How Money Works

Below is an article I wrote a number of years ago about how the money system works and what is wrong with it. Maybe I'd put more nuances in it today, but I still believe it is basically correct. Most people don't really have any clue about money and think it is being 'made' by doing good work. It isn't. It is being made by borrowing it from somebody who doesn't have it, but who invents it out of thin air. Which I think is alarming. I'm no economist, but I haven't heard anybody educated in economics challenge this. The feedback I've mostly gotten from experts is that it all doesn't really matter. Anyway, read on...

"Some of the problems with our prevalent economic system as I understand it is this:

Money is created by banks. In part by central banks who can make up amounts and lend them out, mainly to central governments, but also to regular banks.

The worst problem is not that the central banks are mostly outside the control of any elected representatives of the population, even though that is certain cause for some suspicion and alarm. In some areas, such as the U.S., the central bank is a completely privately owned institution, owned by its member banks. The central bank of central banks, the Bank for International Settlements in Basel Switzerland, is also not controlled or owned by any government, but is a corporation with stocks. It is located on land that is not considered part of Switzerland or any other country, it is not answerable to any public body, and it does its business in secret.

However, the worst problem is that interest is being charged for the money that is lent out. It might well be a good idea to use fiat money, that is, money that doesn't have any inherent value, but is only valuable because we trust that it is. All currencies on the planet are, as far as I know, fiat money. However, the problem is the interest. more >