Simple Solution to the Debt Crisis

Screen shot 2013-04-28 at 23.38.41By Positive Money

Have you ever wondered why there’s so much debt? Or why the experts and authorities seem completely unable to solve the current debt crisis?

Well the reason they can’t solve it is because they’re trying to fix and repair the existing banking system. But the existing banking system is completely flawed. It’s the existing system that has buried all of us under a massive mountain of debt.

In the next 3 minutes I’ll show you how the design of the banking system guarantees that the vast majority of people will end up in debt, and why allowing the banks to go back to business as usual would be the worst thing for the economy and for society as a whole.

But first, where do you think all this debt came from? Many people would assume that a bank needs to get money from a saver before it can make a loan to a borrower – after all, isn’t that what banks do? Taking money from people who want to save it, and lending it to businesses and people who need to borrow?

Well, Not exactly.

Here’s a fact that not many people know. A bank doesn’t actually need to have any real money before it can make a loan to someone.

When you take out a mortgage from the bank, the bank doesn’t take that money from somebody’s grandma’s life savings.

No. Instead, they simply open up a computer, and type some numbers into your account.

You get a huge wad of money in your account, and you also get a huge wad of debt that you’ll be repaying over the next 25 years.

But the money that you borrowed was created out of nothing and just typed into your account.

We know that’s hard to believe, but you don’t need to take our word for it. The Bank of England themselves say that “When banks make loans, they create additional [bank] deposits for those that have borrowed the money.” These ‘bank deposits’ are just the numbers in your account.

And Martin Wolf, the chief economics editor at the Financial Times, says that “The essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending.”

So almost all the money we use today is made in this way – out of nothing, by banks, when they make loans.

And the only way that we, as the public, can get our hands on this money, is to go into debt to the banks.

In other words, almost every pound that we need in the economy – to run shops, businesses, factories, schools and hospitals, must first be borrowed by us from a high-street bank. And if one person has a million pounds, the rest of us MUST be a million pounds in debt.

If we try not to go into debt, then the banks would be unable to create money and the economy would grind to a halt.

This is effectively a whole-scale privatisation of the power to create money.

I know what you’re probably thinking, but this is no conspiracy. We’ve been through over 500 documents from the Bank of England to make absolutely sure that this is how the system works.

From this research, we’ve developed a simple solution to the debt crisis. It involves removing this power to create money from the banks, and making sure that money – whether it’s cash or electronic money – can only be created by the Bank of England. Any new money would be created and spent into the economy – instead of being lent by banks to people who already have too much debt. This new money would allow us, collectively, to reduce our total debts to the banks, and help us to end the debt crisis.

The authorities are trying to patch up a system that is fundamentally broken. If we let them continue, then we will all end up even deeper in debt, and problems like poverty, extreme inequality and economic chaos will get worse and worse. We need a solution to the crisis that doesn’t involve passing the costs back on to ordinary people. And we need you to get involved.

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