MMM Is Immortal: the National Bank of Kazakhstan Carries On Mavrodi's Work

The man who set the price himself

The MMM cooperative was registered in 1989. The name is three surnames: Sergei Mavrodi, his brother Vyacheslav, and Olga Melnikova.

The price of an MMM ticket was not set by any market. Mavrodi announced it personally — twice a week, on Tuesdays and Thursdays. It was called self-quotation: the issuer states what the paper he issued is worth today and prints it in the newspapers. The ticket was backed by nothing but the announced number. The number rose because it was announced as rising. By Mavrodi’s own estimate, there were more than fifteen million depositors.

What follows is the part usually told wrong.

The pyramid did not collapse on its own. On 4 August 1994 the tax police and riot police entered the office on Warsaw Highway, Mavrodi was arrested, and the quotations fell a hundredfold in a day. The mechanism was not exhausted — it was stopped from outside.

Remember that. By the end of this article it will turn out to be the one difference that matters.

In 2007 a court gave him four and a half years for fraud. The offence is worth remembering exactly. Not “issued an instrument backed by nothing” — that is legal. Not “set its price himself” — that is legal too. He was convicted for promising an income that had no source.

He was seventy-six years late

Assembling the name from three surnames, Mavrodi did not know the initials were taken. And taken long before.

Modern Money Mechanics. A booklet of the Federal Reserve Bank of Chicago: a workbook on bank reserves and deposit expansion. First edition May 1961, last revision 1992.

Not an underground document. A teaching aid the American central bank mailed out free to schoolchildren and students: thirty pages, with pictures and exercises, on where money comes from.

But 1961 is the date of publication, not of invention. The booklet invented nothing. It wrote down in plain language what had been running for forty-eight years already.

The count starts on 23 December 1913, when the Federal Reserve Act was signed. That is when the mechanics were established: the right to make money out of thin air — by typing figures — went to a system of private banks headed by a central one. Half a century later the booklet merely said so aloud, and gave the thing a name that a Moscow cooperative would later repeat by accident.

Count from the law, not from the booklet. December 1913 to 1989 is seventy-six years. That is exactly how late Mavrodi was.

What came before the Federal Reserve

In the autumn of 1907 a banking panic swept America. There was no public money to save the system: it was saved personally by John Pierpont Morgan, who gathered the bankers and allocated who would support whom. A country with the world’s largest economy discovered that its financial stability rested on the health of one elderly man.

The conclusion drawn was correct: a permanent mechanism was needed. What is interesting is who wrote it.

November 1910. A private railway car with drawn blinds leaves New Jersey heading south. Six passengers have agreed to address one another by first names only, so the staff will not learn their surnames. They are bound for Jekyll Island off the coast of Georgia, to a hunting club closed for the season.

The surnames they hid are today listed by the Federal Reserve System itself on its own history site: Senator Nelson Aldrich, chairman of the National Monetary Commission; Piatt Andrew, Assistant Secretary of the Treasury; Arthur Shelton, Aldrich’s secretary; Henry Davison of J. P. Morgan & Co.; Frank Vanderlip of the National City Bank; Paul Warburg of Kuhn, Loeb & Co.

Three bankers, two officials and a secretary spent nine days drafting a bill to regulate banking.

This is not a guess by the Fed’s opponents. It is a participant’s admission. On 9 February 1935 Vanderlip published a memoir in The Saturday Evening Post in which he wrote plainly:

“Despite views about the value to society of greater publicity for the affairs of corporations, there was an occasion, near the close of 1910, when I was as secretive — indeed as furtive — as any conspirator.”

The word “conspirator” is his own, chosen voluntarily, for a magazine with a circulation in the millions.

But what came next matters more than the secrecy. The Aldrich plan failed in Congress — it smelled too much of Wall Street. It was rewritten, renamed, and then passed in the open: the House by 298 votes to 60, the Senate by 43 to 25. On 23 December 1913 Woodrow Wilson signed it into law.

The mechanism did not creep in by stealth. It was passed by majorities, in daylight. The question is not how it passed, but what it does.

Who owns the Federal Reserve

There is no National Bank of the United States. No such institution exists, on any map or in any law.

There is the Federal Reserve System, and it has two parts. The Board of Governors in Washington is indeed a government body: seven members, appointed by the President with the Senate’s consent. And there are twelve district Federal Reserve Banks, which do all the work: hold the reserves, conduct the operations, issue the money.

The second part does not belong to the state.

Each of the twelve is a separate corporation, and its shares are owned by the commercial banks of its district. To become a member bank, a bank is required to buy in. The dividend on that stock is written into law: 6 percent a year for banks with assets under 10 billion dollars; for larger ones, the lesser of 6 percent or the yield on ten-year Treasury notes. The dividend is cumulative: if it is not paid, the obligation carries forward.

The Federal Reserve itself answers evasively on its own website: “The Federal Reserve System is not ‘owned’ by anyone.” A court was more specific.

In 1982 the United States Court of Appeals for the Ninth Circuit heard Lewis v. United States: a man was struck by a vehicle belonging to the Los Angeles branch of the Federal Reserve Bank of San Francisco, and he sued the government. The court wrote:

“…the Reserve Banks are not federal instrumentalities for purposes of the FTCA, but are independent, privately owned and locally controlled corporations. Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. The stockholding commercial banks elect two thirds of each Bank’s nine member board of directors.”

We do not hide the qualifier “for purposes of the FTCA”: in other cases Reserve Banks have been held to be federal instrumentalities. But when it came time to answer for a man knocked down in the street, the bank turned out not to be the government.

The rate in the United States is set by the Federal Open Market Committee: twelve votes. Seven are the Governors in Washington. The eighth is the president of the Federal Reserve Bank of New York, who holds a permanent seat. Four more are the presidents of the other banks, rotating.

Those presidents are elected by no citizen. They are installed by the board of directors of their own bank — the board two thirds of which is elected by the shareholding banks — with Washington’s approval. No election, no Senate confirmation.

Five votes out of twelve on the price of the world’s reserve currency belong to people no voter ever chose.

Mavrodi, at least, never hid that MMM was his own private outfit.

What MMM actually says

The quotations below are verbatim; the original is public and can be checked in a minute.

The section is headed “Who Creates Money?” The answer:

“The actual process of money creation takes place primarily in banks.”

Then the origin of the trade, without a trace of embarrassment:

“Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money.”

And the sentence worth reading twice:

“Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could ‘spend’ by writing checks, thereby ‘printing’ their own money.”

Then the arithmetic, in a workbook for schoolchildren. The Federal Reserve buys $10,000 of securities from a dealer:

“The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank A’s books are matched by $10,000 of the dealer’s deposits that did not exist before.”

That did not exist before. That is a central bank’s own phrasing in its own teaching aid.

The exercise concludes:

“Carried through to theoretical limits, the initial $10,000 of reserves distributed within the banking system gives rise to an expansion of $90,000 in bank credit (loans and investments) and supports a total of $100,000 in new deposits under a 10 percent reserve requirement.”

Ten thousand becomes a hundred thousand.

And here we must stop, because a word is about to deceive you.

The booklet says “book entries,” and it sounds respectable: bookkeeping, ledgers, debits and credits — so it must all be honest and by the rules. That is exactly how this language works: it is built so you will not notice what is happening. Let us say it in human terms.

You go to a bank for a loan of ten million. The bank does not go to a vault. It does not take the money from depositors, does not borrow it from another bank, does not ask the central bank, does not bring it from anywhere at all. A clerk opens your account and types: 10,000,000. Presses a key.

Before the key was pressed, that money did not exist in the world. After it, it does.

You go and buy a flat with it. The seller receives real money and buys a real car with it. The dealership pays real wages out of it. And it came into being out of thin air — out of nothing, in one second, as digits typed on a keyboard.

Your debt, meanwhile, will be entirely real. You will pay it back over twenty years — with real labour, real health, and interest on top. The bank made a number out of nothing and exchanged it for twenty years of your life.

That is the whole trick. The ninety thousand in the example did not exist before it was typed, and exists only because it was typed.

The word “entry” will appear again in this article. Read it exactly as it should be read: money out of thin air.

Now for the part that overturns the usual picture.

Mavrodi made no money out of thin air. Not one rouble.

An MMM ticket was not money: you could not buy bread with it, wages were not paid in it, taxes were not accepted in it. Mavrodi took real roubles from some depositors and handed real roubles to others, and between those operations he set the price of the paper himself, according to how many new people had come in. Russia’s money supply did not grow by a single kopeck because of his work.

His pyramid was closed: whatever one man won, another lost. And both walked in on their own two feet, carrying their own money.

Here it is otherwise. Here they make the money itself — the money wages are paid in and courts award damages in. New tenge enter the common pot, and every tenge in the country loses value: for the man who never took a loan; for the man who does not know the words “monetary base”; for the pensioner who never signed anything in his life.

Mavrodi took from the participants. Here they take from everyone.

A man who stayed out of MMM lost nothing. A man who stays out of the banks loses anyway — every year, by exactly the rate of inflation.

And in one respect Mavrodi was the more honest. He announced the price of his paper openly: twice a week, in the newspaper, over his own name. Anyone who cared to look could see that the number was set by him personally and came out of new depositors. The mechanism lay on the surface.

Let us be precise so as not to be misread: the court convicted him of deception, and rightly. He lied about the future — he promised the income would continue, knowing there was no source. But he did not conceal the present: how his operation worked was visible to anyone who opened a newspaper.

Today’s mechanism is hidden behind the words “book entries,” “monetary base,” “transmission mechanism” — and those words are enough to keep ninety-nine people out of a hundred from asking a single question.

It turned out worse: even that textbook was the soft version

The scheme from Modern Money Mechanics is still taught: banks collect deposits, set aside a reserve, lend out the rest; the central bank manages reserves and, through the money multiplier, the whole money stock.

In the first quarter of 2014 the Bank of England published “Money creation in the modern economy.” The authors are staff analysts of its Monetary Analysis Directorate. The very first line of the summary:

“…banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.”

And further:

“…the act of lending creates deposits — the reverse of the sequence typically described in textbooks.”

And the verdict on the multiplier:

“While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality.”

Consider the structure of that admission. The Fed’s booklet said banks create money but are limited by the reserve requirement: ten to one, and no more. Half a century later another central bank reported that no such limit exists even in that form. First the loan is made and the deposit appears; the reserves the system finds afterwards — from the central bank, which will supply them, because otherwise payments stop.

The soft version turned out to be softer than reality.

In 2014 this was tested with live money. Professor Richard Werner took out a loan of 200,000 euros from Raiffeisenbank Wildenberg in Germany, having secured access to the internal books at the moment of issue. The bank took the money from no one’s account, borrowed it from nowhere, drew it from no reserve. It typed a number in two places in its ledger — and two hundred thousand euros came into being out of thin air. They did not “move” or “get released”: they were not there, and then they were.

And on 15 March 2020 the Fed announced that from 26 March reserve requirement ratios would be reduced to zero percent. That “ten to one” ceiling from the 1961 workbook ceased, legally, to exist.

The scheme that textbooks still draw as a constraint was abolished in the country that invented it.

The bill for a hundred and thirteen years: forty trillion

On 21 August 2026 the national debt of the United States stood at 40 trillion 32 billion dollars. To the cent: $40,032,876,505,819.31. The figure is downloadable from the US Treasury’s own site; anyone can check it.

In 1913, at the moment the Federal Reserve Act was signed, the US debt was 2.9 billion dollars. Not trillion. Billion.

Over a hundred and thirteen years it grew 13,728-fold.

By itself that is not yet an argument — a comparison is needed. There is one, from the same table, the same country.

Between 1790 and 1913 — over the hundred and twenty-three years before the Federal Reserve — the US debt grew 41-fold. The Civil War, the Louisiana Purchase, the settling of a continent, the industrial revolution: all of it together produced forty-one times over a century and a quarter.

A hundred and twenty-three years without the Fed: ×41.
A hundred and thirteen years with it: ×13,728.

One people, one country, one Constitution. What changed was the mechanism for issuing money.

On average the debt grew 8.8 percent a year and doubled every eight years — under every president, every party and every economic fashion. After 1971, when Nixon ended the dollar’s convertibility into gold and the last external brake came off the mechanism, it grew a further 101-fold.

The debt is serviced, and that shows in the budget. In fiscal year 2025 the United States paid 1.22 trillion dollars in interest — 3.3 billion a day, thirty-eight thousand dollars every second you spend reading this line.

More than a trillion a year builds no road, no school, no kilowatt. It is the fee for the use of numbers somebody once typed on a keyboard. What that means for world politics is in “Interest Beats Guns”.

And the central point. The US national debt is not the result of particular administrations’ extravagance, nor a consequence of wars. It is the direct product of the mechanics in Modern Money Mechanics: money enters circulation as somebody’s debt at interest, the interest is not created when the loan is made, and so servicing old debt requires new debt. The debt is obliged to grow — and has grown for a hundred and thirteen years without a break.

Kazakhstan’s money supply, by the same method

Everything below is taken from the “Rates and inflation” page, where every figure carries its source and date and can be checked against the National Bank’s own site.

Over thirty-two years Kazakhstan’s money supply grew 6,776-fold. Output over the same years grew 3.6-fold. The gap is 1,899 times. That gap is inflation: that many surplus tenge issued beyond the goods they can buy.

Set that beside the American number. The Federal Reserve needed a hundred and thirteen years to reach 13,728 times. The National Bank of Kazakhstan needed thirty-two years to cover nearly half that distance.

In terms you can feel: money grew 31.7 percent a year and doubled every two and a half years; output grew 4.1 percent a year and doubled every seventeen. For thirty-two consecutive years one ran seven times faster than the other.

70 percent of that money supply was created not by the National Bank but by the commercial banks — by precisely the method in Modern Money Mechanics: making a loan and creating the money for it out of thin air. The rest the National Bank issued directly.

The position as of July–August 2026:

• monetary base 16.7 trillion ₸; broad money M3 55.8 trillion ₸;
• money supply growth over the year 18.21 percent, against real economic growth of 6.50 percent;
• base rate 16.75 percent, published inflation 10.20 percent;
• the declared inflation target is 5 percent; the actual figure is exactly double.

In thirty-two years inflation has never once come down to the declared target. Not one year out of thirty-two. Over the past decade it has averaged 9.8 percent against a promised 5.

The institution that issues the money sets its own target, chooses its own instrument, and reports on its own result. Thirty-two consecutive misses in the same direction are not a miss. They are an operating regime.

Recall the self-quotation: the issuer announces twice a week what his own paper is worth. The base rate is the same act, only quarterly and with minutes of the meeting.

What it means for you personally: a thousand tenge put aside in 1995 buys today exactly what 21 tenge bought then. The rest has been eaten. And the losses are not shared equally — “Inflation hits those who have less”: whoever holds savings and a salary in tenge pays in full; whoever holds assets, debts and access to cheap funding earns from it.

There is also a test of backing. Divide the whole money supply by the country’s entire foreign reserves: you get 875.98 tenge per dollar. The announced rate for the same month is 474.63. The near-double gap is the portion of issued tenge behind which there is no currency at all.

How it is explained

The explanation is the same every year, and it always comes from outside: world oil prices, the rouble, tariffs, the harvest, logistics, “external shocks,” “elevated consumer demand.”

There is a shorter folk version: a bad dancer is always hindered by something.

It is easy to check. If the cause is outside, then the quantity of tenge in the country does not depend on it. But the quantity of tenge is not the weather. Every issue has a date, a resolution number and a signature. Eighteen percent of money-supply growth in a year did not arrive from Rotterdam along with the Brent quotation. It was issued here.

How that rhetoric is built we examined in “The growth nobody felt” and “The shortage that isn’t”, and the habit of blaming circumstances in “Astana Hub and a 35-year tradition of starting over”.

And the thing almost never said aloud. A rate of 16.75 percent against inflation of 10.20 percent means the real price of borrowed money is 6.55 percentage points above the rise in prices. For twenty-two of the last thirty-two years, borrowing in Kazakhstan cost more than prices rose. For trading in money that is an excellent climate. For a plant that pays for itself in seven years it is a prohibition on existing: debt at 16.75 percent doubles in four and a half years — faster than the workshop can be built.

That is why output grew 3.6-fold and money 6,776-fold. This is not “the resource structure of the economy.” It is the price of money, and it is not the market that sets it.

Why the target is 5 percent and not zero

If the National Bank’s task in law is “ensuring price stability,” why is the target set at 5 percent a year rather than zero?

The arguments used worldwide are well known, and we will not pretend otherwise. Deflation is more dangerous than inflation: when prices fall, purchases are postponed. The consumer price index overstates the rise by half a point to a point, so a measured zero is already a real minus. At zero inflation there is no room to cut rates in a crisis. Wages do not move downwards.

The arguments are not empty. But look at what follows from them and what does not.

Five percent is not stability. It is a declared plan to devalue money at a known rate. Hit the target exactly and the tenge loses half its purchasing power in fourteen years. Someone saving for old age over forty years, with the target met perfectly, gets back fourteen percent of what he put aside — not because of any crisis, but precisely because everything went according to plan.

That target appears in no law. We checked the full text of the Law on the National Bank of the Republic of Kazakhstan: the phrase “inflation target” does not occur once, nor does the word “target.” Article 7 speaks only of “ensuring price stability,” without saying what that means. The figure of 5 percent the National Bank assigned to itself, by its own press notice.

The target has already been moved — upwards. The plan announced earlier was stricter: 4–5 percent for 2023–2024 and 3–4 percent from 2025. It never reached 3–4; the target in force became 5. When the promise became inconvenient, it was the promise that changed, not the result.

And above all: the argument about zero does not apply to our case. All four arguments explain why aiming at zero is dangerous. Not one explains why actual inflation of 10.2 percent is double the bank’s own target. Here the gap between promised and measured is larger than the entire subject of that debate.

In the National Bank’s own statement announcing the 5 percent target, deflation is not mentioned, nor is measurement error. What it says is that consistency in formulating the target will help anchor inflation near 5 percent — that is, the target is justified on the grounds that announcing it will help achieve it. In thirty-two years it has not helped once.

And 5 percent has a beneficiary, easily named. Inflation reduces the real weight of debts. The largest debtors in the country are the state and the banks. Whoever holds savings and a salary in tenge pays; whoever holds debts and assets earns. Five percent a year is the pre-announced rate of an annual transfer from the first to the second.

Why nobody answered for thirty-two misses

Because the law provides nothing that could follow. This is not a figure of speech — it is there in the text.

Article 3 is headed “Accountability of the National Bank of Kazakhstan” and begins: “The National Bank of Kazakhstan is accountable to the President of the Republic of Kazakhstan.” The law then lists what that accountability consists of. Eight items: appointment and dismissal of the Chairman; appointment and dismissal of his deputies; approval of the structure and headcount; agreement on the pay system; approval of the Regulation on the National Bank; approval of the annual report; approval of the design concept of banknotes and coins; provision of information on request.

All eight concern personnel, headcount, salaries, paperwork and the appearance of banknotes. The law requires the design of the notes to be agreed, and says nothing about what to do if those notes lose their value.

No threshold of deviation, no deadline, no duty to explain, no consequence. And the target one might be held to, as we have seen, is simply not in the law at all.

Formally a lever exists: the Chairman is appointed and dismissed by the President. But that is not accountability for a result — it is dependence on one man, who may dismiss for anything or for nothing. Between inflation of 10.2 percent and anyone’s job, Kazakhstan’s legislation contains no connection whatsoever.

Here is what it looks like where the connection was written down. In the United Kingdom the target is 2 percent, and if inflation deviates from it by more than one percentage point the Governor of the Bank of England is required to write the Chancellor of the Exchequer an open letter — why they missed and what is being done. The letter is published. The most recent was written on 30 April 2026, with inflation at 3.3 percent: a deviation of 1.3 percentage points.

Our deviation is 5.2 points — four times the British one. Nobody is required to write anything.

Add to that the doctrine of central bank independence. It was conceived as protection from the political cycle, so rates would not be moved to suit elections. In practice, independence from politicians turned out to be independence from the result as well.

Mavrodi answered to a court. Here there is no court, because there is no offence: failing to do what is written down nowhere is legally impossible.

The view from orbit

Let us rise to where neither flags nor surnames are visible. From there, two lines on one chart.

The first is physical: grain, metal, kilowatt-hours, houses, roads. It grows slowly, running up against land, energy and time. And it wears out: bread goes stale, metal rusts, people age. Its laws are the laws of nature.

The second is arithmetical: debt at interest. It does not rust and does not tire; it doubles on schedule for as long as the number stands in the ledger. Its laws are the laws of mathematics, and mathematics does not care about the harvest.

Both are drawn on the same axis. They are bound to diverge — and they do: forty trillion against roads and factories; 6,776 against 3.6. Every financial crisis in history is the moment the lines are forced back together: by inflation, default, devaluation, war.

It was not an economist who noticed this, but a chemist. Frederick Soddy, Nobel laureate of 1921, published Wealth, Virtual Wealth and Debt in 1926. The argument is almost indecently simple: real wealth obeys thermodynamics and decays, while debt obeys the rules of addition and grows without limit. To build an economy as though the second can outrun the first forever is not even greed — it is a mistake in physics.

Work it out yourself. A tenge at five percent doubles every fourteen years; over two thousand years that is a number with forty-three digits. There are not that many tenge and never will be. So no debt at compound interest survives two thousand years: it will be written off, inflated away, or taken by force. The only question is who is the debtor at that moment.

Those who understood this were never taught to you

Twenty-three centuries before the Chicago booklet, it had all been said.

Aristotle, in the Politics, divided household economy in two, and both words are worth giving in full — the substitution of one for the other is where everything began.

οἰκονομία — oikonomia, from οἶκος (oikos) “household” and νόμος (nomos) “law, rule.” Literally: the rules of running a household. Providing for real needs — to grow, produce, exchange, feed the family and the city. It has a natural limit: sufficiency. Our word “economy” comes from it.

χρηματιστική — chrematistike, from χρήματα (chremata) “money, property.” Literally: the art of acquisition. It has no limit by definition: the aim is not the thing but the number.

Aristotle held them to be different occupations and warned that the second passes itself off as the first. So it proved: what is called “the economy” today is chrematistics.

On interest he put it in terms that need no addition:

“The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth this is the most unnatural.”

The term he means is τόκος (tokos): in Greek it means both “interest” and “the offspring of livestock.” Money that calves. More on this in “Money that calves”.

The ban on interest is not one Greek’s private opinion. All three Abrahamic traditions established it, each independently: the Torah, the Christian councils, the Quran. How it was circumvented in practice, and who lived by that, is in “Shulhani: trading in money is haram”. Three religions, millennia of dispute among themselves — and the same ruling on this one question. Coincidences like that come not from prejudice but from shared experience.

Silvio Gesell (1862–1930) was no professor. A German merchant, ruined in Argentina’s currency crisis, who set out to understand why an economy stops when the goods, the machines and the workers are all still there.

His insight inverts the sign. The problem is not that money is expensive. The problem is that money is the one commodity that does not spoil. Grain rots, machines age, labour leaves with age — so their owner hurries to put them to work. The owner of money can wait as long as he likes and charge for having stopped waiting. That privilege is interest.

Gesell proposed removing it: make money perishable, like everything else. Freigeld — money you pay to hold.

Keynes devoted pages to him in the General Theory: “the strange, unduly neglected prophet Silvio Gesell … whose work contains flashes of deep insight” — and, in the same chapter, “I believe that the future will learn more from the spirit of Gesell than from that of Marx.”

Marx has departments, institutes and a century of state experiments devoted to him. Gesell you are probably hearing of for the first time.

Wörgl: the experiment was stopped, but not for failing

It was tested in reality — once, in earnest.

The Austrian town of Wörgl, 1932, at the depth of the Great Depression: some 500 unemployed among 4,000 inhabitants, an empty municipal treasury. On 31 July the mayor, Michael Unterguggenberger, issued local “certified compensation bills” to Gesell’s recipe: to stay valid, a bill needed a stamp worth 1 percent of its face value affixed once a month.

One percent a month for holding it. Keeping such money is unprofitable — spending it is.

Wages were paid in it, local taxes accepted in it, building done with it: a bridge, roads, a water main, a ski jump. Money came back to the treasury faster than it went out, because people hurried to pay in advance. While unemployment rose across Austria, in Wörgl it fell by roughly a quarter. Visitors came to look, up to the French premier Daladier.

On 1 September 1933 the experiment was stopped. It was stopped by the National Bank of Austria.

The reason named in the decision is stated plainly, and it is not an economic one: infringement of the central bank’s exclusive right of issue. Not “it did harm,” not “it failed.” It worked — and it was being done by the wrong party.

That is the answer to why this is not taught. Not because it is forbidden. Because the monopoly on issuing money is itself the subject, and a subject is studied from a textbook written by the monopolist.

Why the textbooks still lie

The most checkable proof lies in plain sight, and no conspiracy theory is needed for it.

In 2014 the Bank of England officially wrote that the money multiplier model “is not an accurate description of how money is created in reality.” Twelve years have passed. Open an introductory macroeconomics course — Kazakh, Russian, American. The multiplier is still there.

Twelve years is enough to rewrite a chapter. It was not rewritten.

The same goes for the alternative. In 1933 economists of the University of Chicago — Simons, Knight, later Irving Fisher, the foremost American economist of his generation — proposed the Chicago Plan: 100 percent reserves, under which a bank cannot create money but only transfer what exists. In 2012 two IMF staff economists put that plan into a modern macroeconomic model. The conclusion: it works — debt falls, fluctuations smooth out, inflation drops. The Bank of England itself cites that paper.

So: the mechanism was described by a central bank, its constraint has been abolished, its theoretical justification refuted by another central bank, and the alternative modelled at the IMF. And nothing has changed. There is nobody to change it: whoever could is the beneficiary.

Mavrodi’s business lives on

Let us say it plainly.

Sergei Mavrodi died on 26 March 2018. His business did not die with him. It is carried on by the National Bank of the Republic of Kazakhstan and the central banks of other states — together with the commercial banks that create most of the money supply under their rules and at their rate.

The mechanics are the same:

• the issuer sets the price of his own instrument — Mavrodi’s self-quotation twice a week, the National Bank’s base rate once a quarter;
• the instrument is backed by nothing but the announced number — there are 876 issued tenge for every dollar of reserves, against an announced rate of 475;
• money is made out of thin air and lent at interest — while the interest itself is made out of thin air by nobody, so old debt can only be serviced with new;
• the promise is not kept, and the blame is placed outside — for thirty-two consecutive years.

There are three differences, and all three run against the present construction.

First: Mavrodi made no money out of thin air, and here they do. He shifted real roubles from new depositors to old ones — the country’s money did not increase by it. Here they create the money itself, and every tenge held by everyone loses value as a result. Mavrodi took from the participants; here they take from everyone, including those who signed nothing.

Second: with Mavrodi, participation was voluntary. Bring your money or don’t. Here participation is compulsory: taxes are accepted only in this money, wages are paid in it, courts award damages in it. You cannot leave this pyramid without leaving the country.

Third, and most important: Mavrodi’s pyramid had someone to stop it. It was not exhausted and did not collapse under its own weight — on 4 August 1994 the tax police and riot police arrived. A force existed outside it that put an end to it.

This pyramid has no such force. There is nobody to walk into the National Bank and switch off the keyboard the money is made on: it is its own issuer, its own supervisor and its own judge of the result. That is why it does not end — and why, instead of a collapse in a day, it delivers a devaluation stretched over thirty-two years. The loss is the same: a thousand tenge became twenty-one. It merely arrives a little at a time, every year, and therefore does not look like robbery.

Mavrodi got four and a half years for promising an income that had no source.

Those who do the same at the scale of a state, with participation compulsory, are granted independent status and the right to report to themselves.

We do not ask anyone to take our word for it. The “Rates and inflation” page updates automatically from National Bank data, every chart carries its source and date, and every formula is worked out in front of you. The US national debt downloads from the American Treasury’s site. The Fed’s booklet, the Bank of England’s paper and the Law on the National Bank are all in the public domain.

They published all of it themselves. We only put it in one place.

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Sources

• Modern Money Mechanics. Federal Reserve Bank of Chicago, 1961, rev. 1992 — full text
• McLeay M., Radia A., Thomas R. Money creation in the modern economy // Bank of England Quarterly Bulletin, 2014 Q1 — PDF
• Werner R. Can banks individually create money out of nothing? // International Review of Financial Analysis, 2014 — text
• Federal Reserve Board. Reserve Requirements: ratios reduced to zero effective 26 March 2020 — Fed page
• US national debt as of 21.08.2026 and the series from 1790 — US Treasury, Debt to the Penny, Historical Debt Outstanding, Interest Expense
• The Jekyll Island meeting, November 1910 — Federal Reserve History
• Vanderlip F. From Farm Boy to Financier // The Saturday Evening Post, 9 February 1935 — publication
• Lewis v. United States, 680 F.2d 1239 (9th Cir., 1982) — opinion
• Fed structure, ownership and the member-bank dividend — Who owns the Federal Reserve, Section 7 of the Federal Reserve Act, FOMC composition
• Law of the Republic of Kazakhstan “On the National Bank of the Republic of Kazakhstan,” 30 March 1995 No. 2155, Articles 3 and 7 — Adilet
• National Bank of Kazakhstan. On refining the inflation target — press notice
• Bank of England. Exchange of letters on the deviation of inflation from target, April 2026 — publication
• Keynes J. M. The General Theory, 1936, ch. 23 — text
• Benes J., Kumhof M. The Chicago Plan Revisited // IMF Working Paper 12/202, 2012 — PDF
• The Wörgl experiment, 1932–1933 — Unterguggenberger Institute archive
• Soddy F. Wealth, Virtual Wealth and Debt, 1926. Aristotle, Politics, Book I, 1256a–1258b (Jowett translation)

Kazakhstan data: National Bank of Kazakhstan — monetary aggregates, international reserves, base rate, official exchange rate (July–August 2026); World Bank — real GDP growth. Collected with sources and dates on the “Rates and inflation” page.

Related articles: “Money that calves” · “Shulhani: trading in money is haram” · “Interest Beats Guns” · “What is really in the bank” · “Money: a short history of trust” · “Inflation: why prices rise” · “Inflation hits those who have less” · “The growth nobody felt”