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Showing posts with the label after the music stopped

How Is Money Created?

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Money isn't just pixel dust!
In an earlier post I described money as “pixel dust.” I was being cute—way too cute! Sometimes an analogy can hide much more than it reveals. Money is not created by Tinker Bell, though I did feel a bit smug upon realizing that the writers of the Zeitgeist film series repeated my observation that when you take out a bank loan you create that debt out of nothing.



Banks have the right to create money, but they need your help
The bank does not have the money it is lending you. Stop and think about that for a moment, because it is the answer to the question “how is money created?” As more and more people struggle to understand bitcoin, the fact that money is just a way of recording debt is starting to sink in. When I googled the question “how is money created?” I was surprised by the number of sites covering the question—the number of people who knew the answer. I found myself asking, as I often do, how could I not know this? Shouldn’t every ten-year-…

What Is Money?

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The system runs on borrowed moneyThe cliché that “The system runs on borrowed money” is well known.  You might imagine that you are somehow removed from that “system.”  Whether you are aware or not, your country, state or province, your school, your job, your church, your city, and your household are all run on borrowed money.  Nonetheless, “borrowed money” is a funny/peculiar expression because it is redundant.  There is no other kind of money.
What is money?  Experts aren't sure.Reading Graeber’s Debt:  The First 5000 Years I was bemused to discover that there is no consensus among the experts on what exactly money is.  (See   When Should You Repay Your Student Loan? ) Of course, we all know what money is, but it is one of those obvious, everyday concepts that makes perfect common sense until you start to think about it.
IOU or Commodity?Historically, the debate has been between seeing money as a commodity like gold or silver (something that has a value) or viewing it as an IOU, a…