»In nature there are no debts and no interest is charged. That’s why it doesn’t occur to plants and animals to hoard more than they need. Because of that there are no »rich« and »poor« plants or animals«.
Have you ever wondered where money actually comes from? How was it created? Does it simply come from the cash dispenser like electricity from the socket? Did a creator make it in some prehistoric time as God created the world? And who created the debts?
There is a touch of mysticism about money. And so it is no wonder that only very few people know how money is created. »Money creation« is a term from the world of finance. It describes the process by which money comes into being. And indeed it is now something mystical since today’s money is often called fiat money. This has nothing to do with the car make of the same name but refers to the Bible: in Genesis, the first book of the Bible, God said in Latin »Fiat lux!«, which means »Let there be light!«. And there was light, as we learnt in our religious instruction lessons. Today’s creator gods say »Fiat money!«, or »Let there be money!« And they create money from borrowing or debt.
Fiat money signifies »money from nothing«. A small part of it is created by the central banks and the greatest part by the commercial banks. In the bank balance sheet the total of all accounts has to be »zero«. Expressed differently, the total credit balances have to be equal to the total debts.
How does the creation of money from nothing work? Imagine that you and I both have a zero amount of euros on our bank accounts. We have absolutely no money at all. Although neither of us has any money, you buy books from me to give to your friends because you would like to pass on the valuable knowledge about the Natural Economy of Life. As you are an honest person, you transfer a hundred euros to my account. I am now the happy owner of a credit balance of one hundred euros: and you unfortunately have a debt of one hundred euros to the bank.
What has just happened? Money was created from nothing – through debt! Inside the bank the procedure is in fact slightly more complex but for us »non-bankers« (that’s what banks call people like you and me) only what goes in and what goes out counts. Nothing goes in and assets and debts come out.
Who has created the money then? The central bank? Its bank director? The friendly bank clerk who looks after your current account? The bank computer? The answer is hard but clear: you have created money, thus burdening yourself with debt. You wanted to do something good, support a project, inform your friends, make the world a bit better and in doing so have got yourself into debt!
»Yes, but only because I didn’t have any money. You should only spend what you have.« This – or something similar – is what you may be thinking now. But can this rule be kept at all in a system where money is created through debt? For every credit in euros there has to be a debit somewhere else. If you have no debt someone else has. There is no other possibility in our system. So that it does not come to people’s attention our governments have assumed the debts on behalf of their citizens. In Germany that currently makes 20,000 euros in government debt per person. Virtually all nations worldwide have enormous debts and many of them are on the verge of bankruptcy.
Such a system cannot function at all – least of all when we consider the threefold good for there it fails on all three levels. The good of the individual is diminished since you either have debts or have helped to create other people’s debts. The good of the community is at risk on account of the high government debts with the risk of state bankruptcy. Today the entire international community is affected. And finally the good of the big scheme of things is negatively impacted since highly competitive markets do not shrink from waging wars and destroying the environment.
A system of creating money from debt harms everybody and benefits nobody.
Interest and compound interest further aggravate the problem. But even interest-free monetary systems have the harmful impact described. Well-meaning alternative monetary systems, such as barter clubs and exchanges, LETS systems and suchlike are also included in this category. Regional currencies, which are tied to the national currency, cannot be considered as solutions for this very reason.
»It is beyond doubt that the good is always the bad that you cease to do«.
– Wilhelm Busch
German humorist, poet and graphic artist
In the following sections you will get to know a monetary and economic model which does not create money from debt but from life itself. It is constructed in such a way that everyone benefits and nobody is harmed.
And it is based on a principle which should be a matter of course for a civilised species…