If a 10 year old can understand this…

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Personal debt is at its highest level in history. We currently pay £192 million in interest to the banks every single day. Over 2 million people are unable to find work in the UK, and millions more worldwide… But the government’s ‘answer’ to this crisis is to get people to borrow even more!

Please take 3 minutes to watch this new video, and then read about why we decided to make it below:

In one way or another, money affects almost everything that happens on the planet. So if the people in charge of the economy don’t understand where money comes from or how it works, we’re in trouble.

Believe it or not, many economics graduates come out of uni without ever being taught about how money – those numbers in your bank account – actually come into existence. Even when they are taught something about money creation, it’s a story about the banking system that’s at least 40 years out of date.

These people go on to get jobs in the government, civil service, the media or in banks. They make decisions and policies that lead to financial crises, and then try to deal with the crisis in a way that makes things even worse.

This is why the government is trying to solve a debt crisis by encouraging people to borrow even more. As Holly says in the video:

We need money for everything  we do, but the only way we can get it in the first place is to borrow it from the banks!

That’s why the government wants to get banks lending again – to get them to create even more money.

But the whole problem is there’s too much debt. So how can the answer be for us to borrow even more?

The financial crisis happened because people couldn’t pay the debts they had. But now the government (with the willing help of the Bank of England) is trying to blow up another debt-fueled bubble. The ‘recovery’ you hear about in the press is fuelled by new money created by banks. Even though families in the UK have the highest level of debt in history, mortgage debt has started rising again, as has consumer credit (personal loans and credit cards). But lending to businesses is still falling.

They say if you don’t know history, you’re destined to repeat it. And we’ve definitely been here before: in the ten years before the financial crisis, banks created and pumped hundreds of billions of pounds of new money (or “credit”, in banking jargon) into property bubbles and financial markets. Just 13% of their lending went to businesses. The result was the worst global recession in 80 years.

So if we don’t understand money, then we’re destined to head into another financial crisis. We’ll see ordinary people getting poorer, house prices getting further out of reach, and unemployment staying high, because those with the power to create money – the banks – use it to push up house prices rather than to support the real economy.

It doesn’t have to be like this. Simply removing the power to create money from the banks that caused the financial crisis would limit the chances of another debt-fueled bubble turning into a second financial crisis. As Holly says:

Why should the same banks that caused the financial crisis be allowed to decide how much money there is and where it goes?

We want to return the power to create money to a public and accountable process, working in the public interest. This would mean that when new money is created, it can go into the real economy, where it will fuel jobs and support real businesses, instead of going into the financial markets and property bubbles. We’ve written a book on this (Modernising Money), and we’re about to release a paper on how we can get a sustainable recovery instead of the government’s current debt-fueled ‘recovery’. And we’ve seen a few encouraging signs that people in positions of influence are seriously rethinking the wisdom of letting the banks that caused the financial crisis have the power power to create money.

Right now, we need your help to share this video

We’re trying to get the people in charge to understand why our current money system is broken and how we can fix it. It’s not going to happen overnight, but we think Holly’s explanation of the problems in our money system will help other people – and policy makers – to understand why we need to change it. The faster we get the public, academics, the media and politicians to understand money, the faster we can change the system. So please take a few minutes to:

1. Share the video on Facebook

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3. Email the video to friends

You can use this text: Hi, this video is amazing – I think you will like it too: it’s a 10 year old explaining the truth about where money comes from: http://bit.ly/14XIAaQ

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  • chefdave5

    Your analysis is all wrong and the changes you advocate would create as many problems as they solve.

    The cause of the crisis was runaway houseprices and in turn runaway houseprices are caused by the way we allow homeowners to gain financially whenever the local area improves . I.e if a new train station is built or the service is upgraded so you’re able to reach London quicker homeowners increase their house prices accordingly.

    When people realise they can pocket these easy gains by speculating in housing all hell breaks loose as they begin bidding up the price of real estate with borrowed money.

    Fractionally reserved debt-based money isn’t the problem, but it does serve to keep people’s eye off the ball.

    • Tom Werber

      I think your eye is off the ball, or perhaps too much on the ball and not on who is doing the kicking and who and what is setting the rules of the game. And let’s be clear; this is all a game.

      Without out-of-control lending, the house prices would not be able to run away as they have, nor would there be trading in derivatives – toxic debt.

      Uncontrolled lending and an obsession with the growth necessary to keep up with inflation is what is destroying not only the economic system but our entire planet.

      • chefdave5

        The housing market caused out of control lending, not vice versa. Because land prices naturally rise when the capitalist economy develops and land/housing benefits from an income stream (rent) banks like to lend money against housing and speculators like borrowing money to hopefully trouser some of these easy gains for themselves.

        This could all be resolved with a simple land value tax not monetary reform, changing the debt based money system will only serve to make things worse.

        • http://ralphanomics.blogspot.com/ Ralph Musgrave


          Your point about the unearned profit reaped by landowners as the economy expands is perfectly valid. Economists are well aware of that point.

          However it’s separate to the BOOM/BUST cycle, which affects house prices (and much else besides), and which does the real damage.

          Prior to the crunch, UK banks were lending money into existence like there was no tomorrow. In contrast, over the last couple of years they’ve hardly brought about any net increase in the money supply. It’s that GYRATION that does the damage, and which PM’s proposals would ameliorate.

          • chefdave5

            Hi Ralph,

            My own understanding is that the boom/bust is driven by land speculation as speculators attempt to pocket some of these windfall gains by playing real life monopoly.

            How do PM account for the difference in house prices between Chelsea and Hull for example? Same money supply, same banking system, same high street banks. It’s because the market has decided that Chealsea is a much more pleasant place to live so real estate prices vary accordingly. All the time we allow the benefits of civilisation to crystalise into the real estate market there will always be the incentive to speculate in housing with borrowed money. The only way this can be solved is with a land value tax, and I don’t know why this solution isn’t on Ben Dyson’s radar.

          • http://ralphanomics.blogspot.com/ Ralph Musgrave


            There are plenty of arguments both ways on this issue. E.g…

            If the ONLY reason or MAIN reason people hold an asset is speculation, I agree that causes booms and busts. That happened in the Dutch tulip mania in the 1630s and with the South Sea Bubble.

            However, I’d imagine that about 95% of landowners have no intention of speculating in any big way. For example significant chunk of the UK’s land is owned by government (local and national). They have no intention of speculation.

            Another large chunk will be owned by farmers most of whom intend leaving their farms to their children, rather than flog the land when the price rises far enough.

            Another large chunk consists of semi-detached suburban gardens. I agree that speculation is ONE MOTIVE for buying a house, but for 90% of house owners, a house is just somewhere to live, I’d guess.

            I think a land value tax is certainly right in principle. But the Labour government under Harold Wilson tried a land development tax (i.e. a tax on the increase in land value that derives from getting planning permission) but it was unworkable.

            To get instability in any system, you need a feed-back mechanism. In the case of private money creation, there is certainly such a mechanism: the price of some asset rises (say houses), that makes houses a better form of collateral, so people use it to borrow more and buy more expensive houses, etc etc.

            In contrast, in the case of land values rising in line with GDP, I don’t see where the feed-back mechanism is.

            Re land values in the South East compared to elsewhere, I’d put that down to AGGLOMERATION: it makes sense to concentrate or agglomerate many economic activities in small geographical areas. That’s why towns and cities arise. And land values in cities are thus higher than in rural areas.

            I think London and the South East is just the biggest example of that phenomenon in the UK.

          • chefdave5

            I would say everyone is aware that the lion’s share of nation’s wealth crystalises into land/house price values. But instead of recognising this system for what it is: a form of welfare for the land/homeowning classes, we’re encouraged to play the game by becoming ‘aspirational’ homeowners.

            The reason it’s survived so well is because the landowners managed to ‘democratise’ the system by allowing the middle classes to get in on the action too with suburban house price inflation. Imo though theft is still theft and welfare is still welfare even if it’s dished out to 50/60% of the population and they’re all only acquiring a relatively small piece of the action.

            You can’t run an economy on theft and cheating, not without periodic breakdowns. And the 2007/8 bust was the latest in the long line of housing led recessions. I’m not convinced monetary reform is the answer.

  • Sarah

    Do we need to “own” property? Radical rethinking of “lifestyle”. Our own personal insecurities support “banks”, insurance co.’s. Better practical education.

  • thomasdeaquino

    I’d be interested in your thoughts about Hungary beginning to issue debt-free money and asking the IMF to close its offices in that country.

    Prime Minister Viktor Orban: “No longer will Hungarians be forced to pay usurious interest to private, unaccountable central bankers. Instead, the Hungarian government has assumed sovereignty over its own currency. It now issues money debt free, as it is needed.”

    Will people in the West be able to look beyond the inevitable opprobrium that will be inevitably unleashed on Hungary and understand the importance of debt-free money?

  • Harry White


    Bill Still’s latest report No. 95 confirms that Hungary has paid off its debt to the IMF and requested that they close their Hungarian offices but states that the Hungarian government has not assumed sovereignty over its own currency and now issues money debt free, as it is needed. For the present we must wait for wider confirmation on this issue. http://www.youtube.com/watch?v=gpQs_khGgOM
    If this link fails to launch google Bill Still’s Report 95.

    • thomasdeaquino

      Many thanks for that.

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