This short film, Money as Debt, by Paul Grignon was definitely more interesting and informative than I had anticipated. The Mint surprisingly only makes 5% of the United State’s money, with banks creating 95% of all the rest. It is startling to find out that the banks simply trust people and that when a loan is given, money is “created” and the total amount of money in the United States increases. I had never thought about the actuality that it started a long time ago with goldsmiths and how they would cast coins based on eights and purity of metals (gold and silver) and that is how they had a value of worth. The paper money we now have is a spin-off of the paper claim checks that those bankers back then were making, which also had a scheme behind it. People were taking out loans and taking money out on credit, and the banks charged interest which was making them money. Eventually, a “run on the bank” happened when bankers lent out too much money and did not have enough supply when people started asking for their gold back. The government had to regulate banking and legalize that practice. This seemed good, but now we are in the terrible crisis of money being debt today.
Now, money isn’t value, but debt. It used to be worth an amount of silver, but now it’s just a “digital dollar.” In the past, gold and silver had to be found and dug out of the ground, and it was limited, but now it’s created as debt, and it’s created whenever anyone takes a loan out from the bank. The American debt is an astonishing $45 trillion (in 2007), compared to the $5 trillion debt in 1957. A 40 trillion dollar increase in 50 years is a really scary thought, considering that the amount of time was so small. Paper, digital, and plastic money definitely makes more sense in our world, especially the way we live in such a fast paced society.
Our deposits are actually loans to the bank in reality. All banks are connected, and bank credit created at one bank becomes a deposit in another, and vice versa. One part discussed how banks collect interest on money it never had. The money that they charge interest has to come from the people who took out the loans, and the banks charge incredible amounts to try and keep up with the rising debt. When someone pays off their debts, that individual will have more money, of course, but, if all the debts are paid off, that leaves society with no money. The example of The Great depression is exactly that: the money supply shrank drastically while supply of loans dried up.
I definitely agree with the statement in the movie that “Greed and dishonest are the main problems,” especially because money is the focus of everything. There could be no national debt if the federal government simply created the money it needed, but our interest payments to the government would be impossible. It is also ridiculous that bankers are in charge of who gets the money they need and who doesn’t. It’s getting harder in our society because of the economic probels we are now all encountering. The survey was also discussed where they asked people about money and no one had an accurate understanding about how money was created, even employees at banks! It is not surprising, however, because I know that personally I had no idea about this either.