6. It's Just Not Scientific

The World's Most Powerfully Misused Words


The words 'lend' and 'borrow' already have their use and meaning in the world outside of finance. Say I have a bicycle and you would like to 'borrow' and make use of it for a period before returning it to me, I could 'lend' that bicycle to you and the interaction between us really would be an example of what our language ordinarily conveys by the words 'lending' and 'borrowing'.


And if we invoke the legal construct of the 'reasonable person', I'm sure that if you approached a 'reasonable person' in the street and asked them what they thought those words mean, you'd get the very same definition I offered there.


But banks of course don't do that. Banks record money into and out of existence in the process of facilitating our debts. In the case of households, we understand that these really are real debts, but we understand they are not the result of any "lending" or "borrowing" in the commonly, reasonably accepted understanding of what those words mean. Money is endogenous and creditary; money is debt it comes into and out of being when we go into and out of debt.


In my experience, it's not too uncommon to find other economists or finance professionals who understand that money works this way (something they might call "multiplying money" or "expanding banks' balance sheets"). What is much harder to find are those among them who recognize that there's something fundamentally wrong in couching these processes in the extraordinarily misleading language of lending and borrowing, or indeed show concern for the consequences - the establishment of cruel and unnecessary, hierarchical lender-borrower relationships which dominate the economies and the people of the entire world.


Recording money into and out of being, as records of outstanding indebtedness, is an existentially different phenomenon to that of the lending and recovery of already-existing money that is the rightful property of another. This is a basic fact that any schoolchild could readily understand. Yet this misleading langauage and the mass misunderstanding it inspires are being overlooked (or worse) by academic, financial and political communities/authorities who raise far too few objections to the damages being done as a consequence.


This is a clear case of the abuse of, or at best the unscientific treatment of, language. I'm sure there are many professionals who use these terms unconsciously or uncritically, who, for a lack of a better understanding themselves, really believe (or have assumed) that banks do in fact 'lend' to 'borrowers' other people's money. But even still, that isn't what we need or expect from professionals. From the professional community, we expect honesty and accuracy. And as much as there may be some whose use of this language could be described as innocent or uncritical, there are clearly many others who know very well that this is an inappropriate and misleading language, yet use it anyway.


The economics community is suffering a crisis of reputation, as I'm sure it does every time the world descends into economic calamity and it's revealed that those at the top have been looting and plundering all along. With the rise of communications technology, more and more people every day are coming to understand that this type of 'economics' is just systematically flawed, that society is absolutely lost to corruption and about as far from the ideals of civilized, decent and democratic life as economies ever have been.


If you know, as children can and should know, that money comes into being when we need it, when we go into debt, would you still be happy to hand up hundreds of thousands of dollars of hard-earned income - many thousands of hours of your working life - in interest payments to people who are not only already rich, but simply did not earn and do not deserve that money? Would you be happy to see the great majority of the working population around you do the same? Working people will pay 3 times for their homes (the 35 year average rate to the 2007/8 crash); once for their home, twice as a simple gift to the class of wealth. No further investigation is needed to determine how it is they acquired that wealth in the first place, or how such a small number of people came to own everything of value in society - and now just about everything of value on Earth.


If you knew that much of the world's "national debts" were also the result of simple money creation, not the lending and borrowing of already-extant money, would you continue to accept the endless mainstream chatter about deficits, over-spending and the cost of public services and public debt? Would you accept the loss of public rights and public assets in the name of "paying up" and "living within our means"? Would you accept the unconscionable drain private banks inflict on many of the poorest nations in the world through institutions like the IMF or World Bank? Would you still believe the capitalist system is one of justice and fairness, where wealth is "earned", where we reward 'enterprise', 'endeavor' and 'merit'? Or would you suspect that this all is just great frauds and corruption; perhaps the greatest examples of such in history? I don't imagine for a minute that you'd fail to have serious concerns about what is going on; I think you'd look very differently at how property, income and opportunity has been allocated under capitalism and I think you'd wonder exactly what alternatives humanity is being deprived.


So let's go from understanding this world is set up by and for a corrupt few to actually doing something about it. Basic economic literacy is the foundation for a better economic future, for economics founded on the knowledge and the real rights of all. Let's act now, if only for the sake of the world's poorest (many of whom lose their battle against global capitalism every day), and make sure we're still around to see life and opportunity are returned to those from whom they are currently being stolen. And that's pretty much every last person on Earth, including economists. What might the world look like then?




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And we'll change the world.