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.

Refugees and Anarchists – Greece’s Burgeoning Popular Resistance

Resistance in Athens

Medialien (2016)

Film Review

Resistance in Athens is a short documentary about the ongoing dismemberment of Greece by the Syriza government to satisfy harsh bailout conditions imposed by the IMF and European banks. As brutal austerity measures continue to shrink the Greek economy, unemployment (now at 25%) and hunger continue to increase and more than 200,000 young people have left Greece for other European countries.

Meanwhile a continuing influx of Syrian, Afghan and African refugees across the Mediterranean continues to fuel the resistance movement. Owing to government budget shortfalls and refusal by other EU countries to accept non-European migrants, Greek anarchists and socialists have played a major role in welcoming refugees and meeting their needs for shelter, food and other survival needs.

The documentary focuses on Exarcheia, a growing self-governing anarchist community spanning four decades.

For me, the highlight of the film was the personal interviews –  with Exarcheia members about their work with traumatized refugee children and with refugees who have turned against capitalism due to their brutal treatment by European authorities.

Click on the cc icon in the lower right hand corner for English subtitles.

The Truth Behind Crapitalism*

The Truth Behind Capitalism

Truth Behind Politics UK (2015)

Film Review

The Truth Behind Capitalism examines the current demonization of “socialism” in the mainstream media and the corporate interests who drive it. It begins by exploring growing interest in Marxism stemming from the obvious failure of capitalism to cope with the 2008 economic collapse. It also attempts to correct the popular misconception that Karl Marx was responsible for the totalitarian dictatorship that developed in the former Soviet Union. About half the film is devoted to three century battle against central banks and the privilege governments grant them to create debt-based money out of thin air. It incorporates lengthy segments from Inside Job, an excellent 2010 documentary narrated by Matt Damon.

The filmmakers, who describe Marx as a sociologist, philosopher and student of capitalism, maintain his central concern was capitalism’s use of exploitation and oppression to keep poor people poor. Oversimplifying considerably, they summarize his ideal society as one run by workers themselves through a combination of worker cooperatives and state owned enterprises.

The film ends with examples from all over the world – including the 2008 Iceland revolution, the Occupy movement and the rise of Syriza in Greece – of working people organizing to strip private banks of the control they exert over our lives.

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*Crapitalism (def): an economic system that treats ordinary people like crap. See A Mini-Dictionary of Neoliberalism

The Rise and Fall of Syriza

The latest news from Greece is that Prime Minister Tsipras has resigned and called a new election. This follows a rebellion by 1/3 of Syriza MPs, who voted against the IMF bailout Greek voters rejected in the 5 July referendum. According to the The Guardian, 25 Syriza MPs have broken away to form the anti-austerity party Popular Unity, led by former energy minister Panagiotis Lafazanis. Some analysts predict the new party will call for Greece to exit the euro monetary union: see Senior Syriza MP Greece Must Exit Monetary Union

The following documentary lays out some of the economic and social realities that led to the rise of Syriza.

Greece on the Brink

Manuel Reichetseder (2014)

Film Review

Greece on the Brink is a 2014 documentary about brutal living conditions in Greece that led to the rise of the left wing Syriza government. At the time the film was made, 65% of Greek youth age 15-34 were unemployed. Millions of Greeks had no income at all and were scavenging food out of garbage cans. Twenty thousand were homeless and one third had no access to privatized health care.

The film documents that only a tiny proportion of the $206.9 billion bailout Greece received between 2010-2013 went to public services:

• 48% went to European creditors
• 28% went to Greek banks
• 22% went into the national budget (of this 16% went to interest payments, most of the balance went to the Greek military)

In addition to bolstering Syriza’s rise to power, the Greek economic crisis has led to numerous experiments in worker self-organization: solidarity clinics run by health professionals volunteering their services, solidarity networks that provide free food, a journalist cooperative in which journalists run their own newspaper, various worker co-ops which have occupied and taken over shuttered factories, and TV journalists and engineers who took over the state broadcasting service after the Greek government shut it down.

Most of the commentators featured in the film are militant Syriza members who predicted a year ago  (based on compromises Tsipras made to propel his party into power) that Syriza wouldn’t solve the problems faced by the Greek working class.

The most interesting section is a Marxist analysis by British economist Allen Woods about the real cause of the 2008 “credit crunch” that triggered Greece’s sudden economic collapse. According to Woods, debt is the mechanism capitalists use to avoid the crisis of overproduction. Marx believed that overproduction was an inevitable structural defect of so-called free market capitalism. By its very nature, capitalist production always overshoots the ability of the market to regulate it.

As Marx noted 150 years ago, capitalism tries to make up for this defect by expanding credit (ie debt). Woods gives the current 30% overcapacity of the global automotive industry as an example. This is illustrated by an article that appeared in Zero Hedge a year ago about new car graveyards – see Where the World’s Unsold Cars Go to Die

Woods predicts that there will be no solution to the current global economic crisis until overproduction (and the debt that supports it) are eliminated.

Living the Revolution

Solidarity4All (S4A) co-founder Christos Giovanopoulos is presently touring the US in his effort to grow the international solidarity movement supporting Greek workers. S4A is a collective that facilitates the development of grassroots solidarity structures emerging in response to the humanitarian crisis caused by Greece’s deep austerity cuts. It grew out of the Greek Indignados movement that formed alongside the Spanish Indignados* movement in July 2011. Both would serve to inspire the international Occupy movement that first formed on Wall Street in September 2011.

As of January 2015, there were self-governing 360 solidarity structures, representing 30% of the Greek population. The list includes social pharmacies, social medical clinics, social kitchens, social grocery stores, time banks,* a social collective of mental professionals, olive oil producers who share olive oil and the “potato movement,” where farmers cut out supermarkets and middlemen by trading directly with consumers.

All initiatives are non-hierarchical and hold weekly assemblies where decisions are made. The role of S4A is to serve as a centralized network for information, tools, and skills sharing and to build an international solidarity movement to support Greek workers and to inspire similar grassroots self-governing structures in other countries.

Although most S4A members support the left-wing party Syriza, the two are totally separate organizations. S4A chiefly derives its power from its ability to provide humanitarian services can’t deliver due to the Greek financial crisis. Nevertheless Syriza directly supports S4A by requiring each of their MPs (members of parliament) to donate 10% of their salary.

An International Movement

Already hundreds of international trade unions, community, environmental and immigration groups have signed on to the Solidarity4All movement. Ironically most are in Germany, whose government has been the most staunch in forcing debt repayments and austerity cuts on the Greek people. At present Giovanopoulos is seeking to build S4A chapters in New York, Seattle, Chicago, San Francisco, Oakland and Baltimore.

In the following video, Giovanopoulos speaks to the importance of a strong grassroots movement to counteract the pressure the EU and IMF are putting on Syriza. This is especially urgent owing to the inability of the current Greek government to address the humanitarian crisis. Thanks to Solidarity4All, the immediate needs of workers continue to be addressed. If a Grexit does occur, this will also provide a framework for Greece to look after itself – instead of relying on foreign funders.

For more information, check out the English S4A website at Greece Solidarity

Individuals and groups can join S4A at Join us

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*Los Indignados is a grassroots Spanish anti-austerity movement that first captured public attention in July 2011 through massive demonstrations in which they occupied public squares and spaces. An estimated 6.5– 8 million Spaniards have participated in these events.
**A time bank is a mutual credit system in which members earn credits for helping other members and spend them for other services.
***Syriza is a left wing political party that came to power in January 2015 based on a pledge to end the austerity cuts forced on Greece (as a condition of further bailout funds) by the European Central Bank and the International Monetary Fund (IMF).
****Grexit refers to the potential exit of Greece from the eurozone monetary union, owing to its inability to repay its public debt.