Moneytruth.org is a website where you can learn a little something about money. And if you like it, maybe you can help other people learn about money too.
Money is both fascinating and, clearly, very important stuff. Today, whilst schools, colleges and universities teach about finances, they do not teach about money itself; what it is, where it comes from, or under what terms etc., despite those things being fundamental to all of a society's internal and external relations - in short, to all human social and economic relations. And the right to a basic monetary education is not properly recognized and protected in human rights law. The result is a collective, worldwide failure to understand and to use money properly. Instead of being a tool for justice, inclusion and human rights/betterment, money is more likely to be a source of injustice, exclusion and conflict.
So this is a campaign to fix that. Welcome to a millennia-old problem and a campaign for an historical first: basic monetary literacy and universal economic rights. Be sure to follow the slides below and then share them with your friends.
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 being kept in vaults). 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 that means that society, or some part therein, has a corresponding debt to that person. Money, then, is relational, there are two sides to money: on one side claims, on the other side debts.
If money is debt, then we can say where it comes from. Money comes into being when somebody goes into debt. Money exists as a record of a debt and remains in existence for as long as the debt remains outstanding.
Some of you may know that money is 'promissory' or like an 'IOU'. Well, a promissory note or an IOU is also a legal relationship that would come into being when somebody goes into debt and 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 to pay for something; conversely, money is later paid out of existence again when the debt is repaid.
I'll explain these things in more detail later on, but it should be clear that money, banking and debt are entirely different to what people ordinarily believe. That gives us the opportunity - and we should take it - to think again about the entire economic world we live in.
Let's say you're selling your house and I want to buy. Almost nobody could ever have a home if it weren't for the facility of debt (that's given by the fact that we're young before we're old), so millions of people every day use debt to buy a home; they take out a mortgage. Where does the money for mortgages come from? Where do you think the money would come from if I needed a mortgage to buy your house?
That's right, the money that I'll buy the house with would come into being for me, when I need it, at the point I 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 have a new house.)
It's important to understand that these numbers (→) come into being during the process and they are money. The idea that money should somehow be different to that, that society should have to root around to find some already-existing money to 'lend' to me is, by comparison, a very primitive, a very inconvenient and a very expensive idea. It would result in far fewer people getting access to money when they need it and at very high prices. There are even worse consequences too, which I will cover later.
In practice, major financial operations like banking could never operate on the basis of actual lending and borrowing; trade and money would inevitably resolve to its most efficient form, which is nothing more than simply recording into being, and facilitating the transfer and settlement of, legal debts.
For that reason, credit (debt) currencies are just a simple practical reality. Through credit currencies, through the 'creditary' or debt nature of money, we share a common credit platform upon which exchange is carried out by no more than recording who owes and who is owed.
That's pretty much it
What we've covered in these slides makes up what I would call basic monetary literacy. If you followed along, you should see that the world around us is really not what it at first seems, that we have the chance now to ask if the world might be a better place if we had a new literacy and new rights for all.
Banks, the very heart of capitalist economics and the world's most powerful, most profitable businesses, don't 'lend' and you, I and our governments don't 'borrow' when we go into debt. So why should all the world's people and all the world's economies be stuck suffering with the idea that they do?
Today, the injustice of 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, sadly, die, in comparative and often abject rightslessness/dependency.
None of it is natural and none of it is necessary. Money itself is a commonly inherited technology or facility: our common currencies are common credit platforms upon which none should be excluded and none exploited. With only basic monetary literacy, every person and every government on Earth could have access to money (debt) free of the belief or claim that money is being "loaned". 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 nature of money.
Being debt, money comes into being when we need it, when we go into debt - simply as a 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.
It's exactly the same when governments deficit (debt) spend too. Just like us, governments don't actually 'borrow' anyone else's money in order to facilitate debt. Indeed, with respect to government debts which are spent within the home economy, this form of money creation is called a debt only by convention; we can think of it as a "debt we owe ourselves" hence is not a debt at all. Internationally, nations also benefit from a common credit platform upon which debt is facilitated by record keeping, not 'borrowing'.
It's inaccurate to perceive banks as 'lenders'. Rather than standing on the other side of a lender-borrower divide, banks might better be described as '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 on the same side as debtors, next in line in the responsibility to honor those debts - that is, to pay money out of existence again.
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, 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 literacy and rights, or an ongoing dark age world where illiteracy is fostered in the many so they can be excluded and exploited for the power and profit of a few?
All that is required to change it is basic monetary literacy - so that's what we're here to promote. If it's something you support, then please join our campaign for:
The teaching of basic monetary literacy in schools.
The recognition and protection of the right to basic monetary literacy in human rights law.
The request to revisit household debt and public debt the world over.
You may also be interested in our sister campaign Action on Education; a fight for children's educational rights in schools.