Welcome to moneytruth.org, where we hope to bridge the gap between basic economic education and some of the greatest issues of our time; issues like global poverty, the persistence of economic injustice and turmoil at home as well as abroad, and whether or not we have what it takes to live sustainably - among many more. You'll see that by looking again at money, we can re-examine everything that comes after. Hold onto your seats.
Money is fascinating and, clearly, very important stuff. But did you know that money is very different to what most people believe? We aren't taught the most important facts about money, like:
What money is, really.
Where money really comes from.
How banks and debt in truth basically work.
And despite the significance money in all our lives, the right to know these things is not yet properly recognized in human rights law. (Which is where we come in.)
The result has been a worldwide failure to use money properly. Instead of being a powerful economic tool for justice, inclusion and human rights/betterment, money is more likely to be a source of economic dysfunction, injustice, exclusion and conflict.
So this is a campaign to fix that. These are adult educational materials, but they are aimed at informing a syllabus suitable for children. Get involved and help us spread the word. Looking more closely at money is the most important step any of us can take in changing the world for the benefit of 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. It's true that 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 whatsoever; most money doesn't exist in physical form at all.
Most money exists as nothing more than numbers in the banking system and in people's bank accounts. They really 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. So 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 the 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, highly impractical. 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 hierarchical 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 numbers and bookkeeping i.e. nothing more than recording who owes and who is owed.
For that reason, what we call 'credit' (debt) currencies are just a simple practical reality for every society. But they are also very much more than that. Through credit currencies, through the 'creditary', debt nature of money, we all share a common platform upon which our debts and our exchanges are facilitated, not by 'borrowing', but by simply recording numbers on paper or on a computer screen.
And that means most of our debts should be interest free.
Money really is a far more democratic technology than we're conventionally led to believe. Money really should be at the foundation of all people's real economic rights. Every person, as well as every government, should have a democratic relationship to money and access to money on democratic terms, free of unnecessary lender-borrower relations and free of interest. Human rights demands it!
Covered in these slides are what I would call basic monetary literacy. I hope you now have a better idea of 1. What money really is. 2. Where it really comes from. And 3. How money can work differently in the future. There's more to read which explores this theme in greater detail and you can get in touch with us on our Facebook page if you have any questions.
Our goal is to get this basic economic literacy into schools and into human rights law where it rightly belongs. So if you think you can help, please do get in touch.
We'll explore money with more examples and in more detail on the Understanding Money page. So if you'd like a walk-through example of how money, banking and debt really work, click through to the first section on that page: How Money Really Works. I'm going to go ahead and offer a few bullet points:
The nature of money and banking throughout the world is that of a large credit system.
Money isn't stuff like gold or silver, money is relational. Rather than being hewn from the Earth, money is socially constructed and is given its life in society and law.
Money is debt, it is a commonly tradeable, anonymous record of outstanding debt. We can also call it 'creditary' (the word 'credit' means debt here) or 'promissory', as in a 'promise to pay', or we can even think of it as an IOU. 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 repay our debts, the process is reversed and money ceases to be again.
What we have, then, is a common credit system 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. It's reasonable to assume, then, that many of our debts should be interest free.
National sovereign debts work very much the same way. In the process of deficit (debt) spending, governments' debts are turned into money ('monetized') within the banking system. Domestically, it should be clear that money created this way is not only not 'borrowed' money, being a 'debt we owe ourselves', it is very hard to regard it as a debt at all. Another way of saying that is governments should have every right to a democratic, debt and interest free monetary base and not have to 'borrow' that money into existence from capitalist banks. Internationally, the creditary, endogenous nature of money and debt means that, just like us, nation states also share a common credit platform upon which debt is facilitated by simple record keeping, not by 'lending' or 'borrowing' anyone else's money.
Rather than standing on the upper side of a vertical lender-borrower relationship, banks really have a much more horizontal relationship with their customers. Banks are more like credit agents; they record into being and then facilitate the circulation and eventual settlement of our debts. Banking should be a largely horizontal, not hierarchical, affair.
What's happened in the capitalist world is that all democratic foundation for money has been taken away. The only way money can enter the capitalist world, then, is through 'loans' and that means all money in the capitalist world is the interest bearing private property of capitalist banks.
In reality, money, debt and banking are very different from their common portrayal. Seen in a clear light, they lose their imposing character and can be identified as remarkable tools for universal economic participation and for universal economic rights.
There's plenty more to explore. You can read about things like mortgage debt and sovereign debt, as well as money theory, an introduction to capitalist economics and more in the Understanding Money section.
The economic world exists in a perpetual state of dysfunction. Fundamental aims like stability and justice have been shown over generations to be undeliverable. From the perspective of economic and systems sciences, that is a failure. And imposing it on the rest of the world is unwarranted, if not in fact criminal.
Our economies today aren't founded on basic literacy or rights, they are founded on their absence; they are founded on a fostered ignorance, class hierarchy and abuses of power. That should be more than enough to condemn them. Our economies remain dark age systems of domination, exclusion and abuse and money is at the very heart of that problem.
But economies can work very differently. Everyone can possess the basic literacy set out here and money can easily be made to work for all. Poverty and present day extremes of economic injustice are unnecessary. A more just, more humane foundation for economic life is easily achievable and will allow our economies to work much more from the bottom up, lifting us all and strengthening us against the development and expression of unwarranted and undeserved power.
All that's required is basic monetary/economic literacy. So please share us with your friends and support our campaign for:
The teaching of basic economic literacy in schools.
The recognition and protection of the right to basic economic literacy in human rights law.
The request to reassess household and public debts the world over.
You may also be interested in our sister campaign Action on Education; a fight for children's wider educational rights in schools.