Overview

There are three main types of money: currency, bank deposits, and central bank reserves. ...Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves. {Bank of England, Money in the Modern Economy (2014) The most outstanding fact of the last depression is the destruction of 8 billion dollars -- over a third -- of our check-book money -- demand deposits. {Irving Fisher, 100% Money and the Public Debt (1936) The process by which banks create money is so simple that the mind is repelled. {John K Galbraith, Money: Whence it Came, Where it Went (1975) Where does money come from? Why is there so much debt? Who is all the debt owed to? Since the 2008 banking system failure and bailout debacle, eyes and minds are opening to the reality that there is something deeply wrong with the money system itself. Governments do not issue their national money supply in the form of legal tender currency: banknotes and coins; the cash money supply. Commercial banks issue the money supply in the form of credit-debt balances: bank deposits; the deposit account money supply. Our deposit account credit balances are our banks' deposit liability debt balances. We use commercial banks' deposit liability debts as our deposit account 'money' supply. And the commercial banks' creditor-assets/debtor-liabilities balance sheet credit-debt creation system is in the midst of another one of its historic balance sheet meltdowns: a financial crisis of creditors' uncollectable money assets (credit balances) that are owed as debtors' unpayable money liabilities (debt balances). Financial crisis is historically resolved by writing off our deposit account credit balances to relieve the commercial banking system of its unpayable deposit liability debt balances. Which is what bankruptcy Trustees did in the 1930s. And which the Dodd-Frank debt-for-equity swaps program (depositor bail-ins) plans to do this time. Monetary system reformers since the 1930s have advocated government issuance of debt-free (non-repayable) money as a solution to the built-in failings of the commercial banks' debt-based repayable bank loan and bond purchase credit-debt creation system. This Money Problem book describes how the central-commercial bank monetary system creates the money and the credit-debt; and shows how the commercial banks' privately-owned money supply creation monopoly systematically transfers ownership of the real economic wealth of nations out of the hands of the people who built it by working, into the hands of the people who create (and un-create) the money supply; and traps the people and governments of nations in inescapable pits of debt bondage. [I recently published a much shorter more concise description of how the monetary system works - The Road to Debt Bondage: How Banks Create Unpayable Debt. If you just want to see how the banks' money and credit-debt creation system works, and why it fails, and how government issuance of debt-free money can fix it: read the Debt Bondage book. If you want more details about how the banks' money supply creation monopoly systematically inflates and deflates asset prices, and generates recurring financial crises that concentrate ownership of money and assets into ever-fewer, ever-richer hands; and if you want more historical examples of monetary system failures and monetary reformers and their reform proposals: read this Money Problem book.]

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