What is Money?

This is perhaps an unusual article for The Bone, for the fact that one of its main features is a piece of work created other than by the person who wrote it. There is however a good reason - it concerns a subject so simple that almost nobody on the street understands it, yet the majority of such people worship it with no idea of what it’s about. Forget Christianity, Islam, Buddhism, Paganism, Judaism, Hinduism or in fact any other “ism”, it’s the biggest God the world has ever known (albeit a false god in the view of most other religions), and it comes by many Names - Finance, Economics, Capital, Profit, … You probably know it best as “Money”.

You may well be thinking at this point that this may be some kind of rant against the greedy aquisition of material wealth, but you’d be mistaken. It’s not: It’s quite the opposite. You see, Money has no value, and that’s not about spiritual value or how our souls could be clouded in darkness by it’s worship. It’s about the fact that Money has no value… It’s debt. To have money is to own debt. Take out a bank note from your purse or wallet, and study it closely… it may well say “I promise to pay the bearer on demand the sum of…”, or “payable to the bearer on demand”, or whatever your countries equivelant of the phrase is. It’s a promissory note from the bank - more commonly known in English as an IOU (or “I Owe yoU”.) It’s just a piece of paper that represents a promise, and actually has no value in itself. The only thing that gives it any value is the belief and trust that the promise will be kept. The trouble is, if all physical money is merely a promise, then what supports that promise… why do we believe in it? A very simple equation tells us what money is, and it looks like this… paper + belief + trust = Money. It is for that reason that the monetary system can be called a religion, and why money itself can be regarded as an Idol - a God. Quite frankly, it doesn’t exist in any real form. There are numbers flying around the world from computer to computer, there are promises flying around from person and from country to country, but it’s all based upon a belief and a trust in it’s value. If you still find the fact that all money is debt difficult to believe, consider the following quote…

“If all bank loans were paid…there would not be a dollar of coin or currency in circulation. Someone has to borrow every dollar we have in circulation. We are absolutely without a permanent money system.” - Robert Hemphill, Federal Reserve Bank in Atlanta, in foreword to “100% Money” by Irving Fisher

This leads nicely to another question. We already know what money is, but where does it come from? Up until this point, you could be excused for wondering why the money = debt equation matters to you - what could it mean for your life? The answer is this… We assume that banks lend out the money they get from people making deposits into their accounts, and they don’t. When a person takes out a loan from the bank, they sign a note saying that they owe the bank that sum of money, plus interest payments on it. The bank then writes that amount of money into that person’s account, while simultaneously writing into the banks account that it is owed that sum of money. When you study that closely, you realise that assuming that the money will be repayed, the money the bank has lent doesn’t have physically to exist in the first place. The bank merely promises that it will pay the bearer of that money the sum involved when it is spent. Essentially, that morgage or loan agreement that was just signed creates the sum of money it declares out of virtually thin air.

This means, in simple terms, that the bank may not actually have the amount of money that it lends out. The result is that if all people with accounts at the bank came in and withdrew all of their money at the same time, the bank may not have enough money to cover it, and in fact, probably doesn’t. In the current economic climate where we are hearing of a large economic crisis, and learning that a number of our banks are in trouble, this is particularly notable. This is what is referred to when a government guarentee’s bank deposits (though taxation, of course)… when a bank falls, if you have money in it, you may well lose it with no recourse to getting it back. This is basically what happened in the UK to Northern Rock, and why it was nationalised. People heared that it wasn’t doing so well, and so people actually queued up outside the bank to withdraw their money, but the bank couldn’t have covered it all. Effectively, the bank was going bankrupt! The way this was fixed was by the government taking control of it, meaning that government funds could be used to guarentee people that their money was safe, using taxpayers money of course.

So, why did the government nationalise Northern Rock? Surely a few people losing money like that, unfortunate and lamentable though it is, is not a national issue? Surely that one loss would not “break the bank” so to speak? Well, most are begrudgingly comfortable with the nationalisation either for reasons of compassion, or because they are told it has to happen. It is, however, bigger than that. It is not a case that would have “broken the bank”, but rather, the bank was broken. Letting the bank go bankrupt would have been like throwing a stone in a pond, with the effects rippling out across the rest of the financial world. Banks are the ones that make money - most people assume that it’s the government, but the government’s printing presses only make a small percentage of the total. The rest is made by banks. If the banks are in trouble, then everybody is in trouble as the whole economic system is dependant upon them. It’s not just individuals that are at their mercy, but entire nations and governments to… we depend on the banks to such a degree that we simply cannot “afford” to allow them to go bust and blink out of existance without changing the system beforehand to be prepared for it. As long as you consider it metaphorically, Money really does make the world go ’round.

The thing is, as you can imagine, the banks stand to lose quite a lot by the system changing, and will do their best to stamp on any such attempt. With the banks controlling the worlds money supply, they have all the power needed to do just that. Even when the banks crash, owing to our dependance on them, they still are powerful enough a force that those that depend on them bail them out - and that means you… the taxpayer, the customer, the depositor, the person that gives the bank such tremendous power. When the banks are OK, they make tremendous amounts of money, making their executives and their shareholders very rich indeed while you go about your normal and perhaps even meagre daily life and everybody seems happy… but when the banks get the hiccups (or worse), you pay the price.

In the words of an international banker, an American president, and a British Primeminister…

“Give me the right to issue and control a nation’s money and I care not who governs the country.” - Meyer Amschal Rothschild, International banker

“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than the aristocracy, more selfish than the bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes.” - Abraham Lincoln 16th president of the USA

“The international bankers swept statesmen, politicians, journalists and jurists all to one side and issued their order with the imperiousness of absolute monarchs.” - Lloyd George, Former British Prime Minster

And so, to conclude - if that seems a little to much to take in, if you just want to see a more in depth (yet incredibly simple and easy to understand) explanation or even if you’re looking for a way to kill some time, then please feel free to watch the following video by a man named “Paul Grignon”. Futher information about him may be found in the related links section of this page.