Debt creates money

Debt creates money. I didn’t know that, but now I understand why congress is acting.
https://www.youtube.com/watch?v=4AC6RSau7r8&ab_channel=MalikMuhammad

The link above goes to a  video that explains money and banking. There are no snappy soundbytes or candidate slurs, it’s just an Econ 401 course condensed into a 10 minute video. The video is long, but anybody can understand.

If you don’t want to watch the video, here is a synopsis:

The video gives a brief history of money and banking from first invention up thru today.

The crucial point they make is that today’s money does not exist without debt > in short, the creation of debt IS the creation of money.

This is counter-intuitive to general thinking, since most people believe the Treasury makes money by printing it. The revelation explodes the myth that banks loan money based on deposits which is simply not true.

The video explains how debt creates money. It further points out that debt must be continually created, or the economic system collapses. This is why the government is doing a bailout to restore the ‘credit market.’ The government has to pump money into the debt-creating process or else money will disappear.

But wait, that’s not all.

The video shows that debt creates money, but the debt does not create enough money to cover the interest. The interest has to be earned in the future. How is that done? The economy must expand each year.

To pay interest on the debt, natural resources must be harvested in greater quantities each year so the economy will grow. The video points out the logic that natural resources are finite, and therefore growth is harder to sustain each year.

Somebody showed this video to congress.

The complexity of money also shows why congress is not explaining the situation to the public: Because the public yawns at long explanations and defers to soundbytes that reaffirm their already-held beliefs.

Unfortunately, the public appetite for having somebody else do their thinking makes congress look dishonest.

The video concludes by offering a backward glance at those societies that solved the cyclical nature of market economies by eliminating ‘interest’ owed on debt. Sort of a utopian ‘ban-the-money-changers’ idea, but an interesting solution none-the-less.


Gene Haynes