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Inspired by Iceland

Understanding Money & Debt – The Next Bubble is About to Burst

05/11/2012 | By | Reply More

Money can provide protection from certain problems and alleviate certain stresses

(cf. Phil 10: 15)

MoneyOver 95% of all the money in the western world are create by commercial and private banks. The banks create this money when they make loans to ordinary people and businesses. As hard as it is to believe, when you take out a loan, the money that appears in your bank account doesn’t come from anywhere – it’s just typed in using a computer. Brand new money is created electronically bases on a system named e. fractional reserves.

Do banks really create money? Yes! But we know it’s hard to believe. After all, the police spend time and energy hunting down any criminal gang that starts printing their own money, in what ever currency they want to create. But when it comes to digital money – the numbers in your bank account – the same rules don’t apply.

Since 1844 it has been illegal for anyone other than e.g. the Bank of England to print £5 or £10 notes in United Kingdom. But that law has never been updated, even though 97% of money is now digital in UK. The government still creates cash, but has never regulated against the high-street banks’ creation of electronic money that the makes up the majority of money in the current system. And that means we have to borrow it from the banks.

Many people would be surprised to learn that even among bankers, economists, and policymakers, there is no common understanding of how new money is created. This is a problem for two main reasons. First, in the absence of this understanding, attempts at banking reform are more likely to fail. Second, the creation of new money and the allocation of purchasing power are a vital economic function and highly profitable.

It is therefore important for everyone who read this article to focus with themselfs, to understand on the role of banks, how they creating in the nation’s money supply through the accounting process they use when they make loans – an aspect of banking which is poorly understood.

It is also important for you as an individual where these fundamental flaws are at the root of – or a major contributor to – problems of poverty, excessive debt, growing inequality and environmental degradation which ultimately will hit your own wallet by rising taxes, inflation and rising food prices, to name a few issue.

All of us need to identify the links between the current banking and monetary system and the serious social, economic and ecological problems that face the world today. I challenge you to spread the word in your own community and tell your politicians to STOP this system NOW, like the Icelanders did when 3 main commercial and private banks collapsed in October 2008 and subsequently became bankrupted with magnificent loss for all citizens and the nation. The Icelanders said: “We don´t pay for Gamblers”.


Sir Mervyn King, governor of the Bank of England

Don’t take my word for it – this is Sir Mervyn King, governor of the Bank of England:

When banks extend loans to their customers, they create money by crediting their customers’ accounts” Sir Mervyn King, Speech to the South Wales Chamber of Commerce at The Millenium Centre, Cardiff on 23 October 2012. “The usual role of a central bank is to limit this rate of money creation, so that an excessive expansion of money spending does not lead to inflation. But a damaged banking system means that today banks aren’t creating enough money. We have to do it for them. And as private sector balance sheets contract, public sector (government and central bank) balance sheets have to take the strain. The way in which the Bank of England expands the money supply is to purchase government gilts from the non-bank private sector and credit the bank accounts of people from whom the gilts are purchased. Please note that we are not giving money away” says Sir Mervyn King.

But this problem does not only suffers in United Kingdom. Every country in Europe, also here in Scandinavia, in United States, in Canada and in many other countries of the world, are right now dealing with this conflict. The present Money Crisis. You can also read our article of the Money Eurozon Storm from here, written in May 17. 2012.

What is then the main problem using this system? Frankly to name a few; Lack of control by goverments, Inflation, More Debt, Unemployment and Social Problems to name a few issues. Does it matter that our money is created by commercial and private banks as debt? Let’s take a look of the reason of this;

  • Why is there so much debt? Because almost every worth of money in the economy has to be created by a bank and lent to us. There has to be as much debt as there is money, and the more we borrow, the more money there will be. It’s actually impossible for the public to reduce their total debt as long as banks are allowed to create money as debt.
  • House Prices. Most of the hundreds of billions that banks created over the last decade was created to buy houses. All this money has pushed house prices through the roof, with a three-fold increase in just over 10 years. This means that any first time buyer today will need to work an extra 11 years just to have a place to live. Who benefits from high house prices? The banks.
  • Jobs & Unemployment. When banks create new money and pump it into the economy through personal loans and credit cards it causes a ‘boom’ that creates jobs. But because the boom is all fuelled by debt, sooner or later it causes the crash that results in millions losing their jobs. As long as banks control the money supply, we’ll have an unstable ‘manic depressive’ economy.
  • Banking Vs Democracy. The TV news cameras point at Parliaments, but doesn’t the real power lie with the banks. Banks distribute more money than the government, with no accountability to their customers. If we want to save our democracy then we need to reform the banks.
  • Inequality. The debt-based money system redistributes wealth from the poor to the rich, from the real economy to the financial sector.
  • Environment. The current banking system fuels environmental breakdown by forcing unsustainable economic growth. By channeling our money into short term investments aimed to sustain exponential growth the environment is reduced to an economic externality.
  • Inflation. When banks make loans they create new money for those who have taken out the loan. This pushes up the prices of everything we buy and makes life more expensive.
  • Higher Taxes. Your taxes are higher because government has given the power to create money to banks. This means e.g. that the UK government has lost out on over £2 Trillion of revenue – and that means UK taxpayers paid an extra £2 trillion in taxes. Paying the banks for the right to use money.

Is this what we want? The answer is NO.

In this graf below can you see what has happen in United Kingdom alone: The Red Line shows Central Banks notes and coins – Green Line shows how commercial and private banks has created money in UK where it rise continuously from 1970. Similar examples can you find from other western countries.


Money-Supply-1870-2010 – Source: Positive Money, London UK

A soulution to change present monetary system to solve the Money Debt Crisis

Each currency are based on their monetary and facing the following factors:

  1. Issue money.
  2. The way in which money is placed in circulation.
  3. How money disappears from circulation.

This monetary system that we have had to get used to, it has NOT been particularly successful as I have mention above. Prices have been volatile, high inflation, high interest rates and public debt and State steadily increasing despite high production and economic growth. These problems are to a large extent due to the monetary system itself is broken.

Please view to this video below about the present problem and a simple solution to solve the Debt Crisis.


Better monetary system is possible known as “e Full Reserve Banking” or “The Chicago Plan“. The solution has been known for decades.

In the wake of the Great Depression in the United States, some of the leading economists of that time, put up proposals to reform the monetary system but unfortunately their proposals would not be executed. By listening to Mr. Jeff Opdyke, below will you figure out why.

The debt crisis, which has caused a tempest now that economists have again taken the whole reserve system under consideration. Economists at the International Monetary Fund have recently put such arrangements in the theory of the fund to determine whether it will return results. Their conclusion was that the results would be even better than Idea dared to praise at the time. You can read their report from here.

From United States can we hear another voice, build by similar ideas. Tomorrow, November 6. is an President Election for the next 4 years, between present President Barak Obama and Mitt Romney. A review of polling data going back to 1936 shows the race between them is the closest in 76 years.

Who which will be the next Pesident of United States, will wait a difficult task to solve the U.S. from this economic crisis.

Please listen to the presentation which the Editor of The Sovereign Individual Newsletter, Mr. Jeff Opdyke, is talking about the next Bubble, which is about to burst.

If we don’t take action now, I am afraid many humans will get a deep depression of this debt crisis, like now, people are losing their homes, their jobs, their savings for pension and much more. The challenge lies with the politicians, ones at the top in each country and within parliaments and the world community.

Politicians! People need action NOT LATER THAN NOW.


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