Creating Money Out of Nothing!

DISCLAIMER: I am not a student in economics, neither do I profess to know anything about credit, debit, contracts, foreclosure, currency rates, stocks, bonds etc. This blog post only documents the stuff I have learnt from some videos and it might be instructional to ignorants like me.

Let me start with the question: What is Money?

Well in the old days of the barter system, anything you had which was in demand by other people constituted money eg. if you had wheat, it represented money. Then in the times of kings and queens, gold represented money. Why? Because all knew how hard it is to mine gold and thus it was valuable.

What is money today?

It is paper. I will tell you a story before illustrating how stupid this concept of money is.

One of my early childhood memory is: One day while I was doing shopping with my mama, I saw, that while the doodhwala(milkman) gave huge amount of milk(it was hard to carry, I tried!) and lots of notes and lot of coins, my mama gave him just one single note. I remarked to everybody after coming home, that our doodhwala is stupid. And they laughed and explained to me the concept of money. They explained that the same amount of paper can represent different values of money. Now when that notion was disturbing and counter-intuitive to even a child, why is it not disturbing to all of us. (It was disturbing to me because I still did not know how to print numbers on paper)

A person who claims himself to be authority can start cutting trees, making paper, put random values on it and then distribute it to people in return for some of their goods. Or if they have nothing to give in return, this benevolent person can give them this paper for free! Only if they promise to return it back to him some time later, but with interest i.e. more paper. Its only fair they say, because you got the money for free! Though they forget, that there is only one person making money the whole time. So if I borrow money from him and keep it safe, I will need to steal someone else money to pay back the interest and the original amount. If I fail, I will need to give my lands to the benevolent person and work for him for the rest of my life.

One might argue that cutting trees and making paper is hard work too. Well, that is true, but since that person can put any ridiculously high value on the paper, he can cheat you into giving more goods to him. Remember the story. And moreover, in today’s digital world, you don’t even need paper, since today almost 97% of the total money resides in computers! So, all in all, with the invention of computers, this seemingly benevolent person who distributes money to all the needy people just needs to type it all in his computers. Hard work indeed!

Now, you might want to know, who is this lucky person. A person who creates money by typing. Well that lucky person is your friendly neighbourhood international bank. They distribute money to the governments, large corporations and in turn people frequently for free! And when those people are not able to give back the original sum along with some more(remember interest), since they were not able to steal enough, bank takes away their lands and turn them into slaves(means they are bankrupt or more appropriately robbed by banks). They call this: “The Fractional Reserve Banking System”.

To summarize, I will leave you with this staggering ironic thought:

If all the people on this planet paid off every single dollar they owe to the banks, there would be no money left in circulation on this planet.