Welcome to moneytruth.org, a website where you can discover a little something about money. And if you like it, maybe you can help others discover that little something too.
Money is both fascinating and, clearly, very important stuff, but did you know... money has a secret. Despite the unparalleled significance of money in all our lives, very few of us are taught the most important facts about it, like what money really is and where it really comes from. And the right to know these things is not properly recognized in human rights law.
The result has been a worldwide failure to understand and to use money properly. Instead of being a tool for justice, inclusion and human rights or betterment, money is more likely to be a source of injustice, exclusion and conflict.
So this is a campaign to fix that. We believe that basic monetary literacy is enough to change the direction of life on Earth for the benefit of all. Welcome to a millennia-old problem and a campaign for a historical first: basic monetary literacy and a new economics based in real human rights for all.
So, what is money? And where does it come from?
To answer this, let's start by saying what money is not.
Although people often think of money the way they think of gold or silver, it's easy to see that money is really not made from any precious materials. Yes, coins are often made to look like gold and silver, but that's really only for effect. In reality, not only is money not made of precious materials, most money isn't made of any materials; most money doesn't exist in physical form at all.
Most money exists as nothing more than numbers in people's bank accounts. And they are just numbers; there are no corresponding piles of notes or coins (or gold or silver) being kept in vaults. So, if money is really just numbers, then what are those numbers? What are they measuring and where do they come from?
The numbers of money are measuring a legal 'title' or 'claim'. Someone who has money has a measured claim within society and society itself, or some part therein, has a corresponding debt to that person. It may be hard to grasp at first, but money is relational, there are two sides to money: on one side claims, on the other side debts.
Another way to say that is money is debt. Like any debt, it has two sides: someone who owes and someone who is owed. Money really exists as just a record of a debt; it comes into being when someone goes into debt and remains in existence only for as long as the debt remains outstanding.
Some of you may know that money is 'creditary', or 'promissory' or like an IOU. And that's exactly right: these are legal relationships with a debt on one side and a claim on the other. They all come into being when somebody goes into debt and they last only for as long as the debt remains outstanding.
These are the simple, two-sided relations that are expressed through money. This is a reciprocal system in which money exists only to occupy the space between giving and receiving. Money comes into being when somebody (including a government) goes into debt and will cease to exist again when the debt is repaid.
I'll explain these things in more detail, but the point I'm making is that banks are really not 'lending' and we and our governments are really not 'borrowing' other people's money when we go into debt. It should be clear that money, debt and banking are very different to their common portrayal. And that gives us an opportunity to think again about how the economic world around us should work.
Let's say you're selling your house and I want to buy. In our world today, almost nobody could have a home if it weren't for the facility of debt, so debt is very important to us and many, many people every day use debt to buy a home; they take out a mortgage. Where does that money come from? Where would the money come from if I needed a mortgage to buy your house?
The money would come into being, simply as transferrable numbers in my bank account, when I need it, when I sign a mortgage agreement and go into debt.
And when that new money is transferred to you, you will be the holder of x dollars of new claims within society (which you can redeem at your convenience). I will be the holder of the exact same amount of new debt. (But I will also now have a house.)
These numbers (→) come into being during the process and they are money. The idea that money should somehow be different to that, that someone should have to root around to find some already-existing money to 'lend' to me is, by comparison, a highly impractical idea. And it has far graver consequences too. Not only would it be restrictive and expensive, resulting in far fewer people getting access to money and at very high prices, it would set up the some of the most unjust and corrosive relations that can exist within society.
In practice, major financial operations like banking could never operate on the basis of actual lending and borrowing. Money will inevitably resolve to its most efficient form, which is simply bookkeeping i.e. nothing more than recording into being, and facilitating the transfer and eventual settlement of, legal debts.
For that reason, what we call 'credit' (debt) currencies are just a simple practical reality. But they are so much more than that. Through credit currencies, through the 'creditary' or debt nature of money, we all share a common credit platform upon which our debts and our exchanges are facilitated by no more than recording who owes and who is owed.
Covered in these slides are what I would call basic or essential economic or monetary literacy. I hope you now have a better idea of what money is and where it comes from. If you're still at school, or have children who are, help our cause by asking them why they don't teach these things there. The most basic justification for schooling, after all, is that it prepares children for participation in economic life.
I also hope you can see just how much our relationships to money and to banks (i.e. the world's super rich) are just not as they could and should be.
The fact that money comes into and out of existence as we need it, means that all human beings (and all governments) can access or create money free of undue 'lender-borrower' relations and free of interest. Money really is a wholly common or democratic facility. As a result, it should serve all of humanity as the basis of democratic economic society, without any undue exclusion or exploitation.
In order to achieve it, however, we must be basically economically literate and understand the difference between money creation and 'lending'. It is by this simple confusion that the immense power of money is taken away from the majority of the world's people and into the hands of a few.
We can restate the problem as follows:
Today, money circulates:
As the property of an elite class.
At their discretion (put it in, take it away 'business cycles').
As an interst bearing debt to them (tribute economy).
The rest of humanity has to live, struggle and sadly even die 'subject' to that. Globally, that's trillions of dollars of distortionary, boom-bust economics and interest taking that simply should not exist.
Today, our divided economic world transfers trillions of dollars in power and profit to a few every year, whilst everyone else on the planet must live, suffer and die in a state of comparative or abject rightslessness.
That's not a natural condition, nor is it necessary. With only basic monetary literacy, all people on Earth (as well as their governments) can have access to money democratically, free of the belief or claim that they are 'borrowing' anyone else's. The future, then, is of fundamentally (albeit not completely) interest free economics for the service of all. Human rights demands it!
We've seen that money is relational, that, quite apart from it being hewn from the Earth, money is socially constructed and is given its life in society and law.
Money is a commonly tradeable, anonymous record of outstanding debt. We can also say that money is 'creditary' (the word 'credit' means debt here) or 'promissory', as in 'promise to pay'. All these words reference the same thing: the debt-based (and therefore temporary) nature of money.
Being debt, money comes into being when we need it, when we go into debt - most commonly as a simple numerical record of that debt. Conversely, when we recover money and repay our debts, the process is reversed and money ceases to be again.
What we have, then, is a common credit platform upon which money exists only to occupy the space between giving and receiving. Banks are not 'lending' and neither you nor I are actually 'borrowing' anyone else's money when we go into debt.
Just like us, governments' deficit (debt) spending should not be equated with 'borrowing' anyone else's money either. The government's bank (central bank) creates and destroys money in just the same way our highstreet banks create and destroy money for us when we deficit spend. Domestically, it should be clear that not only is government created money not 'borrowed' money, as a 'debt we owe ourselves' it is very hard to regard it as a debt at all. And internationally, this basic, creditary nature of banking means that, just like us, nations also share a common credit platform upon which debt is facilitated by record keeping, not by the 'lending' or 'borrowing' of anyone else's money.
It is wildly inaccurate and profoundly detrimental to us all to perceive banks as the 'lenders' of their own or other people's money. Rather than standing on the upper side of a lender-borrower hierarchy, banks are really 'credit agents' or glorified 'credit accountants'; their role is to record into being and then facilitate the circulation and eventual settlement of our debts. Banks really stand level with debtors, next in line in the responsibility to honor those debts - that is, to pay money out of existence again. In other words, banking should be a largely horizontal, not hierarchical, affair.
Money, debt and banking are very different from their common portrayal. Seen clearly, they lose their imposing character and can be identified as remarkable tools for universal economic participation and for universal economic rights.
We'll go into more detail and find many more fascinating things to say about money. You can read about mortgage debt and sovereign debt in the Understanding Money section and you can read Bite-Size pieces on important matters of money theory - including my little take on the basics of capitalist economics. I also show you how capitalist banks account for the creation of money and how it might more properly be performed.
Over to us
What kind of world do we want to live in, one built on a foundation of literacy and rights, or an ongoing dark age world where illiteracy is fostered in the many so they can be herded, excluded and abused for the power and profit of a few?
All that is required to change everything about how the economic world works is this basic, essential monetary literacy. So that's what we're here to promote. If that's something you support, then please join our campaign for:
The teaching of basic monetary literacy.
The explicit, unambiguous recognition and protection of the right to basic monetary literacy in human rights law.
The request to revisit household and public debts the world over.
You may also be interested in our sister campaign Action on Education; a fight for children's educational rights in schools.