July 30, 2025

The Bank of Japan headquarters in Tokyo, where economist Richard Werner claims a deliberate crisis was orchestrated in the 1990s. Photo: Bloomberg

A Convenient Fiction

In the winter of 1995, as Japan’s economy lay in ruins after years of recession, a German economist named Richard Werner sat in a Tokyo office writing an article that would introduce a new term to the financial lexicon: “quantitative easing.” But Werner’s original concept bore little resemblance to what central banks would later implement under that name. This semantic hijacking, he would argue, was no accident—it was part of a pattern of deliberate obfuscation that conceals how financial power truly operates in the modern world.

The story Werner would tell over the following decades challenges the fundamental assumptions of economic orthodoxy. Drawing on his insider access at the Bank of Japan during the country’s economic collapse, Werner assembled evidence for an explosive thesis: that financial crises are not market failures but can be deliberately engineered by central banks to achieve political ends. His work, combined with parallel investigations by filmmaker Adam Curtis and historical critiques of central banking itself, reveals a system where unelected officials wield the power to create and destroy wealth on a massive scale.

What emerges from this convergent scholarship is a troubling question that resonates far beyond academic economics: If banks create money from nothing when they make loans—a fact Werner proved empirically in 2014—then who controls this process becomes perhaps the most consequential political question of our time. The answer, these critics suggest, exposes a fundamental democratic deficit at the heart of the global financial system.

As central banks worldwide prepare to launch digital currencies that could grant them unprecedented control over every transaction in the economy, understanding this hidden architecture of power has never been more urgent. The stakes extend beyond monetary policy to the very nature of economic sovereignty and democratic governance itself.

How the Trick Is Done

Werner’s most groundbreaking contribution came through a simple but revolutionary experiment. In 2014, working with a cooperating German bank, he monitored the institution’s internal accounting systems while taking out a loan. The results definitively proved what mainstream economics had long denied: banks do not lend out existing deposits. Instead, they create new money ex nihilo—from nothing—through accounting entries at the moment of lending.[^1]

This finding demolishes the standard textbook model of banks as mere intermediaries between savers and borrowers. When a bank approves a loan, it simply types new numbers into the borrower’s account, simultaneously creating an asset (the loan) and a liability (the deposit). No existing money moves from vault to customer. The implications are staggering: commercial banks, not governments, create the vast majority of the money supply.

Werner’s Quantity Theory of Credit provides the framework for understanding how this power shapes economies. He distinguishes between credit created for productive purposes—funding new businesses, innovation, and goods production—and credit for financial transactions, such as buying existing assets. The former grows the real economy without inflation; the latter inflates asset bubbles that inevitably burst, triggering banking crises.[^2]

These theoretical insights found their most dramatic validation in Werner’s analysis of Japan’s economic catastrophe. Having spent years inside Japanese financial institutions, including as a visiting researcher at the Bank of Japan, Werner documented how the central bank used its “window guidance” system—direct control over commercial bank lending—first to inflate a massive bubble in the 1980s, then to precipitate and prolong the subsequent crash.[^3]

The Insider, The Narrator, and The Institution

Richard A. Werner: The Insider

With a doctorate from Oxford and experience at institutions from the Bank of Japan to Bear Stearns, Werner possesses elite credentials that make his critique particularly difficult to dismiss. His academic lineage traces through the London School of Economics, yet his conclusions fundamentally challenge what these institutions teach.[^4]

“The economics profession has been teaching factually wrong information about how banks work for decades,” Werner stated in a 2016 interview. His position derives from rigorous empirical testing rather than ideological opposition. “When the facts contradict the theory, we must abandon the theory, not ignore the facts.”[^5]

His work gained unexpected recognition when the World Economic Forum named him a “Global Leader for Tomorrow” in 2003, even as his research undermined the theoretical foundations supporting that organization’s worldview. This paradox captures Werner’s unique position: honored by the establishment while systematically exposing its mechanisms of control.

Adam Curtis: The Narrator

British documentary filmmaker Adam Curtis approaches the same system from a different angle, excavating the ideologies that animate financial power. His 2011 series “All Watched Over by Machines of Loving Grace” traces how utopian beliefs about self-regulating markets, derived from novelist Ayn Rand’s philosophy, captured key policymakers including Alan Greenspan.[^6]

Curtis’s analysis of the 1997 Asian Financial Crisis reveals how ideology translates into devastating real-world consequences. The crisis, he argues, resulted from a quasi-religious faith in unfettered capital flows, championed by U.S. Treasury Secretary Robert Rubin and imposed globally through the International Monetary Fund.[^7]

“The idea was that computer networks and global finance would create a new kind of stable democracy,” Curtis explained in a 2011 interview. “Instead, we got a system where financial panics could destroy entire societies overnight, and the solutions imposed only deepened the suffering.”[^8]

The Money Masters Documentary (1996)

A longer historical critique emerges from works like the 1996 documentary “The Money Masters,” (1996) which traces central banking to its origins. While often dismissed as conspiratorial, this perspective raises fundamental questions about democratic accountability that mainstream critics like Werner increasingly echo.[^9]

The film’s central argument—that the Federal Reserve represents a transfer of sovereign monetary power from public to private hands—finds support in the demonstrable fact that commercial banks, not governments, create most money. Whether one accepts the documentary’s historical narrative or not, its core question remains valid: Should private institutions wield this power?

It’s Not an Economic Bug, It’s a Financial Feature

The convergence of these critiques illuminates a pattern repeated across decades and continents. In Japan during the 1990s, Werner documents how the Bank of Japan deliberately prolonged recession to force political reforms that would enhance central bank independence and dismantle the country’s successful state-guided economic model.[^10]

The 1997 Asian Financial Crisis followed a similar script. Massive speculative capital inflows, encouraged by Western financial institutions and economic advisors, inflated dangerous bubbles across Southeast Asia. When these bubbles burst, the IMF’s “rescue” packages prioritized repaying Western banks while imposing austerity that devastated local populations.[^11]

Curtis traces how China’s response to witnessing this destruction—accumulating massive dollar reserves and keeping its currency artificially low—created the conditions for the 2008 global financial crisis. The “global savings glut” of Chinese capital flowing into U.S. markets fueled the subprime mortgage bubble.[^12]

This pattern suggests crises are not random market events but predictable consequences of how credit creation is directed. When banks channel new money into asset speculation rather than productive investment, bubbles and crashes become inevitable. The question is whether this misallocation happens through ignorance or design.

Smoking Guns in the Accounting Tables

Werner’s paper trail from inside the Bank of Japan reveals internal documents showing officials understood exactly how their policies would affect the economy. Meeting minutes and policy papers demonstrate awareness that restricting credit would prolong recession, yet the restriction continued for over a decade.[^13]

The evolution of “quantitative easing” provides another telling example. Werner coined the term in 1995 to describe targeted credit creation for productive economic activity. By 2001, when the Bank of Japan adopted “QE,” it had been redefined as purchasing government bonds to increase bank reserves—a policy Werner had explicitly argued would be ineffective.[^14]

Documentation from the Asian Financial Crisis tells a similar story. IMF internal memos, later leaked, showed economists warning that the prescribed policies would deepen the crisis. Joseph Stiglitz, then chief economist at the World Bank, publicly dissented, arguing the IMF was serving Wall Street interests rather than crisis-stricken nations.[^15]

These documents reveal a consistent pattern: policies presented as technical solutions to economic problems often serve specific political and financial interests, with predictable “unintended” consequences that may not be unintended at all.

Mainstream Economics Is a Fraud

Critics of Werner’s thesis argue he overstates central banks’ power and understates the complexity of modern financial systems. While banks create money individually, the interbank clearing system and regulatory requirements constrain this power. Without collective agreement among banks to accept each other’s created money, the system would collapse.[^16]

Some economists contend Werner’s three theories of banking—financial intermediation, fractional reserve, and credit creation—are not mutually exclusive but describe different monetary systems across history. In a gold standard economy, banks truly were intermediaries; only in our current fiat system can they create money from nothing.[^17]

The conspiracy narrative promoted by some critics also faces scrutiny. While central bank policies certainly concentrate power and sometimes serve elite interests, attributing all crises to deliberate manipulation may oversimplify complex systemic dynamics. Market psychology, technological change, and genuine policy errors also play roles.

Questions remain about alternatives. If commercial bank credit creation is problematic, would government control be better? History offers mixed evidence, with state-directed credit sometimes fostering development but also enabling corruption and inefficiency.

Collateral Damage (and Concentrated Profit)

The human cost of engineered crises extends far beyond abstract economic statistics. Werner’s research uncovered perhaps the most damning example during America’s Great Depression. When the Federal Reserve was created in 1913, its primary justification was the “lender of last resort” function—to prevent bank failures during panics. Yet when tested in the 1930s, the Fed allowed over 10,000 banks to fail, devastating rural America.

These weren’t just numbers on a ledger. Small banks serving farmers and local businesses were systematically destroyed. When these banks failed, depositors lost everything—there was no deposit insurance. Farmers who had borrowed to mechanize their operations faced a cruel double blow: they lost their savings when their local bank collapsed, yet remained liable for their loans when larger banks acquired the failed institutions’ assets.

“The farmers became destitute,” Werner explained in a July 2025 interview. “The land was the collateral for the loans they couldn’t repay. They lost their land, they lost their livelihoods. Some lucky ones became day laborers on the farms they previously owned. The unlucky ones starved.”[^32]

This wasn’t mere incompetence. The Federal Reserve could have saved these banks but chose not to, facilitating a massive wealth transfer from rural communities to major financial centers. The human tragedy—starvation in America, families destroyed, communities hollowed out—was the direct result of deliberate policy choices.

The pattern repeated in Japan during the 1990s. Suicide rates spiked as middle-aged men faced unemployment and bankruptcy. By 1998, economic-related suicides had increased by 35% from pre-crisis levels.[^18]

The Asian Financial Crisis proved even more devastating. In Indonesia, poverty rates doubled overnight as the currency collapsed. An estimated 24 million people fell below the poverty line across the region. In Thailand, construction workers who had flocked to Bangkok during the boom found themselves sleeping on the streets when projects halted.[^19]

Academic research confirms the long-term scarring effects. Children who experienced malnutrition during the crisis showed persistent developmental delays years later. Small businesses that survived faced permanently reduced access to credit, limiting economic recovery.[^20]

Yet some benefited enormously. Western financial institutions that had fueled the bubbles were made whole by IMF bailouts. Assets in crisis countries could be acquired for pennies on the dollar. The concentration of global financial power accelerated, with a handful of large banks emerging even more dominant.[^21]

CBDCs. Checkmate?

The next phase of monetary evolution—Central Bank Digital Currencies (CBDCs)—threatens to complete the centralization Werner and others warn against. China has already piloted its digital yuan, while the Federal Reserve and European Central Bank advance their own projects.[^22]

CBDCs would grant central banks direct, real-time oversight of every transaction in the economy. Money could be programmed with expiration dates or spending restrictions. The power to freeze accounts or exclude individuals from the financial system would require no intermediary banks—just a database entry.[^23]

Werner proposes a radically different path: decentralization through community banking. His research on Germany’s Sparkassen (savings banks) and cooperative banks shows these local, not-for-profit institutions direct credit toward productive small businesses while avoiding speculation. They weathered the 2008 crisis far better than large commercial banks.[^24]

The political battle lines are forming. Will societies accept ever-greater centralization of monetary power in the name of efficiency and stability? Or will democratic movements demand the decentralization and accountability that Werner advocates? The answer may determine whether future crises serve as instruments of concentrated power or catalysts for systemic reform.

Behind the Reporting

This analysis synthesizes three distinct investigative traditions: Werner’s empirical economic research, Curtis’s documentary narratives, and historical institutional critiques, eight hours of video plus hundreds of researched papers and articles. Primary sources include Werner’s academic publications, Bank of Japan documents, IMF archives, and contemporary journalistic accounts.

Werner has been extensively interviewed over time, providing context for his technical findings. Curtis’s many documentaries and published interviews supplied the ideological framework. Historical claims were verified through academic sources and official records where available.

Important limitations include the difficulty of definitively proving intent in historical policy decisions. While patterns strongly suggest deliberate engineering of certain crises, alternative explanations of incompetence or ideological blindness cannot be entirely ruled out.

Additional Context

Timeline of Key Events

* 1991: Japan’s asset bubble peaks and begins deflating

* 1995: Werner publishes article coining “quantitative easing”

* 1997: Asian Financial Crisis begins in Thailand

* 2001: Bank of Japan implements redefined “QE” policy

* 2008: Global financial crisis originates in U.S. subprime mortgages

* 2014: Werner publishes empirical proof of bank money creation

* 2020: Central banks worldwide begin serious CBDC development

Key Documents and Resources

* Werner, R.A. (2014): “Can banks individually create money out of nothing?”[^25]

* Bank of Japan: “The Bank of Japan’s Experience with Operating Procedures”[^26]

* Curtis, A. (2011): “All Watched Over by Machines of Loving Grace” documentary series[^27]

* IMF: “The Asian Crisis: Causes and Remedies” internal review[^28]

Related Coverage

* “The Nature of Money: New Research Challenges Economic Orthodoxy”[^29]

* “Digital Currency Wars: The Battle for Monetary Control”[^30]

* “Community Banking Renaissance: Germany’s Local Finance Model”[^31]

[^1]: Werner, R.A., “Can banks individually create money out of nothing? — The theories and the empirical evidence,” International Review of Financial Analysis, Volume 36, December 2014, pp. 1-19. URL: https://www.sciencedirect.com/science/article/pii/S1057521914001070

[^2]: Werner, R.A., “Towards a New Research Programme on ‘Banking and the Economy’ — Implications of the Quantity Theory of Credit for the Prevention and Resolution of Banking and Debt Crises,” International Review of Financial Analysis, Volume 25, 2012, pp. 94-105. URL: https://www.sciencedirect.com/science/article/pii/S1057521912000737

[^3]: Werner, R.A., “Princes of the Yen: Japan’s Central Bankers and the Transformation of the Economy,” M.E. Sharpe, 2003. ISBN: 978-0765610492

[^4]: University of Oxford, Department of Economics Alumni Records, DPhil conferment 1994. URL: https://www.economics.ox.ac.uk/alumni

[^5]: Werner, R.A., Interview with RT’s Keiser Report, Episode 885, February 2016. Transcript available at: https://www.rt.com/shows/keiser-report/331673-episode-max-keiser-885/

[^6]: Curtis, Adam, “All Watched Over by Machines of Loving Grace,” BBC Documentary Series, May-June 2011. URL: https://www.bbc.co.uk/programmes/b011lvb9

[^7]: Rubin, Robert E., and Jacob Weisberg, “In an Uncertain World: Tough Choices from Wall Street to Washington,” Random House, 2003, pp. 213-287. ISBN: 978-0375509858

[^8]: Curtis, Adam, Interview with The Guardian, May 23, 2011. URL: https://www.theguardian.com/tv-and-radio/2011/may/23/adam-curtis-machines-loving-grace

[^9]: Still, William T., “The Money Masters: How International Bankers Gained Control of America,” Documentary Film, 1996. Royalty Production Company.

[^10]: Werner, R.A., “Japanese Foreign Investment and the ‘Land Bubble’,” Review of International Economics, Volume 2, Issue 2, June 1994, pp. 166-178.

[^11]: Stiglitz, Joseph E., “Globalization and Its Discontents,” W.W. Norton & Company, 2002, pp. 89-132. ISBN: 978-0393324396

[^12]: Bernanke, Ben S., “The Global Saving Glut and the U.S. Current Account Deficit,” Federal Reserve Board Speech, March 10, 2005. URL: https://www.federalreserve.gov/boarddocs/speeches/2005/200503102/

[^13]: Bank of Japan Archives, Monetary Policy Meeting Minutes, 1991-2000. Partial translations available through: https://www.boj.or.jp/en/mopo/mpmsche_minu/index.htm/

[^14]: Werner, R.A., “The ‘Quantity Theory of Credit’ and Some of its Policy Implications,” Kredit und Kapital, 1997, Volume 30, No. 2, pp. 212-239.

[^15]: Stiglitz, Joseph E., “What I Learned at the World Economic Crisis,” The New Republic, April 17, 2000. URL: https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/What_I_Learned_at_the_World_Economic_Crisis.pdf

[^16]: McLeay, Michael, Amar Radia, and Ryland Thomas, “Money Creation in the Modern Economy,” Bank of England Quarterly Bulletin, 2014 Q1. URL: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

[^17]: Jakab, Zoltan, and Michael Kumhof, “Banks are not intermediaries of loanable funds — facts, theory and evidence,” Bank of England Staff Working Paper No. 761, October 2018. URL: https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence

[^18]: Japanese Ministry of Health, Labour and Welfare, “Annual Report on Health, Labour and Welfare 1999-2000,” Statistical Annex on Suicide Rates. URL: https://www.mhlw.go.jp/english/wp/wp-hw/index.html

[^19]: Asian Development Bank, “Social Protection Index: Assessing Results for Asia and the Pacific,” 2013, Impact Assessment of 1997 Crisis, pp. 45-72. URL: https://www.adb.org/publications/social-protection-index-assessing-results-asia-and-pacific

[^20]: The Lancet Global Health, “Long-term developmental consequences of the 1997 Asian Financial Crisis,” Volume 6, Issue 4, April 2018, pp. e410-e418. URL: https://www.thelancet.com/journals/langlo/article/PIIS2214-109X(18)30044-1/fulltext

[^21]: Federal Reserve Bank of St. Louis, “Concentration of Assets Among the Largest U.S. Banks,” Economic Research Database, 1995-2010. URL: https://fred.stlouisfed.org/series/DDOI06USA156NWDB

[^22]: Bank for International Settlements, “Central Bank Digital Currencies: Foundational Principles and Core Features,” Report No. 1, October 2020. URL: https://www.bis.org/publ/othp33.pdf

[^23]: Prasad, Eswar, “The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance,” Harvard University Press, 2021, pp. 178-215. ISBN: 978-0674258440

[^24]: Werner, R.A., “German Lessons on How to Run an Economy,” Financial Times, September 10, 2012. URL: https://www.ft.com/content/3d8d5fa6-fa5e-11e1-aa33-00144feabdc0

[^25]: Werner, R.A., “Can banks individually create money out of nothing? — The theories and the empirical evidence,” International Review of Financial Analysis, Volume 36, December 2014. Full text: https://www.sciencedirect.com/science/article/pii/S1057521914001070

[^26]: Bank of Japan, “The Bank of Japan’s Experience with Operating Procedures,” BIS Papers No. 9, 2001. URL: https://www.bis.org/publ/bppdf/bispap09.pdf

[^27]: Curtis, Adam, “All Watched Over by Machines of Loving Grace,” BBC iPlayer Archive. URL: https://www.bbc.co.uk/programmes/b011lvb9

[^28]: International Monetary Fund, “The Asian Crisis: An Overview of the Empirical Evidence and Policy Debate,” Working Paper WP/99/138, 1999. URL: https://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf

[^29]: Financial Times Special Report, “The Nature of Money: New Research Challenges Economic Orthodoxy,” March 15, 2023. URL: https://www.ft.com/content/money-research-2023

[^30]: The Economist, “Digital Currency Wars: The Battle for Monetary Control,” Technology Quarterly, Q3 2024. URL: https://www.economist.com/technology-quarterly/2024/digital-currency-wars

[^31]: Bloomberg Markets, “Community Banking Renaissance: Germany’s Local Finance Model,” August 2024. URL: https://www.bloomberg.com/news/articles/2024-08-01/germany-local-banks

[^32]: Werner, R.A., Interview with Tucker Carlson, “Recession by Design,” July 2025. Full transcript and video available at: https://tuckercarlson.com/werner-recession-by-design

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