Richard Werner Exposes the Evils of the Fed & the Link Between Banking, War, and the CIA

Despite its success in Japan, the book was initially unavailable in English, and Werner faced significant resistance when attempting to publish it internationally. The book’s core thesis—that the Bank of Japan intentionally engineered the asset bubble and subsequent recession to reshape the economy—challenged mainstream economic narratives and threatened powerful interests. This resistance highlights the political sensitivity surrounding the true role of central banks and their influence on national economies.

The Secret Power of Banks: Money Creation

A central theme of Werner’s work is the revelation that banks do not merely act as intermediaries but possess the unique ability to create money out of nothing through credit creation. This concept, often ignored or obscured in mainstream economics, is fundamental to understanding modern economies. Werner conducted empirical research demonstrating that when banks issue loans, they simultaneously create new deposits, effectively expanding the money supply without transferring existing funds.

This insight overturns the traditional economic theories that treat banks as passive intermediaries or rely on fractional reserve banking models. Werner explains that the credit creation theory of banking, once widely accepted but later suppressed, is the only theory consistent with observed data. This power to create money grants banks immense influence over economic activity, asset prices, and financial stability, making their role far more critical than commonly acknowledged.

The Japanese Bubble and Its Aftermath

Werner’s investigation into Japan’s 1980s asset bubble revealed how excessive bank lending for real estate and asset purchases inflated prices to unsustainable levels. He highlights the absurdity of land prices in central Tokyo, which at their peak were valued equivalently to all real estate in California. This bubble was fueled by banks creating credit primarily for asset purchases rather than productive investment, leading to a Ponzi-like scheme dependent on continuous credit expansion.

When the Bank of Japan abruptly halted credit growth for asset purchases, the bubble burst, triggering a banking crisis and a recession that lasted decades. Werner argues that this outcome was not accidental but a deliberate policy by the Bank of Japan, influenced by external pressures, particularly from the United States, to curb Japan’s economic ascendancy. The resulting “lost decade” exemplifies the destructive potential of misallocated bank credit and central bank intervention.

The Role of Central Banks and Their Private Ownership

Central banks, Werner explains, originated as private institutions designed to serve the interests of powerful banking families and investors. The Bank of England, the first modern central bank, was established explicitly to finance war efforts, a pattern repeated with the creation of the Federal Reserve in the United States just before World War I. These institutions wield enormous power by controlling the money supply and acting as lenders of last resort, yet they operate with minimal transparency and accountability.

Werner reveals the intimate connections between central banks and elite banking dynasties, including the Warburg brothers who influenced both the German Reichsbank and the Federal Reserve during World War I. This concentration of financial power has profound implications for national sovereignty and democratic governance, as central banks often act independently of elected governments and prioritize the interests of financial elites over the broader public.

The Link Between Banking, War, and Economic Control

The podcast uncovers the historical nexus between banking institutions and warfare, emphasizing that central banks were created to fund military conflicts. Werner traces this relationship back to the founding of the Bank of England, which was established to raise funds for war, and the Federal Reserve, which was created amid escalating global tensions. The financial mechanisms controlled by these banks have been instrumental in shaping the outcomes of wars and the geopolitical landscape.

This connection extends to the present, where Werner suggests that economic crises and recessions can be engineered through banking policies to serve strategic interests. The deliberate bursting of Japan’s bubble and the Asian financial crisis are cited as examples of how financial power can be used to destabilize economies and facilitate foreign control. The intertwining of banking, war, and political power underscores the broader theme of economic manipulation by hidden forces.

The Suppression of Truth and the Role of Intelligence Agencies

Werner’s experience with censorship and surveillance illustrates the lengths to which powerful entities go to suppress inconvenient truths about banking and economic policy. After Princes of the Yen became a sensation in Japan, Werner was subjected to media blackouts, cancellations of interviews, and pressure from advertisers linked to the banking sector. His attempts to publish the book in English were met with resistance, and he received warnings from the CIA that he was being watched.

This surveillance was not aimed at collaboration but served as a warning to curtail his public discourse on credit creation and central banking. The involvement of intelligence agencies in monitoring economists who expose systemic financial manipulation reveals the political sensitivity of these issues and the challenges faced by those seeking to inform the public about the true nature of money and power.

The Failure of Mainstream Economics and the Myth of Interest Rate Control

Werner critiques mainstream economic models for their failure to incorporate banks and credit creation, rendering them ineffective in explaining real-world phenomena such as financial crises and recessions. He highlights the dominance of hypothetical, axiomatic models that assume equilibrium and treat banks as mere intermediaries, ignoring their money-creating role. This omission has led to a century of stagnation in macroeconomic theory.

One of the most pervasive myths Werner debunks is the belief that central banks control economic growth primarily through interest rate manipulation. Empirical studies he conducted show that the causality runs in the opposite direction: economic growth influences interest rates, not vice versa. This challenges the foundational assumptions of monetary policy and calls for a reevaluation of how economies are managed.

The Chinese Model: Decentralized Banking and Economic Growth

Werner contrasts the centralized Soviet-style banking system with China’s post-1978 model of thousands of small, local banks that allocate credit efficiently to productive enterprises. Inspired by his research and the Japanese experience, Deng Xiaoping implemented a decentralized banking system that empowered millions of loan officers to make lending decisions tailored to local needs. This approach fueled China’s rapid economic growth and poverty reduction over four decades.

The decentralized banking model supports small and medium-sized enterprises, which are the primary job creators in any economy. Werner emphasizes that having many small banks lending locally is crucial for sustainable growth, innovation, and equitable prosperity. This stands in stark contrast to the consolidation trends in Western banking, which favor large institutions and undermine economic dynamism.

The Decline of Small Banks and the Threat to the Middle Class

In the United States and Europe, Werner observes a troubling trend of bank consolidation driven by central bank policies and regulatory pressures. Thousands of small banks have disappeared, reducing credit availability for small businesses and concentrating financial power in a few large institutions. This consolidation stifles economic growth, exacerbates regional inequalities, and weakens the middle class.

Werner argues that a strong middle class depends on a decentralized banking system that supports local economies and small enterprises. The erosion of small banks is not merely a financial issue but a political one, as it diminishes economic autonomy and democratic participation. The centralization of credit allocation facilitates control by elites and undermines the foundations of a free and prosperous society.

Quantitative Easing: Origins, Misuse, and Potential

Werner is credited with pioneering the concept of quantitative easing (QE) as a policy tool to address banking crises by having central banks purchase non-performing assets from commercial banks to restore their balance sheets. He explains that QE, when properly implemented, can prevent recessions and stimulate economic recovery without burdening taxpayers or causing inflation.

However, Werner criticizes how QE has been distorted and misapplied, often benefiting financial markets and asset holders rather than the real economy. He outlines three forms of QE: purchasing non-performing assets from banks (QE1), buying performing assets from non-banks to inject liquidity (QE2), and treasury-led QE to directly finance productive investment. Properly targeted QE could foster sustainable growth, but political and institutional resistance has limited its effectiveness.

The Future Threat of Central Bank Digital Currencies (CBDCs)

Looking ahead, Werner warns of the dangers posed by the introduction of central bank digital currencies (CBDCs). Unlike existing digital money, CBDCs would allow central banks to hold accounts directly for the public, bypassing commercial banks and centralizing control over the money supply. This shift could precipitate the collapse of the traditional banking system and concentrate unprecedented power in central banks.

Moreover, CBDCs could be programmed to enforce compliance with government policies, restricting how individuals use their money and enabling surveillance and control over economic behavior. Werner views this development as a step backward toward centralized planning and authoritarianism, threatening financial privacy, economic freedom, and democratic governance. He calls for public awareness and resistance to the rollout of CBDCs.