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Daddy, where does money come from?
Carolyn Baker, Speaking Truth to Power
Anyone who hasn’t watched “Money As Debt,” an animated DVD by Paul Grignon, should consider purchasing this extraordinary explanation of money’s origin in an economy totally dependent on debt. Almost everyone has seen footage of federal printing presses cranking out paper money, and some of us have even visited a government mint or two and have observed the process firsthand. But like so many other illusions with which the U.S. economy is replete, money is not created by government printing presses.
During the first few minutes of “Money As Debt” I began feeling my eyes glazing over in anticipation that I would soon begin viewing photo footage instead of animation. I then realized that I, like the masses of Americans who demand that every video experience provide them with entertainment, was unconsciously holding the same expectation. I then promptly hit the rewind button and started over, this time listening and watching attentively.
“Money As Debt” is not entertainment-far from it. The film offers amazingly elementary facts about the creation of money in the United States, narrated by a soothing voice, which could make for a bland presentation, yet the film’s message is anything but vapid. In fact, if it doesn’t leave your blood boiling, it behooves you to check your vital signs.
Beginning with the most fundamental question of all, Grignon asks: Where does money come from? The answer to this question will almost never be found in grammar school-or even college. What we aren’t told in formal education is that money is created by central banks.
Banks create money, not from their own earnings or from the funds deposited by customers, but from the borrowers’ promises to repay loans. Most importantly, borrowers not only promise to repay, but to repay with interest, and the bank writes the amount of money of both into the borrower’s account.
(23 August 2007)
My One And Only Stock Market Advice Post
Sharon Astyk, Casaubon’s Book
…Now I regularly get emails and posts requesting that I give my opinion on the state of the stock market, whether to liquidate your 401K, how and whether to plan for college and a host of other financial advice I’m totally unqualified to give. I generally ignore these questions, not because they aren’t real and legitimate, but because I honestly don’t know how to answer. I can tell someone what I do, or what I’ve read, but I feel even less qualified to advise here than usual. My basic take on the stock market is the same as my basic take on driving – it seems crazy to me that everything would work as well as it does, so I’m probably not the person to expound enthusiastically about the possibilities of any particular investment.
And part of the reason for this is that I don’t quite understand why the free market system works even to the extent it does. That is, I understand why economists say it works, but any close look will point out that the claims economists make about rational choices and market resilience don’t tell even half the story.
Now my personal financial strategy is pretty simple. No debt, except mortgage debt, and get rid of that as fast as humanly possible. We save some money, save some for the kids college/setting up house funds, and the rest goes back into the farm in the form of new roofs, barn repairs, goat fencing, perennials, warm boots, down comforters, rechargeable batters, etc… I don’t have a lot of gold or silver (a bit, mostly inherited), we have no major investments, and we tend to trust that our savings plus our willingness to work will get us through most crises.
…The other reason I don’t invest is that I believe that the origin of our economic problem is growth capitalism – that is, the debt based money system that requires that our economy grow always faster and consume more and more resources. If we don’t change that, we’ll never be able to live within the bounds of nature. But that means I want to participate as little as possible – to pay and receive as little interest as possible. What I make I’d like to be the profit of my own hands, and my own labor, not a system I deplore. The interest I want to live on is my own fair share of the natural resources of the world – the dirt I live on, the food I grow on it, the energy I produce from it. I’m not there yet, but seeking out a significant return in interest seems contrary to the basic principles I hold.
Now I’m not perfect, and my savings accounts do pay a little interest. I don’t keep my money under my mattress, and I am no saint. But generally speaking, I stay out of the money game to the extent I can.
(26 August 2007)
For what it’s worth, here are some basic books on investing and retirement that I’ve found useful:
Get a Life: You Don’t Need a Million to Retire Well (Nolo Press)Your Money Or Your Life (“Transforming Your Relationship With Money & Achieving Financial Independence”)
Books by the late Sylvia Porter
Possum Living by Dolly Freed.
Information from Vanguard.
Books and writings from the Simple living movement. I’m especially fond of the books by the late Mennonite author Doris Janzen Longacre.
-BA
No reason to assume she’ll be right, mate
Scott Burchill, The Age
THOSE who have much at stake in the current stock market shakedown employ an interesting, if self-defeating strategy to mask a financial system that seems crisis-prone.
The subprime mortgage meltdown in the US triggered a liquidity crisis in markets that are not even exposed to its bad debts or irresponsible lending practices, including Australia. Recent central bank interventions in the US and Europe may have only delayed the inevitable reckoning, which at worst could result in highly leveraged hedge funds tipping over, dragging the whole financial system down.
And yet the mantra of most analysts is that we are only witnessing a “market correction” – an idea that is as wishful as it is misleading.
Belief in a self-correcting market has a long and mythical status in liberal economic thinking, something approaching a law of nature. It is based on two false assumptions.
The first is that the involvement of the state isn’t required when markets fail – or that markets never really fail. And yet this occurs even in the US, where the Savings and Loan scandal (in the early 1980s) and Long Term Capital Management crisis (1998) were only cauterised by federal government interventions.
The second assumption is that the world economy, despite its volatility, is inherently rational and therefore manageable. There is little evidence to support such a belief.
Dr Scott Burchill is senior lecturer in international relations at Deakin University.
(27 August 2007)
If the financial crisis gets worse, we can expect more criticism of capitalism like this essay from Dr. Burchill. Keynes and Marx will make a comeback, and mainstream neoliberal economics will go into decline. -BA
