A CAPITALIST MAXIM

'Printing more money doesn’t improve economic output in any way. It merely causes inflation.'

Source: Any economics text book - or, for example Economics Help

Woops!?

So ... 'printing' money is fine, it seems, as long as it is the banks that are doing it, not the government. And in addition to being inflation-free (apparently), there are other advantages to the banks printing money rather than the government.

1. The money is not just a means of exchange, it is also a debt, because banks create money by making loans against other people's deposits1. The loans are of course not actually the deposits, they are newly created money which can be withdrawn as well as the deposits (rather than instead of them - which would be the case if the 'loans' were really the deposits themselves).
2. The loan (newly created money) is owed not to those who made the original deposits, nor to the taxpayer-citizen who is supposed, in a democracy, to be the source of governance - but to the banks. Who obviously need it more than any of the rest of us.
3. When the economy crashes and people realise what the banks have known all along - that the banks are bankrupt because they have 'lent out' more money than they are able to supply, then the heavily indebted taxpayer citizen leaps in to save the banks, which have created the mess through their greed.
4. If, in addition to saving the banks in their hour of need, everyone decided to go debt-free, and pay back their loans to the banks (and live off grass), then the banks would be even more fabulously rich than they are at the moment - and the rest of us would be moneyless, in every sense. There would simply be no money in the economy becasue it would all be in the banks' vaults (or at least, on their valueless pieces of paper). And we would be back to traditional methods of exchange - like barter - unless we thought to be so stupid as to print some (debt-free) money we could use instead.

Advantage No. 3 reminds me of another capitalist maxim, spouted regularly in relation to those developing countries which were forced to take out huge loans in order to swell the western banks' coffers: what message would it send to people - asked the banks - if we were to forgive past debts and simply write them off?

Indeed, dear banks - dear capitalists. What messages have you sent to all of us. That 'loans' can be made without having anything to lend; that when they are repaid, the 'lender' (who had nothing to lend) takes possession of the payment; that loans can be pushed on those unable to take them on, and they will pay with blood; and that if they cannot be made to pay with blood because they happen not to be victims in distant parts of the world, but western citizens who vote for those that keep you in power, then those that keep you in power will still make sure it is not you that suffer. The citizens will pay, regardless. They will pay off your bad debts.

And in the meantime, you will reap the interest from the loans you should never have made because you did not have the money, and you will keep your jobs and 6-figure salaries while others have none, and you will continue to preach economic probity and the importance of living within your means. And they - the citizens of other countries - who 'took on' debt in the same way that a slave takes on his master's chains, will be paying it off for the rest of their lives, and the rest of their children and grandchildren's lives.

See this page for some facts and figures on debt

Detail showing bottom part of graph

(figures, chart and ideas taken from Michael Rowbotham's 'The Grip of Death')

• 1. see this wonderful video for an explanation