Sunday, March 03, 2013

A Problem With Our Monetary System

There is a major problem with our monetary system that few people, even financial experts and economists, either don’t understand or refuse to confront.

The principle creators of our money are private banks that have incentives to act in their own interest, not the public interest. The overwhelming percentage of our money is created through the issuance of debt, unconstrained by anything but a lack of eligible debtors. And, even that doesn’t stand in the way when wins can be privatized and losses socialized.

Essentially free money is available to fund debt that need not even contribute to productivity, but instead can be used for unproductive speculation, if the return is greater. There is no need to take the risks involved with financing new productive ventures when loans can be collateralized with valuable assets like real estate.

It’s a prescription for endless bubbles and crashes that continue to distribute income to a wealthy elite from the most needy of the population. When money is created from the issuance of debt, the holders of the debt will always be the most needy and the interest will always accrue to those with the wealth to fund the debt. Attempts to correct the problem will lead to more debt and an accelerating cycle of increasingly severe crises.

The problem is not a new one. It was addressed decades ago by people like Hyman Minsky and others, but current so-called financial experts, economists, and political leaders have forgotten history and plunge ahead toward certain catastrophe.

To understand the details of the problem watch this short video describing the problem, this series of short videos describing the details of the problem, or spend a couple hours watching the free film, “97% Owned”. This is the British version, but the U. S. is directly comparable.

No comments: