Time to reboot the (financial) system

Opinion and comment

When you first hear that banks create money by typing numbers into a computer you can’t quite believe it. When you hear that this free ‘money’ is lent out with interest added, you dismiss it as lies because the banks would be no better than counterfeiters.

Back in 2009 I wondered where all this money came from. I watched documentaries (see bottom of page) such as Bill Still’s The Secret of Oz, Paul Grignon’s Money as Debt and read Deirdre Kent’s book Healthy Money, Healthy Planet – where she writes: “When it comes to creating money, banks only create the principle – not the money to pay the interest they charge.”

It took less than a week to join the dots and understand that we are collectively indebted to the banks and the debt will only grow larger. Under the current monetary system, there is no way out.

Even now, years after I wrote the first version of this post, I have to pinch myself that money is man made. It is artificial. Created when someone at a bank types numbers into an account. Want to borrow $5,000 from your bank? Tap, tap, tap, ENTER. There you are.

Once you understand that the banks create 98 per cent of all money in New Zealand, and the money is loaned out with interest, and that the two per cent of money (physical cash) created by the government is no where near enough to pay that interest, you start to understand why we are in a collective spiral of increasing government and personal debt. All money created by banks is debt. It is only created to be lent out.

I’d wager that most of our elected representatives do not realize what’s going on. If they do, they don’t seem to care, perhaps having an eye on securing a seat at the table of a bank’s board after their political career has run its course.

The Reserve Bank of New Zealand, which has the legal right and ability to create debt-free money, will tell anyone who cares to listen why it would be madness for the RBNZ to take back control of the money supply.

This is what Mike Hannah of the Reserve Bank has to say about it some years back: “If the government ‘prints money’ and uses it to spend in the economy, the quantity of money in the economy increases, and all else [being] equal, interest rates will fall, and prices will rise.”

What Hannah forgets is that government printed money would not be inflationary when spent on items such as infrastructure – items that are currently funded by taxes and commercial bank loans.

Loans that are re-paid with tax receipts and reduced public services. Quantity theory assumes that money is ‘neutral’. It’s not, it is debt.

Hannah says: “Conversely, when the government borrows money from the public to spend, this in itself does not increase the money supply.”

This ‘public’ money comes from banks, the creators of most of our funds. So it has already been created out of thin air and is attracting interest. Instead of saying ‘money supply’ Hannah could more accurately call it ‘debt supply’.

If the government created and controlled the money we need, it would not need to borrow any money. As a country we would not be beholden to any corporation or bank.

Is changing the way government obtains the money it needs to pay for public services, infrastructure and civil servant payrolls an election issue? It could be.

But as countries start to fall further into debt, as banks step in to foreclose on people’s homes, businesses and countries, a sea change may be unstoppable.

When banks lend governments billion of dollars, do you do what the people want, or what the banks want? Who’s your daddy?

Keep an eye on the New Zealand debt clock.