Conspiracy theory my butt
A Tale of Two Conspiracies
by Timothy Paul Madden, forensic-financial-economist, and historian of equity, law, and policy.
When is a conspiracy theory not a conspiracy theory?
When you focus on the means instead of the object.
One must not confuse the object of a conspiracy with the means by which it is intended to be carried out. Scott v. Metropolitan Police Commissioner  60 Cr. App. R. 124 [House of Lords]
Somewhat paradoxically, the objects are most often subjective, while the means are near always objective. Virtually all genuine criminal convictions for conspiracy are obtained by the conspirators tripping up on the illegality of their means irrespective of the provability of their objects.
Conversely, the people behind the truly monumental conspiracies keep us arguing and otherwise distracted over the objects of the conspiracy, so that we do not focus our attention on the means by which those objects are obtained or carried out.
What society needs is a certain kind of conspiracy / issue upon which to focus its attention.
- The issue must be obviously and unquestionably important.
- The fact of it must be objectively and easily provable, so that
- Men and women of conscience can pursue it with the utmost confidence that they cannot be wrong or even mistaken in its importance, or ridiculed as a conspiracy theorist.
Stop me if and when I make a categorically, or even likely, false statement:
- Rightly or wrongly, money is among the most important determinants of power among humans.
- Among the most significant sources of money is interest.
- The primary means or method by which about 80% of all private financial institutions globally determine the amount of interest money due from their nominal borrowers / debtors has been required by law throughout the U.S. since 1968 (Regulation Z) and is labelled Truth in Lending legislation.
- The same means or method of interest money determination / calculation has been recognised and prohibited as criminal fraud in the U.K. since 1974 on the grounds that it is “false and seriously misleading”.
- By total amount, all debt in the world today exists, and would not exist without, the objective math-error / defect that makes the banned method “false and seriously misleading”.
All five statements are self-evident, or objectively and verifiably true. We would thus appear to have a likely candidate for our three conditions, albeit with the proviso that “important” has often proved to be relatively subjective.
On the face of it, however, the question / issue is: How can something as obviously / apparently important as the primary means or method by which interest money is determined globally, be required by law in the U.S. under federal Truth-in-lending legislation, while being prohibited outright in the U.K. as criminal fraud on the grounds that it is “false and seriously misleading” – in the absence of some kind of conspiracy?
Clearly, something is not right.
Thirty years ago, in 1989, I went to Court in Canada to test the importance of the issue. The actual rate of interest on my department store credit card account was 2.4% per month. The card-issuer claimed and declared that such is an annual rate of 28.8%. In fact it is 32.9%.
At this (still relatively low) level, the exponential error or differential (4.1 percentage points) between the two alleged methods of calculation was accounting for roughly 15% of the card-issuer’s gross daily revenue from interest charges, or about a $60,000 per day difference at that time. I believed that to be an important difference. Especially given multiple collateral laws and regulations that require interest rate disclosure to be accurate to within 1/8 of 1% per annum.
In April of 1990 I won the case (Edmonton Journal, April 27, 1990):
My legal win in 1990 was based on a still-valid 1897 federal securities law that requires creditors to disclose the real interest rate per annum, and not the so-called “nominal” annual rate, otherwise no more than 5% per annum can be enforced. The official records of Parliamentary debate reveal that the primary intended purpose of the 1897 law was to prevent creditors from using the nominal method of interest calculation – which they recognised as fraudulent – without concurrent disclosure / declaration of the real interest rate.
The nominal method of interest calculation is a purported measuring device for the time-value-of-money. It is used almost exclusively to determine interest charges and to disclose / declare rates per annum for interest payment periods of less than a year. Its foundational premise is that there is no incremental-time-value-of-money for any period less than a year. It is as clinically insane as it is transparently fraudulent. Its only virtue is that it just happens to be close as long as the real interest rate is close to zero.
Among the most damning tests of the nominal method is that the creditors do not use it – nor could they – for internal purposes. The nominal interest rate (which is not a rate at all) is near-meaningless (and by itself often actively misleading) information that does not recognise the incremental-time-value of money for any period less than a year. No financial institution could function on any such basis. It is more or less reserved exclusively as a way to systemically understate real interest rates in fraud of borrowers. It has no other purpose.
As an example designed to expose and demonstrate the nature and extent of the fraud and the absurdity of it, if the actual interest amount were determined at 1% per day, for example (e.g., 1% for 1 day, and 37% for 37 days, etc.), then there are 365 different real interest rates so-defined in a year, and which range from 365% per annum (365% for 365 days) to 3,678% per annum (1% for 1 day), while the nominal annual rate remains at 365% in all 365 cases. Why is that? Because there are 365 days in a year, and that is all that the nominal method allows you to determine.
And if there are 365 different such real interest rates in a year, while the nominal-interest-rate remains the same, then how can the nominal-interest-rate be an interest rate at all? Answer: It can’t and it isn’t. It never has been and it never will be.
Most simply put, based on this example, if the real interest rate is anywhere between 365% per annum and 3,678% per annum, then the nominal creditor will claim that the rate of interest is 365%, and the resulting actual discrepancy (applied to all loans at their actual claimed rates) currently accounts, by total amount, for all debt everywhere in the world, and by several times over.
At its core the official explanation is that the nominal borrowers from whom the interest money is harvested are not sufficiently intelligent to understand the mathematical formula by which the real interest rate is determined, and therefore it is acceptable to tell them that the interest rate is 365% when it is in fact 3,678%.
“Nominal” means “Existing in name only – not real or actual” and, in this context, the term “nominal interest rate” means literally “pretended interest rate” and / or “decoy interest rate”. Stripped of the cogno-linguistic charity of the word nominal it is the “Some-number-we-made-up-because-people-have-been-dumbed-down-enough-to-believe-it-method”.
But its true menace is its exponential-deviance. At a stated or agreed 3% per annum, for example, and monthly payment, the nominal method results in a real interest rate of 3.05%, and the bankers used to pretend or agree-among-themselves that such is not a material difference. But the difference grows exponentially with the stated rate. Just between a stated rate of 1% per annum and a stated rate of 30% per annum, the absolute and relative error or deviance increases by more than 1,000-times.
Beyond that, and more toward the near inconceivably fraudulent higher-end, an average or typical payday loan in Canada (and the U.S., and most everywhere else) defines a real interest rate of about 30,000% per annum, but which is passed off, using the nominal method, to the borrowers and to the public generally, as about 300%.
Its broader object and policy is to help ensure that the working-poor and the rank-and-file military remain in a state of perpetual poverty, subservience, and political powerlessness by targeting and taking away their de facto working-capital.
It also helps the entrenched-money-power immensely that the public be kept generally ignorant of what it is that the rate of interest measures. If, for example, I loan you a penny, and charge you a penny interest for one day, then the rate of interest is absolutely astronomical, but it is still only a penny.
At the same time, if I am able to loan a penny to each of seven billion people on Earth, and collect from them a penny interest per day each, then the rate is astronomical, and so is the amount ($70 million per day return on a $70 million investment). Professional creditors are in the business of seeking out the most extractive balance between the amount and the rate.
The amount of interest is the torque, and the rate of interest is the horsepower.
The amount of interest is the amperage, and the rate of interest is the voltage.
The amount of interest is the speed, and the rate of interest is the acceleration.
More generally, to triangulate financial reality, you need both pieces of information – the real interest (growth) rate and the so-called nominal rate (or pro rata amount). The real cost-of-credit is manifest in the relative difference between the two. That is why even in the U.K. where, in the early 1970’s, the legislature recognised the fraudulent substance of the nominal method by itself, the bankers went into heavy damage-control-mode and fought to limit the new law to requiring only the real interest rate, and not what was and remains truly needed, which is both.
But even then, the individual and aggregate amounts being exacted today are more than sufficient to convict the creditors (and the governments who support them) of not just racketeering, but of crimes against humanity. The near astronomical rates are not just a technicality.
I would later discover that an important contributing factor why the law had not been enforced in the modern era in Canada was that after passing all three readings in the House of Commons (in 1897), someone in the appointed / unelected Senate (or Ex-Bankers’ Club) appears to have whispered something in the clerk’s ear, and the words in the typeset bill requiring disclosure of “what is truly the per annum rate” were crossed out and replaced with the hand-written insertion “yearly rate which is equivalent”. The alteration – of which there is no record of any legitimate procedure or debate – did not alter the technical meaning, but it eliminated the intended emphasis against the nominal method. The creditors then simply ignored the new law and continued to use the fraudulent nominal method.
One reason that I had won in 1990 was because (essentially by chance and unknown to me at the time) four years earlier in 1986 the Supreme Court of Canada had ratified the abandonment of a 400-year-old English-law rule that had prohibited the submitting of evidence of legislative intent in a civil action.
A simple calculation
The calculation of the real interest rate is regardless simple, verifiable, and consistent, and is used internally by all financial institutions, including as follows for example in my case where the actual / physical rate was 2.4% per month.
Here is the spreadsheet formula (for ms excel and apple numbers) (using 30.4 days because that is an average month (“^” means “raise to the power of” (above the “6” on most keyboards))):
= 0.329435411 or (rounded) 32.9% per annum.
At this time (1990) the most significant socio-economic or socio-financial aspect was that there was (and remains) a clearly established legal chain-of-financial-liability that made the legal profession in Canada (and their bonding / malpractice-insurance underwriters) liable for the minimum $100 billion difference ($100,000,000,000) from the direct overcharges, and as much as $1 trillion if the 5% per annum limitation were enforced nationwide.
In my case, for example, the math-error / deviation accounted for about 15% of gross interest revenue to the card-issuer on any given day, such that after about 8 years it accounted for all of it – 100% – because without it there would be no debt at all. That is a critical part of the exponential basis and deviance of the error and overcharge. Whatever the absolute amount of overcharge is today, the victim / target of it then pays the card-issuer or creditor interest on it forever. Then repeat (add a little bit more) the next day – and the next – and the next – in perpetuity.
Perhaps the best way to perceive it is from the reverse or converse. Assume that there is a $100 difference in a given case and that the banker is suddenly compelled to do the calculations correctly so that he loses the extra $100 from the bogus calculation methodology. Based on a given gross payment made by the debtor:
- He loses the extra $100 that goes / went into his pocket today (as earned interest income);
- He loses another $100 because it is applied instead to a reduction in the debtor’s debt; and
- He loses the interest in perpetuity that would have otherwise continued to accrue on the $100 reduction in the debtor’s debt.
If his ability to employ the bogus methodology were restored, then he would gain that same triple-whammy-bonus. That is what makes interest-accounting-fraud the most lucrative crime on Earth. Now imagine obtaining that same triple-whammy-bonus on every loan payment made on Earth for the past 50 years (or rather the 80% that uses the fraudulent methodology) and it becomes easy to understand why the fraud in the nominal method accounts for a total amount that is vastly greater than all debt on Earth.
At that point in 1990, the legal-and-financial-system in Canada went into its own heavy damage-control-mode, and my win (on the issue) was fully and finally overturned by the Supreme Court of Canada in 1995. The official final decision of the Courts (saturated and dominated by former-bank-lawyers / solicitors) was that 28.8% per annum and 32.9% per annum are both equal to 2.4% per month, and that if either one is disclosed or declared, then the federal securities law has been complied with. (And by necessary implication that both are accurate to within 1/8th of 1% per annum. Above a stated 5% per annum (and monthly payment / conversion) the nominal method is invalidated on that basis alone).
The judges of the appeal Courts wilfully suppressed and otherwise ignored the fraudulent substance of the nominal method, the accuracy laws / regulations, and the evidence of legislative intent in the official record (as well as their own massive conflicts of interest (personal liability) as former bank-lawyers / solicitors).
The fact and substance of the three-year U.K. (Crowther Committee) Investigation and its identification and resultant banning of the Canadian nominal method as criminal fraud (“false and seriously misleading”) was egregiously / deceitfully dismissed out of hand as follows:
The United Kingdom has devised a complicated formula which is incorporated into statute law for dealing with disclosure requirements in similar circumstances.
At that time (1995) the most significant socio-economic or socio-financial aspect is that we collectively missed a legitimate chance to expose and eliminate this objectively and insidiously fraudulent alleged method of interest money calculation with an error that increases exponentially with the stated or claimed rate of interest per annum.
At about the same time (1995), the then nascent payday-loan phenomenon became established and then rapidly entrenched itself in Canada (and most of the rest of the so-called First World).
Let us now examine two relatively more recent articles – one specialised, and one more general – that are directly relevant to the issue. Both are more-or-less typical of their respective loan-type subject matter.
The first article is legal commentary from a lawyer and lawyers-website in the U.S. where the objectively fraudulent nominal method is required by law. The state of our reality is reflected in the details and layered-complexity of his brief description of a consumer loan contract in the U.S. (in material part, emphasis added):
The Enforceability of Adhesion Contracts
The 2016 Delaware case, James v. National Financial, LLC, is a case study in unconscionability of an adhesion contract. Here, the plaintiff, Gloria James, was a part-time housekeeper at a local hotel. She had dropped out of high school and had neither a savings account nor a checking account. To make ends meet she signed an agreement for a $200 consumer loan that was a standardized, boilerplate agreement that was provided to her on a take-it-or-leave-it basis. It was clearly an adhesion contract.
The contract’s terms called for James to make twenty-six, bi-weekly, interest-only payments of $60, followed by a twenty-seventh payment comprised of $60 in interest plus the original principal of $200. The contract required her to pay $30 per week in interest, the total payments adding up to $1,820. The annual interest rate came out to a whopping 838.45%. ….[lawshelf.com].
So what is wrong with the article?
While the amounts regardless define an egregiously exploitive transaction, the real story is the prima facie innumeracy (mathematical illiteracy) of the lawyer(s) and of the judge(s) / Courts.
The rate of interest defined by the terms of the loan is 93,368% per annum and not 838%.
If you had an effective / real-interest-rate daily-accrual savings account, then it would have to pay interest at an annual rate of 93,000% for $60 to accrue on a deposit of $200 over fourteen days.
The Court / judge(s) (and the lawyer(s) reporting on it) are out by more than a factor of 100 times or what scientists and other educated professionals refer to as two orders-of-magnitude. 93,000% is not 800%. The most immediate and lethal danger faced by humanity is that society’s most critical decision-makers have a massive right-brain / left-brain imbalance. They are masters at manipulating language – but they cannot do even junior-high-school-level math. More critically – they are not even aware that they cannot do even junior-high-school-level math.
Without accurate and objective numbers / values, the exploiters are limited solely by their ability to manipulate language and by their capacity for self-deception – both of which are near limitless.
The second article, and a microcosm of everything that is wrong with the world, is from the CBC (Canadian Broadcasting Corporation) website nominally advising Canadians on the high cost of payday-loans (cbc.ca website, Payday Loans: Short-term money at a hefty price. October 4, 2006) (in material part):
How much do payday loans cost?
They are the most expensive legal way to borrow money
Typically, you can expect to pay up to $100 in interest and fees for a $300 payday loan. The Financial Consumer Agency of Canada says that amounts to an effective annual interest rate of 435 per cent on a 14-day loan.
The interest rate objectively defined by that transaction is just over 180,000% per annum. Here again, it is a fairly simple calculation and easily verifiable:
= 1807.54 or 180,754% per annum.
If a virus or price-inflation is growing / occurring at the rate of 33.3% every 14 days, then virtually no educated professional will have any problem determining that the annual rate of growth / inflation is 180,754%. But throw a (credit-based) dollar-sign in front of the numbers and it is as if people’s brains short-out or cannot quite grasp the reality of it and instead go into a kind of systemic denial.
If price-inflation is occurring at a constant rate of 100% per month, then something that costs $100 today will cost $409,600 one-year from now. The annual rate of inflation is literally 409,600%. If I were to respond to the reality of it with: “Yes but 100% times 12 is 1,200%, and there are in fact twelve months in a year”, then I would be sent back to junior-high-school for not paying attention and / or for not doing my homework. It is just plain stupid yet this flat-out-embarrassing logic-flaw has been engrained into the global finance system owned and operated by the same entrenched-money-power that also gains the benefit of the deceit and deliberate mal-education of the masses.
Assume that we are standing by the side of the road and a car drives by us at a near inconceivable 400 miles per hour. We can feel the car approaching from the increasing vibration and what is called the Doppler effect from the ever-building distorted sound of its engine screaming because the car itself is moving toward us at about half the speed of sound, and we can feel the massive movement of air in its wake as it passes by us and as a visual blur because it is moving at such a speed as is beyond our normal frame of reference.
I then turn to you and I seriously insist to you that I am a professional who is in the business of measuring speed and that the vehicle that just went past us was moving at 1 mile per hour.
You would obviously conclude that I am either an idiot or a criminal because of the utter impossibility and ridiculousness of it.
How is it then that people generally have virtually no reaction or even suspect that something might be wrong when some presumed authority-figure tells them an interest rate (180,754% per annum) is 400-times lower (435%) than it really is (or rather vice versa)? Is it just that money and interest are not that important to even worry about such things?
But the real mistake here is to assume that it has much to do with the numbers at all. Imagine if an ordinary taxpayer were to objectively make $180,000 of income in a year, and were to then file a tax return claiming total income of $435. When challenged by the government they respond: “Well $180,000 is merely my real income. My nominal income is $435. The government then replies: “Yes of course – how could we have been so stupid.”
The real phenomenon is the ability of government and the judges of the Courts to accept whatever they are told by the entrenched-money-power, no matter how transparently fraudulent and / or flat-out stupid.
And the corresponding incapacity of the masses to even perceive that something is seriously wrong with the whole process or even any small part of it.
Between 1977 and 1990 (and my win against Eaton’s) the nominal-method-fraud was kept in play in Canada by the efforts of (among others) a Mr. Justice Willard Z. Estey. According to the principle / reasoning explained by the late Supreme Court of Canada judge (at the time (1977) a judge of the Ontario Court of Appeal), 100% taken in advance such that the borrower gets nothing, yet must repay the principal a year later, is only greater than 100% per annum if the lender chooses to do something with the 100% received in advance in the meantime (i.e., $0 today for $100,000 in a year, is the same rate as $100,000 today for $200,000 in a year) (in material part, emphasis added):
It has long been said…that interest at the rate of ten percent per annum calculated monthly [the nominal method] is more than 10% per annum calculated yearly [the real-interest-rate method] [i.e., that an equal amount paid sooner is a higher rate]. This is so only if one assumes the recipient of the monthly payment puts the money to work during the balance of the year and consequently accumulates interest. Such is not the case if x percentum per annum is payable annually. If one does not make the assumption that the interest is reinvested during the balance of the year then ten percent per annum is the same whether paid annually or monthly. Hence the issue here really involves the application, as a quasi-rule of law, of the reinvestment principle.
Hint: If the Honourable Judge were already in a psychiatric facility, then he would not be getting out anytime soon. At the very least, the man’s intellectual self-respect had to have been close to zero to put in writing something that objectively and profoundly stupid. An equal amount paid sooner is a higher rate – this isn’t bleeping rocket science.
The nominal creditor and immediate beneficiary of the deemed-reinvestment-principle and quasi-rule-of-law in the 1977 case was Metropolitan Trust Company of Canada. Justice Estey was then elevated (also in 1977) from the Ontario Court of Appeal to the Supreme Court of Canada. In 1988 he retired from the S.C.C. to then become a Director of – surprise – surprise – Metropolitan Trust Company of Canada, and an Executive Officer of the Bank of Nova Scotia.
He had been a very good dog, he got lots of cookies, and a well-deserved pat on the head.
Imagine the extinction of humanity beginning with the following (as yet) hypothetical news story out of equatorial Africa:
Thus far 100 million people are dead from the worst infectious disease outbreak in human history. An international panel of experts has identified the primary cause of the crisis getting out of control as being that the original samples of the incredibly lethal virus, with an observed actual growth rate of 5% per 24-hours, were mislabelled by the technician responsible, as having an AGR or Annual Growth Rate of 1,825% instead of the real and actual 5.4 billion per cent (5,400,000,000%). The technician, a recent graduate of Bankers’ Math University, responded when asked for comment: “I’m really sorry. I honestly didn’t know.”
A species that celebrates and rewards systemic professional incompetence, and especially in pursuit of unearned financial gain, is a species living on borrowed time.
As humans obtain more and more technology, we are ever-increasingly exposed to lethal danger that grows exponentially. The existential problem with lethal danger that grows exponentially is that if you wait until you actually see it coming, then you’re already dead.
If a virus grows at the rate of 5% per day or every 24 hours, then it grows at an annual rate of 5.4 billion per cent. Even if only for a single day.
If price-inflation runs at a daily rate of 5%, then it runs at an annual rate of 5.4 billion per cent. Even if only for a single day.
It is only interest-bearing-debt, where if it grows at 5% per day, then that is deemed or pretended to grow at an annual rate of only 1,825% (for public consumption and education purposes), and not 5.4 billion per cent, as the correct and accurate latter figure might have the tendency to reduce public confidence in government and most everything else.
With the CBC article, note also and especially what the criminal law refers to as a compounding of the felony. The article does not merely rely on public ignorance but also adds the directly and scandalously false presentation that 435% is the “effective [real] annual interest rate”.
But the people have been generally too dumbed-down mathematically to even suspect that there is a problem with the numbers. And no one seems to even wonder about who funds The Financial Consumer Agency of Canada. How can the people running a financial consumer protection agency not know the difference between 435% and 180,000%?
Answer: they are professional schizophrenics. One of them knows, and the other one doesn’t.
Interest, and how it accumulates, is arguably the most significant determinant of all wealth and power on Earth, and yet even the most significant professionals in closely-related fields are essentially clueless.
As long as real interest rates were both relatively and absolutely low (i.e., close to zero) it was a fairly easy matter to pass off the discrepancy or bankers’ bonus as of little consequence as and when the issue came up.
The official story is to (sometimes – if necessary or unavoidable) acknowledge the fact of the difference while asserting it to be trivial and of no material consequence. Bankers and government regulators are masters at (consciously and / or unconsciously) picking and / or structuring examples that make the difference seem trivial, and they studiously avoid real world combinations that make the fraud obvious and overwhelming.
The (mostly banker-written) Encyclopedia of Banking and Finance (1931), as a typical example, explains under the general heading “Interest” (in material part, emphasis added):
…if the interest period is less than one year, the [interest money assessed under the] nominal…interest rate is greater than the true interest rate… Practically, however, the difference is disregarded. [!!!] [My butt it is!!!]
While according to the former bankers and bank solicitors who operate and control the Courts in Canada (Standard Reliance v. Stubbs  S.C.C. VOL. LV 423):
It must be observed that whatever interpretation is put upon the words “calculated…,” the difference [from the nominal method] in the rate chargeable would be only fractional, …
Meanwhile, testifying under oath before the Select Standing Committee on Banking and Commerce in 1928, the spokesman for the chartered banks (Mr. M. W. Wilson) said of the nominal method discrepancy / overcharge:
Mr. Wilson: It [use of the nominal method] makes an infinitesimal difference. That is not the reason it is done, I give you my word for it.
For well over a century whenever the issue has been raised the official investigators and / or academics have taken the “These are not the droids that you are looking for. Move along” approach and / or the direct lie / false-statement approach.
And / but when it goes the other way, the bankers systematically, and fraudulently, exploit the same public ignorance while self-righteously explaining the elementary logic and mathematics.
From the May 25, 1993 Edmonton Journal (emphasis added):
Banks and trusts are finally “coming clean” on a rate deal that was unfair to retirees who took the option of receiving monthly interest payments on their GICs [Term Deposits],… The moves belatedly corrected a situation where rates on monthly-paying GICs were unfairly low compared to rates on those that pay once a year,….
The five-year GIC was paying [a nominal] 6.5 per cent, if the investor was paid interest monthly, and had a seven per cent rate, if paid yearly.
Normally, the rate on a GIC that pays monthly would be somewhat less than one paying yearly…. [because] the investor gets his or her [interest] money sooner…
The bankers had been simultaneously admitting (actually promoting) the discrepancy, while also overstating it (by almost double) to cheat seniors. Note also (to appreciate the cognitive manipulation) that to make sense logically the last sentence above ought to read:
Normally, the total monthly amounts [per year] on a GIC that pays monthly would be somewhat less than one paying yearly…. [because] the investor gets his or her [interest] money sooner…
In terms of financial significance (i.e., to measure the relative scale of the fraud even at this relatively low / historical-norm level), assume that the bankers charge a nominal 7% on advances of credit while paying out an adjusted 7% on GIC’s (Term Deposits) such that they appear to the public to make exactly no money or exactly break-even, while employing the deception explained by the smoking-gun newspaper story above.
They would collect an effective 7.23% from borrowers while paying out an effective 6.75% to depositors for a difference of roughly 1/2 of 1% per annum.
In 1993, the big six private banks in Canada collected / assessed some $60 billion of interest revenue or roughly $8.3 billion for each percentage point, thus making the half point difference – the deception – worth about $4 billion. It would have also roughly doubled their aggregate net profits. And, again, this is still at relatively low interest rate levels.
That is also why no one in the industry ever asks the obvious question: “Why don’t you just obey the accounting laws (GAAP), and use the proper real-interest-rate calculation formula to adjust the amount of interest to always exactly correspond to the stated / agreed rate per annum?”
That is why the objectively and literally ridiculous statement (or non sequitur) in the 1993 Edmonton Journal article:
Normally, the rate on a GIC that pays monthly would be somewhat less than one paying yearly…. [because] the investor gets his or her [interest] money sooner…
makes perfect sense to a banker – the logic-error has been grafted into their cognitive-DNA.
Meanwhile, however, and back on the lending side of the equation, by the late 1960’s and early 1970’s the seemingly relentless increase in interest rates generally made the exponential fraud in the nominal method virtually impossible to ignore, at least in the U.K. (most likely because it was then under a relatively-hostile Labour government and which temporarily altered the dynamics of the entrenched-money-power control system).
MP Mr. Alan Williams in 1973 explained before the U.K. House of Commons in respect of the proposed new law (Consumer Credit Act (CCA)) to ban the nominal method (in material part, emphasis added):
Mr. Alan Williams (Swansea, West): The [Consumer Credit] Bill…is a bipartisan bill [i.e., endorsed by both the Conservative and Labour parties]. It is not a Bill that will provide the basis for great political dispute…. The [Crowther] committee was set up in 1968 by the Labour government. It reported in 1971, and the present Government is correct in saying that, largely, they are implementing the proposals arising from the consumer protection element of the report….
The Daily Mirror [newspaper] and the Consumers Association undertook an investigation of moneylenders, and the results were published on 19th June this year . On the basis of computations worked out according to the prescriptions of the Moneylenders Act 1927, the investigation showed a range of [nominal rate] interest between 48 per cent. and 325 per cent. I am sure that the House will regard those figures as unacceptable. However, using the more up-to-date [effective / real rate] formula which would apply under the Bill and assessing the true rate of interest on that basis, one finds that the range is not between 48 per cent and 325 per cent. – all of which were illegal under the Moneylenders Act anyhow – but between 57 per cent. and an incredible 1,706 per cent….
Similarly, the Consumers Association…undertook a survey with BBC local radio stations in Derby, Nottingham and Stoke. This survey found that some finance houses were charging a true rate of interest of 111 per cent., and that over half the moneylenders were charging more than 48 per cent…. All too often, the terms are made to sound attractive, and the more attractive they sound the more expensive they may in fact be…. Moreover, the Consumers Association and the BBC local radio stations found clearly that in all cases it was the poor who paid most.
At the high-end of the study, the working-poor of the day were being charged amounts corresponding to rates that were more than five times greater than they had contracted for.
It is also critical to note that the Crowther Committee had examined about a dozen so-called or technically nominal methods of interest calculation (e.g., the Rule of 78’s, the Add-on Method, the Discount Method, the Sum of Digits Method, etc. (also including combinations and derivatives)) that had been in use among creditors in the U.K. (in addition to the most common Straight-Double-Division nominal Method that we are currently examining), and not a single one of them had an error or deviation that was in favour of the borrower or debtor. Every one of them embodied an error or deviation that resulted in the creditor taking interest money at a likewise exponentially-increasing greater rate (per annum) than had been either disclosed or agreed to.
Yet almost immediately after being identified and exposed, all of these other fraudulent nominal methods were stuffed down the memory hole and the issue presented to the public as a choice between only two methods – the mathematically correct way and the most-common (straight-double-division) nominal method.
And this is where the true socioeconomic sleight-of-hand came into play as additional damage-control or containment. The very extensive Crowther Committee Investigation (1968-71) had determined sufficient facts to establish (1) that the most common and dangerously-deceitful (straight-double-division) nominal method overwhelmingly satisfies the essential elements of fraud under the criminal law (i.e., the official finding that it is “false and seriously misleading” was in fact a massive understatement), and (2) that it cumulatively accounted for an amount greater than all debt everywhere on Earth at that time, and most certainly all debt in the U.K.
Yet the remedy was to merely ban the nominal method going forward, so as to henceforth require the creditors to do the calculations correctly, but without any refund or write-down of the industry’s ill-gotten gains. As in “Ok – No more stealing or accounting fraud but you can keep all the money and accumulated wealth that you have stolen / defrauded so far, plus all of the interest that has compounded upon it, and then continue to charge your victims more interest upon it until they repay the stolen money (their fraudulently-inflated debt-balances) to you.”
The contemporary spin-doctors then went to work so that by the time the new law came into force it was being presented and portrayed (marketed) to the public as a mere administrative adjustment. Even MP Mr. Williams (who supported the new law) in reference to the formula which is not criminal fraud describes it as “the more up-to-date formula” with the implication that the old formula was merely administratively inferior. That is why it was so important to first disassociate the straight-double-division nominal method fraud from all the other fraudulent nominal methods identified and exposed by the Crowther Committee Investigation.
Remember the screaming headlines in 1974?:
U.K. bans U.S. interest calculation method as criminal fraud!!
Of course not – because there wasn’t any. Doesn’t that seem rather odd? It is what happens when the entrenched-money-power’s media arm reports to the public on the criminal activities of its financial services arm.
Not that banning the nominal method had any truly profound effect in the U.K. either. The creditors there simply switched / adapted to a more (illegal and unlawful / criminal) loan-fee-dominated (accounting-fraud) system to accommodate the same fraud:
Payday loaner: You get £300 today for a post-dated cheque for £400, due in 14 days. Legally I have to disclose and declare to you that the interest rate is 180,000% per annum.
Borrower: 180,000%!!! – I can’t possibly afford that!
Payday loaner: Ok – I tell you what – we’ll call the £100 difference an application fee or a cheque-cashing fee. That way you get £300 today and only have to pay back £400 in 14 days. That way the rate of interest will be zero. How’s that?
Borrower: Oh, that’s much better. I can afford zero per cent.
The truly sad state of humanity is that this transparently stupid nonsense actually works on people. That is why it is so important to the entrenched-money-power that they also control the education process.
Discussions in the Canadian House of Commons eighty years ago in 1939, concerning the then proposed Small Loans Act, make it clear that it was then common knowledge that there is a very real difference between a rate of interest and an amount of interest (all examples given are the real rate and not the nominal rate):
Hon. J. L. ILSLEY (Minister of National Revenue): May I bring before the committee some typical cases. They would be extreme cases, but there were placed before the banking and commerce committee last year instances taken from press reports of loans made by unregulated lenders, the rates for which loans amounted to over 100 per cent per annum. In one instance a loan of $45 for eight months involved a charge of 7.27 per cent a month or, converted to an annual basis, 132.1 per cent per annum [and not a nominal 87.24%]. Another loan of $50 involved an annual rate of 119 per cent per annum, while one $10 loan involved an annual rate of over 91,000 per cent per annum. In the case of a loan which was reviewed by the courts in Toronto last year, the rate was found to be over 5 per cent per month, or over 80 per cent per annum [and not a nominal 60%].
In each case the minister above gives the effective / real annual rate because a statement of the amount or nominal rate has no meaning if one wants to know the cost of credit expressed as an equivalent amount paid once at the end of a year. The debate continued the following day:
Mr. CLARKE (Rosedale):…I should like to ask the minister whether any definite percentage of that cost may be charged the borrower, who wants to get out from under this high rate of interest, particularly when he reads in the newspapers that the loan companies borrow money at less than three per cent [per annum] on which he is charged two per cent. a month or approximately 26.8 per cent annually….
Mr. JOHNSTON (Bow River): I do not think it should be necessary for this house to pass a dominion law authorizing a loan company to charge the exorbitant rate of 26.8 per cent… 
Notwithstanding the efforts of those (the entrenched-money-power) who own the consumer finance industry to educate the borrowing public, it has for most of our history been common knowledge among those with at least secondary school education that 24% per annum does not equal 2% per month and that 2% per month does not equal 24% per annum. They are, and always will be, two radically different rates of interest.
If we could go back in time and tell the people in 1939 that eighty years in the future the average citizen would be incapable of understanding that an equal amount paid sooner is a higher rate, they would be incredulous. They genuinely believed that science and technology would lead to a better future for everyone, and not that it would all be hijacked by an entrenched-money-power that would deliberately and methodically render the masses stupid for no other purpose than to facilitate robbing-them-blind so as to keep them poor and subservient for its own sake.
The total quantum of human potential that is so suppressed and squandered / wasted is near beyond comprehension. This utter nominal-nonsense has been going on since at least 1810 in the quasi-modern-era (Lord Clancarty v. Latouche), and 1705 for the loan-fee-fraud (Jennings v. Ward). How is it that no matter how many times Parliament recognises these fraudulent credit practices and makes them illegal – the entrenched-money-power is able to keep going back to them generation after generation?
Overall, the most important aspect today is the typical or average high-end ratio of about 100-to-1. While most of us are generally or at least vaguely aware that the working-poor are being exploited for their labour by the owners of the financial system, we are just not grasping that it is normally somewhere between 10-times greater and 300-times greater than we think it is or presume it to be.
Extended globally, from the temp-worker in Chicago, to the army-private in Birmingham, to the subsistence-farmers in India, the broadly-defined micro-loan / payday-loan industry is extracting / harvesting about (or rather as an absolute minimum) the USD-equivalent of $100 billion ($100,000,000,000) annually from about 100 million of the broadly-defined working-poor and rank-and-file military (on average about $1,000 each), at average rates of about 30,000% per annum. Even the words obscene and despicable don’t quite do it justice.
For hundreds of years the real business of the entrenched-money-power has been hiding, denying, and otherwise obfuscating to the rest of us just how much of a free-ride they are obtaining from the rest of us. We have simply reached the runaway-point in an exponentially-deviant system.
If the borrower receives for example, $335 today, in exchange for an obligation to pay $400 in ten days’ time, then the principal amount is $335, the interest charge is $65, and the interest rate is 64,622% per annum:
= 646.22 or 64,622% per annum.
The payday-lender makes a gross rate of return of 64,622% per annum on their $335 principal investment over and for the ten-day period. Here too, if you had an effective / real-interest-rate daily accrual savings account, then it would have to pay interest at an annual rate of 64,000% for $65 to accrue on a deposit of $335 over ten days.
If the borrower instead receives $350, then the interest charge also declines to only $50, and the rate of interest is:
= 129.82 or 12,982% per annum.
If instead we go the same $15 the other way, then the borrower will receive only $320, and the interest charge also increases to $80, and the rate of interest is:
= 3444.20 or 344,420% per annum.
Note again and especially the exponential sensitivity. Our base case is $65 and 64,000%. Based on the same $400 paycheck / paycheque and due in the same ten days, if you give the borrower an extra $15, then the rate of interest declines to just under 13,000% per annum. But if instead you take away another $15, then the rate of interest balloons to 344,000%.
Every competent engineer, math teacher, insurance professional, and banker on the planet knows how to do the calculation. And most insist on (legally and / or contractually require) accuracy to within 1/100th of 1% per annum. That is why the base-unit in the financial-trading system is the basis-point or 1/100th of 1% per annum. Why? Because it makes a difference.
But for the consumer-market upon whom the financial-professionals feed – “Well, yes, – technically we mean 180,000% when we say or declare 435% – Whatever. You just need to get back to work and stop asking questions that might cause social-unrest. Questions that are above what the civil-law system defines and refers to as your ‘station-in-life’”.
Prima facie criminal conspiracy by the lawyers (and government)
Next, and likewise, consider specifically the real interest rates that correspond to 20% per two-weeks, and to 20% per week. 20% for two weeks or 14 days is:
= 114.97 or 11,497% per annum.
And 20% per week or per 7 days is:
= 13449.44% or 1,344,944% or 1.34 million percent per annum.
Since 1981 and the amendment to the Criminal Code (of Canada) to provide for a criminal rate of interest (anything above an effective or real 60% per annum), various private law firms in Canada have (in total) produced a series of periodic nominal Criminal Interest Rate / Payday Loan Reports targeted at the broadly-defined legal profession that are in effect training manuals on money-laundering and on how to falsify securities to conceal violations of the criminal law on behalf of financial-institution-clients.
What is so interesting from a conspiracy theory viewpoint is that although these ostensibly unrelated private Reports employ a variety of example transactions and general approaches, they all use the same identical / verbatim footnote to set / describe the respective Report’s frame of reference with respect to the nominal method, and (at the higher end) they all deal exclusively with the nominal interest rates and do not provide the corresponding real interest rates.
The particular Report from which I copied the footnote (one of two that used the same examples – see below) used 20% per two weeks and 20% per week as example transactions, and which it claimed to be 520% and 1,040% per annum respectively, and, again, without even mentioning or referencing the corresponding real rates of 11,497% and 1.34 million percent, respectively; but qualified as follows by the footnote (emphasis added):
The annualized percentage rate (APR) [used in this Report] is the nominal rate not the effective rate. The nominal method is used for calculating consumer loans in North America and Europe, excluding the U.K. The effective method, which is a more complex actuarial calculation, is used in calculating the criminal rate of interest under s. 347 of the Criminal Code [of Canada]. The effective rate would be significantly higher for short-term loans.
For the lawyers and the legal profession more generally, that is certainly a curious way of explaining that the U.K. recognizes and condemns their banker-clients’ interest calculation methodology as wholly fraudulent and has banned it outright.
Especially given that the term “annualized percentage rate” means “effective annual rate” such that the Orwellian double-speak of the opening sentence is “The effective annual rate [used in this Report] is the nominal rate and not the effective rate”, which reduces to “The effective annual rate is not the effective annual rate” or “The real interest rate is not the real interest rate”.
And regardless of whether such qualifies as a conspiracy theory – it would be sufficient in a competent court of criminal jurisdiction to convict all of the various Report authors / lawyers of a criminal conspiracy to aid and abet within the meaning of that real and actual offence (conspiracy) as defined under the Criminal Code.
But what makes this particular Criminal Interest Rate / Payday Loan Report so special is that even though it uses exactly the same identical / verbatim footnote as the Reports prepared by the private law firms (and uses the identical example transactions of one of them), this one was actually the feature article in the May 2007 edition of Perspectives, the monthly publication of Statistics Canada!!! The mathematically correct real-interest-rate formula flows through the very veins of Statistics Canada. Yet the people who run the agency appear to have adopted (verbatim) the position of the private law firms – as if they were taking dictation.
Even more alarming is that after 40 years of doing it right (up to a point – more on this aspect below) in the U.K. – and notwithstanding the issue of unlawful and illegal loan / credit fees (real–interest-rate-concealment fees and accounting-fraud-concealment fees) – with the relatively recent massive rise in the payday loan industry to service (cripple) the working poor, the media appear to have unilaterally and illegally decided to ignore and violate the Consumer Credit Act (CCA) and are getting back into the business of expressly passing off the Nominal Rate or Decoy Rate as the rate of interest. The following excerpt is from a U.K. Mail Online article published April 11, 2014 (in material part, emphasis added):
Probe into overdraft fees that cost twice as much as a payday loan.
Customers using the Halifax [Bank] Reward current account and the Santander [Bank] Everyday Account pay £100 in charges for going £100 into an unauthorised overdraft for a month, equal to an annual percentage rate of 1,200 per cent. [Real interest rate and CCA required disclosure and declaration is 409,500%].
But it would cost £37 to borrow £100 from payday lender Wonga over the same period [Real interest rate and CCA required disclosure and declaration is 4,370%].
[Consumer watchdog group] “Which?” also found that customers borrowing £100 over a month with Halifax within an agreed overdraft would pay £30 for the period, giving an effective APR of 356 per cent. [Real interest rate and CCA required disclosure and declaration is 2,230%].
Note the inherent tactics involved in having the private media (and consumer watchdog organisation) violate the CCA in their reporting of the rates, instead of the financial institutions doing it themselves directly. Once the public (the little people) have been sufficiently re-conditioned back to accepting the nominal rate or decoy rate, the banks (and / or Parliament) will likely follow suit (and likely justified under some form of global harmonization legislation).
Although, here too, they are in fact double-violating the CCA and the criminal law because they are both failing to disclose / declare the real interest rate while also falsely and fraudulently claiming that the nominal / pretended / decoy rate is the real rate.
Also note that the latter two examples have relatively low real rates per annum (i.e., 4,370% and 2,230%, respectively), (mostly) because the period is relatively long at one month. For payday loan companies, the (Canadian industry, self-reported) average turnover or loan period is just 10 days. The media, however, tend to restrict their examples to 14 days or more, and generally prefer one month.
But to focus on the escalation of it, how can a nation of about 50 million people (credit consumers) suddenly be told that 100% per month is an effective annual rate of 1,200% after more than 40 years of theoretical exposure to the fact of it being over 400,000%, while no one sufficiently notices to even complain about it? How can a populace be rendered so thoroughly innumerate that they can be so viciously lied to – including by a consumer watchdog organisation – without even suspecting that there might be a problem with the numbers?
The answer to that question is that in practice and regardless of what the CCA requires, the people in the U.K. have rarely been exposed to real interest rates above a certain relatively low level as decided by their collective credit-industry and media handlers / minders.
My 1989 Eaton’s Department Store credit card account in Canada stated:
Interest Rate: 28.8% per annum (2.4% per month)
While a (typical) U.K. department store credit card (e.g., BhS Options Dept. Store) agreement stated at the time for example (emphasis added):
…: 2.4% per month, 32.9 APR [Annual Percentage Rate]
The operating parameters of the two accounts are essentially identical. Interest is calculated (or converted / compounded) monthly and it is payable monthly at 2.4%. Eliminate the claimed annual rates and the contracts are identical – the stated annual rates are pure disclosure / declaration. The U.K. agreement simply discloses / declares the interest rate and the Eaton’s Department Store in Canada states something that is not the interest rate while falsely claiming that it is the interest rate.
But that is approaching (about half-way) the limit of tolerance for truth in the U.K. Above this still relatively low level of real interest rates (a maximum of about 60% per annum), even in the U.K. the creditors just cannot bring themselves to disclose the real interest rate and tend to revert back to passing off the nominal or decoy rate as the interest rate. Likewise, the authors of the CBC article in Canada just could not bring themselves to reveal even the nominal annual rate of 870%, and so used illegal and unlawful loan fees to justify 435% (exactly half).
In an especially telling example dated July 1993, American Express (U.K.) placed a 16-page advertising supplement / insert in the U.K. edition of Esquire Magazine. In it, the company (management) set out to persuade readers that existing or potential U.K. Amex cardholders should use their Amex cards (or get one) rather than risk running up an overdraft at a U.K. bank. The insert claimed that U.K. banks were attempting to recover from “disastrous losses” in the then recent housing price collapse, by milking their overdraft accounts.
The piece featured an example of a £200 overdraft for which a major U.K. bank had charged total interest / credit charges of £118.90 for one month (59.45% per month). Although the clear and stated purpose of the piece was to educate consumers as to the “astronomical effective interest rates” defined by short period credit, it chose to state, claim, and (falsely) disclose / declare, in large red letters in the centre of the page (and throughout), that the effective annual rate is 713%, instead of the mathematically accurate and legally required 22,000%-plus. Why would they do that?
Why would management (and their solicitors) at American Express choose to deliberately lie and also violate the CCA, and the criminal law, while also directly undermining their own thesis and message by understating the real rate by a factor of 30-times?
It is just more relative damage control, where violating the CCA is deemed a lesser evil than exposing the public to the true magnitude of the rates being exacted via seemingly small amounts turned over quickly by the nominal financial services industry.
And that brings us to our second not just obvious – but truly in-your-face conspiracy. From a psychiatric perspective, I think that the credit/charge-card fraud is technically an extension of the nominal method, but whether considered as such versus a separate and distinct conspiracy, it is prima facie evidence of criminal intent on the part of the entrenched-money-power. At the very least it demonstrates conclusively that the nominal method fraud is not a fluke or otherwise an anomaly.
But in summary of the nominal method fraud, shouldn’t all this be illegal under the Criminal Code?
Well it is, under s. 330(1), but like a banker’s yo-yo it is snatched-back under s. 330(2).
Section 330(2) is what is called a saving provision that provides that as long the banker accounts for the amount of the total payment made by the nominal borrower / debtor, then it is not an offence to fraudulently misapply the proceeds to interest for the banker instead of principal reduction for the borrower / debtor! It is just another example of the utter contempt that the entrenched-money-power-parasites have for the producers upon whom they feed.
s. 330. (1) Every one commits theft who, having received anything from any person on terms that require him to account for or pay it or the proceeds of it or part of the proceeds to that person or another person, fraudulently fails to account for or pay it or the proceeds of it or the part of the proceeds of it accordingly.
(2) Where subsection (1) otherwise applies, but one of the terms is that the thing received or the proceeds or part of the proceeds of it shall be an item in a debtor and creditor account between the person who receives the thing and the person to whom he is to account for or to pay it, and that the latter shall rely only on the liability of the other as debtor in respect thereof, a proper entry in that account of the thing received or the proceeds or part of the proceeds of it, as the case may be, is a sufficient accounting therefor, and no fraudulent conversion of the thing or the proceeds or part of the proceeds of it thereby accounted for shall be deemed to have taken place.
That is why this section of the Criminal Code is just another law-of-apartheid – It objectively defines the act / practice as an act of theft – but not if committed by a banker / creditor.
Conversely, that is what makes s. 347 (criminal interest rate) so massively important – the entrenched-money-power truly and monumentally messed-up-big-time and they technically forfeit everything – CHECKMATE!
Their only chance is to convince the rest of us that it is our move so as to avoid the fact that the game is technically over and that they lost it.
Beyond that, what the typical citizen-victim of the entrenched-money-power needs to understand and appreciate is that the criminal law is not merely ineffective – it has been actively and deliberately written to facilitate the looting of the masses by the entrenched-money-power.
Free Loans my butt
Concealed-credit-charges cross-leverage the nominal rate fraud
The minimum real rate of return to a mainstream Visa or Mastercard operation, for example, is about 150% per annum just from the concealed-credit-charges referred to as merchant service charges, but which are actually taken / collected as a rake-off from card-user payments at the end of the nominal grace periods when they are also physically paid to the banks as part of the nominal full balance.
It should, however, be made clear up front that the actual rate to the card-issuers is infinity to the extent that they do not put any of their own money into the nominal transactions. The real business of American Express, for example, is credit-insurance and not money-lending.
Assume, for example, that Amex’s throughput globally is the USD-equivalent of $100 billion per monthly payment cycle, with the sole exception of the year-end holiday month (December) when gross-throughput doubles to $200 billion for that month or payment-cycle only.
So where does Amex obtain the extra $100 billion needed to cover the extra payment orders for December? Answer: From its card-users. The signed payment orders (or PIN-authorized payment orders) are financial instruments that Amex recognises and records as cash-equivalent money-assets on its balance sheet. Amex does not need to go out and find an extra $100 billion in December because its card-users directly provide it with an extra $100 billion in December.
All the work Amex needs to do is in pre-qualifying the nominal credit limits (credit-guarantee-limits) of its card-users. The payment-orders are functionally indistinguishable from signed-cheques payable to Amex from the pre-qualified card-user’s on-going income stream – but which are effectively post-dated by 21 to 52 days depending on what point they are issued in the on-going payment / statement cycle. All Amex is doing is insuring the payment order against default between the issuing of a given order and the final settlement 21 to 52 days later – it is not investing or lending any of its own money. The signed payment order is itself an advance of credit to Amex from the card-user, which Amex then reinsures to the merchant while stripping off a 5% premium for itself. Amex is actually receiving an average 250% p.a. on its card-user’s money.
(In its early days this was especially obvious as Amex would often wait until it received 100% reimbursement from its card-user before it even paid the 95% net to the merchant.)
The same goes for Visa and Mastercard and the rest of the so-called credit cards which are in fact (98%-plus of the time) credit-insurance cards.
Otherwise, and with that critical clarification and qualification, Amex (with generally the highest rates) typically receives or harvests a gross (average) rate of return of about 250% per annum through its concealed-credit-fees called merchant service charges (when annual fees are included in the rate determination). As a condition of access, virtually all credit / charge-card companies require merchants to give stipulated percentage price discounts for card-users and / but are also forbidden from disclosing / revealing them to the card-user, so that the bank / creditor can receive a concealed-credit-charge as a rake-off from the card-user payment at the end of the next statement / grace period, while leading the card-user to believe that they have received cost-free credit or a free loan. But for the financial markets and regulators, Amex has to declare the substance of its business under its Statement of Accounting Principles:
Interest income is capitalized [front-loaded] into the loan balance [into the “cardmember receivable” balance as and when a purchase is made] in accordance with the terms of the Cardmember agreements. [Amex Bank of Canada Financial Statements / Annual Report]
All amounts charged to the account, including purchases..and …fees [front-loaded and concealed interest / credit charges capitalized in advance at time of purchase] will be called Charges in this Agreement. [Amex Cardmember Agreement] [i.e., all Principal-plus-Interest-capitalized-in-advance will be called Principal].
Amex (owners and management) requires / needs the card-user’s legal consent to pay the concealed-credit-charges, but absolutely not their knowledge or understanding-in-fact.
So, with respect again to its advertising insert, there would be a certain shock to the cognitive system if management at American Express were to substitute the truth of 59% per month being 22,000% per annum. That is far enough up the exponential-curve that it might cause social unrest in a way that disclosing on a department store card that 2.4% per month is 32.9% per annum (and not 28.8%) may not. At the very least it might prompt the masses to start thinking about how Amex (and the others) makes such obscene amounts of money making free loans.
Currently, in 2019, the world’s nominal credit / charge-card issuers (overwhelmingly Visa and Mastercard banks with about 75% of the total global market) quietly skim (actually drain) the USD-equivalent of about $2 billion a day ($2,000,000,000) from the global economy through these concealed-credit-charges called Merchant Fees or Merchant Discount Fees. About $1 trillion ($1,000,000,000,000) roughly every 18 months!!!
And about 10% of that, or $200 million per day, is a direct rake-off from VAT, GST, HST, and other forms of government sales taxes that are run through their system. Many banks skim more money directly from the government sales tax revenue than they nominally pay in nominal income taxes.
The bankers (in Canada) then pay a kick-back from the rake-offs to the federal political parties that have been co-opted (literally paid-off) since the late 1980’s into going along with it.
The following (Toronto Star / Canadian Press) newspaper article explains just one of the multiple independent arrangements that all of the major political parties have or have had with the private banks, individually and collectively – or rather vice versa.
The only thing missed or overlooked by the otherwise diligent reporters was the 2% to 5.75% concealed credit-fee rake-off from which the 1/4% kick-backs are paid to the political parties. For some reason they failed to mention that, while also directly implying that there is no such charge. At the time (1989) the private banks in Canada were obtaining / skimming about $3 million per day in such concealed-credit-charges:
Liberal party Visa cards newest fundraising plan
OTTAWA (CP) – The cash-strapped Liberal party wants to charge its way out of more than $4 million in debt by using plastic. *** Party and banking sources said yesterday the Liberals have forged a financial partnership with the Royal Bank of Canada to offer “affinity cards” – Visa credit cards with the Liberal [Party] logo. *** In return for promoting the Royal Bank product among its members, the party would get to keep most of the annual renewal charge of about $12 for every new cardholder signed. *** A bank industry source said the plan also would give the Liberals a small percentage [e.g., 1/4 of 1% (reported elsewhere)] of the volume of sales rung up on the card. *** The idea could offer multiple benefits for the party and its members, especially at fundraising events. *** A Liberal could pay for tickets to a fundraiser using the card. The party would get the initial amount for the ticket, a percentage back from the bank for using the card and the party member would still be eligible for a tax benefit for making a contribution to a recognized political party. *** It’s also possible that a Liberal MP, travelling on parliamentary business paid for by taxpayers, could help raise funds for the party by using his or her affinity card to pay for hotels. (Toronto Star – June 1989)
About 30% (about $1 million per day) of the gross concealed-credit-charge revenue at the time was received / skimmed by the banks in violation of the criminal interest rate law, but – surprise – surprise – the card-carrying provincial Attorneys-General (illegally / criminally) chose not to prosecute them for it. (More on this aspect below).
Meanwhile, however, both the government and the private banks either juice or take a rake-off from the sales tax revenue, respectively, as quasi-pointed-out in Canada after the introduction of the then new 7% federal sales tax (GST or federal VAT) in 1991.
Assuming that the gross throughput is subject to the new tax, then, after the imposition of the tax, every $1 billion of previous throughput would go to $1.07 billion for an increase of $70 million. Application of an average 3% discount would therefore generate a new bonus of $2.1 million as a rake-off from the tax revenue (per $1 billion). In fiscal 1992, for example, gross throughput was almost exactly $40 billion (for Visa and Mastercard combined in Canada) and so the potential rake-off would have been about $84 million that year. But 3% was actually a somewhat low estimate (for the average) such that the actual total (or potential) for 1991 would have been closer to $100 million. But the newspapers (largely owned in Canada by the same people / families who own the chartered banks) studiously avoided revealing the total amount of money at stake.
Also, the article may seem confusing or otherwise non sequitur in places because the extra-amounts are charged twice – the banks fraudulently bill their card-users for an amount that the bank did not pay out, while the government illegally demands the same overcharge from the merchants as an effective and illegal increase in the tax rate from 7% to 7.21% (measured against the actual selling price and credit advanced (actually reinsured). In my opinion, the author(s)-in-fact of the article went out of their way to avoid making that clear.
Credit card companies reap GST profit, bookkeeper says
Visa, Master Card [sic] deny they are making windfall profits
Jac MacDonald, Journal Staff Writer
Credit card charges levied against the goods and services tax mean extra profits for Visa, Master Card, and American Express, an Edmonton bookkeeper says. *** “Visa and Master Card are going to be making millions of extra dollars,” said Tire Village bookkeeper Neal Shymko. *** Credit card charges [i.e., concealed credit-charges] of two to five per cent on each transaction are also applied to the GST charged on a purchase, [i.e., the GST is applied to both the real purchase price and the added/concealed credit charge] he said. *** On a $100 sale with $7 GST owing, a merchant who pays a two per cent fee on credit card sales must pay an extra 14 cents to the banks for the $7 GST charge, he said. *** In a year it costs our business an extra $1,000 in credit card charges in collecting money for the government,” he said. Businesses cannot regain the extra costs from their customers because if they do, the price of the item will rise and be subject to the tax and the credit card charge once again, he said. *** “It’s a spiral [i.e., a discount / exponential function]”. *** Banks also do not pay the GST on the credit card charges, he said.
Revenue Canada spokesman Glenn Nichols confirmed that the tax is not [supposed to be] applied to the charges levied by credit cards on merchants. “These are considered to be exempt,” Nichols said. *** Customs and Excise [Revenue Canada] is not concerned about profits that may be made by credit card companies on the GST, he said. *** “We cannot tell anyone how to invoice their customers [!!!]. What we care about is if the tax is applicable, we want the tax that is applicable,” he said. *** Credit card companies deny they are reaping a windfall, but decline to say how much they expect to make by charging their fees on top of the GST [i.e., illegally applying the tax to the exempt concealed credit charge as well as to the actual credit advanced / real price of the article]. *** Bill Tucker, a spokesman for Royal Bank Visa, said the GST is no boon for Visa. “That is ridiculous. No way,” Tucker said. *** Credit card use has declined this year [A flat-out lie as the banks / bankers reported a substantial increase for the referenced period to the subsequent Commons Committee] due to the recession, he said. *** “Whatever this chap thinks we are going to make on GST, we have lost on the economy,” he said. *** Tucker said the [Royal] bank charges merchants two to five per cent on each credit card transaction…He declined to say how much the Royal Bank will make by charging merchants who use Visa for the tax, calling it information that would be useful to his competitors….[Bank of Montreal spokesperson] Harris declined to give the range of the discount rate the Bank of Montreal charges…calling it proprietary information….” We don’t see it as a huge windfall for us,” he said. *** “It’s not a windfall,” says Ivan Shasser [sic], spokesman for American Express. “We have additional costs on (the GST) we cannot recover.”
This article is one of several that were published across Canada at the time on the same issue. To me the structure and cadence of the article is to reenforce the bankers’ technically ridiculous position on the nature of their business as if the newspaper were an official spokesperson instead of an independent reporter of news.
Either way, the salient points made by the various government and bank spokespersons, above, are that:
• They admit to the application and collection of the tax on the concealed credit fee component of “the charges” or the “full balance”;
• they admit awareness that such cannot be done legally because of the exemption under the GST [Excise Tax] Act;
• they admit that after collecting the differential from the card user, billed on the monthly statement as the tax component applied to the financial service charge, the amount is retained by the banks and not remitted to Revenue Canada;
• they admit that the merchants are being coerced into remitting a greater amount to the government than is legally due and which they do not in fact receive from the card-issuers, and
they claim to be justified in both ignoring the law and (both of them) pocketing the difference by the observation that the economy is not as good as it should be.
With respect to the purported spokesperson for Amex Bank of Canada (who I assume to be Ivan Shaffer and not Ivan Shasser as spelled in the article), the term “It” in the words “It’s not a windfall” refer to a specific thing which exists and that is the bonus to the card companies from billing their card-users for an amount of tax implicit in the total said to be due (e.g. $107) from a purported $100 sale plus $7 of tax where, as a question of fact, the Bank will have physically paid out only $6.65 in respect of the represented $7.00. (Based on Amex’s then standard 5% nominal discount rate).
By direct analogy, assume that a businesswoman has her accountant pay her annual property taxes on her behalf and that the accountant submits a statement to the effect:
Taxes paid: $3,100.00
Fee for services: $100.00
Total due [to accountant]: $3,200.00
The bill is paid and the businesswoman later discovers that her property taxes were only $3,000 and that the accountant had thus essentially taken a $200 fee for his service. The accountant will have committed an apparent wrongful (criminal) act notwithstanding that the government in fact received the amount of taxes due. The statement sent by the accountant makes a material misrepresentation as to the amount paid out on account of taxes irrespective of the amount legitimately due or not due to the government.
Here again, what makes it so significant is that the sales tax on the concealed-credit-fee is being assessed and collected twice when legally it is not taxable at all (Another double-whammy-device). The government demands it from the merchant even though the merchant did not receive it from the bank / card-issuer, and the bank demands and receives reimbursement for it from the card-user when it did not pay it out.
That is another / additional reason why it is technically classified as racketeering.
If the banks were to follow the exemption, (and based on a 3% nominal discount rate) then the tax on a nominal $100 purchase would only be $6.79 and not $7.00 and a significant number of card-users would ask the merchant as to why the tax is not $7, and the merchant would be compelled to reply to the effect: “Because the nominal sales price is not the real sales price. My agreement with Visa requires me to sell the item to you as a Visa card-user at a 3% discount. The real price to you is only $97 and there is a $3 concealed-credit-charge for Visa that you are not aware of and that concealed-credit-charge is not taxable.”
That in turn might cause relative social-unrest and disruption to the banks’ aggregate harvesting / rake-off mechanism, and so the bankers and the government constructively agreed that it is ok for the bankers to ignore the exemption and charge the sales tax on the concealed-credit-charge anyway, and in return the government would also demand it from the merchant anyway so as to effectively increase the tax rate to 7.21% on anything charged to or through a credit/charge-card account.
There have been literally thousands of studies globally by economists on the massive negative effects of government sales taxes on gross economic activity, yet apparently not a one of those economists has thought to study the effects of the double-discount-handling-fee-rake-off by the private credit/charge-card industry on an estimated global minimum annual taxable system-throughput in excess of the USD-equivalent of $10 trillion ($10,000,000,000,000).
The bankers used the academic studies to get the government to agree to legally exempt the concealed-credit-charges from the sales tax, and then used administrative procedure to effectively double-the-tax-in-fact on the same concealed-credit-charges and to pocket the difference.
So based on a global $2 billion daily rake-off, of which about $200 million is from the sales-tax revenue, the card-users and merchants get double-whammied to boost the effective total take to $2.2 billion a day because the governments demand another extra $200 million by applying the sales taxes to the technically-exempt concealed-credit-charges to help their banker-friends conceal them from the public. Welcome to Planet Earth – owned and operated by a criminal banking cabal and cartel.
System of apartheid by selective-non-prosecution
The Canadian criminal interest rate law (anything above an effective or real 60% per annum), enacted in 1981, was a strategic and / or tactical-error by the entrenched-money-power in Canada. It was created as a deal between the government and the bank-lobbyists to get rid of the 1939 federal Small Loans Act that had limited interest rates on balances of $500 or less to 6% per annum. The bankers at the time desperately needed to jack-up credit-card-account rates from a nominal 6% (a real 6.167%) to a nominal 24% (a real 26.8%) in order to remain solvent or at least to maintain or regain the appearance of solvency.
The original proposal had been for a criminal rate threshold of 45% per annum, but the bank-lobbyists had pressured the government to increase it all the way to 60% per annum, for, among other reasons, to accommodate “the small administrative charges to merchants” on credit / charge-card transactions.” But it would have been politically impossible for the lobbyists to explain that they needed a minimum threshold of about 250% per annum based on their actual such merchant discount rates in effect at the time.
And of course, the saving-provision-technique used under s. 330(2) (fraudulent accounting) would have been too obvious under a criminal interest rate law – even for a dumbed-down population (i.e., that the criminal interest rate law does not apply to an account between a debtor and a creditor).
Instead the bankers and the government provided for a metaphoric ace up their sleeve in the form of scandalously illegal selective-non-prosecution, formerly known as dispensation or non obstante, but more commonly known or described in the modern era as a law of apartheid.
Most generally, apartheid means using the law to create different classes of people or legal-persons with different legal rights solely or substantively for the purpose of keeping them superior or subservient respectively.
Direct apartheid or front-door-apartheid is where, as a most simple example, a government makes it illegal for Black people to walk on the public sidewalks. Under administrative apartheid or back-door-apartheid the same government would make it illegal for anyone to walk on the public sidewalks, and then choose to only prosecute Black offenders and not White offenders.
Administrative or back-door-apartheid or non-obstante or selective-non-prosecution has been prohibited under broadly-defined English law since the Bill of Rights of 1689. Under the Bill of Rights the Crown was compelled to concede in perpetuity that the Law is the Law of the Land and not the Law of the Person. It is a foundational principle of law and government.
In late 1980, just prior to the final amendment of the Criminal Code (in early 1981) to provide for a criminal rate of interest conversion with respect to time (but after it had been rammed through all three readings in the House of Commons without debate over the last two days of the session (July 21/22)), it was on several occasions (over roughly a three-month (Oct. – Dec.) period) directly and indirectly raised and conceded by certain witnesses before the Senate banking committee that mainstream financial institutions would routinely violate the new criminal law via loan fees, including (in fact) also and especially so-called merchant fees on credit / charge-card transactions, and that they would therefore be open and liable to criminal prosecution. The most direct reference was as follows (and notwithstanding that it was otherwise an obvious and transparent contrivance and an act of pure theatre to explain / justify giving such alleged discretionary power to the AG’s) (in material part, emphasis added):
(On average the yield to the card-issuers from the nominal or pretended merchant fee would be criminal in about 25% of all transactions (the object), but all of them (100%) would offend the new law by being capitalized in advance (on the day of the transaction) in order to help conceal them from the card-users (i.e., because of the means by which they are concealed)).
Mr. Paul-Emile Wong, Consumer Research Branch, Department of Consumer and Corporate Affairs: Senator Buckwold, in one of the submissions made to the department at an earlier stage, the question was raised whether or not a standby fee [or any loan fee converted / received in advance], being a fee, would be included in the definition of “interest”, and if it were, how would the interest [rate] be calculated, because, being infinite, it would certainly be above 60 per cent [per annum],…
Senator Buckwold: Is that illegal?
Mr. Wong: As the section stands, that would be illegal, yes.
Senator Buckwold: Then looking at the reverse aspect, the bank, theoretically, could be prosecuted for charging a criminal rate of interest for a standby fee [or any other loan fee received / converted in advance (or (virtually always in practice) from the loan / credit proceeds)]…
Mr. Wong:…theoretically, yes. That is one of the reasons this [soon to be new] section [of the Criminal Code] is unusual, in that it requires the consent of the Attorney General before [criminal] prosecutions are initiated, thus preventing the application of the section to [criminal] commercial practices to which it was not intended [by the bankers and other controllers of the credit / money system] that it apply. It then becomes a question of the Attorney General’s discretion [i.e., administrative apartheid but which we can pass off as policy]. ((Select Standing Committee on Banking, Trade and Commerce) (SSCBTC) transcripts; 4-11-1980 [November 4, 1980], 24:28)
Ever since, the government has on occasion used the fact of the criminal law to put certain of the little people, such as a Mr. Robb, into prison because the law is the law.
In 1985, in R. v. McRobb, the Crown sentenced Mr. McRobb (portrayed (rightly or wrongly)) as an apparent common street-hustler (and who claimed to be unaware that there was such a thing as a criminal interest rate) to a term of imprisonment for entering into an agreement to receive $500 of interest three months after loaning $1,500, for an effective annual rate of interest of 217% (a nominal 133%), because the law is the law, and the AG gave the Crown’s consent:
347 (3) Where a person receives a payment or partial payment of interest at a criminal rate, he shall, in the absence of evidence to the contrary, be deemed to have knowledge of the nature of the payment and that it was received at a criminal rate.
It would appear that the general rule applicable to both civil and criminal usury is that there must exist an intent that the lender is to take more than the legal rate of interest for the sum loaned. The required intent does not involve a consciousness of the illegality of the transaction or a specific intent to violate the statute, but only an intent to extract payments in excess of the amount of interest permitted by law.
While the same government / Crown employs the illegal (and scandalously wrongful) administrative / back-door-apartheid provision to choose to not prosecute the owners of the privately-owned credit / charge-card industry who are currently employing pretended merchant fees to harvest / take-a-rake-off of about $10 million per day in Canada at average rates of about 150% per annum and routinely as high as 250% per annum. About $1 million a day of that is a skim from the sales tax revenue.
At the highest such level or tier, the same government concurrently employs the same illegal administrative / back-door device to also look the other way on the owners of the payday-loan industry that receive / exact some $2 million per day (in Canada) from the working-poor and rank-and-file military at average annual rates of about 30,000% (and routinely up to 180,000%).
The unlawful and illegal selective-non-prosecution device is used as a social-stratification device to maintain “A place for everyone, and everyone in their place”.
What happened here in 1980/81 was arguably one of the most significant events of the 20th century because (1) it set precedent (after 300 years) for the revival of administrative / back-door-apartheid by a so-called First World government and (2) it directly and expressly extended it into the criminal-law-realm (where no previous government had been brazen enough to even attempt it), and (3) it did so in respect of the single most financially significant offence under the entire Criminal Code (and several international treaties on racketeering and money-laundering to which Canada is a contracting-state-party).
If you take all 800-plus offences defined by and under the Criminal Code of Canada, and rank them according to the total amount of money that is obtained in fact in violation of them, then the subsection making criminal the conversion of unearned interest (credit / loan fees) in advance / from-the-proceeds (s. 347(1)(b)) would be ranked Number 1, and would be at least a hundred times greater than the next closest competitor, and regardless easily greater than all the other criminal offences combined.
Five consecutive circus-side-shows
More generally, since about the time of the criminal law amendment in early 1981 the federal government has conducted no fewer than five official Parliamentary Investigations / Inquiries into the broadly-defined credit / charge-card industry in Canada.
In every case the respective Committee has concluded that the bankers’ public explanation is accurate and correct – that they are forced to charge such outrageous rates on outstanding balances because they effectively lose money on every transaction where the card-user pays off their full-balance within the statement / grace-period so as to effectively receive a free-loan from the bank / card-issuer. From the various official conclusions / final-reports:
- the effective yield to card issuers is below the posted rate on credit cards…
- ..someone [“interest payers”] is financing credit card balances that are repaid before the end of the grace period..
- What this discussion does highlight is that the grace period is costly to the card issuer – someone must be paid for the funds used to finance a purchase made with a credit card…
- This practice is obviously costly for financial institutions. The bonus card-users receive by taking advantage of the grace period is a cost to the card issuer….
- So, how do card issuers allow for the cost – the lost potential revenue – from those card-users who take advantage of the grace period?
- That some cardholders receive what is in effect a free loan should not lead others to believe that they too deserve a free loan.
But fully 2/3 of the gross interest revenue normally received by a card-issuer (and almost 100% for Amex (at the time)) is in the form of concealed-credit-charges that are nominally labelled / pretended “Merchant Discount Fees” or “Merchant Fees” but which all of the card-issuers / banks are legally required to (and do) account for and record as interest / credit charges received from the card-users from whom the issuers actually receive them, and not from the merchants.
Again, currently (2019), the global industry is assessing / adding the USD-equivalent of about $1 billion per day ($1,000,000,000) as acknowledged interest charges on outstanding balances on the pretence that such is necessary to recover their losses from those card-users (“free-riders”) who take advantage of the banks by paying their “full balance” within the “grace period”. That is about $365 billion per year to recover less than $4 billion in actual expenses.
They concurrently receive an additional (double-dipping) $2 billion per day or $730 billion per year on the same credit and from the same aggregate card-users by the additional fraudulent pretence that such is paid by the merchants and not the card-users. The merchants have to agree to the rate, but it is the card-users who actually / physically pay the corresponding amount to the banks. And having paid for all of their actual (and already relatively minor / insignificant) expenses from the outstanding-balance-interest, the $730 billion from the throughput-skimming-side is all-gravy or pure-profit-padding.
The best way to perceive what is really going on is through American Express because for about 30-years, say from 1955 to 1985, this was the company’s sole business model in this area. All American Express card-users were required to pay off their balances in full every month, and American Express accounted-in-fact for every last dollar of income as interest revenue received from its card-users and not the merchants. To induce American Express to pay a merchant $100, for example, the card-user had to sign for $105.26 and American Express was legally required to, and did, recognise and receive the 5% or $5.26 difference from the card-user at the end of the statement/grace-period as interest income.
Amex was not legally a bank and so it had to go to the money-markets to obtain nominal off-setting deposit balances and the money-markets would not allow the company to pretend to be in the free loan business with its revenues tied to the provision of administrative services to merchants.
Just to be clear, however, such nominal off-setting deposit-liability balances have nothing to do with finance, per se. Here again, Amex directly obtains the financial money or credit from the signed or PIN-authorized payment order issued by its card-user. Under the larger system the then non-bank Amex was only allowed to harvest interest money (concealed credit charges) from its card-user base by demonstrating that it was sharing the revenue with other members of the entrenched-money-power. It wasn’t much in relative terms (e.g., 6% out to offset in-come at an average 150%), but the notion that Amex is somehow employing its etherial (intangible) deposit-liabilities in the financial transaction, per se, is just another form of managed-mental-illness.
Regardless, the objective and obvious true source of all the fees and other forms of interest is aggregate card-user income / earnings – without that there is nothing. It is all about capturing the income of the masses as soon as it is earned by inducing them to run their purchases / expenditures through the banks’ alleged free-loan system purportedly to take advantage of the banks even if they do not need the purported credit facility (by total amount about 98% of all new purchases are made by free-riders who pay off their full-balance within the grace period. So-called interest-payers may make up 50% of all card-holders but they are effectively stalled at their collective credit limits and only account for about 2% of new purchases in any given period).
When I first saw the figures / data supplied by the Canadian Bankers Association to the 1992 House of Commons Committee, it was overwhelmingly obvious that the bankers’ official story about free loans was utter nonsense.
So how do they get away with it? Simple: They lie under oath to the Parliamentary Committees who then relay and parrot the ridiculously false information to the public.
The official story from the spokespeople for Visa and Mastercard is that the alleged Merchant Fee is a “small administrative charge to the merchant to cover the administrative expenses of processing the transaction.”
But, again, those actual expenses are currently no more than about $10 million per day, while just the aggregate Visa and Mastercard banks globally (about 75% of the total market) are receiving / skimming $1.5 billion per day – or 150-times more – in concealed-credit-charges.
Uber went viral because actual prices for taxi services had become about three-times-greater than they should have been due to licensing-fees of up to several hundred thousand dollars per taxi in some major cities. Visa and Mastercard banks are charging and receiving purely-pretended-processing-fees that are at least 150-times-greater than actual, yet there is no real competition in sight while the global public concurrently remains virtually oblivious to it.
Double-dipping by discount-daisy-chain
And if that were not a sufficient smoking gun of itself, the official spokespeople then explain to the Committees that the actual administrative procedure is deliberately complicated to otherwise facilitate the approximate 50/50 splitting of the gross concealed-credit-charge revenue between the card-user’s bank and the merchant’s bank!!!:
As explained by a representative from the Canadian Bankers Association to the 1992 Canadian House of Commons Committee investigating the credit / charge-card industry in Canada:
The interchange system [e.g. Visa International or MC (Access) International] co-ordinates the activities of the merchant bank and the card user’s bank. It is similar to the cheque clearing system,… The interchange system also allows the splitting of the merchant discount. The splitting is complicated and varies for the different bank cards. The complications arise because the split cannot be a constant proportion of the discount (say, a 50/50 split) or each financial institution would quickly learn the discounts that all other financial institutions charge. Discounts and changes in discounts are proprietary information. The split can take the form of a fixed percentage of the purchase price less a fixed interchange fee (say 1.75 per cent less 25¢ per transaction) going to the card user’s bank; the merchant’s bank receives the 25¢ per transaction and the remainder of the discount.
In the example of a $100 purchase [and 3.25% nominal discount], the card user’s bank receives $1.50 (($100 x 1.75%) – 25¢) and the merchant’s bank receives $1.50 (($100 x (3% – 1.75%) + 25¢) [plus 25 cents to the interchange]. This is a 50/50 split, but the proportion could differ with a different purchase price and a different merchant discount. With this method of splitting the merchant discount, only the merchant’s bank knows the discount involved.
But the same witnesses had taken the position that the Merchant Fee is solely between the Merchant’s Bank and the Merchant, and has nothing to do with the Card-user or the Card-user’s Bank, therefore the Committee need not investigate any further (including about a dozen flagrant racketeering offences under the Criminal Code and international treaties). That alone is sufficient for a criminal conviction under the Criminal Code (giving contradictory testimony under oath).
At the same time (1992) the same industry was bragging in specialized trade publications that they had gotten their actual expenses down to less than four cents per transaction. So on an actual (or rather nominal) $100 transaction they would recover $3.25 (and up to $5.75) through the discount-daisy-chain to compensate for an actual cost of four cents (and currently (2019) considerably less than two cents).
Also note that the witness for the banks also got it exactly backwards because it is the Card-user’s Bank that physically receives / obtains the “Merchant Discount” as a rake-off from the Card-user’s payment at the end of the grace-period, and then shares or transmits more or less half the revenue (concealed-credit-charge) back to the Merchant’s Bank.
If the Card-user does not pay, then the banks never receive the “Merchant Fee” at all – and that reality of the credit business cannot be avoided by a label.
And, again, the money-markets obviously cannot and do not allow Amex to pretend that it is in the free-loan business while its revenues are tied to the provision of administrative services to merchants. That would be wholly unworkable in addition to just plain stupid.
In The Credit Card Industry – A History (Boston: Twayne, 1990, by Lewis Mandell), the author immediately identifies the substance of the business, and as perceived internally by those in the business itself (and in recognition of what amounts to a physical law), in describing the birth of the charge / credit card (Diners’ Club) in 1949:
While the components of this transaction were hardly novel – both charge accounts and installment credit were widespread – the involvement of a middleman [card company], who used his own creditworthiness to obtain credit from a store, extend that credit to an individual [card-user] who might not otherwise be able to obtain it, and then collect the principal and interest from the party [card user] who had needed the credit, [plus (eventually with dual-purpose Visa and MC) additional outstanding balance interest also from the card-user] was an intriguing twist on the normal process of extending credit. (p. 2)
“Gasp!!!” – You mean the bankers and the card company people have known this from the beginning and all along?!!? But – but – that would imply that some humans knowingly lie to other humans for the purpose of exploiting their labour and dishonestly taking their money!!! Whoever could have anticipated such a thing!?
Even Inspector Clouseau of The Pink Panther movies could have done a more competent job of investigating the bankers. In theory, no one could be that profoundly incompetent. In practice, they are. It has become a virtual art form.
I put together a report explaining both the nominal method fraud and the concealed-credit-charge fraud on all credit / charge-cards – but featuring / focusing on American Express (Amex Bank of Canada) with the highest rates, to one of the Members of Parliament on the 1992 Credit / charge-card investigation committee that I had been invited to submit evidence to, and he submitted my Report (later in 1992) to the Economics Research Division of the Library of Parliament as per the following excerpt from The Free Loan Story (which I wrote circa 1999):
(One important thing to note is that if the rate is above 60%, then the criminal law is offended even if it were the merchant paying the fee and not the card-user.)
The Crown’s politically impartial expert in this area is an economist named Terrance Thomas of the Economics Research Division of the Library of Parliament. Mr. Thomas co-ordinates the preparation of “background information” reports explaining the nature of the credit card business for the MP’s who have sat on the various Committees investigating that business since 1986. The BA’s [Timothy Madden for the Borrower’s Advocate] report was submitted by a member of the credit card Committee for analysis. With respect to the allegation that American Express was receiving about 50% of its interest/credit-charge revenue at criminal rates based on its apparent average 5% “discount rate”, he confirmed the rather straightforward mathematics:
[The BA’s] proposed action against American Express has two key elements. The first naturally, involves the compounding of interest payments. Here [the BA] recognizes the importance to the calculation of the effective interest rate of the days on which purchases and payments are made. If the cardholder takes 31 days to pay the Amex bill (this is the number of days between the purchase and payment), the effective annual interest rate is, according to [the BA], 82.9%. If it takes the cardholder 21 days to pay, the calculated effective rate is 143.9 per cent; if it takes 41 days, the calculated effective rate is 57.9 per cent. All the calculations are based on [the effective rate formula required by s. 347 of the Criminal Code and as used internally by the banks to determine their own profitability]… The actual calculation is mechanical and unobjectionable — the way 2 + 2 = 4 is unobjectionable….
The Research Division thus confirmed that, yes, if the bank / creditor is in the credit business, then the fee for such is routinely received by American Express at a criminal rate in contravention of the criminal law. Its final conclusion, however, was that there was a critical error in our [my] reasoning concerning the “credit advanced” notwithstanding that such is expressly defined by the Criminal Code itself and not by us:
“credit advanced” means the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral [e.g., merchant] agreement or arrangement;
and (in material part):
“interest” means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable,
The criminal law prohibition follows the same basic legislative scheme as the disclosure regulations under the Bank Act on credit card fees, and that is that If the card-holder’s decision to use the card results in anyone receiving a fee, then the card-user is entitled to be informed of the existence and amount of the fee regardless of who is claimed to be paying it or receiving it.
Pretty hard then to avoid the conclusion that Amex is in the racketeering business. But where there’s a will, as they say, there’s a way. Mr. Thomas concluded:
According to [the BA report], about half of the operating revenue collected by American Express has been acquired at a criminal rate of interest, by [s. 347] of the Criminal Code which defines a criminal rate of interest as an annual rate that exceeds 60 per cent per annum [but]…the basic American Express card is a charge card, not a credit card. Cardholders are required to pay their bills in full within 21 days of the statement, so no credit is advanced to the cardholder. [!!!!]
The technical psychiatric term for Mr. Thomas’ position is crackpot crazy (and/or dangerously and criminally incompetent). What exactly is it that the cardholder is paying after 21 days if not the credit advanced with or without the concealed credit fee that Amex objectively receives and records as “Interest income…capitalized into the loan [credit / cardmember receivable] balance”?
But, here again, Mr. Thomas is trapped because the math is objective and both the intent and language of the criminal law make it clear that (even if it were true) the criminal offence cannot be avoided by claiming that the fee is paid by the merchant and not the card-user.
And the banking committee transcripts make it plain regardless that everyone involved knew and understood that the new law would apply to the so-called credit / charge-card merchant-fees – that is why they boosted the criminal rate threshold to 60% from the original 45%.
English translation: Go away. These are not the droids that you are looking for. Move along.
So the Economics Research Division of the Library of Parliament recognises that the Canadian economy is saddled with an economically ruinous and destructive purported free loan system that enriches the creditor / middleman at an overall average annual rate of about 100% on the transaction credit employed, but that nothing can be done about it because the fact that the credit advanced plus the concealed credit charge must be paid / repaid within 21 to 52 days means that no credit is advanced. In some cases the Visa and Mastercard banks advance longer-term-revolving-credit than Amex’s average short-term-revolving-credit but no sane man or woman can conclude that short-term-credit is no credit. It is like claiming that a machine-gun is not a firearm because the number of rounds per minute is so vastly greater than a rifle.
In Mr. Thomas’ defence, however, notwithstanding that his position is technically batsh*t crazy, it is suspiciously consistent with Amex’s equally irrational (clinically insane by existing real medical standards) description of its business in the aforementioned July 1993 advertising insert into the U.K. edition of Esquire Magazine.
The most prominent feature with respect to the criminal law offences is the company’s (management’s) constant and absolutely obsessive reinforcement of the public message that it does not advance credit – that it is absolutely not in the credit business! For a company whose core function is collecting interest charges on the credit it advances this obsessive denial appears to be wholly irrational (like someone in a rubber-room at a psychiatric facility) (emphasis added):
Charge cards such as Amex, and credit cards, are probably the most convenient form of payment when travelling. You don’t incur any costs until you actually pay for something and if you pay the bill in full at the end of the month (you are obliged to do so with charge cards) there is no interest charge for credit. (p.9) Money on the Move – What’s the best way to pay when you’re abroad?
Unlike a credit card where there is a pre-set ceiling for credit, a charge card has no pre-set spending limit. The downside, of course, is that you must settle the [credit] account in full every month – there is no credit – and if you don’t a penalty charge is levied of 2.5 per cent for the first month the [credit] bill is unpaid, three per cent thereafter. A recent Gallup survey revealed that only one in three cardholders understands the differences between charge cards, credit cards and debit cards….Of course, the object of the survey, which Amex carried out, was to promote charge cards which do not offer credit [which offer shorter-term [rapid-roll-over] – credit and not long-term-credit]. “We are not necessarily advocating a massive switch to charge cards, but rather better education of consumers about the facts, especially on interest charges so that they can choose the right card or payment method to suit their particular needs and financial resources,” commented John Petersen, Amex’s head of public affairs. (p. 11)
Don’t Leave The Office Without It
…The company had to undergo a thorough credit check before Amex took them on, but after that they were free to issue cards [to their own employees] at their own discretion. (p. 12)
And if the Cardholder does not pay, then the first line in Amex’s list of Facts in its legal Statement of Claim against the Cardholder / card-user is of the form:
1. The Plaintiff Bank (Amex Bank of Canada) advanced credit to the Defendant Cardholder…
but for general public consumption “there is no credit”. In its Annual Report “Interest is capitalized into the loan [credit] balance in accordance with the terms of the Cardmember agreements [for obtaining credit]”, but for the peace of mind of consumers who don’t understand high finance “if you pay the bill in full at the end of the month…there is no interest charge for credit [which isn’t advanced so how can there be?]”. A credit card has a pre-set “credit limit” but a “charge card” has a pre-set limit on the credit which can be advanced (but which is never advanced) because the “credit” limit on a “charge card” is in fact a “spending” limit and not a “credit” limit. And of course applicants must undergo “a thorough credit check” before being issued an Amex Card by which “credit” is not advanced. Apparently then when the Bank Act grants these private institutions the legal right and “free ride” to advance “credit” the word has meaning – but when the same law directs that as a condition of such right they shall disclose and declare the “cost of credit” then it does not.
As discussed earlier, in the same consumer advisory / advertising supplement Amex explained why the public is well advised to use their “charge cards” rather than run the risk of running up obscene overdraft charges at an ordinary U.K. bank:
Never run up an unauthorised overdraft as it can cost you an arm and a leg. The banks are trying to recoup the losses they have made on their disastrous lending by charging sky high rates for overdrafts…. if you run up an unauthorized overdraft there is a flat fee of £3.50 for every day the account is overdrawn by more than £50, plus interest charges at 29.5 per cent and £9 a month. A £200 unauthorized outstanding for a month will therefore cost you around £114 in charges, plus interest of £4.91 – a total of £118.91 for one month’s £200 borrowing and an APR of 713 per cent. The other banks make similar charges. (p. 14)
An out-take from the text in large red letters in the centre of the page reads:
A £200 unauthorized overdraft will cost you around £114 in charges, – an APR of 713 per cent
Here again, all U.K. creditors are required, by law, to use the mathematically correct actuarial or effective method for calculating, disclosing and advertising rates of interest. A U.K. Visa card or Amex Optima “credit card”, for example, which charges 2% per month on outstanding balances also discloses and declares that the Annual Percentage Rate (the APR) is 26.8% (and not 24%). A £114 interest charge for a loan [credit] of £200 for a period of one month represents an APR of 22,428 per cent and not 713 per cent.
Here again too, although the Amex sponsored “consumer awareness” article is criticising bank practices in the U.K., it would still appear to be in the best interests of the industry that readers (the little people) should associate a monthly rate of 59% with an annual rate of 713% rather than the mathematically accurate and legally required 22,000%-plus. By way of our earlier analogy it is like watching a vehicle drive by at 220 m.p.h. and being told by someone in the business of analysing speed (and trading in the resulting vouchers) that the car is moving at 7 m.p.h. A sophisticated creditor is incapable of making such an error.
If the public had any real appreciation of the rates of gain (cost of credit) being taken from the economy (and directly from card-users at the expense of merchants and cash / cheque / debit customers) by these glorified bookkeeping operations there would almost certainly be a public outcry (sometimes pronounced “lynch-mob”). The economic damage / vandalism which stems from levying credit charges of 59% monthly corresponds to an annual rate of 22,000%-plus and it makes no difference that the individual man or woman incurring such charges can be convinced that the annual rate is 713% or 71% or 7% – or even that they are receiving a “free loan”.
Returning to Canada, recall that I wrote above that the criminal law follows the same scheme as the Bank Act that if the cardholder’s decision to use the card results in anyone receiving a fee, then the card-user is entitled to be informed of both the amount and the effective interest rate so defined. So how does Amex Bank of Canada and the rest of them avoid such disclosure / declarations?
The following is from Part 4 of Free Loans my butt:
(Part 4) The Bank Act Evidence
or Getting by with a little help from their friends
Purchase Transaction Date……………………………..November 30, 1998
Total due from borrower/user on or before statement due date…..$100
Cost of Credit Disclosure Information
Loan proceeds delivered to merchant by Visa…………..$97.00
Transaction charge (interest or discount)……………………$3.00
Statement due date………………………….. December 21, 1998
Credit period……………………………………………………21 days
Annualized interest rate…………………………69.8% per annum
The sample Visa credit card disclosure statement above represents the information which a bank is theoretically required to supply to a card user, given a $97 real loan or advance, a $3 added discount/credit fee, and a $100 total charge/obligation due in 21 days (end of grace period).
That they do not actually disclose this information appears to be courtesy of Mr. Michael Wilson, the former federal finance minister (Minister of Finance).
Section 452(2) of the Bank Act is a special credit card fee disclosure section which was deliberately omitted from the list of sections which the Minister may deem certain types of loans not to apply. It would be rather silly to have a special credit card transaction fee disclosure law, only to have the Minister deem that credit card loans do not apply to it. Where there is a will, however, there is inevitably a way.
The Bank Act states and provides:
449. For the purposes of this section and sections 450 to 456, “cost of borrowing” means, in respect of a loan [including a credit card loan] made by a bank,
- the interest or discount applicable to the loan;…
The words “applicable to the loan” were chosen to prevent a bank from disassociating consideration from compensation by confusing the issue of from whom it receives its compensation.
So how then do the banks / bankers get around all of the many and varied laws requiring them to disclose and declare the discounts applicable to the credit card loans to the card-users who legally, theoretically, and physically pay them?
Well, the definition of “cost of borrowing” continues on (part b) to also include certain other things that can be added by the Minister directly and quickly in case the banks / bankers come up with a new way to get around (evade) the disclosure law (emphasis added):
(b) such charges in connection therewith as are payable by the borrower to the bank or to any person from whom the bank receives directly or indirectly and as are prescribed [by the Minister] to be included in the cost of borrowing.
Using its nominal authority to enlarge the definition / scope of “cost of borrowing” (which expressly already includes the discount/transaction fees “applicable to the loan”) under the Bank Act, Mr. Wilson’s office initiated (or at least continued) Regulation 5 which states with respect to credit card transaction fees:
Charges included in the Cost of Borrowing
Sec. 5. (1) Subject to subsection (2),…, the cost of borrowing includes
(a) administrative charges for services or transactions; and…
(2) The cost of borrowing in respect of a [credit card] loan does not include
(k) a charge in respect of a payment, credit or charge card [!!!!]
The result is a special disclosure and declaration law which expressly requires a bank to disclose the discount / fee applicable to a credit card loan (and the resulting effective rate of interest) to the card-user / decision-maker but “which does not include any charge in respect of a payment, credit or charge card”. [!!!!]
[In a Court of criminal jurisdiction the Minister would be prima facie guilty of fraud, breach of trust, sedition and / or treason because there is prima facie no stated or implied authority for him to remove from the Act anything that Parliament has expressly added or included.]
The Royal Bank of Canada alone, for example [circa / fiscal 1997], collects in excess of $1 million a day of these concealed card-user credit/interest charges courtesy of Mr. Wilson’s pretended belief that exempting credit card discount fees from credit card fee disclosure legislation is “necessary to carry out the purpose of the legislation”.
Mr. Wilson has since left government and is now (and once again, from whence he came) a Director of the Royal Bank Group!!!
Other services performed by Mr. Wilson’s office include the issuing of a Schedule II bank charter to American Express (now Amex Bank of Canada). Mr. Mulroney, who left his position as a Director of the CIBC [Canadian Imperial Bank of Commerce] to become the Prime Minister in 1984 who appointed Mr. Wilson to his position has also since left government, and is currently a Director of [you guessed it] Amex Bank of Canada. [!!!]
To be clear, however, the banks (owners, directors and executive officers) are all also violating multiple civil, regulatory, domestic criminal law, domestic anti-racketeering, and international anti-racketeering laws, that are not in any way affected by the Minister’s legislative chicanery.
The Minister’s real purpose is to provide the banks’ solicitors and management with plausible deniability for their at-least prima facie criminal negligence in allowing / approving (and independently aiding and abetting) the rest of it.
Although, here again, the facts would be prima facie sufficient in a court of competent criminal jurisdiction to convict Mr. Wilson of both treason and sedition (and / or criminal dereliction of duty). The King v. Boucher  S.C.R. 265.
More generally, how can the average citizen, acting in good faith, possibly compete with an entrenched-money-power that is capable of controlling (and does in fact control) who gets elected and has such control-in-fact over the law-making process, when those people / puppets will so viciously betray them for a few million dollars in bonuses and other forms of kick-backs? The utter contempt of these people for ordinary people is as mind-boggling as it is breathtaking.
Now consider the following story that appeared on the yahoo.com website on November 21, 2015 (and notwithstanding, or perhaps even because of, the difficulty in determining whether it is a news-story versus a paid-commercial-advertisement by American Express (emphasis added)):
Billionaire Charges $170 Million Painting to Get Airline Miles
A billionaire charged a $170 million painting to get frequent-flyer miles. (Photo: Clemsen/Flickr)
Now that’s a smart traveler.
Chinese billionaire and art collector Liu Yiqian found a savvy way to accumulate frequent-flier miles. He put his record-breaking purchase of Modigliani’s “Reclining Nude” painting — which he bought at auction for $170 million — on his American Express card.
Liu, a former taxi driver, told The New York Times that he charged the painting so that he, his wife, and their extended family of four children and two grandchildren can accumulate Membership Miles and fly around the world for free.
The billionaire is a passionate traveler: before he started collecting art, he contemplated buying a plane. But who needs a plane when you have millions upon millions of miles?
This isn’t the first time Liu has racked up points with a credit card. In 2014, he paid for a $36 million ancient ceramic cup with his Amex Centurion card. In that case, Bloomberg News reported that he got a whopping 422 million points (based on the Hong Kong dollar), which translated to more than 28 million frequent flyer miles.
According to American Express, Liu isn’t the first cardmember to take this route. “We see a huge range in redemptions using Membership Rewards points,” spokeswoman Kimberly Litt told Bloomberg News. “everything from engagement rings to fine art and, of course, for travel all over the world.”
American Express encourages charging high-ticket items [No sh*t, Einstein!]. The company has the Auto Purchasing Program, which will allow you to buy a car with the card, and there’s even a service that makes it possible to charge mortgage payments.
In fact, there’s a whole community of frequent-flyer nerds called “Hobbyists,” who have figured out how to game the system to fly for free.
Liu certainly has.
So what is wrong – what is missing – from this purported / pretended news story? How about the $8 million or so concealed-credit-charge received and recorded by Amex as “interest / credit-fee income / revenue” or “Interest income…capitalized into the loan [“Cardmember receivable”] balance” from Mr. Liu’s gaming of the system? – from Mr. Liu taking advantage of them?
Although Amex may have given a somewhat lower rate than normal here, assuming that it were to impose its long-time standard 5% discount rate or credit-charge-concealment-fee, the procedure would be as follows:
Amex will receive the nominal $170 million signed / PIN-authorized money-payment-order from the card-user through the auction house as an increase of $170 million in its cash-equivalent money assets on its balance sheet.
Amex will convert / balance said increase in assets (via the matching principle) to issue a new $161.5 million (95% of $170 million) unsecured liability / advance to the auction house.
Twenty-one days later, when Mr. Liu pays his “full balance” of $170 million, Amex will recognize and receive it as a $161.5 million repayment / write-down / off-set of principal, plus an $8.5 million interest / credit fee for its own account. This too isn’t bleeping financial rocket science!
Alternatively Amex may (although illegally under GAAP and the criminal law) advance and increase its nominal liabilities by the “full balance” of $170 million to the auction house, off-set by its concurrent acquisition of a new $8.5 million asset (liability of the auction house back to Amex, due in at most 30 days). The critical element here is that the $8.5 million liability of the auction house is (or would be) created and funded by the advance of the $170 million to the auction house.
That is why financial institutions generally can only deal with the net or real advance (otherwise Amex could advance for example $1.000161.5 trillion with an obligation to the auction house to pay $1 trillion-plus back to Amex at the end of the month, while both of them cooperate to re-invest the $1 trillion difference in the financial markets for the month. Basically the financial-market-rules recognise that financial-people are pathological liars and thieves (or rather professional-schizophrenics) who have to be carefully watched and controlled or they will rob-everyone-blind by cooking their books).
Either way, the net advance is still only $161.5 million, and if for any reason Mr. Liu does not pay, then that is the amount of Amex’s financial loss-in-fact and in-law.
And either way, Amex must (and does) recognise and treat the $8.5 million or whatever differential as interest income received from the card-user, and from whom it actually receives it at the end of the statement period.
And, either way, its rate of return and yield on its $161.5 million nominal investment over and for that 21-day period is 144% per annum.
An honest reporter would have written to the effect:
Billionaire overpays by $8.5 million to obtain $2 million worth of Air Miles!
What a bleeping idiot!!!
Note the absurdity and functional-impossibility of Amex otherwise claiming (or representing to the financial markets) that it made a free loan of $170 million to its card-user, while its $8.5 million of revenue is tied to some side-business said to be in the provision of administrative services to the merchant. It currently costs less than two cents, and not $8.5 million, to process a piece of paper or electronic transaction.
But is it just coincidence that all of the broadly-defined news media that rely on advertising revenue from credit / charge-card companies consistently fail to even mention the nature of their advertisers’ business, and especially the source and amount of its concealed-credit-charges?
For a global $2 billion a day business, it certainly does not seem to get much attention in even the specialized financial media. And when they do report on it, it is almost always on Visa International or MasterCard International but with the stories crafted to make it seem as if the 8% relatively minor rake-off to these two clearinghouse / middleman organisations is the whole rake-off while ignoring the 92% that is divvied-up between the card-user’s bank and the merchant’s bank. And is it somewhat more than coincidence that that same media is largely owned by the same people who own and operate the same purported free-loan system?
Or does asking that question qualify as a conspiracy theory?
Why don’t we ask former Amex CEO James Robinson III for his opinion?
From the opening pages of House of Cards – Inside the Troubled Empire of American Express (1992). The referenced newspaper articles all discussed Amex’s fee schedule (required concealed price discounts and corresponding concealed credit fees):
[American Express president] Jim Robinson was fuming… He stared at a grainy black and white photograph of a restaurant owner who had impaled an American Express Card on the tip of a foot-long butcher knife…. The caption on the Boston Herald photo read “Pointed Protest.” …. The card attack wasn’t an isolated incident. The article in the Boston Herald was one of a dozen that Robinson was studying [from NYC] on that chilly April morning in 1991. They all described at length what AmEx’s staff had begun to call the “Boston Fee Party.” Fed up with exorbitant fees, roughly one hundred restaurants in the Boston area were threatening to stop accepting Amex plastic. “It’s too damn costly” said one protest organizer. For years American Express had charged [US] merchants a commission of 3% to 5% every time a customer used the green or gold card. The “discount fee” had been common throughout the card industry. It had been a key source of revenue to every card issuer. But AmEx’s fee was the highest in the business. Visa, the leading bank card brand and AmEx’s closest rival, charged only 2%.… [actually a range of 2% to 5.75%]” Did you see the paper? Did you see what’s happening in Boston?” Robinson thundered. He sounded panicked. “What the hell is this?”… “In my entire career, my entire career,” began Robinson,…“I have never seen anything as distasteful as this goddamn thing.” … “How could you let it get so far?”… “Do you know how this makes us look?”….”What I want to know right now is what we’re doing,”… “We can’t have our SE’s [concealed price discounts and concealed credit fees] paraded around in the goddamn papers”.
Even if they did not realise it, the restaurant owners were really complaining about the concealed price discounts they were required to give Amex card-users in exchange for access.
The reason Mr. James Robinson III (a.k.a. “Jimmy Three Sticks”) was on the verge of having a stroke is because at least one of his multiple personalties is fully aware that American Express is technically and actually in the racketeering business, and one of the world’s premier money-laundering operations.
And of course all of the credit / charge-card issuers, like all proper gangsters, have stated and implied (and flagrantly criminal / illegal) Keep-your-bleeping-mouths-shut rules in their Merchant Agreements. Here a Toronto restaurant owner had put display cards on his tables revealing the various / different price discounts that he had to give to Visa, MC, and Amex, etc. card-users:
American Express is making an example of a local restauranteur who displays the charge card’s rates, [by revoking its agency status or licence to accept Amex Cards], …..the charge card firm counters that it will take action against any restaurant that accepts American Express but directly or indirectly discourages customers from using it….. Fabian Siebert, proprietor of Marcel’s Bistro and president of the Toronto Culinary Purchasers Society, chastised American Express for its actions against La Bodega: “They’re just picking on one (restaurant) to make an example in hopes everyone else will just shut up,” Siebert said….. American Express spokesperson Ivan Shaffer said the company was simply protecting the rights of its card members…..Amex’s administrative fees are higher because the firm doesn’t make any money through interest charges [!!!] as does credit companies like Visa, Shaffer added…..
[Shaffer] said the firm has received a number of complaints from La Bodega’s customers who feel embarrassed and harassed by the [credit card price discount rate(s)] display cards. Shaffer said the display cards also violated La Bodega’s contract with Amex because the aim is to discourage the use of the charge card.
Either Mr. Shaffer has no clue about what his employer actually does for a living – or else he is a professional and / or pathological liar. Inquiring minds want to know.
While I was in the process of reading House of Cards in 1993 I asked a good friend who was the general manager of a chain of computer stores in Edmonton whether his stores accepted American Express and it was as if I had hit some kind of nerve. He immediately blurted out: “Those #$%&@’s want 6%!!! I don’t even make 6% on #$%^& computer hardware!!!” What he meant of course was that he could not afford to give a 6% price discount to customers who wished to pay with short-term revolving credit from American Express.
Let us now fast-forward to the present to review how American Express is currently presented to the public. The following is from the yahoo.com website (September 24, 2019) and dated (updated from) July 29, 2019 (How American Express Makes Money – by Nathan Reiff (in material part, emphasis added)):
American Express’ Business Model
American Express divides its operations into three large segments: Global Consumer Services Group (GCSG), Global Commercial Services (GCS), and Global Merchant and Network Services (GMNS). Broadly, the company earns revenue from two major sources: cardholders and merchant partners. Among cardholder revenues, American Express earns money from interest on outstanding balances, card fees, conversion fees, and more. The largest portion of the company’s revenue, however, is discount revenue derived from transactions occurring at partner merchants around the world.
American Express’ Cardholder Revenue
One of the main reasons the entire business model stays viable is that American Express has tens of millions of cardholders who don’t understand how it works [How’s that for a Freudian slip!], demonstrating this by failing to pay their bills on time. As with all credit cards, outstanding balances tend to generate massive interest and late fees, which spells larger revenues for the issuing company. We won’t explain the basics of how credit cards work right here, but the late payers make it easy for the rest of us to ride free. With 114 million American Express cardholders charging about $1.2 trillion in 2018, that’s a lot of revolving credit.
Note how the author (undoubtedly screened by the company’s lawyers / solicitors) is careful to provide for plausible deniability around the fact that the “discount revenue” is legally and actually defined and recognised as “interest revenue” received from card-users and not merchants by describing it as being “derived from transactions occurring at partner merchants…”.
And of course the merchants formerly organising a lynch-mob in Boston with an American Express card impaled at the end of a foot-long butcher knife, and of the same mind-set as the one in Toronto whom Amex was “making an example of” have been transmogrified into “partner merchants”.
And the whole ridiculous notion and pretence that there is no credit has been dropped with the obvious yet still breathtaking observation that “With 114 million American Express cardholders charging about $1.2 trillion in 2018, that’s a lot of revolving credit”. Here again – “No sh*t, Einstein!”.
And virtually all references to the broadly-defined business state or imply that the money is being charged off to some other party – either “interest payers” who irrationally choose to incur the outrageous outstanding balance interest rates by not paying off their full balance every month, or the “tens of millions of cardholders” who “don’t understand how it works” and fail to “pay off their bills on time”. Whatever it takes to prevent the card-users from thinking about the fact that they (and / or other consumers) are overpaying by about $500 for every $100 that they receive in “rewards”.
In order for the aggregate card-issuers to skim $1 trillion from the global economy every 18 months, broadly-defined consumers have to overpay by $1 trillion every 18 months. Once again, no matter how hard the bankers try to get us to believe otherwise – this isn’t bleeping rocket science. It is just plain and simple racketeering.
Isn’t it fun having our perception of reality so carefully managed and manipulated by teams of psychologists and psychiatrists while being robbed blind by people who are technically violating over a dozen international anti-racketeering laws and laughing in our faces about it because the governments they also own make a policy decision not to prosecute them for it? The law is the law – except when it’s not.
Regardless, both the nominal method and the illegal-capitalization-in-advance (accounting-fraud) to conceal the credit-charge cross-leverage or cross-compound upon each other. The total financial rake-off and deception is vastly greater than the mere sum of its parts.
One of the foundational rules of banking is that a bank is not allowed to engage in any other trade or business. But under their aggregate credit / charge-card rake-off system the private banks are obtaining the same return as from about a direct 20% to 40% equity-ownership interest in aggregate small-business worldwide. And / including by effectively taking it away immediately (as an effective rake-off from gross revenue via mandatory price discounts) they ensure that small-business also remains dependent on the banks for high-cost working capital.
As for the approximate $200 million a day global rake-off from the sales-tax revenue, they likely see that as a pure bonus – perhaps as gas money for their fleets of private jets.
And virtually all so-called merchant fees are tailored to match the maximum amount that can be concealed within the public selling price of the particular goods or services being sold to the public. That is why a single independent gas station will get nearly the same 1% to 2% discount rate as a chain of 10,000 gas stations, while the expensive / high-end restaurant across the street will have to concede up to a 6% price-discount.
Here again, this isn’t bleeping rocket science.
Hypothetical honest Government investigator (circa 1994): Let me get this straight – According to your trade publications it costs you less than 4 cents to process a payment-order / voucher regardless of the amount or purpose for which it is issued, while your official position and story for the public is that it costs you from 50 cents to $1 to process a payment-order / voucher to pay for gasoline (1% to 2% of an average $50 face value) and / but it costs you $30 to process a payment-order / voucher from an expensive restaurant (6% of an average $500 face value)? Is that correct?
Banker: You know better than to ask me that kind of question.
Conceptualize the private global banking system as being owned by 2,000 special-people / families that we will call Free-riding-fat-cats. Each of those 2,000 Free-riding-fat-cats receive a $1 million bonus as a rake-off from the global payment system. Every. Single. Day. They divvy up roughly $1 trillion ($1,000,000,000,000) every 500 days or about 18 months.
And that total $2 billion pure daily rake-off is equal to the aggregate or combined gross-labour-income of the poorest one billion people on Earth or roughly 15% of humanity.
It is not merely a prima facie crime-against-humanity but also expressly criminal and racketeering / money-laundering under several different international treaties to which virtually all of the countries belong and have made contractual agreements to recognise and treat as racketeering and money-laundering regardless of whether the puppets-du-jour comprising the government in Canada choose to not prosecute them in Canada.
It is a recognised principle of international customary law that a state may not invoke the provisions of its internal law as justification for its failure to perform its international obligations. (Zingre v. The Queen et al.  2 SCR 392)
So even if the provision under s. 347(7) requiring the consent of the AG were not itself unlawful and illegal (and in fact a Nuremberg-level offence / crime-against-humanity), it still could not be used to negate Canada’s international treaty obligations to treat it as a racketeering offence, and to seize whatever proceeds of crime are involved.
Strictly-speaking these poorest one billion mostly-people-of-colour are where they are and will very likely stay there due to the policy of a representative 2,000 mostly-white-bankers acting in active reliance on a scandalously illegal law-of-apartheid.
…thus preventing the application of the section to [criminal] commercial practices to which it was not intended [by the bankers and other controllers of the credit / money system] that it apply. It then becomes a question of the Attorney General’s discretion [i.e., administrative or back-door-apartheid passed-off as policy]. ((Select Standing Committee on Banking, Trade and Commerce) (SSCBTC) transcripts; 4-11-1980 [November 4, 1980], 24:28)
And it is all stabilized by about $10 billion per year from the gross rake-off being kicked-back directly to card-carrying judges, lawyers, court-workers, politicians, political parties, and the owners and employees of credit-reporting agencies, in the form of membership-rewards and other air-miles-like kick-back programs. The bankers systematically go about the business of capturing any one or any thing that can stop them. They put the organised in organised-crime.
As the former bank-lawyers / solicitors directly appointed as judges by the former bank-director and / or former bank-lawyer / solicitor normally occupying the prime minister’s office at any given time put it (from Rule of Law my butt):
Henceforth (as of 1989/90) in Canada, whether a contract / security that is offensive to the criminal / international-racketeering law remains valid as an asset to the nominal-creditor / criminal-offender, and a binding liability on the nominal-debtor / indentured-servant / financial-fraud-victim, depends upon the judges’ (former-bank-lawyers’) opinion of:
The serious consequences of invalidating the [criminal] contract, the social utility of those consequences, and a determination of the class of persons for whom the [criminal] prohibition was enacted…
Welcome to Apartheid 2.0.
Thus far we have mostly examined individual transactions. The effect is even more pronounced on term-loans and mortgage amortisation periods. Here again, the financial consequences of the math procedure error in the alleged nominal method increase exponentially with the stated or claimed interest rate. At a stated rate of 3% per annum, for example, on a 30-year mortgage amortisation (as is the norm in the U.S. for example), it is the difference between making the same monthly payment for 30 years versus 29.75 years. Almost no difference (because the claimed / nominal interest rate is close to zero – and assuming zero loan fees).
By a stated 6% per annum, the extra 1/4 year has increased to almost 1.4 years (30 years v. 28.6 years) and the difference (which is entirely interest) now accounts for about 9% of all the interest money to be paid under the mortgage / contract.
By a stated interest rate of 15% per annum, again for example and to show the incredibly rapid (exponential) progression, it is the difference between making the same monthly payment for 30 years versus 18.7 years.
By a stated or nominal 15%, the fraudulent methodology quietly and exponentially leverages the total interest / money cost of credit under the contract by 93% over and above a real 15%, and accounts for 48% of all the interest money to be paid over the 30-year amortisation. That is another reason among several why the nominal method was at least officially banned outright in the U.K. in 1974 as criminal fraud, and on the grounds that it is “false and seriously misleading”. And a stated 15% per annum was close to the average interest rate (for all credit and not just mortgages) for the 30-year period 1974 to 2004.
The effect is even today massively important on high-rate second and third mortgages (so-called mortgage-broker-loans) even where general interest rates are purportedly low, and most certainly in countries like South Africa where mortgage rates are closely parallel to those in North America in the mid to late 1970’s.
And of course, here too, the illegally-capitalized-in-advance loan-fees cross-leverage or cross-compound the fraud in the nominal method. You really cannot understand one without the other.
From a different perspective – or another logical and criminal tell – in the late 1970’s the global pressure of rapidly increasing interest rates was used to justify repealing the Small Loans Act in Canada to accommodate, among other things, a massive increase in department store credit card account rates from a nominal 6% to a (suspiciously-near-uniform) nominal 28.8%. So-called “Prime” had gone from about 4% to peak at a real 25% (in August of 1981 (a “nominal” 22.75%)). “Prime” has since been up-and-down and long since generally declined to about 3%, but department store credit card rates remain at a nominal 28.8% (a real 32.9%) and have not budged one iota in the ensuing 40 years. So what happened to the market forces? Market forces my butt.
Rolling tsunami of interest
Finally, and from yet another slightly different perspective, consider the following brief excerpt from (my eBook) “Nominal my butt” on the longer-term effects of interest generally and of the nominal method of interest calculation. The much-longer-term-time-element is also directly and overwhelmingly relevant to all of the transactions examined thus far.
(Under the nominal method, when a bank in Canada (and / or the U.S., etc.) claims that the rate of interest is 6% per annum (with monthly payment), it means a real 6.167%).
Entrenched-money-power surfs the long term interest tsunami ever rolling forward
A more recent globally-shared event demonstrates the same essential (managed reality) phenomenon but from a different perspective. Over longer periods, even at still relatively low rates the difference [between a real interest rate and its corresponding nominal or decoy interest rate] is increasingly significant and eventually monumental. On June 11, 2008, Prince Charles was widely reported as having paid off a debt incurred and owed by his (alleged / legally-pretended) family (King Charles II) some 357 years earlier.
At a real interest rate of 6% per annum, the original £453 debt with interest (as at 2008) was about (rounded) 490 billion pounds (£490,000,000,000). Here is the (full text) story from Associated Press. Note especially the mix of studious avoidance and positive deceit as the powers that be dance around the issue of the interest (emphasis added):
Prince Charles pays centuries-old royal debt – without interest
June 11, 2008 – 14:34
THE ASSOCIATED PRESS
LONDON – Prince Charles has paid off a royal debt from the 17th century. But he showed modern day financial prudence by declining to pay the accumulated interest, which would have been substantial after more than 350 years.
The payment of 453 pounds and three shillings, or about $900, was made yesterday during a visit to Worcester by Charles and his wife Camilla. The debt was incurred in 1651 when King Charles II was preparing for the Battle of Worcester.
He asked the Clothiers Company in Worcester to prepare uniforms for his soldiers and pledged to pay afterward – but his forces were defeated and Charles fled to mainland Europe.
He left behind the unpaid bill, and never got around to paying it after he returned from exile in 1660 to claim his throne as king of England.
Worcester businessmen have tried to collect the bill for the last 15 years, and according to a statement released by his office, Prince Charles decided to pay it as “a gesture of goodwill.”
The Master of the Clothiers Company of Worcester, Andrew Grant, received the money from the prince in a 1650-style gaming purse made by the Royal Shakespeare Company. The two met at the Commandery, the royal headquarters during the battle.
“We are very grateful to the Prince of Wales for repaying the debt to the Worcester Clothiers Company,” Grant said.
Prince Charles said he was happy to take care of the debt but said he would not be paying the interest because “I was not born yesterday.” With interest, the bill would have exceeded 47,000 pounds, or $94,000, according to the British Broadcasting Corp.
Although (carefully / studiously) misrepresented in the above article, the general (but still unstated) quasi-consensus (in a plausible-deniability-if-later-challenged sort of way) from all the articles (and / or commentary on the AP story) that I could find through the internet (I spent about an hour searching and reading on the day of the event), is that £47,000 is what the same quantity and quality of uniforms would cost today. None of the articles that I found dealt with the amount of the debt at actual commercial interest rates, or even much lower judgment or pre-judgment interest rates, since the time the debt was incurred (i.e., other than to misrepresent it as in the above article).
So why would they do that? News and newspaper editors are constantly and actively looking for ways to sensationalize their stories, yet here where the very subject is unpaid debt-interest charges, they carefully avoid – and apparently deliberately and radically downplay or misrepresent, the fact of it.
Again, at even a relatively modest real 6% per annum the £453 would have grown to almost £500 billion (£490,000,000,000). The story was carried all over the world but, as far as I have been able to determine, not a single mainstream (or even alternative) media outlet dealt with the enormity of the real debt, even to speculate – as if the subject of debt-growth / compounding were itself taboo. At a real-world commercial rate of 2% per month on overdue trade accounts, the royal debt with interest would have grown to £3,119,784,110,359,810,000,000,000,000,000,000,000,000 (i.e., £3.1 octillion-billion). Albert Einstein said “The most powerful force in the universe is compound [constant rate] interest”. He knew what he was talking about.
At a nominal 6% per annum, meaning an actual 0.5% per month (or real 6.167% per annum), the Royal Family’s debt with interest would have increased from £490 billion to £861 billion versus a real / actual 6% per annum or 0.4868% per month. At just a fraction over a real 6.2% per annum the debt would have grown to exactly £1 trillion.
If I were the editor of a newspaper, especially a stereotypical British tabloid, I would have had a two-inch banner headline screaming: “Royal Family artfully dodges £1Trillion (£1,000,000,000,000) in overdue interest!!!”. And on a slow news day I would have had some trouble resisting “Prince of Wales welches on £1Trillion Royal Debt!!! Probably explains regardless why I’ll never be hired as a mainstream newspaper editor. Real-world editors would seem to know instinctively that they can’t go there.
If you know where to look (and I do), then this at-least-constructive conspiracy has been going on in earnest for at least the past 150 years, and we are now well into the runaway phase of the exponential function.
Likewise the concealed-credit-fee rake-off industry at-least-constructive conspiracy has been going on for some 60-plus years. And both of these monumental frauds compounds upon or cross-leverages the other.
Does it really matter, then, whether we can objectively establish as to whether the perpetrators are more correctly idiots versus criminals? Whether they truly believe or not their own utterly ridiculous and transparently-fraudulent stories?
The private global financial system is sucking liquidity from the global economy at monumentally brutal and truly breathtaking real rates with one dominating object in mind – and that is to take away the working capital of the masses (including small business) to ensure that they stay poor, politically powerless, and subservient to the owners of the private banking / financial system for its own sake. It is not about greed, per se. It is about perpetuating domination.
When I was a high-school junior in the early 1970’s, one of the most salient news stories was when the American industrialist Howard Hughes became the world’s first billionaire and purportedly the world’s single richest human, with an inter-generationally-accumulated family fortune of $1 billion. Some 45 years later and a relative handful of uber-wealthy families are skimming the USD-equivalent of twice that amount – about $2 billion – every single day – as purported administrative charges on the truly massive amount of new credit that they are also creating / kiting (actually obtaining and reinsuring) through the same device – every single day. Here again, that is about $1 trillion ($1,000,000,000,000) every 500 days. And, here again too, we are all necessarily overpaying by the same $1 trillion every 500 days or about 18 months.
Yet the lap-dog media that they also own and / or control has been very carefully trained not to go there at all – except to systemically and systematically misrepresent the reality of it to the little people upon whom they and their masters feed.
Beyond that, and back again to the nominal-method, at the high-end, the more general and utterly absurd situation is:
We, being 80% of the global private financial system, have a right to assess and receive interest from the working-poor and rank-and-file military at the rate of 30,000% per annum, when we declare, disclose, and gain their contractual agreement and consent to pay 300%, because we got away for decades with passing off a real 3.05% as being only 3%, and we use the same exponentially-increasingly-inaccurate and recognized fraudulent formula in both cases. We always used to pretend to round-off 3.05% and call it 3%, so today we have a right to pretend to round-off 30,000% and call it 300%.
That’s. Not. Sane. It is the real world and it is what it is.
It is what happens when you destroy most everyone’s ability to understand math and numbers. Your reality becomes subject to the controllers’ ability to manipulate language – and that is near limitless. If a real 6% per annum is the appropriate metric, then the AP news-story’s implied estimate of £47,000 is out by a factor of more than 10-million-times – or seven orders of magnitude – yet virtually no one notices.
In the result, the nominal method has become a genuine glitch in the matrix.
Interest is the single most significant source of new income on Earth, which currently accounts for the USD-equivalent of more than a net new $10 billion every day. There are two broadly-defined factions. One faction, representing about 80% of the global financial services industry, employs a ridiculous and recognised fraudulent calculation method to account for as much as 90% of the amount of interest money assessed / harvested on any given day (e.g., as at the high end of the payday loan industry or sub-industry). The other faction, which represents the remaining 20%, expressly recognises the multi-faceted fraud and illegality of the first / other-faction’s method, and at least technically / legally bans it outright in 1974. It then goes on for 45 years without anyone even mentioning it.
Welcome to The Twilight Zone of global finance and social control, and the breathtaking criminal incompetence of the mainstream media.
And when I last checked about four years ago, according to Wikipedia there were some 25,000 PhD’s in Economics globally, who have apparently failed to even notice the existence of this rather large elephant in their living room.
The word-game explanation is: “Well you’re just talking about compound interest.” But virtually all interest is compound interest – in practice there is no other kind. As explained in the handbook Monthly Payments for Mortgages:
If these conditions [rate period and payment period being the same] are not met, a mathematical adjustment is necessary to make the periods of time the same. This adjustment, more commonly called compounding in mathematics of finance, is required because not only does compounding occur when interest is added to interest but also when a payment is made.
If interest is paid annually, then it is compounded annually. If interest is paid monthly, then by definition it is compounded monthly. And if it is taken as a rake-off daily – then it is compounded daily. Yet the broadly-defined public has been constructively brainwashed to perceive the opposite – that when interest is paid it is some lesser-peril called simple interest and not compound interest. So the bankers’ answer to the reality of it is that the way to avoid paying them compound-interest is to be certain to make your compound-interest payments on time. Compounded means converted and all interest is compounded whenever it is converted from debtor to creditor.
The further linguistic / cognitive explanation is that if you ask a typical human: What is the opposite of “principal” they will reply “interest”, and vice versa. But in a very critical sense both “principal” and “interest” are exactly the same thing – they are both “interest-bearing-debt”. “Principal” is interest-bearing-debt, and “interest” is interest-bearing-debt. That is why in practice virtually all interest is compound interest.
Concurrently, all the (ordinary perceived) debt in the world that has been compounding forever, currently generates about $10 billion per day ($10,000,000,000) in new interest charges. While the private global credit / charge-card issuers who record (keep-track-of) a substantial portion of the new daily transactions obtain an additional 20% or about $2 billion a day ($2,000,000,000) in “small transaction charges to cover the administrative costs of processing the transactions”. “We have to charge you an extra $2 billion a day to pay for actual expenses of about $10 million a day and the computer system that keeps track of how much money you owe us. And notwithstanding that we purchased said global computerized infrastructure with the money we stole from you earlier.”
The public is officially told that these private banks are in the free loan business. And all it takes is to simply label the concealed-credit-charge / interest-accrual-period as a grace-period and the public laps it up.
Of course, here again and to be fair, to keep what they call The Wheel turning, the bankers do also kick-back some 20% of the gross daily rake-off, or $400 million per day globally, as and under Membership Rewards and broadly-defined Air Miles programs. These so-called programs were the industry’s answer in the early 1990’s to the various merchant revolts like the one that so distressed Jimmy Three Sticks at American Express on that chilly April morning in 1991. Get the card-users to put massive pressure on the merchants to submit to it (and to recover their relative losses from cash, cheque/check, and debit-card customers, and generally / commensurately higher prices for everyone).
And be certain to direct at least some $10 billion per year of the kick-backs from the kick-backs to judges, lawyers, court-system-workers, politicians, political-parties, and the owners and employees of the credit-reporting industries that make it all run smoothly.
Either way, the $2 billion that the banks will skim today gives them an additional $2 billion that they can spend today. But it also simultaneously creates another $2 billion of debt because it is taken as a rake-off from the payments to the accounts so that the interest-bearing outstanding balances are also not reduced by that extra $2 billion. And that extra-extra $2 billion then pays them or generates more interest to them in perpetuity. Then repeat the cycle tomorrow, and the next day, and the next, also in perpetuity.
That is how you go from the world’s single richest human having an inter-generationally-accumulated family fortune of $1 billion in 1974, to $2 billion-a-day or a $1 trillion rake-off every 18 months in 2019.
One might think that at least one PhD Economics out of 25,000 could figure that out.
Instead the bankers say – “No it’s not a concealed-credit-charge – it’s a discount-for-cash”.
So if a given merchant accepts MC, Visa, and Amex, with a 3%, 4% and 5% “merchant discount fee”, respectively, then how much is the price of the merchandise, and how much is the discount for cash? Well obviously there is no answer because there is a different concealed-credit-charge depending upon the supplier of the “free loan”.
And how regardless and exactly, does one stuff a $2 billion discount for cash into one’s pockets each day?
Between the nominal method and the concealed-credit-fees, it is as if the entrenched-money-power is engaging in a competition among themselves to see who can foist the most outrageously stupid story on the public and get away with it.
Unless I am losing my mind, I have to believe that I have clearly and unambiguously satisfied our three starting conditions / qualifications:
- The issue must be obviously and unquestionably important.
- The fact of it must be objectively and easily provable, so that
- Men and women of conscience can pursue it with the utmost confidence that they cannot be wrong or even mistaken in its importance, or be ridiculed as a conspiracy theorist.
All educated professionals and men and women of conscience who care about the future of humanity need to embrace this issue (and / or these two issues) and refuse to let it go, no matter how much the constructive or actual conspirators may twist and turn to shake you, or to lose you, or to otherwise get you to believe and accept that: These are not the droids that you are looking for. Move along.
All debt everywhere in the world, by total amount, exists and would not exist – based on the payments of money already made – without the error and fraud in the alleged nominal method – and by several times over.
And that is just since 1974 when the nominal method was recognised as criminal fraud and made illegal in the U.K.
The most critical functionality of the nominal method is that it has almost no effect, per se, on the entrenched-money-power, but is absolutely devastating to the working-poor and rank-and-file military, while simultaneously transferring back the product of the labour of the working-poor to the entrenched-money-power, while allowing the latter to claim and to believe that it is using the same and consistent method for everyone. But the poorer you are – the exponentially-more you get financially screwed by it.
Its true function is to help ensure that the working-poor and rank-and-file military remain in a state of perpetual poverty, subservience and political powerlessness.
The concealed-credit-fee industry serves the same purpose to make sure that small business stays that way.
What struck me as near inconceivable was that even professionals, such as medical doctors and economists, who routinely deal in the mathematics of exponential growth and exponential-based relationships generally, when exposed to the CBC article stating that a real rate of 180,000% is only 435%, had no real clue that there was something wrong with the math – until it was specifically and emphatically pointed out to them.
Put more bluntly, why would any rational / sane man or woman care what some economist or financial analyst thinks about a 1% versus a 1.5% US Fed Rate, when these purported experts genuinely cannot tell the difference between 435% and 180,000%?
The bankers and their owners are not financial geniuses – the only reason they own and / or control everything is because their great-grandfathers accidentally discovered the great Stupid-ray that keeps the rest of us believing whatever they tell us, no matter how obviously and profoundly stupid.
Educated people acting in good faith have got to take back control of this planet from the professional language manipulators, or else we are all doomed – and I don’t mean in the distant future, but rather right soon.
Timothy Paul Madden, Johannesburg, South Africa. October 30, 2019.
Allonge and endorsement
We the undersigned, as educated professionals and / or reasonably educated and intelligent people / beings-of-conscience, and based on the evidence so provided and the prima facie nature of the issue once our specific attention is brought to it, support and will give our intellectual assistance into a bona fide global inquiry into the use and persistence of the alleged nominal method of interest calculation and its effects on human socio-economic and socio-financial relationships, including and especially the ongoing accrual and concentration of unearned and unjust wealth and power for the purpose of dominating other humans.
Appendix A – text of April 27 1990 Edmonton Journal article
Court win could spur claims worth billions
City man defeats Eaton’s in interest-rate case
[by] Ron Chalmers
Journal Staff Writer
An Edmonton man says his court victory over Eaton’s department store could spark billions of dollars in claims against banks and other creditors.
A lawyer agrees that “drastic consequences” could follow.
Tim Madden argued that Eaton’s did not accurately disclose its annual interest rate on his charge account.
M.B. Funduk, master in chambers at the court of Queen’s Bench in Edmonton, agreed in a recent decision, applied the Interest Act and awarded Eaton’s only five-per-cent simple annual interest on Madden’s $467.27 charge-card balance.
Eaton’s had claimed interest of 2.4 per cent per month which, on information it provided to Madden, was equated to 26.8 [sic] per cent annually [should read 32.9 per cent annually] Mr. Chalmers likely confused (or cross-confused) the fact that 2% per month is equal to 26.8% per month, while 2.4% per month is a “nominal” annual rate of 28.8% but a real rate of 32.9%).]
But Madden successfully argued that 2.4 per cent monthly compounds to 32.92 per cent annually.
Funduk, citing the recent precedent of The Bank of Nova Scotia v. Dunphy Leasing Enterprises Ltd. [sic] [actual case name is Dunphy Leasing Enterprises Ltd. v. The Bank of Nova Scotia] agreed with Madden and ruled that “as the contract does not provide an effective annual rate of interest, the defendant has to pay interest at 5 per cent per annum simple interest.”
Madden says that that will save him about $1,000 – and could create a $100 billion headache for banks, finance companies and department stores.
Bradley Willis, a Red Deer lawyer who has acted for clients who sue banks, says the Interest Act clearly states that “If you don’t come to an agreement, it’s five percent.”
[The above statement is wholly non sequitur – Mr. Willis is referencing s. 3 of the Interest Act and not s. 4. Section 3 provides that where parties agree to interest but fail to provide for a rate, then the rate shall be 5% per annum. That had nothing to do with the case.]
He suggests, however, that Eaton’s or The Bank of Nova Scotia might argue, in appeal, that their contracts did effectively disclose the true interest rate and that their customers agreed to them.
[This statement, also by Mr. Willis, is nonsense because the word “nominal” means “existing in name only – not real or actual” and the people in the credit business rely upon that meaning in fact to justify the inaccuracy of their stated annual rates. The whole point is the so-called “nominal interest rate” is not an interest rate. It is a circular reference for the number of payment periods in a year and has nothing to do with the rate of interest, per se.]
[Also, and although I did not know it at the time, the Canadian bank/system’s “nominal method” had been prohibited outright in the U.K. as criminal fraud since 1974 on the grounds that it is “false and seriously misleading” (and which is itself the understatement of the century.]
If the appeals fail, “drastic consequences may well be the case”, Willis predicts.
Madden believes that credit granting companies [in Canada] earn as much as $10 billion annually from the discrepancy between real and advertised interest rate[s].
He foresees “massive lawsuits” and possibly the “collapse of the banking system” if his victory stands.
But he only wants the credit grantors to change their practices.
Local Eaton’s executives refused to comment. Max Gold, lawyer for Eaton’s, says they are considering a possible appeal.
Bernie Webster, spokesman for the Canadian Bankers’ Association, predicts the Dunphy case will be appealed.
In the Dunphy case, decided March 26  in Calgary Court of Queen’s Bench, Justice Peter Power ruled that Dunphy Leasing Enterprises Ltd of Calgary had over-paid the Bank of Nova Scotia by $85,000 because the bank had equated a monthly interest rate of two per cent to an annual rate of 24 per cent. [actual rate per annum is 26.8%]
While I do not believe that either Mr. Chalmers of the Edmonton Journal, or the Red Deer lawyer Mr. Willis, deliberately set out to obfuscate or confuse the issues, it would have been difficult for a typical reader to fully grasp what the Courts / judges had actually ruled, because of the errors and omissions in the article as pointed out above.
Although Mr. Chalmers does seem to have cherry-picked my comments from our actual conversation / interview to emphasise the consequences to the banks etc. instead of the massive amounts of money involved from the differential and the exponential nature of the error / fraud in the nominal method. He did mention the $10 billion figure but that was only the then-current-year overcharge taking all of the existing debt as legitimate. He did not mention that all of the debt then in Canada was a direct function of the accumulated overcharges from the bogus methodology.
Also, Master Funduk had actually been rather hostile to my position, but he was bound by the higher Court ruling in Calgary that had been released six days earlier after a trial that had lasted eight years and which had involved extensive evidence on the bogus nature of the nominal method from Dr. Charles Prentice who was a business math professor from the University of Calgary.
Master Funduk’s ruling and reference to “simple interest” was also incorrect and contrary to what the Calgary judge had ruled. The term “simple interest” literally means “interest at a declining rate” and the judge in Dunphy had ruled that the Bank of Nova Scotia was bound by s. 4 of the Interest Act to use the mathematically accurate effective or real interest rate formula. The difference is slight at that low level (about 5.1% versus 5%) but it is still important to get the details right. On the whole I did not get the impression that anyone involved (other than Dr. Prentice) had a firm grasp of the math or of its consequences.
The ultimate spin on the issue from the lawyers, bankers, and mainstream media was that the discrepancy was so small as to be trivial, and / but that the financial system would collapse if they had to pay it all back!
- “26.8” in the fifth paragraph should be “32.9”. See full text at end as Appendix A. ↑
- Based on the per diem principle under GAAP, the base deception is 993-times greater, but the vast majority of creditors then employ various other fraudulent devices to virtually always leverage the total to over 1,000-times. ↑
- Although even in the U.K. the creditors only obey it up to about 60% per annum, and then habitually default to the illegal nominal method (to spare the working-poor and the public generally the trauma of knowing the truth). Also, if both were provided then the people would realise that they are two very different things, and not two different ways of disclosing the same thing. ↑
- Lor-Wes Contracting Ltd. v. The Queen, Federal Court of Appeal;  1 F.C. 455. The courts / judges were more or less forced to overturn the 400-year-old rule because the judge in the case was being compelled to essentially guess at the meaning of safety regulations in legislation regarding the construction of a nuclear power plant. ↑
- Although any serious inquiry would have also revealed massive collusion between the money-people and the lawyers and which would have significantly altered the liability dynamics. ↑
- Smith et al. v. Canadian Tire Acceptance Ltd. Aug. 22, 1994; Winkler, J., trial decision p. 26. Subsequently ratified in 1995 by the Ontario C.A. and the S.C.C. I had abandoned my (2nd) appeal in Alberta in favour of filing a class-action against Canadian Tire Acceptance (CTA) in Ontario. The first Alberta appeal court (in 1992) had ruled that because Eaton’s had provided a nominal annual rate, the law requiring disclosure of the real annual rate did not apply! CTA’s contracts had the rate-forms reversed. Note also that the Courts’ decision was doubly deceitful because both the U.K. legislation and the Canadian Criminal Code specified the identical mathematically accurate actuarial formula that had existed for centuries. The U.K. did not “devise” the formula in 1974. ↑
- The article advances a rather odd use of the term adhesion contract. I first encountered the term in the early 1990’s. It was then used to describe the practice of credit card companies in the 1970’s of mass-mailing unsolicited credit cards to people with bank accounts with the provision that if they chose to use the card, then they also agreed to be bound by its terms. The term adhesion contract had the same sense as a bait contract where if the target took the bait, then they were bound by the terms. That basic business model has since become so entrenched that there may be an organised or consensus effort to redefine the meaning of the term to distract from its original meaning. ↑
- The article also used nominal loan fees to reduce the nominal annual rate from 780% to exactly half or 435%. Apparently even the true nominal rate was deemed too high for public consumption. And the constructive disclaimer passing off the responsibility to the Financial Consumer Agency still constitutes criminal incompetence by the CBC. ↑
- Which was itself based upon the Queen’s Bench trial decision in Dunphy Leasing Enterprises Ltd. v. Bank of Nova Scotia (1990) which had been decided some six days earlier after a circa 8-year-long trial. Neither one of us had been aware of the other at the time. See “Nominal my butt Part 2” for the whole sordid story of how the former bank lawyers committed massive additional crimes to avoid their financial and legal / criminal liability. ↑
- Re: Miglinn and Castleholm Construction Ltd. (1977) ↑
- I do not presently have access to all of my original research material (from the 1990’s (in storage back in Canada)) and the edition / publication date may in fact be 1938. But the same entry is very likely in both the 1931 edition and the original 1924 (first) edition. (When I switched to a Mac from a PC in 2012 some of my footnotes did not copy over to the new format). ↑
- Select Standing Committee on Banking and Commerce hearing transcripts,  p. 464. ↑
- Hansard, British / U.K. House of Commons, 14 November 1973, pp. 522, 525. ↑
- See the extensive discussion of the Supreme Court of Canada in R. v. Olan, (1978), 41 C.C.C. (2d) 145, 86 D.L.R. (3d) 212,  2 S.C.R. 1175 on the essential and material elements of criminal fraud under English and Canadian criminal law. ↑
- And / or switched back to the nominal rate if the the real rate was above about 60% per annum. ↑
- Hansard, Canada, House of Commons April 25, 1939 p. 3204. ↑
- supra, p. 3272. ↑
- supra, p. 3273. ↑
- It is difficult to obtain accurate / precise figures (it is growing so fast that it like trying to hit a moving target) but this is a very conservative estimate / extrapolation based on (among others) the 2016 report from the Financial Health Network in the U.S.: “This year, we report that financially underserved consumers in the U.S. spent approximately $173 billion in fees and interest during 2016 to borrow, spend, save, and plan across 29 financial products in this diverse and continually growing marketplace.” Also bear in mind that although the average may be $1,000, there is also a very high standard deviation or average variance, meaning for example that the local averages in the U.S. will be much greater than those in India. ↑
- The annual rate of inflation corresponding to 100% per month is 409,600% but the annual rate of interest corresponding to 100% per month is only 409,500% because 100-percentage-points of the total is the original principal amount. ↑
- And likely several other publications as well. I just happened to come across the insert in the then current U.K. edition of Esquire (at the public library in Edmonton (Canada)). ↑
- At an average 3% concealed-credit-charge, the Visa-banks alone are currently (2019) skimming almost $1 billion per day from a gross (Visa) throughput in excess of $11 trillion ($11,000 billion) per year (global USD-equivalent). Also do not confuse the approximate 8% of the gross rake-off that goes to Visa International with the 92% that is retained and divvied up by the card-issuer-bank and the nominal-merchant’s-bank. The $2 billion daily total also includes so-called debit-card charges that are determined as a percentage of the amount of the debit and / or fixed amounts above the actual cost of processing. Also, the range of 2% to 5.75% was from an earlier US Federal Reserve study of US rates. The Canadian bankers conceded to Parliament that rates in Canada were “somewhat higher” than those in the US but refused to supply the actual figures on the ground that pricing secrecy is essential to the competitive process!According to the forbes.com website on December 17, 2018, here are the latest (2108) figures for Visa alone:Payments Volume Growth Boosts Visa’s 2018 Earnings; Key Initiatives To Drive Future Value (October 29, 2018):In fiscal 2018, Visa’s number of cards (including virtual cards) increased by about 80 million to 3.3 billion. The total volume surpassed a record $11 trillion, driven by 182 billion transactions during the year. The company’s payments volume growth remained strong across the globe, with double-digit growth (in constant dollars) in all regions except Europe. [Based on 182 billion transactions per year, an allowance of 2 cents per transaction would generate almost exactly $10 million per day to pay actual processing expenses (for Visa)]. ↑
- The word “forged” in this context is quite interesting. Because of the concealed credit fees and / or the criminal rates that are so concealed, the securities are legal forgeries or forgeries-in-law. It is difficult to know whether the use of the term is a Freudian slip, or if the owners of the newspapers are merely rubbing our noses in it. ↑
- Based on the yield. In fact 100% of it was technically received at a criminal rate because by procedure it was all capitalised in advance at an infinite or at least astronomical rate to facilitate its concealment from the card-users. ↑
- More directly, the banks’ Merchant Agreements all expressly forbid the merchants from directly or indirectly revealing the fact or amounts of the concealed-credit-charges. ↑
- Note that the spokesman for Revenue Canada is careful not to say plainly: “These charges are expressly exempt under the tax laws” but instead the much more vague and subdued “considered to be exempt”. ↑
- The example was also premised on the payer of the standby fee later choosing not to claim or draw upon it, but that is both wholly irrational and irrelevant either way. The criminal act is complete as and when the nominal creditor receives the illegal payment as defined under the section. ↑
- A standby-fee is a de facto insurance premium that is paid up front from the nominal / potential borrower’s own funds for a standby-letter-of-credit which is a de facto insurance policy that pays on proof of non-performance (unlike an ordinary letter-of-credit that pays on proof of performance). What the more sophisticated committee members wanted to avoid was any example where the credit advanced also creates the loan fee money itself (as with a so-called merchant fee or merchant-discount fee). ↑
- “interest” means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes; (s. 347(2)) [and]”credit advanced” means the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral agreement or arrangement; (s. 347(2)). ↑
- The section was originally enacted a s. 305.1 and later amended to s. 347, but I will refer to it throughout by its current designation as s. 347. ↑
- R. v. McRobb (1984), 20 C.C.C. (3d) 493 Appeal dismissed (1986), 32 C.C.C. (3d) 479 (Ont. C.A.) ↑
- Based on a marginal-cost-of-processing of one-cent per transaction, which is still above the expected amount based on the logical progression. In 1992 the published/documented cost of processing was four-cents per transaction, and which had declined to two-cents per transaction by the early 2000’s. I have not done any recent or further research in this area but based on existing cost-of-technology-models their expected processing costs should today be well below one-cent per transaction. ↑
- Note the manifest absurdity of the assertion. A discount is akin to a void or a shortfall or an amount of credit that is not advanced. It is not a kind or species of credit but a kind or species of nothing. So how do two banks split a shortfall or amount of credit that is not advanced? “The interchange system also allows the splitting of [the amount that the merchant does not receive]”. How do you split an amount not received? The real question is not as to where the so-called merchant revenue comes from but rather when does the bank receive it. The bank does not actually receive it until the card-user pays the full balance at the end of the concealed-credit-charge-accrual-period or grace-period. And yes, the people who operate the banks do in fact have a God Complex that allows them to grant grace periods and/or redemption periods and on occasion to forgive loans. And of course those upon whom the banking system smiles are a special class of people who are deserving of “free loans”. As one criminally incompetent Parliamentary investigation into the credit/charge-card business in Canada concluded: “That some cardholders receive what is in effect a free loan should not lead others to believe that they too deserve a free loan”. The rank stupidity of the government investigators is nothing short of breathtaking. ↑
- This last assertion is (also) absurd and ridiculous. There are dozens of ways for one bank to statistically determine the so-called discount rates of the others. Also, this particular explanation neglected to mention the fixed charge or rake-off of 25 cents to the interchange (e.g., Visa International) which at the time was owned (as a co-op) by all the visa banks pro rata to the number of cards issued by a given bank/member and throughput per card). ↑
- In any given year. When cumulative “Annual Fees” and other fees are taken into account the longer-term running average is about, or rather at least, 150% per annum. ↑
- In this case at the extreme high-end, Mr. Liu’s Annual Fee would likely be a relatively negligible portion of his annual throughput (gross charge volume). Averaged over Amex’s entire cardmember-base, however, after payment of their fourth Annual Fee, Amex is in effect loaning card-users their own money back once every 36 days while taking up to a 6% rake-off from each cycle. That is why its minimum return is about 250% per annum. But of course the real rate of return is infinity because Amex does not put any of its own money into the transactions. By signing the payment order Mr. Liu advances $170 million of credit to Amex and all Amex does in substance is to insure Mr. Liu’s $170 million of credit to Amex for the 21-day grace period between issuing the payment order and re-payment or payment again 21 days later. ↑
- And that 8% was in the 1990’s when the clearinghouses were owned by the card-issuing banks. Visa International at least has since been sold off as a public company and it is likely that the clearinghouse rake-off will be closer to the approximate 1% that would represent actual processing costs plus a healthy profit. ↑
- Note the absurdity of the literal definition of a discount fee as being a fee paid by the merchant to receive less than amount ordered by the card-user. No thanks. Just pay me the whole amount and there will be no need for the discount fee. ↑
- This figure is extremely misleading. The US Federal Reserve system study determined that the range of Visa rates in the US at that time was 2% to 5.75%. It appears as though (at best) the authors contacted Visa and were given merely Visa’s best rate in the US. As they were writing a book about Amex they likely did not follow up on the Visa figures. Actually a case can be made for gross incompetence or willful blindness of the authors, who recognized the flaws in Amex’s official story but did not take it any further. According to the official story Amex has no reason to exist. The company receives, recognises, and records tens of billions of dollars annually of “interest / credit-fee income” while its official spokesperson can state with a straight face “[T]he firm [Amex] doesn’t make any money through interest..” What a world! ↑
- Toronto Star, January 15, 1992. ↑
- Including so-called equipment leasing / rental fees for card processing. A typical small business in Canada (circa 1999) would get a 5% nominal discount rate, plus a monthly equipment fee that boosted the effective discount rate to about 8% based on actual throughput). The equipment fees act as a fourth-node on the discount-daisy-chain that breaks up the total charge into smaller pieces (i.e., Merchant’s Bank – Visa International – Card-user’s Bank – Equipment Fee) that all take a seemingly small rake-off that corresponds in total to about 8% of gross revenue. Plus the sales-tax component is effectively double because the concealed credit fees are not supposed to be taxed at all but are in effect taxed twice otherwise the card-user might become aware of the concealed credit charge itself. ↑
- Thomson, (William E.) Associates Inc. v. Carpenter  34 O.A.C. 365. Note also how quickly (in the same decision) the Court / judges commit the constructive Freudian slip of referring to the criminal law as a “prohibition” notwithstanding the substance of their core ruling in the same case that there is technically no such prohibition. It is criminally insane either way of course, but that’s policy. ↑
- The financial system in the U.K. is just as criminal as in Canada and most everywhere else – they just use different fraudulent techniques to adapt to different circumstances such as the banning of the nominal method. ↑
- Monthly Payments For Mortgages, pub. by COMPUTOFACTS (1973) Willowdale, Ontario; at p. 636, ↑
- At least nominally. The air-miles programs, for example, buy unused capacity from the airlines at much lower prices and then likely report the full retail price as the value of the reward – so it may in fact be as low as about a 10% gross kick-back from the rake-offs. ↑
- Even if the $2 billion is overwhelmingly paid by free-riders it still directly increases the banks’ aggregate capacity to accommodate new purchases and increasing balances from the interest-payers (like a giant ratcheting-device). In practice also even the free riders would or could have used the concealed credit charges to pay down their other debts. ↑