Where Money Comes From and Why They Don’t Teach It in School

Money Puzzles: A Film About Money and Debt, Austerity, Solidarity and Alternative Solutions

Directed by Michael Chanan (2016)

Film Review

This film starts by examining the history of money, which developed in all civilizations except the Incan civilization (the Incas had gold but didn’t use it for money). The first coins seem to have appeared independently in China, India and Ionia* in the 6th century BC.

Our current system of money creation, sometimes referred to as “fractional reserve banking,”** began in the Netherlands and the Italian city states in the 17the century. It came to Britain (and most of the British colonies) with the formation of the Bank of England in 1694.

Contrary to popular belief (and most economic courses), 97-98%*** of the world’s money isn’t created by government (or central banks), but by private banks when they issue loans. The money banks loan out doesn’t originate from reserves or savings accounts. Banks create it out of thin air.

The documentary’s main focus is the debt crisis that collapsed the Greek economy in 2015. Unfortunately the film mentions, but fails to explain clearly, that governments also create money by borrowing from private banks. At times, when banks stop making private loans, governments are forced to increase borrowing to ensure there is sufficient money in circulation to keep the economy going (ie to prevent recession and/or economic depression).

What many people fail to realize, is that most governments have the constitutional authority to create money. Their decision to borrow it from banks (rather than create it themselves) is purely political.

The film explores the collapse of the radical Greek party Syriza when its leadership  ignored a 2015 popular referendum rejecting the EU’s austerity bailout proposal. 61.3% of Greek citizens opposed the bailout, essentially opting for Greece to default on their debt and withdraw from EU.

The filmmakers also explore the Argentinian decision to default on their debt in 2001. Although UN General Assembly passed a resolution in support of the Argentinian default in September 2015, a new Argentinian government took out new IMF loans in 2016 to resume debt repayments.

The documentary concludes with a number of innovative grassroots alternatives Greek citizens have initiated to support each other in meeting post-collapse survival needs (see Debt and the Economic Colonization of Greece), Spain, and Argentina have adopted in the face of extreme economic austerity. These include local currencies, squatting and a variety of community-based mutual aid cooperatives to ensure people don’t go without food, clothing or other basic necessities.

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*Ionia was an ancient civilization in the western part of modern day Turkey. It consisted of the northernmost territories of the Ionian League of Greek settlements.
**Under fractional reserve banking, banks are required to hold in reserve a minimum percentage (10%) of loan’s face value. In reality, most central banks discarded reserve requirements at least a decade ago, essentially allowing private banks to decide how much money to create.
***The other 2-3% of the money supply is issued by central banks as notes and coins.  97-98% is electronic money created via computer entries.

The Movement for Youth Liberation

Common Notions: Handbook Not Required

Directed by Carla Berman and Corine Browne (2016)

Film Review

This documentary concerns a “youth liberation” space called The Purple Thistle a group of Vancouver BC young people ran between 2001-2015. This project was started by eight teenagers as an alternative to school. They involved a series of adult volunteers to sign the building lease, apply for grants and help them find mentors for their various projects.

The film features commentary by several activists and educational specialists who explain the phenomenal success of The Purple Thistle. They feel it’s a big mistake to exclude young people from the community by confining them to a classroom. At all levels, we need to focus more on teaching people to work collectively.

The only rules at The Purple Thistle were no alcohol, no drugs, no assholes (ie no racism, sexism or homophobia and clean up after yourself) and no sleeping (naps were okay). Kids at The Purple Thistle governed themselves via anarchist-based principles of consensus decision making and mutual aid.*

Most of the film focuses on on various creative projects Purple Thistle teenagers undertook.

The project was forced to close in 2015 due to funding cuts. (See letter to the community)

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*The principle of mutual aid creates a safe space for people to ask for and offer help. It also promotes economic solidarity whereby no member of the community is allowed to go without.