CHAPTER 3: HOW MONEY WORKS TODAY: A SUMMARY.
This chapter summarises how money works today. For convenience’s sake, there will be some repetition of material covered elsewhere.
Founded on debt rented out at interest, the money system is difficult for most human minds (mine, for instance) to grasp. It is counter-intuitive, so much so that a leading banking historian (Lloyd Mints) described it as work of the devil. In his own words:
‘It would seem that an evil designer of human affairs had the remarkable prevision to arrange matters so that funds repayable on demand could be made the basis of profitable operations by the depository institutions. It is wholly fortuitous that an income can be earned from the use of such funds, but this being so has resulted in the creation of institutions which have largely taken over control of the stock of money, an essential government function.’[1]
Authoritative sources describe our system of money and finance much as it is described in this chapter. Journalists, teachers and writers of textbooks, however, tend to describe an entirely different (mythical) system in which ‘savings’, rather than newly-created money, form the basis of capitalism.[2]
What is ‘Money’?
We all know what money is. It’s something we can own which can be swapped for other things that are up for sale. It is a kind of abstract property: mine is mine, and yours is yours.
For people who like their truths to be stated with a bit more gravitas, here is an economist saying the same thing:
‘So long as, in any community, there is an article which all producers take freely and as a matter of course, in exchange for what they have to sell, instead of looking about, at the time, for the particular things they themselves wish to consume, that article is money, be it white, yellow, or black, hard or soft, animal, vegetable or mineral. There is no other test of money than this. That which does the money-work is the money-thing.’[3]
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