Money as Debt
Directed by Paul Grignon (2006)
Money as Debt is the classic primer for understanding where money comes from in contemporary society.
Most people erroneously believe that government issues all the money in circulation by printing bills and minting coins.
In reality, less that 5% of all the money circulating in the global economy is issued by government. More than 95% is issued by private banks as loans to businesses, families and governments.
Most people also mistakenly assume that banks lend money their customers have deposited in savings accounts. The truth is that banks lend out vastly more money than they have on deposit. In fact, every time they issue a loan, they simply create the money out of thin error as a bookkeeping entry.
There is a deliberate effort (by banks and government) to conceal these facts. Even front line bank employees don’t understand this is how money is issued.
The belief that the economy would improve if all government and private debt were repaid is also erroneous. Because nearly all the money in circulation is debt-based money issued by banks, if we paid off all the debt, there would be no money left to run the economy.
A severe shortage of debt triggered both the Great Depression of 1929 and the 2008 economic crisis. Both occurred when banks drastically reduced the supply of new bank loans.
Money as Debt also makes an important link between this debt-based monetary system and the drive for perpetual economic growth. Banks only create (out of thin air) the principal for new loans. Money to pay the interest can only be found by creating more debt through new loans. This pressure to create more and more debt requires a continual increase in production and simultaneous depletion of resources.
The film traces how our current debt based money system first started in England in 1694 and how US founding fathers fought to resist private bank control of the US monetary system until 1913. That was the year Woodrow Wilson signed the Federal Reserve Act, handing control of the US monetary system over to a consortium of private banks called the Federal Reserve.
Filmmaker Paul Grignon is particularly concerned about a system in which governments are forced to borrow from private banks to run military and public services. Because it gives banks far more control than voters over government decisions, he calls it an invisible economic dictatorship.
Check out Positive Money to examine some of the alternatives.