Just yesterday in Brixton, in London, they launched just such a scheme. So I will return to this issue of innovation in this field later, but one of the most important things I got from beginning to work on this, is that I realize I, like many people, have so many completely unfounded assumptions about what money is.
Someone asked me the simplest of questions: “Where does money come from?”
Where does money come from?
Now, I am a Professor of Management, not Economics, but I like to think I know things, and it’s a very simple question, and I didn’t have a clue. I offered the idea that: “Wow, doesn’t Government create it?”
And then I found out that well, yes, 3% of all money is created by governments in the mint, so these are the coins and the notes we have. But the rest, in nearly all countries of the world, the rest 97%, is made by banks, private banks, it’s electronic. And they create this with interest, of course.
So when you go to a bank, did you think that the bank had the money to lend you, when you borrow it? I did. But no, they create it out of nothing. And of course, as I say, they create it with interest. But they don’t create the interest, so who creates the interest? It’s created with another loan, with more interest. So it means today, there is more debt in the world than money.
Just like with the knight and his tokens, we can’t pay off the debts, there is just not enough money. Individually we might, but collectively, we are in debt forever. We are paying compound interest forever. Now this creates a lot of problems, but for time, I’ll mention just two.
The first is this system of money creation as debt, with interest, means that increasing economic inequality — differences between rich and poor — is a mathematical certainty. No wonder then the 2% of people in the world now control half, or more than half now of the world’s wealth.
The second problem is environmental. Because we need more and more landing to catch up because of all the interest, we must have more and more products and services traded, and therefore we must have more consumption of natural resources, otherwise the system will collapse, and we’ll have to fall through recession, and so on.
Now we don’t have an exponentially expanding planet, as far as I’m aware, and so, this money system means that, for all our ingenuity, all we are doing is delaying the ultimate crash that has been pre-programmed by this stupid money system. So that’s the theory.
But how does this really feel? Who’s got some money? I’ve brought along 20 euros. Let me see your money. Show me your money, I want to see some money.
Now we know this is just paper, don’t we? We know this is paper. As paper is not that useful to us, you can scribble on it maybe, or write a prayer and put it under your pillow and pray. But it’s just, just paper. We choose to make it worth something more that that because that’s helpful for us, but it would be a delusion to think it has value in itself. It’s just paper, it’s just money.
We are the wealth, us. Our ability and our desire to do things for each other. It would be a delusion to think this is wealth. And If we run our society as if this is wealth, haven’t we gone completely mad? You turn on the telly, as I think many of you do, and what do you see? You see everyone talking about growth, we need more growth to restore growth.
So I used to think anyone talking like this was a nutter, and maybe you can relate to that now. And I think it was my desire to be relevant and my fear of being ridiculed that helped me back from working on these critical issues. And I’ve realized that the mass media, many of you guys, help to define what’s considered relevant or ridiculous. So you have a key responsibility to encourage effective debate about the real causes of all these crises we are seeing.
So I looked on-line for a quick check and I found that there are about 42 million webpages mention financial crisis. So guess how many of those also mention monetary reform? Just over a hundred and so thousand, so about 0.3%; it’s almost as if there is a taboo about talking about the real causes for our current problems.
So what if media embraced this responsibility to challenge our assumptions, to dig a bit deeper, and what if journalists asked our top politicians the simplest of questions: “Where does money come from?” You might get some funny answers. It might make for some amusing Television program.
Fortunately, we do have the weld of new media — as we’ve been hearing about — and this is allowing independent voices to reach audiences of millions worldwide. So home-made films like Money as debt have been watched over a million times on YouTube. Social networks means that currency innovators and campaigners for monetary reform can share what they’re doing and learn from each other. There is one initiative I’m engaged in, it’s called: The Finance Innovation Lab, in the UK, and through that, we are learning about all these different initiatives and innovations.