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What is wrong with money?

Except for small amounts of notes and coins, all money is debt. The only source of money is a loan issued by private corporations (call them banks if you like) by means of bookkeeping, out of nothing (there’s no gold in the vault, or someone else’s savings).

These loans are debt (ie., claim on your assets or labour), issued at compounding interest that has to be paid out of the principle thus reducing the money supply, requiring more loans, and leading inevitably to bankruptcy, dispossession, poverty, and enslavement.

Richard Werner explains banking lucidly.

Why do we need another monetary system?

The explosive growth of Germany and Japan after WWII, and China after Mao, was possible because they had no debt (like debt jubilees of old). Since all money is debt at interest, as the society grows, debt and finance charges accumulate, choking the economy until it stagnates and defaults under the burden of compound interest, like all Western countries.

Scarcity of money is the cause of recessions, unemployment, and dispossession, while interest is the plunder of value from borrowers for simply transacting with money.

Please see Michael Hudson’s “…and forgive them their debts” talking about debt jubilees.

So how trustworthy is mutual credit?

Trust in mutual credit has three components:

  1. The party granting credit (the same as a wholesaler providing credit to a retailer for example).
  2. The party issuing payment (this payment is an IOU that can be redeemed by any bearer).
  3. The network vouches for its members.

All issuers accept their currency back (redemption) for payment, or demand for product or service. In this way a receiver has more recourse and backing than the current system where we have no alternative but to trust bankrupt private corporations called banks. Please see Thomas Greco‘s presentation.

Trust is achieved through transparency (at least with trading partners) and reputation. How this differs from the transparency that governments gain with Central Bank Digital Currencies (CBDC), is that the government additionally has the means to unilaterally impose policy.

Can you explain the Technology of Trust?

Johann Gevers explains the four pillars of decentralised societies where secure, private transactions are instant, easy to use, and virtually free, leading to an explosion of wealth creation.

What gives bank currency value?

The currencies (bookkeeping) of banks (private corporations) have value only because that’s what governments demand for tax payments.

In other words the coercive machinery of the state (revenue, police, justice, incarceration, forces, investigative, borders, etc., (ie., 2/3 of all bureaucrats)) is employed to force the use of bank fiat.

Government money (notes and coins) is legal tender (one needs to accept it or forfeit payment), but makes up a very small, and declining fraction of the money supply.

What gives mutual credit value?

In 1992 the Brazilian economy was saved by a virtual currency backed by eggs. In addition to eggs and gold mining, Mutual Credit is backed by any economic transaction. In this way, the real economy gives value to the currency, and there is always enough currency at no interest, for all real economic activity, thus no unemployment. Economic activity creates the currency.

Why not use bitcoin, gold, or local currencies?

All these currencies have to be purchased with fiat (unless you can afford to mine bitcoin). This means you first have to acquire fiat in order to obtain one of these. The idea behind local/community currencies is that the currency can only be spent locally, thus supporting local business.

How is local/community currency different from mutual credit?

A community currency is only obtained by having fiat first (or working for someone who has already exchanged fiat for local currency). Mutual credit is earned with an economic transaction (labour, products, and services) without fiat, debt, or interest.

Isn’t this money laundering?

Money laundering is corporate- and government bureaucrats and politicians hiding ill-gotten money stolen from citizens and taxpayers. Mutual credit has nothing to do with this.

Please see Michael Hudson explaining the mechanism of money laundering.

Are banks really bankrupt?

We need to bear in mind that banks are just private corporations, not the government. Bank insolvency is supposed to be controlled by:

  1. Reserve requirements. Many countries have no reserve requirements, but even those that do simply borrow the reserve at rates a fraction of what normal people have to pay.
  2. The assets of a corporation needs to exceed liabilities. Banks create money to buy financial assets (derivatives). The more and riskier derivatives they acquire, the better their returns. However, any decline in the “value” of these risky derivatives threaten banks’ solvency.

Retail banking is a sideshow for banks, who would prefer not dealing with us at all except for bail-outs (by governments), and bail-ins (seizing money in your account – now legal in most countries since 2009). Please see Richard Werner‘s presentation.

How can there be a shortage of money with Quantitative Easing?

Most of the money created by private corporations called banks (supply side) is used to buy up financial assets such as bonds, corporate debt, equity, etc. It does not reach the real economy (demand side) where it takes collateral and usurious rates to access money.

This money is debt (loan) which is a claim on your assets or labour, issued at interest, which you have to fight for from other peoples’ loans. Richard Werner’s Quantity Theory of Credit explains why an increase in the currency creation does not lead to more economic activity.

How can there be under/unemployment?

On the one hand we have infinite needs, wants, and desires, and on the other hand we have unemployed folks able to deliver on those wants.

There is a shortage of money

In recession of 1891, Silvio Gesell noticed that the need for his products persisted as before the recession, but people simply couldn’t buy any. He understood goods and services as the supply side, and money as the demand side of the economy.

Money supply to the real economy is choked

Richard Werner explains (Quantity Theory of Credit) how there can be a shortage of money in the real economy despite Quantitative Easing.

The purchasing power of new money created by QE comes from an invisible tax on wages and savings (by inflating the currency supply). This money is used to purchase financial assets (derivatives), not productive investments in real businesses.

They choke supply to the real economy in order to charge interest, which inevitably leads to foreclosures. This dispossession is accelerated by recessions caused by credit contraction (not sunspots, weather, or viruses).

What about financial inclusion for the unbanked?

Press ganging the impoverished into debt at interest in the name of “financial inclusion” is forcing them into slavery. Antonopoulos clearly explains their plight and offers technological solutions without banks and bureaucrats.

Is the reference to slavery relevant?

There is little difference between someone given just enough pittance (most people earn minimum wages) to house and feed themselves, and find their way back to the plantation the next day, and someone housed and fed on the plantation.

Charters of rights and freedom to not apply on the private property of corporations, where wage-slaves do not even own their own tools.

Why not simply barter?

Barter has the problem of coincidence of wants, where both parties simultaneously want what the other party has to offer. In order to facilitate one side of a barter transaction, liquidity (IOU) is provided for the other side in the form of mutual credit (pretty much like paying for purchases with cash, but readily available, and interest-free).

What “backs” the IOU?

Participants understand that any IOU issued can be redeemed from the issuer at the convenience of the bearer. All money is debt – the issuer owes (indebted to) the bearer the amount issued. What is different from commercial banks are:

  • Anyone can issue an IOU (debt),
  • An IOU issued has no compounding interest, and
  • A credit limit granted (analogous to a bank loan) does not carry interest

Everyone can create money; the problem is to get it accepted (Hyman Minsky).

How is trust established?

Just as with any accounts payable/receivable relationship, credit is extended (and limited) at the discretion of the transacting partner. Total credits received thus limits the extent of someone’s capacity to issue.

It is up to the trading partners to negotiate trust limits.

What about capital?

Currently, when one receives a loan on the strength of an asset, one has to pay interest. The bank started with nothing before I went in. When I left, the bank has a claim against my asset and an interest income stream, and all they did was a bookkeeping entry. That claim abstracts to a financial asset used in the highly paid financial industry of parasites who create nothing.

With mutual credit, anyone can be a banker and grant credit to another based on their assets, labour, and reputation; essentially vouching for payments against that credit granted. The grantor benefits from trade and investment.

Why not simply trust the government to manage money?

Since banks destroy societies and destitute people, why not simply let the government manage the money supply?

Well, providing bureaucrats with the unfettered means to create endless wealth for themselves is sure way to more corruption, ballooning bureaucracies, choking red-tape, overbearing officials, hyperinflation, central planning, communism, and totalitarian dictatorship.

Max Keiser, James Turk, and Pierre Jovanovic explain fiat money inflation (in two parts).

But there is a third way that needs neither banks nor bureaucrats, and that is to facilitate barter (purchasing) with decentralised community credit.

The idea is to offer the unbanked and underemployed (precarious) in both LDCs and OECD countries, as well as those with spare time, product, and capacity, a complimentary means to transact, and raise capital.

Benefits include retaining more cash, decreasing reliance on bank loans, creating goodwill, establishing alliances, accessing new markets, reducing excess inventory, and increasing revenue.

What about MMT?

The attraction of Modern Monetary Theory (MMT, re-branded Chartalism) is the impression of money for nothing. The assumption is that government can spend unlimited amounts of money (on free infrastructure, handouts, etc.), and manages inflation with taxes (which it does not need for revenue since it can create as much as it wants).

So what’s wrong with this utopia?

Well firstly the buying power of created currency comes from our wages and savings, depleted through inflation (an invisible tax). It won’t be long before the politicians and bureaucrats print money to their hearts’ desire, and worse, decide who gets handouts, and who gets taxed (central planning).

Secondly, the money issued by government is not interest free, but rather private money created through bookkeeping by private corporations (called banks), that is issued as debt at interest to people, corporations, and governments. Governments use pensions, and national assets as collateral for these loans. (Governments create notes and coins, the rest of the money (97%) is created by banks and lent to governments.)

For governments to spend they either have to tax or go into more debt at interest (already the single largest charge (from you to banks) on all government budgets is interest). Please see Government Digital Currency and Cashless Society.

What is the difference between Organic and Parasitic money?

Consider buying a house.

In an organic system the money used to pay the builder for a house remains in the economy, and used by the builder for his/her purposes. These are two sides of the same transaction, so just as the wealth created (house) remains in the economy, so does the money.

Imagine you make bicycles, and traded 100 bicycles for the house. The bicycles would not disappear, nor would an IOU for the bicycles. This IOU could be used by the builder as money.

In a parasitic system, money is issued as debt, which means the financier has a claim on the house. Note that the money was created out of nothing by a bookkeeping entry.

It gets worse. That debt is lent at interest (which was not created). So as interest is paid, the money supply is reduced, and more and more money needs to be borrowed just to maintain the same economic activity, requiring more and more interest and borrowing, leading inevitably to bankruptcy and dispossession.

Let’s be clear. A private corporation called a bank, started with nothing, not someone else’s savings, nor gold in the safe. Money was created by bookkeeping on the strength of the loan. Suddenly the bank has a claim on a house, and an income stream of interest (who knows where that interest is supposed to come from).

At the end of the day the bank owns the house through foreclosure, and has had a nice interest income stream, starting with absolutely nothing!! The borrower has lost both the house and the money for no reason of his/her own – the system is built that way.

Furthermore, banks manage the allocation and appropriation of money. In others words, they decide who gets financed, who gets excluded, and who gets dispossessed.

Can you explain Riba (Usury)?

Timing difference

Riba arises when there is a timing difference with a transaction. If participants in a transaction exchange like-for-like simultaneously then there is no Riba involved (the agreed price may include profit of course).

However if one party takes delivery immediately while the other has to wait for their half of the transaction, then a fee can be negotiated. 


Riba is also not relevant where the investor shares in the risk of the project. In other words, investing in a share of a project, risking one’s investment for a return, is not Haraam.

Riba means increase

Riba means increase, so we are talking about compound interest. If there was a timing difference, and an amount was negotiated, then that amount cannot be increased. 

It is compounding that leads to dispossession and enslavement.


It is difficult to understand that money (future payments) retains it’s value in the current world of runaway inflation of the currency supply (invisible tax on wages and savings). 

If we assume “sound” money such as dirham and dinar, then inflation is not possible, and an increase of the amount owed in future is not necessary. (Sheikh Imran Hosein explains) 


Hoarding of money removes capacity from the economy causing recessions, thus the tax on excess wealth (beyond home, tools, etc.) to encourage the use and investment of money.

You might be familiar with demurrage made famous by Gesell at Wörgle.

Please don’t hesitate to pose questions in the comment section below, or the contact page.


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