Money as Debt

Money is money only because people think it is money, and hence accept it as money. In reality money does not exist, it is just a piece of paper or some bits stored somewhere. So, are there better systems to regulate humans social interactions? You bet there are!
For now just start thinking about the questions that emerge from the following video, would you?
Paul Grignon’s 47-minute animated presentation of “Money as Debt” tells in very simple and effective graphic terms what money is and how it is being created.

9 thoughts on “Money as Debt

  1. Dave

    Impressive! I didn’t know lot of these stuffs… more.. I didn’t even imagine it. Thanks for sharing.

  2. lu_zero

    Thank you for using non free technologies like flash and not providing a link to a more accessible (and free) media.

  3. Matt Heitzenroder

    This is brilliant. I have always been interested in $$ theory and have been acutely aware that money is debt. I am trying to live a debt free life as much as possible not to “buy” into the system. I do work and do invest to take advantage of the system though !

  4. riffaff

    greatvideo, even if it would ave been btte if it ointed out the problems wth the gold standard, but it would be spoiling the fun, I guess

  5. paolo Post author

    riffaff, the typos are because you were using exploder on winzozz, in fact with firefox on ubuntu everything is fine ;-)

  6. paolo Post author

    Keith agreed that I post his reply to my message on here.

    The reply is at
    and pasted below.


    Thanks for the links. I have spent some time with the film, Money as debt
    and recently wrote this about it.

    The film, Money as Debt — an underground hit in activist circles — seeks
    to explain where money comes from. Most people probably imagine that the
    government issues the money they use and that, under its surveillance,
    banks lend amounts that are covered by assets such as gold and property or
    at least by cash deposits. In fact, over 95% of the money in circulation is
    issued by banks whenever they make a loan. The ‘fractional reserve system’
    traditionally constrained them to lend up to nine times the value of
    deposits with the central bank; but this ratio has since increased and in
    some cases no longer exists. The real basis of money, the film points out,
    is thus our signature whenever we promise to repay a loan. The banks create
    that money by a stroke of the pen and the promise is then bought and sold
    in increasingly complex ways. The total debt incurred by government,
    corporations, small businesses and consumers spirals continuously upwards
    since interest must be paid on it all. The film briefly mentions some
    possible remedies, including local currencies.

    This attempt to demystify money is admirable, but the message is
    misleading. Debt and credit are two sides of the same coin, the one
    evoking passivity in the face of power, the other individual empowerment.
    The origin of money in France and Germany is thought to be debt, whereas in
    the USA and Britain it is traditionally conceived of as credit. Either term
    alone is loaded, missing the dialectical character of the relations
    involved. The role of state-sanctioned banks in creating money involves
    some sleight of hand; but they are also subject to the same financial
    constraints as ordinary businesses. The film demonizes the banks and
    interest in particular, letting the audience off the hook by not showing
    the active role each of us plays in sustaining the system. Money today is
    issued by a dispersed global network of economic institutions of many
    kinds; and the idea of economic growth is fed by our own norm of getting
    ahead, not just by bank interest.

    Money as debt is a fable that never moves beyond the nationalist
    assumptions of twentieth-century North American society. It says nothing
    about the current world economic crisis. This has features that are well
    enough advertised in the media. The huge trade and budget deficits of the
    US economy are financed principally by Japan, China, the Gulf States and
    Britain (but not the US banks). The dollar’s slide seems to be limited only
    by its role as the world currency and unit of account for the oil trade and
    by its creditors’ desire to retain the value of their Treasury paper. The
    interests at stake in the global energy economy are manifested in the war
    for Middle East oil; the trade imbalances reflect the transfer of
    manufacturing production and many services from the West to Asia.

    Moreover, since the invention of money futures in 1975, world money flows,
    fuelled by bets on the future prices of notional assets such as stock
    market indices (‘derivatives’), now dwarf the volume of international trade
    and national budgets. The US housing market is a major part of all this
    paper debt, especially the dodgy loans known as ‘sub-prime mortgages’ now
    suffering massive default. The faith of the British middle classes in
    consumerism financed by ever rising housing prices hovers on the brink of
    the financial crisis. Reference is occasionally made to the Great
    Depression of the 1930s, but rarely to more recent demonstrations of the
    system’s fragility: the global slump induced by the oil price hikes of the
    1970s or the crash of 1987. We could be entering a new stage of capitalism
    where markets have been rationalized and risk is managed efficiently; or,
    more likely, we are heading for a deflationary crisis of unprecedented
    severity. In either case, a lot more political education is needed before
    people can begin to reduce their dependence on an impersonal economic
    system and develop a more personally meaningful relationship to money.



    Original Message:
    From: paolo massa
    Date: Thu, 30 Aug 2007 11:54:59 +0200
    To: keith at, playethical at, idc at
    Subject: Re: [iDC] Don Tapscott’s Wikinomics: A Dismal Netology?

    I would like to suggest two resources that I think are relevant for this
    They are linked from this blog post

    1) The video “Money as debt”

    2) And the ripple project. Ripple is an open-source software project
    for developing and implementing a protocol for an open decentralized
    payment network.
    In particular check the paper “Money as IOUs in Social Trust Networks
    & A Proposal for a Decentralized Currency Network Protocol”
    If you are interested, let me know your email address and I’ll
    probably open a little line of credit (trust!) for you on ripplepay


  7. Pingback: » On why we accept worthless pieces of paper and what happens when we stop. - Paolo blog: Ramblings on Trust, Reputation, Recommender Systems, Social Software, Free Software, ICT4D and much more

  8. Pingback: » Making money from money: is this a needed feature of our society? - Paolo blog: Ramblings on Web2.0, Trust, Reputation, Recommender Systems, Social Software, Free Software, ICT4D and much more

Leave a Reply

Your email address will not be published. Required fields are marked *