The Shocking Truth of How Money Is Created

Posted by – February 13, 2011

Those who like sausages and justice should never watch either being made, so goes the old saying. Maybe it’s time to add money to that list.

When you understand what I’m about to tell you, you’ll find yourself wondering how we will stop the banks from eventually owning everything. I’ve been wondering the same thing myself since I discovered the horrifying truth about money a few years ago.

Money as Debt — A rather paranoid but nonetheless enlightening video.

Do you remember how, when you were at school, your teachers showed you videos in which bank notes were being printed out on impressive-looking printing presses? You were probably left with the impression that that’s how money is usually created.

Of course, we’re in the electronic age now, so maybe the old printing presses have been replaced by figures held in computers, but the principle’s the same, right?

Nope. Here’s the awful truth about how 95% of all money comes into being.

Suppose you want to start a business. It’s not easy to start a business without money and few of us have tens of thousands of dollars lying around in drawers, so naturally you borrow money from a bank. Let’s call it Bank X. For the sake of simplicity, pretend that Bank X is the only bank in the world.

You then use the money to rent a shop for a year, let’s say. The owner of the shop gratefully receives the money and pays it into his own bank account, also with Bank X.

Bank X can then lend the money out again to someone else, once again charging interest on the money it lends out.

But wait a minute, doesn’t that mean that the money goes around in circles, the overall supply of money in society steadily increasing while Bank X collects ever more and more interest payments?

The answer is yes, that’s exactly what happens. A small amount of money lent out to someone like you or me can quickly mushroom into a hundred times the original amount of money, with the banks collecting interest payments on it every step of the way.

It’s this process that governments attempt to control using interest rates (via their central banks — did someone just mention foxes guarding chicken coops?). By increasing interest rates, central banks make people less inclined to borrow money. They also make it harder for people who are already in debt to repay their debt.

This economic system means that on average, everyone is in debt to the banks. At any given time, the money that circulates in society must be matched by a nearly equal amount of debt, because that’s how most money is basically created. Incredible! It’s literally nearly impossible for everyone to pay off their debts without the economy completely collapsing.

But as recent events show, there’s no need to worry; although the world economy sounds as though it must be horrendously unstable, and although the world’s greatest currency trader, George Soros, claims that the entire system continually tends towards instability, basically the world’s governments have got the whole thing under control and aren’t in a horrifying and unsustainable amount of debt at all …. oh, wait a minute ….

Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Notify me of followup comments via e-mail. You can also subscribe without commenting.