Money as Debt logo

site map / view all movies / contact

problem / pages 1 2 3 4 5 6

"Twice-Lent Money"page 2
Money is created as a promise to pay it back

Today almost all of our so-called money supply is created as bank credit. The borrower creates bank credit (promises of fiat cash on demand), by signing a contract to pay fiat cash or bank credit money back to a chartered bank or trust.

Thus, bank credit money is a promise of repayment in itself.

So also is fiat cash, which is "real money" in the sense that it is legal tender. The courts enforce its acceptance.

Legal tender is created by the nation's central bank as a promise of repayment (usually by the national taxpayer but now other debt) that is not paid back, just serviced with perpetual interest. This debt creates the "base money" supply that provides the system with central bank balances and physical cash. But base money is often just 5% or less of the money supply.

The rest of the money supply, the vast majority, is "retail" bank credit, numbers on computer screens, promises of repayment in bank credit, denominated in legal tender units. Most of this bank credit is created as mortgages, and must be paid back on time.


All of it is Money created as Debt.
Those who have seen my movies may not need to review the explanation any further.

For those who would like to read a succinct written explanation, I have a one-page PDF:
Where does money come from? and several essays.

back / next ~ Interest is not the mathematical problem some people think it is


site map / view all movies / contact

problem / pages 1 2 3 4 5 6