Getting broad agreement-possible?

This is taken from a comment on one of my earlier posts A Word on Finance to which I wrote a long reply and which I felt warranted its own post. If you haven’t read it you should do so first otherwise this will make little sense.

The solution stated in that post is a solution that is fixing one point and one point only: Only the biggest departure from what would otherwise be an ideal situation. It does not create a complete solution for a perfect system. But it does handle the biggest point, which, when corrected fixes the largest part of the problem at turns things around. Certainly, once this is implemented, other correction could be envisioned.

A big factor on establishing this solution was that it had to be doable.

I’ve virtually read 100s of “solutions” which were all glorious and some truly magnificent. The one drawback I found though is that they established no path to implementation, or the path of implementation was so radical, that it would be near impossible to achieve widespread agreement. This is contrast is easy to implement.

It is also a solution which will actually benefit everyone.

  • The banks continue to make money out of nothing but also achieve higher certainty that the funds to repay the loans do actually exist in the economic system and are not being depleted.
  • The super rich will love it, as returning the balance to the economy and ridding the society of the super poor will greatly increase social stability which in term means they can continue to enjoy their riches.
  • Same for the – not quite as well off as the superrich – upper strata of society.
  • For the middle classes, it will be a gods send as finally they are no longer being throttled further and further onto the cliffs of indigence.
  • The poor will love it because finally there are adequate resources available to provide the education and support systems needed to help them to make a living and live a happy life.
  • Governments will love it because the money created in interest is flowing to them as an extra.

I really can’t think of any political party, regime or strata of society who would not want to embrace this once it’s understood.

Where does the money of a loan really come from?

Well, good question. In September I wrote an article on the solution to the international financial crisis A Word on Finance and while the article was well, received I have been receiving many questions on a specific point: Where does the money of a loan really come from? Readers seem to not get that point fully.

Let me lay it out here, one more time, really clearly:

When you get approved for a loan by a commercial bank, the money you get given did not previously exist. Period. This is really hard to get your wits around sometimes. But the fact is that the second the banker approves your loan the money appears in your account. That’s it, nothing more. The money is not transferred into you account out of some reserves or you are given the money an old lady gave the bank to look after.

The simple fact is that in our world today, money is simply created whenever a loan is approved. That’s it. From now on there is more money in the world because of it.