Modern Money Mechanics – An Analysis of the Impact of Individual Debt

Modern money mechanics, as described in the banking handbook with this same name, is a system whereby money is created out of debt. This system is used in nearly every civilized country and as of late has been the biggest contributor to the credit crisis. I will explain this system in detail in the following sections, but as a quick foreword, your financial problems are not your fault.

Money, that pretty green piece of paper with official looking seals all over it, doesn’t exist. Money is created out of the need for more money. I’ll give you an example. The government electronically sends the federal reserve a request for ten billion dollars. The federal reserve replies and then starts to print the money and these bills become federal reserve notes. The government in turn begins to print out some official looking pieces of paper called government bonds. A 10% reserve is held out of the ten billion and the nine billion is the excessive. Because that nine billion is consitered the excessive, new loans can be created based off of that amount.

Now lets say that a bank decides to borrow the newly created nine billion dollars. You would think that the money that was created earlier would be used in the new loan, but it isn’t. The other ten billion was just used as a basis for this new loan and the newly available nine billion is created out of thin air just for this bank. In fact, the process continues up to nine times, down to 8.1 billion, 7.29 billion and so on. All of this money has been created simply out of a need for it, a debt. Therefore we can conclude that money equals debt. Inflation is actually a purposefull taxation on people in order to keep the population working longer(wage slavery at it’s best).

Now that you know the internal structure of it, lets consider how it affects you. We all know how inflation is a constant in our modern world, but we don’t know how to combat it as a society. The fact of the matter is, if there was no debt, there would be no money. If debt equals money, and inflation means that the value of our dollar is lowering constantly, then our only choice is to get out of debt as individuals. If we get out of debt, then the value of the dollar will raise, and our banking system will take a serious hit while we reap the benefit. Imagine your little $25,000 a year job becoming the equivalent of $200,000.

So now that you realise the reprocusions of what you’ve just read, I recommend reading another article of mine on how to get out of debt quickly and easily.


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