Why we need to know what money is!

Money Talks, or just a Money Talk:  I have become a campaigner – hence the following talk given at the Island Free Library in my local community – that grew out of realization that I did not know what money is, is just thought that I did, because I knew a bit about how to use it. [You can use and share, note it is Creative Commons Licensed].

This is a link to Slide Share: where the videos work, but you have to be online while presenting.

This is an uploaded power point file: moneycreation (I don’t think the Positive Money short videos I inserted work with this upload, their URLs are below at Slide 3 and Slide 13, if you download and re-insert.) You should use the slide share unless your internet is bad.

Below is more or less the verbal accompaniment to the slides – anyone using them should use their own story, mine belongs to me!

Notes on Money Creation

Slide 1

About four or five years ago I had retired, I took up some sporadic editing work for a Pakistani Women’s NGO [KK, or Khwendo Kor, means Sisters Home, they work to improve education, health, independence of women, prevent violence against women, and work for men too]. My job could be done online, someone had translated annual reports and case studies from Urdu into English, to help dissemination of their work, my job was make it English speaker English. Easy, do it now and again, when I had the time. Feel-good too.

A piece about independence referred to “micro-finance” and Islamic Banking. It was confused as written, but I knew nothing about either. I couldn’t see what was wanted nor the correct way to rewrite. So I started a quick surf – google and wikipedia – how lucky we are to have these libraries of information – just there!

And I met Positive Money. And I met questions:

What is Money?

Who creates Money?

What happens when we realize something counter-intuitive? It is not that we were wrong, exactly, it is that the perspective we had, the way we looked, the system we were looking inside, was … not really REAL. We had a story in our heads that seemed to work … most of the time … then one day it didn’t.

I realised I had no idea what money was.

I have not become an economist, nor a historian of how the world arrived at its present system. But I have become a campaigner, because people who have done a lot of work and thinking have let me to see that asking this question matters to almost everything any of us care about.

Slide 2

There is confusion about what money is. We are all familiar with the essential quality of money as something we own, which can be exchanged for other things that are up for sale, or given to us for work we do. Most people are aware that money has ‘been’ different things in different places: gold, silver, beads, stones with holes in them, etc. This lets us realize that it is actually an idea, rather than anything in particular, a something decided upon that people will trust.

Provided there is agreement, anything will do. The agreement is now an unspoken consensus, seldom considered. Money can be used all over the world, currencies exchanged etc. goods bought and sold, according to various methods, some is notes and coins, some is figures in accounts that can be exchanged electronically (it used to be figures written in a book, essentially the same idea). What I found difficult to grasp, is in fact the case: MOST MONEY is CREATED FROM NOTHING. The short video “Is Money at the Root” explains this. [https://www.youtube.com/watch?v=I_QC15C7o4A&feature=youtu.be]

Slide 3PM video Is Money at the Root of All Our Problems?

Having watched, this is what money is: Money is DEBT – created from nothing as a speculative risk. The risk is not borne solely by the speculator, it is also borne by the borrower whose work or assets must hold their value in order to repay, and also, value has to be gained for payment of interest. In other words, work has to be done, energy expended, something of worth repays the money created. In particular, if the borrower is government, it is the public, the common people, served by government, who hold the risk and repay with worth, their work and skills .

Questions? Comments? Feelings – can’t be true?

Slide 4

[history – not needed – just available for the curios]

The British Parliament passed the Promissory Notes Act 1704, a law that allowed debt to be ‘negotiable’ – something to be freely bought and sold – as if it is a commodity, rather than an agreement or contract between two parties. Once debt is negotiable, value can be created in a variety of different ways. for example, a government borrows, gives the lender a ‘government bond’, equal in value to what it has borrowed. For the lender, a bond is equivalent to money, an asset and the lender loses nothing by lending, BUT the public (government) is put into debt. (The process therefore takes from those who work and gives to those who have had assets already.)

US history includes Alexander Hamilton, Jefferson; later Lincoln offered a different system; Federal Reserve came into being in 1912, the system is institutionalised.

Negotiable debt is a very versatile source of ‘created value’. New ways of creating value based on negotiable debt are still being invented: derivatives, CDO’s, CDS’s, repos and ‘shadow’ banking are some fairly recent additions. However, in 1700s and 1800s, negotiable debt, bank-money and government debt, was the foundation of a new form of power, that of FINANCE, an industry where financial assets can be used to bring further assets, or change the value of those already in existence. British international activity, led by the power of this system, forced the adoption of negotiable debt as the way in which money is created and placed into the world economy of goods, services, work and energy. Similar legislation was subsequently adopted by most if not all commercial nations (including USSR where money creation followed the same system during the communist era.)

The system is maintained by governments and capitalists (the assets holders), with commercial banks and central banks acting as intermediaries between them in a way that also enables banks themselves become corporate owners of capital.

Note a speculative risk is taken, but the bank can choose the safest project, not the most necessary, and, can see who will bear the risk, and who the gain – not the same people!

Slide 5, 6, 7 consequences

For me, the impact on humans is that more and more we become divisive and competitive – in order to survive or manage well enough. It forces US and THEM thinking, we care , they don’t. They are thoughtless consumers, we are just needing a holiday, a decent lifestyle, we work hard enough etc.

Slide 8

Change Regulations:

keeps the possibility alive of creating value out of nothing. Splits based upon ideological views, e.g.

Left: The State should be entrusted with providing a money supply: public good – environmental improvements – nationalized goods and services.

Right: Distrusts the power of government. Human freedom produces goods and public services more efficiently. For people with needs – welfare, personal and communal responsibilities

Change fundamental laws

The laws which enable banks to create money also enable governments to create national debt – little or no expense to the lender/bank, great expense to the rest of the population.

The governor of the Bank of England: ‘Of all the many ways of organizing banking, the worst is the one we have today.’

Yet talk of fundamental reform is more-or-less absent from any agenda.

Slide 9

Why no reform – questions suggestions comments

Slide 10

If we think about the changes that have happened…

Monetary System will face crisis…again…this time maybe fundamental.

Power Elites will lose credibility

A justice (economic and political) opening/vacuum will occur.

We must be prepared to move into that opening/fill that vacuum.

Slide 11

When the history of change is recorded, often find that some have just been unaware – that is ignorant, but others who hold power do act to keep it, and act against the common interest. We should look out for these things

Which do you see at present?

Slide 12

There are well researched routes to reform, where to look, e.g. video

Slide 13PM proposals video

Slide 14 where to look

Lobby representatives, Talk/Share, Sign petitions, or create one.


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