Money as Debt

One of the unfortunate side-effects of the scandal over MPs expenses was that it took people’s minds off that other group of perennial fiddlers, the banks.

The difference is, of course, that whereas MPs expenses amounted to thousands of pounds, bankers bonus’ are measured in the millions. And whereas MP’s perks consisted of such unlikely items as floating duck islands and cleaner moats, the ultimate outcome of the present banking system is nothing less than total domination of the whole world by a few powerful institutions.

Everywhere you go you see the same thing. In the middle of every major city, in every country, there are huge buildings of glass and steel which tower above the city landscape like imperious statements of wealth and power. Invariably these buildings are banks.

How did the banks grow so big and come to dominate our world?

How come we have let them?

The process is insidious. Most money in existence does not consist of the notes and coins we carry about in our pockets, but is in the form of debt to banks. The banks create this money out of thin air. This is the simple and startling fact. The money we owe did not exist until the moment we signed the contract to pay it back.

This is known as Fractional Reserve Banking. Banks do not only lend out money deposited with them by savers, but are legally entitled to lend out many, many times this figure.

Thus banks create money. They create money as debt. They create money as debt and then charge interest on it. Thus our money is already devalued even at the moment it is created, since the amount lent out is always less than the amount which has to be paid back.

This is the cause of inflation and it forces us to borrow even more money to cover the difference. Thus there can never be enough money in the entire world to pay off all the debts owed to the banks, and the banks will, in the end, own everything.

And here’s us worrying about floating duck islands.