The simple answer is that’s it’s made up.
By bankers of course.
From the British Green Party’s “Banking Reform Motion – Background Paper“:
The fact that banks can literally make money out of nothing in this way is regularly acknowledged by experts in the field of money and banking. For example: In a speech on 23rd October 2012, Sir Mervyn King, Governor of the Bank of England said: “When banks extend loans to their customers, they create money by crediting their customer’s accounts”
In an article, published in the Financial Times on 9th November 2010, Martin Wolf, the FT’s Chief Economics Commentator, wrote: “The essence of the contemporary monetary system is the creation of money, out of nothing, by private bank’s often foolish lending.”
Got that? Debt creates money. Of course it’s a little more complicated, but in essence this is it.
They propose three options for reforming the banking system to remove or limit the power of private cheap lasix no prescription banks to create money:
- Tighter regulation of the banks – including strict controls on their lending
- Taking banks into public ownership
- Restoring the power to create our national currency to public control
The third option is recommended after comparing the pros and cons.
And it makes sense. Our problem is not debt; it is the bankers and the government’s blessing on them, which has created many of the problems today (as it did in the 1930s).
Which is why the NDP has been saying:
Also, the Public should be in control of the money supply. The country needs to reform and remove the power to create money from private banks, and to fully restore the supply of our national currency to democratic and public control so that it can be issued free of debt and directed to environmentally and socially beneficial areas.
Read the British Green Party’s paper. It describes the problem, offers solutions, and provides details on how to implement it.