The Cost Of Thin Air: How Banks Lend You Money They Don't Have

When you go to the bank for a loan, have your application accepted and duly find the loan amount credited to your account, do you ever wonder where the money has actually come from? 

 Do you know whose hard cash it is that has been transferred from one account (the "lender's") to your account (the "borrower's")?

If a class action suit recently filed in Canada succeeds, the answer to these questions could be quite simple: the money came from nowhere, because it never existed in the first place. It was created out of "thin air", the result of a bank cashier typing some figures next to your account number on the bank's computer system. No actual equity involved, no tangible assets monetized, no hard cash used.

So, a rather disturbing issue may start to keep the world's banking chiefs awake at night, for a change. If, as the class action suit claims, these transactions constitute counterfeiting and money-laundering (in that monies paid into borrowers' accounts cannot be traced to a real source, nor explained, nor accounted for), when the time comes for (potentially millions of) Canadian borrowers to pay back the loan or at least to pay interest - they, in theory at least, won't have to - since the original loan agreements will have been deemed illegal, void, or voidable.

John Ruiz Dempsey BSCr, LL.B, a criminologist and forensic litigation specialist filed a class action suit on behalf of the People of Canada alleging that financial institutions are engaged in illegal creation of money.

Dempsey says the transactions constitute counterfeiting and money laundering, in that the source of money, if money was indeed advanced by the defendants and deposited into the borrowers' accounts, could not be traced, nor could it be explained or accounted for.