I realised something that changed how I see the entire financial system.

Banks create money from nothing. Then they charge interest on it.

It’s a legalised filthy trick.

When a bank issues a mortgage, they don’t lend out deposits from savers. They create new money through an accounting entry. The loan appears as an asset on their balance sheet. The deposit appears as a liability.

Both sides balance. Both are created simultaneously.

The bank’s cost? Essentially zero.

Your cost? Decades of real labour.

The Asymmetry That Nobody Talks About

Consider a typical Australian mortgage of $600,000 at 6.5% over 30 years.

The borrower repays approximately $1,367,000 total. The bank claims roughly $767,000 in profit for creating that money electronically.

The interest often equals the principal itself. Meanwhile, bank expenses have plummeted with digitalisation.

Everything runs on computers now. Very low overhead.

Yet interest payments have become one of the largest expenses in people’s lives. They keep increasing.

When newspapers lament that property prices haven’t doubled in a decade, they’re revealing who the housing market actually serves.

This Isn’t Capitalism

Capitalism should be value for value.

You produce something. Someone else produces something. You exchange.

Fractional banking violates this completely.

Banks produce nothing. They create credit through accounting entries. Then they demand repayment with money earned through actual work.

It’s money for nothing for the banks. Meanwhile, they share profits with politicians and media to keep them quiet.

The Government Can’t Print Money Because Inflation

Here’s where it gets interesting.

Governments can’t create money directly. That would cause inflation, they say. It would create instability.

So instead, governments sell bonds.

Who buys these bonds? The Reserve Bank of Australia holds about 33% of them. Commercial banks hold another substantial portion, probably another third.

Where does the Reserve Bank get money to buy government bonds?

They create it from nothing.

Where do commercial banks get money to buy government bonds?

They create it from nothing through credit creation.

So the government “can’t create money because that causes inflation”.

But the central bank can create money to lend to the government. And commercial banks can create money to lend to the government.

The government then pays interest on money that was created from nothing.

Taxpayers fund that interest.

The Historical Theft

Before 1959, Australia had the Commonwealth Bank.

It was government-owned. It functioned as both a commercial and central bank. When the government created money through the Commonwealth Bank, they weren’t paying interest to external private entities.

They were essentially paying interest to themselves.

Then Robert Menzies introduced the Reserve Bank Act of 1959. This separated central banking from government control.

Since then, house prices have exploded. In Sydney and Melbourne, median house prices now sit at 8-9 times the average annual wage, far beyond any reasonable affordability measure.

Taxpayers now pay interest on money created from nothing by private institutions.

This pattern happened everywhere. Not just Australia.

When The Data Suddenly Appears

Ask for historical house price data and you’ll hear excuses.

“Oh, nobody was counting back then, mate.”

“Data wasn’t collected systematically.”

“Records are fragmentary.”

Funny how the data gap exists exactly when you need it most.

But look at what data does exist:

1901: A standard house in Sydney cost around £1,000 (roughly $2,000)

1950s: Around $7,150 — prices remained relatively stable in real terms for half a century

1960: Around $12,700

1970: Around $18,700 in Sydney

1980: Around $76,500 — starting to accelerate

1990: Around $184,600 — more than doubled in a decade

2000: Around $312,000

2010: Around $575,900

2020s: Around $1.4 million in Sydney

Notice the pattern?

From 1901 to 1950 — fifty years — prices barely moved in real terms.

From 1950 to 1980 — another thirty years — modest, manageable growth.

Then suddenly, from 1980 onwards, prices go absolutely vertical.

What changed?

Financial deregulation in the 1980s removed the last constraints on private banks creating credit. The floodgates opened.

Before deregulation, banks faced lending limits and interest rate controls. After deregulation, they could create as much money as they wanted through mortgage lending.

And they did.

The explosion in house prices perfectly tracks the expansion of bank credit creation. It’s not supply and demand. It’s not population growth. It’s not a housing shortage.

It’s private banks creating money and funnelling it into property.

The “data gap” for the first half of the 20th century is convenient. It obscures the fact that for generations, house prices were stable and affordable.

Only when private banks gained unlimited power to create credit did prices become impossible for ordinary wage earners.

The Business Cycle Is A Feature

Fractional banking creates inflation through the money multiplier effect.

This inflation creates economic crises. They call it the business cycle.

Banks make money on the way up. Then markets crash. Rates drop.

Institutional investors backed by cheap bank loans buy up housing on the cheap.

Over time, places like Australia transform. People who were free and built their own lives become nations of renters.

When banks risk going broke, politicians create central banks as backstops to bail them out. With money created from nothing by the banks.

Which taxpayers pay interest on.

The Coordinated Silence

Try finding a single headline from any major newspaper questioning whether central banks should exist.

Not whether they should adjust interest rates. Whether they should exist at all.

You won’t find one.

The media doesn’t discuss it. Politicians don’t debate it. Even AI systems are programmed to obfuscate it.

When you try to get straight answers about how this system works, you have to wring the truth out. Every institution deflects, minimises, and redirects.

The stats that really count don’t exist either.

Try finding decade-by-decade median house prices tied to median incomes from 1900 onwards. The data that would prove exactly when and how ordinary people lost their economic freedom.

It’s either missing, destroyed, or buried in fragmented records that make analysis nearly impossible.

The Dependency Trap

Here’s why the system persists.

Banks make sure to pay the institutions who might speak out about it.

In a world of rapidly rising prices, everyone needs the fake money from the banks to get by.

Politicians rely on banks. Media organisations rely on banks. Universities rely on banks. Think tanks rely on banks.

They keep quiet to be supported or paid in kind.

Even people who understand the system participate in it. Because what choice do they have?

The inflation banks create makes prices so high that borrowing becomes the only option. You need their created-from-nothing money just to afford basic housing.

Then you spend decades repaying it with real labour.

We pay interest to banks for currency they created from nothing to lend us. We pay taxes to governments to service bonds banks bought with money they created from nothing.

Supposedly this is good for society.

The entire financial system runs on a legalised trick that converts your labour into their profit.

And everyone who might expose it depends on it for survival.