Cartoon video: 'Money as Debt'

View here.

It explains the growth of banking in Europe. At 08:53 it mentions the concept of the 'run on the bank', with which all Northern Rockers will be familar. At 09:50 we see the local bank affected by the run on its reserves (Northern Rock, USB, ) being bailed out by an infusion of real money by the Central Bank (the Bank of England).

At 09:10 it touches upon the fact that government had the opportunity to outlaw banks, but they preferred not to stand in the way of the inevitable. The creation of the concept of banking - of lending money at interest on funds that don't physically exist - is a particular feature of the arms race of Modernism. Banking facilitates the maximisation in output of the availability of credit. If we discover a better way to do something (and production-output is an objective indicator of success), are we to revert to more primitive methods out of fear? No. Once the idea is introduced to the world, then competition becomes a fact. The law bans only the forms of competition which are counterproductive to the economy as a whole. As the availability of credit allows the flow of commodities to increase, and the increase in commodities increases the number labourers employed in the market both as waged producers and individuals with needs that need to be met with money. Consequently, credit is good for the economy. To illustrate the success of the 'credit model', we should note that (at 18:27 in the video), of all the money in the economy, only 5% of money is government-created 'hard cash', whereas the remaining 95% comes from bank credit (money created out of debt). Moral and ethical concerns are secondary.

A problem: at around 31:00 we are introduced to a solution to the problem of exponential growth. Sustainability, as the sustainable solution which would avert the collapse of an economic system predicated upon infinite growth (such as ours), is made possible by the division of labour as it exists in the present system. The reduction of all value to labour and commodities from debt and securities would mean a great decrease in the amount of money in the economy, partly because the source of funds which enables loans to be made would shrink to a 1-to-1 correspondence between value and money. The decrease in value would mean cutbacks in funding, because there is no incentive to lend money, part of which contributes to the upkeep of the workers, and no worker wants to pledge labour without receiving value in return. Workers would be forced to work without receiving pay, and pay is only created in this new system by exchanging actual value created in the product they are working on.
Of course, the government could own the money and lend without interest, enabling projects to be completed and the worker to be paid along the way, but we would have an economy that had halted almost all possibility of developing new forms of technology and medicine through lack of funding; the only way to increase funding in this 1-to-1 economy is to increase the amount of actual value created, which is marked against the labour producing the commodities that are available. How do you increase the money in such an economy, making funding of new projects possible? By introducing new people to the labour-market and by producing more goods. There is no escape from the 'arms race', and its destiny in Mutually Assured Destruction.