Wednesday, October 29, 2008

Money, Money, Moneyyy

Paul Grignon created a video in a simple, cartoon form to explain the complexity behind our monetary system. His video traces the history of money back to the era of the goldsmith. Money used to be tangible. Then bankers began the interest system to generate more money to make a living and maintain bank operations. This simple system has spiraled into our society and others living in perpetual, accelerating debt. Banks are using debt to create loans. They are essentially creating money that is not backed up in paper. When the loans are paid back with interest, the bank profits and seemingly no one is affected by this trick.

If I wasn’t shown this video in class I would have continued to live a life of ignorant bliss, completely unaware of the corrupt, damaging system around me. As a communications and journalism major, numbers are not “my thing.” I pride myself when I balance my checkbook and cringe when I think of my own personal debt I’ve accumulated. I’ve taken out many loans for my education and haven’t given much thought as to where this money was coming from. I assumed my lender, Sallie Mae Student Loans, was this wealthy lending tree handing out large sums of money to students each year. They too are apparently handing me worthless checks that I’ll be paying them back for over the next ten years of my life. It’s a difficult concept to grasp how businesses can sustain with the constant cycle of loans, debt, and accumulating interest.

3. How can a money system based on perpetual accelerating growth be used to build a sustainable economy?

As radical as it seems, society and the economy could not do without debt. This perpetual cycle of debt, loans, and interest is needed. However, this system is effective in moderation. When the loans are paid back in a timely manner with interest, money is created and banks profit. The loans are used to help citizens further the economy either by using them for educational or business purposes. It is a win-win situation. However, when too many loans are given out and not paid back in a reasonable time span, the debt that is created grows exponentially. A sustainable economy is dependent upon using resources properly, increasing investments, promoting stability along with competition, and developing skills. Debt in moderation can promote these factors of a sustainable economy. However, when it gets out of control, the nation will cripple and it will be up to the government to make the money, not the elite group of dominant bankers.

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