Welcome to the facsinating world of money.
We're here to set the record straight about money, banks and all that enormous debt.
Find out why so much of what we hear about money is wrong and why some of the most elementary observations we can make in monetary economics are:
Every country should have a democratic, debt-and-interest-free national currency base.
All households and all governments should have access to interest free financing.
Flick through the slides below for a brief introduction to the subject. There's more throughout the rest of the site. Enjoy.
This part may be easier to read in landscape.
What is money? And where does it come from?
What is money? And where does it come from?
To answer this, let's start by looking at 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 is just numbers in accounts within the banking system. They really are just numbers; there are no corresponding piles of notes or coins, or gold or silver, being kept in vaults. The numbers are all there are. The question, then, is what are those numbers? What are they measuring and where do they come from?
The numbers measure a legal 'title' or 'claim'. Someone who has money has a measured claim within society. And that means society itself, or some part therein, has a corresponding debt to that person. It can be difficult to grasp at first, but money measures out the two sides of a legal relationship: on one side claims, on the other side debts.
That's why we say money is debt. Like any debt, money has two sides: someone who owes and someone who is owed. Money exists as 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.
You may know that money is 'creditary', or 'promissory' or like an IOU. These words all describe the debt-based nature of money: a legal relationship with a debt on one side and a claim on the other.
This is a reciprocal system in which money exists only to occupy the space between giving and receiving. This is a truly fundamental (and ancient) foundation for trade. Money comes into being when somebody makes a 'promise to reciprocate' (i.e. takes on a debt) and will cease to exist again when the debt/money is repaid.
Economists call this 'endogenous' money creation or "money creation by banks". What it means is that the banking system creates the money we need, when we need it - we and our governments really are not 'borrowing' other people's money when we go into debt. And for that reason, we can say that these debts should be interest free.
In our world today, almost nobody could have a home if it weren't for financing and debt. So debt is very important to us. Many people every day use debt to buy a home; they take out a mortgage. If you were selling your house and I needed a mortgage to pay for it, where would that money come from?
My bank would create the money that I need, simply as a deposit in my account, when I ask for it, when I sign myself into a mortgage agreement and into debt.
And when that new money is transferred to you, you will be the holder of x amount of new claims within society. I will be the holder of the exact same amount of new debt. (But I will also now have the house.)
Those numbers (see image →) were created during the process and they are money. The idea that money should somehow be different to that, that money should be physical, or that someone should have to root around to find some already-existing money to 'lend' to me is, by comparison, very impractical. And it has far graver consequences too. Not only would it be inconvenient and very expensive, it would set up some of the most corrosive relationships that can exist within society.
There's nothing wrong, fundamentally, with the way this system works. It's exactly how it should work. The problem is that most people haven't been taught to understand it. The banks know they can tell their customers that they're "borrowing" other people's money and that they'll believe them, paying lots of money in interest because they believe they should.
This is true with respect to both household debt and public debts too. Governments all over the world too are "borrowing" money into existence and recording it as a debt with interest due. This results in large national debts, which taxpayers are servicing because they don't know they shouldn't have to.
In practice, major financial operations like banking could never operate on physical notions of money (like gold or silver) and actual lending and borrowing. Money will inevitably resolve to its most efficient form, which is simply numbers - numbers recording who owes and who is owed.
For that reason, the 'debt-based' nature of money is just a simple practical reality. But, as you've seen, it's also capable of very much more than that. It is through this type of money that we all share a common platform upon which our debts and our exchanges are facilitated, not by "lending and borrowing", but by simply recording numbers into and out of existence on paper or on a computer screen.
And that really does mean most of our debts should be interest free. The money we already have really should support a very different type of economics and very different economic relations all around the world.
Money should work much more for everyone. Money can and 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 should constitute everyone's basic monetary or economic literacy. I hope you now have a better idea of what money really is, where it really comes from and how banks and debt, in reality basically work. We all have the right to understand, to be taught, those things.
There's more to read throughout the website. We're here to promote literacy and the economic foundations of democracy and human rights. Join us. Support us.
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So What's Really Going On?
You saw that money is deeply associated with debt, that money naturally and inevitably resolves to debt, to occupy the space between giving and receiving and to do so efficiently.
And because we facilitate debts in that way, by creating money, rather than 'lending' money that belongs to other people, that access to money should be interest free. (Banks, of course, can still charge competitive fees.)
But you've also seen that powerful profit motives exist to pass this process off as the "lending and borrowing" of already existing money - a practice that has, sadly, come to define the financial services throughout the west and across much of the rest of the world.
We can also observe that the lender-borrower relations which dominate private sector economies also dominate the world's nation states. Just as banks create money as 'loans' for households, so too do banks create money as 'loans' for the world's governments.
We can now already see deep into the core of the global economic structure, its anti-democracy, its structural injustice. We can now see more of why eonomies all over the world suffer immense inequalities and are buckling under the weight of so much debt. From here it's easy to imagine a better world, with greatly improved basic literacy and far greater democratic and human rights for everyone.