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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-…