21 Nov 2011

Where does money come from?

If you want to know the answer, I can strongly recommend reading the book "Where does money come from?" written by Josh Ryan-Collins, Tony Greenham, Richard Werner and Andrew Jackson who are from the Positive Money group.

Their analysis reveals something that is a very well kept secret. Virtually all the money in the economy is created on demand by commercial banks. It's literally created out of thin air. All the banks need is to find someone (a person, a company, or a country) prepared to take on debt, and bingo, money is magically created. Of course, they can then charge interest (typically 16-20% for credit card loans), even though they didn't have the money they lent. Is it any wonder that banks make huge profits?

Amazingly, this has nearly always been the case. In the 1600s, goldsmiths in the City of London, issued notes when somebody deposited their gold with them. The note said "I promise to pay the bearer one pound of gold". These notes ended up being used as a sort of money. But then the goldsmiths realized that they could offer the same notes to people who hadn't made a deposit. It was clearly fraudulent, but people seemed to like the idea - especially the British government, who found that they could use the notes to finance wars etc.

The banks have never looked back. And since the deregulation of the markets in the early 80s, there has been no stopping them. They've been throwing money that they didn't have to any one prepared to take on debt. Much of that money has gone into the housing bubble. But 10 trillion euros is now owed by the 27 EU countries to the banks. And those banks can now blackmail elected leaders. The result is for all to see.

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