An argument used by Jerome Daly in 1968 to win his foreclosure case can be applied to all dealings with banks today, from a micro loan for an individual mortgage, for example, to a macro loan for Greece from the IMF.

Central to Daly’s argument was the fact that banks create money out of thin air using the fractional reserve banking system. As a result, he argued that any loan which banks make does not consist of real capital or collateral. It is, in fact, just an entry in their book keeping system.

Therefore, Daly argued the contract he made with the bank was invalid in as far as the bank never fulfilled its side of the contract by putting up something of value, any capital or collateral in return for the mortgage in the first place. All the banks put up as their sid eof the contract was fiat money created out of thin air by an accounting entry.

Greece can use the same argument today when rejecting repayments of its debts as illegal. Greece never received any money from the IMF, the ECB or any private bank.  The loan only existed as an accounting entry. There is nothing in the European Constitution which says money can be created in this way. 

Read the judgement in the Daly case where the bank manager was forced to admit that the bank’s money was created out of thin air with the help of the Federal Reserve and this was an unconstitutional way of creating money here:

The German central bank, the Bundesbank, admitted that money is created out of thin air and has even explained it in a text book for school children.

In the meantime, even the Bank of England has admitted they create money out of thin air as an IOU or debt on its books in a report in 2014.

“When a bank makes a loan to one of its customers it simply credits
the customer’s account with a higher deposit balance.
At that instant, new money is created.
Banks can create new money because bank deposits are
just IOUs of the bank; banks’ ability to create IOUs is no
different to anyone else in the economy. When the bank
makes a loan, the borrower has also created an IOU of
their own to the bank. The only difference is that for the
reasons discussed earlier, the bank’s IOU (the deposit) is
widely accepted as a medium of exchange — it is money,” says the Bank of England report.

Standard &Poor’s top economist, Paul Sheard, has also written the fact that banks don t lend capital in a piece called ”Repeat After Me: Banks Cannot And Do Not “Lend Out”

Jerome Daly applied these facts to his particular case and won.

“Most importantly, banks cannot cause the amount of reserves at the central bank to fall by “lending them out” to customers. That possibility is not allowed for in the identity because bank lending does not enter into it. Assuming that the public does not change its demand for cash and the government does not make any net payments to the private sector (two things that are both beyond the direct control of the banks and the central bank), bank reserves have to remain “parked” at the central bank.”

“Mr Daly explained that the money was in fact not the property of the bank, for it was created out of nothing as soon as the loan agreement was signed. Remember what Modern Money Mechanics stated about loans? What they do, when they make loans is to accept promissory notes in exchange for credits. Reserves are unchanged by the loan transactions, but deposit credits constitute new additions to the total deposits of the banking system. In other words: The money doesn’t come out of their existing assets, the bank is simply inventing it, putting up nothing of it’s own, except for a theoretical liability on paper.”

The Banks president ,Mr. Morgan, took the stand and affirmed that ,in collusion with, the Federal Reserve Bank Inc., did create the money out of nothing.

Justice Martin V Mahoney personal memorandum ….”in the judge’s personal memorandum he recalled that “the Plaintiff (banks president) admitted that in combination with the Federal Reserve Bank did create the money and credits upon its books by bookkeeping entry. The money and credit first came into existence when they created it. Mr Morgan admitted that no US Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. The Jury found that there was no lawful consideration and I agree.” He also poetically added: “Only God can create something of value out of nothing.”

And upon this revelation the court rejected the bank’s claim for foreclosure and Daly kept his home.”

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