person from the State Dept wants to arrange a meeting with you. He’s coming to Tokyo to see you. I thought, let’s meet in a public place, not a dark alley. And sure enough, when we met, the main message was, the CIA is watching you. There was no quizzing or trying to manipulate me. It’s just the CIA is watching now what you’re doing.
Why the Japanese economy was successful: decentralized banking. What is the link between the size of the bank and the size of the borrower? Big banks want to do big deals with big customers. Small banks want to do business with small firms. Why is that important? Small firms are the biggest employer, they employ 65 to 70 percent of the work force, in every country of the world. 99.9 percent of companies don’t issue publicly traded stocks and shares. They are small firms. Where do they get money from? Internally, family and friends. Externally, from banks. Which banks? If you have a banking system dominated by large banks, small firms don’t get money. Everything is affected by the concentration of banking in a few large companies. Even demographic trends and fertility. If you have to move to the cities where property is more expensive and apartments are smaller, you can’t have another child. So many things in society are affected directly by this trend [of banking concentration].
This concentration is driven by central banking. The ECB, the newest central bank, only founded around 2000, has already managed to kill 6,000 banks in Europe. Through over-regulation, reducing profit margins, forced mergers. So the number of banks goes down, and that means banks lend less for productive business investment. Germany when it had many many local banks also had the largest number of ‘hidden champions’, companies we never heard of that are the top in their niche. Germany had by far the largest number in the world of these hidden champions, because of its extremely decentralized banking system. That explains why Germany in the past did very well, but that’s now being eroded. Same in the U.S.
What happened in the 1930s [in the U.S.] is that farmers became destitute, their land was the collateral for the loans they couldn’t repay, they lost their land, they lost their livelihoods. The central banks when push comes to shove, they pursue the agenda of concentrating the banking system, and reducing the number of banks, which increases the power of the central banks.
Deng Xiao-Peng came to Japan seeking the magic elixir of economic growth. He didn’t care whether it was capitalist, communist, or anything, just so it would create prosperity. Japanese Ministry of Finance officials asked him ‘How many banks do you have?‘ One. One bank for what was then a population of 600 million people. They told him you need thousands, in every village and town, each with ten or twenty loan officers, five million people making loan decisions and creating credit. Deng went back to China and — we don’t know that he specifically implemented the Japanese model, but for two decades since Mao’s death in 1976 China experienced double-digit growth and brought hundreds of millions of people out of poverty. [Japan’s pre-1989 system of decentralized loan decisions and credit creation, it can be inferred, is what created what was then often called the Japanese ‘economic miracle‘.]

Today I want to talk about truth, and especially why is it that many people are not able to see the truth. Truth, we have to understand, is real. Truth is eternal, truth is immutable, truth exists whether we believe in it or not. But unfortunately because of the very popular satanic belief system that has infiltrated into the consciousness of many many people, it’s popular to now believe that there is no such thing as truth; and that there is your truth and my truth and that you have the right to believe what you believe, and I have to right to believe what I believe. But this is creating chaos. If we really want to grow spiritually, we have to come to understand that truth is a prerequisite for freedom, and if we hold on to mere opinions and beliefs, then we can only ever create chaos. Because true order, true Harmony is always based in truth.
