Wednesday, January 11, 2012


Somewhat different from Graeber's explanation, but worth checking out. The crucial point is money = debt, banks create money out of nothing to give out as debt, when debt is paid, money is destroyed. If noone was in debt, there would be no money.

"Then how is interest paid to depositors?" you ask: That money has to come from somewhere too, and in the current system, it cannot come anywhere else but from more debt (which is money) to / from someone else. Since this equation is unbalanced, overall debt must grow in order to pay back interest + satisfy regular loan demand.

The video answers basic questions such as how is money inserted in the circulation, and who decides how money there is out there, and how much. I guess if money in circulation needs any anchor, loans to people / companies could be that anchor. If someone is in debt, that person is on the hook, chances are they will be motivated to create more value in order to pay back the debt. The whole thing of course does sound like a ponzy scheme which, acording to a cynical view, could easily be labeled as such.

But increasing debt also means continous growth and that puts pressure on our energy, and non-renewable resources. A potential solution is the abolishment of the current system with a self-sustaining one. Banks lend out of a constant money supply, earn interest but distribute their earnings back to every citizen. Hence banking becomes a public service.

Q&A - 12/7

Question I still have issues with the baker case. . why could the baker not serve the gay couple? Here is a good analogy Imagine you ...