What Is Money, How Is It Created, And What Are The Consequences?

USCurrency_Federal_ReserveWhen money drives almost all activity on the planet, it’s essential that we understand it. Yet simple questions often get overlooked, questions like: Where does money come from? Who creates it? Who decides how it gets used? And what does this mean for the millions of ordinary people who suffer when the monetary, and financial system, breaks down? We have yet to see an election fought on these grounds and as political philosopher John Gray, commented, “We’re not moving to a world in which crises will never happen or will happen less and less. We are in a world in which they happen several times during a given human lifetime and I think that will continue to be the case”

People are waking up to this fact: the Occupy movement and the European indignados have erupted as a response to the current status quo. The media and ‘myth makers’, however, have found it much to easy to pigeonhole these movements into a “spiritual malaise” that provides no meaning or direction for our modern world. This is the response expected from a dominant neo-conservative economical world. This ever-adaptive financial system has been as such for centuries and those who can control it see no reason to steer a course elsewhere. Indeed the economics of emancipation can impart to us an interesting insight to the cyclical and prevailing nature of this economic paradigm.

At the turn of the 19th Century North America and the West Indies was a remarkable healthy commercial network for the British economy accounting for 57% of British exports and 32% of imports. By 1820, however, the West India lobby was in economic turmoil. Blaming their plight on the antislavery movement and the adverse effect of emancipation on property prices they pushed for unprecedented compensation. Under enormous political pressure the British government eventually paid, £20Million or 40% of gross government revenue to the Plantation owners. Little is mentioned to the efforts of the merchants and emergent bankers who leveraged the plantation owner’s debts and mortgages far beyond the levels of commercial sensibility. As a result very little of the monstrous sum found its way to the West India colonies. Instead the colonists complained ‘It was paid for the most part, to mortgages, in or about, the small circle of Threadneedle Street.’ (City of London). Bailouts are not a modern phenomena.

Fast-forward to 1989 and Michael Rowbotham’s seminal work, “The Grip of Death”. From this work we begin to see a new challenge emerge to the widespread assumption that monetary statements, commonly used as the basis of economic decisions, are actually valid. He commented, “General confidence in modern money and monetary judgments is utterly misplaced; the apparent neutrality of the present financial system is quite false. Modern money is not a neutral medium; indeed, the way in which money is currently created gives it a specific nature and serious bias. Modern money actu­ally operates within its own detached and limited mathematical world. It projects its own version of `the facts’; its own version of an economy; its own reality. It tells us what we can and cannot do; it tells us what we can and cannot afford. But these amount to demonstrably false, irrelevant and misleading statements.”

This work inspired a new, younger group of Monetary Reformers who, web savvy and technologically proficient, quickly built networks of like minding people and resources. Oft so tricky to achieve in the past the modern movement has converged around a central point that the monetary system is inherently unstable, depending primarily on the confidence of the private banks themselves, as it is the Banks who control the quantity of money created and whether it is used for productive or speculative means. The vast majority of people still believe that banks lend their depositors savings to customer who wish to borrow and it is this main argument that needs to be won.

In December 2010 I contacted a small research and campaign organisation called Positive Money and what ensued was a determination to create a documentary that would explain how banks create money and the consequences.

97% Owned is the culmination of almost two years of research and interviews with those who have come to understand how the monetary system really works. Together this new group have worked to inform MP’s, meet with the Treasury and work with thousands of people to raise the profile of monetary reform from the backwaters of conspiracy theory to the real politick. 97% owned is a documentary presenting serious research and verifiable evidence on our economic system. If you have decided that crisis as a result of the monetary system is not an event you want to keep revisiting in your life-time then this documentary will equip you with the knowledge you need, what you do with it is up to you.

Mike Horwath an independent filmmaker, writer, researcher and the founder of Queuepolitely. After studying the ‘History and Art form of Documentary’ Mike set up Queuepolitely to create, collaborate and distribute social movement documentary. Mike’s latest production 97% Owned is due for release May 1st and is the first documentary film backed by academics, authors and researchers to explain ‘What is money, how it is created and what are the consequences.’ This film follows on from Mikes previous documentaries examining the financial system, Generation OS13: The New Culture of Resistance, The Potemkin League and Northern Lights. Mike lives near London in the UK and his website is www.queuepolitely.com

15 Comments on "What Is Money, How Is It Created, And What Are The Consequences?"

  1. Liam_McGonagle | May 1, 2012 at 2:34 pm |

    Money is just a crudely quantifiable proxy for “trust” (hence the centrality of “credit” to the economic paradigm).

    It’s a jury-rigged, slapdash way of saying, “We both maintain a shared commitment to the same set of transactional rules and arbitrating principles.  We can exchange quickly with a minimum of complication.”

    Of course, when form is taken more seriously than substance, the whole thing becomes a sick joke.

    • mannyfurious | May 1, 2012 at 4:35 pm |

      Precisely. Money is useful so long as we all recognize its limitations. It’s usefulness lies in its being a symbol. Instead of trying to set up a meeting consisting of a real estate agent, a grocer, a representative from the energy company, a tailor, a cobbler, a TV manufacturer, a couch manufacturer, etc. and saying to them, “If you give me a house, and some food, and some electricity, and some clothes and a couch and a TV etc., I promise to do 40 hours/wk of social work” we simply exchange symbols of that wealth. The symbol itself is not the wealth. You cannot eat a dollar. A dollar cannot heat your home or parlay TV signals into your home. You cannot really wear it. It is utterly worthless… except as a symbol of that wealth. 

      The issue is that we’ve all forgotten this fact, and we all (even the poor–especially the poor) treat money as if it is the ends instead of the means. At any second we can all choose to stop accepting the illusion that paper money is worth anything in and of itself, and take the “wealth” away from those who hoard, but we don’t. And the fact that we don’t, I think, says more about the 99-percent than the 1-percent. 

      • It makes me wonder how much real wealth the 1% actually have.  How much richer than us are they really?

      • Jin The Ninja | May 2, 2012 at 4:50 pm |

        great point- especially the last line.

    • Hanksmith | May 2, 2012 at 4:05 am |

       Agreed.   A handshake and your word use to mean something.  now its all about lawyers cleaning up small details and bullshit contracts. 

    • Correction:

      Credit is just a crudely quantifiable proxy for “trust”,  

      Money is the token of a promise that begged for the credit.

      The mistake the charlatans make is to confuse the two.  

      Broadly speaking, the money supply (M4) is the sum total of promises made by commercial banks to demand deposit holders, not the sum total of promises made by borrowers to the banks.

  2. Leviasan | May 1, 2012 at 8:54 pm |

    Why don’t you ask an economist? “Money is a commonly used medium of exchange. People wishing to achieve their ends often have to trade. They can exchange their goods directly, if they have matching preferences and suitable goods, or indirectly, with the help of another good, the medium of exchange.” There is commodity money and fiat money. “Often called paper money, fiat money is in a wider sense any money declared to be legal tender by government fiat (ie law). In the narrower sense used here, fiat money is an intrinsically useless good used as a means of payment and a storable object. All modern paper currencies are fiat money. “In no period of human history has paper money spontaneously emerged on the free market. In all known historical cases, paper money has come into existence through government-sponsored breach of contract and other violations of private-property rights.”—
    Jörg Guido Hülsmann, Ethics of Money Production.

    • Economists practice what is not a science at all, it’s voodoo.  No model of an economy ever presented by any economist has ever predicted anything about any real system. They all have a confirmation bias and most people who don’t understand science buy into it.  Asking an economist anything would be as useful as asking a priest:  Both proceed from faith without any real evidence that what they’re saying has never been proven. 

      Further, to say that all paper money fiat money is a false assertion.  The united states uses a system referred to as “debt as currency”.  The value of the money is predicated on the fact that its issuance incurs debt and interest, and the interest is where the value of the money comes from.  There are other forms of backing for money that aren’t fiat or commodity based, so again, you’ve made a false assertion that there are only two ways to back currency.

      I suggest you learn about economics from an unbiased source.

    • Sigsoldboy | May 2, 2012 at 9:00 am |

      You will also find that 80% of the people involved in this film all have traditional economics backgrounds, the majority all have degrees in economics and masters. 

    • Either that quote is taken wildly out of context or Hülsmann needs to spend more time in the History Department.

  3. Lifobryan | May 1, 2012 at 11:15 pm |

    Open up your wallet. Take out a dollar bill. Hold it in your hands. Feel it. Look at the front of the bill. George Washington, with his sphinx-like gaze, seems to tell us, “This is society, this is stability, this is security. Believe in this.” The dollar is the foundation of our economy, our lives, the basis of our life decisions and social classes. The dollar is our enabler, our defeater, our liberator, our enslaver. Turn the bill over. There’s a pyramid – the very epitome of stability, security & permanence. There is also an eagle with a shield (our defense), an olive branch (our diplomacy & negotiation), and arrows (our weapons).

    Now look up …. there are some words: “In God We Trust.” This all makes perfect sense if we read those words as self-referential. The dollar is God. Now, doesn’t it all make perfect cents ….?

  4. Icecycle66 | May 1, 2012 at 11:15 pm |

    Money is representative of resources used. The acceptance of money is a social compact that allows inter-individual debt of resources to be offered
    to another person regardless of relation to the original debt.


    • Money represents resources that do not exist apart from a promise to pay later. 

      With another resource available a debt would be paid by that instead of the money.

  5. Money is a shared delusion, a trick that makes us believe that it is worth something. The truly rich and powerful could care less about money, but they do care about maintaining the idea that it is something to have. If the majority were willing to wake up to this then maybe….who am I kidding?

  6. SmudgeServices | May 3, 2012 at 11:13 am |

    i wish there was a politician who understood this issue, cared, would speak up, and do whatever he could to help change the monetary  system.

    oh wait… RON PAUL has been warning people about this and trying to revolutionize the monetary system for over thirty years.

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