Map of Canaan from around 750 BC

A painful history

The Jewish Question

For centuries, the Jewish people have lived as a minority in the lands of others. Their relationship with the others has often been problematic. The Jews lived separately in dedicated quarters and were second-rate citizens. And from time to time, they had to flee from murderous mobs. What to do with the Jews? It was a question asked by thinkers and leaders alike. Martin Luther and Karl Marx expressed their views on this matter, called The Jewish Question. Adolf Hitler sought a definitive solution by trying to exterminate the Jews.

As the founder of Zionism, Theodor Herzl, wrote, ‘The Jewish question persists wherever Jews live in appreciable numbers. Wherever it does not exist, it is brought in together with Jewish immigrants. We are naturally drawn into those places where we are not persecuted, and our appearance there gives rise to persecution.’ In folklore, conspiracy theories blamed the Jews for all kinds of things, ranging from spreading diseases, sacrificing children, and conspiring to dominate the world, and this tradition continues into the present. A few examples:

  • People who oppose interest and usury often blame the Jews as they have been money lenders for centuries, and many are still working in finance.
  • Jews have taken a piece of Arab land that is now called Israel. They expelled many Arab inhabitants. That is why a lot of Arabs hate Jews.
  • You sometimes hear that the Jews determine what you hear on the radio and see on television because they control the media.
  • Perhaps you have read that Jews cause wars and revolutions, often with the help of the secretive Freemasons and the elusive Illuminati.
  • There is a worldwide trade in illegally harvested organs, and Jews are also involved. But it is not only Jews doing this.
  • Perhaps you cannot trust Jews because they are more loyal to Israel than the country they live in. And what about people from other nationalities?
  • The United States has a corrupt and dysfunctional political system. The Jews use it to their advantage. So, follow the money.
  • The same goes for poor-quality Hollywood movies. The Jews did it.
  • And Jews can be blamed for other things too, of course not the ‘good Jews’, only the ‘evil Jews’, but it is hard to tell the difference, so do not trust them.

It is a painful history. The truth can only set us free if we let go of hatred. There is a relationship between ethnicity and conduct that goes through culture. Cultures emerge out of history and circumstances. You can’t blame someone for being raised in a particular tradition, but these traditions can harm society. And that isn’t only Jews. Just think of the damage white Europeans have caused all over the globe. Other particular traditions can also be harmful, for instance, ethnicity-related organised crime like the Italian mafia.

Closer inspection reveals that things are not always what they seem. If antisemites allege Jews do this or that, look at the facts and don’t get carried away. If a US politician doesn’t unconditionally support Israel, you know what happens. Money rules our world. But hatred doesn’t solve the issue. Karl Marx wrote:

What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly god? Money[…] The Jew has emancipated himself in a Jewish manner, not only because he has acquired financial power but also because, through him and also apart from him, money has become a world power, and the practical Jewish spirit has become the practical spirit of the Christian nations. The Jews have emancipated themselves insofar as the Christians have become Jews[…] Money is the jealous god of Israel, in the face of which no other god may exist. Money degrades all the gods of man – and turns them into commodities[…] The bill of exchange is the real god of the Jew. His god is only an illusory bill of exchange[…] The chimerical nationality of the Jew is the nationality of the merchant, of the man of money in general.1

Marx had Jewish roots, so he knew what he was talking about. He equated practical Judaism to huckstering and money and claimed that Christians have become Jews and that humankind, both Christians and Jews, needs to emancipate itself from this practical Judaism. Money rules our world. Money is our God. And that is the core problem we face today. How this situation came to be is a long history.

There has been a long Christian tradition of intolerance towards Jewish people. Only Christians were even more intolerant towards all other religions, including diverging versions of Christianity. Christians only tolerated Jews, first because the Pope said so and later because they proved helpful for trade, tax collecting and moneylending, which were activities Christians found morally reprehensible and didn’t like to do themselves.

Muslims were even more tolerant. Apart from Jews, they also tolerated Christians. And they did not persecute Jews as much as Christians until the Jews founded the state of Israel and expelled the Muslims. That infuriated many Muslims, so they often returned the favour by expelling the Jews. Despite all this tolerance, Christianity and Islam were among the most intolerant religions ever. That proved to be crucial for their success. The owner of this universe, commonly known as God, did not provide sufficient proof of Her existence, so convincing people with reason was not always possible. The Jews did not get that. They preferred to hold on to their exclusive relationship with the all-powerful Creator of this universe. And so, they were not so kind to try to save others from eternal damnation by forcefully converting them.

The plight of Jewish people was not much unlike that of other minorities that did not adapt and integrate into society. The Jews had their religion, and the claims of Christians about Jesus did not make sense to them. Being beaten up regularly is the least you can expect from peasants if you differ from them. And it was often worse than that.

Map of Canaan from around 750 BC
Map of Canaan from around 750 BC

A short primer on Jewish history

Between 1200 BC and 900 BC, a few small nation-states emerged in an area now covered by Israel, Palestine, Jordan, Syria and Lebanon. Among them were Israel and Judah. These small states appeared because Egyptian power in the area was waning. It took a few centuries before new strong powers emerged and overran these small states. Israel fell into the hands of the Assyrians in 720 BC. Judah was destroyed in 587 BC by the Babylonians, who had taken over the Assyrian Empire.

These small kingdoms had a national deity for fortune and protection. Their kings may have adopted this deity to promote a sense of a nation to assert their authority. Yahweh was the national deity of Judah and probably also of Israel. At first, Yahweh’s worship may not have differed much from the worship of other national deities, such as Chemosh, the god of Moab.

After Israel and Judah had ceased to exist, their inhabitants faced an identity crisis. The new powers defeated their uprisings, and the Babylonians took many Jews into exile in Babylonia. Jewish priests then began to write down the Torah (Old Testament) to define a sense of nation around their national deity, Yahweh, without a king or a territory.2 In this way, the Jews became a people without a land. Their promised land, Israel or Zion, remained central to their religion.

Around 450 BC, many exiled Jews were allowed to return. From 164 BC, there was an independent Jewish state for 100 years until the Romans conquered it. At the time of Jesus, tensions were growing between the Jews and their Roman overlords. It led to several uprisings between 66 AD and 136 AD. During these revolts, the Romans destroyed the Jewish temple. Over time, the majority of the inhabitants of the area became Christians and later Muslims. Jews remained in scattered communities around the Mediterranean.

In ancient societies, only the elite received education. The Jews introduced mass education for their people. The Torah became the pillar of their national education system. Divine knowledge, rules, and regulations became open to the public.2 The value of education thus became embedded in Jewish culture.

Nations came and went, but the Jews remained, so becoming people without a land was a successful long-term survival strategy. The Jewish people have been around for more than 2,500 years while not having a homeland for nearly 2,000 years. That was why not all Jews supported the Zionist project of creating the state of Israel. A Jewish state might endanger the Jewish people if they cannot defend their land.

The Jewish religion became the basis for Christianity and Islam. Christianity and Islam both tend to see Judaism as a legitimate religion. Christians and Muslims allowed Jews to live in their lands, albeit as secondary citizens. Living together was not easy. For instance, Christians sometimes blamed the Jews for killing Jesus.3 The Jewish high priests had accused Jesus of blasphemy as he claimed to be the Son of God. According to the Gospel, the Jewish high priests and a Jewish mob demanded the crucifixion of Jesus. And the Gospel, which means good news, by the way, says:

When Pilate saw that he was getting nowhere, but that instead an uproar was starting, he took water and washed his hands in front of the crowd. ‘I am innocent of this man’s blood,’ he said. ‘It is your responsibility!’ All the people answered, ‘His blood is on us and on our children!’

Matthew 27:24-25

The Jews are forever responsible for the death of Jesus, the wording implies, and it became a justification for Christian anti-Semitism.

German picture of 1493 depicting human sacrifice by Jews
German picture of 1493 depicting human sacrifice by Jews

In the Middle Ages, rumours spread from time to time that Jews abducted Christian boys for their secret rituals. It is known as the blood libel. So when a boy disappeared, it was time to kill some Jews. There was no basis for these beliefs, but little did people know about the Jewish religion and its practices.2 And because of their ritual hygiene, the Black Death did not hit Jews as much as Christians. Rumours spread the Jews were behind the disease. Medieval peasants often freaked out because they were superstitious and lacked education. And so they burnt witches at the stake when the harvest failed.

In popular culture, Jewish people had a low standing. They worked in trade and finance. These activities were often seen as reprehensible as trade and finance often coincide with questionable ethics. Some languages still reflect this. The English language has the term Jewish stock take, referring to a shopkeeper destroying his shop in a self-lit fire to claim insurance. The Dutch language has the word ‘jodenbod’, which means Jew’s bid, to indicate bids below a reasonable price which people in a desperate position have to accept. Jews living from trade and finance and little love existing between Christians and Jews might lead to that kind of situation.

After the French Revolution of 1789, Jews in Western Europe received citizenship. In Eastern Europe, and most notably in Russia, they faced pogroms or riots that included robbery, destruction of property and sometimes killings. Around 1870, the first Jewish settlers entered Palestine. In 1896, Theodor Herzl published The Jewish State. He claimed that the solution to The Jewish Question was a Jewish state. It marked the beginning of modern Zionism.

In 1873, the Vienna stock market crashed. A lingering recession followed that lasted until 1896. It was the first global economic crisis. Economic growth was lower than previously. Anti-Semitism rose in German-speaking areas and France as people blamed Jewish bankers and industrialists for the situation. It was the time when Silvio Gesell was a businessman. He experienced the poor economic conditions first-hand. It made him investigate the underlying causes and later write the Natural Economic Order.

In 1894, Captain Alfred Dreyfus, the only Jewish member of the French general staff, was convicted of spying for Germany. He was innocent and rehabilitated a decade later after vigorous protests. During World War I, many Jews fought for their nation-states. After the war, a myth emerged in Germany, suggesting Germany lost because of leftists, republicans and a Jewish conspiracy.

A Jewish state

In 1917, the British offered Palestine to the Jews to establish a national home for the Jewish people. The declaration was part of a letter from the United Kingdom’s Foreign Secretary Arthur Balfour to Lord Rothschild, a leader of the British Jewish community. Shortly after the start of World War I, a Zionist Cabinet member, Herbert Samuel, wrote a memorandum proposing to back the Zionist cause to enlist the support of Jews in the war. The Arabs living in Palestine had no say in this, which soon led to tensions and Arab resistance, which the British repressed. Between 1920 and 1940, 300,000 Jews migrated to Palestine, often to escape persecution. The Arabs revolted between 1936 and 1939. The British subsequently restricted Jewish immigration.

After World War II, large numbers of Jews entered Palestine, many of them Holocaust survivors. The Holocaust became a trauma in the collective memory of the Jewish people. Nearly six million of them died in concentration camps and mass executions. It gave credibility to the case of the Zionists, who believed that the Jewish people could only be safe once they had a country of their own. The atrocities the Jews had suffered from raised support for the Zionist cause in the West, most notably in the United States. The Zionists started a guerrilla war against the British. It included 70 terrorist attacks between 1937 and 1948, including the King David Hotel bombing that killed 91 people and the devastating bomb attack on the British police headquarters in Haifa.

In 1947, the United Nations planned to divide Palestine between the Jews and the Arabs. The plan allotted 62% of the land to the Jewish state despite the Palestinian Arab population numbering twice the Jewish population. The Zionist Jews accepted it as it was a favourable deal for them. The Arabs rejected it because, in addition to the Arabs forming a two-thirds majority, they owned a majority of the lands. The Arabs were also unwilling to accept a division and aimed for Arab rule of Palestine.

When Israel declared independence in 1948, a civil war broke out. The neighbouring Arab countries attacked Israel, but the Zionists were prepared and well-trained, and the Arabs lost. Around 700,000 Arab Palestinians, or 80% of the population, fled or were expelled from their homes. The Palestinians call it ‘The Catastrophe’. The Catastrophe greatly influenced Palestinian culture and helped to create a separate Palestinian identity. The Catastrophe means displacement, dispossession, statelessness and fracturing of Palestinian society. It is much like the Jewish diaspora.

During the Six-Day War of 1967, Israel conquered the remaining Palestinian territories. Israel started this war after Egypt blocked Israeli shipping through the Egyptian-controlled Strait of Tiran and brought military forces close to the Israeli border. An Israeli surprise attack caught the Egyptian forces off-guard, causing Egypt to lose nearly all its military aeroplanes. Jordan and Syria came to Egypt’s aid but were also defeated. Whether this pre-emptive war prevented an Egyptian attack on Israel remains a matter of debate. Israel captured and occupied the Golan Heights from Syria, the West Bank from Jordan, the Gaza Strip and the Sinai Peninsula from Egypt.

Around 300,000 Palestinians and 100,000 Syrians fled or became expelled from the West Bank and the Golan Heights. Many others came to live under Israeli occupation. At the same time, Zionist settlers began colonising the remaining parts of Palestine, most notably the West Bank. In 1973, Egypt and Syria launched a surprise attack against Israel with the support of other Arab nations in the Yom Kippur War. After initial Arab successes, Israel repelled the attack. Syrian and Egyptian forces killed and tortured captured Israeli soldiers. Over time, Israel achieved peace with several Arab countries, but the Israeli-Palestinian conflict remains unresolved. Palestinian resistance often comes in the form of terrorist attacks while Jewish settlers keep on colonising Palestinian land.

Conspiracy theories

The anti-Semitic conspiracy theories range from crazy allegations to well-documented research like the investigation into the Israel lobby by John Mearsheimer and Stephen Walt. There is a large grey area in between. And it is a minefield because of the Holocaust. No sensible person would like to see pogroms or worse. The Jewish people are a small nation with an enormous impact on world history. That fuels speculation. Before going into the conspiracy theories, it might be good to come up with a few general explanations for the remarkable successes of the Jewish people. These are:

  • The Jews invented mass education twenty-five centuries ago (it took twenty-four centuries before Western Europe followed suit) because they felt they all had to understand their scriptures to discuss them intelligently.
  • Due to restrictions imposed on them in the past, Jewish people often went into occupations like trade and finance, which are activities that can make you rich without a lot of toils.
  • For centuries, the Jewish people lived under marginal and uncertain conditions which required resourcefulness that may have become part of Jewish culture.
  • There might be a script running all that happens in this universe, and the Jews may be God’s chosen people, even though that was not always a blessing for the Jews themselves. The parallel with the sacrificial lamb Jesus is eye-catching.

Anti-Semitic conspiracy theories have done tremendous harm and helped to make the Holocaust possible. It may nevertheless be better to view them more objectively as theories for which there might be evidence and the understanding that cultural differences are a source of trouble because the behaviour of one group can harm others. That may require emotional distance as the truth is not always politically correct.

There is a joke that goes like this, ‘Why does Israel not become a state of the United States? Well, if Israel does, it will have only two Senators.’ Israel has the unconditional support of the United States. Senators and members of Congress who hold different views face the powerful Israel Lobby. The lobby will fund the campaign of their opponents, which likely means losing the election. Jewish interest groups have a lot of power, and a book claims there is a secret Jewish plot to gain world domination.

The Protocols of the Elders of Zion is a fiction made up by the Russian secret service around 1900. The Russian tsarist regime was hostile towards Jews. Some people took the protocols seriously, and it subsequently became a guidebook for blaming Jews for everything. The Protocols claim the Jews form a secret cult conspiring to gain world dominance via plots and schemes hidden from the public eye. Adolf Hitler and the automaker Henry Ford believed it, as did many others. And somehow, the work became a bit prophetic. That might be called the irony of history or perhaps the plan of God.

The main themes of the Protocols and related conspiracy theories are Jewish control of world finance, Jewish organisation of radical movements and Jewish manipulations of diplomacy to cause wars that kill white Christians. There are racist, political and religious aspects to these claims. You can definitely read ‘evil Jews’ between the lines. Anti-Semites use so-called whistle words, which means that they mean ‘evil Jews’ even when they do not say so. But using that as an argument can become a way to dismiss legitimate concerns.

Mearsheimer and Walt investigated the power of the Israel Lobby. They claimed that if you criticise Israel in the United States, you will be branded an anti-Semite. It means that you are a racist Jew-hater. Major newspapers subsequently published editorials calling their research anti-Semitic. AIPAC is the most prominent organisation in the Israel Lobby. Mearsheimer and Walt concluded:

AIPAC’s success is due to its ability to reward legislators and congressional candidates who support its agenda, and to punish those who challenge it. AIPAC makes sure that its friends get strong financial support from the myriad pro-Israel PACs. Those seen as hostile to Israel, on the other hand, can be sure that AIPAC will direct campaign contributions to their political opponents. The bottom line is that AIPAC, which is a de facto agent for a foreign government, has a stranglehold on the U.S. Congress. Open debate about U.S. policy towards Israel does not occur there.4

Stranglehold is a whistle word as it might imply that ‘evil Jews’ control US politics, but if you leave out the word ‘evil’, you arrive at a well-documented conclusion. And so, the anti-Semitism argument increasingly fails to convince people. It is apparently forbidden to say the truth in US politics. If you think of the consequences of anti-Semitism in the past or that millions of Jews face displacement or worse if Israel collapses, you might understand why Jewish interest groups go to such great lengths to keep American support.

Suppressing the truth is a self-defeating strategy in the long run while dealing with it is like opening a can of worms. Several powerful lobbies operate in the United States, some representing foreign national interests, but few attract as much attention as the Israel Lobby. So why is the Israel Lobby so powerful, visible and aggressive? There are some possible answers:

  • Unlike other foreign interests, the Israel Lobby long had broad popular support. Anti-Semitism led to the Holocaust, so the Israel Lobby could more easily claim the moral high ground.
  • Jews in Israel do not feel secure because of the Holocaust and because Israel is on land taken from the Arabs. Criticism of Israel provokes the fear that the legitimacy of the Jewish state is at stake.
  • Israel ignores international law by colonising Palestinian land. The unconditional support of the United States helps Israel to do that.

The Israel Lobby is the most visible in the United States but has significant influence in some other countries as well. When a public figure demonstrates a one-sided sympathy for the Palestinian cause, like the former Dutch Prime Minister Dries Van Agt, the lobby brings in anti-Semitism allegations. Former labour leader Jeremy Corbyn faced a similar fate in the United Kingdom. He associated himself with anti-Jewish figures, including Holocaust deniers. His personal views on the matter became of secondary importance. Pro-Israel figures do not face the same kind of scrutiny.

Powerful lobbies undermine democracies, most notably when they suppress dissent, which most interest groups did not do as much as the Israel Lobby. The Woke copied these tactics inspired by the Frankfurt School. In his book Critique of Pure Tolerance, Herbert Marcuse claimed that freedom of speech limits freedom. He proposed a liberating tolerance, which is intolerance to right-wing movements and toleration of left-wing movements. That thought emerged within a context. The Frankfurt School is from Germany and was preoccupied with preventing the reappearance of Nazism.

Usury

The Jew as usurer is a well-known theme in anti-Semitic folklore. The Roman Catholic Church forbade Christians to charge interest to fellow Christians. During the Middle Ages, Jews were excluded from several professions and pushed into activities that Christians deemed reprehensible. One of them was money lending. The Torah allowed Jews to charge interest to Christians. Their principle was, thou shall not lend at interest to your brothers. Christians believed in that same principle. But Christians and Jews did not see each other as brothers. The long-term consequences of interest are not well-understood in modern times as economic growth and price inflation mask them. Interest charges can destroy people, businesses, nations and even entire civilisations.

The financialisation and indebtedness of Western societies, most notably that of the US and the UK, can be traced back to interest charges. The mere pursuit of profit, or making money with money, undermines the moral fabric of society. That may not be obvious as people have different views about right and wrong. There are supposedly nihilist philosophies that are either the outcome of despair or the acknowledgement that we are animals and that our moral values are not absolute but relate to our human nature. But apart from that, the love of money is the root of many kinds of evil.

In the Middle Ages, interest rates were high, sometimes as much as 20% to 30% annually. And so, the misery caused by interest charges was more visible. And Jews often received the blame because they were moneylenders. The official lending by Jewish money lenders mandated by the Church allowed for interest rates below 10%. Persecuting Jews was also profitable for their debtors. For instance, in 1290, King Edward I expelled the Jews from England, confiscated their assets, and defaulted on the loans he had received from them.

In the 16th century, short-term interest rates dropped to around 10% annually because financial markets became more developed and efficient. As interest rates went down, and because of the Protestant Reformation, religious objections against charging interest waned. Once Christians could charge interest on fellow Christians, the Jewish role in money lending was reduced, but it remained significant. Interest became an essential part of the capitalist economy, and Western culture became ignorant about the problematic nature of interest charges. Usury is an insidious process leading to a possible endgame of financial collapse or hyperinflation once economic growth falters.

Jews play a prominent role in the financial sector in the United States. They have served as chairmen of the Fed, including Alan Greenspan, Ben Bernanke and Janet Yellen. The exploitative nature of finance and the bailouts feed the conspiracy theory of Jewish usury. Real wages in the United States have hardly risen for decades, but the US financial sector comprised only 10% of total non-farm business profits in 1947 but grew to 50% by 2010. Finance does not produce food or widgets but merely extracts its profits from those who make real things. At the top of the financial and economic food chain are relatively many Jews. While many ordinary people in the United States struggle to make ends meet, the top 1% is doing well.

Influence on the media and opinion

In 2012, six corporations owned 90% of the mainstream media in the United States. Most of these corporations have Jewish CEOs and owners. Journalists are also often Jewish. How much that affects the reporting remains to be seen. In 2008, Philip Weiss remarked that in a few months, several serious people suggested that Jews predominate in the American media. For instance, at a forum at the Nixon Center, the former high-ranking government official Dov Zackheim said, ‘Jews don’t dominate the policy-making process, but the media is a different story.’ From his personal experience, Weiss claimed most editors were Jewish.6

The real issue is, does it matter? Weiss thinks so when it concerns the Israeli-Palestinian conflict. He cites a few Jewish journalists who admitted to having a bias.5 J.J. Goldberg wrote in The Forward that, although Jews hold many prominent positions in the US media, they do not prioritise Jewish concerns and that Jewish Americans generally perceive the media as anti-Israel.6 And what about the Jews dominating Hollywood? That is such a Jewish stereotype. Joel Stein of the Los Angeles Times mocked the efforts of the Anti-Defamation League (ADL), which is another part of the Israel Lobby, to educate the American public:

I have never been so upset by a poll in my life. Only 22% of Americans now believe “the movie and television industries are pretty much run by Jews,” down from nearly 50% in 1965. The Anti-Defamation League, which released the poll results last month, sees in these numbers a victory against stereotyping. Actually, it just shows how dumb America has gotten. Jews totally run Hollywood.7

The Internet is more difficult to manage. Anti-Semitic and anti-Zionist messages can be found on many message boards. Israel has tried to counter that by paying students to post pro-Israel messages on social media.8 It was part of a public relations effort named ‘hasbara’ that some call propaganda.

In October 2007, about 300 academics issued a statement calling for academic freedom from political pressure, most notably from groups portraying themselves as defenders of Israel. In 2009, sociology professor William Robinson sent an email to students in which he compared the Israeli occupation of Gaza with the Nazi-controlled Warsaw Ghetto during World War II. The ADL started a campaign to discipline him for violating the faculty code of conduct.

Linguistics professor Noam Chomsky, a left-wing political activist, claimed the ADL had compiled a 150-page dossier on him. He is highly critical of US and Israeli policies. Chomsky also defended the right to deny the Holocaust as freedom of speech. The ADL called him a Holocaust denier, describing him as a dupe of overweening intellectual pride who is incapable of distinguishing between totalitarian and democratic societies and between oppressors and victims. Apparently, the ADL collected information to use against him. Chomsky said that an ADL insider sent him the file. It included conversations, correspondence and other materials. Chomsky added that it read like an FBI file. He further noted:

It’s hard to nail this down in a court of law, but it’s clear they essentially have spies in classrooms who take notes and send them to the ADL and other organisations. The groups then compile dossiers they can use to condemn, attack or remove faculty members. They’re like J. Edgar Hoover’s files. It’s kind of gutter stuff.9

In January 1993, the city’s police department raided the San Francisco ADL’s Northern California office. It kept files on more than 600, predominantly leftist, civic organisations and over 10,000 individuals. The police estimated that the ADL had illegally obtained 75% of that information. By November, District Attorney Arlo Smith appeared close to indicting the ADL. Fearing to lose the support of the influential Jewish community for his election, he dropped the case. The police investigation uncovered information about the ADL’s spying operations.10

In recent years, the influence of the Jewish lobby on public opinion in the United States waned because of the simultaneous rise of the woke left and the white supremacist right. The Woke favour the marginalised and oppressed and support the Palestinian cause, while white supremacists are open to anti-Jewish conspiracy theories. The woke people use the tactics that the Jewish lobbies have used previously, for instance, cancelling those with different views. The 2023 Gaza War eroded Israel’s standing further. For Hamas, the coverage of the Israeli brutality in Gaza was a gift that kept on giving. The terrorist attacks were over after a few days, but the misery in Gaza dominated the news for months.

Causing wars and revolutions

The French revolutionaries decided that Catholics, Protestants and Jews became full members of society. In 1797 and 1798, a French Jesuit and a Scottish physicist published two remarkably similar books claiming secret societies were undermining the social order and had started the French Revolution. Both named the Freemasons and the Illuminati as the main culprits. And Jews were also seen as conspirators. They benefited from Napoleon giving them equal rights, so they must have organised it. Much of contemporary conspiracy thinking still centres around these secretive groups and Jews.

And Jews supposedly started the Russian Communist Revolution of 1917. Anti-communists brought up the idea during the ensuing civil war to use existing anti-Semitic sentiments for their political aim. There was a high number of Jewish Communist Party leaders during the revolution. The anti-Semitism in the Russian Empire may have induced them to join radical political movements.

That does not explain why many Jews joined radical movements in other countries. Milton Friedman tried to shed some light on this issue. He found that Jewish people wrote a significant part of the revolutionary anti-capitalist literature and ran and disproportionally filled the ranks of Communist parties in many countries.11 A conspiracy theorist would like you to believe that the Jews seek to control both sides.

Friedman did not think Jews were seeking world domination. He gave two reasons why they joined radical movements. First, the left provided the Jews with equal citizenship, while the Christian right did not. Second, the stereotype that Jews are profiteers and usurers may have persuaded them to show themselves and the anti-Semites that they are not selfish and heartless but public-spirited and idealistic.11 A third reason, which Friedman did not mention, was that many intellectuals were Jewish causing them to have a significant influence on both socialist and capitalist thinking.

Anti-Semitism did not disappear in the Soviet Union. In 1948, Stalin started a campaign against the so-called rootless cosmopolitans, a euphemism for Jewish intellectuals. During that campaign, the Soviets killed leading Jewish writers and artists and removed Jewish scholars from the sciences.

After 1968, the left gradually alienated from its traditional base of workers in favour of disadvantaged groups like ethnic minorities, women, and LGBT people. The Marxist Frankfurt School played a significant role in this development. The Cultural Marxism conspiracy theory claims Marxists of the Frankfurt School undermine Western civilisation with civil rights movements, feminism, multiculturalism, LGBT propaganda, and above all, pop music, causing a breakdown of traditional Christian values. Several prominent thinkers of the Frankfurt School were Jewish, so some see Cultural Marxism as an anti-Semitic conspiracy theory.

The recent American wars in the Middle East are, to a significant extent, the outcome of the neoconservative ideology. They based their thinking on The Clash of Civilisations by Samuel Huntington. Huntington wrote that Western nations will lose predominance if they fail to recognise the irreconcilable nature of cultural tensions. He thus questioned whether multiculturalism would ever work. Huntington considered Islam a fundamental problem for the West.12 Only, Huntington himself believed that the West should adapt to a new era in which it is no longer dominant.

The neoconservatives held a different view. Leo Strauss, the founder of American neoconservatism, proposed a restoration of the vital ideas underpinning Western civilisation, such as classical Greek philosophy and the Judaeo-Christian heritage, and promoted faith in the moral purpose of the West. It is one of the reasons why the neoconservatives pressed for war to bring liberal democracy to Iraq. It was mainly due to the personal efforts of the non-Jewish Vice-President Dick Cheney, who had links to the oil industry, that this war came about. The Iraq War caused at least 300,000 civilian fatalities.

A conspiracy theorist could allege that, apart from undermining Western civilisation, the Jews also spread it by orchestrating wars and revolutions. The Protocols inspire this kind of thinking. If take the Protocols seriously, you might conclude that the Jews of the Frankfurt School and the Jewish neoconservatives secretly coordinate their actions to achieve Jewish world domination. And that the absence of evidence for this claim would be solely due to the secrecy of the operation rather than its non-existence.

Blood Libel 2.0

In 2009, the Swedish newspaper Aftonbladet ran an article about Israeli organ harvesting with the sensationalist headline ‘Our sons are plundered of their organs’. That was bad publicity for Israel. The allegations bore some similarities to the blood libel. Dead Palestinian children had been returned to their families by the Israeli army with organs missing.13 In the 1990s, Israeli doctors had taken skin, corneas, heart valves and bones from deceased Israelis, Palestinians and foreigners without permission.14

Organ trafficking is widespread. China, India, Pakistan, Egypt, Brazil, the Philippines, Moldavia, and Romania are among the world’s leading providers of trafficked organs. And China harvested organs from political prisoners. Trafficked organs are either sold domestically or exported to be transplanted into patients from the US, Europe, the United Arab Emirates, Saudi Arabia and especially Israel.15 Israel faces a shortage of organ donors because Jewish religious law requires the body to be intact in burial.16

Illegal organ trade is a questionable business but it can save lives. For poor people, the choice may come down to selling a child or selling an organ. Not allowing organ sales may make their situation even more miserable. Stealing organs from the dead is reprehensible because the deceased nor the family have given permission. These practices probably existed in Israel on a wider scale even though they likely have ended by now. It is telling that a stolen heart may have been used in Israel’s first successful heart transplant.17

Allegiance

The loyalty of Jews is another theme in conspiracy theories. Every minority in a foreign country faces the question of allegiance. It isn’t a big issue when the minority and the host country don’t have a serious conflict of interest, or when the minority has little influence. Jews have significant clout in the United States and elsewhere. In his book By Way of Deception, Victor Ostrovsky, a former operative for the Israeli intelligence service Mossad, claimed this service recruits helpers among the Jews outside Israel for its operations.18 Other secret services also enlist compatriots for espionage abroad, but the Mossad is legendary for its daring operations on foreign soil.

One of the most well-known helpers was Jonathan Pollard. As a young Navy intelligence analyst, he had claimed that the United States withheld information from its close ally, Israel. He took it upon himself to correct this injustice. He sold classified US documents to Israel. Sensitive documents stolen by Pollard ended up in the hands of the Soviet Union, putting the lives of US intelligence assets at risk. A few other cases of Israeli espionage in the United States attracted publicity, such as the arrests of former AIPAC officials Steve Rosen and Keith Weissman.

A noteworthy incident that raises questions is the Israeli attack on the spy ship USS Liberty during the 1967 Six-Day War, killing 34 Americans and wounding 170 others. The attack consisted of an air attack followed by a sea attack with gunboats. The official story is that Israeli forces mistakenly identified it as an enemy vessel. A story reported by former US Ambassador to Lebanon, Dwight Porter, who recounted a conversation between an Israeli pilot and the Israel Air Force war room picked up by an NSA aircraft and inadvertently cabled to CIA offices around the world, tells a different story:

Israeli pilot to war room: This is an American ship. Do you still want us to attack?
War room to Israeli pilot: Yes, follow orders.
Israeli pilot to war room: But sir, it’s an American ship – I can see the flag!
War room to Israeli pilot: Never mind; hit it.

It was clear to the Israelis that the ship was American. Israeli reconnaissance planes had already identified the ship as an NSA intelligence vessel earlier that day. The exchange between the pilot and the war room raises questions. What reasons could the Israelis have had? And why would they risk angering their ally, the United States? The journalist Peter Hounam claimed that President Johnson, fearing he would lose the election, sought a pretext to let the United States join the war on the Israeli side and had asked the Israelis to stage a false flag attack. That would also have been in Israel’s interest.

The intriguing coincidences surrounding the terrorist attacks of 11 September 2001 have kept conspiracy theorists on edge. One of them is that a New York housewife spotted five Israelis filming the attacks on the World Trade Center from a rooftop just after the first strike had hit the Twin Towers. The Israelis appeared full of joy as the World Trade Center burned and crumbled. The police arrested them with $4700 in cash, foreign passports and a pair of box cutters of the type used by the hijackers. Two of them were Mossad agents. The FBI believed they were spying on Islamic extremist networks.19

The FBI interrogated them for weeks and concluded that there was no evidence they had foreknowledge of the attacks. The Israelis were uncooperative. It was impossible to extract much information from them. Later, some of them discussed the events on an Israeli talk show. One said, ‘We come from a country that experiences terror daily. Our purpose was to document the event.’19 The evidence suggests the Israelis knew more, likely some specifics of the attack plan. An Israeli official told the Associated Press, ‘Everybody knew about a heightened alert and knew that bin Laden was preparing a big attack.’ He said the Israelis had passed on this information to Washington and denied Israel had concrete intelligence that could have prevented the attacks.20

The Mossad is known for its daring operations. In the aftermath of the Hamas terrorist attacks of 7 October 2023, Israel scored some remarkable successes against Hezbollah and Iran with the help of its secret services. Mossad agents had duped Hezbollah into buying thousands of explosive pagers and walkie-talkies. When Israel attacked Iran in 2025, it immediately struck a slew of high-value targets, killing senior commanders and nuclear scientists and disarming Iran’s air defences. Israel’s successes stem from intelligence operations conducted inside Iran. Commando forces operated in Tehran and across the country, while Iran’s security and intelligence agencies remained unaware. Mossad teams targeted air defence missiles, ballistic missiles, and missile launchers. Israel had already assassinated several Iranian nuclear scientists and acquired Iranian nuclear information. These attacks occurred almost immediately after the UN watchdog had declared Iran in breach of its non-proliferation obligations.

Influence on the United States government

An evangelical Christian desire to return the Jews to the Holy Land has promoted the Zionist cause in the United States, as they believe it to be a prerequisite for the Second Coming of Jesus. Consequently, there is strong support for Israel amongst Evangelical Christians and Republicans. Jewish Americans often back Democratic candidates, so Democrats pay close attention to their Jewish voters. It ensures support for Israel in both political parties. US politicians need donations to fund their campaigns. Corporations and wealthy individuals buy influence, which is bribery. Jews generously donate to political campaigns. In 2006, 60% of the Democratic Party’s fundraising and 25% of the Republican Party’s fundraising came from Jewish-funded Political Action Committees.

Several Jewish Americans found their way into influential positions in the United States government. Some were also citizens of Israel. In 1994, the Israeli paper Ma’ariv wrote that the Clinton Administration allowed more Jews in sensitive positions than any government before. The article noted that this was not a design and that their achievements had brought them there. The Jewish component of the Democratic government was significant, but there were also Jews heading for top positions in the Republican Party, for example, Paul Wolfowitz.21

Wolfowitz was one of the neoconservatives, a political movement whose ideology played a significant role in American policies after 11 September 2001. In 2000, he was one of the supporters of the Project for the New American Century (PNAC), which promoted the removal of Saddam Hussein. After 11 September 2001, the PNAC pushed for an attack on Iraq. The security of Israel played a role in the considerations of the neoconservatives, but there is little evidence that protecting Israel was a principal reason for starting the Iraq war.

Mearsheimer and Walt wrote that pro-Israel figures have established a commanding presence at the American Enterprise Institute, the Center for Security Policy, the Foreign Policy Research Institute, the Heritage Foundation, the Hudson Institute, the Institute for Foreign Policy Analysis, and the Jewish Institute for National Security Affairs and that these think tanks are all decidedly pro-Israel.4

In most cases, the US supported the position of Israel, but there are a few instances in which the US government did not. The Eisenhower administration forced Israel to withdraw from the Sinai after the Suez Crisis. The administration of Bush Sr delayed support to Israel because of the settlements in the Palestinian territories. The Israeli government and the Obama administration differed on the settlement issue and how to deal with Iran, and the Israel Lobby organised resistance in Congress and the Senate.

Protocols of the Learned Elders of Zion cover
Protocols of the Learned Elders of Zion cover

The irony of history

Perhaps the Protocols of the Elders of Zion are worth reading to see how the most bizarre conspiracy theories can appear convincing if you look at the evidence. If the Protocols had been for real, then the situation in the United States today may not have been so different. There is no grand conspiracy of Jews aiming for world domination, but what difference does that make in practice? It is the irony of history and perhaps God’s peculiar sense of humour. And so Manny Friedman wrote in the Times Of Israel:

We have, for example, AIPAC, which was essentially constructed just to drive agenda in Washington DC. And it succeeds admirably. And we brag about it. Again, it’s just what we do. But the funny part is when any anti-Semite or anti-Israel person starts to spout stuff like, “The Jews control the media!” and “The Jews control Washington!” Suddenly we’re up in arms. We create huge campaigns to take these people down. We do what we can to put them out of work.22

Did Friedman write that Jews determine who is allowed to govern in Washington DC? And perhaps the Israel Lobby has taken advice from the Protocols:

And let’s not forget AIPAC, every anti-Semite’s favourite punching bag. We’re talking an organisation that’s practically the equivalent of the Elders of Zion. I’ll never forget when I was involved in Israeli advocacy in college and being at one of the many AIPAC conventions. A man literally stood in front of us and told us that their whole goal was to only work with top-50 school graduate students because they would eventually be the people making changes in the government.22

Did he write that the Jewish interest groups act as if the Protocols were real? Perhaps the anti-Semites who believe the Protocols are real are not that imaginative. Then Friedman draws the following conclusion:

The truth is, the anti-Semites got it right. We Jews have something planted in each one of us that makes us completely different from every group in the world. We’re talking about a group of people that just got put in death camps, endured pogroms, their whole families decimated. And then they came to America, the one place that ever really let them have as much power as they wanted, and suddenly they’re taking over. Please don’t tell me that any other group in the world has ever done that. Only the Jews. And we’ve done it before. That’s why the Jews were enslaved in Egypt. We were too successful. Go look at the Torah — it’s right there. And we did it in Germany too.22

Did Friedman imply that Adolf Hitler had valid reasons to fear the Jews would take over Germany and that the proof of it is that they did so in the United States? It may be the personal opinion of a Jewish writer, but he made these comments in good spirit and as an expression of pride about his fellow Jews, and he writes what many people think. And you can plausibly interpret the evidence that way. Friedman could say it because he is a Jew, but if you are not, you are an anti-Semite. And you cannot call him a renegade or a self-hating Jew.

Jews excel in many fields, for instance, academics and finance. But pride comes before destruction and an arrogant spirit before a fall (Proverbs 16:18). The Nazis went down with their musings about Germans being a superior race. If the upper class of society coincides more and more with a small ethnic minority, ethnic tensions arise. The situation needs attention. Otherwise, this can end badly. History has taught us that too.

The Jewish people always lived at the margin and had to be resourceful to survive. These skills could have become part of Jewish culture so Jewish people could come out on top once they could operate without restrictions. And that can be at the expense of others and elicit resentment. That is not to say that there should be restrictions applying to Jews that do not apply to others. It is an instance of cultural differences causing trouble in multicultural societies. A fairer and more equitable society can also solve this issue.

Latest revision: 26 January 2024

Featured image: Blame Jews For Everything For Dummies. Found on Reuvera.hubpages.com. [copyright info]

1. On the Jewish Question. Karl Marx (1844).
2. The Bible’s Prehistory, Purpose and Political Future. Jacob L. Wright (2014). Coursera.org. [transcript]
3. Practising Tolerance in a Religious Society: The Church and the Jews in Italy. Bernard Dov Cooperman (2014). Coursera.org. [transcript]
4. The Israel Lobby and U.S. Foreign Policy. John J. Mearsheimer and Stephen M. Walt (2006). London Review of Books.
5. Do Jews Dominate in American Media? And So What If We Do? Philip Weiss (2008). Mondoweiss.net. [link]
6. Jewish power: inside the American Jewish establishment. Goldberg J.J. (1997). Basic Books. pp. 280–281.
7. Who runs Hollywood? C’mon. Joel Stein (2008). Los Angeles Times. [link]
8. Israel to pay students to defend it online. USA Today (2013). [link]
9. Israel lobby descends on UC Santa Barbara. Committee To Defend Academic Freedom at UCSB. [link]
10. ADL Spies. Jeffrey Blankfort (2013). Counterpunch.
11. Capitalism and the Jews. Milton Friedman (1988). Foundation For Economic Education. [link]
12. The Clash of Civilizations. Samuel P. Huntington (1996). Simon & Schuster.
13. ‘Our sons are plundered of their organs’. Donald Boström (2009). Aftonbladet. [link]
14. Israel harvested organs without permission, officials say. Kevin Flower and Guy Azriel (2009). CNN. [link]
15. Organ trafficking: a fast-expanding black market. Janes Defence & Security Intelligence (2008).
16. A mitzvah called organ donation. Efrat Shapira-Rosenberg (2007). Ynetnews. [link]
17. 40 Years After Israel’s First Transplant, Donor’s Family Says His Heart Was Stolen. Dana Weiler-Polak (2008). Haaretz. [link]
18. By Way of Deception: The Making and Unmaking of a Mossad Officer. Victor Ostrovsky (1990). St. Martin’s Press.
19. Five Israelis were seen filming as jet liners ploughed into the Twin Towers on September 11, 2001. The Scotland Herald (2003). [link]
29. Context of ‘August 23, 2001: Mossad Reportedly Gives CIA List of Terrorist Living in US; at Least Four 9/11 Hijackers Named’. Cooperativeresearch.org.
21. The Jews Who Run Clinton’s Court. Avinoam Bar-Yosef (1994). Maariv.
22. Jews DO control the media. Manny Friedman (2012). Times of Israel. [link]

Graffiti near the Renfe station of Vitoria-Gasteiz

The monster called financial system

Is the financial sector overtaking the real economy?

Less than 1% of foreign exchange transactions are made for trading goods and services. More than 80% are made for exchange rate speculation. Every three days an entire year’s worth of the European Union’s GDP of € 13 trillion is traded in the foreign exchange markets.1 So is the financial sector overtaking the real economy?

Financial industry share of total nonfarm business profits. Evan Soltas (2013)
Financial industry share of total non-farm business profits. Evan Soltas (2013). Economics and Thought.

In the United States financial sector profits grew from 10% of total non-farm business profits in 1947 to 50% in 2010.2 This figure excludes bonuses. It is explosive stuff and the original research has been removed from the Internet. The findings could give us the impression that the financial sector is a big fat parasite that feeds on us. And who would have guessed that?

What a scary monster the financial system has become. This terrible creature could easily wipe out human civilisation as we know it. That nearly happened in 2008. And it can still happen. We are hostage of this monster. It is too big to fail. But what created it? It wasn’t Frankenstein for sure. The answer is already out there for thousands of years. It is interest on money and loans. In the past this was called usury and often forbidden.

The core problem is that incomes fluctuate while interest payments are fixed. This causes instability in the financial system. And if the investment is more risky, lenders demand a higher interest rate, which contributes to the risk. Limiting interest would reduce leverage and make financial system more stable and less prone to crisis.

It’s the usury, stupid!

Fraud in the financial sector contributed to the financial crisis of 2008. To what extent the fraud or the size of the financial sector are to blame is less clear. Financial crises are not a recent phenomenon. They have caused economic crises in the past. For instance, the stock market crash of 1929 and the subsequent bank failures caused the Great Depression of the 1930s. Back then the financial sector was not as large as it is today and there was no large-scale mortgage fraud. Hence, there must be another cause.

Charging fixed interest rates on debts causes problems as incomes fluctuate. So if some person’s income or some corporation’s profit suddenly drops, interest payments may not be met. When the economy slows down that happens to a lot of people and corporations simultaneously, which makes the financial system prone to crisis. And interest is a reward for risk. Creditors may be willing to lend money to people and corporations that are already deeply in debt, but only if they receive a higher interest rate. So if interest was forbidden, that might not happen, and there could be fewer financial crises.

Banning interest has been tried in the past and it failed time after time. That is because without interest lending and borrowing wouldn’t be possible and the economy would come to a standstill. Until now there was a shortage of money and capital so interest rates needed to be positive, but that may be about to change. The increased availability of money and capital pushed interest rates lower. Money and capital may soon be so abundant that interest rates can go negative. That could be the end of usury.

The scary monsters in the financial system

Apart from exchange rate speculation there are frightening creatures like quantitative easing, shadow banks and derivatives. These things will be explained later in this post. Some experts believe that the financial sector is out of control. That may not be the case. Usury created this monster so Natural Money, which is negative interest rates and a maximum interest rate of zero, could make many of these seemingly hard-to-solve issues disappear, and perhaps shrink financial sector profits too.

Leverage, shadow banking and derivatives make the financial sector so profitable for its operators because of interest and risk. Interest is a reward for risk but interest also increases risk because interest charges are fixed while incomes aren’t. But more risk means more profit for the usurers because all that risk needs to be ‘managed’. That provides opportunities to profit for those who make the deals. Usury is the main cause of financial crises and generates most financial sector profits.

Quantitative easing

Quantitative easing means that central banks print money to buy debt with this newly created money. Trillions of dollars and euros have been printed so central banks now own trillions in debt. In this way the financial crisis of 2008 was stemmed. Investors and banks wanted to get rid of debts and preferred cash because there was a risk that some of these debts would not be repaid in full. This caused the crisis.

But what if there was a tax of 10% per year on cash and central bank deposits? Losing a few percent on bad debts suddenly doesn’t seem such a bad deal any more. Investors may have kept these debts and the crisis would not have occurred. The losses on bad mortgages turned out to be a lot less than 10% per year. That was also because the crisis was halted with central bank actions like quantitative easing.

If there had been a tax on cash and central bank deposits there would always have been liquidity. The crisis may never have happened in the first place and quantitative easing may not have been needed. And if this tax is going to be implemented in the future, investors may gladly gobble up the debt on the balance sheets of central banks, so that quantitative easing can be undone, and most likely at a profit for the taxpayer.

Shadow banks

In order to protect depositors, banks are subject to regulations. Regulations are bad for profits because they limit the risks banks can take. Bankers who were looking for bigger bonuses came up with a scheme that is now called shadow banks. Shadow banks don’t offer deposit accounts to ordinary people so regulations don’t apply. And so shadow banks can take more risk and generate more profits.

A shadow bank borrows money from investors and invests it in products like mortgage-backed securities. A mortgage-backed security is a derivative that looks like a bunch of mortgages. The owner of the security doesn’t own the mortgages themselves, but is entitled to the interest from the mortgages but also the losses when home owners fall behind on their payments. Not owning the mortgages themselves makes trading a lot easier because mortgages involve a lot of paperwork.

Shadow banks can be dangerous because bank regulations don’t apply. Ordinary banks are required to have a certain amount of capital to cushion losses so that depositors can be paid out in full when some loans aren’t repaid. The balance sheet of an ordinary bank might look like the one below:

debit
credit
mortgages and loans
€ 70,000,000
deposits
€ 60,000,000
loans to other banks
€ 10,000,000
deposits from other banks
€ 20,000,000
cash, central bank deposits
€ 10,000,000
the bank’s net worth
€ 10,000,000
total
€ 90,000,000
total
€ 90,000,000

But shadow banks don’t need to comply to these regulations because they don’t have depositors. And so the balance sheet of a shadow bank might look like this:

debit
credit
mortgage-backed securities
€ 500,000,000
short-term lending in money markets
€ 490,000,000
insurance and credit lines
the shadow bank’s net worth € 10,000,000
total
€ 500,000,000
total € 500,000,000

What is so great about shadow banking, at least for bankers? If banks borrow at 2% and lend at 4%, the ordinary bank can make € 1,400,000. The bank’s net worth is € 10,000,000 so the return on investment is 14%. But the shadow bank can make € 10,000,000 and the return on investment is 100%. And you can imagine how great this is for bonuses. Only, if something goes wrong, there is little capital to cushion losses. That’s not a problem for the bankers because by then they have already cashed their bonuses. But it could become our problem as shadow banks can blow up the financial system.

If the loans drop 10% in value because some home owners fall back on their mortgage payments, the capital of the ordinary bank can cushion the loss of € 8,000,000, while the shadow bank goes down in flames leaving an unpaid debt of € 40,000,000. And now we get to the point where financial system blew up. It is the insurance and credit lines part on the balance sheet of the shadow bank. There is no value attached because credit lines so insurances don’t show up on balance sheets or only for a very low amount.

Ordinary banks guaranteed credit to shadow banks just in the case investors like money market funds didn’t want to invest in shadow banks any more. The great thing of credit lines for bankers is that they get a fee for these credit lines while they don’t appear on the balance sheet so that banks don’t have to cut back their lending. When homeowners fell behind on their payments, investors didn’t want to invest in shadow banks any more, and these credit lines had to be used. This means that ordinary banks had to step in and suddenly their capital wasn’t sufficient to cover the losses. Also going down in flames, were the insurers of mortgage-backed securities.

The United States had a government policy of stimulating home ownership. Under the guise of this policy mortgages were given to people who couldn’t afford them. Behind the scenes usury was to blame. If there was doubt whether the borrower could afford the mortgage, a banker could charge a higher interest rate to compensate for the risk. This made the mortgage even less affordable to the borrower. The solution for that problem was giving ‘teaser rates’, meaning that the interest rate was low during the first year so that the home owner could afford the mortgage payments at first. Meanwhile the mortgage was packaged in a mortgage-backed security so the banker was already off the hook when the home owner fell behind on his or her payments.

And there is more. Shadow banks offer higher interest rates to their investors. Shadow banks don’t have a lot of capital so investing in them is a more risky than putting money in a bank account of a regular bank. Investors in shadow banks need a compensation for that risk. That’s no problem because the enterprise is very profitable. It is therefore possible for shadow banks to pay higher interest rates. This might not be possible if interest was forbidden, unless shadow banks had a lot more capital to cover their losses, but that would solve the problem of them being too risky. It is usury that allows for risky schemes like shadow banks to exist.

The multi-trillion-dollar derivatives monster

In 2016 the notational value of all outstanding derivatives is estimated to be $650 trillion. This is the so-called multi-trillion derivatives monster. This figure is more than eight times the total income of everyone in the world.3 Some people are spooked by the sheer size of that number. And indeed, derivatives can be dangerous. In 2003 the famous investor Warren Buffet called derivatives ‘financial weapons of mass destruction’.

Five years later derivatives played a major role in the financial crisis. An improper use of derivatives nearly brought down the world financial system. But derivatives can be useful. Most banks use derivatives to hedge their risks. Banks that managed their risks well using derivatives fared relatively well during the financial crisis compared to banks that didn’t.4 Therefore, derivatives are probably here to stay.

But what about the multi trillion monster? The number is a notational value, not a real value. Derivatives are insurance contracts, often against default of a corporation, a change in interest rates, or home owners falling behind on mortgage payments. You may have a fire insurance on your house to the amount of € 200,000. This is the notational value of the contract. You may pay the insurer € 200 per year. That is the real value of the contract, until something happens, that is.

If your house burns down, the contract suddenly is worth € 200,000. Insurers often re-insure their risks, which is a prudent practice. But re-insurance makes the notational value of the outstanding derivatives increase. So if your insurer re-insures half of your fire insurance to reduce its risk exposure, another contract with notational value of € 100,000 is added to the pile of existing insurance contracts.

So what went wrong? If suddenly half the houses in a nation catch fire because there is a war, insurers go bankrupt. The cause of the financial crisis was many home owners falling behind on their payments at the same time so that insurers of derivative contracts like mortgage-backed securities went bankrupt. The American International Group (AIG) was the largest insurer of these contracts and it was bailed out with $ 188 billion. The US government made a profit of $ 22 billion on this bailout, but only because the financial system wasn’t allowed to collapse.

In a financial crisis a lot of things go wrong at the same time. The financial system can’t deal with a major crisis. If it happens, it may cause the greatest economic depression ever seen, and in retrospect it may herald the collapse of civilisation.

The usury issue

Money circulation in the economy is like blood circulating in the body. It makes no sense for a kidney or a lung to keep some blood just in case the blood stops circulation. The precautionary act makes the dreaded event happen. It is a self-fulfilling prophecy. A financial crisis is like all parts of the body scrambling for blood at the same time. When the blood circulation stops, a person dies. An if the money circulation stops, the economy dies. Hoarding is to blame for that.

Perhaps big banks are too big to fail. Breaking them up may not help because the banking system is closely integrated. Banks lend money to each other. If a few banks fail then others get into trouble too. And in a crisis all the trouble happens at the same time. So perhaps it is better to address the cause of failure itself, which is interest on money and debts. And it may be possible because interest rates are poised to go negative.

A tax on cash makes negative interest rates possible. It can also keep investors from hoarding money. If money keeps on circulating, there may never be a crisis. The crisis happened because investors scrambled for cash when they feared they might lose money on bad debts. But if they expect to lose more on cash, they might keep their debts. And there may have been fewer bad debts in the first place if there had been no interest on debts as interest is a reward for risk.

Featured image: Graffiti near the Renfe station of Vitoria-Gasteiz. Wikimedia Commons. Public Domain.

1. The rise of money trading has made our economy all mud and no brick. Alex Andreou (2013). The Guardian. [link]
2. The Rise of Finance. Evan Soltas (2013). Economics and Thought. [no link because the information has been removed]
3. Here’s What Makes the Derivatives “Monster” So Dangerous (for You). Michael E. Lewitt (2016). Money Morning. [link]
4. Financial innovation and bank behavior: Evidence from credit markets. Lars Norden, Consuelo Silva Buston and Wolf Wagner (2014). Tilburg University. [link]

Arab farmer taking straw to his farm. Public domain.

Clutching at a Straw

Fleeing is no longer possible

As mentioned earlier, I read The Limits of Growth in my late teens. Having hoped to live for another sixty years or so, I was informed by that book that a computer had calculated I would live to see the end. And who would argue with a computer, an entirely logical device? Time was ticking. Tic toc tic toc. As a child, I dreaded the future whenever the song Vluchten Kan Niet Meer (Fleeing Is No Longer Possible) was on the radio. It unnerved me profoundly, as it painted a dismal future in which nature would be gone. The ticking clock had made me run for cover as a toddler. That gloomy mood faded when I went to secondary school, and for a long time, the coming doom hardly crossed my mind.

That was until I read The Limits of Growth. It featured dreadful graphs showing decades in advance how resources would run out, and billions of people would die. Two decades had passed since then, and everyone had ignored it. It led me to join a local environmentalist group, Friends of the Earth, after finishing my studies. That was in 1993. My political affiliation had gradually trended to the centre-left. For a long time, I had believed that there was no alternative to capitalism, but gradually I realised that it also meant there was no alternative to doom. And so there had to be an alternative. It was impossible, but it was necessary. And that thought settled.

Friends of the Earth is an international organisation known in the Netherlands as Milieudefensie, with local activist groups, most notably in student towns like Groningen. We researched issues and tried to convince people. Friends of the Earth also lobbies with politicians and pressures corporations. We were a hodgepodge of students, people with jobs, unemployed, activists, and ordinary people, led by a woman in her thirties who acted like an Akela in the Boy Scouts. A 22-year-old student was her boyfriend.

We were not as militant as Greenpeace, but sometimes we protested. Once, we blocked the entrance of Groningen Airport to object to the government subsidies for the airport. The police came and told us to leave, which we did. It made me realise that activism wouldn’t solve the world’s problems. What could you do? If you went extreme and vandalised property, people would hate you for it, and it wouldn’t change the world. Starting a political party wouldn’t help. Think of what must be done and promise that you will do it. Few will vote for that. Even the most ‘extreme’ environmental party, the Green Party (GroenLinks), didn’t have what it takes, and they had only a few seats. That did not bode well.

And finally, if the Netherlands was going to do it, but no one else would, it wouldn’t help. And then there is the competition in the economy. Businesses will go bankrupt if they do more to save the environment than others. Their products would be more expensive, and we wouldn’t buy them, except for those who care enough for the environment to pay more. The group had about thirty active members and was divided into subgroups centred around specific issues such as vegetarianism, factory farms, air pollution, and economics. Economic issues caught my interest.

My mind was often grinding. It was like Hegelian dialectic, so trying ideas and looking for reasons why they would fail. You can ask hypothetical questions. Is it possible to make capitalism sustainable and just? Fat chance. Wasting is the essence of the system. If capitalism doesn’t solve these problems, then why not try socialism? Would that work? Probably not. People want more stuff. Democracy? Authoritarianism? Likely not. Can we make nature sacred? They will laugh at the idea. Money is sacred. All I got was an increasing pile of objections as to why ideas don’t work. I was too realistic to get carried away by any idea. History is full of examples of ideas going wrong. You can discard most ideas without even trying. That was the benefit of knowing history all too well.

No frivolous accounting

Friends of the Earth in Groningen was a small outfit, so compared to the art festival at the university campus, the yearly budget was negligible, about 6,000 guilders (€ 2,723). It covered the group’s activities. We were short of money. That changed once I became the treasurer. I took measures to make expenses match project income. Everything had to be accounted for. I eliminated the use of cash and required everyone to deliver receipts and state their purpose. I transferred the money via bank transfer, so it was clear where the money went. Yet, luck played a major role.

Each year, we received two grants of 2,500 guilders (€ 1,134), one from the province of Groningen and one from the municipality of Groningen. The provincial administration had just denied the allowance we had received in previous years. We could appeal to the decision at the Appeals Commission, which we did. Then I went to the Provincial House to discuss the issue with the official responsible for the grant. He explained that our request had been late and that the money jar was empty. I asked him whether there was any point to the appeal. He said no. It was a done deal.

So, after receiving an invitation to a hearing at the Appeals Commission, I decided not to waste my time going. After all, it was a done deal. One of the commissioners called me after the hearing to ask why we hadn’t shown up. And I told him. That probably touched a nerve, as it gave him the impression that no one took the Appeals Commission seriously. Our appeal was granted, and we received the subsidy. As I had made a budget that didn’t anticipate this money and had implemented budgetary discipline, we ended up with income exceeding expenses.

Once over a cliff, a cartoon character might clutch at a straw to save itself. Only in animated pictures does the straw hold. The Dutch saying ‘clutching at a straw’ means grasping at your last hope. On economic issues, the local group of Friends of the Earth worked together with Strohalm, or more precisely, Rinke. He lived in Groningen and was actively engaged in Strohalm and its ideology. He was on social benefits, and his career was working for Strohalm and Friends of the Earth. He was serious about his job and worked hard. The meaning of the Dutch word strohalm is straw.

The people of Strohalm claimed that the economy must grow to pay interest. Interest rates can’t go below zero, and if debts aren’t repaid with interest, the financial system collapses, so it is grow-or-die. And interest adds to the principal until infinity. To deal with that problem, I later figured that central banks print money to fill the gaps and aim for inflation, which is why it hadn’t collapsed. Sound accounting attracted me, so this made me think. And the idea of economic growth is frivolous accounting if you are the accountant of our planet’s resources. Many people worry about government deficits, but not about the overexploitation of the earth. And so, the cranks run the show in this world with insane planetary accounting schemes and delusions about growth. And the global economy and financial system create oceans of wealth and deserts of poverty, Srohalm argued.

Strohalm aimed to end interest by charging a holding fee on money. You don’t have to pay the fee if you lend your money. In this way, it could be attractive to lend money without interest. Natural Money as an idea thus already existed back then. Silvio Gesell introduced the holding fee in his 1916 book The Natural Economic Order. Strohalm also promoted local money. And Strohalm promoted local solutions to shield the local economy from international financial markets, such as local currencies.

When you buy groceries at your local supermarket, you have no clue where your money ends up and what it helps to accomplish. The supermarket chain may use it to build a new distribution centre. One of the contractors there might exploit immigrants. It is hard to do something about that, but it made me aware of the impact my money has on the planet and on other people. I moved most of my savings to an ethical bank, first ASN and later Triodos. Later, I also started buying Fair Trade products.

With local money, you could oversee what it accomplishes. And so, Strohalm began a LETS (Local Exchange Trading System) in Groningen. We exchanged goods and services using fictitious currency with a holding fee. It soon dawned upon me that LETS would accomplish very little. It was more of a tea party than a viable alternative for the regular economy. The exchange circle had a few hundred people, and many weren’t very active, so there were only a few products and services. And most weren’t things you needed. You might get a Reiki healer but not a handyman.

If your skills had market value, you wouldn’t exchange them in the LETS circle because you could get guilders you could spend everywhere. Thus, it was not only a matter of scale but also of commitment. The people in the exchange didn’t offer valuable skills or products, either because they didn’t have them or because they could fetch more in the market. You could say that people value money more than community, but you could also say that people tried to make money from their hobby, so they didn’t have to work for a living.

The people in such a scheme were mostly idealists who wanted to change things rather than people who would get things done. For a closed economy to work, the community needs scale to fulfil most of its needs. And it must produce tradeable goods and services to fulfil the remainder of its needs. Above all, building such a community requires commitment. Everyone must contribute, make themselves useful by acquiring new skills if needed, and accept a lower standard of living because they forgo the benefits of the division of labour in international markets. How can you achieve that?

Friends of the Earth Groningen once held a camp to work on our persuasion skills. Rinke was one of the organisers. He specifically praised me and called me an example for the others. That couldn’t be because of my communication skills. What set me apart was that I knew very well what other people were thinking and how they would react. My parents and some of my friends disapproved of my joining the environmentalists. And I didn’t try to convince others of my views, but merely tried to figure out how much they were willing to go along with them. Everyone knows that dumping garbage in nature is not okay. You can use that.

My parents found environmentalists a nuisance at best. When, in 2012, the socialists, led by Diederik Samsom, had a chance to win the elections, they were alarmed because Samson had been with Greenpeace as a student. A former environmentalist running the country was their worst nightmare. Perhaps you can see the irony of that. They considered voting for the conservative liberals (VVD) rather than the Christian Democrats (CDA), for which they had voted all their lives, to prevent that from happening. And so, there is no point in arguing. Did I ever convince anyone of my political views as a teenager? Probably not. That lesson I had learned already as a young man.

Few people are willing to change their lifestyles for the welfare of animals or future generations. Blocking roads would make people angry. People want to drive cars and don’t care about climate change. Strohalm proposed a tax on air travel because air travel is highly polluting and a luxury. Environmental taxes would raise prices and infuriate people. Taxes have caused revolutions. People aren’t willing to give up their right to murder their children. I didn’t give up on environmentalism just because we were heading for the apocalypse, but annoying people wasn’t the way to solve the problem. Only that wasn’t particularly satisfactory. If you accept doom, you might as well commit suicide right away. And so, there must be a way, even if there isn’t.

And there were issues with interest-free money. Why would you lend out money without interest if you could receive interest elsewhere? If you can borrow money at an interest rate of zero, you could borrow as much as you can and put it in a bank account at interest. That is not going to work. That was my grinding mind, looking for failures. It is an occupational hazard if you work in IT. A programme always has errors, and it is better to find the bugs before running it. Cleaning up the mess afterwards is far more work. Still, if interest is the root cause of social and environmental problems and can destroy human civilisation, we must make interest-free money work, even if it never will.

And perhaps it could work. During the Great Depression, a small Austrian town, Wörgl, had money featuring a holding fee. It was a stunning success. A similar money had existed in ancient Egypt for over a thousand years. The Egyptians used receipts for grain stored in the granaries as money. These receipts had a holding fee to cover storage and putrefaction. A Strohalm book related it to the biblical story of Joseph, who supposedly had introduced these granaries to weather seven lean years. If it can work for a thousand years, it can work forever. If only we could uncover the key to these successes. That was a reason not to let go of the idea. Maybe the impossible is possible.

In 1997, I moved to Sneek to live with my wife, Ingrid. Sneek had no local Friends of the Earth group, so I stopped being an active member, but I kept using public transport. Not owning a vehicle while working in IT consultancy for 10 years was a considerable sacrifice. Living in Groningen had made that possible. It was a remote corner of the country. My jobs were either in Groningen itself or so far away that I had to stay in a hotel. In Sneek, I could use Ingrid’s mother’s car if needed. Still, life without a car is quite uncomfortable. And my sacrifice was pointless. More and more people drove SUVs. They didn’t care. They figuratively gave me the middle finger, and their message was, ‘If you don’t ruin this planet, we double down our efforts.’ That was not what these people were thinking, but terrorists at least believed they were doing it for a good cause, and these SUV drivers must have known that they were doing something wrong, at least if they had a conscience.

If you can do an IT consultancy job for ten years without owning a car, few people really need one. But who will tell them to ditch their cars and move closer to their jobs, or cram into crowded buses and trains for a journey that lasts up to twice as long? We can replace vehicles with public transport, but few people would do that voluntarily. The Dutch nickname for the car is ‘Holy Cow’ for a reason. In 2003, Ingrid’s mother’s vehicle broke down, and she didn’t buy a new one. Having never aspired to higher moral standards than others, at least if they are pointless, I bought a car. It must help. Otherwise, you are just having a hard time, with nothing good coming of it. We used the car to go to my parents’ home in Nijverdal or the forest in Rijs, as there was no forest near Sneek.

Becoming your avatar

Between 1998 and 2002, I was a freelance IT specialist. Lots of money came in, so there was some capital to invest. My first investments were small and unprofitable because I believed that profits mattered. At the time, loss-making internet startups did well in the stock market, while profitable corporations did poorly. Understanding financial markets seemed challenging, which made me think I had to stay informed and join the IEX investment message board. At the time, I still occasionally said, ‘With SuperB***,’ when picking up the phone. That once led to a hilarious moment when I expected a call from Ingrid, but it turned out to be from Martien. And so, that name became my avatar. I also took the Financial Markets course at the Dutch Open University.

Later, I changed my avatar name after someone noted that SuperB*** sounded arrogant. From then on, I never answered the phone, saying, ‘With SuperB***.’ That was no longer needed to feel better. A strange thing about avatars is that you somehow become this person, SuperB***, on the message board. People don’t know you, only the avatar. Readers began to expect serious commentary and strong writing from SuperB***. And so, I introduced a few other avatars with fanciful names like IEKS! (a Dutch exclamation of shock that sounds like IEX) or Schaduwschaap (shadow sheep) to be someone else and have fun. And I wasn’t the only one. Others also came up with fanciful names like mooiepipo (beautiful clown), danger money, !@#$!@! (some curse) or Schraalhans (a Dutch joke). Some also used multiple avatars, so the message board became a playground for practical jokes.

Usually, the name had some witty meaning. It could be something like this, ‘Buy And Hold (BAH) is for sheep and sheep say bah and like to live a calm life in the shadows, hence shadow sheep.’ Walhalla Raaskalla, which means something like mad ravings in the heavens of the Viking gods, just sounded funny. And it rhymed. MMWOPS stood for ‘Making Money While Other People Sleep.’ It was the name of an American scam company defrauding the Dutch shipbuilder RSV, which went bankrupt in 1984 despite receiving two billion guilders in government support. Most of my avatars didn’t last long, except Dikkevettebeer (big fat bear), who believed the stock market would crash to zero and the gold price would rise to infinity. Bears believe that stocks go down, and the stock market went down at the time, so the bears grew fatter.

Some people were promoting certain stocks and hoped others would buy them, so they could profit. Some people were there to defraud others. And you couldn’t see each other face-to-face, which promoted paranoia. You see that on social media today. Can you trust other posters? Do they have a hidden agenda? There is a lot of misinformation. Some governments and corporations pay people to spread their propaganda. Some believe other posters who disagree with them get payment.

A colourful investment fund manager, Michael Kraland, ran the message board. He wrote entertaining commentaries. At the time, he rode the hype of the internet and telecom bubbles. His strategy was risky and not sound advice to inexperienced investors. It was even more irresponsible because his boasting made uninformed people invest in these crappy stocks. And because he was a boaster, he received nasty negative comments on the message board, including unproven accusations of wrongdoing. And perhaps also because he was a Jew, which seemed not accidental, as he worked in finance, and there are many Jews in finance. And even though, as far as I know, he never did anything illegal, I considered him a dubious character.

You could witness what Keynes called ‘animal spirits’ on the message board, experience the fear and greed of small investors, and become part of it. You hope your investments do well and fear they will not. I traded in stock options and made a few huge gains, but overall, I lost. Human emotions often drive the decisions people make about their investments. I was not much different. Those who had success imagined they were geniuses. And then they lost it all when the bubble collapsed. I wasn’t good at picking stocks or trading, but I didn’t take many risks.

Introduction to conspiracy thinking

After some time, a day trader named Cees joined the IEX message board. A day trader is someone who tries to make a living out of trading rather than investing. About 90% of the people aren’t successful in trading and lose money, including me, for I have tried trading stock options for a while. Cees began sharing conspiracy theories from US message boards and websites. One was about the Plunge Protection Team. If the markets were about to collapse, a secretive group called the Plunge Protection Team would come to the rescue. A stock market crash could undermine confidence in the financial system run by Wall Street. They couldn’t allow that to happen.

Many ridiculed Cees at first, but after the internet bubble had popped and even more so after 9/11, markets often miraculously recovered due to massive buying in the futures markets just before they crashed, so his credibility gradually rose. It probably wasn’t entirely true, as the stock markets declined dramatically between 2001 and 2003 during one of the most epic bear markets in recent history. Still, something fishy was definitely going on there. And the gold price regularly plummeted due to sudden selling at irregular hours when most markets were closed.

Cees believed central banks were orchestrating this to bolster confidence in their currencies. He wrote that if the gold price were to rise, the public would lose trust in central bank money. In times of thin trade, you can sell a bit of gold to make the price drop. The trick was to break a trend. Trend followers, called technical traders, would join the bandwagon and sell more gold, lowering the price further, in a manipulative cycle. The purpose of the trade was to bring the price down, which made sense because if a rational investor planned to sell gold, he would seek the best price. And these sales at quiet hours caused the price to crash. These kinds of intriguing posts kept the reader’s attention.

The gold market was rigged like most markets, but not in this spectacular manner, other pundits explained. They would look at traders’ positions in the Commitment of Traders (COT) report to predict price movements. So, if the category of small speculators had loaded up on precious metals, prices would probably go down. Gold mining corporations sell gold in advance on futures markets to make their budgets predictable and plan their operations. The bullion banks were the intermediaries. These banks sold that gold in futures markets to hedge their risk and played the market to enhance their profits. Successful traders exploit our emotions with deception. They spread false information about central banks selling gold to scare suckers on gold bug sites into selling. Once the bullion banks had sold all their inventory on the futures market, they might crash the price to repurchase it at a lower price. And so a veritable conspiracy theorist should have asked, ‘Who profits from these conspiracy theories?’ You can ask the same question about many other conspiracy theories. Who profits from undermining trust in society and its institutions?

Meanwhile, I found alarmist websites about Peak Oil, claiming that oil production was about to decline. There were also websites denying global warming. Most people wouldn’t take them seriously and believe what the scientists say, but I looked into them to see what they had to say. Having studied the philosophy of science, it was not hard for me to uncover the brazen lies, falsifications and misinterpretations of the facts in the climate change denial scene. And they claimed climate scientists committed fraud. People want to believe it. Like my sister once said, ‘I will believe in Santa Claus as long as he brings me presents.’ The benefit of denying climate change is having the comfortable feeling of not needing to change your excessive consumerist lifestyle. The Internet proved to be an ideal platform for cranks to spread their nonsense, making me think there would soon be, like Peak Oil, a time of Peak Bullshit, where the truth would have gone lost entirely. Only, I never thought of what would come after that. The name suggests that after reaching a peak, bullshit would decline.

There was reason to be suspicious. The United States was the centre of a global empire financed by the US dollar’s reserve status, so the Powers That Be (TPTB) would, in all likelihood, protect the financial system at all costs. A collapse could mean the end of their trade and usury empire and their insane profits. I had already bought gold for other reasons and didn’t trust financial markets or those who operate them. And so these stories intrigued me, and I began to visit the sites Cees mentioned. American gold and bear websites complained corporations pumped up profits with frivolous accounting, thereby abandoning the tedious Generally Accepted Accounting Principles or GAAP, which made me smile because GAAP is Dutch for yawn. For the record, a bear is an individual who believes markets will go down and invest accordingly, while a bull thinks markets will rise and invest accordingly.

Those running the financial markets might be pulling out every lever to keep the Ponzi scheme of interest-bearing debt going. Debts continued to grow, as did interest payments, so there could soon be a day of reckoning. I had read ‘The Limits of Growth,’ so I knew that collapse was inevitable. The bear websites reminded me of that. If the sky has come down on you once, as it did to me as a student, you worry it might happen again. It made me on edge concerning my investments, which wasn’t helpful for profits. Gold was a long-term investment, as owning gold could help weather a financial collapse, so I didn’t care much about gold price swings. I sometimes hoped that the corrupt system would collapse, but that was because I hadn’t fully considered the consequences. If you come to think of it, it is unlikely that something good would come out of it.

Back then, conspiracy websites appeared reasonable because they investigated issues that the mainstream financial press did not. But it is a slippery slope. There are all kinds of secret goings on, but the imagination of the conspiracy theorists has no limits. You can go nuts if you don’t perform a regular reality check. Your beliefs will get farther from reality. When I revisited these sites in the early 2020s, they had gone delusional, disseminating misinformation about vaccinations, global warming and the 2020 US elections. The Dutch would call them Wappies. They never ask themselves, who profits from our nuttery? But also, if you rationally look at reality, you might go insane as well. The world is insane.

In 1999, I had already bought my first gold. The gold price had reached historic lows. Gold mines were loss-making and closing, making me smell total apathy toward precious metals, suggesting a generational low point. It made me think that it could be the beginning of a long-term trend of rising gold and silver prices that might last a decade or more. And feeling that an apocalypse could come, it was an insurance. And so, I went to my bank to open a gold account. They sent an investment advisor to talk me out of it. He said, ‘No one does that anymore. I know a man who has had a silver account with us for two decades. Silver has gone nowhere all that time. Gold mines are making losses because the price of gold is only going down. You should invest in the stock market instead. Stock prices only go up.’ It reinforced my belief that it was the perfect time to buy gold, so I pressed on and opened a gold account. Perhaps the investment advisors at the bank office had a good laugh that day.

Nijverdal, where I lived as a child, was the scene of a gold rush in 1901. It was the only place in the Netherlands that ever had a gold mining operation. The rush was short-lived because the ore concentration was lower than previously thought. In Sneek, I bought a goldsmith’s home. That is an interesting set of coincidences. There are no precious metals accounts anymore. Today, precious metals ETFs are essentially the same. I had gold coins in a safe-deposit box at a bank to weather a possible financial collapse. Later, I also acquired silver bars and coins, about 75 kilogrammes in total, and stored most of them in a safe deposit box at another bank. I did this, fearing financial collapse due to reckless debt creation and humanity’s depletion of resources.

A thought that didn’t die

In 2001, after the Internet bubble had popped, I pitched interest-free money on the IEX message board. My lack of financial knowledge didn’t deter me. Everyone can participate in a debate on a message board, so you can exchange thoughts with people you wouldn’t meet otherwise. Others rebuked me time after time and pointed out my errors, so I gradually learned. Lengthy exchanges over several years resulted in unwieldy discussion threads. As these arguments proceeded, my knowledge of finance improved. If you are trying something new, you learn more from open discussions on the Internet than academic debates, often occurring in closed circles under rigorous standards that don’t allow you to speculate. Seeing the issue from different perspectives is more helpful than having in-depth knowledge of a narrow field. My persistence came from an unwavering belief in the insanity of ever-expanding debts and interest payments.

Interest payments destabilise the financial system because borrowers must return more than they borrowed. That money isn’t there, so someone must borrow the difference. If no one else borrows, the government or the central bank must borrow or print new money. Otherwise, a financial crisis and possibly an economic depression will ensue. That is why debts accumulate and why inflation happens. Interest-free money can be sound money because banning interest promotes responsible lending, stabilises the financial system and ends inflation. You don’t lend to someone you don’t trust if you receive no compensation for the risk of not returning the loan. You don’t need to incur more debt to pay off existing debts. That is the theory, but practical issues stood in the way. The market sets the interest rate. If you have money to invest and can receive interest, you won’t lend without interest. That is why economists never took interest-free money seriously. It was a domain of eccentrics like me.

The gold websites familiarised me with the Austrian School of Economics and their adherents, another eccentric bunch. Many were libertarians who saw government, rather than the love of money, as the root of evil. Usually, the private sector can produce a product or service more efficiently than the government, so they believe the government shouldn’t impose regulations or provide public services. They also had ideas about sound money and preventing irresponsible lending. They question banks’ money creation and dispute the need for central banks. Banks create money, which causes inflation. Central banks help banks in trouble, which promotes irresponsible lending. They hoped to limit money creation or return to a gold standard to enforce financial discipline.

They didn’t want governments or central banks to interfere with economic cycles, thereby accepting financial crises and economic hardship to cleanse the excesses. They argued that these corrections are necessary and beneficial as they would terminate poorly run businesses. And things would only worsen if you didn’t allow these natural cycles to run their course. They would argue that the central bank, the FED, had exacerbated the Great Depression and that its policies had contributed to the 2008 financial crisis, as its support for commercial banks had promoted reckless lending. They have little regard for mainstream economics, which underpins government and central bank actions to manage the economy, or what economists call fiscal and monetary policies, thus running government deficits, setting interest rates and printing money.

These issues troubled me as well, as did reckless lending. And so, we had a common ground. Paying interest on existing debts with new ones is fundamentally unsound. To me, funny accounting is an abomination and the basis of corruption. Banks profit from creating money. Inflation is the price we pay for their profits. Banks steal from us, most notably people with low incomes and those who don’t own stocks or real estate. If real estate values rise, so do rents, benefiting homeowners at the expense of renters. The underlying cause is usury, thus charging interest on money and debts, but few people notice. By their lending, banks create money and demand more in return, so we need more money to prevent the scheme from collapsing. And if the scheme collapses, like it nearly did in 2008, that could be the end of civilisation as we know it. For adherents of the Austrian School, charging a fee on currency and banning interest are out of the question, as they run counter to their view of ‘free’ markets. Those who accept a wage below subsistence level are free in their view, even when slaves have a better life.

They were a cult, with their own particular universe of facts. They believed the fairy tale that once the government had disappeared and markets were ‘free’, we would live in Paradise. Even though they were on opposite sides of the political spectrum, a comparison to communists is apt indeed. Both ideologies are like religions. Like communists have their prophets, such as Marx, Lenin, and Engels, libertarians have their own, such as Von Mises, Hayek, and Rand. Both have holy books. Communists have Marx’s Das Kapital or the Communist Manifesto, and libertarians have Rand’s Atlas Shrugged or Ludwig von Mises’s The Theory of Money and Credit. I didn’t read these books, but I have read several of their articles and had discussions with them, so over time, I learned about their beliefs. And perhaps that works better. You can better understand Islam by listening to the opinions of Muslims than by reading the Quran. That is my conclusion after reading the Quran and having had exchanges with Muslims on message boards. I also never read Karl Marx’s books.

If their ideology fails, communists blame the capitalists, while libertarians blame the government. The problem is that humans are unfit for communism, but also for free markets. Regardless of the system, people take advantage of each other’s weaknesses and the system itself. If you held alternative views like me, they accused you of being Keynesian, which seemed worse than being Satan himself. They would argue for ending minimum wages and sell it as a way to help the poor. So, if you can’t earn a subsistence-level income in the so-called ‘free’ market, letting you starve would help you.

If their ideology fails, communists blame the capitalists, while libertarians blame the government. The problem is that humans are unfit for both communism and free markets. Regardless of the system, people take advantage of each other’s weaknesses and the system itself. If you held alternative views like me, they accused you of being Keynesian, which seemed worse than being Satan himself. They would argue for ending minimum wages and sell it as a way to help the poor. So, if you can’t earn a subsistence-level income in the so-called ‘free’ market, letting you starve would help you. To illustrate the mood among these people, on 23 February 2026, someone posted on the Austrian Economics subreddit, ‘It’s time for welfare reform: Maybe food is so expensive because 42 million people get it for free.’ Letting people die of starvation will lower food demand, which might lower food prices. Letting poor people starve for lower food prices for the rich is their line of thinking.

These Austrians may come up with all kinds of charitable motives as to why poor people should starve to pay for the boob jobs of rich women. It is how free markets work. If they were to run the world with their 19th-century views on economics, we would end up in an Oliver Twist novel. They were preoccupied with money like me, but in a way as if only money mattered. From that narrow perspective, their views make sense. Like them, I looked for a sound monetary system, so their views had my interest. Yet, they are a gathering of Scrooges McDucks fearing rot in their money vaults. A funny coincidence is that their hero, after whom they named their website, is Ludwig von Mises. So Mises for misers. Wall Street may be much more evil than they are, but they represent money worship in its purest form. Something isn’t quite right about these people. Central bankers may be the high priests of the money religion, but the Austrians consider them heretics. They are the true faith of Mammon, that is. And the great thing about them was that they had an unparalleled religious zeal to prove me wrong in monetary matters.

They raised new arguments and brought to my attention every error in my thinking they could find. And so, my mind kept grinding. Whatever these people say, the root of frivolous accounting is charging interest on money and debts. It may not be possible to end it because if you do, lending might stop, and the economy might collapse. However, if you investigate a problem, you must at least correctly identify the root cause. Otherwise, the solution will remain out of sight. Charging interest leads to crises. Only you can’t tell Scrooge McDuck. He thinks there is no life after usury. And so, I learned as much from the Austrians as from Strohalm. And perhaps it is no coincidence that the miracle of Wörgl happened in Austria. The answer to the issue that kept the Austrians awake at night, sound money, had been quietly gathering dust in their backyard all along.

In this way, two opposing fringe ideas, which were interest-free money with a holding charge and the Austrian School view, challenged each other in my mind. It was Hegelian Dialectic at its finest. I wasn’t constantly brooding over this issue, but I couldn’t let it go either. In 2008, this resulted in the synthesis of Natural Money. In a gold standard, you need positive interest rates to get the economy going. As a result, you end up with debts you can never repay in gold. At some point, you must face collapse or leave the gold standard. The latter is the easy short-term solution, so you can leave the problem for future generations to solve. Like Keynes said, ‘In the long run, we’re all dead.’

When you do that, the sky is the limit, and debts escalate to infinity, which we have seen happening, most notably after the end of the last remnant of the gold standard. The long run is now over, and Keynes is dead. It is up to our generation to address the problem. Limiting the interest rate to zero can curb money creation and stop irresponsible lending. If the money supply is stable and the economy grows, prices, including the gold price, would drop. And so, a well-managed currency with a holding fee could be stronger than gold. The economy can perform better without interest, allowing interest-free money to yield better returns. That was the beginning of Natural Money. Over the following decade, I developed a more comprehensive theory using modern monetary economics.

Latest revision: 21 April 2026

Featured image: Arab farmer taking straw to his farm. Public domain.

Of Usury, from Brant's Stultifera Navis (the Ship of Fools)

The Problem Of Interest

Compounding

Imagine that Jesus’ mother had put a small gold coin weighing 3 grammes in Jesus’ retirement account at 4% interest just after he was born in the year 1 AD. Jesus never retired but he promised to return. Suppose now that the account was kept for this eventuality. Imagine now that the end is near, and that Jesus is about to return. How much gold would there be in the account in 2018?

It is an amount of gold weighing 11 million times the mass of the Earth. The yearly interest would be a gold nugget weighing 440,000 times the mass of the Earth. There is a small problem, a fly in the ointment so to say. It would be impossible to pay out Jesus because there simply isn’t enough gold.

It might seem that the bank had to close long ago because of a lack of gold, but that isn’t true. As long as Jesus doesn’t show up it can remain open, at least if the borrowers are allowed to borrow more to pay for the interest. If the economy grows 4% it may not be such a big deal. The interest can be created out of thin air by making new loans that allow borrowers to pay for the interest. And if Jesus doesn’t claim his gold when he returns and accepts bank credit, everything will be fine.

There is a limited amount of gold while compound interest is infinite. As long as bankers can create money out of thin air to pay for the interest and people accept bank deposits for payment, everything is fine. Problems only arise when people demand real gold. A bank can go bankrupt when depositors want to take out their deposits in gold.

Central banks

Perhaps Jesus’ retirement account isn’t such a big problem after all. Our money isn’t gold but currencies central banks can print. Assume now that Jesus’ mother had put one euro in the account instead. One euro at 4% interest makes 22,000,000,000,000,000,000,000,000,000,000,000 euro after 2017 years. That may seem an intimidating figure, but the European Central Bank can take 22 pieces of paper and print 1,000,000,000,000,000,000,000,000,000,000,000 euro on each of them. And there you are. Something like this happened during the financial crisis of 2008. This is called quantitative easing. You may have heard that word before.

Central banks can print new dollars and euros to cope with a shortfall. In fact, this is what central banks often do. There is always a shortfall because of interest because most money is debt and interest on this debt needs to be paid. To make up for the shortfall, there are two options. First, people can borrow more. Second, central banks can print new currency. Both things can happen at the same time. Central bank decisions about interest rates are also about dealing with the shortfall caused by interest charges.

When central banks lower interest rates, people can borrow more because interest rates are lower. Central banks lower interest rates when people are borrowing less than is needed to cope with the shortfall. If central banks raise interest rates, people can borrow less because interest rates are higher. Central banks raise interest rates when people are borrowing more than is needed to cope with the shortfall and the extra money makes people want to buy more stuff than can be made. And if people don’t borrow at all, this is a crisis, and central banks may print more currency to cope with the shortfall.

Interest on capital versus economic growth

There is a problem central banks can’t fix by printing more currency. Interest is more than just interest on money. Interest is any return on investment. Throughout history returns on investments were mostly higher than the rate of economic growth. Most of these returns have been reinvested so a growing share of total income was for investors. This can’t go on forever because who is going to buy the stuff corporations make in order to keep these investments profitable? A simple example can illuminate that.

interestvers
Interest income (red) versus total income with interest income growing faster than total income

The graph above shows how total income and interest income (in red) develop with an economic growth rate of 2% and an interest rate of 5% when interest income starts out as 10% of total income and all interest income is reinvested. After 25 years the economic pie has grown faster than interest income and wages have risen. At some point interest income starts to rise faster than total income, and wages go down. After 80 years there’s nothing left for wages. This graph explains a lot about what is going on in reality.

In the short run it was possible to prop up business profits and interest rates by letting people go further into debt to buy more stuff. In the long run, the growth rate of capital income cannot exceed the rate of economic growth. Interest rates depend on the returns on capital so this can explain why interest rates went down in recent years. In the past interest rates below zero weren’t possible but from time to time there were economic crises and wars that destroyed a lot of capital. This created new room for growth.

Wealth inequality and income inequality

When interest rates go down, the value of investments tend to rise. If savings yield little this benefits the wealthy as most people have their money in savings while the wealthy own most investments. But it is important to know the cause otherwise you might think that interest rates should rise. The graph above shows that wealth inequality causes interest rates to go lower, hence redistributing income, for example via higher wages or taxes on the wealthy, can bring higher interest rates.

There is a difference between wealth inequality and income inequality. Your labour income and the returns on your investments are your income. If you are rich but make no money on your investments, your wealth doesn’t contribute to your income. In reality wealthy people make better returns on their investments than others because they have better information and can take more risk. Still, the graph shows that income and wealth inequality can’t increase indefinitely, and that returns on investments can’t exceed the reate of economic growth in the long run, hence interest rates need to go lower.

Most people pay more interest than they receive. The interest paid on mortgages and loans is the proverbial tip of the iceberg. Interest is hidden in rents, in taxes because governments pay interest on their debts, and the price of every product and service because investments have to be made to make these products and services. German research has shown that 80% of the people pay more in interest than they receive, while only the top 10% of richest people receive more in interest than they pay. Lower interest rates benefit most people despite some side-effects that work in the opposite direction.

Economic cycles

Humans are herd animals. They buy stuff and even go into debt to buy stuff when others are going into debt to buy stuff too. Suddenly they may realise that they have bought too much or have gone too deeply into debt, and all at the same time. One day they may be borrowing money, queueing up before the shops, and bidding up prices. The next day, they may decide to pay off their debts, leaving the shop owners with unsold inventories they have to get rid of at fire sale prices. So prices may go up when people are in a buying frenzy and may go down when sales dry up.

When there is a buying frenzy business owners are optimistic and do a lot of investments, and often they go into debt to make those investments. But if suddenly customers disappear, they may be stuck with unsold inventory and debts they cannot repay. Businesses may then have to fire people. Those people are then left without income, and cannot repay their debts too, so sales will go down further. If their debts are not repaid, banks could get into trouble. In most cases the economy will recover. In the worst case banks go bankrupt, money disappears, the economy collapses, and an economic depression takes off.

Interest can make things worse. Assume that you have a business and expect to make a return of 8%. You have € 100,000 yourself and you borrow € 200,000 at 6%. You expect to make 8% so borrowing money at 6% seems a good idea. If you only invest your own € 100,000 you can make € 8,000, but if you borrow an additional € 200,000 you can make € 12,000 (8% of € 300,000 minus 6% of € 200,000, which is € 24,000 minus € 12,000). The balance sheet of your business might look like this:

debit
credit
inventory
€ 250,000
loan 6%
€ 200,000
cash, bank deposits
€ 50,000
owner’s equity
€ 100,000
total
€ 300,000
total
€ 300,000

If sales disappoint and you only make a return of 2% on your invested capital of € 300,000, which is € 6,000, you make a loss because you pay € 12,000 in interest charges. You may have to fire workers. Businesses can go bankrupt because they have borrowed too much and have to pay interest, even when they are profitable overall. Sales often disappoint when the economy fares poorly. This means that more businesses face the same difficulties and make losses because of interest payments. They may have to fire workers and these workers lose their income. This can worsen the slump.

Interest, economic depressions and war

Silvio Gesell discovered that interest rates can’t go below a certain minimum because lending would then stop. Money would go on strike as he put it. Why is that? Low yields make investing and lending money unattractive because of the risks involved. Debtors may not repay and banks may go bankrupt. Depositors then prefer to take their money out of the bank and keep it with themselves.

This can cause economic crises and depressions. Silvio Gesell lived around 1900. Interest rates below zero weren’t possible because of the gold standard. Depositors could go to the bank and withdraw their deposits in gold so that they didn’t have to accept negative interest rates. From time to time there were bank runs, economic crises and wars that destroyed a lot of capital. And this created new room for growth.

There may be a relationship between interest, economic depressions and war. In 1910 the amount of capital income (the red circle in the graph) relative to total income (the two circles together) was close to what it was in 2010. This could have led to an economic depression but then came World War I. The war destroyed a lot of capital so that there was new room for capital growth and interest rates could remain positive.

A few decades later the Great Depression arrived. If interest rates could have gone below zero in the 1930s, the Great Depression might not have happened, Adolf Hitler would not have risen to power and World War II would not have occurred. The currency of Wörgl demonstrates that negative interest rates could have ended the depression. After World War II interest rates never came near zero again. Governments and central banks printed more money. This caused inflation, which eroded trust in money.

People feared that inflation would make their money worth less so interest rates rose. In the 1970s the link between money and gold was abandoned because there was a lot more money than there was gold to back it. In the 1980s governments and central banks started policies to bring down inflation and to promote trust in money. As of 1983 interest rates went down gradually as a consequence of a renewed trust in money and central banks. Debt levels rose and interest rates went near zero.

Promoting inflation might not be a good idea. The end result is unpredictable. The best one can hope for is a poor performing economy and a lot of inflation like in the 1970s. But if interest rates rise because lenders lose their trust in money and debts, people may not be able to repay their debts, and the financial system might get into serious trouble. This can cause another great depression or another great war. But if the alternative is negative interest rates, stability and prosperity, then why not opt for that?
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Featured image: Of Usury, from Brant’s Stultifera Navis (the Ship of Fools). Albrecht Dürer (1494). Public domain.